In December, 2024, the Union Ministry of Steel unveiled the Green Steel Taxonomy, a significant step towards reducing carbon emissions in India’s steel sector. As one of the most carbon-intensive industries, steel plays a crucial role in the country’s decarbonisation journey. This taxonomy establishes clear benchmarks for low-carbon steel production, aligning with India’s climate goals while enhancing the global competitiveness of its steel producers.

What is the Green Steel Taxonomy?

The Green Steel Taxonomy classifies steel products based on their carbon emissions per tonne of finished steel, encouraging cleaner production practices. Any steel product emitting less than 2.2 tonnes of carbon dioxide equivalent per tonne of finished steel (tCO₂e/tfs) qualifies as green steel.

The “greenness” of steel is expressed as a percentage, indicating how much a plant’s emission intensity falls below the 2.2 tCO₂e/tfs threshold. Based on emission levels, green steel is categorized into three tiers:

• Three-Star Green Steel: Emission intensity between 2 and 2.2 tCO₂e/tfs
• Four-Star Green Steel: Emission intensity between 1.6 and 2 tCO₂e/tfs
• Five-Star Green Steel: Emission intensity below 1.6 tCO₂e/tfs

Steel exceeding 2.2 tCO₂e/tfs will not qualify for a green rating. The benchmarks for star ratings will be reviewed every three years to adapt to technological advancements and industry improvements.

The taxonomy covers Scope 1, Scope 2, and limited Scope 3 emissions. To ensure accountability, the National Institute of Secondary Steel Technology (NISST) has been designated as the nodal agency for measurement, reporting, verification (MRV), and issuing certifications and star ratings for green steel. This framework is the result of a year-long collaboration with key stakeholders in the steel industry.

What’s Next?

The next crucial step is stimulating demand for green steel. While defining green steel is a milestone, scaling up production will largely depend on domestic demand, as most of India’s steel consumption happens within the country. Given that the taxonomy is designed for Indian conditions, its alignment with low-carbon steel demand in developed nations may be limited to specific categories under the current definition.

To promote demand, the government is considering measures such as public procurement mandates and incentives. Policies like green public procurement, carbon pricing, and tax benefits are expected to play a key role in accelerating adoption and ensuring the success of the Green Steel Taxonomy.

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