What do COP26 Green pledges mean for Indian steel industry?

The United Nations Climate Change Conference, 2021 (COP26) recently concluded in Glasgow on a promising note. But India, along expected lines, found itself in the eye of a storm with decarbonisation goals focused largely on the domestic steel industry.

India's aim to nearly triple its crude steel production by the end of the decade clashes with Prime Minister Narendra Modi's over-ambitious pledge at COP26 of aiming to reach net-zero emissions by 2070. In fact, at Glasgow, India surprised many by making its first net zero pledge. The bold promises include installing non-fossil fuel electricity capacity of 500 GW by 2030 (in line with its domestic target of building 450 GW of renewable electricity capacity by 2030); sourcing 50% of energy requirement from renewables by 2030; achieving carbon intensity reduction of 45% over 2005 levels by 2030 which also translates to around 1 billion tonnes of emissions reduction till 2030 and achieving net zero by 2070.

Last year, the world's top steelmaker, China, set a 2060 deadline to achieve net-zero emissions.

While India struggles to produce 255 mn t of steel by CY'30 instead of the current 100 mn t, it inevitably faces the challenges of balancing its decarbonisation plans with the needs of a growing economy in order to remain economically competitive in the global steel industry.

Greening the global steel industry

The steel industry bears the brunt of climate activists from across the world as it generates about 8% of global CO2 emissions.

Fortunately however, the global steel giants have already been taking significant strides in adopting various climate-friendly technologies, especially by recycling industrial waste products into valuable commodities. Amongst considerable advancements, captured CO2 from steel plants is being harnessed as raw material for construction by combining water and steel slag. The use of Green hydrogen, produced from renewable electricity such as biomass, is another notable progress.

Swedish steel manufacturer SSAB's breakthrough unveiling of the world's first fossil-free steel, produced using hydrogen instead of coal and coke, represents proof that it is possible to make the Green transition and significantly reduce the carbon footprint of the steel industry.

That apart, Rio Tinto Group initiated a pilot project to produce low-emission steel using biomass as a replacement for coal.

Indian steelmakers focus on decarbonisation

India-based integrated steel manufacturers have not been far behind in the path to decarbonisation.

JSW Steel has invested in a carbon capture plant in Maharashtra which aims to cut emissions to as low as 1.95 tonnes of CO2 equivalent per tonne of steel produced by 2030. Reliance has also expressed interest in Green hydrogen.

More importantly, Tata Steel, at its Jamshedpur plant, has been successfully reducing emissions by recycling higher quantities of its scrap steel back into liquid steel form.

Several of the country's steel mills are gradually shifting towards pellets and reducing the usage of sinters. Notably, the average pellet feed ratio by Indian steel plants has reached 40-45% as against the earlier 10-15%.

However, insufficient investment in superior research facilities and demo plants, alongside meagre carbon control measures followed by the country's many mid- and small-scale steelmakers, pose as big obstacles that the Indian steel sector faces in its journey towards lower emissions.

Furthermore, India produces most of its steel through the secondary route, using either induction furnaces or electric arc furnaces. These facilities are predominantly fed with direct-reduced iron (DRI), which itself is produced using coal-based DRI plants which produce more emissions than gas-based ones.

At this juncture, India will be in a paradox situation wherein it will have to industrialise on its path towards reducing emissions.