Can the new carbon credit scheme clean up India’s steel sector?

The proposed new greenhouse gas emission intensity targets for the iron and steel sector under the Carbon Credit Trading Scheme (CCTS) are expected to accelerate industrial decarbonisation. However, the real test will be whether they can influence the long-term investment decisions of industry players.

India is transitioning from the Perform, Achieve and Trade (PAT) Scheme to the Carbon Credit Trading Scheme (CCTS), marking a significant shift from energy efficiency to comprehensive carbon competitiveness.

The green targets

This evolution enables industries to move beyond merely reducing energy consumption and focus on optimising greenhouse gas emissions through the adoption of low-carbon technologies and a roadmap for shifting the sector's emissions trajectory.

The draft emission targets for the iron and steel sector come after extensive discussions and multiple rounds of back-and-forth between industry players and the government.

Parth Kumar, Programme Manager, Sustainable Industrialisation Unit, CSE, says the initial targets are likely to drive improvements through energy efficiency and other relatively low-cost operational measures.

“However, the real test will be whether future compliance cycles begin to influence long-term investment decisions and accelerate the adoption of low-carbon technologies that bring about a deeper, structural shift in the sector's emissions trajectory,” adds Kumar.

He further explains that the CCTS is particularly important for India’s steel sector, where demand is still growing rapidly.

“As the world's second-largest steel producer and one of the few major economies with significant capacity expansion ahead, the choices made today will shape the sector's emissions trajectory for decades,” he says.

What does it mean for the industry?

Manish Dabkara, Chairman and Managing Director, EKI Energy Services, and President, Carbon Markets Association of India, says steel is an interesting case right now because it is the one sector for which CCTS targets have not yet been finalised.

“Eight other sectors already have final targets; steel keeps getting sent back for revision, and that tells you regulators are still working out what is fair between a blast furnace and a DRI-EAF (electric arc furnace) plant. Once this draft becomes final, that conversation is over. BEE takes over verification, and whatever target a plant gets assigned is what it lives with for the compliance cycle,” says Dabkara.

He further says that for producers, the smart move is not to wait for that certainty but to use this consultation window to contest the numbers that do not fit their processes. “The ones who show up now with data will get better targets than the ones who wait and hope the rule works out in their favour,” he adds.