Green Steel Transition: Policy and Fiscal Challenges in India's Decarbonization Strategy

The Hindu - Opinion · 17 Feb 2026 · 2 min read
Prelims · Environment Mains · GS3 Environment and biodiversity High relevance

India's push for green steel production faces hurdles like the 'green premium' and fiscal constraints, but strategic public procurement and policy alignment can drive the sector's decarbonization, crucial for meeting the 2070 net-zero target.

Key points

Green Steel: The Ministry of Steel has formed 14 task forces to map decarbonization pathways, highlighting steel's role as a major industrial emissions source in India.

Green Premium: High upfront costs for green steel production necessitate fiscal support, including GST rationalization and time-bound incentives to ease the transition for manufacturers.

Public Procurement: Despite the green premium, using green steel in public infrastructure projects would only increase costs by 1.1%-5.5%, a manageable increment given long-term benefits.

EU Carbon Border Adjustment Mechanism (CBAM): India faces pressure from CBAM and volatile coking coal prices (50 million tonnes annually), making green steel a strategic necessity to avoid carbon tariffs and ensure energy security.

Green Steel Taxonomy: India introduced a 3-, 4-, and 5-star rating system to classify steel by emission intensity, providing transparency and market incentives for low-carbon production.

[GS3-Economy] The fiscal impact of green steel adoption is minimal relative to overall infrastructure budgets, aligning with India's broader economic and environmental goals.

Trust Deficit: Procurement officers lack reliable methods to verify green steel, necessitating QR code integration with Quality Council of India's accreditation for real-time carbon credential checks.

Policy Alignment: Production Linked Incentives (PLI) and green hydrogen missions must sync with procurement tenders to ensure state-backed demand for green steel, harmonizing public and private incentives.

Way Forward: India should pilot green steel procurement through central agencies like Indian Railways, codify carbon intensity in Schedule of Rates, and progressively tighten standards post-2030 to incentivize industry investment.

Key terms

Green Steel

Steel produced using low-carbon technologies like hydrogen-based reduction or carbon capture, crucial for India's industrial decarbonization. Its adoption is vital to meet net-zero targets and comply with global carbon regulations like CBAM.

Green Premium

The additional cost of producing green steel compared to conventional methods. For UPSC, this highlights the need for fiscal policies (GST rationalization, incentives) to bridge the cost gap and ensure industry participation in decarbonization.

EU Carbon Border Adjustment Mechanism (CBAM)

A tariff on carbon-intensive imports by the EU, aimed at preventing carbon leakage. For India, CBAM pressures steel exports, making green steel a strategic imperative to maintain trade competitiveness and avoid economic penalties.

Green Steel Taxonomy

A classification system (3-, 4-, 5-star ratings) introduced by India to rank steel by emission intensity. This institutionalizes transparency in carbon footprints, enabling market-driven decarbonization and aligning with global climate governance frameworks.