21-September-2024-Special-Article

DECARBONIZATION OF THE STEEL SECTOR

The steel industry is one of the largest contributors to global carbon emissions, making its decarbonization a critical step in mitigating climate change. As India is the second-largest steel producer, the Ministry of Steel has begun exploring funding strategies and policy reforms to transition toward green steel production.

This includes various financial and technological initiatives aimed at reducing the steel sector’s carbon footprint and supporting the country’s climate goals.

Steel Sector Decarbonization

Performance-Linked Incentives (PLI)

• The Ministry of Steel is considering using PLI schemes to incentivize decarbonization efforts in the steel industry.
• A report estimates that USD 300 billion will be required for full decarbonization.
• USD 13 billion will be used for upgrading technologies in smaller steel mills, and USD 150 billion will be allocated for advanced technologies like direct reduction of iron and carbon capture.

Direct Reduction of Iron

• Direct reduction of iron involves removing oxygen from iron ore in the solid state without melting, unlike in traditional blast furnaces.
• This method is being explored as a way to reduce emissions during steel production.

Natural Gas as a Substitute

• Natural gas is being evaluated as a cleaner alternative to coal or coke in blast furnaces.
• India’s steel plants have an energy consumption of 6-6.5 Gigacalories (Gcal)/tonne, higher than international standards (4.5-5 Gcal/tonne), primarily due to the heavy reliance on coal.

Green Steel Policy

• India’s Green Steel Policy is in its initial stages, focusing on PLI schemes and other strategies to decarbonize the steel sector.

Import Duties and Protection

• Discussions are underway to protect domestic steel producers from foreign competition by adjusting import duties (potentially increasing from 5% to 10-12%) and implementing safeguard duties.
• This measure aims to balance trade trends, as India has become a net importer of steel in the fiscal year 2024, with a trade deficit of 1.1 million tonnes.

What is Decarbonization of the Steel Sector?

Decarbonization refers to the process of reducing carbon dioxide (CO2) emissions in the production of steel, focusing on creating Green Steel. This is vital for sustainable industry practices and climate change mitigation.

India’s Steel Industry

• India is the second-largest producer of crude steel, with a production capacity of 5 million tonnes.
• Per capita steel consumption in India is 7 kg, lower than the global average of 221.8 kg.
• The National Steel Policy 2017 aims to raise per capita consumption to 160 kg by 2030.

India’s Climate Commitment

• India contributes only 4% to global greenhouse gas emissions but is committed to low-carbon development.
• Decarbonizing the steel sector is crucial as it accounts for 10-12% of India’s total emissions.

Green Steel

• Green steel is produced without using fossil fuels, often relying on green hydrogen and blue hydrogen. These methods have the potential to significantly reduce carbon emissions.

Challenges to Decarbonizing India’s Steel Sector

• Scrap and Pellet Usage: Developed nations rely heavily on scrap and low-carbon fuels, but India faces challenges due to a lack of scrap availability and the high cost of natural gas.
• Energy Sources: The use of low-grade coal and iron ore in India increases emissions and energy consumption. Emission intensity in Indian steel plants is 54 tonnes of CO2/tonne of crude steel (tCO2/tcs), compared to the global average of 1.91 tCO2/tcs.
• Research and Development: Innovation is key to decarbonization, but India’s RD&D expenditure is relatively low. Only 64% of its GDP is allocated to research, and just 36% of this comes from the private sector.
• Finance: Decarbonizing the global steel sector could cost between USD 5.2-6.1 trillion. Indian steel plants will need around USD 283 billion to transition to green technologies.
• CO2 Emissions Monitoring: Monitoring carbon emissions in Indian steel plants faces challenges like complex supply chains, inadequate data, and a lack of skilled carbon management experts.

Government Initiatives

• Task Forces: The Ministry of Steel has created 14 task forces to develop strategies for decarbonizing the steel sector.
• Steel Scrap Recycling Policy, 2019: This policy promotes a circular economy by enhancing the availability of domestically generated scrap and provides guidelines for scrap processing.
• National Green Hydrogen Mission: Launched by the Ministry of New and Renewable Energy, this mission focuses on green hydrogen production, with steel being a key sector.
• Motor Vehicles Scrapping Rules, 2021: These rules aim to increase scrap availability for the steel sector by establishing a framework for vehicle scrapping.
• PAT Scheme: The Perform, Achieve, and Trade (PAT) scheme incentivizes energy savings in the steel sector, leading to significant reductions in carbon emissions.
• Carbon Credit Trading Scheme (CCTS): Introduced in 2023, this scheme allows for trading carbon credits, helping companies reduce their carbon costs.

Decarbonization Strategies in the Steel Sector

Energy Efficiency

• The PAT scheme has resulted in significant energy savings. Further reductions in energy intensity can be achieved through the adoption of Best Available Technologies (BATs).

Green Hydrogen

• Green hydrogen is being explored as a substitute for fossil fuels in steel production. Indian companies like Tata Steel and JSW are leading research efforts.

Carbon Capture, Utilization, and Storage (CCUS)

• CCUS can reduce 56% of emissions from existing technologies. Although India has some experience with CCUS, high costs remain a challenge.

Biochar

• Biochar, produced from biomass, can partially or fully replace coal in steel production. However, challenges include a lack of biomass supply chains and scientific data.

Way Forward

• Defining Green Steel: A clear, universally accepted definition of green steel is essential to foster demand for low-emission products.
• Policy Support: Policies should encourage the adoption of Best Available Technologies (BATs) to align India’s steel sector with global energy consumption standards.
• International Collaboration: Decarbonizing the global steel industry will require international cooperation. India should explore multilateral financial support and coordinate efforts with international platforms.
• Skill Development: The transition to green steel will require upskilling the workforce, with a focus on new technologies like hydrogen-based production and CCUS.

Mains Question:

1. “Discuss the challenges and opportunities in decarbonizing India’s steel sector, focusing on technological advancements, financial requirements, and policy support.” (150 WORDS)