(Commonwealth_India) India is standing at a critical moment in its steel story. The country wants to massively increase how much steel it produces, and the surprising thing is that almost all of this new capacity hasn’t been built yet. That means the decisions made right now—about what technology to use and how to finance it—will shape India’s climate impact and energy security for decades.
A new briefing from the Institute for Energy Economics and Financial Analysis (IEEFA) says that if India keeps building traditional, coal-based steel plants, the emissions from those plants will be locked in until around 2060 or 2070. Steel factories have a long lifespan, and altering their technology later becomes challenging and costly. So, making the right choices early is crucial if India wants to meet its long-term climate goals.
There’s also the issue of energy security. Blast-furnace steelmaking depends on metallurgical coal, and India imports most of it, mainly from Australia. If India keeps expanding the old way, coal imports could almost double by 2035. That would leave the country more exposed to rising prices and global supply problems.
IEEFA’s global research shows that green steel projects almost always need government support in the beginning. The technology works, but it’s expensive, takes years to pay back, and private investors tend to shy away from that kind of risk. But the type of government support makes a difference. Credit guarantees, where the government covers the downside if things go wrong, pull in far more private investment than handing out direct grants, and they make public money go much further.
One of the report’s authors, Saurabh Trivedi, notes that big green steel projects are nothing like tech startups. Venture capital and private equity usually look for quick returns, and this sector simply doesn’t offer that. These projects require billions of dollars, long timelines, and customers who are willing to pay a premium for cleaner steel. Globally, around US$24 billion has already gone into trying to decarbonize steel, and almost every major project needed strong government backing.
India is already working on something similar. The government is designing a National Mission for Sustainable Steel with a budget of about Rs5,000 crore (roughly US$600 million). This money will likely be used for incentives, cheaper loans, or government guarantees. A lot of it is expected to support smaller steelmakers, who are important to the industry but often lack the financial muscle to adopt new technology on their own.
Another idea being developed is Green Public Procurement, which would require a portion of steel used in government projects to be low-carbon. This would give green steel a steady, reliable market at home. But progress hasn’t been perfect. In 2024, officials turned down a proposal to create a central agency to buy green steel in bulk, which slowed the process.
There’s also a system for trading carbon credits coming in 2026. It could reward companies that produce cleaner steel, but how powerful this system becomes will depend on how strict the emissions targets are and what kind of carbon prices develop.
Some Indian steel companies are already trying green bonds and sustainability-linked loans, but those tend to help with smaller improvements, not the big leaps needed for truly green steel. And globally, the market is becoming picky. Natural-gas-based green steel projects in the US and Germany couldn’t find buyers willing to pay extra, so they were cancelled. But fully hydrogen-based projects powered by renewable energy, like Sweden’s Stegra, have secured long-term buyers happily paying 20–30% more because the steel is genuinely low-carbon from start to finish.
Based on these lessons, IEEFA recommends that India use a mix of tools: credit guarantees to attract private investors, competitive auctions to figure out what price buyers will pay for green steel, and special support to help smaller steel producers prepare projects.
The bigger message is that India doesn’t need huge, expensive subsidies. What it needs are smart, well-designed instruments that make each rupee of public funding count. If India executes this right, it can build a steel industry that’s cleaner, more competitive, more energy-secure, and ready for the future, while also helping the country stay on track with its climate commitments.
