India’s green steel demand is projected to grow exponentially, reaching 179 mln tons by FY50, driven by the automotive, infrastructure, and construction sectors, according to a new report by EY-Parthenon.
Using an emission intensity benchmark of under 0.5 tons CO2 per ton of crude steel, the report estimates demand will rise from nearly zero today to 4.49 mln tons by FY30, led by construction (2.52 mln tons), infrastructure (1.5 mln), and automotive (0.48 mln). Demand is expected to nearly triple to 73.44 mln tons by FY40.
India’s current steel consumption stands at 136 mln tons, with construction and infrastructure making up 78pct of finished steel demand. This figure is expected to grow to 390 mln tons by FY50, supported by rapid urbanization and infrastructure expansion.
The report warns that carbon pricing will significantly impact the economics of steelmaking. Prices for conventional BF-BOF steel could increase by 81pct by 2050, from USD 660 to USD 1,193 per ton, due to rising carbon taxes. Meanwhile, hydrogen-based DRI green steel is expected to become more cost-competitive as production scales up and premiums shrink.
Currently, green steel adds moderate cost increases, 4.1pct in automotive, 3.7pct in construction, and 5.2pct in infrastructure. These are expected to fall below 1pct by 2035-2040 as technology advances.
However, international regulatory pressure, especially from the EU’s Carbon Border Adjustment Mechanism, poses challenges for Indian exporters. With India’s emission intensity at 2.5 tons CO2 per ton of steel versus the EU’s 1.28, exporters face a significant emissions gap and rising tax exposure without urgent decarbonization efforts.
The report recommends coordinated action. For the government: implement carbon pricing (USD 90-100 per ton by 2040), offer subsidies and tax breaks, and enforce emissions standards. For industry: cut emissions to 1.21 tons CO2 per ton by 2030, scale green steel production (particularly hydrogen-based DRI), and invest in R&D to cut costs by 30pct by 2040. End-users are urged to begin green steel procurement a decade ahead of their net-zero goals and work closely with suppliers to manage supply chain stability and pricing.
To meet the growing demand, India must rapidly expand green steelmaking capacity using hydrogen-based DRI and scrap-fed electric arc furnaces powered by renewable energy, though significant supply-demand gaps remain, the report added.
