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India has notified draft emission-intensity targets for 255 iron and steel units under its Carbon Credit Trading Scheme.
This brings the world’s second-largest steel producer formally into the carbon market from FY 2026-27.
Move aims to cut CO2 per tonne of steel, recalibrates earlier baselines, and can shape long-term decarbonisation investments.
The Indian carbon market moved another step towards operationalisation with the publication of draft targets for the iron and steel sector notified in The Gazette of India. India’s steel sector is the second-largest in the world with an approximate crude steel production of 151 million tonnes in FY 2024-25, while contributing 10-12 per cent to the country’s total CO2 emissions.
The notified targets encompass 255 units, with a combined baseline emissions of 358.6 million tonnes of CO2 equivalent (MtCO2e) across all units. As of 2023-24, the average emission intensity per tonne of crude steel produced in India was at 2.54 tonnes of CO2, while the global average emission intensity per tonne of crude steel stands at 1.9 tonnes of CO2.
Since India’s Carbon Credit Trading Scheme (CCTS) is an emission intensity-based carbon market, it seeks to reduce net the emissions for per tonne of production. In addition, it contributes to the Union Ministry of Steel’s larger goal of 2.2 tonnes of CO2 per tonne of crude steel by 2030.
The first draft targets for the iron and steel sector were released in June 2025 alongside draft targets for secondary aluminum, petrochemical, petroleum refinery and textile industries. Targets for these industries were notified in January 2026, excluding the iron and steel sector from final notification then. Consequently, the sectoral notification has been issued in June 2026, skipping the first compliance year of FY 2025-26 in its entirety.
As noted above, this second draft notification under the CCTS mandates iron and steel sector compliance starting in FY 2026-27. The required reduction in emission intensity ranges from 2.1-9.3 per cent across various types of steel entities in the list, with a median target of around 5.5 per cent.
In general, and consistent with the benchmarking approach, plants with higher baseline emission intensities (above 3 tCO₂e per tonne of equivalent product) have been assigned steeper percentage reductions than relatively efficient plants. Among the obligated entities, 75 sites have been assigned emission intensity targets of 2.2 tCO₂e or lower per tonne of equivalent product.
Together, these sites produced 39.97 Mt in FY 2023-24, accounting for 26.88 per cent of the total production covered under the mechanism. While this is numerically comparable to the threshold under India's Green Steel Taxonomy, direct comparison needs detailed assessment of each unit’s operational nature.
However, in contrast to the cement and other sectors, where facilities are categorised based on their production processes (such as integrated plants, grinding units and blending units), the steel notification does not classify sites by sub-sector or process type, making it difficult to understand the operational characteristics of the obligated sites.
In a sector with diverse value chain ranging from upstream ironmaking and sponge iron production to downstream steelmaking, rolling and finishing operations, sub-classification of units becomes essential.
The June 2026 notification introduces both structural and numerical revisions in comparsion to the targets published in June 2025. The notification now covers 255 obligated entities, reflecting the addition of Bilasraika Sponge Iron India Pvt Ltd, OCL Iron & Steel Ltd and Orissa Metalliks Pvt Ltd (formerly MSP Metallics Ltd). At the same time, Hare Krishna Metallics Ltd has been removed from the list, while Bhushan Power & Steel Ltd has been renamed as JSW Sambalpur Steel Ltd.
Between the two drafts, a comparison of all overlapping entities indicates the 2026 notification is a broad recalibration rather than just an expansion. The primary driver for these revised targets appears to be updated baseline data, which changed for 126 units, nearly half of the total. For the remaining 126 units, 73 units show a target relaxation, while 24 units see their targets tightened. This analysis excludes minor adjustments, ie fourth decimal place revisions.
Among the entities receiving more relaxed targets, the upward revisions ranged from 0.0010 to 0.0055 tCO₂e per tonne (below 0.1 per cent), with Nava Bharat Ventures Ltd, Paloncha recording the largest increase in its compliance target. Conversely, among the entities assigned more stringent targets, the downward revisions ranged from 0.0010 to 0.0224 tCO₂e per tonne (0.01 to 2.5 per cent), with JSW Steel Ltd’s Salav unit witnessing the steepest tightening of its compliance target.
These revisions demonstrate that the Ministry has revisited plant-level baselines and benchmarks before the commencement of the first compliance year, reflecting stakeholder consultations and updated assessments of technological and operational realities.
As per the Union Ministry of Steel’s Annual Report 2024-25, the country's steel production remains concentrated in conventional production routes. The BOF route contributes 42.7 per cent of crude steel production, while the IF and EAF routes account for 35.4 per cent and 21.9 per cent, respectively.
Compared to 2019-20, the share of IF-based production has increased from 29.5 per cent, while the shares of BOF and EAF have declined from 44.5 per cent and 26.0 per cent, respectively. This trajectory is at odds with emission reduction goals, as the more emission-intensive IF route (dependent largely on coal-based DRI) is expanding, whereas the EAF route, a promising pathway for scaling recycled, lower-carbon steel, is contracting.
The sectoral concern extends beyond the compliance of the existing steel fleet. India’s future investment pipeline remains heavily tilted towards coal-based steelmaking, risking decades of carbon lock-in. According to Global Energy Monitor, India has the world's largest steelmaking capacity under development, with around 258 MTPA of projects announced or under construction. More than two-thirds of this proposed capacity is based on the highly emissions-intensive BF-BOF route, while EAFs account for just 13 per cent. Further, over 90 per cent of the ironmaking capacity under development is expected to rely on coal, reinforcing the sector’s dependence on fossil fuels.
At the same time, India’s relatively young BF fleet is approaching its first relining cycle. Reinvesting to extend the life of these assets alongside the massive pipeline of new coal-based capacity, risks locking the sector into fossil fuel dependence for another two to three decades. Ultimately, this crowds out cleaner technology investments and will make India's eventual decarbonisation significantly more costly and complex.
The inclusion of iron and steel targets under CCTS will expand the coverage of the Indian ETS even further, strengthening its position as the third-largest compliance market in the world. The initial targets are likely to drive improvements through energy efficiency and other relatively low-cost operational measures. 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.
As the world's second-largest steel producer and one of the few major economies where steel demand is still growing, the industrial choices of today will decide the emission trajectory of the sector going forward and influence the success of India’s climate commitments.