Three Times the Steel, Two-Fifths Less Carbon: Why CBAM Makes Green Steel a Condition of Trade

GREEN STEEL IS NOW A PASSPORT, NOT A PREFERENCE

Look first at the headline targets. India's draft steel policy wants capacity to rise from about 220 million tonnes to 604 million tonnes by 2047, an increase of nearly 2.75 times. Over the same period, it wants each tonne of crude steel to carry 1.54 tonnes of CO2 instead of 2.54, a cut of about 39%.

Put those two numbers together and the challenge becomes clear. If all that capacity were running at the target intensity, total emissions from the sector would still be roughly two-thirds higher than today's capacity would produce at current intensity.

That is illustrative arithmetic on capacity, not a forecast. Even so, it shows that the policy is about growing cleaner per tonne, not about emitting less in total.

Who feels the squeeze first An Indian steel mill exporting hot-rolled coil to Europe already faces this question as a cost, not an abstraction.

Since 1 January 2026, the definitive phase of the EU's Carbon Border Adjustment Mechanism has made steel exporters to the EU financially liable for the carbon embedded in their products. A tonne made through the coal-based blast furnace route carries more embedded carbon and therefore a higher carbon charge at Europe's border, than a tonne made with scrap or cleaner energy.

The mechanism is simple. Higher emission intensity means a larger carbon bill, which means a lower margin or a higher price, which in turn means losing ground to cleaner competitors. That is why the draft's emission target matters less as a climate pledge and more as a condition of staying competitive in export markets.

India's own Green Steel Taxonomy, released in December 2024, already sets the benchmark buyers will look for: below 2.2 tonnes of CO2e per tonne of finished steel to qualify as green and below 1.6 for the top five-star rating.

The coking coal knot The harder constraint sits upstream.

India imports about 90 to 92% of its coking coal, mostly from Australia and Russia. The draft projects demand of 236 million tonnes by 2047, alongside 772 million tonnes of iron ore. Its answer is to diversify supply through overseas assets and strategic global outreach, while Mission Coking Coal aims to raise domestic output from 52 million tonnes in 2022 to 140 million tonnes by 2029-30.

Here lies the policy's internal tension. Coking coal is the input of the very blast furnace route that decarbonisation has to move away from. Every new coal-based furnace built to reach 604 million tonnes deepens import dependence and locks in emissions for the furnace's working life, which can run for decades.

The draft's emphasis on scrap use, Industry 4.0 and AI points towards cleaner routes, but the balance between old and new technology will decide whether both targets can be met. For the GS3 answer on industry and climate, take this insight into the exam: CBAM has turned decarbonisation from a moral commitment into a price, so India's steel policy is really a trade policy as much as a climate one.