India’s Green Steel Taxonomy — Emission Standards, Five-Star Rating System and Transition Challenges

CURRENT AFFAIRS | MARCH 2026

India’s Pioneering Green Steel Taxonomy

In December 2024, India released its Green Steel Taxonomy — becoming one of the first countries globally to formally define what constitutes “green steel” through measurable emission benchmarks. This was not merely a symbolic gesture. As the world’s second-largest steel producer with an ambitious capacity expansion target of 300 MT by 2030, India needed a domestic standard that could serve multiple purposes: guiding industrial investment, enabling green procurement, establishing credibility in international markets facing CBAM pressures, and providing a framework for financial instruments (green bonds, sustainability-linked loans) in the steel sector.

The Five-Star Rating System

The Taxonomy employs a graduated five-star rating system based on emission intensity measured in tonnes of CO2 equivalent per tonne of finished steel (t-CO2e/tfs):

This graduated approach is significant. Unlike a binary green/non-green classification, the five-star system creates incremental incentives for improvement — a steel plant rated 2-Star has a clear pathway to 3-Star, and each upgrade brings tangible market and regulatory benefits. This pragmatic design reflects India’s industrial reality: the majority of existing capacity operates at 2.3-2.5 t-CO2e/tfs, and an abrupt binary standard would classify virtually all Indian steel as “non-green.”

MRV Framework — Measurement, Reporting and Verification

A green taxonomy is only as credible as its monitoring mechanism. The MRV (Measurement, Reporting and Verification) system mandated under the Taxonomy requires steel producers to measure emissions across the entire production chain (Scope 1, 2, and partial Scope 3), report these measurements to a designated authority using standardised protocols, and submit to independent third-party verification.

The MRV framework draws on the GHG Protocol Corporate Standard and aligns with International Standards Organisation (ISO) 14064 series. This international compatibility is deliberate — it enables Indian green steel ratings to be recognised under EU CBAM reporting requirements, reducing the compliance burden for exporters.

Scrap Economy and the 50% Target by 2047

India has set an ambitious target of 50% scrap-based steelmaking by 2047 — the centenary of independence. Currently, scrap-based production accounts for approximately 25-30% of total output. Achieving the 50% target requires a comprehensive scrap ecosystem: vehicle scrapping policy implementation (Vehicle Scrappage Policy, 2021), organised scrap collection infrastructure, quality grading standards (BIS specifications), and sufficient EAF capacity to process increased scrap volumes.

The National Green Hydrogen Mission (Rs 19,744 Crore) provides the complementary policy framework. Green hydrogen produced from renewable electrolysis can serve as both the reducing agent in H-DRI steelmaking and a carbon-free energy source for EAF operations, creating a pathway to near-zero emission steel production.

Legal and Regulatory Framework

The Green Steel Taxonomy operates within the broader legal framework of the Environment Protection Act, 1986 and the Bureau of Indian Standards Act, 2016. EPA 1986 empowers the Central Government to set environmental standards for industries, while BIS provides the standardisation framework for product labelling and quality certification.

The National Green Tribunal (NGT), established under the NGT Act, 2010, has enforcement jurisdiction over environmental norms. Section 15 of the NGT Act provides for compensation and restitution for environmental damage, while Section 26 provides for penalties for non-compliance with tribunal orders — creating a judicial enforcement mechanism for emission standards.

From a constitutional perspective, Article 48-A (DPSP) directs the State to protect and improve the environment, while Article 51A(g) makes it a fundamental duty of every citizen to protect the natural environment including forests, lakes, rivers, and wildlife. The Supreme Court in MC Mehta v. Kamal Nath (1997) applied the public trust doctrine to natural resources, holding that the State is a trustee of natural resources for the benefit of the public.

Implementation Challenges

The Taxonomy faces several implementation hurdles. The most significant is the SME challenge: India has over 300 small and medium steel producers (mini-mills and induction furnaces) that collectively account for approximately 30% of total production. These producers often lack the technical capacity, financial resources, and institutional support to implement comprehensive MRV systems. Without targeted support — simplified reporting protocols, subsidised third-party verification, capacity building programmes — these producers risk being excluded from the green steel market.

Second, the green premium issue: green steel currently costs 20-40% more than conventional steel. Unless procurement policies (government green procurement mandates), market mechanisms (carbon pricing, green certificates), or consumer preferences create sufficient demand for green steel, the financial incentive for producers to invest in decarbonisation remains weak.

Source: UPSC Essentials, The Indian Express — March 2026

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