NEW DELHI/MUMBAI: India’s plan to bring its steel industry under a domestic carbon trading market has slowed after inconsistencies surfaced in emissions data collected from steel plants, forcing the government to reverify the baseline needed to set reduction targets and allocate credits, according to two steel ministry officials familiar with the matter.
The government had gathered emissions data from about 70 plants to establish this baseline. But a review found mismatches between reported emissions and fuel use or production levels at some units, while others used differing calculation methods. In some cases, steel companies also raised concerns over how emission levels were determined.
Since emission limits and credit allocations depend on this baseline, the steel ministry has begun rechecking plant-level data. The revised study is underway.
“We are going to start the carbon credit trading system very soon. Till the baseline survey is completed, we will issue broader interim guidelines for the sector, and gradually move to revised emission reduction targets,” one of the two steel ministry officials cited earlier said, requesting anonymity.
Carbon market mechanics
India’s Carbon Credit Trading Scheme, introduced under the Energy Conservation (Amendment) Act, 2022, is designed to create a domestic market where companies emitting less than their permitted limit earn credits that can be sold to those exceeding their caps. A carbon credit typically represents one tonne of carbon dioxide emissions.
The push to operationalize a domestic carbon market is also linked to the European Union’s Carbon Border Adjustment Mechanism, which became fully operational in 2026 and requires importers of carbon-intensive goods such as steel to pay a levy based on embedded emissions.
Indian policymakers want a domestic carbon accounting and trading framework in place before entering negotiations with the European Union so that exporters are not exposed to overlapping compliance costs.
“The idea is to avoid paying twice for the same emissions,” the second official cited earlier said.
Until the revised baseline is completed and verified, interim guidelines will focus on emissions reporting, energy efficiency improvements and gradual adoption of cleaner technologies, the official added.
Emission reduction targets are expected to be differentiated by production technology, with separate benchmarks for blast furnace-based plants and electric arc furnace units, rather than a single sector-wide cap. This is aimed at ensuring that plants using scrap-based or lower-emission processes are not assessed using the same benchmarks as traditional coal-intensive facilities, the second official said.
Steel is among India’s most carbon-intensive industries and a major contributor to industrial greenhouse gas emissions. Indian steel plants emit about 2.5 tonnes of carbon dioxide per tonne of crude steel produced, compared with a global average of around 1.9 tonnes. The government has set an indicative goal of reducing this to roughly 2.2 tonnes by 2029-30.
Industry experts said the direction on carbon pricing is clear, but the effectiveness of the system will depend on the strength of India’s emissions monitoring and verification infrastructure.
“While the government’s move to introduce carbon emission limits is directionally aligned with global standards, the real challenge lies in monitoring and enforcement. At present, disclosures are largely self-declared and the verification infrastructure is still evolving,” said Dhruv Goel, chief executive of commodities intelligence firm BigMint.
Goel said India currently lacks fully developed systems to physically verify emissions at plant level. “There is a nodal agency framework, but we do not yet have the on-ground infrastructure to independently verify emissions declared by companies. Monitoring remains the biggest challenge.”
Steelmakers have broadly supported the transition towards cleaner production but caution that deep emission cuts will require large investments and structural changes.
“Technology upgrades can improve efficiency and reduce emissions by 4-5%, but changing the core steelmaking process itself is not easy and will take time,” Goel said. “Even achieving the 2030 emissions intensity target will require significant investment and structural adjustments across the sector.”
For now, India’s carbon market remains in a preparatory phase, with no active trading. Once the revised baseline survey is completed and compliance rules are notified, the steel sector is expected to be among the first major industries to operate under a domestic carbon pricing regime.