India’s Green Steel Taxonomy: Star Ratings, Who Qualifies and What It Means | Reclimatize.in
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Steel · Policy AnalysisIndia’s Green Steel Taxonomy: What the Star Ratings Mean, Who Qualifies Today, and Why It Matters Beyond a Label
India notified the world’s first Green Steel Taxonomy in December 2024 — a classification system that defines what green steel is, grades it by emission intensity across three star levels, and links certification directly to the CCTS MRV framework. For Indian steel producers navigating CBAM exposure, the upcoming public procurement mandate and an evolving domestic carbon market, the taxonomy is not a box-ticking exercise. It is a framework that will determine market access, procurement eligibility and carbon market positioning for the next decade.
India is the first country in the world to define green steel through a formal national taxonomy. The Gazette Notification 763(E), dated 12 December 2024, defines green steel as steel with CO₂ equivalent emission intensity below 2.2 tonnes per tonne of finished steel (tfs) — and grades qualifying steel into three-star, four-star and five-star categories.
India’s sector average emission intensity is approximately 2.55 tCO₂/tcs — meaning the majority of India’s current steel production does not qualify for any green rating under the taxonomy as it stands. The taxonomy’s 2.2 tCO₂/tfs threshold is a stretch target for most Indian producers, not a description of where they are today.
The emission scope under the taxonomy covers Scope 1, Scope 2 and limited Scope 3 — including agglomeration, beneficiation, coke making and embodied emissions in purchased inputs — but excludes upstream mining and downstream transport. This makes it broader than CBAM’s current coverage for steel, which is Scope 1 only.
Certification is administered by the National Institute of Secondary Steel Technology (NISST) using the BEE’s CCTS MRV procedure — meaning taxonomy certification and CCTS compliance share the same measurement and verification infrastructure. This integration is a significant design advantage that avoids duplicated reporting burdens.
A Green Public Procurement Policy, mandating 25 to 37% of steel used in government infrastructure projects to be certified green-rated, is expected to take effect from FY 2028. A CII report projects green steel consumption through public procurement could reach 10.6 million tonnes by FY 2031, creating India’s first large-scale domestic demand signal for certified low-carbon steel.
The star rating thresholds will be reviewed every three years. As the taxonomy tightens, scrap-based EAF producers — who can already achieve sub-1.3 tCO₂/tcs in ideal conditions — stand to gain the most from a premium green steel market, while most BF-BOF producers must invest significantly in renewable energy, efficiency upgrades and eventually technology transition to access the highest tiers.
Why India acted first — and what it signals
On 12 December 2024, Shri H.D. Kumaraswamy Ji, Union Minister of Steel and Heavy Industries, unveiled India’s Green Steel Taxonomy at Vigyan Bhavan in New Delhi — in the presence of officers from the Ministry of Steel, representatives from major producers, think tanks, academia and a delegation of the European Union. The notification appeared in the Official Gazette on 23 December 2024. No other country had done this before. India was the first in the world to formally define green steel through a national government notification.
That timing is not coincidental. The EU’s CBAM had entered its financial phase just two weeks earlier, on 1 January 2025. Steel was among CBAM’s first covered sectors. The domestic carbon market — the CCTS — was in its final stages of operationalisation, with sector-specific targets for 253 iron and steel entities under notification. And India’s Green Steel Mission, carrying an estimated Rs 5,000 crore outlay, was being designed with public procurement mandates as its central demand-creation mechanism. The taxonomy was the connective tissue that made all of these instruments legible to each other and to international buyers.
Globally, the definition of green steel has been contested territory. The EU does not have an official green steel standard. The Science Based Targets initiative, ResponsibleSteel, the Sustainable Steel Principles and various national and regional initiatives each use different methodologies and thresholds. Indian steelmakers exporting to Europe were facing a patchwork of customer-imposed requirements with no shared benchmark. The taxonomy created a single, government-backed, gazette-notified definition — giving Indian producers a credible domestic standard to point to in commercial negotiations.
The three star ratings — what they mean and who can reach them
The taxonomy defines green steel through a “greenness percentage” — the percentage by which a plant’s emission intensity is lower than the 2.2 tCO₂e/tfs threshold. A plant at exactly 2.0 tCO₂e/tfs has a greenness of 9.1%. A plant at 1.6 tCO₂e/tfs has a greenness of 27.3%. A plant at 0 tCO₂e/tfs — net-zero emissions steel — would have 100% greenness. Star ratings are then assigned based on the absolute emission intensity, not the percentage, with three tiers currently defined.
The taxonomy’s emission boundary is Scope 1 + Scope 2 + limited Scope 3, where limited Scope 3 includes agglomeration processes (sintering, pellet making, coke making), beneficiation and embodied emissions in purchased raw materials and intermediate products — but excludes upstream mining and all downstream emissions including transport. This is a broader boundary than CBAM’s current Scope 1 coverage for steel, which means a plant’s taxonomy rating and its CBAM exposure can be calculated on different emission footprints. The taxonomy inclusion of coke-making emissions is particularly significant for integrated BF-BOF producers — coke making alone contributes approximately 0.3 tCO₂/tcs, which is the difference between three-star and four-star for a well-run plant. Producers need to understand both calculations separately rather than assuming the taxonomy star rating directly maps to CBAM compliance cost.
Who qualifies today — a route-by-route assessment
The most commercially useful question about the taxonomy is not what it says on paper, but which Indian producers can realistically reach which tier given where they are today. The answer varies sharply by production route.
| Production Route | Typical India Emission Intensity | Taxonomy Rating Today | Path to Higher Rating | CBAM Exposure |
|---|---|---|---|---|
| Scrap-based EAF (renewable power) | 0.8 to 1.2 tCO₂/tcs | ★★★★★ Five-star | Maintain renewable sourcing; green certification straightforward | Very low — already below EU benchmark |
| Scrap-based EAF (grid power) | 1.1 to 1.5 tCO₂/tcs | ★★★★★ / ★★★★ | Increase renewable procurement share to move firmly into five-star | Low to moderate |
| Gas-based DRI-EAF | 1.5 to 1.7 tCO₂/tcs | ★★★★ Four-star | Blend green hydrogen into DRI process; increase renewable power share | Moderate — close to CBAM benchmark |
| BF-BOF (frontier) (BAT implemented) | 2.0 to 2.3 tCO₂/tcs | ★★★★ / ★★★ | Further BAT upgrades + renewable electricity + scrap blending | High — well above EU benchmark of 1.37 tCO₂/t |
| BF-BOF (average) India sector average | 2.5 to 2.7 tCO₂/tcs | No rating | BAT upgrades essential first step; 14% intensity cut needed for 3-star | Very high — drives majority of India’s CBAM exposure |
| Coal-based DRI-EAF/IF | 3.0 to 3.1 tCO₂/tcs | No rating | Route change required; coal-to-gas DRI transition as near-term step | Highest — 2x EU CBAM benchmark |
| H₂-DRI EAF (green hydrogen) | 0.3 to 0.5 tCO₂/tcs | ★★★★★ Five-star | Already at five-star; moving toward near-zero with renewable power | Near-zero — CBAM effectively eliminated |
The table makes a structural reality visible. India’s secondary steel sector — scrap-based EAF producers — is largely already green-rated or close to it. India’s primary steel sector — BF-BOF and coal-based DRI — is almost entirely outside the taxonomy as currently written. The taxonomy is simultaneously an accurate description of where India’s secondary sector already is, and an aspirational target that the primary sector must work toward.
This matters commercially because secondary steel producers — historically viewed as lower-quality commodity producers in India — now have a taxonomy credential that their blast-furnace competitors do not. In EU export markets where CBAM makes carbon intensity a financial variable, that credential translates directly into a cost advantage.
How certification works — the NISST process
Certification under the taxonomy is administered by the National Institute of Secondary Steel Technology (NISST), which acts as the nodal agency for MRV, certificate issuance and registry maintenance. The process runs as follows.
Steel plants register with NISST for a one-time fee of Rs 10,000 per plant. Certification costs Rs 1,000 for every 500 tonnes of finished steel certified — so a 2 million tonne per year plant seeking annual full-production certification would pay Rs 40 lakh annually in certification costs, which is modest relative to the commercial value of the green credential. Certificates are issued on a financial year basis by default, though plants can opt for more frequent MRV cycles and receive certificates accordingly.
The critical integration point is the MRV methodology. The taxonomy explicitly specifies that emissions measurement follows the procedure published by BEE in July 2024 under the Carbon Credit Trading Scheme — the same procedure that CCTS-obligated steel entities use for their compliance reporting. This means that a BEE-accredited carbon verification agency (ACVA) conducting a CCTS verification simultaneously produces the data needed for taxonomy certification. The two processes are not duplicated — they run on the same data, the same verification standard and the same institutional infrastructure. For steel producers who are already CCTS-obligated (all 253 entities in the iron and steel sector), taxonomy certification does not add a separate MRV burden. It adds only the NISST registration, the certification fee and the application process.
Each certificate issued by NISST carries the plant name, the emission intensity (in tCO₂e/tfs), the greenness percentage, the star rating and the certified quantity of steel. This certificate is the document that a steel producer can present to EU buyers, government procurement agencies and financial institutions as evidence of the steel’s emission performance.
The taxonomy defines and certifies green steel. It does not yet create financial incentives for producing it — those come from the forthcoming Green Steel Mission, the public procurement mandate and the CCTS carbon market. The taxonomy also does not yet have formal international recognition — EU buyers may accept NISST certificates as evidence of emission intensity, but they are not legally recognised under CBAM in the way that EU-accredited verifier data is. NISST certification is a domestic credential that strengthens a producer’s position in export negotiations, but it does not substitute for the CBAM-compliant verified emissions report that EU importers require for the CBAM declaration. Indian producers need both.
The public procurement connection — the most important demand signal
India’s Green Public Procurement Policy, expected to take effect from FY 2028, is the most consequential near-term commercial implication of the taxonomy. Government-linked infrastructure projects consumed approximately 30.6 million tonnes of steel in FY 2024 — roughly 22% of India’s total steel demand. That consumption generated approximately 78 million tonnes of CO₂ emissions, or about 21% of India’s total steel sector emissions. Making a mandatory share of that procurement green-rated would create the first large-scale, guaranteed domestic market for certified low-carbon steel.
A CII report prepared with the support of Climate Catalyst and released in early 2026 projects that introducing the GPP from FY 2028 would result in green steel consumption of 2.2 million tonnes in FY 2027 rising to 10.6 million tonnes by FY 2031, with the share of green steel in total government procurement growing from 5% to 15% over that period. The analysis found that 93% of steel manufacturers surveyed were ready to supply certified green steel at scale, provided the government mandate gives clear price authority and procurement specifications. The incremental cost impact on public infrastructure projects is estimated at just 0.2 to 1.2% — a figure that makes the policy economically straightforward to mandate.
There is, however, a structural complication. A proposal to establish a centralised government agency for bulk procurement of certified green steel was rejected by the Ministry of Finance in 2024 — citing concerns about market distortion and the administrative overhead of running a centralised buyer. The GPP policy is therefore being designed as a procurement specification requirement — mandating that individual project agencies specify minimum green ratings in tenders — rather than as a centralised offtake mechanism. This is the right structural approach for a large, decentralised procurement system, but it requires capacity building across the country’s hundreds of public works agencies, whose procurement teams currently have no experience with carbon-intensity specifications.
The CBAM connection — where taxonomy and trade policy meet
The taxonomy and CBAM operate on related but distinct emission boundaries. Understanding exactly where they align and where they diverge matters for Indian exporters who are trying to use taxonomy certification as a commercial asset in EU markets.
CBAM currently covers only direct Scope 1 emissions from steel production — the emissions from fuel combustion and process reactions within the production boundary. The taxonomy covers Scope 1, Scope 2 (indirect electricity emissions) and limited Scope 3 (agglomeration processes and purchased input embodied emissions). This means a plant can have a three-star taxonomy rating even if its Scope 2 electricity emissions are high — because the star rating reflects the full emission boundary, and Scope 1 reductions could offset high Scope 2 costs within the rating system. For CBAM purposes, only the Scope 1 component drives the current certificate obligation.
The practical implication: taxonomy certification does not substitute for CBAM-compliant verified emissions reporting. But the NISST certification process — which uses the same BEE MRV procedure as the CCTS — produces installation-level emissions data with a verification standard that can be used as supporting evidence in the CBAM chain. An EU importer whose Indian supplier has a NISST certificate and a CCTS-compliant ACVA report has stronger documentary evidence for any Article 9 carbon price deduction claim than an importer relying on default values. See our analysis of how that deduction works: India’s CCTS and CBAM: How the Carbon Price Offset Deduction Works.
As the European Commission expands CBAM’s coverage to downstream steel and aluminium products from January 2028 — under the proposal in COM 2025/989 — the population of Indian steel products with CBAM exposure will grow significantly. Taxonomy certification, combined with robust MRV infrastructure, is the foundational commercial response to that expansion.
What changes as the thresholds tighten
The taxonomy specifies that star rating thresholds will be reviewed every three years — meaning the next review is expected around 2027. As India’s green hydrogen mission progresses, as EAF capacity expands, and as the CCTS drives intensity reductions across the sector, the Ministry of Steel is expected to tighten the thresholds progressively. A three-star today may require below 2.0 tCO₂/tfs in the next review cycle. A five-star threshold of 1.6 tCO₂/tfs today may move closer to 1.2 tCO₂/tfs in the 2030 review — consistent with what global net-zero steel trajectories require.
This creates a clear strategic planning horizon for Indian steel producers. The actions that earn a three-star rating today — BAT upgrades, some renewable electricity procurement, NISST certification — are necessary but not sufficient to maintain any green rating in 2030. Producers who invest now only to reach the current three-star threshold will find themselves slipping back below the eligibility line as the benchmark moves. The sustainable commercial strategy is to aim for the highest feasible rating today, with a transition roadmap that anticipates threshold tightening and government procurement requirements that will favour higher star ratings over time.
India’s Ministry of Steel has set a sector-level target of reducing average emission intensity from approximately 2.65 tCO₂/tfs to 2.20 tCO₂/tfs by 2029–30 — bringing the sector average just to the taxonomy eligibility threshold. That is a necessary minimum. But the commercial reward in EU markets, in domestic procurement and in carbon credit revenues goes to the producers who move fastest and furthest, not simply to those who reach the floor.
Frequently Asked Questions
Does a NISST green steel certificate satisfy CBAM verification requirements?
No — not directly. CBAM requires embedded emissions to be verified by an EU-accredited third-party verifier using the CBAM-specified methodology. The NISST certificate and the ACVA-verified CCTS emissions report are complementary documents that together provide strong evidence of a plant’s emission performance, and they can support an Article 9 CBAM certificate deduction claim — but they do not substitute for the CBAM-prescribed verification process. Indian exporters need separate CBAM-compliant verification alongside taxonomy certification.
Can a BF-BOF producer get any green rating today without making major capital investments?
Potentially yes, if the plant has already implemented BAT measures and is in the 2.0 to 2.2 tCO₂/tfs intensity range — which applies to the best-performing Indian BF-BOF plants. These producers can achieve three-star certification with proper MRV documentation through NISST. However, the majority of Indian BF-BOF plants at the sector average of 2.55 tCO₂/tcs need approximately a 14% intensity reduction to reach three-star eligibility, which requires real investment in efficiency measures and renewable electricity procurement rather than documentation alone.
How does the greenness percentage work?
Greenness percentage measures how far a plant’s emission intensity is below the 2.2 tCO₂e/tfs threshold. A plant at 2.0 tCO₂e/tfs has a greenness of 9.1% (the difference of 0.2 divided by the threshold of 2.2, expressed as a percentage). A plant at 1.6 tCO₂e/tfs has a greenness of 27.3%. The certificate shows the absolute emission intensity, the greenness percentage and the resulting star rating — giving buyers a quantitative performance indicator rather than just a categorical label.
When does the Green Public Procurement Policy take effect?
The draft Green Steel Public Procurement Policy was released for stakeholder consultation at the same December 2024 event where the taxonomy was unveiled. Final notification and implementation is expected from FY 2028. The draft policy proposes mandating 25 to 37% of steel in government infrastructure projects to carry a minimum green rating. Implementation will apply through existing procurement platforms including GeM (Government e-Marketplace), requiring green rating specifications in tender documents for covered projects.
Is taxonomy certification separate from CCTS compliance?
They share the same MRV infrastructure but serve different purposes. CCTS compliance requires obligated entities to meet GHG emission intensity targets and either earn or purchase Carbon Credit Certificates. Taxonomy certification classifies the steel produced at those plants into star rating tiers for commercial purposes — procurement, EU market access, green branding. For CCTS-obligated steel entities, the ACVA-verified emissions report required for CCTS compliance also provides the underlying data for NISST certification. The certification fee and NISST application are additional steps, but the core data generation is shared.