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Steel · DecarbonisationIndia’s Steel Scrap and EAF Expansion: The Economics of Secondary Steelmaking Under CCTS and CBAM
India’s electric arc furnace route operating on the national grid emits approximately 1.2 to 1.4 tCO₂ per tonne of steel — against 2.2 to 2.5 tCO₂ per tonne for the blast furnace basic oxygen furnace route. An EAF running on roughly 50% renewable electricity, like Tata Steel’s newly inaugurated Ludhiana facility, achieves below 0.3 tCO₂ per tonne — placing it at the top tier of India’s gazette-notified green steel taxonomy and generating Carbon Credit Certificates under CCTS at a rate that materially offsets capex. India’s total scrap consumption reached 41 million tonnes annually, against domestic generation of approximately 32 million tonnes. With the current 9-million-tonne import gap projected to widen to 20 to 30 million tonnes by 2030 as EAF capacity scales, the critical question is no longer whether to shift toward scrap-electric steel — CCTS and CBAM have answered that — but how fast domestic scrap mobilisation can close the supply gap that will otherwise force expensive imports.
India produced 151.14 million tonnes of crude steel in FY2025, making it the world’s second-largest producer. Steel capacity stood at 200.33 Mtpa and is targeted to reach 300 Mtpa by FY2030. Of installed capacity, approximately 43 Mtpa is EAF-based, alongside 88.5 Mtpa of BF-BOF and 74 Mtpa of induction arc furnace (IAF). The EAF route accounted for approximately 23% of India’s crude steel output in FY2025. India consumed around 41 million tonnes of ferrous scrap annually, with domestic generation at approximately 32 million tonnes — creating a structural import requirement of around 9 million tonnes that is set to widen sharply as EAF capacity grows.
On 20 March 2026, Tata Steel inaugurated India’s first scrap-based greenfield EAF at Hi-Tech Valley, Ludhiana, Punjab. Built with an investment of approximately Rs 3,200 crore, it has a capacity of 0.75 million tonnes per annum, uses 100% steel scrap, and is designed to operate with approximately 50% renewable energy. Target CO₂ emissions are below 0.3 tCO₂ per tonne of steel — solidly within the 5-star category of India’s gazette-notified green steel taxonomy. The plant manufactures Tata Tiscon construction rebar for the domestic market and aligns with Tata Steel’s stated net-zero target of 2045.
The combined financial incentive from CCTS and CBAM for shifting from BF-BOF to scrap-based EAF with renewable electricity is now material. Under CCTS, a tonne of steel produced at 0.3 tCO₂ instead of 2.36 tCO₂ (the gazette-notified sector baseline GEI) represents a surplus of approximately 2.06 tCO₂e per tonne, generating approximately 2.06 CCCs. At an expected CCC price of Rs 600 to Rs 1,000 per tCO₂e, a 1 Mtpa EAF plant operating at this surplus generates Rs 124 crore to Rs 206 crore per year in CCC revenue. Under CBAM, an EAF-RE plant at 0.3 tCO₂/t pays approximately €19.50 per tonne of EU-exported steel in CBAM certificates against approximately €162.50 for a BF-BOF plant at 2.5 tCO₂/t — a differential of approximately €143 per tonne, or around Rs 12,900 to Rs 13,500 per tonne at current exchange rates.
The Vehicle Scrappage Policy (Voluntary Vehicle-Fleet Modernization Programme, launched 2021) is the most important near-term lever for domestic scrap supply. India has approximately 12 million vehicles eligible for scrappage, including 4.5 million medium and heavy commercial vehicles. From August 2022 to July 2025, approximately 350,500 vehicles were formally scrapped — significantly below the government’s target of 500,000 per year by 2026. Full implementation could yield roughly 9 to 12 million tonnes of additional ferrous scrap annually, nearly eliminating the current import requirement. The Steel Scrap Recycling Policy 2019 provides quality and processing standards for formal scrap aggregation, but implementation remains uneven in the informal sector that dominates collection.
JSW Steel is developing a scrap-based EAF greenfield plant in Kadapa, Andhra Pradesh, with Phase 1 commercial production targeted for January 2029. The plant is designed at 1 Mtpa initially, expanding to 3 Mtpa, and will operate on green energy. JSW Green Steel Limited — carved out of the Salav, Maharashtra unit — is separately developing 4 Mtpa of green steel capacity in phases. The JSW Vijayanagar plant, which already hosts EAF capacity within its integrated complex, is conducting green hydrogen trials at a 3,800 tonne/year pilot scale powered by 25 MW of renewable energy, as of October 2025.
The emission gap — how the two routes compare in India’s context
The decarbonisation case for EAF is structural, not marginal. India’s BF-BOF fleet operates at a weighted average GEI of approximately 2.36 tCO₂ per tonne — the gazette-notified CCTS sector baseline under the GHG Emission Intensity Target Rules. Some older integrated plants emit as high as 3.83 tCO₂ per tonne where high-ash coal and older burden management compound. The global BF-BOF average is approximately 1.99 tCO₂ per tonne, confirming that India’s fleet sits above the global benchmark principally because it relies heavily on high-ash imported coking coal and its plant profile has not yet benefited fully from the most recent operational improvements.
The EAF route breaks this dependence. An EAF operating on India’s national grid — at a grid emission factor of 0.710 tCO₂/MWh as published by CEA Version 21.0 for FY2024-25 — and charged with 100% scrap produces approximately 1.2 to 1.4 tCO₂ per tonne of steel, depending on electricity intensity and scrap quality. This places it below the CCTS 3-star green steel taxonomy threshold of 2.2 tCO₂/t and delivers the steel at a GEI comfortably within what Phase 2 CCTS targets (expected from FY2027-28) are likely to require of the sector. As the grid decarbonises with renewable energy additions, this figure will fall automatically for grid-connected EAFs without any additional plant-level investment.
Introducing renewable electricity to the EAF pushes the GEI to below 0.5 tCO₂ per tonne. At approximately 100% RE — as Tata Steel’s Ludhiana facility is designed to approach — the combined Scope 1 and Scope 2 GEI falls below 0.3 tCO₂ per tonne, which is solidly within the 5-star green steel taxonomy category.
(CCTS gazette sector baseline GEI)
(high-ash coal, older plant)
(100% scrap; CEA GEF 0.710 tCO₂/MWh)
(scrap EAF + green open access)
(Tata Steel Ludhiana design target)
The financial implication is direct. Under CCTS, every tonne of steel produced below the sector GEI target earns a CCC. For a new EAF plant at 1.3 tCO₂/t operating against a sector baseline of 2.36 tCO₂/t, the surplus is 1.06 tCO₂e per tonne of output. On a 1 Mtpa plant, that is 1.06 million CCCs per year. At Rs 800/CCC — a midpoint of the analyst range — this represents Rs 84.8 crore per year in CCC revenue. For an EAF-RE plant at 0.3 tCO₂/t, the surplus jumps to 2.06 tCO₂e per tonne, generating 2.06 million CCCs and approximately Rs 164.8 crore per year at Rs 800/CCC. These figures are not hypothetical — they follow directly from the gazette-notified baseline and the expected CCC price range confirmed by analysts and cited in the CERC framework.
The policy stack — five instruments now pointing in the same direction
Five policy instruments simultaneously create the incentive environment for EAF-scrap investment in India’s steel sector. For the first time, their combined effect provides financial signalling that goes beyond planning aspirations.
National Steel Policy 2017 targeted 35 to 40% of steel output from scrap by 2030. At the 300 Mtpa target, this means 105 to 120 Mtpa of scrap-based steel production — roughly 2.5 to 3 times the current 41 Mtpa of scrap input. The NSP did not attach price signals to this ambition; CCTS and CBAM have since provided those.
Steel Scrap Recycling Policy 2019 formalised India’s scrap processing framework with quality standards for collection, dismantling, and processing. Its primary impact has been on creating the framework for Registered Vehicle Scrapping Facilities and on improving the grade consistency of processed scrap, which is critical for EAF metallurgical requirements. Without consistent scrap quality — particularly managing tramp element content — EAF heat efficiency and product grade variability deteriorate.
Vehicle Scrappage Policy (V-VMP, 2021) is the most consequential near-term domestic scrap supply lever. Personal vehicles older than 20 years and commercial vehicles older than 15 years are eligible. Incentives include registration fee waivers on new vehicle purchases, state motor vehicle tax refunds of 15 to 25%, and up to a 5% discount from vehicle manufacturers. From August 2022 to July 2025, approximately 350,500 vehicles were formally scrapped through the Registered Vehicle Scrapping Facility network — significantly below the target of 500,000 per year by 2026. India has approximately 12 million eligible vehicles including 4.5 million commercial vehicles. One BS-4 truck generates pollution equivalent to approximately 14 new BS-6 trucks. Full VSP implementation is therefore simultaneously an air quality, road safety, and scrap supply programme — three separate policy goals served by a single instrument.
CCTS is the first instrument that puts an actual price on GEI for India’s steel sector. A BF-BOF plant above its gazette target must purchase CCCs or pay Environmental Compensation at 2× the average CCC trading price. An EAF well below the sector baseline GEI earns CCCs to sell. The scheme does not mandate a route change — it makes the economics of GEI over-performance financially visible for the first time.
CBAM from January 2026 is the most externally powerful incentive for Indian steel exporters to the EU. CBAM currently assesses Scope 1 emissions for steel. At an EU ETS price of approximately €65 per tCO₂e, a BF-BOF plant at 2.5 tCO₂/t exporting to the EU pays approximately €162.50 per tonne in CBAM certificate costs. An EAF-RE plant at 0.3 tCO₂/t pays approximately €19.50 — a differential of approximately €143 per tonne, equivalent to around Rs 12,900 to Rs 13,500 per tonne depending on the exchange rate. India exported 6.02 million tonnes of finished steel during April to February of FY2025-26, with Italy, Belgium and Spain among the top destinations. Even at 10% of total exports reaching EU markets, the CBAM differential on this volume would amount to approximately €86 million annually — a figure that fully justifies investment in lower-emission production routes.
The two routes compared — a full financial picture
(India fleet average position)
(scrap-based with renewable electricity)
One important caveat on the financial comparison: scrap price volatility. EAF steelmaking is a price-spread business — the difference between scrap input cost and steel output price. When scrap prices rise sharply, the economics of EAF narrow relative to BF-BOF’s ore-and-coal inputs. In mid-2025, Chinese sponge iron flooded Indian markets, causing DRI prices to collapse and temporarily reducing scrap import volumes 8 to 12% despite strong crude steel output. The structural advantage of the EAF position under CCTS and CBAM is that carbon price pressure is independent of commodity cycles: as carbon prices firm and targets tighten from 2027, the EAF carbon advantage compounds while the BF-BOF carbon liability grows regardless of what scrap prices do.
The scrap balance — supply, demand, and the growing import gap
India’s domestic scrap generation has grown impressively but cannot keep pace with demand growth. The EY Closing the Loop report (2026) documents this trajectory against JPC production data.
Domestic scrap generation grew from 19 million tonnes in FY2022 to 32 million tonnes in FY2025 — a 68% increase in three years. This is a genuinely strong trajectory, driven by India’s growing industrial base, rising per-capita vehicle ownership, and construction demolition cycles. But it is not keeping pace with demand growth driven by EAF capacity additions and higher scrap charging rates in existing IAF mills. The projected 65-million-tonne demand by 2030 against a realistic domestic supply of 35 million tonnes creates a 20 to 30 million tonne structural import requirement.
The Iron and Steel Scrap Council white paper of April 2026 identifies the absence of a digital, traceable scrap ecosystem as the primary bottleneck. Punjab uses 85% scrap in its EAF charge mix; Chennai EAF mills operate at 90% scrap. Both states benefit from higher per-capita industrial and vehicle density generating local scrap. The challenge is in Odisha, Jharkhand and Bihar — where the formal scrap collection infrastructure is thin despite significant industrial activity — and in the large informal sector where scrap dealers operate outside formal processing standards, creating grade inconsistency that limits EAF charging rates.
Projects in motion
| Project | Company | Location | Capacity | Status | CO₂ target |
|---|---|---|---|---|---|
| Ludhiana scrap EAF | Tata Steel | Hi-Tech Valley, Ludhiana, Punjab | 0.75 Mtpa; 100% scrap; ~50% RE; Tata Tiscon rebar; investment Rs 3,200 crore | Inaugurated 20 March 2026 | <0.3 tCO₂/t |
| Kadapa EAF greenfield | JSW Steel (AP High Grade Steels) | Kadapa, Andhra Pradesh | 1 Mtpa Phase 1 → 3 Mtpa; scrap-based; green energy commitment | Construction began Feb 2023; Phase 1 commercial production targeted Jan 2029 | Not yet specified |
| JSW Green Steel (Salav) | JSW Green Steel Ltd (JSW subsidiary) | Salav, Maharashtra | 4 Mtpa green steel in two phases; DRI base (0.9 Mtpa) + EAF expansion; green hydrogen integration planned | Carved out into separate entity; phased capacity rollout | Near-zero (green steel mandate) |
| Vijayanagar green H₂ pilot | JSW Steel | Toranagallu, Karnataka | 3,800 t green H₂/year; 25 MW RE power; within integrated EAF-DRI complex | Trial runs near-complete as of Oct 2025; commissioning imminent | H₂ blend reduces DRI-EAF GEI |
The Tata Steel Ludhiana facility establishes a replicable model at approximately Rs 4,267 crore per Mtpa of capacity. This is above the global benchmark of $200 to $400 million per Mtpa but reflects India’s specific context: greenfield in Punjab’s industrial zone, RE integration from inception, and the cost of establishing a scrap aggregation supply chain where none previously existed at this scale in the region. As subsequent projects benefit from established local scrap networks and contractors with EAF greenfield experience, unit capex for Indian EAF projects should move toward the lower end of the global range.
India’s secondary steel sector operates through two distinct electric technologies: EAF (at large producers with installed capacity of ~43 Mtpa) and induction arc furnace (IAF, used by MSMEs and small producers, ~74 Mtpa). IAF mills together produce a substantial share of India’s construction rebar, structural sections and wire rod using a mix of scrap and DRI, and their emission profile is broadly similar to EAF when scrap content is high. Most IAF mills fall below the CCTS 50,000 tonne per year threshold and are therefore not obligated entities — the carbon price signal CCTS creates does not reach them directly. This has two implications. First, the 23% EAF share understates the total electric route contribution to Indian steel; combined EAF and IAF represents closer to 40% of output. Second, the transition of the IAF sector to higher scrap utilisation and cleaner electricity happens without the CCTS price signal, relying instead on raw material cost pressure and green procurement requirements as they develop. India’s overall steel GEI trajectory depends on both segments — but CCTS currently addresses only the larger EAF mills, leaving the vast IAF ecosystem to find its own path to lower emissions.
Frequently Asked Questions
Does EAF-route steel match BF-BOF quality for all Indian applications?
For construction steel — rebar, wire rod, structural sections — scrap-based EAF fully meets quality requirements. These are India’s highest-volume steel products and the primary output of Tata Steel’s Ludhiana facility. For flat products requiring ultra-low residual elements — automotive body panels, electrical steel, cold-rolled precision sheet — EAF faces metallurgical challenges because scrap carries tramp elements (copper, tin, nickel from alloyed steel in the scrap mix) that cannot be economically removed. Global automotive OEMs typically require primary steel (BF-BOF or H₂-DRI) for visible body panels and for certain high-strength grades, while accepting scrap-EAF for structural components where residual content limits are less critical. In India’s current context, the largest immediate volume opportunity for EAF expansion is in the construction sector, where quality constraints are not binding. The premium flat products segment, which is smaller in volume, will continue to rely on primary routes for the foreseeable future.
How does EAF scrap-based steel perform under India’s green steel taxonomy?
India’s gazette-notified green steel taxonomy (Gazette Notification 763(E), December 2024) defines 3-star as below 2.2 tCO₂/t, 4-star as 1.6 to 2.0 tCO₂/t, and 5-star as below 1.6 tCO₂/t. An EAF on the national grid at 1.2 to 1.4 tCO₂/t qualifies at 3-star and approaches 4-star. An EAF at 50% renewable electricity at 0.4 to 0.6 tCO₂/t qualifies for 5-star with considerable margin. An EAF approaching 100% renewable electricity at below 0.3 tCO₂/t is solidly 5-star. This taxonomy is expected to underpin government procurement norms mandating minimum star ratings for public infrastructure steel, creating a price premium market that favours EAF operators over BF-BOF operators who do not qualify at current average GEI.
What is the CCTS compliance position of a large EAF plant in India?
An EAF plant above the 50,000 tonne per year CCTS threshold is an obligated entity. Its GEI target is set by BEE based on its plant-specific baseline in FY2023-24 and the gazette-notified sector trajectory. For most large EAF plants operating at 1.2 to 1.4 tCO₂/t, the gazette GEI target (calibrated to the sector baseline of 2.36 tCO₂/t) will be materially above their operating GEI. This means EAF plants are almost automatically in CCC-surplus territory from the first compliance year. On a 1 Mtpa EAF plant achieving 1.3 tCO₂/t against a target of, for example, 2.2 tCO₂/t, the annual CCC surplus is 900,000 tonnes × (2.2 minus 1.3) = 900,000 CCCs. At Rs 800/CCC this generates Rs 72 crore per year in tradeable CCTS credits. This CCC revenue stream reduces the effective opex of the EAF operation and shortens the payback period on the capital investment.