India's 2035 NDC: Exploring Target Scenarios for Steel, Aluminium, and Fertilisers
India's Updated NDC for 2035 is projected by analysts to target an estimated 47% reduction in GDP emission intensity by 2035 relative to 2005 and a 60% non-fossil power capacity goal. These represent intensity goals, not absolute caps. For industrial sectors, the CCTS serves as a related domestic delivery instrument. This analysis models the potential pathway from a sovereign Paris commitment to plant-level compliance scenarios.
Key Takeaways
- India's Updated Nationally Determined Contribution for 2035, expected to build upon the official 2022 Updated NDC, is widely projected to contain two headline quantified commitments: an estimated 47 percent reduction in the emission intensity of GDP by 2035 relative to 2005 levels, and achieving 60 percent of total installed electric power capacity from non-fossil fuel sources by 2035. The first modeled target continues India's established intensity-based framing, aiming to decarbonise per unit of economic output while allowing total emissions to grow in line with economic expansion. Analysis suggests the second target would represent a linear extrapolation of the 2030 NDC's 50 percent non-fossil capacity goal, reflecting the continuing growth of India's renewable capacity.
- The GDP emission intensity target is an economy-wide average, not a sector-specific mandate. The actual per-sector emission intensity reduction required to support the economy-wide target depends on the relative size and growth rate of each sector, baseline intensities, and the degree of decarbonisation achieved through the power sector's transition. For energy-intensive sectors like steel and aluminium, which feature higher emission intensities than the GDP average, the sectoral GEI reduction required to contribute proportionately to an economy-wide goal often demands substantial operational changes.
- The Carbon Credit Trading Scheme (CCTS) is one of the primary domestic policy instruments expected to support the NDC's industrial contribution. The CCTS GEI targets set by the Bureau of Energy Efficiency (BEE) for each obligated sector translate economy-wide ambitions into sector-specific intensity reduction frameworks. Phase 1 CCTS targets are estimated at approximately 1 to 3 percent per year across covered sectors, designed to establish monitoring, reporting, and verification (MRV) infrastructure. Official guidance suggests Phase 2 CCTS targets (FY2027-28 onwards) will be more ambitious, potentially calibrated to align closer to long-term national intensity reduction pathways.
- A 60 percent non-fossil capacity target carries direct implications for India's Grid Emission Factor (GEF) trajectory. If non-fossil sources reach 60 percent of installed capacity by 2035, and generation shares follow accordingly, the GEF is estimated to decline from its historical baseline of approximately 0.71 tCO₂/MWh to an estimated 0.38 to 0.45 tCO₂/MWh by 2035. Assuming a consumption of 14.5 MWh/t, a GEF decline of 0.31 tCO₂/MWh yields an estimated passive Scope 2 reduction of approximately 4.5 tCO₂/t for grid-connected aluminium smelters.
- The NDC framework historically accommodates development-led growth, with intensity targets designed to be compatible with sustained GDP expansion. This framing is important for industrial companies: the NDC does not dictate absolute emission reductions in the near term. As an illustrative mathematical example, a steel plant that expands production by 50 percent while simultaneously reducing GEI by 25 percent would see its absolute emissions rise, but its intensity fall, contributing to the intensity trajectory.
- A formalized NDC submission can act as an enabling condition for accessing concessional finance through the Green Climate Fund (GCF) and bilateral development finance institutions. Furthermore, India's JETP (Just Energy Transition Partnership) discussions, initiated around G20 Bali 2022, could potentially align with future NDC implementation, supporting transition finance frameworks for qualifying industrial investments.
India's climate commitment architecture operates across varying time horizons. The net-zero 2070 target represents the long-range ambition that successive generations of government and industry must navigate. The 2035 NDC acts as a medium-term commitment, projecting India's emission trajectory for the current decade. Concurrently, CCTS Phase 1 GEI targets function as near-term operational instruments, establishing the compliance mechanism that begins translating national intensity goals into plant-level frameworks. Understanding how these layers interconnect is essential for planning capital allocation against an evolving policy environment.
The anticipated parameters of a 2035 NDC project a 47 percent GDP emission intensity target, which extends the 2022 Updated NDC's 45 percent by 2030 target. Because this goal is modeled for a later year, it implies a steady intensity reduction trajectory over a longer duration. The projected 60 percent non-fossil capacity commitment builds on India's current renewable expansion; with non-fossil capacity estimated to be above 50 percent in early 2026, reaching 60 percent by 2035 requires sustaining the established installation pace.
The macro-to-micro translation: economy-wide scenarios to sector GEI targets
Estimated India 2025 GDP emission intensity: ~0.98–1.05 tCO₂e per lakh rupees Estimated reduction achieved vs 2005: approximately 40–42%
Context: As India's GDP continues to grow, total emissions can rise if intensity falls more slowly than economic output expands. Intensity-based targets structurally accommodate this dynamic.
Industrial sector GEI contribution scenario: If energy-intensive sectors collectively reduce GEI, AND the power sector's GEF declines (passively lowering Scope 2 GEI), the economy-wide intensity target becomes mathematically achievable alongside projected GDP growth.
| Sector | Estimated 2005 Intensity | Estimated 2025 Intensity | Illustrative 2035 Target Range | Potential Reduction Lever | CCTS Phase 2 Scenario |
|---|---|---|---|---|---|
| Steel (BF-BOF, all-in) | ~2.7 tCO₂/t | ~2.2 tCO₂/t | ~1.5–1.8 tCO₂/t | Renewable electricity for Scope 2; DRI-EAF transition; scrap recycling | Phase 2 targets are modeled to require tighter GEI reductions than Phase 1 |
| Aluminium (coal CPP baseline) | ~18–20 tCO₂/t | ~16.5–17.0 tCO₂/t | ~10–12 tCO₂/t | Grid Emission Factor decline and renewable procurement | Phase 2 target scenarios strongly incentivise a transition to renewable electricity |
| Fertilisers (urea, LNG-based) | ~2.8–3.2 tCO₂/t urea | ~2.4–2.8 tCO₂/t | ~1.5–2.0 tCO₂/t | Potential green hydrogen substitution (subject to HPO trajectories); N₂O abatement | Phase 2 calibration depends heavily on domestic green H₂ availability |
| Cement | ~0.90–0.95 tCO₂/t | ~0.60–0.65 tCO₂/t | ~0.40–0.50 tCO₂/t | Clinker ratio reduction; blended cements | Phase 2 targets are modeled to be achievable with continued efficiency improvements |
Grid emission factors and passive industrial Scope 2 reductions
The modeled commitment of 60 percent non-fossil installed capacity carries significant industrial implications. The Grid Emission Factor (GEF) represents the average CO₂ per kWh generated across the national grid. As non-fossil installed capacity scales, the generation mix transitions. If 60 percent of installed capacity is non-fossil by 2035, and average renewable capacity factors improve through storage and grid integration, analysts estimate the non-fossil generation share could reach 50 to 55 percent. This scenario projects the GEF declining from approximately 0.71 tCO₂/MWh to an estimated 0.38 to 0.45 tCO₂/MWh by 2035, reducing the Scope 2 GEI of grid-connected industrial entities.
CCTS Phase 2 Ambition and Industrial Planning.
BEE is expected to calibrate CCTS GEI targets to be consistent with India's broader climate trajectory. Early indications suggest Phase 1 targets were structured to support the establishment of MRV infrastructure without imposing immediate operational disruption. Consequently, Phase 2 is highly likely to require active abatement investment — spanning renewable electricity procurement and process efficiency enhancements — rather than relying on passive GEF decline alone. Analysts caution that companies deferring transition investments until Phase 2 begins may face heightened compliance pressures. Subject to final regulatory banking rules, companies that outpace Phase 1 targets may bank CCC surpluses for future compliance periods, underscoring the strategic value of early action.
Frequently Asked Questions
How does the 2035 NDC scenario compare to the official 2022 Updated NDC?
The 2022 Updated NDC committed to a 45 percent reduction in GDP emission intensity by 2030 relative to 2005, and 50 percent non-fossil installed power capacity by 2030. The projected 2035 NDC scenario anticipates a 47 percent intensity reduction and a 60 percent non-fossil capacity goal. While the headline numbers indicate progression, the extended timeline to 2035 adjusts the required annual rate of change. The primary significance of the 2035 framework lies in its alignment with the Paris Agreement's ratchet mechanism, projecting continuous policy momentum.
Does an NDC create direct legal obligations for private industrial companies?
The NDC itself creates no direct legal obligations for private industrial companies; it is a sovereign commitment made by the government under the Paris Agreement. Domestic policy instruments, such as the CCTS, Renewable Purchase Obligations (RPO), and emerging frameworks like the Green Steel Taxonomy, serve as related regulatory mechanisms rather than direct NDC mandates. However, a formalized NDC submission can act as an enabling condition for accessing international climate finance networks that may indirectly support industrial transitions.
How does India's intensity-based approach compare to other major economies?
India's intensity-based framing shares structural similarities with China's NDC approach, which targeted a 65 percent intensity reduction by 2030 relative to 2005. Conversely, Brazil's NDC is expressed in absolute terms, targeting a 50 percent absolute reduction by 2030, while South Africa utilizes a peak-plateau-decline trajectory. India's intensity-based approach structurally accommodates economic growth, allowing absolute emissions to rise alongside improving carbon efficiency to support development objectives.
Sources
- UNFCCC, India's Updated NDC — 2022 submission baseline
- Ministry of Environment, Forest and Climate Change, Climate policy statements and historical emission inventory data
- NITI Aayog, India's Long-Term Low Emissions Development Strategy — 2070 net-zero pathway
- Central Electricity Authority, Grid Emission Factor (GEF) historical data and capacity mix projections
- Bureau of Energy Efficiency, CCTS Phase 1 operational guidelines and target methodologies