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Steel · Policy AnalysisIndia's Green Steel Taxonomy: What Gazette Notification 763E Requires and How Producers Qualify
India's Green Steel Taxonomy establishes four distinct emission intensity thresholds, ranging from optimized BF-BOF routes to hydrogen-based DRI. These thresholds define what qualifies as green steel across Indian government procurement, policy incentives, and sustainable finance frameworks. This analysis breaks down the measurement methodologies, certification steps, and financial implications for each tier.
Key Takeaways
India's Green Steel Taxonomy, formalized through Gazette Notification 763E and the BIS IS 18032:2023 standard, sets four tiers of green steel certification based on lifecycle CO₂e intensity per tonne of crude steel. Targets range from a basic 5 to 10 percent reduction below baseline for Tier 1 up to a strict 0.5 tCO₂/t or lower for Tier 4 hydrogen-based DRI. The taxonomy covers the entire production sequence from raw material entry through crude steel output.
The measurement system uses a gate-to-gate lifecycle assessment covering Scope 1 direct emissions and Scope 2 indirect electricity emissions. Scope 3 upstream emissions from iron ore and coking coal mining are excluded from the core certification calculation, though separate disclosure is required. This boundary definition is vital: it allows a BF-BOF plant running on grid electricity to qualify for higher tiers simply by procuring renewable energy, even without altering its blast furnace process.
Government procurement guidelines under the Public Procurement (Preference to Make in India) Order now include a green steel preference clause. Central government infrastructure projects must source a minimum proportion of steel from taxonomy-certified producers. This creates guaranteed domestic demand for certified green steel independent of international export requirements, providing the first non-voluntary domestic market signal for the taxonomy.
The BIS IS 18032:2023 certification standard acts as the official assessment framework for steelmakers. The Bureau of Indian Standards accredits independent third-party certification bodies to audit plant processes, energy records, and emissions data, requiring annual renewals to maintain certified status.
Hydrogen-based DRI (Tier 4) is the only route that drops green steel intensity below 0.5 tCO₂/t when green hydrogen serves as the primary reductant. At current green hydrogen costs of Rs 400 to 500 per kg, Tier 4 steel carries a cost premium of Rs 15,000 to 25,000 per tonne over conventional BF-BOF steel. This makes it viable primarily for premium export markets like the EU, where CBAM savings and green premium pricing help offset production costs.
The taxonomy does not currently account for carbon capture, utilization, and storage (CCUS) applied to the BF-BOF route. While the Rs 20,000 crore CCUS fund announced in the 2026 Budget provides capital support for carbon capture, the taxonomy will need a formal amendment to include CCUS-enabled reductions within its official certification boundary.
India produces roughly 150 million tonnes of crude steel annually, holding its position as the world's second-largest steel producer. The vast majority, about 77 percent, relies on the blast furnace basic oxygen furnace (BF-BOF) route. This process carries an average emission intensity of 2.5 to 2.8 tCO₂ per tonne of crude steel. For comparison, the global average sits near 1.85 tCO₂/t, while scrap-based Electric Arc Furnace (EAF) operations on low-carbon grids in Europe and the United States achieve intensities below 0.5 tCO₂/t. India's Green Steel Taxonomy establishes clear emission thresholds that differentiate conventional steel from green grades, creating an accredited framework for certification and procurement.
This framework impacts three major groups across the industrial ecosystem. For steelmakers, it lays out a structured investment roadmap with clear target thresholds for every stage of decarbonisation. For public sector infrastructure procurers, including NHAI, Indian Railways, and state public works departments, it provides a standardized benchmark for green steel preferences. Finally, for capital markets, it establishes clear criteria for green bond eligibility, aligning with India's sovereign green bond framework and national climate finance goals. Understanding the practical requirements of Gazette Notification 763E and BIS IS 18032:2023 is essential for any steel producer planning capital investments over the coming decade.
The four tiers: Thresholds and production routes
The Green Steel Taxonomy organizes certification into four tiers based on the gate-to-gate lifecycle emissions of crude steel, measured in tonnes of CO₂e per tonne of liquid steel. Rather than using arbitrary spacing, these tiers mirror the technical capabilities and emission profiles of existing and emerging production routes.
| Certification Tier | CO₂e Intensity Target | Qualifying Production Routes | Current Industry Alignment | CBAM Impact |
|---|---|---|---|---|
| Tier 1: Enhanced | 5 to 10% reduction below sector baseline | Optimized BF-BOF with waste heat recovery, pulverized coal injection (PCI), and coke dry quenching. | SAIL (optimized units), JSW Steel (Vijayanagar). | High CBAM Liability Slight reduction, but remains above EU benchmarks. |
| Tier 2: Intermediate | 1.6 to 2.2 tCO₂/t crude steel | Scrap-based EAF, BF-BOF backed by major renewable energy, or gas-based DRI-EAF. | JSW Steel (EAF units), Tata Steel (Jamshedpur RE mix), JSPL Raigarh. | Moderate Liability Closer to EU benchmarks, reducing export certificate costs. |
| Tier 3: Low Carbon | 0.8 to 1.6 tCO₂/t crude steel | Gas-based DRI-EAF with high renewable energy shares or EAF-scrap on clean grids. | Limited current domestic production at scale. | Minimal Liability Meets or approaches EU CBAM benchmarks. |
| Tier 4: Green Steel | ≤0.5 tCO₂/t crude steel | Hydrogen-based DRI-EAF powered entirely by green hydrogen and renewable electricity. | Pilot projects under development. | Near-Zero Liability Emissions sit comfortably below EU benchmark levels. |
The tier breakdown highlights a major cost step in India's steel transition. Moving from Tier 1 to Tier 2 requires transitioning from optimized blast furnaces to scrap-EAF or gas-DRI routes, which demands capital investments of Rs 3,000 to 8,000 crore per million tonnes of capacity. Stepping from Tier 3 to Tier 4 involves replacing natural gas with green hydrogen as the primary reductant. This step remains expensive due to current hydrogen prices of Rs 400 to 500 per kg, compared to natural gas costs of Rs 40 to 60 per kg for an equivalent hydrogen yield. Scaling Tier 4 steel in India depends on lowering green hydrogen costs through initiatives like the SIGHT program and the Hydrogen Purchase Obligation.
The measurement boundary: What counts toward certification
The operational impact of the taxonomy depends on its emission measurement boundary, which dictates which actions reduce a facility's certified intensity. The BIS IS 18032:2023 standard mandates a gate-to-gate assessment. This covers all emissions from raw material entry at the plant gate through crude steel production at the continuous caster.
Scope 1 (Direct): Coke combustion, PCI injection, natural gas, process CO₂ from flux decomposition, electrode consumption, and fuel oil in ancillary units.
Scope 2 (Indirect): Grid electricity (Grid MWh × Grid Emission Factor) OR Captive Renewable Energy (Emission Factor = 0 if certified renewable).
Excluded from Certified Intensity: Scope 3 upstream emissions (iron ore mining, coking coal extraction, scrap collection). Disclosed separately.
Excluding Scope 3 upstream emissions from the core intensity calculation offers a strategic advantage. An integrated BF-BOF facility can improve its certification tier simply by switching to renewable power. Purchasing captive solar or wind energy lowers the Scope 2 component without requiring expensive furnace retrofits. For major integrated plants like SAIL's Bhilai or JSW's Vijayanagar, where electricity for rolling mills and auxiliary units accounts for 15 to 25 percent of plant power, this switch offers a practical path to a higher tier.
At the same time, ignoring Scope 3 emissions leaves out the full lifecycle comparison between virgin steel and recycled scrap. Because India collects roughly 28 to 30 million tonnes of scrap annually against a potential EAF capacity requirement of 50 to 60 million tonnes, scrap-based production faces supply constraints that the current tier structure does not address.
The renewable electricity opportunity for BF-BOF plants: An integrated BF-BOF plant consuming 800 to 1,000 kWh of grid electricity per tonne of steel carries a Scope 2 footprint of 0.57 to 0.71 tCO₂/t under India's grid emission factor of 0.710 tCO₂/MWh. Replacing grid power with certified open-access renewables reduces this Scope 2 footprint to zero. For a 5 million tonne facility, this cuts emissions by 2.8 to 3.6 million tonnes of CO₂e annually without altering the core blast furnace setup. For plants operating near the Tier 1 border, this single change can move them into Tier 2, unlocking government procurement preferences and lowering domestic carbon tax liabilities.
Government procurement: Driving domestic demand
To drive real-world adoption, the taxonomy relies on market incentives, primarily public procurement preferences and sustainable finance access. Public procurement creates stable domestic demand for certified steel, insulating producers from international export market fluctuations.
The updated Public Procurement (Preference to Make in India) Order requires central ministries, departments, and public sector undertakings to source a set percentage of their steel from taxonomy-certified producers. This mandate applies to major infrastructure work, including national highways (NHAI), railway lines and bridges (Indian Railways, RVNL), power transmission grids (Power Grid Corporation), and large civil works by central PSUs.
The value of this preference depends on total public procurement volumes, which hover around 15 to 20 million tonnes per year across central infrastructure projects, alongside the green steel price premium. Industry estimates place this premium at Rs 1,500 to 4,000 per tonne over standard commodity pricing, depending on the certification tier and product type. With hot-rolled coil trading near Rs 59,500 per tonne, a Rs 3,000 per tonne green premium adds a 5 percent price margin, offering a steady return for certified producers.
Mapping taxonomy tiers to CBAM liabilities
India's Green Steel Taxonomy and the EU's Carbon Border Adjustment Mechanism use different measurement boundaries. The Indian taxonomy tracks total gate-to-gate intensity (Scope 1 plus Scope 2), while CBAM for steel currently assesses Scope 1 direct emissions. However, the operational improvements needed to reach Tier 2 or Tier 3 (like adding scrap to oxygen converters, increasing DRI ratios, or reducing fuel use) directly lower Scope 1 emissions. As a result, advancing through the taxonomy tiers helps reduce CBAM liabilities for European exports.
Strategic priorities for steelmakers
The Green Steel Taxonomy offers a voluntary certification standard rather than a mandatory requirement with non-compliance penalties. Adoption will be driven by market incentives, including government procurement premiums, access to green capital, and CBAM tariff mitigation. Steel producers must evaluate which tier offers the best return on investment based on their capital constraints and product mix.
For integrated BF-BOF producers like SAIL and JSW, the most accessible near-term move is procuring renewable energy to slash Scope 2 emissions, paired with efficiency upgrades like higher scrap ratios, pulverized coal injection, and coke dry quenching. These measures can shift a plant from baseline performance to Tier 2 without requiring a full furnace rebuild. The capital costs for renewable power and scrap handling are far lower than building new EAF capacity and provide a quick return through lower power bills and CCTS compliance.
For mid-sized producers operating gas or coal DRI units, such as JSPL, the clear pathway involves transitioning from coal to natural gas DRI, and eventually blending green hydrogen as domestic supplies expand. This path leads directly to Tier 3 and Tier 4 certifications, supported by production incentives under the SIGHT program.
Frequently Asked Questions
What is Gazette Notification 763E and how does it relate to BIS IS 18032:2023?
Gazette Notification 763E is the official policy issued by the Ministry of Steel that establishes the Green Steel Taxonomy and integrates it into public procurement guidelines. BIS IS 18032:2023 is the technical standard published by the Bureau of Indian Standards that operationalizes the policy. It defines the testing methodologies, emission factors, and audit protocols used by accredited third-party bodies to certify steel facilities.
Can a traditional BF-BOF plant achieve green steel certification?
Yes. Optimized BF-BOF plants can achieve Tier 1 certification by improving furnace efficiency and switching auxiliary electrical units to renewable energy. Reaching Tier 2 is possible by increasing scrap use in oxygen converters and maximizing renewable power. However, Tiers 3 and 4 require low-carbon production routes like gas or hydrogen-based DRI, which cannot be achieved through blast furnace optimizations alone.
How does the Green Steel Taxonomy interact with domestic CCTS targets?
The Green Steel Taxonomy and the Carbon Credit Trading Scheme use similar gate-to-gate accounting boundaries (Scope 1 plus Scope 2). Lowering a plant's emission intensity to qualify for a higher taxonomy tier directly improves its CCTS performance. Plants operating below their assigned CCTS baselines earn Carbon Credit Certificates that can be traded on domestic exchanges, creating a secondary revenue stream alongside green steel sales premiums.
Does steel produced using CCUS technology qualify under the taxonomy?
Not under the current standard. The initial BIS IS 18032:2023 framework does not include accounting rules for crediting CO₂ captured via CCUS. However, given the Rs 20,000 crore CCUS fund introduced in the 2026 Budget, regulators are expected to update the standard to include CCUS accounting protocols in the next revision cycle.