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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 proudly notified the world's first Green Steel Taxonomy in December 2024. This classification system explicitly defines what "green steel" is, thoughtfully grades it by emission intensity across three distinct star levels, and importantly, links certification directly to the CCTS MRV framework. For Indian steel producers currently navigating CBAM exposure, upcoming public procurement mandates, and an evolving domestic carbon market, the taxonomy is far more than a simple box-ticking exercise. It serves as a foundational framework that will definitively determine market access, procurement eligibility, and carbon market positioning for the next decade.
Key Takeaways
India proudly became the first country in the world to define green steel through a formal, national taxonomy. Gazette Notification 763(E), dated 12 December 2024, defines green steel as steel with a CO₂ equivalent emission intensity dropping below 2.2 tonnes per tonne of finished steel (tfs). It then neatly grades this qualifying steel into three-star, four-star, and five-star categories.
Currently, India's sector average emission intensity hovers around 2.55 tCO₂/tcs. This essentially means the vast majority of India's active steel production doesn't yet qualify for any green rating under the taxonomy's current rules. The 2.2 tCO₂/tfs threshold acts as a tough stretch target for most Indian producers, rather than a reflection of where they comfortably operate today.
The emission scope under the taxonomy covers Scope 1, Scope 2, and a limited slice of Scope 3. This carefully includes agglomeration, beneficiation, coke making, and embodied emissions in purchased inputs, while smartly excluding upstream mining and downstream transport. Consequently, it is broader than CBAM's current coverage for steel, which strictly focuses on Scope 1.
Certification is carefully administered by the National Institute of Secondary Steel Technology (NISST) using the BEE's CCTS MRV procedure. This smartly ensures that taxonomy certification and CCTS compliance share the exact same measurement and verification infrastructure, a significant design advantage that prevents duplicated reporting burdens.
A sweeping Green Public Procurement Policy, which aims to mandate that 25 to 37% of steel used in government infrastructure projects be certified green-rated, is expected to take effect starting in FY 2028. A recent CII report projects that green steel consumption through public procurement could hit a massive 10.6 million tonnes by FY 2031. This will effectively create India's first truly large-scale domestic demand signal for certified low-carbon steel.
The star rating thresholds will be carefully reviewed every three years. As the taxonomy naturally 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. Meanwhile, most BF-BOF producers must invest significantly in renewable energy, efficiency upgrades, and eventually new technologies to access the highest tiers.
Why India acted first, and what it truly signals
On 12 December 2024, Shri H.D. Kumaraswamy Ji, Union Minister of Steel and Heavy Industries, proudly unveiled India's Green Steel Taxonomy at Vigyan Bhavan in New Delhi. The launch took place in the presence of key officers from the Ministry of Steel, representatives from major producers, think tanks, academia, and a delegation from the European Union. The official notification subsequently appeared in the Gazette on 23 December 2024. No other country had attempted this before; India safely became the first globally to formally define green steel through a direct government notification.
The timing here is far from coincidental. The EU's Carbon Border Adjustment Mechanism (CBAM) was poised to enter its financial phase just weeks later on 1 January 2026. Steel was notably among CBAM's very first covered sectors. Meanwhile, the domestic carbon market (the CCTS) was in its final stages of operationalisation, carefully setting sector-specific targets for 253 iron and steel entities. On top of that, India's Green Steel Mission, carrying an estimated Rs 5,000 crore outlay, was being actively designed with public procurement mandates as its central engine for demand creation. The taxonomy effectively serves as the vital connective tissue that makes all of these distinct instruments fully understandable to each other and to international buyers.
Globally, the exact definition of green steel has been hotly contested territory. The EU lacks an official green steel standard. The Science Based Targets initiative, ResponsibleSteel, the Sustainable Steel Principles, and various national or regional initiatives each rely on entirely different methodologies and thresholds. Indian steelmakers exporting to Europe were facing a frustrating patchwork of customer-imposed requirements with absolutely no shared benchmark. The taxonomy efficiently created a single, government-backed, gazette-notified definition, finally giving Indian producers a credible domestic standard to leverage in their commercial negotiations.
The three star ratings: what they mean and who can actually reach them
The taxonomy ingeniously defines green steel through a "greenness percentage", which is the percentage by which a plant's emission intensity sits below the 2.2 tCO₂e/tfs threshold. For example, a plant operating at exactly 2.0 tCO₂e/tfs has a greenness of 9.1%. A plant at 1.6 tCO₂e/tfs achieves a greenness of 27.3%. A plant producing net-zero emissions steel (0 tCO₂e/tfs) would logically boast 100% greenness. Star ratings are then clearly assigned based on the absolute emission intensity rather than the percentage, with three tiers currently set in stone.
The highest tier. Currently, this is achievable primarily by scrap-based electric arc furnaces running on a significant share of renewable electricity. A well-run EAF using standard grid power at India's current carbon intensity achieves approximately 1.1 to 1.3 tCO₂/tcs. Shifting to a substantial renewable share brings it comfortably to or below the five-star threshold. Gas-based DRI-EAF can potentially reach this level provided there is a high renewable share in the power mix. Hydrogen-based DRI, when fully commercial, would easily achieve five-star status, trending closer to zero. The five-star tier is exactly where CBAM exposure essentially disappears and where the premium in EU markets will naturally be the highest. Most BF-BOF producers simply cannot reach this level without a fundamental technology change.
The mid-tier. This is realistically achievable by the best-performing BF-BOF producers who have deployed the best available technology (BAT) upgrades, such as Pulverised Coal Injection, Coke Dry Quenching, and Top Pressure Recovery Turbines. They also must procure a significant share of renewable electricity for auxiliary operations and captive power. A remarkably well-optimised Indian BF-BOF plant at the efficiency frontier sits around 2.0 to 2.2 tCO₂/tcs, right at the boundary. Reaching the lower end of this tier (approaching 1.6 tCO₂/tfs) requires additional heavy levers, including substantial renewable power procurement and serious scrap blending. Gas-based DRI-EAF generally reaches the lower end of this tier. This is the tier where the upstream Scope 3 inclusions in the taxonomy become highly commercially important, as they can easily push a plant from three-star to four-star, or vice versa, depending heavily on the carbon intensity of purchased inputs like coke and lime.
The entry tier. For most Indian BF-BOF producers, this serves as the most immediately reachable green rating, provided they have aggressively implemented BAT efficiency measures and made some real progress on renewable power procurement. A sector average of 2.55 tCO₂/tcs means reaching three-star status requires roughly a 14% reduction in emission intensity from where the average Indian BF-BOF plant sits today. That is a realistic near-term target, highly achievable within the next two to four years through proven technology upgrades that generally have positive business cases independent of the green label. For a plant already at the sector frontier of 2.0 to 2.2 tCO₂/tcs, three-star certification is immediately achievable as long as the proper MRV documentation is securely in place.
Steel produced above 2.2 tCO₂e/tfs simply does not qualify for any green rating and cannot be legally certified under the taxonomy. Given India's sector average of approximately 2.55 tCO₂/tcs, this category unfortunately catches the vast majority of India's current steel production. This is particularly true for coal-based DRI plants, which average a heavy 3.0 to 3.1 tCO₂/tcs, and the massive number of BF-BOF plants that have yet to implement comprehensive BAT upgrades.
The taxonomy's exact emission boundary is Scope 1 + Scope 2 + limited Scope 3. Here, limited Scope 3 includes agglomeration processes (sintering, pellet making, coke making), beneficiation, and embodied emissions in purchased raw materials and intermediate products. Crucially, it excludes upstream mining and all downstream emissions, including transport. Because this is a much broader boundary than CBAM's strict Scope 1 coverage for steel, a plant's taxonomy rating and its CBAM exposure can actually be calculated on entirely different emission footprints. The inclusion of coke-making emissions is deeply significant for integrated BF-BOF producers, as coke making alone contributes about 0.3 tCO₂/tcs, which is often the strict difference between a three-star and a four-star rating. Producers must thoughtfully calculate both separately rather than lazily assuming a taxonomy star rating directly maps to a low CBAM compliance cost.
Who qualifies today: a route-by-route assessment
The most commercially relevant question regarding the taxonomy isn't just what it says on paper, but rather which Indian producers can realistically hit which tier based on their current operations. The answer predictably varies quite sharply depending on the 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 comfortably move 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; push renewable power share. | Moderate. Close to CBAM benchmark. |
| BF-BOF (frontier) (BAT implemented) | 2.0 to 2.3 tCO₂/tcs | ★★★★ / ★★★ | Deploy further BAT upgrades, utilize renewable electricity, and boost 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 are an essential first step. A 14% intensity cut is needed just for 3-star. | Very high. Drives the vast majority of India's CBAM exposure. |
| Coal-based DRI-EAF/IF | 3.0 to 3.1 tCO₂/tcs | No rating | A fundamental route change is required; a coal-to-gas DRI transition serves as a near-term step. | Highest. More than 2x the EU CBAM benchmark. |
| H₂-DRI EAF (green hydrogen) | 0.3 to 0.5 tCO₂/tcs | ★★★★★ Five-star | Already safely at five-star. Moving toward near-zero with fully renewable power. | Near-zero. CBAM costs are effectively eliminated. |
The table effortlessly makes a structural reality incredibly visible. India's secondary steel sector (scrap-based EAF producers) is largely already green-rated, or at least comfortably close to it. Meanwhile, India's primary steel sector (BF-BOF and coal-based DRI) sits almost entirely outside the taxonomy as currently written. The taxonomy thoughtfully acts as both an accurate description of where India's secondary sector successfully is today, and an aspirational target that the primary sector absolutely must work toward.
This undeniably matters commercially. Secondary steel producers, who have historically been viewed as lower-quality commodity producers in India, now proudly possess a taxonomy credential that their massive blast-furnace competitors simply do not. In EU export markets where CBAM makes carbon intensity a very real financial variable, that credential translates directly and efficiently into a hard cost advantage.
How certification actually works: the NISST process
Certification under the new taxonomy is carefully administered by the National Institute of Secondary Steel Technology (NISST), which proudly acts as the nodal agency for MRV, certificate issuance, and registry maintenance. The process runs smoothly as follows.
Steel plants initially register with NISST for a modest one-time fee of Rs 10,000 per plant. Certification costs are set at Rs 1,000 for every 500 tonnes of finished steel certified. Therefore, a 2 million tonne per year plant seeking annual full-production certification would only pay Rs 40 lakh annually in certification costs, which is highly modest relative to the immense commercial value of holding a green credential. Certificates are predictably issued on a financial year basis by default, though plants can actively opt for more frequent MRV cycles and receive certificates accordingly.
The critical integration point here is the MRV methodology. The taxonomy explicitly specifies that emissions measurement must follow the exact procedure published by the BEE in July 2024 under the Carbon Credit Trading Scheme. This is the exact same procedure that CCTS-obligated steel entities use for their standard compliance reporting. This smartly means that a BEE-accredited carbon verification agency (ACVA) conducting a routine CCTS verification simultaneously produces the precise data needed for taxonomy certification. The two processes are not pointlessly duplicated. They brilliantly run on the exact same data, the same verification standard, and the same institutional infrastructure. For steel producers who are already legally CCTS-obligated (all 253 entities in the iron and steel sector), taxonomy certification does not frustratingly add a separate MRV burden. It simply adds the NISST registration, the basic certification fee, and the final application process.
Each certificate issued by NISST safely carries the plant name, the exact emission intensity (in tCO₂e/tfs), the greenness percentage, the star rating, and the certified quantity of steel. This clear, verifiable certificate is the critical document that a steel producer can confidently present to EU buyers, government procurement agencies, and financial institutions as solid evidence of the steel's impressive emission performance.
The taxonomy beautifully defines and certifies green steel, but it does not yet automatically create the financial incentives for producing it. Those incentives will come directly from the forthcoming Green Steel Mission, the public procurement mandate, and the CCTS carbon market. The taxonomy also does not currently possess formal international recognition. While EU buyers may willingly accept NISST certificates as highly credible evidence of emission intensity, they are not yet legally recognised under CBAM in the exact same way that EU-accredited verifier data is. NISST certification acts as a brilliant domestic credential that strongly strengthens a producer's position in export negotiations, but it absolutely does not substitute for the strict CBAM-compliant verified emissions report that EU importers legally require for the CBAM declaration. Indian producers realistically need both.
The public procurement connection: the most important demand signal
India's sweeping Green Public Procurement Policy, widely expected to take effect starting in FY 2028, serves as the most consequential near-term commercial implication of the entire taxonomy. Government-linked infrastructure projects consumed a staggering 30.6 million tonnes of steel in FY 2024, which translates to roughly 22% of India's total steel demand. That massive consumption generated approximately 78 million tonnes of CO₂ emissions, or about 21% of India's total steel sector emissions. Mandating that a specific share of that procurement be strictly green-rated would successfully create the very first large-scale, safely guaranteed domestic market for certified low-carbon steel.
A detailed CII report, prepared carefully with the support of Climate Catalyst and successfully released in early 2026, projects that introducing the GPP from FY 2028 would steadily result in green steel consumption of 2.2 million tonnes in FY 2027, ultimately rising to a massive 10.6 million tonnes by FY 2031. The share of green steel in total government procurement is expected to grow impressively from 5% to 15% over that period. The analysis confidently found that 93% of surveyed steel manufacturers were fully ready to securely supply certified green steel at scale, provided the government mandate reliably delivers clear price authority and tight procurement specifications. The incremental cost impact on public infrastructure projects is surprisingly estimated at just 0.2 to 1.2%, a figure that makes the policy remarkably economically straightforward to mandate.
There is, unfortunately, a slight structural complication. A bold proposal to establish a centralised government agency dedicated to bulk procurement of certified green steel was firmly rejected by the Ministry of Finance in 2024, citing completely valid concerns about market distortion and the heavy administrative overhead of managing a massive centralised buyer. Consequently, the GPP policy is being smartly designed as a procurement specification requirement instead. It will strictly mandate that individual project agencies specify minimum green ratings deeply within their tender documents, rather than acting as a centralised offtake mechanism. This is arguably the smartest structural approach for a large, heavily decentralised procurement system, but it urgently requires significant capacity building across the country's hundreds of public works agencies, whose procurement teams currently possess practically no experience dealing with carbon-intensity specifications.
The CBAM connection: where taxonomy and trade policy finally meet
The taxonomy and CBAM naturally operate on highly related, but distinctly different, emission boundaries. Understanding exactly where these rules effortlessly align and where they frustratingly diverge matters immensely for Indian exporters who are actively trying to leverage taxonomy certification as a powerful commercial asset in competitive EU markets.
CBAM currently only covers direct Scope 1 emissions originating from steel production. These are strictly the emissions from fuel combustion and process reactions occurring completely within the production boundary. The taxonomy, conversely, bravely covers Scope 1, Scope 2 (indirect electricity emissions), and a carefully limited slice of Scope 3 (agglomeration processes and purchased input embodied emissions). This realistically means a plant can successfully secure a three-star taxonomy rating even if its Scope 2 electricity emissions are quite high, primarily because the domestic star rating thoughtfully reflects the full emission boundary, and Scope 1 reductions could successfully offset those high Scope 2 costs. But for strict CBAM purposes, only the Scope 1 component safely drives the actual certificate obligation.
The practical, real-world implication is that taxonomy certification absolutely does not safely substitute for CBAM-compliant verified emissions reporting. However, the robust NISST certification process, which intelligently uses the same BEE MRV procedure as the CCTS, perfectly produces highly detailed installation-level emissions data with a verification standard that can confidently be used as excellent supporting evidence securely within the CBAM chain. An EU importer whose Indian supplier proudly holds both a NISST certificate and a CCTS-compliant ACVA report actually holds much stronger documentary evidence for any Article 9 carbon price deduction claim than an importer foolishly relying on simple default values.
As the European Commission relentlessly pushes to expand CBAM's coverage seamlessly into downstream steel and aluminium products starting from January 2028 (under the proposal in COM 2025/989), the sheer volume of Indian steel products suddenly facing CBAM exposure will inevitably grow significantly. Solid taxonomy certification, expertly combined with robust MRV infrastructure, securely forms the foundational commercial response to that aggressive expansion.
What changes as the thresholds begin to tighten
The taxonomy strictly specifies that the star rating thresholds will be carefully and thoroughly reviewed every three years, meaning the next major review is predictably expected around 2027. As India's ambitious green hydrogen mission steadily progresses, as EAF capacity massively expands, and as the CCTS safely drives crucial intensity reductions across the sector, the Ministry of Steel is fully expected to tighten the thresholds progressively and aggressively. Achieving a three-star rating today may soon require dropping efficiently below 2.0 tCO₂/tfs in the very next review cycle. Similarly, a top-tier five-star threshold of 1.6 tCO₂/tfs today might swiftly move significantly closer to 1.2 tCO₂/tfs in the 2030 review, keeping it highly consistent with what global net-zero steel trajectories actually require.
This ultimately creates a brilliantly clear strategic planning horizon directly for Indian steel producers. The smart actions that effortlessly earn a three-star rating today (such as BAT upgrades, some renewable electricity procurement, and basic NISST certification) are absolutely necessary, but they simply won't be sufficient to safely maintain any green rating by 2030. Producers who choose to invest now only to barely reach the current three-star threshold will inevitably find themselves slipping painfully back below the eligibility line as the benchmark rapidly moves. The most sustainable commercial strategy is unquestionably to aim high for the absolute highest feasible rating today, fully armed with a transition roadmap that astutely anticipates rapid threshold tightening and shifting government procurement requirements that will overwhelmingly favour higher star ratings over time.
India's Ministry of Steel has already firmly set a vital sector-level target of dramatically reducing average emission intensity from approximately 2.65 tCO₂/tfs safely down to 2.20 tCO₂/tfs by 2029–30. This perfectly brings the sector average right down to the taxonomy eligibility threshold. That is considered a necessary minimum. But the massive commercial reward within EU markets, in secure domestic procurement, and heavily in carbon credit revenues confidently goes to the producers who smartly move the fastest and the furthest, not simply to those who lazily reach the floor.
Frequently Asked Questions
Does a NISST green steel certificate satisfy CBAM verification requirements?
No, not directly. CBAM strictly requires embedded emissions to be properly verified by an EU-accredited third-party verifier using the specific CBAM-specified methodology. The NISST certificate and the ACVA-verified CCTS emissions report serve as highly complementary documents that together provide exceptionally strong evidence of a plant's true emission performance, and they absolutely can support an Article 9 CBAM certificate deduction claim. However, they do not substitute for the CBAM-prescribed verification process. Indian exporters absolutely need separate CBAM-compliant verification alongside their domestic taxonomy certification.
Can a BF-BOF producer get any green rating today without making major capital investments?
Potentially yes, but only if the plant has already seamlessly implemented aggressive BAT measures and confidently sits securely in the 2.0 to 2.2 tCO₂/tfs intensity range. This realistically applies only to the best-performing Indian BF-BOF plants. These specific producers can effortlessly achieve three-star certification with proper MRV documentation through NISST. However, the vast majority of Indian BF-BOF plants resting at the sector average of 2.55 tCO₂/tcs urgently need approximately a 14% intensity reduction to simply reach three-star eligibility. That requires highly real investment in efficiency measures and heavy renewable electricity procurement, rather than relying on documentation alone.
How does the greenness percentage work?
The greenness percentage effectively measures how far a plant's emission intensity is completely below the 2.2 tCO₂e/tfs threshold. For example, a plant sitting at 2.0 tCO₂e/tfs achieves a greenness of 9.1% (the exact difference of 0.2 neatly divided by the absolute threshold of 2.2, comfortably expressed as a percentage). A cleaner plant at 1.6 tCO₂e/tfs easily achieves a greenness of 27.3%. The official certificate cleanly shows the absolute emission intensity, the exact greenness percentage, and the resulting clear star rating. This successfully gives eager buyers a fully quantitative performance indicator rather than just a fuzzy categorical label.
When does the Green Public Procurement Policy actually take effect?
The draft Green Steel Public Procurement Policy was confidently released for stakeholder consultation at the exact same December 2024 event where the new taxonomy was proudly unveiled. Final notification and full implementation is heavily expected starting from FY 2028. The draft policy smartly proposes mandating that 25 to 37% of steel used heavily in government infrastructure projects must confidently carry a minimum green rating. Implementation will directly apply through highly existing procurement platforms, notably including GeM (Government e-Marketplace), strictly requiring clear green rating specifications directly in tender documents for any covered projects.
Is taxonomy certification completely separate from CCTS compliance?
They brilliantly share the exact same MRV infrastructure but ultimately serve two distinct purposes. CCTS compliance legally requires obligated entities to properly meet tight GHG emission intensity targets and either cleanly earn or securely purchase Carbon Credit Certificates. Taxonomy certification, on the other hand, highly classifies the actual steel produced at those plants completely into star rating tiers solely for commercial purposes, heavily including procurement, lucrative EU market access, and green branding. For fully CCTS-obligated steel entities, the ACVA-verified emissions report legally required for CCTS compliance wonderfully also provides the exact underlying data needed for seamless NISST certification. The specific certification fee and basic NISST application are minor additional steps, but the heavy lifting of core data generation is beautifully shared.