India Targets 2 Tons CO2 per Ton of Steel by 2035 While Expanding Capacity to 400 Million Tons

India is preparing a major reset of its steel strategy by pairing large-scale capacity expansion with a sharper emissions reduction target for one of its most carbon-intensive sectors. According to a Reuters review of the draft National Steel Policy 2025, the government wants to reduce steel-sector emissions intensity from about 2.65 tons of carbon dioxide per ton of finished steel to 2 tons by 2035–36, while increasing crude steel capacity from roughly 168 million tons to 400 million tons over the same period. That would amount to an emissions-intensity cut of about 25% even as production capacity more than doubles.

The scale of the challenge is significant because steel already accounts for 10% to 12% of India’s total emissions. As output rises to support infrastructure, manufacturing, and exports, the sector’s decarbonisation pathway becomes central to India’s broader net-zero strategy. The draft policy therefore signals that India no longer sees industrial growth and emissions management as separate policy tracks. Instead, the government is trying to combine them inside a single long-term competitiveness plan.

 

Trade pressure is accelerating the policy shift

 

The timing is closely linked to changes in global trade rules. The European Union’s Carbon Border Adjustment Mechanism entered its definitive regime in 2026, and iron and steel account for 98% of the volumes covered in the first reporting window published by the European Commission. That raises the pressure on exporters in high-emissions sectors, including Indian steelmakers, to lower carbon intensity if they want to remain competitive in regulated markets.

India’s draft policy reflects that reality. Reuters reported that the government wants to more than double steel exports to 20 million tons by 2035–36 even as carbon-related trade barriers tighten. That means the country’s steel decarbonisation effort is not only about climate alignment. It is also about preserving export relevance in markets where embedded emissions are becoming a commercial factor.

 

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Cleaner production will depend on fuel, scrap, and infrastructure

 

To move the sector toward lower emissions, the draft policy prioritises more gas-based steelmaking, higher scrap use, and incentives tied to continuous emissions reduction. But the path is constrained by infrastructure. Reuters reported that only 21% of blast furnace capacity and 5% of direct reduced iron capacity currently have access to gas pipeline networks, limiting how quickly producers can shift away from coal-based processes.

This is where the policy becomes more than a target document. It points to the need for parallel investment in gas access, logistics, and technology partnerships. The draft also references cooperation with 19 countries, including Australia, Japan, Germany, Russia, and the United States, to support resource access and technology transfer. That suggests India sees steel decarbonisation as a systems challenge involving energy, trade, and industrial policy rather than only plant-level efficiency upgrades.

 

The capital requirement is large, but so is the economic upside

 

The financial scale is substantial. Reuters reported that reaching 400 million tons of capacity by 2035–36 will require about 17 trillion rupees, or roughly $183.4 billion, in investment. At the same time, the government expects the expansion to create more than 3 million additional jobs on top of the 2.8 million already supported by the sector.

That combination makes steel one of the clearest examples of how industrial decarbonisation is becoming an investment and employment story, not just an emissions story. India is effectively trying to redesign the sector so it can remain a growth engine while becoming less exposed to carbon costs, imported fuel risk, and trade penalties. This broader interpretation is an inference based on the policy’s investment, export, and emissions targets.

 

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What the draft policy signals

 

The draft National Steel Policy 2025 shows that India is moving toward a more explicit industrial decarbonisation model in which emissions intensity, energy security, and export competitiveness are being addressed together. The country is not slowing its steel ambitions. It is trying to make those ambitions more viable in a world where carbon performance increasingly affects market access and capital allocation.

Execution will be the real test. Cutting emissions intensity to 2 tons per ton of finished steel while building out to 400 million tons will require faster infrastructure deployment, wider fuel access, cleaner technologies, and consistent policy support over a decade. But if India can make meaningful progress, it could reshape how emerging industrial economies approach heavy-industry growth under climate constraints. This final point is an inference based on the scale and structure of the draft policy.