The Indian Steel Sector and the Risks of CCUS Funding
In its 2026 Union Budget, India announced a substantial INR 20,000 crore (approximately USD 2.2 billion) to support carbon capture, utilisation, and storage (CCUS) technologies in the industrial sector. While the intention aims at reducing emissions, this approach raises critical concerns, especially for the steel industry, which could find itself trapped in a cycle of high emissions and escalating energy security risks.
The Track Record of CCUS: A Mixed Bag
CCUS isn’t a nascent technology; its history spans decades, marked by numerous attempts and significant failures globally. The track record reveals a persistent struggle to achieve meaningful emissions reductions in steelmaking. Historically optimistic about CCUS’s potential, even the International Energy Agency (IEA) has recently tempered its enthusiasm, deeming its role in decarbonisation as “minimal.” Such a shift in perspective underscores a growing skepticism regarding the efficacy of CCUS as a solution.
Economic Viability: A Hard Sell
One of the major hurdles for CCUS is economic viability. The high investment and operating costs, coupled with expensive transportation logistics, make it hard for CCUS to compete with genuinely clean technologies. Additionally, the projects face significant unique conditions that impede “learning-by-doing” effects, stunting potential cost reductions in the sector. Pouring billions into CCUS risks being an inefficient allocation of government resources, particularly when more promising technologies exist.
Limited Success in Steelmaking
Within the steel sector, CCUS has demonstrated a lackluster performance. The only commercial-scale CCUS plant operational for steelmaking is the Al Reyadah facility in the UAE. Even then, it captures only about 25% of total emissions. Since its inception a decade ago, no similar plants have emerged, indicating a stagnant landscape. Furthermore, Al Reyadah operates on a direct reduced iron (DRI) steel plant, while most of India’s steel production relies on blast furnace (BF) technology, for which no CCUS plants currently exist worldwide.
Regulatory Pressures and Market Challenges
As the global market evolves, carbon border adjustment mechanisms (CBAM) loom on the horizon. The existing emissions-intensive steel produced through BF methods and CCUS is likely to fall under scrutiny, especially from the EU. Historical experiences from Europe, such as ArcelorMittal’s CCU plant in Belgium, demonstrate the pitfalls of underperforming projects. This facility captures less than 2% of carbon emissions and now faces shutdown, an ominous sign for the reliability of CCUS technology.
Underreported Success Stories
Recent reports from various projects have illustrated how even the most praised CCUS projects fail to deliver on their promises. The Sleipner project off the Norwegian coast, previously lauded as a success, recently disclosed over-reporting of captured carbon emissions—another indicator that CCUS projects can underperform against initial expectations. Equinor’s announcement to downscale its CCUS initiatives further underscores the challenges these projects are facing in meeting market demands.
Methane Emissions: An Overlooked Issue
CCUS’s limitations extend beyond capture rates; it fails to address the methane emissions linked to metallurgical coal mining. These emissions could constitute about one-third of total lifecycle steelmaking emissions. Therefore, relying on CCUS to decarbonise India’s steel production risks an incomplete solution, one that doesn’t sufficiently tackle the broader issue of greenhouse gas emissions.
Energy Security Risks
The dependence on CCUS also exacerbates India’s reliance on imported metallurgical coal. Currently, around 90% of India’s met coal is sourced from imports, raising substantial energy security concerns. As Australia dominates coal supplies to India, it faces a myriad of pressures—from legal to climate-related—that could jeopardize this vital resource in the future. Stakeholders need to be aware of these risks as they might raise the specter of future coal shortages.
Exploring Alternatives: Green Hydrogen and Scrap Recycling
While CCUS aims for a transformative impact, more viable technologies are emerging. Green hydrogen, for instance, is being piloted in India, with JSW Steel testing it at their Vijayanagar plant. This method represents a genuine green alternative that could significantly reduce reliance on metallurgical coal while concurrently decreasing emissions.
Furthermore, focusing on scrap steel recycling could present another way forward. As the availability of scrap steel in India increases, enhancing the logistics and collection of recycling could cut emissions and lessen dependence on imports.
Strategic Decisions for the Future
As one of the fastest-growing steel markets globally, India faces a crucial crossroads. It must make strategic tech decisions now to evade entrapment in rising met coal imports and perpetual high emissions. The stakes are high, and the implications will shape the future of India’s steel sector—and its environmental footprint.