EY Parthenon report reveals India's green steel demand to surge to 179 million tons by 2050

• Green steel demand in India's automotive, infrastructure and construction sectors projected to increase from negligible levels today to around 179 million tons by FY50
• Current green steel premium of US$210 per ton is expected to drop dramatically in future, as carbon prices shall increase conventional steel prices, making sustainable steel economically viable
• Without decarbonization efforts, Indian steel exports to EU could face CBAM tax impact of INR 19,277 crores by 2030 due to emission intensity differential

NEW DELHI, July 28, 2025 – A comprehensive report by EY Parthenon, developed in collaboration with WWF-India and CII-Green Business Centre, reveals that India's green steel demand is poised for exponential growth, reaching around 179 million tons by FY50 as the country's automotive, infrastructure and construction sectors drive the transition toward sustainable manufacturing practices.

The report, titled "Unlocking Green Steel Demand: An Assessment of India's Automotive, Infrastructure and Construction Sectors," provides critical insights as India aims to achieve 500 million tons per annum steel capacity by 2047 while meeting its climate commitments.

"The transition to green steel represents both a significant challenge and a tremendous opportunity for India's industrial sector," said Kapil Bansal, Partner at EY Parthenon and lead author of the report. "Although the current premium for green steel appears significant, our analysis indicates that it might reduce steel within the next decade—driven largely by the increasing impact of carbon pricing. Additionally, the cost gap is expected to narrow as green hydrogen-based DRI steelmaking becomes more affordable, with green hydrogen prices projected to decline over the coming years. This shift is not just environmentally necessary—it's becoming economically inevitable

Current market dynamics and future projections

Based on an emission intensity benchmark of below 0.5 tons CO₂ per ton of crude steel, the analysis estimates that green steel demand—currently negligible—will rise significantly to 4.49 million tons by FY30, with the construction sector leading adoption at 2.52 million tons, followed by infrastructure at 1.5 million tons, and automobiles at 0.48 million tons. By FY40, total demand is projected to nearly triple to 73.44 million tons.

The study reveals that India's steel consumption currently stands at 136 million metric tons, with construction and infrastructure sectors collectively accounting for 78% of finished steel demand. This consumption is expected to grow to 390 million tons by FY50, driven by rapid urbanization and infrastructure development.

Carbon pricing impact and green steel premium

The report highlights how carbon pricing will fundamentally reshape steel economics. Traditional BF-BOF steel prices are projected to increase by 81% by 2050 due to escalating carbon taxes, rising from the current US$660 per ton to US$1,193 per ton. In contrast, green steel produced through hydrogen-based DRI technology will see its premium decrease significantly as production scales up and costs decline.

Currently, the green steel premium translates to modest increases in production costs across sectors: 4.1% for automotive manufacturing, 3.7% for construction projects, and 5.2% for infrastructure development. However, these impacts are projected to fall below 1% by 2035-2040 as the green steel premium diminishes.

CBAM and export competitiveness

The European Union's Carbon Border Adjustment Mechanism poses significant challenges for Indian steel exporters. With India's current emission intensity at 2.5 tons of CO₂ per ton of steel compared to the EU benchmark of 1.28 tons, the emission intensity differential of approximately 106% could result in substantial financial impacts.

The report projects that without proactive decarbonization, Indian steel exports to the EU could face escalating tax burdens, emphasizing the urgent need for industry transformation to maintain global competitiveness.

Strategic recommendations

The whitepaper provides comprehensive recommendations for government, industry, and end-use sectors to facilitate the green steel transition:

For government:

• Implement carbon pricing mechanisms with costs reaching US$90-100 per ton by 2040
• Provide subsidies and tax incentives for green steel production technologies
• Establish regulatory mandates aligned with international emission standards

For industry:

• Transition to low-emission technologies to reduce emission intensity from 2.5 to 1.21 tons of CO₂ per ton by 2030
• Scale up green steel production using hydrogen-based DRI and other innovative routes
• Invest in R&D to reduce green steel production costs by 30% by 2040

For end-use sectors:

• Begin green steel procurement 10 years ahead of net-zero targets
• Accept current minor production cost increases (3.7-5.2%) for long-term sustainability benefits
• Collaborate closely with suppliers to ensure steady green steel supply

Technology pathways and supply-demand gap

The research identifies that green hydrogen-based Direct Reduced Iron (H₂ DRI) steelmaking and alternative methods such as scrap-based electric arc furnaces powered by renewable energy will be critical to meeting demand. However, significant supply-demand gaps are projected, necessitating rapid scaling of green steel production technologies.

About the Report

"Unlocking Green Steel Demand: An Assessment of India's Automotive, Infrastructure and Construction Sectors" was prepared by EY Parthenon in collaboration with WWF-India and CII-Green Business Centre (GBC), with support from the India Green Steel Coalition (IGSC).

About EY Parthenon

EY Parthenon teams work with clients to navigate complexity by helping them reimagine their ecosystems, reshape their portfolios and reinvent themselves for a better future. With global connectivity and scale, EY Parthenon teams focus on Strategy Realized—helping CEOs design and deliver strategies to better manage challenges while maximizing opportunities as they look to transform their businesses.