Iron and Steel Under CCTS – What 255 Plants Must Know About India's Largest Carbon Market Expansion
Introduction: A Watershed Moment for India's Steel Sector
India's iron and steel sector has reached a historic turning point. On June 26, 2026, the Ministry of Environment, Forest and Climate Change (MoEFCC) issued a draft notification bringing 255 iron and steel units under mandatory greenhouse gas (GHG) emission intensity targets under the Carbon Credit Trading Scheme (CCTS).
This is not a minor regulatory update. It is the largest sectoral expansion of India's carbon market to date. With combined baseline emissions of 358.6 million tonnes of CO₂ equivalent (MtCO₂e) across all units, the iron and steel sector now accounts for the largest share of India's compliance carbon market.
India is the world's second-largest steel producer, with an approximate crude steel production of 151 million tonnes in FY 2024-25, while contributing 10-12 per cent to the country's total CO₂ emissions. The sector's inclusion in the CCTS transforms the scheme from a policy framework into a working compliance market for hard-to-abate industries.
The notification, published in The Gazette of India, mandates iron and steel sector compliance starting in FY 2026-27, skipping the first compliance year of FY 2025-26 in its entirety. This means steel producers have a compressed timeline to prepare for their first compliance obligation.
This guide provides a comprehensive analysis of the iron and steel CCTS notification, explaining what the targets mean, who is affected, how the sector can comply, and what steel producers must do to prepare for India's largest carbon market expansion.
The Notification: What Changed and When
The Legal Basis
The draft notification has been issued under Sections 3, 6 and 25 of the Environment (Protection) Act, 1986. It proposes amendments to the Greenhouse Gases Emission Intensity Target Rules, 2025, introducing a new schedule that sets plant-wise GHG emission intensity targets for iron and steel manufacturers for the compliance years 2025-26 and 2026-27.
The Timeline
| Date | Event |
|---|---|
| June 23, 2025 | First draft targets for iron and steel released |
| January 2026 | Targets for other industries notified, excluding iron and steel |
| June 26, 2026 | Revised draft notification issued |
| FY 2026-27 | First compliance year for iron and steel sector |
The Significance of the Delay
The sectoral notification was issued in June 2026, skipping the first compliance year of FY 2025-26 in its entirety. This means:
- Steel producers have less time to prepare for their first compliance obligation
- The compliance timeline is compressed compared to other sectors
- The delay signals the complexity of designing appropriate targets for India's diverse steel sector
The Public Consultation
The draft notification was issued for a 60-day public comment period from the date of publication in the Official Gazette. This is an opportunity for steel producers and industry associations to submit feedback on the proposed targets.
The 255 Units: Who Is Covered?
Major Integrated Steel Producers
The draft notification covers some of India's largest producers:
| Company | Location |
|---|---|
| Tata Steel | Jharkhand |
| JSW Steel | Karnataka |
| Steel Authority of India Ltd. (SAIL) | Multiple locations |
| ArcelorMittal Nippon Steel India | Multiple locations |
| Jindal Steel and Power | Chhattisgarh |
Diverse Production Routes
The notification also covers numerous sponge iron, alloy steel, and secondary steel producers across states such as Odisha, Chhattisgarh, Karnataka, Jharkhand, West Bengal, Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu and Telangana.
What This Means
Each obligated entity has been assigned a baseline emission intensity based on its 2023-24 performance and corresponding emission intensity targets that must be achieved during the compliance years. Companies that outperform their targets will be eligible to receive Carbon Credit Certificates (CCCs), while those failing to meet their prescribed limits may be required to purchase carbon credits from the domestic market.
The Numbers: 358.6 Million Tonnes of CO₂e at Stake
The Scale of the Challenge
The iron and steel sector's inclusion in the CCTS represents a massive expansion of India's compliance carbon market.
| Metric | Value |
|---|---|
| Number of units covered | 255 |
| Combined baseline emissions | 358.6 million tonnes CO₂e |
| India's steel production (FY 2024-25) | 151 million tonnes |
| Steel sector share of India's CO₂ emissions | 10-12% |
| National target | 2.2 tCO₂ per tonne of crude steel by 2030 |
| Current average emission intensity | 2.54 tCO₂ per tonne of crude steel |
The Global Context
India is the world's second-largest steel producer, trailing only China. The choices made in the Indian steel sector will have a significant impact on global steel emissions.
The Decarbonisation Challenge
The iron and steel sector is considered "hard-to-abate" because:
- The chemistry of ironmaking (reduction of iron ore using carbon) inherently produces CO₂
- High-temperature processes require significant energy
- Capital-intensive nature makes technology transitions slow
The India-Specific Challenge
Indian steel producers face a unique challenge. While the global average emission intensity is 1.9 tonnes of CO₂ per tonne of crude steel, India's average is 2.54 tonnes. This gap represents both a challenge and an opportunity.
Emission Intensity Targets: The Reduction Range
The Target Range
The required reduction in emission intensity ranges from 2.1% to 9.3% across various types of steel entities, with a median target of around 5.5%.
The Benchmarking Approach
Consistent with the benchmarking approach, plants with higher baseline emission intensities (above 3 tCO₂e per tonne of equivalent product) have been assigned steeper percentage reductions than relatively efficient plants.
| Production Type | Target Reduction |
|---|---|
| High-emission plants (>3 tCO₂e/t) | Steeper reductions |
| Efficient plants (<3 tCO₂e/t) | Moderate reductions |
| Overall range | 2.1% – 9.3% |
| Median target | ~5.5% |
The 75 Plants with 2.2 tCO₂e or Lower
Among the obligated entities, 75 sites have been assigned emission intensity targets of 2.2 tCO₂e or lower per tonne of equivalent product. Together, these sites produced 39.97 Mt in FY 2023-24, accounting for 26.88 per cent of the total production covered under the mechanism.
The National Target Alignment
The 2.2 tCO₂e threshold aligns with India's national goal of achieving 2.2 tonnes of CO₂ per tonne of crude steel by 2030. This is a significant benchmark for the sector's decarbonisation trajectory.
India's Steel Emissions Intensity Gap
The Data
As of 2023-24, the average emission intensity per tonne of crude steel produced in India was 2.54 tonnes of CO₂, while the global average emission intensity per tonne of crude steel stands at 1.9 tonnes of CO₂.
| Metric | India | Global Average |
|---|---|---|
| Emission Intensity (tCO₂/t crude steel) | 2.54 | 1.91 |
The National Target
India has set a national goal of 2.2 tonnes of CO₂ per tonne of crude steel by 2030. The CCTS targets for the steel sector are designed to contribute to this larger goal.
The Emissions Intensity Gap
The gap between India's current emissions intensity (2.54) and the global average (1.91) means that Indian steel producers face a significant disadvantage in carbon-constrained export markets. This gap represents the challenge that the CCTS is designed to address.
The 75 Plants with 2.2 tCO₂e or Lower
The Significance
Among the obligated entities, 75 sites have been assigned emission intensity targets of 2.2 tCO₂e or lower per tonne of equivalent product. This is significant because:
| Factor | Implication |
|---|---|
| Production share | These sites produced 39.97 Mt in FY 2023-24 |
| Percentage of total production | 26.88 per cent |
| Alignment with national target | 2.2 tCO₂e is India's national target by 2030 |
| Efficiency leadership | These are India's most efficient steel producers |
The Companies Behind the 75
The 75 sites include some of India's most efficient steel producers. These are typically:
- Scrap-based EAF operators: Lower emissions due to recycled scrap
- Gas-based DRI producers: Lower emissions than coal-based DRI
- Efficient integrated steel plants: Optimised operations with best-in-class technology
The Competitive Advantage
Companies that already achieve 2.2 tCO₂e or lower have a significant competitive advantage:
- They are closer to meeting their targets than less efficient producers
- They may earn surplus CCCs that can be sold
- They face lower compliance costs
- They are better positioned for CBAM-compliant exports
The Missing Sub-Classification: A Critical Gap
The Problem
In contrast to the cement and other sectors, where facilities are categorised based on their production processes (such as integrated plants, grinding units and blending units), the steel notification does not classify sites by sub-sector or process type, making it difficult to understand the operational characteristics of the obligated sites.
The Diversity of Steel Production
The steel sector has a diverse value chain ranging from upstream ironmaking and sponge iron production to downstream steelmaking, rolling and finishing operations. Different production routes have vastly different emission profiles:
| Production Route | Description | Emission Intensity |
|---|---|---|
| Blast Furnace (BF) | Traditional coal-based route | High |
| Direct Reduced Iron (DRI) | Gas-based or coal-based | Medium-High |
| Electric Arc Furnace (EAF) | Scrap-based | Lower |
| Induction Furnace (IF) | Scrap-based, coal-dependent | Variable |
The Call for Classification
In a sector with such diversity, sub-classification of units becomes essential. Without it, it is difficult to assess whether the targets are appropriate for different production routes. The lack of sub-classification has been noted by industry observers as a significant gap in the notification.
What Changed from the First Draft?
The First Draft (June 2025)
The first draft targets for the iron and steel sector were released on June 23, 2025, alongside draft targets for secondary aluminium, petroleum refinery, petrochemicals, and textile sectors. Targets for these industries were notified in January 2026, excluding the iron and steel sector from final notification.
The Revised Draft (June 2026)
The June 2026 notification introduces both structural and numerical revisions in the emission intensity targets.
| Change | Details |
|---|---|
| Recalibration | Nearly half of the covered steel units have revised baseline emissions |
| Compliance Year | First compliance year (2025-26) skipped |
| 2026-27 Targets | Limited change from previous draft |
The Missing Explanation
The ministry has issued the revised draft without any explanation for the fresh draft. This lack of transparency has been noted by industry observers and stakeholders.
The Structural Issue
In contrast to the cement and other sectors, where facilities are categorised based on their production processes, the steel notification does not classify sites by sub-sector or process type.
Why Steel? The Sector's Emissions Profile
The Scale of the Challenge
The steel sector is among the country's largest industrial emitters, making its inclusion a significant step in operationalising the domestic carbon market.
Why the Sector Was Prioritized
| Reason | Explanation |
|---|---|
| High Emissions Intensity | Steel is one of the most carbon-intensive industrial products |
| Scale of Production | India is the world's second-largest steel producer |
| Export Exposure | Steel exports to Europe face increasing CBAM pressure |
| Abatement Potential | While hard-to-abate, there are proven technologies to reduce emissions |
| National Steel Policy | Supports India's goal of 2.2 tCO₂ per tonne of crude steel by 2030 |
The Hard-to-Abate Reality
Steel is considered a "hard-to-abate" sector because:
- The chemistry of ironmaking (reduction of iron ore using carbon) inherently produces CO₂
- High-temperature processes require significant energy
- Capital-intensive nature makes technology transitions slow
The CBAM Connection: Export Competitiveness at Stake
The CBAM Reality
India's steel and aluminium exports to the European Union (EU) fell 24.4 percent in Financial Year (FY) 2025, with steel alone down 35.1 percent , before any Carbon Border Adjustment Mechanism (CBAM) financial obligation had taken effect.
The Export Impact
| Metric | Value |
|---|---|
| Combined steel and aluminium exports decline | 24.4% |
| Steel exports decline | 35.1% |
Why This Matters
The decline suggests European buyers are already reorienting toward lower-emission producers, underscoring what is at stake as India's CCTS enters its operational phase.
Compliance Pathways for Steel Producers
Pathway 1: In-House Reduction
Steel producers have several levers to reduce emission intensity:
| Lever | Description | Potential Impact |
|---|---|---|
| Blast furnace efficiency | Optimising furnace operations | Moderate |
| Heat recovery | Capturing and reusing waste heat | Moderate |
| Power mix | Increasing renewable energy use | Moderate |
| Scrap ratio | Increasing scrap usage | Significant |
| Digital MRV | Enhanced monitoring and optimisation | Moderate |
Pathway 2: Credit Procurement
Entities that fall short of their targets may be required to purchase Carbon Credit Certificates from the domestic market. This creates a financial incentive to reduce emissions while providing a compliance pathway for those that cannot achieve the required reductions in the short term.
The Economic Logic
If the target is tighter than the 2023-24 baseline, a steel producer may need to buy credits or invest in efficiency. If it beats the target, it can generate Carbon Credit Certificates with monetary value. That is the direct link between compliance and operating margin.
The IEEFA Report: A Strong Carbon Market Framework
The Core Finding
A new report by the Institute for Energy Economics and Financial Analysis (IEEFA), produced in collaboration with the Environmental Defense Fund (EDF), maps the trajectory of the CCTS and makes recommendations on the decisions that will shape the scheme's trajectory.
Key Themes
The analysis is structured around four interconnected themes:
- Financial market participation: Building liquidity and depth
- Border carbon costs: Responding to CBAM
- Sectoral expansion: Including the power sector
- Offsets and Article 6: Managing international opportunities
What This Means for Steel
The choices made now in the CCTS design — including benchmark calibration and enforcement mechanisms — will determine whether the market produces a carbon price signal strong enough to guide the steel sector's decarbonisation over 15- to 30-year investment horizons.
The Path to Decarbonisation: What Comes Next
The Initial Phase
The initial targets are likely to drive improvements through energy efficiency and other relatively low-cost operational measures. The required reduction ranges from 2.1% to 9.3%, with a median target of around 5.5%.
The Long-Term Challenge
The real test will be whether future compliance cycles begin to influence long-term investment decisions and accelerate the adoption of low-carbon technologies that bring about a deeper, structural shift in the sector's emissions trajectory.
The Technology Pathways
| Technology | Description | Status |
|---|---|---|
| Hydrogen-based DRI | Using green hydrogen instead of coal | Emerging |
| Carbon Capture, Utilisation and Storage (CCUS) | Capturing CO₂ emissions | Pilot stage |
| Scrap-based EAF | Using recycled scrap | Mature |
| Blast furnace efficiency | Optimising existing BF-BOF route | Mature |
Our Services
| Service | What We Do |
|---|---|
| Compliance Assessment | Understand your obligations and assess your position |
| Gap Analysis | Calculate your shortfall and develop a mitigation strategy |
| Emission Reduction Planning | Identify cost-effective reduction opportunities |
| Credit Procurement | Help you buy CCCs at the best price |
| CBAM Readiness | Assess your exposure and develop a mitigation strategy |
| Legal Documentation | Draft watertight agreements and handle regulatory filings |
| Public Consultation Support | Help you prepare and submit comments during the 60-day consultation period |
Why Choose Carboned.in?
| Reason | Why It Matters |
|---|---|
| Legal Expertise | Led by Siddharth Gupta, Advocate, Calcutta High Court |
| Regulatory Knowledge | Deep understanding of CCTS, MoEFCC, and CBAM |
| Sector Experience | Knowledge of the steel sector's unique challenges |
| End-to-End Support | From assessment to compliance |
Your first consultation is completely free. No obligation. Just honest advice.
Conclusion: Prepare for Compliance
The CCTS expansion to iron and steel is a significant milestone in India's carbon market development. With 255 units covered and combined baseline emissions of 358.6 MtCO₂e, this is the largest sectoral expansion to date.
Key Takeaways
| Aspect | What You Need to Know |
|---|---|
| Coverage | 255 iron and steel units |
| Baseline | FY 2023-24 |
| Compliance Year | 2026-27 |
| Target Range | 2.1% – 9.3% (median ~5.5%) |
| Combined Emissions | 358.6 MtCO₂e |
| CBAM Context | Steel exports to EU down 35.1% in FY 2025 |
| India's Emission Intensity | 2.54 tCO₂/t (global: 1.91 tCO₂/t) |
The Choice Is Yours
| Option | Outcome |
|---|---|
| Act now | Assess your position, reduce emissions, earn credits, maintain export competitiveness |
| Wait and see | Face penalties, higher costs, lost market access, reputational damage |
📞 Ready to Prepare for CCTS Compliance?
Book a free consultation with Siddharth Gupta, Advocate, Calcutta High Court.
- Understand your CCTS obligations
- Assess your compliance position
- Develop a reduction strategy
- Procure credits if needed
- Protect your export competitiveness
Your first consultation is completely free. No obligation. Just honest advice.
How Carboned.in can help
Our team covers every dimension of India's carbon market — pick the service that matches where you are.
Frequently Asked Questions
When was the draft notification for iron and steel issued?+
June 26, 2026.
How many iron and steel units are covered?+
255 units.
What is the baseline year?+
2023-24.
What is the compliance year?+
2026-27.
What is the required reduction range?+
2.1% to 9.3%, with a median target of around 5.5%.
What is the combined baseline emissions of the covered units?+
358.6 million tonnes of CO₂ equivalent (MtCO₂e).
Who are the major companies covered?+
Tata Steel, JSW Steel, SAIL, ArcelorMittal Nippon Steel India, Jindal Steel and Power.
Why was the sector delayed?+
The June 2026 notification is the second attempt, resulting in skipping the first compliance year of FY 2025-26.
What is the difference from the cement sector?+
Unlike cement, the steel notification does not classify units by process or sub-sector.
What is the CBAM connection?+
Steel exports to the EU fell 35.1% in FY 2025 before CBAM even imposed financial obligations.
Siddharth Gupta is the founder of Carboned.in and specialist counsel for India's carbon compliance framework — advising obligated entities, project developers, and buyers on CCTS, CR-I registration, and credit transactions.
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