Carbon capture risks leading Indian steel down a technological dead end

The INR20,000 crore (USD2.2 billion) of support for carbon capture, utilisation and storage (CCUS) for industry announced in the 2026 Union Budget risks leading India’s steel sector down a path of high emissions and rising energy security risk. 

The track record of CCUS demonstrates it has no capacity to adequately reduce steelmaking emissions. Its deployment also risks locking India into growing dependence on metallurgical (met) coal imports.

CCUS is not a new technology. Its implementation has been attempted around the world for decades, with a lengthy track record of failure and underperformance. Even the International Energy Agency (IEA) — historically optimistic about CCUS — now views its role in decarbonisation as minimal.

High investment, operating costs and transportation costs, doubts over storage locations, and inflation-sensitive components and materials make CCUS economically uncompetitive compared with alternative, genuinely clean technologies. Each CCUS project faces a unique set of conditions that limit “learning-by-doing” and cost reductions across the sector.

Sinking billions into supporting CCUS projects looks unlikely to be an efficient use of government funding.

In the steel industry, CCUS has an even more underwhelming track record. The only commercial-scale CCUS plant in the steel sector is the Al Reyadah plant in the United Arab Emirates. This plant captures only about 25% of total emissions. In the 10 years since it opened, no other commercial-scale CCUS plants for steelmaking have been built.

Importantly, the Al Reyadah plant captures carbon at a direct reduced iron (DRI)-based steel plant, while India’s steel plant pipeline is dominated by blast furnace (BF) technology. There are still no CCUS plants for blast furnace-based steelmaking anywhere in the world.

Meanwhile, the project pipeline of commercial-scale steel sector CCUS plants is characterised by a lack of available detail that casts doubt over their development status and timelines.

The low capture rates characterised by CCUS projects across industries mean it is unlikely to protect India’s steel sector from carbon border adjustment mechanisms (CBAM), such as that now implemented by the EU. Steel produced via BF and CCUS will remain emissions-intensive and will be exposed to the EU’s CBAM.

Europe has plenty of experience with underperforming CCUS projects. ArcelorMittal’s flagship CCU plant at its Belgian steel plant captures less than 2% of its carbon emissions. The €215 million project now faces shutdown.

Even CCUS projects in other sectors that showed early promise have disappointed. The Sleipner project off the coast of Norway was hailed as an example of successful CCUS implementation. However, project operator Equinor had to admit in 2024 that it had been over-reporting the amount of carbon captured at the project for years.

And earlier this month, Equinor announced it was scaling back its CCUS plans as project economics and customer demand had not met expectations.

Low captures rates are only one reason CCUS will be unable to adequately reduce steelmaking emissions. CCUS also does not address methane emissions associated with met coalmining. These emissions may add about one-third add to total lifecycle steelmaking emissions.

Reliance on CCUS to decarbonise India’s steel production also locks the sector into growing met coal dependence. Given the sector imports about 90% of its met coal needs, this is a mounting energy security issue. 

Australia is India’s biggest met coal supplier, but the risks to this supply are rising. Its long-term production is increasingly at risk from financial, legal, regulatory and climate risks, increasing the possibility that future met coal supply from Australia may fall short of Indian steelmaker’s expectations.

Unlike CCUS, the steelmaking technologies that can meaningfully decarbonise steel are also those that can improve India’s met coal energy security problem. 

The use of domestically produced green hydrogen in DRI-based steelmaking is already being piloted in India. Green hydrogen-DRI — the most advanced, genuinely green primary steelmaking technology globally — is being trialled by JSW Steel at its Vijayanagar plant. In the long term, green hydrogen can help reduce reliance on met coal imports while reducing steelmaking emissions.

Another longer-term solution is scrap steel recycling. Larger volumes of scrap steel will eventually become available within the Indian economy, and recycling it will reduce both emissions and reliance on imported met coal. Efforts to improve the collection, sorting and logistics of scrap steel should be a priority.

India is the most significant steel growth market globally. Key technology decisions need to be taken early to avoid getting locked into growing met coal imports and high emissions.

This article was first published in Energy World.