India should consider including some of its local taxes as part of its emission calculation standard. This would allow companies to claim “credits” against such carbon tax-type payments made here under the European Union’s (EU) proposed Carbon Border Adjustment Mechanism (CBAM), TV Narendran, CEO and MD, Tata Steel,said.

According to him, the Indian government also needs to spell out financial and policy support for transitioning manufacturing processes to green steel, somewhat on the lines of what the European Union has done previously.

“In the short term there are many costs which we incur, taxes which we pay which are not called carbon tax here. But which are like a carbon tax (as per global market norms). So (we need to) see and organise ourselves better. Because, CBAM also allows you to take credits for carbon taxes that you pay in the domestic markets,” Narendran told businessline during an interview.

“I think there are opportunities for us to better leverage the situation in India and that is may be a more reasonable route than expecting Europe to say there won’t be CBAM,” he added.

The CBAM regulation officially entered into force the day following its publication in the Official Journal of the EU on May 16. The mechanism (reporting standards) will enter into application in its transitional phase on October 1, with the first reporting period for importers ending January 31 2024. It will initially apply to imports of certain goods and selected precursors whose production is carbon intensive which includes iron and steel.

Typically aluminium and steel are said to be two export items that will come under stress once carbon taxation rules apply in Europe – one of the key overseas markets. At a high level meeting recently, two key ministries – Mines and Steel – were asked to take up the issue of CBAM and transition to carbon reporting standards under this new methodology with their stakeholders.

India’s emission intensity is 2.55 tonne of CO2 emitted per tonne of crude steel produced; while global average is 1.85.

Need for Policy Intervention

According to Narendran, there is also a “need (for) policies” to incentivise transition to green steel production, here in India. The transition is “not easy” and “costs a lot of money”. At the same time customers , including the Government, also needs to be educated to pay higher once the switch-over happens.

Pointing out to some of the practical problems, the Tata Steel MD said, green steel entails use of input materials, like scrap, which are far costlier; while there remains concerns over availability gas in some parts of the country, like in the East, where most of the steel plants are located. For instance, the Dutch plant of Tata Steel has a carbon emission of 1.8 tonnes per tonne of steel produced (as it depends on scrap), while emission at Tata Steel’s Jamshedpur plant is at 2.11.

“We also don’t have availability of gas in Eastern India where major steel capacities are coming up. We need to make sure that infra is built so that the gas is available in Eastern India in plenty and at a reasonable price so that steel companies can invest in gas based plants, eventually hydrogen,” he said.

He pointed out, India cannot remain isolated if it intends to keep participating in “global markets”. Policies that Europe put in place some years back, like carbon pricing mechanisms, could provide some guidance for the way forward.

India, incidentally, is also mulling its own carbon trading system

“I don’t think India needs to reinvent the wheel. Look what Europe has done... developing a policy that had both the stick and the carrot. Plus, if you look at the European governments, they are supporting the transition. They are supporting capex and opex. We (in India) are still some distance away from that,” he said.