India’s industrial sector emits about 25% of the national greenhouse gas (GHGs). According to GHG Platform India, the industrial sector’s GHG emissions increased at an average annual growth rate of 10.42% between 2005 and 2018. In contrast, the overall average growth rate of all other sectors combined was 7.8%. Assuming this rate is maintained, India’s industrial GHG emissions are projected to represent approximately 30% of its total GHG emissions by 2030.
India is responsible for more than 7% of global GHG emissions, making it the world’s third-largest emitter of atmospheric pollution. Reducing its industrial carbon footprint will be essential to reducing its economy’s carbon intensity by at least 45% by 2030 (compared to 2005 levels) and achieving net zero by 2070. But, with India set to become the world’s second-largest economy by 2050, its energy consumption is projected to grow about one and a half times faster than the global average over the next three decades. Therefore, greater effort is needed in reducing energy intensity, particularly in the industrial sector (Figure 1).
Figure 1: India’s Industrial Emission Intensity is Nearly 2.5x Higher than G20 Average
New research from McKinsey & Company, Wood Mackenzie, and MIT Technology Review provides a roadmap for transitioning India’s industries away from fossil fuels, including using green hydrogen, carbon capture, utilization, and storage (CCUS), thermal batteries, and heat pumps. These technologies can significantly contribute to decarbonizing the sector and navigating upcoming regulatory changes such as the voluntary carbon market scheme. In a series of interviews, leading experts highlight how industrial hubs, R&D, and government policies can facilitate India’s adoption of clean industrial energy solutions.
Efficient Infrastructure is Needed to Scale Green Hydrogen Adoption
In 2023, the Indian government launched the National Green Hydrogen Mission (NGHM) to establish India as a global green hydrogen production, export, and manufacturing hub. The NGHM aims to reach a green hydrogen production capacity of 5 million metric tons per annum (MMTPA) and add 125 gigawatts (GW) of renewable energy capacity by 2030. To these ends, the NGHM has allocated US$125 million (₹1,066 crore) for pilot projects in the steel, mobility, and shipping sectors. Additionally, the Strategic Interventions for Green Hydrogen Transition (SIGHT) program has allocated US$2.1 billion (₹17,490 crore) to incentivize green hydrogen production and the manufacture of electrolyzers through 2029–30.
However, an Institute for Energy Economics and Financial Analysis report highlights several areas for improvement to the SIGHT program. It points out that using green hydrogen to decarbonize domestic end-use industries faces significant challenges, including infrastructural limitations, regulatory ambiguities, and a need for clear adoption mandates. A NITI Aayog and RMI report also identifies high costs and supply chain complexities as major hurdles in scaling India’s hydrogen economy.
Given the increasing global pressure to reduce industrial GHG emissions, particularly as more countries implement carbon tariffs and stricter environmental regulations, Indian industries must address the structural challenges in adopting green hydrogen. This growing international scrutiny led companies to adopt proactive measures to overcome these hurdles, ensuring they remain competitive and compliant with emerging global standards.
Abhyuday Jindal, Managing Director at Jindal Stainless, says, “India’s larger industries have begun conducting R&D and launching pilot projects to identify the most effective ways of integrating green hydrogen into their operations.” Jindal Stainless, itself, announced a green hydrogen pilot project at its stainless steel plant in Hisar, Haryana, earlier this year. Jindal adds that, following a successful pilot, “Jindal Stainless plans to scale up and use green hydrogen across all the bright annealing lines by FY 2027.”
But, considering that 96% of India’s industrial units are micro, small, and medium enterprises (MSMEs), Jindal stresses the importance of “developing industrial hubs equipped with green hydrogen infrastructure near existing facilities (Figure 2).” This approach would enable India’s MSMEs—who cannot often build their own infrastructure—to adopt green hydrogen more easily.
Figure 2: Locations of Key Industrial Facilities
With the price of green hydrogen projected to drop to US$4.3/kg—the second lowest in Asia after China’s—by 2030, Jindal notes that “the development of these industrial hubs will allow more MSMEs to take advantage of the price reduction and produce by-products through zero-emission processes. This could provide India’s industries with a competitive edge in exporting products like green steel to international markets. Additionally, establishing these hubs will facilitate the enforcement of strong hydrogen storage and transportation standards, which are essential for ensuring safe and efficient usage.”
Commercially Applying R&D Will Be Crucial in Integrating CCUS
In its recent report, NITI Aayog highlights that CCUS is critical to reducing India’s industrial GHG emissions, which account for nearly a third of total emissions from hard-to-abate sectors such as steel, cement, oil, gas, and chemicals (Figure 3). The report emphasizes that by implementing CCUS, India’s industries can decarbonize and become more sustainable, potentially avoiding economic costs projected to reach $6 billion annually by 2050.
Figure 3: GHG Emission Breakdown by Sector in India
Additionally, CCUS is important for supporting the production of blue hydrogen, which is a key component of India’s transition to a low-carbon economy due to its potential cost-effectiveness and scalability compared to green hydrogen (Table 1).
Table 1: Hydrogen Emissions Intensity and Price in India
Given the potential for reducing GHG emissions, India’s public-sector oil and gas companies are actively exploring CCUS projects. For example, the Oil and Natural Gas Corporation (ONGC) recently signed a memorandum of understanding with Norway-based energy company Equinor to explore opportunities in low-carbon and renewable sectors, focusing specifically on CCUS. Simultaneously, ONGC and the Indian Oil Corporation (IOCL) are building India’s first industrial-scale carbon capture project at the Koyali refinery. At the same time, Tata Steel has commissioned the country’s first CO2 capture plant from blast furnace gas in the private sector.
However, there are still significant barriers to fully scaling CCUS technology in India: high costs, an absence of regulatory incentives, and a need for extensive CO2 capture and storage infrastructure. According to Miniya Chatterji, CEO of Sustain Labs Paris, “As it stands, the business case for CCUS remains challenging, with industries also waiting for the Indian government to issue GHG regulations. This has led to delays in building CCUS infrastructure and efforts to reduce the costs associated with filtration, transportation, and storage.”
“India,” says Chatterji, “should issue clear policy guidelines on CCUS and regulations on industrial GHG emissions. Additionally, to advance CCUS technologies, India needs to encourage public-private partnerships and develop CCUS infrastructure using the hub and cluster model, which has gained traction globally (Figure 4). This model can reduce the unit cost of CO2 and offer commercial synergies that help minimize investment, operational costs, and technical risk.”
Figure 4: Global CCUS Hub and Cluster Centers
According to the International Energy Agency’s (IEA) analysis, India’s industrial energy consumption is expected to increase significantly by 2040, with steel and cement projected to double and triple, respectively. However, integrating CCUS across India’s industries is challenging because CO2 capture costs vary by sub-sector (Figure 5). To address this, Chatterji emphasizes the need for “more R&D to develop cost-effective solutions for capturing CO2, particularly in the refinery and chemicals, cement, and iron and steel sectors, as these sub-sectors are crucial to India’s economy.”
Figure 5: Cost Curve for CO2 Capture Across Industries/Sectors
With this in mind, the opening of two CCUS centers for excellence at the Indian Institute of Technology (IIT) Bombay and the Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR) represents a significant step forward. Chatterji stresses the importance of ensuring that the research conducted at these institutions is not confined to theoretical work but is applied in practical, commercial settings. She further notes, “Given the real need to build cost-effective CCUS infrastructure and the opportunity to combine blue hydrogen in decarbonizing India’s industries, the work from these centers must be integrated into real-world projects through active collaboration with industry developers to address the key bottlenecks hindering CCUS development in India.”
Carbon Markets Can Incentivize the Adoption of Heat Pumps and Thermal Batteries
Heat pumps and thermal batteries are emerging as vital technologies offering substantial energy efficiency and GHG reduction benefits to the industrial sector. McKinsey & Company notes that heat pumps use electricity instead of coal or gas, allowing them to be powered entirely by renewable energy. India’s renewable energy share in electricity generation is expected to rise from 14% in 2019 to 38% by 2040 under the IEA’s Indian Vision case (IVC); heat pumps thus present an opportunity for industries to decrease their dependence on fossil fuels, which are projected to continue accounting for 51% of industrial energy use into 2040.
Thermal batteries have gained interest for their ability to store clean energy as heat, offering a solution to bridge the gap between intermittent renewable electricity and the consistent power needed for industrial processes by converting stored heat back into electricity when required. However, with costs ranging from US$35 to US$62 per megawatt-hour (MWh) of thermal output, thermal batteries are currently more expensive than coal-generated heat in industrial settings. Nevertheless, with supportive industrial policies and the development of district energy systems, these costs could be reduced, making thermal batteries a more competitive option.
In India, where the industrial sector meets most of its energy requirements from fossil fuels for electricity, heating, and cooling, heat pumps and thermal batteries could enable facilities to harness increasingly available and affordable wind and solar power.
However, Anvesha Thakker, Partner, Business Consulting and National Lead for Clean Energy at KPMG, points out, “India’s industrial companies are looking to transition from coal and other fossil fuel sources for heating, cooling and electricity to clean energy. But the cost remains a challenge in integrating emerging solutions, such as heat pumps and thermal batteries, which has led Indian industries to be more cautious than their foreign counterparts.”
Thakker emphasizes that developing these solutions in industrial parks and smart cities could help address some cost-related challenges. “These centralized locations,” she notes, “can create economies of scale for heat pumps and thermal batteries, making them more feasible for companies to adopt, which may be tested through pilot projects.”
With the introduction of India’s domestic carbon market scheme, which includes both mandatory and voluntary components, emission reductions are poised to become tradeable assets. “Under this upcoming scheme,” Thakker observes, “industries will have an added financial incentive to adopt clean energy technologies like heat pumps and thermal batteries. By having avenues for monetizing their carbon credits, companies can potentially offset the initial costs of these technologies, making them more economically viable. Therefore, a well-designed rollout of this scheme should facilitate India’s industries to be more open towards integrating these innovative solutions into their operations.”
