Decarbonising

India
Charting a pathway for sustainable growth

Authors
Rajat Gupta
Shirish Sankhe
Naveen Unni
October 2022 Divy Malik
 Decarbonising India:
Charting a pathway for
sustainable growth
October 2022

Authors
Rajat Gupta
Shirish Sankhe
Naveen Unni
Divy Malik
Preface

The physical manifestations of climate At COP26, India set out its plan to help such as carbon prices and accelerated
change are increasingly visible across slow down and halt global warming, technology adoption including those of
the globe, and India is not untouched. with a 2070 net-zero target. While we technologies like CCUS. It also includes
More than 75 percent of India’s support the global net-zero ambition estimates for the likely investments this
districts—home to 638 million people, of decarbonising by 2050, we have transition will need and ways in which to
or 1.4 times the population of the used India’s stated national plan as finance it.
European Union (EU)—are categorised the basis for the analysis and scenario
We started our effort with a
as hotspots for extreme climate events modelling in this paper. Our analysis
comprehensive literature review of
already.1 India has acknowledged also shows that the transition though
similar knowledge efforts conducted
this threat in multiple forums, has set difficult is feasible—and could even
in this space. While there are several
ambitious targets and is taking bold be accelerated. However, we don’t
good reports out there, published
measures to address the risks. foresee India getting all the way to net
by credentialled organisations, this
zero in either of our scenarios – the last
Though India’s emissions currently report attempts to differentiate itself
10 percent will be particularly difficult
stand at a mere 1.8 tons CO₂e per capita from others in the following ways:
to decarbonise.
(versus the United States at 14.7 and it is comprehensive across sectors,
China at 7.6), it is still the world’s This report presents an in-depth examines these in depth (including
third-largest emitter at 2.9 GtCO₂e analysis of ways to decarbonise the with customised and detailed sector
(4.9 percent of global emissions).2 six sectors which contribute to roughly models), explores implications of
As India grows, 3 emissions will only 70 percent of India’s overall emissions: inter-linkages across sectors, and takes
increase without a concerted effort power, automotive, aviation, steel, a practical, yet aspirational, view of the
across multiple sectors of the Indian cement and agriculture. Additionally, abatement levers. Finally, it defines a
economy. We use external sources for we analyse four cross-cutting enablers set of actions that need to be executed
GDP growth scenarios in this report and which can help decarbonise multiple with urgency if this orderly transition is
don’t make projections or forecasts. sectors: carbon-capture usage and to get underway.
These scenarios range between storage (CCUS), natural climate
In keeping with our history of exploring
long term forecasts from reputed solutions (NCS), material circularity
environmental sustainability issues,
international agencies such as EIU and and green hydrogen. More than
we offer this report not to prescribe
Oxford Economics and aspirational 100 emission-reduction initiatives have
what policymakers and industry should
estimates, based on employment been identified for these key sectors
do, but to provide a factual basis
needs. We have used the former as and themes, across two scenarios,
for comparing emission-reduction
a basis to develop sector growth both of which assume an orderly
approaches. Further, we hope the
scenarios and hence, GHG emissions. transition: (a) The Line of Sight (LoS)
report will help leaders in the public
With careful planning and execution, scenario with current (and announced)
and private sectors launch emission-
India can meet its growth ambitions policies and foreseeable technology
reduction projects to help secure a
while decarbonising. adoption, and (b) The Accelerated
healthy and prosperous future for India
scenario with further reaching policies
and the world.

1
Council for energy, environment and water (CEEW).
2
As per the World Bank data, 2019.
3
India’s GDP estimated to grow from $3 trillion today to $12 trillion by 2050; The Economist Intelligence Unit (EIU)-Real gross domestic product in USD at
2010 prices.

Decarbonising India: Charting a pathway for sustainable growth iii

iv Decarbonising India: Charting a pathway for sustainable growth
Acknowledgements

This report is the product of a year-long, cross-disciplinary research effort by McKinsey’s Sustainability Practice in India.
We owe special thanks to the core team and co-authors for key sections of this report as well as to all the other sector experts
and support team who worked tirelessly on the report:

Chapter teams

Power: Ketav Mehta, Suvojoy Sengupta and Charulata Singhal

Transportation: Brajesh Chhibber and Gourav Ganguly
Industry (steel and cement): Amit Agarwal, Thomas Czigler, Rajat Gupta, Ashutosh Satapathy and Kunwar Singh
Agriculture: Divy Malik, Rathnika Thomas and Naveen Unni
Energy transition: Rakhi Goyal, Shanu Jain, Amit Khera, Pawan Mundhra and Maulik Patel
Green hydrogen: Karan Agarwal, Rakhi Goyal, Rajat Gupta, Puja Jain and Shivang Mehta
Green finance: Rakhi Goyal, Kanika Khanna, Madhur Maheshwari, Vivek Pandit, Maulik Patel,
Bharath Sattanathan and Naveen Unni
Material circularity: Divy Malik , Richa Malik and Naveen Unni
CCUS: Divy Malik , Richa Malik and Naveen Unni
NCS: Namrata Rana and Rathnika Thomas
Core team: Sarthak Agrawal, Ashok Das, Mohit Geat, Rakhi Goyal, Anubhuti Jain, Soumya Jain,
Ankit Malik, Richa Malik, Maulik Patel, Rathnika Thomas and Himanshu Yadav
Topical experts: Nafie Bakkali, Krysta Biniek, Tejas Dave, Vaibhav Dua, Kanika Khanna, Mikhail Kirilyuk,
Alexia Letoffe, Ying Li, Rishubh Malpani, Sebastien Marlier, Prateek S Mathur,
Abdul Qavi Mohammed, Pawan Mundhra, Nitika Nathani, Sanjiv Ramdos,
Brandon Stackhouse, Nikola Vekic, Steven Vercammen and Christoph Wolff
Global Sustainability practice: Daniel Cramer, Erik Ijzermans, Kristen Jennings, Simran Khural, Mekala Krishnan,
Hamid Samandari, Humayun Tai and Boris Vergote
Editing and communications: Pranusha Chelikani, Gwyn Herbein, Fatema Nulwala, Cuckoo Paul, Raksha Shetty,
Sneha Vats and Pooja Yadav
Design and layout: Harish Karunakaran, Sarath Kumar, Saravanan Mani, Nirmalraj Ramachandran and
Anand Sundar Raman
Editors and copy editors: Courtney Cox, Colin Douglas, Courtney Fagg, Henrietta Rose Ines and Uma Khan

The insights and views expressed in this report are those of the research team and the authors.

Rajat Gupta Shirish Sankhe Naveen Unni Divy Malik

Senior Partner Senior Partner Partner Associate Partner

Decarbonising India: Charting a pathway for sustainable growth v

vi Decarbonising India: Charting a pathway for sustainable growth
Contents

Executive summary 1
1. The current state of India’s emissions and our suggested approach to abatement 34
2. Sector deep-dives 48
2.1. Power 50

2.2. Automotive 66

2.3. Aviation 82

2.4. Cement 90

2.5. Steel 100

2.6. Agriculture 118

3. Cross-cutting enablers 130

3.1. Green hydrogen 132

3.2. Material circularity 148

3.3 Natural climate solutions 162

3.4. Carbon capture, utilisation and storage 176

4. Implications of India’s decarbonisation pathways on emissions,

energy systems, land use, people and benefits 188
5. Financing India’s decarbonisation 208
6. Ten bold actions 224
Technical appendix 230
Acronym glossary 232

Decarbonising India: Charting a pathway for sustainable growth vii

viii Decarbonising India: Charting a pathway for sustainable growth
Executive summary

In 2021, at COP26, India announced its role. With this in mind, India has taken India currently emits a net of 2.9 GtCO2e
ambition to become a net-zero emitter several proactive steps and made every year (as of 2019). The bulk of
by 2070.1 Despite low per-capita commitments. For instance, its updated these emissions (about 70 percent)
emissions (1.8 tons CO₂ per capita), Nationally Determined Contribution are driven by six sectors: power, steel,
India is the third-largest emitting (NDC) for 2030 commits to using half automotive, aviation, cement and
country globally.2 Therefore, if we are to of power-installed capacity from agriculture (Exhibit A).
win the global war on climate change, non-fossil fuel-based energy
India will need to play an important resources and to achieving a 45 percent
reduction in emissions intensity from its
2005 levels. 3

1
India’s NDC.
2
World Bank; Worldometer.
3
India’s NDC.

Exhibit A

India's current carbon emission mix.

Baseline emissions, MtCO2e1, 2019

Emissions 3274 Carbon sink
MtCO2e2 345 MtCO2e

1,120 928 585 292 202 147 (345)

Iron & steel

Dairy Forest
loss
Trucks

Cement Waste-
water
Rice cultivation treat-
Coal ment
2 and 3
Lime wheelers
Residential
Passenger Total
Mining
cars Forest 2,929
sink
Cows and buffalos Aviation
MtCO2e
Refinery

Synthetic fertilisers
Buses
Others3
Other animals
Gas and oil based generation

Farming equipment Domestic Solid Commercial

maritime waste
Power Industry Agriculture Transport Water & Buildings LULUCF/NCS
waste

2019- % of gross
emissions
34% 28% 17.8% 9% 6.2% 4.5%

1. Converting GHGs into CO2e assuming GWP-100 and AR5 methodology with India’s BUR-3 reported emissions for 2016 as baseline.
2. Gross and net emissions for 2019 based on Climate Action Tracker overall emissions for India.
3. Others include: other industry oil & coal use, ammonia, aluminium, F-gases and ethylene.

Source: McKinsey India Decarbonisation Scenario Explorer

Decarbonising India: Charting a pathway for sustainable growth 1

This report identifies the optimal of 1.7 billion by 2070. Even if its to 40–50 GW per year, a carbon
uses of more than 100 emission- current GDP emission intensity price has to be put in place to make
reduction levers in these sectors, reduction were to continue at the green steel competitive, battery
across two scenarios, both of which same rate, India’s annual emissions costs have to decline by 80 percent
assume an orderly transition: (a) the would still rise to 11.8 GtCO₂e by by 2050, hydrogen by two-thirds
Line of Sight (LoS) scenario with 2070 (from 2.9 GtCO₂e in 2019).6 by 2035, a nationwide roll out of
current (and announced) policies and Getting to the LoS scenario charging infrastructure has to
foreseeable technology adoption would create 207 GtCO₂e of happen, farmers have to adopt new
and (b) the Accelerated scenario carbon space till 2070, while practices for rice cultivation, targets
with further reaching polices like the Accelerated scenario would for circularity have to be met and
carbon prices and accelerated add a further 80 GtCO₂e. This higher targets have to be set.
technology adoption, including those is equivalent to 36 percent and
3. If India is to have an orderly and
of technologies like CCUS. This report 14 percent, respectively, of the
accelerated decarbonisation,
attempts to be comprehensive across remaining carbon budget for an
the transition has to be set up
sectors, examining them in depth, even chance at limiting warming
within this decade. Over three-
highlighting linkages across them while to 1.5 degrees Celsius. This is
fourths of the India of 2050 (and
taking a practical, yet aspirational, view despite India not reaching net
80+ percent of the India of 2070)
of the abatement levers. It attempts to zero in either of our scenarios,
is yet to be built. This growth could
define two possible roadmaps for an due to the residual emissions from
multiply demand across sectors:
orderly transition for India in the context agriculture and select industrial
power (eightfold), steel (eightfold),
of its continued expected growth. sectors (remaining emissions in
cement (triple), automotive (triple)
Finally, it proposes a set of actions 2070 of 1.8 and 0.4 GtCO₂e in the
and food (double). If policies are
that could be executed for an orderly LoS and Accelerated scenarios,
set in place to create the right
transition to get underway. This report respectively). These emissions
demand signals within this decade,
does not address physical risks and have been largely estimated with
then the capacities India adds in
adaptation topics. currently feasible technologies.
the two decades thereafter will
It is to be expected that India
Our analysis shows that the benefits be low carbon ones. For example,
could get to its net-zero-by-2070
of a well-planned, orderly, accelerated in steel, the early imposition of a
commitment through the upcoming
transition could far outweigh the carbon price could lead to 200 Mt
technology developments over
downsides for India, given its growth of steel capacity being built on the
the next decades (e.g., direct air
outlook. India must take steps within low carbon hydrogen route instead
capture {DAC}).
this decade to set things up. Doing so of the coal route by 2050. This has
will allow it to use its growth momentum 2. While achieving the LoS scenario happened before – policies put
and build the country ‘right’ for the reductions will be challenging, in place early in the decade of the
decades thereafter. Also, while the achieving those of the 2010s have led to the explosion of
actions needed for India to decarbonise Accelerated scenario will be even renewables capacity in the recent
are challenging, most of them are more so. While there are emerging past and will continue to enable
‘in-the-money’, and hence the journey tailwinds in the form of falling even greater capacity expansion
is doable. Eight important messages costs of renewables and electrical going forward. 8 These policies could
emerge from this: vehicles (EVs) and some policies are provide a clear outlook on carbon
beginning to be implemented (e.g., prices in three years, as also on
1. There is an opportunity for
Faster Adoption and Manufacturing forward-looking blending mandates
India to create 287 Gt of carbon
of {Hybrid &} Electric Vehicles in (e.g., for aviation fuels) and a
space for the world. In the growth
India {FAME} for EVs, an imputed national land use plan, encourage
scenario assumed for this report, 4
$140–240 per ton of CO₂e tax on local manufacturing capabilities and
India will likely be a $22 trillion
motor fuels7), several other actions gear up financial institutions to lend
economy in real 2010-dollar
with significant scale up are needed. to green projects at scale, amongst
terms 5 (about seven times its
For example, renewable capacity other things. The government can
current GDP) with a population
addition has to increase from 10 GW also define its plans and policies

4
Real GDP growth rate assumption based on Economist Intelligence Unit (EIU) projection for 2020–30 is 5.8 percent, 2030–40 is 5.1 percent and 2040–50 is
4.7 percent. 2050–70 Real GDP growth rate has been assumed to be about 3 percent annually.
5
Based on Economist Intelligence Unit projection of $12.5 trillion by 2050 (Real GDP - USD at 2010 prices) and extrapolated to 2070 with 3 percent
CAGR assumption; This GDP forecast represents a more conservative estimate compared to other estimates - we have considered the lower range of growth in our
analyses to build a more robust decarbonisation pathway.
6
United Nations framework convention on climate change (UNFCC); climate action tracker; India’s biennial update report.
7
Analysis discussed in Chapter 2, automotive section.
8
IEA - India Energy Outlook.

2 Decarbonising India: Charting a pathway for sustainable growth

 such that they are fully in concert need to be directed to the right higher upfront even though the
with investment across sectors, use. For example, the biomass Opex is lower later (e.g., EVs).
technology development, customer- currently being used by households Without this support, their up-front
demand creation, economic viability for cooking and which in future capital expenditure may go up.
and funding, if it is to enable an could be used for thermal power Accelerated decarbonisation
orderly transition. generation might need to get could transform over 30 million
directed to the hard-to-abate jobs (24 million new jobs could
4. India would benefit from this.
sectors like cement; or sugarcane- be created while six million of
India’s transition from thermal
based methanol for the transport the existing jobs could be lost)
power to renewables is expected
sector might need to get directed by 2050.12 However, this number
to decrease the average cost
to aviation. is relatively small in the context
of power supply from INR 6.15/
of the macro trends affecting
kWh in FY20 to INR 5.25/kWh 6. The pressure on land systems
India’s workforce (e.g., 60 million
and INR 5.4/kWh by 2050 in the will increase. Growth and
joining the workforce by 2030, 30
LoS and Accelerated scenarios, decarbonisation combined may
million needing to come off farms
respectively.9 Sustainable farming require 45 million ha more land than
into non-farm jobs).13 That said,
practices could help generate is available (Accelerated scenario).
specific communities (e.g., coal
additional farmer income of Almost 10 million ha of this would be
mining and associated enterprises,
INR 3400/hectares (ha)/annum needed for renewable power and
Eastern India) could be adversely
in the LoS scenario which could 8 million ha for carbon sinks and
impacted, requiring reskilling and
increase to INR 4800/ha/annum forests. Innovative land optimisation
alternative industrial development
in the Accelerated scenario. India techniques such as maximising
in particular areas.
may save a cumulative $1.7 trillion barren land use for renewable
in Forex which may otherwise power, vertical urbanisation, 8. Large funding would be needed
be spent on energy imports improved agricultural productivity, (3.5–6 percent of GDP), front
till 2070. In addition, India will higher forest density would all be loaded, but substantially in
have the opportunity to build needed to ensure there is sufficient the money. India may need an
right the first time, minimising land to use for decarbonisation. estimated $7.2 trillion of green
asset stranding. Finally, if India investments until 2050 to
7. There would be a moderate
can get manufacturing in newer decarbonise in the LoS scenario
impact on household spending
technologies going, it can be a world and an additional $4.9 trillion for
and jobs. A critical consideration
leader in batteries, electrolysers, the Accelerated scenario (about
is what impact accelerated
green steel and many other areas. 3.5 percent and 2.4 percent of
decarbonisation would have on
India’s GDP through this period,
5. There would be shifts in the Indian household spending and
respectively). 50 percent of the
energy system. Fossil fuels, jobs. We estimate that by 2040,
abatement between the LoS and
which comprise 75 percent of the adverse income impact on
the Accelerated scenarios is ‘in
India’s commercial energy mix people with low incomes from
the money’, particularly across the
today, decline to half in the LoS decarbonisation through increased
renewable energy (RE), automotive
scenario and one-sixth in the housing costs would mostly be
and agriculture sectors; others
Accelerated scenario by 2050.10 balanced by the limited impact on
would need policy support. The net
In the Accelerated scenario, over food costs (excluding impact on
spend (Capex minus Opex savings)
60 percent of India’s refining yields from direct climate change)
is front loaded – the Accelerated
capacity, 90 percent of its coal- and the decrease in the costs of
scenario would, net of operational
mining capacity, 100 percent of its energy and transport. This, of
savings, require $1.8 trillion more
coal power generation would not course, presumes an orderly
in the decade of the 2030s and
be needed. Tax collections from transition – if there is a disorderly
$0.6 trillion more in the decade of
automotive fuel, which at $85 billion transition, the inflationary impact
the 2040s than the LoS scenario.
comprise 18 percent of the annual on people with low incomes could
central government income, could be adverse. This also assumes that
decline to $36 billion by 2050.11 households can mobilise financing
Scarce biomass feedstock would for spends where the Capex is

9
Full system cost of power including costs (factoring reasonable returns and system losses) for generation, transmission and distribution. The corresponding cost of
power generation Is INR 3.9/KwH.
10
Ministry of power annual report, 2021–22.
11
International Energy Agency (IEA) data for fossil based energy; tax value as per petroleum planning and analysis cell (PPAC) using INR 75/USD as conversion rate.
12
McKinsey Global Institute: The net-zero transition - what it would cost, what it would bring.
13
McKinsey Global Institute: India’s turning point.

Decarbonising India: Charting a pathway for sustainable growth 3

The decarbonisation pathway by 2070 leading to a 90 percent Tackling the 0.4 GtCO₂e of annual
India has reduced its emissions reduction in economic emissions emissions in 2070, remaining in the
intensity of GDP by 1.3 percent per intensity versus 2019. The Accelerated Accelerated scenario (Exhibit D)
annum over the last decade, somewhat pathway could further close the gap to predominantly from industry and
decoupling emissions from GDP net zero and reduce annual emissions agriculture, will require technological
growth.14 However, this pace of intensity to 0.4 GtCO₂e leading to a 98 percent advancements, including improved
reduction is not quick enough. It will not reduction in emissions intensity by capture technologies, newer recycling
cause India’s emissions curve to bend, 2070 versus 2019. The LoS scenario technologies and ocean-based carbon
given the fast growth expected. India’s would lead to cumulative carbon sequestration.
GHG emissions would likely increase savings of 207 GtCO₂e by 2070
to 11.8 GtCO₂e by 2070 even assuming while the Accelerated scenario would
the reduction in current GDP emissions create further savings of 80 GtCO₂e
intensity. The LoS pathway would cumulatively by 2070 (Exhibits B, C, D).15
reduce annual emissions to 1.9 GtCO₂e

14
UNFCCC, climate action tracker, McKinsey India DSE, EIU, India’s biennial update report 3.
15
UNFCCC, climate action tracker, India’s biennial update report.

Exhibit B

Possible pathways for India to decarbonise.

India’s GHG emissions1

GtCO2e per annum2 LoS scenario

11.8 Ÿ Implementation of India’s NDC,
12 Reducing emissions intensity
Potential to go to net zero with (-1.3% p.a., as in 2010–19) existing and currently announced
technological advancements, e.g.,
LoS scenario
policies
improved capture technologies,
10
newer recycling technologies, Accelerated scenario Ÿ Technology advancement as per
ocean-based carbon sequestration current trajectory
8 Ÿ Shift in demand to sustainable
207Gt CO2e 3 alternatives in selected areas, e.g., EV

6 LoS peak Accelerated scenario

• Adoption of new policies such as
carbon pricing
4 3.4 3.8
2.9 • Technology breakthroughs, e.g.,
CCUS and faster implementation of
1.9
2 -86% 80Gt CO2e3 existing levers
Accelerated
scenario peak 0.4 0.4 • Accelerated shift to sustainable
consumption, e.g., EV, alternative
0 materials, coarse cereals, green steel
1990 2000 10 20 30 40 50 60 2070

1. These emissions have been estimated with largely currently feasible technologies. It is to be expected that India could get to its net-zero-by-2070 commitment
through the upcoming technology developments over the next decades (e.g., direct air capture).
2. Including LULUCF emissions and offset.
3. Global carbon budget for 1.5 degree pathway as per IPCC AR5 is 580 GtCO2e.

Source: UNFCCC, climate action tracker, McKinsey India DSE, India’s biennial update report 3

4 Decarbonising India: Charting a pathway for sustainable growth

Exhibit C

Economic emission intensity reduction for India.

India’s GHG economic emissions intensity1 (volume of emissions/unit of GDP)

Current economic intensity of world’s top
emitter countries3
kgCO2e/$ per annum2 kgCO2e/$ per annum1
Reducing emissions intensity
(-1.3% p.a., as in 2010–19)
4.0
LoS scenario Russia 1.7
Accelerated scenario
3.24
India 1.5
3.0

China 1.5
-54%

2.0 1.52 Brazil 1.1

Canada 0.7
1.0
-98% 0.78
Japan 0.4
0.12
0.05
0 0.03 US 0.3
1990 2000 10 20 30 40 50 60 2070

1. These emissions have been estimated with largely currently feasible technologies. It is to be expected that India could get to its net-zero-by-2070 commitment
through the upcoming technology developments over the next decades (e.g., direct air capture).
2. Including LULUCF emissions and offset.
3. Economic emission intensity from annexed and non-annexed countries in UNFCCC.

Source: UNFCCC, climate action tracker, McKinsey India DSE, India’s biennial update report 3

Decarbonising India: Charting a pathway for sustainable growth 5

Exhibit D

Emission curves for the LoS and Accelerated scenarios.

Net emissions Power Industry Agriculture Transport Waste Buildings Oil & Gas Carbon Sink

Sectoral GHG emissions in LoS scenario Sectoral GHG emissions in Accelerated scenario1
GtCO2e GtCO2e

4 3.7 4
3.7
Potential to go to net zero with
3.3 technological advancements,
3.1
2.9 2.9 e.g., improved capture
3 3 technologies, newer recycling
technologies, ocean-based
2.3 carbon sequestration

1.9 1.9
2 2

1 1
0.4 0.3 0.4

0 0

-1 -1
2019 30 40 50 60 2070 2019 30 40 50 60 2070

1. These emissions have been estimated with largely currently feasible technologies. It is to be expected that India could get to its net-zero-by-2070 commitment
through the upcoming technology developments over the next decades (e.g., direct air capture).

6 Decarbonising India: Charting a pathway for sustainable growth

The challenge of rapid Green hydrogen, which is not going to Investment, currently at $44 billion
decarbonisation be economical versus other alternatives per annum, will likely need to increase
Achieving the LoS reductions will be until 2030, would need a subsidy 3.6 times by 2030 and 10 times by
challenging, those in the Accelerated of $60–80/KW for electrolyser 2040. This is doable so long as early
scenario even more so. India has moved manufacturing and carbon prices action is taken to facilitate the transition
in several sectors with rapid pace – (within this decade) to support uptake within this decade, given that a very
renewables, energy efficiency, EVs, for its largest use case of green large proportion of the decarbonisation
hydrogen. While the results are there steelmaking. 29 GW of electrolysers levers are in the money.
for all to see in the continued reduction may need to be installed by 2030
in carbon intensity of GDP, and with (relative to the current deployment of
several sectors poised for scale up, about 1.4 GW, globally16) and almost
there are also major challenges to be 400 GW by 2040.
overcome (Exhibit E).
Across other industries, steel would
For example, in the Accelerated need growth in hydrogen green steel
scenario, renewable (wind and solar) capacity from nil today to 152 Mt by
capacity addition will likely increase 2040 while blast furnace–basic­oxygen
from 10–12 GW per year today to furnace (BF-BOF) capacity would need
50 GW per year in 2030 and 90 GW to see an increase from 55 Mt today to
per year in 2040. Ten times as much 119 Mt by 2030 and then a decrease
land as is used today would need to to 85 Mt by 2040. Coal-based power
be identified and made available. generation would have to transition
Panels and corresponding raw material from 211 GW today to 120 GW by 2040
manufacturing may need to be scaled and nil by 2050. Refining capacities
up, given 80–90 percent of the solar would need to decrease from 213 Mt
panels are imported currently. per annum today to 114 Mt per annum
by 2040 and 105 Mt per annum
In automotive, 100 percent of two
by 2050.
wheelers, three wheelers and light
truck sales may need to be electric Additional land would be needed
early in the next decade, all car sales to meet India’s land requirements.
would have to be electric by 2035 and This may be needed for agriculture
trucks by 2050. For this, battery costs (12 million ha by 2040), solar plants
may need to decline by 40 percent (5 million ha by 2040), forest
in 2030 relative to today. Charging densification (4 million ha by 2040),
stations would need to increase etc. However, sufficient volumes of
13 times by 2030 and 40 times by suitable land will not be readily available
2040 relative to today. Consumer unless efficient land use practices
financing, given higher, up front EV are implemented.
costs and raw materials for batteries,
will need to be found.

16
https://www.iea.org/reports/electrolysers

Decarbonising India: Charting a pathway for sustainable growth 7

Exhibit E

Challenges for India’s decarbonisation. LoS scenario

Accelerated scenario
Current situation

Power Energy & hydrogen Automotive

Average annual solar + wind Refining capacity, MMTPA Battery costs, $/KWh
onshore capacity addition, GW

134 371 125

337
300 100 101
89 41 89
213 233 76
48 37
114 105
23 93
8 52
25
2022 30 40 2050 2020 2030 2040 2050 2020 2025 2030

Land requirement for solar + wind Coal consumption, MMTPA No. of chargers, millions
onshore, Mha
10 1,216 1,146 9
1,031 7
3 850 793
6 5
626
2 3
2 6 2
1 1 4 68 1
1
2022 2030 2040 2050 2022 2030 2040 2050 2020 2030 2040 2050

Storage capacity, GW Cost of green hydrogen, $/tonne Switchover to 100% EV sales

1,181 4.6

570 2.8
2.3 2.0
1.8 1.7 1.5
300 1.5 1.3
65
35 130 611
5 170
30
2020 2025 2030 35 2040
2022 2030 2040 2050

Coal power generation capacity, GW Electrolyser capacity, GW Ÿ Fame subsidies extended till 2030
Ÿ Retail fuel prices maintained
240 782 Ÿ 2022 battery spot prices hovering
210 214
190 194 around $180/KWh to $195/KWh
322 due to geopolitical issues and
120 388 Covid impact
29 257 460
18
131
11
2020 2030 2040 2050
2020 2030 2040 2050
Ÿ Subsidy of $60–$80/KW for
electrolyser manufacturing

8 Decarbonising India: Charting a pathway for sustainable growth

Exhibit E (Continued)

Challenges for India’s decarbonisation. LoS scenario

Accelerated scenario
Current situation

Agriculture & NCS Steel and cement Circularity & financing

Improved rice straw management, % Steel - BF-BOF capacity, Mt Recycling rates, plastics, %

241 258

40 119 119 95
14 27 85 85
55 51 63 58 66
12 34 13 47
1 23
2 4 6
2020 2030 2040 2050 2020 2030 2040 2050
2020 2030 2040 2050
Electrification of on-farm Steel - scrap based EAF-IF Recycling rates, construction &
equipment, % capacity, Mt demolition, %
100

67
64 115 45
30 25 44
37 30 30
14 33 26 19
16 33 4 39 71 1 11 15
2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050

Incremental land required for Steel - hydrogen green steel Recycling rates, municipal solid
trees, Mha capacity, Mt waste, %
7.8 267

4.1 152 163

3.7
75
60
152 37 45 42 47
104 32
0.8 1.2 1
0.4
2022 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050

Incremental land required for Cement - heat demand met by Average annual investment, $ bn
regenerative agriculture, Mha green fuels, %
% of real GDP: Accelerated LoS

114 620

74 440 200
57
37 60 240
35 50 160 420
18 57 30 44
2 37 1 15 200
18 9 14 100
2022 2030 2040 2050 2020 2030 2040 2050 2020 2020- 2030- 2040
2030 2040 -2050
Ÿ Carbon price of $50 by 2030 1.6% 2.6% 3.1% 4.1%
Ÿ Clinker to cement ratio reduces to
60% by 2050 in Accelerated 1.6% 4.1% 6.8% 6.0%
scenario (vs 65% for LoS)
Ÿ CCUS needed to capture 65% of
remaining emissions from cement

Decarbonising India: Charting a pathway for sustainable growth 9

Addressing the challenges would steel), even as the demand signals Major areas of emission reduction
need to happen in concert – with don’t build up quickly enough for green need urgent action for an orderly
stakeholders playing together in steel, leading to import dependence; transition
harmony. The government would grid instability and power shortages
The Accelerated decarbonisation
need to create demand signals and the because of the unbalanced build up of
scenario can cumulatively abate 80
industrial sector would have to bring storage capacity or inappropriate use
GtCO₂e more than the LoS scenario
capacity. Equity and debt funders may of existing stabilisation sources like
till 2070. More than 80 percent of
have to understand the risk and bring hydropower; demand compression due
this abatement is achievable with
financing at an unprecedented level. to increased upfront consumer prices
seven levers: renewable energy,
Consumers would have to adapt fast. for EVs if banks are unable to assess
electrification of mobility, use
risks and support the higher capital
The risk of a disorderly transition is of hydrogen, implementation of
costs; inflation for recycled material if
very high – it has been seen recently in sustainable agriculture practices,
blending mandates are enforced and
the coal shortages India experienced material circularity, NCS and CCUS
the recycling infrastructure does not
post-Covid as demand bounced (Exhibit F). Getting these sectors set
keep pace; new fossil-based capacity
back. Disorderly transitions can up for an accelerated transition would
build up getting derailed if climate
occur in many ways. For example – need urgent action within this decade.
changes force sudden closure.
under investment in fossil fuel-based
capacities (e.g., coking coal-based

Exhibit F

More than 80% of abatement can be achieved through 7 key levers.

Cumulative emissions reduction between LoS and Accelerated scenarios, 2020–70, GtCO2e

Cumulative emissions in LoS

160
(2020–2070)

Accelerated adoption of RE 16

Material circularity 12

CCUS 11

Sustainable farming 9

Natural climate solutions 7

Scale-up of green hydrogen 6

Faster penetration of EVs1 3

Other abatement levers2 13

Cumulative emissions in
82
Accelerated scenario (2020–2070)

1. In the LoS scenario, EV penetration reaches 100% only by 2070.

2. Includes other miscellaneous abatement levers such as 100% electrification of cooking, complete treatment of wastewater, improved energy
efficiency in industry, and so on.

10 Decarbonising India: Charting a pathway for sustainable growth