The deep challenges of India's clean energy transition: industrial supply chains must be cleaner

Concerns Behind the Expansion of Renewable Energy

India has made remarkable progress in renewable energy in recent years, with solar and wind power installed capacity continuing to rise, and the government has set an ambitious target of 500 GW of non-fossil fuel installed capacity by 2030. However, a neglected challenge is emerging: the production processes of industrial materials such as steel, aluminum, and cement required to manufacture this clean energy infrastructure are themselves still highly carbon-intensive. The industrial sector currently contributes nearly a quarter of India's greenhouse gas emissions, and this share is expected to rise significantly with urbanization, infrastructure construction, and manufacturing expansion. If the industrial supply chain is not deeply decarbonized, the expansion of renewable energy may instead be accompanied by a simultaneous increase in industrial emissions, thereby undermining the climate benefits of the overall energy transition.

Global Carbon Competition: CBAM Reshaping Trade Rules

Changes in the international market are accelerating this urgency. The European Union's Carbon Border Adjustment Mechanism (CBAM) has entered its implementation phase, imposing costs on the embedded carbon emissions of imported products. This marks a shift from voluntary corporate disclosure to a hard threshold for market access. For India's export-oriented steel, aluminum, and other industries, low-carbon production is no longer an option but a necessary condition to maintain global competitiveness. Similar measures are expected to spread to other developed economies, and carbon is becoming a new type of trade barrier. If Indian manufacturers can take the lead in reducing the carbon footprint of their products, they will gain an advantage in the global value chain; otherwise, they may face the risk of market contraction.

Policy Shift: From Voluntary Action to Mandatory Constraints

The Indian government's policy framework is shifting from incentives to mandates. The launch of the Carbon Credit Trading Scheme (CCTS) is a key step, with over 740 industrial facilities already set emission intensity reduction targets, marking the official implementation of performance-oriented climate regulation. At the same time, the government is building an institutional framework to promote industrial decarbonization through initiatives such as the National Green Hydrogen Mission, carbon market development, and support for carbon capture, utilization, and storage (CCUS) projects. These measures provide clear long-term signals and investment certainty for industrial enterprises, encouraging them to transition to low-carbon technologies.

Technology and Business Models: The Economics of Decarbonization Are Improving

The economic feasibility of industrial decarbonization is rapidly improving. Rising coking coal prices, increasing carbon costs, and investors' emphasis on ESG are bringing green steel, renewable energy-driven manufacturing, and circular production models closer to commercial competitiveness. For example, the steel production route using green hydrogen to reduce iron ore, although currently more expensive, is narrowing the gap. The application of digitalization and artificial intelligence further reduces emission reduction costs: AI-driven energy management systems can optimize process efficiency and reduce waste; circular economy models reduce dependence on virgin materials. These technologies not only reduce emissions but also enhance the overall competitiveness of enterprises.

The Global Significance of the Indian Model

No major economy has attempted to simultaneously advance manufacturing, infrastructure construction, and clean energy deployment at such a rapid pace.No major economy has attempted to simultaneously advance manufacturing, infrastructure construction, and clean energy deployment at such a rapid pace. If India can achieve the low-carbon transformation of its industrial supply chain while building clean energy infrastructure, it will create a replicable model of sustainable industrialization. This will not only help India become a low-cost manufacturing hub in an increasingly carbon-conscious world, but also provide an "India solution" for global climate governance. The clean industrial supply chain is shifting from a supporting role in the energy transition to its cornerstone — whether India can lead on this new track depends on policy execution, technological breakthroughs, and the strategic vision of entrepreneurs.