Decarbonising India’s Hard-to-Abate Sectors : The Role of Circular Economy Solutions and Resource Efficiency in Achieving India's Climate Objectives

This thesis explores the role of circular economy solutions (CES) and resource efficiency in decarbonising India’s hard-to-abate sectors—steel, cement, aluminium, and plastics—collectively accounting for approximately 18 to 20 per cent of the nation’s greenhouse gas (GHG) emissions. It investigates production processes and decarbonisation challenges in both global and Indian contexts, highlighting the climatic and economic benefits of CES under various carbon pricing mechanisms, including the EU Carbon Border Adjustment Mechanism (EU CBAM) and India’s Carbon Market (ICM). By quantifying emissions reductions and converting them into financial savings, the study illustrates how CES and resource efficiency can counterbalance the rising business costs associated with carbon pricing, ensure global competitiveness, and contribute to India’s climate goals. The thesis underscores the critical need for enabling policies, advanced technologies, and targeted investments to scale CES and resource efficiency, facilitating deep decarbonisation and sustainable development in India.

The research demonstrates that CES and resource efficiency present considerable carbon emission savings potential, which are financially quantified under different carbon price scenarios. Overall, the adoption of CES and resource efficiency measures across India’s hard-to-abate sectors could reduce approximately 237.4 million tonnes of CO₂-equivalent emissions by 2030, making a substantial contribution to India’s climate targets. The GHG mitigation potential is highest in India’s steel sector, with around 130 million tonnes, followed by the cement sector at 66 million tonnes, the aluminium sector at 37 million tonnes, and the plastic sector at 4.3 million tonnes by 2030.

CES and resource efficiency measures not only support India’s climate targets but also provide significant financial advantages, particularly as carbon prices are anticipated to rise in the coming years, with a pronounced impact on export-oriented industries. Considering the high emission intensity of India’s hard-to-abate sectors relative to international competitors, rapid decarbonisation is crucial for preserving competitiveness in export markets, especially in the European Union, which has implemented the EU CBAM with notably high carbon tariffs.

India’s steel and aluminium sectors, both highly export-oriented, offer the greatest potential for financial savings driven by the substantial emission reduction potential through CES and resource efficiency measures, estimated at approximately $2,164 million in steel and $1,317 million in aluminium production. In contrast, the cement sector’s financial saving potential is more modest, at $990 million, despite its relatively high total emissions. This is primarily due to its focus on domestic demand, where carbon prices are lower, and its limited exposure to international markets implementing carbon tariffs. The mitigation effects of CES and resource efficiency measures in the plastic sector remain uncertain. With limited inclusion in carbon market systems and unclear carbon pricing coverage, the projected financial savings through CES and resource efficiency measures for the plastic sector by 2030 are estimated at $96.3 million. However, these savings are unlikely to be realised due to the challenges associated with increasing secondary plastic production. Despite the relatively low financial savings in the plastic sector, CES and resource efficiency remain crucial for addressing the sector’s broader climate and environmental impacts.

Aligning India’s industrial sectors with global sustainability standards will be crucial to maintaining its competitiveness, particularly in markets like the European Union, which have stringent carbon tariffs. This will require swift decarbonisation efforts, especially in export-oriented industries, to avoid potential trade barriers and secure market access. By embracing CES and resource efficiency measures, India can not only meet its climate goals but also position itself as a leader in sustainable industrial practices, enhancing its global competitiveness in the process.

While the financial incentives for adopting CES are clear, the research highlights the critical need for enabling policies and targeted investments to facilitate the scaling of these solutions. Strengthening regulatory frameworks, fostering innovation in low-carbon technologies, and increasing investments in Research and Development (R&D) are essential to overcoming the barriers to deep decarbonisation. This includes addressing the high upfront costs of green technologies, especially in capital-intensive industries like steel and cement. Moreover, the financial benefits derived from CES and resource efficiency should be leveraged to offset the increasing business costs associated with carbon pricing, ensuring that industries remain competitive in global markets.

CES and resource efficiency should be regarded as one of the most cost-effective pathways for decarbonisation, complementing the renewable energy transition and prioritising them over more expensive approaches, such as Carbon Capture, Utilisation, and Storage (CCUS), which should be reserved for unavoidable GHG emissions.