Replacing just 15% of India’s refinery hydrogen consumption with green hydrogen could reduce carbon dioxide (CO₂) emissions by approximately 6.3 million metric tons (MMT) by 2035, according to EY-Parthenon’s report, “How Green Manufacturing is Reshaping India’s Industrial Landscape.” The report, launched at India Energy Week 2025, highlights green hydrogen’s potential in reducing emissions and supporting India’s decarbonisation efforts.
Currently, India’s refineries consume around 2.7 MMT of hydrogen annually, all produced via steam methane reforming (grey hydrogen), resulting in nearly 24 MMT of CO₂ emissions. A shift toward green hydrogen, produced using renewable energy sources, is seen as a crucial step toward achieving India’s net-zero targets.
Challenges in Scaling Green Hydrogen Adoption
Despite its environmental benefits, green hydrogen adoption faces significant challenges, primarily high costs. Green hydrogen currently costs $6–7 per kg, nearly four times higher than grey hydrogen, which is priced at $1.5 per kg. The Strategic Interventions for Green Hydrogen Transition (SIGHT) program, launched by the Indian government, aims to bridge this cost gap and increase green hydrogen production to 5 MMT by 2030. So far, oil and gas companies have pledged to develop around 2.1 MMT of green hydrogen capacity, which is expected to be operational by 2030.
Blending green hydrogens with city gas distribution networks is also gaining traction, but cost-effectiveness remains a key barrier. The report suggests that government incentives and carbon pricing mechanisms will be necessary to make green hydrogen a competitive alternative in industrial applications.
Carbon Capture and Decarbonisation Strategies
Beyond green hydrogen, the report highlights Carbon Capture, Utilisation, and Storage (CCUS) as another crucial strategy for hard-to-abate sectors such as steel, cement, and oil and gas. While CCUS technology is still in its early stages in India, leading oil and gas companies have already made strategic investments in its development. Scaling up CCUS technology will be critical in achieving India’s net-zero commitments, especially given the rapid expansion of industrial activity.
The report warns that emissions from energy-intensive industries such as steel, cement, and power could reach 2 gigatons of CO₂ annually by 2040 unless proactive decarbonisation measures are implemented. Currently:
- Steel production accounts for 12% of India’s greenhouse gas emissions
- Cement contributes 6%
- The power and utilities sector represents 5.2%
Policy Recommendations for a Sustainable Future
To meet India’s carbon reduction goals, EY-Parthenon recommends
- Strengthening CO₂ reduction targets across industries
- Introducing tax incentives for green initiatives
- Developing a carbon pricing mechanism, targeting $100 per tonne of CO₂ by 2040
- Providing viability gap funding to make green hydrogen cost-competitive
- Increasing investments in clean technology research and development
The report estimates that India will require $300 billion in climate-related investments to support green manufacturing and decarbonisation efforts. A robust public-private collaboration will be essential in developing low-carbon infrastructure across industries, particularly in automotive, manufacturing, and energy.
Balancing Growth with Sustainability
As India’s GDP is projected to reach $7 trillion by 2030, energy demand will surge. The 20th Electric Power Survey estimates that India’s peak electricity demand will rise to 366.4 GW by 2031-32, driven by industrial expansion, urbanization, and emerging technologies like artificial intelligence. Without comprehensive decarbonisation strategies, emissions from key sectors could nearly double as production capacities grow.
The report underscores the need for accelerated efforts from both the government and industry to meet India’s sustainability goals. While India has already made significant progress in green manufacturing, further investments in renewable energy, green hydrogen, and CCUS technology will be necessary to drive long-term decarbonisation.
A Defining Period for India’s Green Transition
As India moves forward in its Amrit Kaal (2024–2047), the country must balance economic growth with sustainability. Its commitment to green manufacturing, clean energy adoption, and decarbonisation will play a key role in securing energy security and positioning India as a global leader in sustainable industrialisation. The decisions made today will shape the future of India’s energy landscape, ensuring a cleaner and more sustainable future for generations to come.
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