India's clean energy transition needs cleaner industrial supply chains

India's clean energy transition has entered a decisive new phase. For more than a decade, conversation has focused on expanding RE capacity. But, today, a more fundamental question is emerging: how sustainably are we manufacturing the infrastructure that powers the transition?

Industrial emissions are increasingly becoming the biggest challenge on the pathway to net-zero, accounting for nearly a quarter of GHG emissions. This will rise sharply, with the increase in demand for industrial commodities as the country pursues rapid urbanisation, infrastructure expansion and manufacturing growth.

This creates a critical contradiction. RE deployment may continue to accelerate, but if materials required to build that infrastructure are produced through carbon-intensive processes, industrial emissions could rise alongside clean energy growth. Without meaningful industrial decarbonisation, India risks undermining climate benefits of its own energy transition.


Importance of cleaner industrial supply chains is also being reinforced by developments in global markets. Sustainability is no longer confined to ESG disclosures or voluntary reporting frameworks. It is increasingly becoming a determinant of market access and trade competitiveness. The EU's Carbon Border Adjustment Mechanism (CBAM) exemplifies this shift. By attaching a carbon cost to imported products, CBAM is changing how global manufacturers evaluate supply chains. Similar measures are likely to emerge across other developed markets.

For Indian exporters, particularly in sectors such as steel and aluminium, decarbonisation is no longer simply about corporate reputation. It's becoming essential for preserving market access and maintaining competitiveness in GVCs. Manufacturers that can demonstrate lower embedded emissions will enjoy a distinct advantage in a world where carbon is becoming an economic variable.

Fortunately, economics of industrial decarbonisation is becoming increasingly attractive. Rising coking coal prices, growing carbon-related costs and investor expectations are narrowing the gap between conventional production pathways and greener alternatives.

Green steel, RE-powered manufacturing and circular production models are moving towards commercial viability. While challenges remain, particularly around tech and scale, the business case for cleaner production is becoming stronger. Increasingly, decarbonisation is being viewed not merely as a compliance requirement but as a long-term strategy for competitiveness and resilience.

Policy support is also accelerating transition from voluntary action to mandatory transformation.

India's Carbon Credit Trading Scheme (CCTS) marks an important step in creating accountability for industrial emissions. More than 740 industrial facilities across key sectors are now subject to emission-intensity reduction targets, signalling a clear shift towards performance-based climate regulation.

At the same time, GoI initiatives supporting green hydrogen, carbon markets, and carbon capture, utilisation and storage (CCUS) are helping build the policy architecture needed to drive industrial decarbonisation at scale. These measures provide industries with both incentives and regulatory certainty required to invest in low-carbon technologies.

Technology and resource efficiency will be crucial enablers of this transformation. RE adoption alone will not deliver the deep emissions reductions required from hard-to-abate sectors. The next frontier lies in digitalisation, AI, process optimisation, electrification and circular economy practices.

AI-enabled energy management systems can improve operational efficiency, reduce waste and optimise resource consumption. Circular production models can lower dependence on virgin materials while improving productivity. Together, these innovations offer industries a pathway to reduce emissions and enhance competitiveness.

No major economy is attempting to simultaneously scale manufacturing, infrastructure and clean energy deployment at this pace. By building cleaner industrial supply chains alongside clean energy infrastructure, India can create a globally replicable model of sustainable industrial growth, and position ourselves as a trusted hub for low-carbon manufacturing in an increasingly carbon-conscious world.

The future of India's energy transition won't be determined solely by RE capacity it installs. It will also depend on carbon footprint of the materials and industrial processes that make that transition possible. Cleaner industrial supply chains are no longer a supporting element of the energy transition. They are rapidly becoming its foundation.