Rethinking the Drivers of Energy Intensity in India’s Iron and Steel Firms: The Role of Imported Intermediates

Abstract

The improvements in energy intensity of India’s iron and steel industry despite the limited research and development (R and D) expenditure, high cost of adapting technologies/fuel and heavy dependence on coal-based process is intriguing. In attempting to understand the underlying drivers, this article uses firm-level panel data to show that firms have improved their energy intensity through retrofitting of the existing production utilities and ‘brownfield’ installations in the form of technology extensions. The improvements are essentially on account of the use of imported capital goods/equipment rather than core R and D. For policy, this highlights critical dependence on imports of green goods in meeting the net-zero targets. The finding is used to call for technology transfers as part of brownfield installations and policy interventions to support the domestic capital goods industry for reducing the dependency on imports. On the sidelines, the results also show that international trade has a positive externality through supporting the environment.