Green manufacturing and industrialisation key to powering India’s US$7 trillion future by 2030 

• EY recommends bridging the green hydrogen cost gap, boosting R&D, unlocking climate funding and fostering public-private partnerships for large-scale green projects

New Delhi, 12 February 2025: As India is on course to becoming a US$7 trillion economy by 2030, to meet its increasing industrialisation growth and energy demands , it will need to prioritise green manufacturing and aggressive decarbonisation, particularly in hard-to-abate sectors such as oil & gas, steel and cement, according to EY-Parthenon’s latest report, “How green manufacturing is reshaping India’s industrial landscape”, launched at India Energy Week 2025.

Global regulations, competitive positioning and changing customer preferences are providing the primary push for green industrialisation. Projections indicate that, within the next 15 years, emissions from hard-to-abate sectors could reach approximately 2 gigatons of CO2 annually, underscoring the urgency of comprehensive decarbonisation measures. The EY report recommends decarbonisation strategies and innovative technologies across high-emission sectors and advocates for policy-driven incentives, increased investment in research and development, and establishment of carbon pricing mechanisms to accelerate the adoption of clean technologies and achieve net-zero emissions.

Rajiv Memani, Chairman and CEO, EY India, said, “India’s journey to Viksit Bharat must balance high growth with sustainability. Besides renewable energy integration into the industrialisation process, green industrialisation and manufacturing require new technologies, and fuel sources to make the manufacturing process cleaner. Businesses in India have a huge opportunity to proactively integrate green technologies into their operations on a cost competitive basis, thereby gaining a significant advantage as global supply chains transition towards sustainability.”

Green Hydrogen and CCUS: the next decarbonisation frontiers

Green hydrogen is set to play a pivotal role in cutting refinery emissions. India’s refineries currently consume ~2.7 MMT of hydrogen, all produced via Steam Methane Reforming (SMR), emitting ~24 MMT CO₂ annually. By replacing 15% of this with green hydrogen, India could cut emissions by ~6.3 MMT CO₂e by 2035.

Blending green hydrogen with city gas distribution (CGD) networks is also gaining traction. However, cost remains a barrier—green hydrogen is priced at $6–7 per kg, nearly four times the cost of grey hydrogen ($1.5/kg). The success of the Indian government’s SIGHT program, which targets 5 MMTPA of green hydrogen production by 2030, will be key to making green hydrogen economically viable. So far, oil & gas players have committed ~2.1 MMT of green hydrogen capacity, set to be operational by 2030.

Another crucial lever for decarbonisation is Carbon Capture, Utilisation, and Storage (CCUS). While CCUS is still evolving in India, leading O&G players have already made strategic investments. Scaling up this technology will be essential to mitigating emissions from hard-to-abate industries.

The road ahead: policy push and industry collaboration

While India has made significant strides in green manufacturing, a concerted effort from both the government and industry is needed to accelerate the transition. Key recommendations include:

·Strengthening policy frameworks: Set clear CO₂ reduction targets, introduce tax incentives for green initiatives, and establish a robust carbon pricing mechanism ($100/tCO₂ by 2040) to encourage low-carbon investments.

• Bridging the green hydrogen cost gap: Introduce viability gap funding to make green hydrogen cost-competitive.

• Boosting R&D investments: Foster innovation in green technologies and infrastructure.

• Unlocking US$300 billion in climate investments: Government and industry must collaborate to build low-carbon infrastructure for the auto and manufacturing sectors.

• Enhancing workforce readiness: Scale up skill development programs for emerging green economy jobs.

• Encouraging Public-Private Partnerships (PPPs): Leverage industry expertise and financing to execute large-scale green projects.

Kapil Bansal, Partner, Energy Transition and Decarbonisation, EY-Parthenon India, said, " A sector-specific approach to decarbonization is essential to achieving net-zero emissions. Even as India is actively pursuing targeted strategies across various industries, strengthening CO₂ reduction targets, scaling up green hydrogen, unlocking climate investments and robust public-private collaboration are key steps in shifting to sustainable industrialisation while ensuring energy security and long-term competitiveness.”

India’s expanding energy footprint and the decarbonisation challenge

The projected growth in Economic activity (6x growth in GDP, and GDP per capita) will lead to a significant growth in India’s energy requirements. The projected all India peak electricity demand is projected to be 366.4 GW by 2031-32 as per the 20th Electric Power Survey. By 2040, it would have gone up further driven by the development needs of the higher population, higher levels of industrialisation and finally, the growing needs of AI computing.

Steel accounts for 12% of India total GHG emissions. Cement accounts for 6% and power and utilities accounts for 5.2% of India’s GHG emissions. Without proactive decarbonisation measures, these emissions could nearly double as capacity expands.

A defining decade for India’s green growth

As India enters its Amrit Kaal (2024–2047), ensuring energy security, environmental sustainability, and energy equity is non-negotiable. India’s commitment to green manufacturing and clean energy will be instrumental in securing its energy future and cementing its position as a global leader in sustainable industrialization.

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About EY-Parthenon

EY-Parthenon teams work with clients to navigate complexity by helping them to reimagine their eco-systems, reshape their portfolios and reinvent themselves for a better future. With global connectivity and scale, EY-Parthenon teams focus on Strategy Realized — helping CEOs design and deliver strategies to better manage challenges while maximizing opportunities as they look to transform their businesses. From idea to implementation, EY-Parthenon teams help organizations to build a better working world by fostering long-term value. EY-Parthenon is a brand under which a number of EY member firms across the globe provide strategy consulting services. For more information, please visit ey.com/Parthenon.

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