Synopsis: Tata Steel is embracing liquified natural gas (LNG) to lower carbon emissions as it strives to double its production capacity, reports Money Control. However, coal continues to be a major part of its energy mix, presenting cost challenges as the company aims to reduce its carbon footprint. Tata Steel is working towards ambitious emission reduction goals and is exploring various energy sources. It aims to reach 'net zero' emissions by 2045, and LNG is seen as a short-term solution, offering a 20-30 percent reduction in carbon emissions compared to diesel. The company is also exploring hydrogen as a potential long-term solution.Article:Tata Steel, a key player in the steel industry, is proactively transitioning to liquified natural gas (LNG) to reduce its carbon emissions. While it is actively exploring cleaner energy options for the long term, the share of coal in its energy mix may remain substantial, even as the company pursues an ambitious plan to double its manufacturing capacity.As Tata Steel targets doubling its production capacity in India to 40 million tonnes per annum by 2030, it faces the formidable challenge of reducing carbon emissions while maintaining cost-effectiveness. While the company is actively seeking alternative energy sources to diversify its energy portfolio, this transformation comes with a cost and may impact its earnings before interest, taxes, depreciation, and amortization (EBITDA).Uttam Singh, Vice President of Iron Making at Tata Steel, explains, "Currently, coal is our primary fuel for producing quality steel in India. However, we are working on various energy mixes to diversify our energy basket."Tata Steel has set ambitious emission intensity targets, aiming to achieve less than 2 tCO2/tcs by 2025 and to reach 'net zero' carbon emissions by 2045. For the financial year 2022-23, Tata Steel's consolidated emission intensity stood at 2.21 tCO2/tcs, while the standalone figure was 2.38 tCO2/tcs.Amid the global push for environmental responsibility, steel companies are compelled to pursue decarbonization, anticipating the potential impact of cross-border carbon taxes on their industry.Tata Steel is actively working on a long-term decarbonization plan, involving emission reduction, carbon capture and utilization (CCU), hydrogen-based steelmaking, increased reliance on renewable energy generation, and the greater use of scrap materials in steel production. However, while the company, like other steel manufacturers, strives to make these technologies viable and cost-effective, it is considering natural gas to bridge the gap in the short term.Rajiv Mangal, Vice President of Safety, Health, and Sustainability, points out, "In the furnace, we currently use coke, and until hydrogen becomes available, we are exploring the use of natural gas. Although natural gas is not currently available in Jamshedpur, it has reached the eastern part of India. We are in discussions with GAIL to bring natural gas to Tata Steel's doorstep."Tata Steel is actively in talks with state-run GAIL to secure liquified natural gas (LNG) for replacing 25-30 percent of the diesel used by its Heavy Earth Moving Machinery (HEMM) at its mines. LNG is known to produce 20-30 percent less carbon dioxide (CO2) than diesel.The company conducted successful experiments in Noamundi and West Bokaro, where they replaced diesel with LNG for two dump trucks. This required a dual fuel kit for the trucks, allowing them to run on a combination of 30 percent LNG and 70 percent diesel. The company is now sourcing dual kits for its entire fleet.In addition to LNG, Tata Steel has signed a memorandum of understanding (MoU) with Indian Oil Corporation Ltd to replace furnace oil and high-speed diesel with liquified petroleum gas (LPG) in its ferroalloy plants. While the use of LPG is not yet in effect, the company plans to begin using it at its plants in Athagarh and Gopalpur in Odisha.Furthermore, Tata Steel is exploring the adoption of hydrogen as a promising fuel to reduce emissions, despite facing infrastructure and cost-effectiveness challenges. The company is engaged in various hydrogen-related initiatives and is contemplating whether to produce or purchase hydrogen. Tata Steel is also partnering with startups to advance its expertise in the hydrogen domain.In a recent report titled 'Steel Decarbonisation in India,' the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research estimated that the steel industry will replace approximately 25-30 percent of its grey hydrogen requirements with green hydrogen by the early 2030-2050 period, with an increase to 80 percent by 2050. The report emphasizes the need to reduce the cost of green hydrogen and impose a price penalty on carbon emissions to incentivize Indian steelmakers to transition to hydrogen-based steel production.Tata Steel undertook a successful trial injection of hydrogen gas earlier this year, demonstrating its potential to reduce fossil fuel consumption and CO2 emissions from the blast furnace. The company is also actively collaborating with the Indian government to garner support and make hydrogen a viable option within the larger ecosystem.While Tata Steel engages with the Indian government for support in its decarbonization efforts, it secured a grant of £500 million from the UK government to aid in decarbonizing its Port Talbot project in Wales, following months of negotiations. Tata Steel plans to contribute £700 million of its own funds towards emissions reduction efforts.Industries with high energy consumption, such as steel, are exploring hydrogen as a means to reduce emissions. Nevertheless, they encounter substantial challenges related to infrastructure and cost-effectiveness. The transition to decarbonization is a costly endeavor for Tata Steel, both in India and the UK, particularly in light of the current prices of alternative fuels. The pace of decarbonization may vary depending on fuel costs and steel market conditions, with societal pressure and Environmental, Social, and Governance (ESG) standards serving as additional motivators for change. The European Union's introduction of carbon emission charges, as part of the Carbon Border Adjustment Mechanism (CBAM), starting in 2026, necessitates that steelmakers like Tata Steel take proactive steps to address carbon emissions.ConclusiomTata Steel acknowledges the importance of making gradual strides in the decarbonization journey, aligning their efforts with the cost-benefit analysis at different stages.