Green Manufacturing and Industrialization: Key Drivers of India’s $7 Trillion Economy by 2030

Green Manufacturing and Industrialization: Key Drivers of India’s $7 Trillion Economy by 2030

EY India Report Highlights the Importance of Decarbonization and Green Technologies

As India moves towards becoming a $7 trillion economy by 2030, prioritizing green manufacturing and decarbonization will be crucial to meeting the country’s growing industrial and energy demands. A recent EY-Parthenon report, How Green Manufacturing is Reshaping India’s Industrial Landscape, launched at India Energy Week 2025, highlights the need for sustainable industrial practices, particularly in high-emission sectors such as oil & gas, steel, and cement.

With global regulations, competitive shifts, and evolving consumer preferences driving industrial sustainability, India’s hard-to-abate sectors could produce around 2 gigatons of CO₂ annually within 15 years if proactive measures are not taken. The report outlines key decarbonization strategies, calls for policy incentives, and stresses the need for investment in clean technologies to help India transition towards a net-zero economy.

Green Hydrogen and CCUS: The Future of Decarbonization

Green hydrogen is expected to play a pivotal role in reducing emissions from refineries, which currently consume around 2.7 million metric tons (MMT) of hydrogen, mostly derived from steam methane reforming (SMR)—a process that emits approximately 24 MMT of CO₂ annually. Replacing 15% of this with green hydrogen could reduce emissions by 6.3 MMT CO₂e by 2035.

Despite the potential, high costs remain a challenge. Green hydrogen currently costs $6–7 per kg, significantly more than grey hydrogen ($1.5 per kg). The success of India’s SIGHT program, which aims for 5 MMTPA of green hydrogen production by 2030, will be key in making it cost-competitive. So far, major oil & gas companies have committed 2.1 MMT of green hydrogen capacity to be operational by 2030.

Additionally, Carbon Capture, Utilization, and Storage (CCUS) is emerging as a vital tool for emission reductions in hard-to-abate industries. While still in its early stages in India, key O&G players have already started investing in the technology. Scaling up CCUS will be critical for achieving long-term climate goals.

Policy and Industry Collaboration: The Path to Sustainability

Despite India’s progress in green manufacturing, accelerating the transition requires a combined effort from government and industry. EY-Parthenon’s recommendations include:

• Strengthening policy frameworks – Setting clear CO₂ reduction targets, introducing tax incentives for green projects, and implementing a carbon pricing mechanism ($100/tCO₂ by 2040).
• Reducing the green hydrogen cost gap – Introducing viability gap funding to enhance cost competitiveness.
• Increasing R&D investments – Promoting innovation in green technologies and infrastructure.
• Unlocking $300 billion in climate investments – Government and industry must collaborate to develop low-carbon infrastructure for sectors like automotive and manufacturing.
• Developing a green workforce – Expanding skill development programs to support emerging green economy jobs.
• Enhancing Public-Private Partnerships (PPPs) – Encouraging industry involvement in large-scale green projects.

According to Kapil Bansal, Partner for Energy Transition & Decarbonization at EY-Parthenon India, sector-specific decarbonization strategies, strengthened CO₂ reduction targets, scaling up green hydrogen, and robust industry collaboration will be essential to ensuring sustainable industrialization while maintaining energy security and economic competitiveness.

India’s Energy Growth and the Decarbonization Challenge

India’s economic expansion—projected to be six times larger by 2040—will drive a substantial increase in energy demand. According to the 20th Electric Power Survey, India’s peak electricity demand is expected to reach 366.4 GW by 2031–32, and will continue rising due to population growth, rapid industrialization, and the increasing energy needs of AI-driven computing.

Currently, key industrial sectors contribute significantly to India’s greenhouse gas (GHG) emissions:

• Steel – 12% of total GHG emissions
• Cement – 6% of total GHG emissions
• Power & Utilities – 5.2% of total GHG emissions

Without proactive decarbonization measures, these emissions could double as industrial capacity expands.

The Next Decade: Defining India’s Green Future

As India progresses through its Amrit Kaal (2024–2047), ensuring energy security, environmental sustainability, and equitable energy access will be crucial. Green manufacturing and clean energy initiatives will be vital in shaping India’s energy future and strengthening its position as a global leader in sustainable industrialization.