How India’s Rs 20,000 Cr CCUS Budget Can Drive Net-Zero Goals

23 Oct How India’s Rs 20,000 Cr CCUS Budget Can Drive Net-Zero Goals

✎ CCUS is indispensable for decarbonising hard-to-abate industries, with India’s ₹20,000 crore allocation in Budget 2026 supporting innovation in materials and AI-driven optimisation.

Subject Relevance — Where This Topic Fits

• GS Paper III — Environment, Conservation and Climate Change  |  GS Paper III — Science and Technology — Developments and their Applications and Effects in Everyday Life
• Prelims: Carbon Capture, Utilisation and Storage (CCUS), Net-zero emissions, Geological sequestration, Hard-to-abate industries, Union Budget 2026, Department of Science and Technology (DST), Carbon pricing mechanisms, Anthropogenic greenhouse gas emissions
• Essay: Climate change mitigation: Balancing economic growth with environmental sustainability, Technological innovation as a catalyst for sustainable development

Quick Revision: CCUS is indispensable for decarbonising hard-to-abate industries, with India’s ₹20,000 crore allocation in Budget 2026 supporting innovation in materials and AI-driven optimisation.

Why is this in the news?

The Union Budget 2026 has allocated ₹20,000 crore for Carbon Capture, Utilisation and Storage (CCUS) technologies over the next five years, marking a significant policy intervention to accelerate industrial decarbonisation while aligning with India’s net-zero commitments. This investment underscores the critical role of CCUS in addressing emissions from hard-to-abate sectors such as steel, cement, and power generation, where conventional mitigation strategies face technological or economic constraints.

Background

• India’s net-zero emissions target by 2070 necessitates a multi-pronged approach, including energy efficiency, renewable energy expansion, and carbon removal technologies.
• Industrial sectors such as steel (7-9% of global CO₂ emissions), cement (8% of global CO₂ emissions), and thermal power contribute disproportionately to India’s emissions profile, accounting for over 50% of total CO₂ emissions.
• The Intergovernmental Panel on Climate Change (IPCC) recognises CCUS as a key technology for achieving net-zero emissions, particularly in sectors where direct electrification or fuel switching is infeasible.
• Global CCUS capacity currently stands at approximately 40 million tonnes of CO₂ per year, with projects predominantly located in North America, Europe, and the Middle East, highlighting the need for scaled deployment in emerging economies.
• The cost of CCUS deployment remains a critical barrier, with current capture costs ranging between ₹7,500–15,000 per tonne of CO₂, necessitating innovation-driven cost reductions to enhance viability.
• India’s commitment to CCUS aligns with its Nationally Determined Contributions (NDCs) under the Paris Agreement, which include a 45% reduction in emissions intensity by 2030 and a 50% non-fossil fuel-based electricity capacity by the same year.

What is Carbon Capture, Utilisation and Storage (CCUS)?

• CCUS is a suite of technologies designed to capture carbon dioxide (CO₂) emissions from industrial processes, power plants, or directly from the atmosphere, followed by either utilisation of the captured CO₂ in industrial applications or permanent storage in geological formations.
• The process involves three key stages: (1) **Capture** — separation of CO₂ from other gases using methods such as post-combustion capture, pre-combustion capture, or oxy-fuel combustion; (2) **Transport** — movement of captured CO₂ via pipelines or ships to storage or utilisation sites; and (3) **Storage/Utilisation** — injection of CO₂ into deep geological formations (e.g., saline aquifers, depleted oil and gas reservoirs) or conversion into value-added products (e.g., synthetic fuels, chemicals, or building materials).
• CCUS is particularly critical for **hard-to-abate industries**—sectors where decarbonisation through electrification or fuel switching is technically or economically challenging, such as steel, cement, chemicals, and heavy industry.
• The **utilisation** component of CCUS enables the circular economy by converting captured CO₂ into commercially viable products, thereby offsetting capture and storage costs while creating new economic opportunities.
• Geological storage of CO₂ leverages **carbon sinks** such as deep saline aquifers, unmineable coal seams, or depleted hydrocarbon reservoirs, which must meet stringent criteria for containment, monitoring, and long-term stability.
• The **cost structure** of CCUS is dominated by capture (60-70% of total costs), followed by transport and storage, necessitating technological innovations to reduce energy intensity and capital expenditure.
• CCUS is recognised by the **IPCC** as a **carbon dioxide removal (CDR) technology**, complementing natural sinks and other mitigation strategies in achieving net-zero emissions.
• Global policy frameworks, such as the **EU Emissions Trading System (ETS)** and **US Inflation Reduction Act (IRA)**, provide financial incentives for CCUS deployment, underscoring its role in climate policy portfolios.

Key Features

Feature	Significance
Carbon Capture, Utilisation and Storage (CCUS)	A suite of technologies designed to capture CO₂ emissions from industrial processes, store them geologically, or repurpose them into useful products, thereby mitigating greenhouse gas emissions while enabling industrial growth.
Rs 20,000 crore Budget Allocation (Union Budget 2026)	A dedicated financial outlay over five years to accelerate the deployment of CCUS technologies, aligning industrial development with India’s net-zero commitments.
Translational Research and Pilot Projects (Rs 4,000 crore)	Focus on reducing the cost of CCUS from Rs 10,000–20,000 per tonne to under Rs 2,000 per tonne through innovation in sorbent materials and AI-ML applications.
Hard-to-Abate Industries	Sectors such as steel, cement, and power generation, where decarbonisation is technically challenging, making CCUS a critical intervention for emissions reduction.
Geological Storage and CO₂ Utilisation	Two primary pathways for captured CO₂: long-term storage in suitable underground formations and conversion into chemicals or other products to create economic value.

Why it Matters

Economic

• CCUS can unlock new revenue streams by converting captured CO₂ into commercially viable products, such as chemicals, fuels, or building materials, thereby enhancing industrial competitiveness.
• Reduction in the cost of CCUS technologies (from Rs 10,000–20,000 to under Rs 2,000 per tonne) can make India a global leader in affordable carbon capture solutions, attracting foreign investment.
• The budget allocation of Rs 20,000 crore over five years can stimulate job creation in R&D, engineering, and deployment sectors, particularly in green technology industries.

Environmental

• CCUS enables the continued operation of critical industries (e.g., steel, cement) while reducing their carbon footprint, addressing the challenge of decarbonising hard-to-abate sectors.
• By capturing and storing CO₂, CCUS directly contributes to India’s net-zero commitments, supporting global climate goals and reducing reliance on unproven or politically contentious carbon removal strategies.
• The technology can mitigate the environmental impact of industrial emissions, particularly in urban areas where air quality is a pressing concern.

Strategic

• India’s investment in CCUS aligns with its long-term energy security strategy by reducing dependence on fossil fuels while enabling a transition to cleaner industrial processes.
• The development of indigenous CCUS technologies can reduce reliance on foreign imports for carbon capture solutions, enhancing technological sovereignty.
• CCUS can serve as a bridge technology, allowing India to meet near-term emission reduction targets while scaling up renewable energy and other low-carbon solutions.

Technological

• Advancements in AI-ML and materials science (e.g., novel sorbents) can significantly improve the efficiency and cost-effectiveness of CCUS, making it scalable for widespread adoption.
• India’s focus on translational research and pilot projects can foster innovation ecosystems, positioning the country as a hub for CCUS technology development.
• The integration of CCUS with other green technologies (e.g., hydrogen production, bioenergy) can create synergistic solutions for a low-carbon economy.

Challenges

1. High Capital and Operational Costs

• The current cost of CCUS (Rs 10,000–20,000 per tonne of CO₂) remains prohibitively high for large-scale deployment, particularly for small and medium enterprises.
• Significant upfront investments are required for infrastructure, such as CO₂ capture facilities, transport pipelines, and storage sites, which may deter private sector participation.
• Operational costs, including energy requirements for capture and compression, further escalate the overall expenditure.

UPSC Link: Environmental Pollution – CSE

2. Technological and Scalability Constraints

• Existing CCUS technologies are often energy-intensive and may not be optimised for India’s industrial and geological conditions.
• The lack of mature, large-scale demonstration projects in India limits the ability to validate the efficacy and safety of CO₂ storage in geological formations.
• Scaling up CCUS requires overcoming technical challenges, such as developing efficient capture solvents, improving storage integrity, and ensuring long-term monitoring.

UPSC Link: Science and Technology – Current Developments

3. Policy and Regulatory Gaps

• India lacks a comprehensive regulatory framework for CO₂ storage, transport, and utilisation, creating uncertainty for investors and project developers.
• The absence of clear carbon pricing mechanisms (e.g., carbon taxes or cap-and-trade systems) reduces the economic incentive for industries to adopt CCUS.
• Cross-sectoral coordination between central and state governments, as well as between industries and research institutions, is often fragmented.

UPSC Link: Environmental Governance – Legal Framework

4. Public Acceptance and Environmental Risks

• Potential concerns about the safety of geological CO₂ storage (e.g., leakage risks) may lead to public opposition, delaying project implementation.
• The long-term environmental impacts of CO₂ utilisation (e.g., in chemicals or fuels) are not fully understood, raising questions about sustainability.
• Balancing the need for industrial growth with environmental protection requires robust risk assessment and community engagement strategies.

UPSC Link: Environmental Impact Assessment

5. Financing and Market Development

• CCUS projects often face challenges in securing financing due to their high risk profile and long payback periods, necessitating innovative funding models.
• The absence of a robust carbon market in India limits the revenue potential for CO₂ utilisation, reducing the financial viability of such projects.
• Public-private partnerships (PPPs) and blended finance mechanisms (e.g., green bonds, viability gap funding) are essential but underdeveloped.

UPSC Link: Infrastructure Financing – Models

Challenges — UPSC Perspective

Issue	Concern
Cost Competitiveness	High capital and operational costs hinder large-scale adoption of CCUS, particularly for small and medium industries.
Technological Maturity	Existing CCUS technologies are not optimised for India’s industrial and geological conditions, limiting scalability.
Regulatory Framework	The absence of a clear legal and policy framework for CO₂ storage and utilisation creates uncertainty for investors.
Public Perception	Potential risks of CO₂ leakage and environmental impacts may lead to public opposition, delaying project implementation.
Financing Gaps	High-risk profiles and long payback periods deter private sector investment in CCUS projects.
Inter-Sectoral Coordination	Fragmented governance and lack of coordination between central, state, and industry stakeholders impede progress.

Way Forward

• Establish a dedicated CCUS mission under the National Mission on Strategic Knowledge for Climate Change (NMSKCC) to coordinate research, funding, and policy across ministries.
• Develop a national CCUS roadmap with clear milestones for technology deployment, cost reduction, and industrial adoption, aligned with India’s net-zero targets.
• Create a carbon pricing mechanism (e.g., carbon tax or emissions trading system) to incentivise industries to adopt CCUS by internalising the cost of carbon emissions.
• Invest in large-scale demonstration projects in hard-to-abate sectors (e.g., steel, cement) to validate technological and economic feasibility, leveraging the Rs 4,000 crore earmarked for research.
• Strengthen the regulatory framework for CO₂ storage and utilisation, including safety standards, liability mechanisms, and environmental impact assessments.
• Foster public-private partnerships (PPPs) to mobilise financing, with blended models (e.g., viability gap funding, green bonds) to reduce investment risks.
• Promote international collaborations for technology transfer, knowledge sharing, and joint R&D initiatives, particularly with countries leading in CCUS (e.g., Norway, Canada).
• Enhance skill development through specialised training programs in CCUS technologies, ensuring a pipeline of skilled professionals for the sector.

UPSC Value Addition

Prelims Practice Questions

Q1. Consider the following statements regarding Carbon Capture, Utilisation and Storage (CCUS) technologies:
1. CCUS can only capture CO₂ from power plants and not from industries like steel or cement.
2. The captured CO₂ can be stored in suitable geological formations or reused to produce chemicals.
3. India’s Union Budget 2026 has allocated Rs 20,000 crore for CCUS technologies over the next five years.

How many of the above statements are correct?

1. Only one
2. Only two
3. Only three
4. None

Answer: Only two — Statement 1 is incorrect because CCUS technologies are applicable to hard-to-abate industries like steel and cement. Statements 2 and 3 are correct as per the given context.

Q2. Assertion (A): The Department of Science and Technology (DST) aims to reduce the cost of carbon capture from Rs 10,000–20,000 per tonne to under Rs 2,000 per tonne.
Reason (R): Lowering costs will make CCUS viable for industries that struggle to reduce greenhouse gas emissions.

In the context of the above statements, which of the following is correct?

1. Both A and R are true, and R is the correct explanation of A.
2. Both A and R are true, but R is not the correct explanation of A.
3. A is true, but R is false.
4. A is false, but R is true.

Answer: Both A and R are true, and R is the correct explanation of A. — Both the assertion and reason are true, and the reason correctly explains the assertion. The DST’s cost-reduction target is directly aimed at making CCUS economically viable for hard-to-abate industries.

Mains Practice Question

✍ Critically analyse the potential of Carbon Capture, Utilisation and Storage (CCUS) technologies in India’s journey towards achieving net-zero emissions by 2070. Substantiate your arguments with reference to the Union Budget 2026 allocations and the challenges in scaling up these technologies. (15 Marks)

Approach: MODEL-ANSWER SKELETON:

1. **Introduction (2 marks)**: Define CCUS technologies and their relevance in the context of India’s net-zero commitment by 2070. Mention the Union Budget 2026 allocation of Rs 20,000 crore for CCUS over five years.

2. **Potential of CCUS (5 marks)**:
– **Industrial Decarbonisation**: Highlight the role of CCUS in hard-to-abate sectors like steel, cement, and power generation (cite examples such as Tata Steel’s pilot projects or NTPC’s initiatives).
– **Economic and Strategic Benefits**: Compare CCUS to transformative technologies like UPI or ISRO’s space program, emphasizing job creation, energy security, and technological leadership.
– **Policy Support**: Discuss the Union Budget 2026’s allocation (20% for R&D, 80% for deployment) and its alignment with global commitments under the Paris Agreement.

3. **Challenges in Scaling Up (5 marks)**:
– **High Costs**: Current costs of Rs 10,000–20,000 per tonne of CO₂ captured; DST’s target to reduce it to under Rs 2,000 per tonne.
– **Technological and Infrastructure Gaps**: Limited geological storage sites, lack of mature utilisation pathways, and dependence on imported technologies.
– **Regulatory and Financial Barriers**: Need for carbon pricing mechanisms, blended finance models, and public-private partnerships to de-risk investments.

4. **Way Forward (3 marks)**:
– **Research and Innovation**: Leverage AI-ML for sorbent material development and pilot validation (cite DST’s initiatives).
– **Policy Interventions**: Implement carbon pricing, tax incentives, and mandates for CCUS adoption in designated sectors.
– **International Collaboration**: Partner with global initiatives like Mission Innovation or the Carbon Capture Leadership Coalition to access funding and technology.

Balance of Views: Acknowledge scepticism regarding the scalability of CCUS versus the urgency of emissions reduction, citing critiques from environmental groups while underscoring its necessity for industrial transition.

Source: The Indian Express

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