India is betting ₹20,000 crore on carbon capture. Will it work?

In the Union Budget 2026–27, the government has set aside ₹20,000 crore for one specific climate technology: Carbon Capture, Utilisation and Storage, or CCUS. Not solar. Not wind. Not EV subsidies. Carbon capture.

For a technology that most Indians have barely heard of, CCUS has suddenly been pushed to the centre of India’s industrial and climate strategy.

So what exactly is going on? Let’s understand.

At its core, CCUS is about catching carbon dioxide before it escapes into the atmosphere. 

Large industrial units such as coal power plants, steel mills, cement factories and refineries emit CO2 either because they burn fossil fuels or because the chemistry of their process releases it. 

CCUS systems separate CO2 from flue gases using chemical solvents, membranes or solid materials. The gas is then compressed, transported through pipelines or ships, and either used to make products such as urea, methanol and synthetic fuels, or injected deep underground into geological formations for permanent storage.

Image Source: Down to Earth

Globally, this technology has existed for decades. 

Since 1996, around 380 million tonnes of CO2 have been stored underground worldwide. 

Today, all the carbon capture facilities operating across the world together remove less than 50 million tonnes of CO₂ every year. In fact, it barely accounts for barely 0.13% of global emissions. Even if every single project that has been announced actually gets built and starts operating by 2030, global capacity may rise to about 337 million tonnes a year. 

If additional long-term plans also materialise, that number could reach roughly 513 million tonnes annually.

Now compare that with what climate roadmaps assume. To stay on track for net-zero targets, global models expect carbon capture to remove several billion tonnes of CO₂ every year by mid-century. Not hundreds of millions. Billions.

That gap between what is being built and what is being assumed is the real debate around CCUS.

The reason India is interested is simple. 

Some industries cannot decarbonise easily by switching to solar or wind. Steel, cement and chemicals are called hard-to-abate sectors. In cement, for example, when limestone is heated to make clinker, CO2 is released as part of the chemical reaction itself. Even if the kiln runs on renewable electricity, those process emissions remain. 

In steelmaking, blast furnaces rely on coal-based coke to reduce iron ore. Replacing this entirely with green hydrogen will take time, massive infrastructure and cheap renewable power.

India is the world’s second-largest crude steel producer after China, with output of about 152 million tonnes in FY 2024–25. Under the National Steel Policy 2017, the target is 300 million tonnes of crude steel capacity by FY 2030–31 and 500 million tonnes by 2047.

Steel alone is responsible for about 10-12% of India’s total greenhouse gas emissions. Cement is another major contributor. Indian cement plants together release around 250 to 300 million tonnes of CO₂ every year. 

And here’s why it is hard to fix. For every one tonne of cement produced, about 0.5-0.8 tonnes of CO₂ are released. A big part of that comes from the chemical reaction involved in making cement, not just from the fuel used.

If India continues to expand these sectors without intervention, emissions will rise sharply. That is where CCUS is being positioned as a bridge technology. 

CCUS gives existing steel plants a way to keep running while cutting down their emissions. At the same time, the government has defined what counts as “Green Steel.” If a steel plant emits less than 2.2 tonnes of CO₂ for every tonne of crude steel produced, it can officially qualify as Green Steel and receive a 3 to 5-star rating.

This matters beyond labels. The European Union is rolling out the Carbon Border Adjustment Mechanism, which will tax imports based on how much carbon was emitted during production. If Indian steel is seen as too carbon-heavy, it could face higher taxes in Europe. Using CCUS can lower that carbon footprint and help exporters stay competitive.

Energy security is another layer. Around 55- 60%of India’s primary energy demand is still met by coal. Roughly 80 gigawatts of additional coal capacity are planned. An immediate coal phase-out is economically and politically difficult. CCUS offers a way to continue using coal with lower emissions, at least during a transition period.

These pilots show movement beyond theory. But they are small compared to India’s total emissions.

The economics remain the biggest challenge. Capturing CO2 from coal flue gas can cost between $50 and $110 per tonne for retrofit plants. Transport may add $15 to $20 per tonne for distances up to 1,500 km. Compression and injection add another $5 to $10 per tonne. 

For a thermal power plant, CCUS could increase tariffs by ₹3.5 to ₹8 per kilowatt-hour. In the absence of a strong carbon price, buying offsets may appear cheaper. Carbon capture systems also consume 15-25% of a plant’s power output. This energy penalty can reduce efficiency and increase fuel use if not managed carefully.

Infrastructure is another missing piece. India does not have a dedicated CO2 pipeline network. Laying high-pressure pipelines across densely populated regions raises land acquisition and safety concerns. 

Geological storage also requires detailed mapping. While India’s theoretical storage capacity is estimated at 500 to 1,000 gigatonnes, much of it lies in basalt formations such as the Deccan Traps. 

Globally, most storage happens in sedimentary basins. Basalt storage is promising but technically more complex and less proven at scale. High-pressure injection can also raise concerns about induced seismicity and groundwater contamination if not properly regulated.

There is a regulatory vacuum too. If stored CO2 leaks decades later, who is liable? The company that captured it, the storage operator, or the government? India does not yet have a comprehensive long-term liability framework. Nor does it have a mature carbon market or high carbon tax that makes capture financially attractive. Without pricing carbon, industries have limited incentive to invest.

India has established two National Centres of Excellence in Carbon Capture and Utilization at IIT Bombay and JNCASR Bengaluru. NITI Aayog has proposed viability gap funding and cluster-based hubs in places like Gujarat and Odisha so that multiple industries can share transport and storage infrastructure.

 The Department of Science and Technology has laid out a roadmap from pilot phase between 2025 and 2030 to commercial scale-up between 2035 and 2045. Mission Innovation collaboration with 24 countries aims to accelerate breakthrough technologies.

The broader point is that CCUS in India is not being pitched as a silver bullet for all emissions. It is being framed as a targeted tool for sectors where alternatives are limited today. At the same time, renewable energy, electrification and green hydrogen continue to scale. The risk is that carbon capture becomes a justification to prolong fossil fuel dependence rather than a bridge to cleaner systems.

The ₹20,000 crore allocation marks a decisive shift from studying CCUS to deploying it. Whether it becomes a cornerstone of India’s industrial transition or an expensive experiment will depend on execution, transparency and whether the technology can move from pilot scale to millions of tonnes per year. 

For now, the message from Budget 2026 is clear. India is willing to test whether carbon, once seen only as a pollutant, can be captured, monetised and managed without derailing growth. The next decade will show if that wager pays off.

FAQs

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

Carbon Capture, Utilisation and Storage (CCUS) is a technology that captures carbon dioxide from large industrial sources like power plants, steel mills and cement factories. The captured CO₂ is either reused to make products such as methanol and urea or stored deep underground so it does not enter the atmosphere and contribute to climate change.

Why did the Union Budget 2026 allocate ₹20,000 crore for CCUS?

The Union Budget 2026–27 allocated ₹20,000 crore over five years to scale up CCUS in sectors like steel, cement, power, refineries and chemicals. These are hard-to-abate industries where emissions cannot be eliminated easily with renewable energy alone. The funding signals a shift from research to large-scale deployment.

Why is CCUS important for India’s steel industry?

India is the world’s second-largest steel producer, with output of about 152 million tonnes in FY 2024–25. The steel sector contributes around 10–12% of India’s total greenhouse gas emissions. CCUS helps reduce emissions from existing blast furnaces while India gradually transitions to cleaner technologies like green hydrogen.

What is India’s Green Steel benchmark?

Under India’s Green Steel taxonomy, steel with emissions below 2.2 tonnes of CO₂ equivalent per tonne of crude steel qualifies as Green Steel. It is rated on a 3 to 5-star system. This helps exporters meet global sustainability standards and avoid carbon-related trade penalties.

How does the EU’s Carbon Border Adjustment Mechanism (CBAM) affect Indian exports?

The EU’s Carbon Border Adjustment Mechanism will tax imports based on the carbon emissions involved in their production. If Indian steel or cement has a high carbon footprint, exporters may face higher costs in European markets. Adopting CCUS can help lower emissions and protect export competitiveness.

How much carbon does the global CCUS industry currently capture?

All operational CCUS facilities worldwide capture less than 50 million tonnes of CO₂ annually. Even if all announced projects are built by 2030, global capacity may reach about 337 million tonnes per year. This is far below the several billion tonnes per year that climate models assume will be needed by mid-century.

What are the main challenges in scaling CCUS in India?

CCUS is capital-intensive and can cost between $50 and $110 per tonne of CO₂ captured. It also requires pipeline infrastructure, suitable geological storage sites and clear regulatory frameworks. India currently lacks a mature carbon pricing system, which reduces financial incentives for industries to invest in the technology.

How does CCUS help hard-to-abate sectors like cement?

In cement production, CO₂ is released not only from fuel combustion but also from a chemical reaction when limestone is heated. Producing one tonne of cement emits about 0.5 to 0.8 tonnes of CO₂. CCUS can capture these unavoidable process emissions, making it one of the few viable decarbonisation options for the cement sector.

Which Indian companies are working on CCUS projects?

Companies such as NTPC, ONGC, Tata Steel and Reliance Industries have launched pilot projects. NTPC is producing methanol and ethanol from captured CO₂. ONGC is testing underground storage through enhanced oil recovery. Tata Steel is integrating capture systems into blast furnaces. Reliance is exploring carbon-to-chemicals and bio-based utilisation.

Is CCUS a complete solution to climate change?

CCUS is not a silver bullet. While it can reduce emissions from heavy industries, global deployment remains small compared to total emissions. Experts say it should be used selectively in sectors where alternatives are limited, alongside renewable energy, electrification and green hydrogen, rather than replacing broader climate action.