Union Budget 2026-27 Carbon Capture Utilisation and Storage (CCUS) Technologies

India's ₹20,000 Crore CCUS Push: A Pragmatic Vision or an Expensive Gamble?

The Union Budget 2026-27’s ₹20,000 crore allocation for Carbon Capture Utilisation and Storage (CCUS) technologies is a bold marker of India’s commitment to its net-zero pledge by 2070. While the initiative is ambitious, it raises pressing questions about technological feasibility, fiscal priorities, and broader governance gaps. CCUS’s promises of emissions reduction cannot bypass the structural inefficiencies of India’s industrial and environmental policy frameworks. Ultimately, this allocation reveals deeper tensions between fiscal prudence and a technology-dependent climate strategy.

The Institutional Landscape: Financing Transition or Prolonging Industrial Emissions?

At its core, CCUS aims to address emissions from sectors such as steel, cement, refineries, and chemicals—fields where energy efficiency is insufficient to neutralize carbon output. From a theoretical perspective, the ₹20,000 crore allocation over five years aligns with India’s Net Zero Roadmap (declared at COP26 in Glasgow). However, the challenges here are substantive. The Department of Science and Technology’s CCUS R&D roadmap (2030) flags critical gaps in funding for field-scale testing, yet the ₹20,000 crore figure, even if fully utilized, constitutes less than 1% of annual public expenditures. The National Green Tribunal's 2023 order, cautioning against the environmental risks of geological carbon storage, complicates the narrative further.

Globally, CCUS remains prohibitively expensive. For perspective, a pilot CCS project in Norway’s Mongstad refinery—which reportedly cost $1 billion—was shuttered due to scalability concerns. India may be chasing scale without addressing affordability—a contradiction rooted in the technology’s history.

The Argument: What Makes CCUS Viable Yet Fraught?

CCUS technologies are most effective in decarbonizing energy-intensive industries. Critically, India’s steel sector accounts for over 7% of national emissions, while the cement industry adds another 8%, making CCUS deployment here imperative. The budget envisions technologies capable of capturing 100–500 tonnes of CO₂ per day, promising reductions in sectors contributing over 40% to total emissions.

India’s potential advantages lie in its robust policy support. Centres of Excellence such as at IIT Bombay and the Jawaharlal Nehru Centre for Advanced Scientific Research are driving indigenous innovation, while mapping initiatives could unlock significant underground carbon storage sites in Rajasthan and Gujarat. The government appears intent on leveraging this allocation toward commercial deployment within five years, a timeline ambitious but plausible.

Economic potential underpins this push. Industrial reliance on CCUS could not only lower on-site emissions but also insulate India from trade volatility induced by mechanisms like the EU’s Carbon Border Adjustment Mechanism (CBAM). Certain industries—particularly steel—face the dual pressure of reducing production costs and ensuring compliance with global carbon benchmarks. Failure risks a loss in export competitiveness, particularly in European markets.

Yet, NSSO data from 2024 offers a counterpoint: industrial CO₂ emissions grew by 12% year-on-year, far outstripping gains from clean energy transitions. Without systemic shifts in production methodologies, CCUS risks becoming a fiscal sinkhole, not a climate panacea.

A Counter-Narrative: Is the Allocation Misguided?

The strongest critique of CCUS technologies is exacting—cost-effectiveness versus alternatives. Renewable energy investments yield indisputably higher returns at lower risk. For instance, the International Renewable Energy Agency (IRENA) reported in 2025 that deploying solar energy at scale costs approximately $20/MWh compared to $80/MWh for CCUS-equipped industrial facilities in similar conditions.

Moreover, opponents argue that CCUS technologies may prolong fossil-fuel dependency. Far from incentivizing systemic shifts like circular economies or decentralized renewable grids, CCUS vulnerable industries may become entrenched, lazily deferring action to “captured” solutions. This structural critique gains weight when viewed against India’s modest renewable energy networks (<40% power generation capacity).

International Achievements and India’s Divergences

What India calls a “transformational investment,” Norway might label as an excessive gamble on untested scalability. Norway’s Longship CCS initiative began in 2014, yet as of 2023, has captured only 1.5 million tonnes annually—nowhere close to national targets. Crucially, Norway’s policy instituted heavy taxes on CO₂ emissions, forcing industries into CCUS adoption. India, by contrast, lacks robust fiscal disincentives, operating as if CCUS investments alone will prompt transformative adoption.

Should India want transformational climate outcomes, emulating Norway’s simultaneous carbon taxation and CCUS deployment could create necessary financial nudges. However, political economy factors—state-backed industry lobbies and implementation bottlenecks—make such models unlikely in India’s current landscape.

Assessment: Can ₹20,000 Crore Separate Vision from Illusion?

India’s CCUS fund signals proactive policymaking but is far from solving foundational challenges. Scaling up CCUS requires not only sustained funding but also capacity building, policy nudges, and coherent public-private collaborations. Legislative nudges—expanding emissions penalties under Sections 15 and 17 of the Environment Protection Act, 1986—and tax benefits for CCUS adopters must complement this initiative.

Realistically, numerous interventions are essential by 2030. Integrating CCUS with green hydrogen transition frameworks could unlock symbiotic potential across energy nodes. Without such integration, ₹20,000 crore risks diluting outcomes. Moving forward, policymakers must address glaring governance gaps while testing CCUS technologies at volumes scaling beyond theoretical projections. Ambition is necessary; rigor is indispensable.

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