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The Billion-Ton Carbon Bet: Analyzing India’s ₹20,000 Crore CCUS Scheme in Budget 2026–27
Key Takeaways (Prelims Catalyst)
- Announcement: ₹20,000 crore over 5 years for CCUS in Union Budget 2026–27.
- What is CCUS:
- Capture: Separating CO₂ from industrial flue gases
- Utilisation (CCU): Converting CO₂ into methanol, urea, green concrete
- Storage (CCS): Injecting CO₂ deep underground into geological formations
- Target Sectors: Thermal Power, Iron & Steel, Cement, Refineries, Chemicals (hard-to-abate sectors).
- Strategic Drivers: Protect manufacturing from CBAM, maintain energy security (coal), bridge to green hydrogen.
- Execution Model: Cluster-based approach with shared pipelines and storage infrastructure.
- Policy Alignment: Builds on DST’s R&D Roadmap for CCUS (Dec 2025).
- Key Challenges: High energy penalty, geological limitations (Deccan Traps), high abatement costs.
Table of Contents
1. What is CCUS? The Three-Stage Process
CCUS (Carbon Capture, Utilisation, and Storage) is not a single technology but a complete supply chain designed to intercept carbon dioxide before it enters the atmosphere.
Stage 1: Capture
CO₂ is separated from flue gases produced in industrial processes using chemical absorption (amine solvents), physical separation, or membrane technologies.
Stage 2: Utilisation (CCU)
Captured CO₂ is converted into economically valuable products such as: - Green methanol (using green hydrogen) - Green urea for agriculture - Curing agent in concrete (locks carbon permanently and strengthens the material)
Stage 3: Storage (CCS)
Excess CO₂ is compressed into a supercritical state and injected deep underground into stable geological formations (depleted oil/gas reservoirs, deep saline aquifers, or basalt formations) for long-term isolation from the atmosphere.
2. Policy Background: DST R&D Roadmap (December 2025)
The ₹20,000 crore allocation builds directly on the “R&D Roadmap to Enable India’s Net Zero Targets through CCUS” released by the Department of Science and Technology (DST).
Three-Phase Approach
- Phase 1 (Near-Term): Translational R&D — moving lab concepts to pilot and demonstration plants.
- Phase 2 (Mid-Term): System validation and optimization of second-generation capture technologies.
- Phase 3 (Long-Term): Disruptive innovation — direct air capture, advanced materials (e.g., metal-organic frameworks).
The Budget 2026–27 scheme allocated the first ₹500 crore to the Ministry of Power to kickstart integrated power-sector research.
3. Target Hard-to-Abate Sectors
The scheme focuses on five sectors where emissions are difficult to eliminate through renewable energy alone.
| Sector | Nature of Emissions | Why CCUS is Critical |
|---|---|---|
| Thermal Power | High-volume flue gas from coal plants | Bridge technology for baseload power while storage scales up |
| Iron & Steel | Process emissions from iron ore reduction | Protects against EU CBAM carbon tariffs |
| Cement | Calcination process emissions (60%+ inherent to chemistry) | Chemical process emissions cannot be eliminated by switching fuel |
| Refineries | High-purity CO₂ from hydrogen production & cracking | Low-cost early capture opportunity |
| Chemicals & Fertilizers | Process emissions from synthesis | Synergizes with new Chemical Parks; turns CO₂ into feedstock |
4. Why India Needs CCUS Right Now
A. Hard-to-Abate Sectors Are Inevitable
India plans to expand steel capacity to 300 MT by 2030–31 and 500 MT by 2047. Transitioning fully to green hydrogen-based DRI will take decades. CCUS allows existing assets to produce low-carbon output without stranding capital.
B. Coal Reality & Energy Security
Coal still generates over 70% of India’s electricity. Completely phasing it out quickly would compromise grid stability. CCUS decouples coal use from atmospheric emissions.
C. Protection from Carbon Tariffs (CBAM)
The EU’s Carbon Border Adjustment Mechanism (CBAM) imposes tariffs on high-carbon imports like steel and fertilizers. CCUS helps Indian exporters maintain competitiveness in global markets.
5. Technical and Structural Challenges
- Energy Penalty: Capturing and compressing CO₂ can consume 15–25% of a plant’s energy output, increasing production costs.
- Geological Limitations: Much of India’s storage potential lies in the Deccan Traps (basalt formations). Mineralization processes in basalt are technically challenging and less proven at commercial scale compared to sedimentary basins.
- High Abatement Costs: Early estimates show significant cost per tonne of CO₂ captured, transported, and stored. Without strong carbon pricing or subsidies, private investment remains difficult.
6. Cluster-Based Execution Strategy
Instead of isolated projects, the scheme promotes an Industrial Cluster Approach in high-emission corridors (Gujarat, Odisha, Tamil Nadu).
Multiple plants (steel, cement, refineries, power) share common CO₂ gathering pipelines and geological storage sites. This reduces per-unit infrastructure costs, spreads risk, and enables Viability Gap Funding (VGF) models.
Practice MCQs for UPSC GS-3
Q1. What does CCUS stand for?
Options:
A) Carbon Conversion, Utilisation and Sequestration
B) Carbon Capture, Utilisation and Storage
C) Climate Change Utilisation and Storage
D) Carbon Control, Utilisation and Sequestration
Answer: B) Carbon Capture, Utilisation and Storage
Explanation: CCUS stands for Carbon Capture, Utilisation and Storage — a technology chain to capture CO₂ from industrial sources, utilise it in products, or store it underground.
Q2. Which of the following sectors is NOT a primary target under India’s CCUS Scheme?
Options:
A) Thermal Power
B) Iron & Steel
C) Information Technology
D) Cement
Answer: C) Information Technology
Explanation: The CCUS scheme targets hard-to-abate sectors with high process emissions: Thermal Power, Iron & Steel, Cement, Refineries, and Chemicals. IT is not a focus sector.
Q3. What is the main advantage of the Cluster-Based Approach in CCUS?
Options:
A) It allows individual factories to build their own storage sites
B) It enables sharing of pipelines and storage infrastructure, reducing costs
C) It eliminates the need for government funding
D) It focuses only on small-scale pilot projects
Answer: B) It enables sharing of pipelines and storage infrastructure, reducing costs
Explanation: The cluster approach allows multiple industries in a region to share CO₂ transportation pipelines and geological storage sites, significantly lowering per-unit infrastructure costs.
Q4. Which international mechanism is India trying to protect its exports from by adopting CCUS?
Options:
A) WTO subsidies agreement
B) EU Carbon Border Adjustment Mechanism (CBAM)
C) Paris Agreement Article 6
D) Kyoto Protocol Clean Development Mechanism
Answer: B) EU Carbon Border Adjustment Mechanism (CBAM)
Explanation: The EU’s CBAM imposes carbon tariffs on imports like steel and fertilizers. CCUS helps Indian manufacturers lower their carbon footprint and remain competitive in global markets.
Q5. What is one of the major technical challenges of CCUS in the Indian context?
Options:
A) Lack of any geological storage sites in India
B) Much of India’s storage potential is in basalt formations (Deccan Traps), which are technically challenging
C) CCUS increases the energy output of power plants
D) There are no policy incentives available
Answer: B) Much of India’s storage potential is in basalt formations (Deccan Traps), which are technically challenging
Explanation: Unlike many countries with large sedimentary basins, a significant portion of India’s storage potential lies in the Deccan Traps (basalt rock), where mineralization processes are more complex and less proven at commercial scale.
Frequently Asked Questions
What is CCUS?
CCUS stands for Carbon Capture, Utilisation and Storage. It is a technology chain that captures CO₂ from industrial sources, either converts it into useful products (Utilisation) or stores it permanently underground (Storage) to prevent it from entering the atmosphere.
Why is India investing heavily in CCUS now?
India needs CCUS because many critical industries (steel, cement, thermal power, refineries) produce emissions that are difficult to eliminate through renewable energy alone. CCUS helps India maintain energy security, protect exports from carbon tariffs (like EU CBAM), and achieve its Net Zero 2070 target in a pragmatic manner.
What are the main challenges in implementing CCUS in India?
Major challenges include: - High energy penalty (capture process consumes 15–25% of plant energy) - Geological limitations (much storage potential is in complex basalt formations) - High initial capital and operational costs - Need for robust regulatory frameworks and carbon pricing mechanisms
What is the Cluster-Based Approach in CCUS?
The Cluster-Based Approach involves grouping multiple high-emission industries (steel, cement, power, refineries) in a region to share common CO₂ transportation pipelines and geological storage sites. This reduces infrastructure costs and improves project viability.
How does CCUS help India with international trade?
The European Union’s Carbon Border Adjustment Mechanism (CBAM) imposes carbon tariffs on imports like steel and fertilizers. By adopting CCUS, Indian manufacturers can lower the carbon intensity of their products and avoid or reduce these tariffs, protecting export competitiveness.
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