Council on Energy, Environment and Water Integrated | International | Independent
Context: The Union Budget 2026–27 has allocated INR 20,000 crore to advance carbon capture, utilisation and storage (CCUS) technologies across hard-to-abate sectors such as steel, cement, chemicals, refineries, and power.
Analysis: Without CCUS, decarbonising existing steel and cement assets could become significantly more expensive and increase the risk of stranded industrial investments.
CEEW’s recommendation: India could lower carbon capture costs, develop storage infrastructure, create markets for CCU products, and align standards with key export markets.
The energy transition is no longer only about expanding renewable energy capacity, but also about fixing the ‘hard-to-abate’ sectors of the economy. The Union Budget 2026–27 reflects these twin concerns with the Indian Government having allocated INR 20,000 crore over the next five years to increase the technology readiness of carbon capture, utilisation and storage (CCUS) solutions across five sectors — power, steel, cement, refineries and chemicals.
Hard-to-abate sectors are heavy industries like steel, cement, chemicals, and refining, where reducing carbon emissions is especially challenging because making the product itself releases carbon dioxide or the production process involves the use of high-temperature heat obtained from fossil fuels. While many may still be unfamiliar with the term, CCUS is a means to capture this carbon dioxide from factories and power plants, and either use it to make products or store it underground so it doesn’t enter the atmosphere.
Research by the Council on Energy, Environment and Water (CEEW) shows that this technology, still being tested across countries, is critical for catalysing the energy transition in these hard-to-abate sectors, as developing cost-competitive, sustainable technology solutions will take time. Our analysis indicates that about 56 per cent of emissions from India’s existing steel and cement capacities can only be abated through CCUS. A well-developed CCUS ecosystem will reduce the cost of transition and lead to fewer stranded assets in the future across these five sectors. Structurally, CCUS can be split into three distinct areas of focus: capture, storage, and utilisation.
First, India must focus on developing cost-efficient capture technologies. Carbon capture thus far has utilised conventional technologies used by the oil and gas industry, which are expensive at USD 30–45 per tonne of carbon dioxide captured when applied to large-scale capture of higher percentages of carbon dioxide (~15–20 per cent) in industrial stack emissions. Newer, more cost-efficient technologies are needed to bring the capture cost below USD 15 per tonne. Technologies such as pressurised water that have low complexity, metal-organic frameworks that act as high-porosity sponges for carbon dioxide, and metal hydroxides that can convert carbon dioxide directly into end products like soda ash should be pursued. The development process can be shepherded under either the Department of Science and Technology or the Anusandhan National Research Foundation from lab to commercialisation.
Second, India should leverage its vast geological storage potential. CEEW estimates India has over 350 gigatonnes of underground storage capacity in saline aquifers, especially in western parts of states like Gujarat and Rajasthan, and basalt rock in mid-western part of India, including Maharashtra, Gujarat, and Madhya Pradesh. Basalt is particularly promising because it mineralises injected carbon dioxide into solid carbonates, significantly reducing long-term leakage risks, a concern that has historically constrained global CCS deployment. Realising this potential will require systematic assessment through seismic studies and pilot projects. Land acreage with storage underground could be licensed in a manner similar to oil and gas exploration, allowing private participation while enabling the government to earn royalty revenue based on the volume of carbon dioxide injected. The resources could also serve as a storage site for other countries at a cost if the actual potential far exceeds our own long-term needs. Equally important is the development of carbon dioxide transport infrastructure, including dedicated pipelines networks to move carbon dioxide from the source to the storage locations. Leveraging existing rights-of-way along petroleum and natural gas pipelines could significantly accelerate rollout while avoiding the land acquisition delays that have historically slowed infrastructure development.
Third, India should transform carbon liability into monetary gains through CCU. The CCU pathway offers the opportunity to transform carbon dioxide from a climate liability into an economic asset by producing value-added chemicals, such as methanol, and fuels, such as sustainable aviation fuel (SAF). The National Green Hydrogen Mission already supports this transition by reducing the cost of green hydrogen, which constitutes about 46–77 per cent of the total cost of these value-added products. CEEW research suggests these chemicals and fuels could enable India to consume 229 million tonnes (MT) of carbon dioxide and 34 MT of green hydrogen, unlocking an investment opportunity of USD 500–1300 billion. This could also reduce India’s import bill by USD 46 billion annually. While CCU products currently carry a “green premium”, early-stage demand from international aviation, maritime bunkering, and premium export markets offers a viable pathway for market creation and scale-up.
Finally, India must align its CCUS strategy with the European Union (EU) to fully leverage the Free Trade Agreement (FTA). Harmonising standards and certification frameworks will be critical for ensuring competitive Indian industrial exports. The focus should be on identifying equivalence in how permanently sequestered carbon dioxide is defined and quantified, rather than pushing for facsimile regulations. We should also develop mechanisms under Article 6 of the Paris Agreement that align with the EU's Carbon Border Adjustment Mechanism, ensuring that CCUS-enabled decarbonisation directly supports export competitiveness under the India–EU FTA.
If designed well and executed at scale, CCUS can become a cornerstone of India’s industrial decarbonisation — cutting emissions, safeguarding competitiveness, and turning today’s carbon liability into tomorrow’s economic opportunity.
Hemant Mallya is Fellow and Deepak Yadav is Senior Programme Lead at the Council on Energy, Environment and Water (CEEW). Send your comments to [email protected].
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