Opinion: India’s Rs 20,000-crore carbon capture bet
CCUS push seeks to balance economic growth with climate goals, but high costs, technological uncertainty, and risks of carbon lock-in raise concerns
By Tuhina Bawa, Stuti Dashora and Barun Kumar Thakur
India has committed Rs 20,000 crore to Carbon Capture, Utilisation, and Storage (CCUS), emphasising energy security and stability amid mounting climate pressures and growing economic demands. This huge allocation highlights sustainability as an economic allocation problem, balancing limited fiscal resources across competing demands such as industrial continuity, job preservation, and emission control, rather than as a moral imperative. The Economic Survey suggested CCUS as a bridge technology, which allows the continuation of hard-to-abate industries such as steel and cement while offsetting emissions.
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What is being Prioritised?
CCUS is embedded within the broader framework of energy security, indicating a strategic decision to keep fossil-fuel-reliant industries active in India despite the coal-based energy mix. This framing makes CCUS appear as a technical solution: to capture post-combustion CO₂ and store it or reuse it (for example, in enhanced oil recovery), enabling emitters to comply with new carbon-border taxes without reducing their production.
In contrast to renewables or efficiency improvements, CCUS allows fossil-fuel-based industries to operate on a business-as-usual basis, with mitigation as an add-on rather than a transformation of the growth model.
More importantly, climate goals are being aligned with economic stability. The Budget also sees emissions as a regulable externality, that is, measurable and manageable through engineering solutions, instead of a structural inefficiency in a high-carbon development process. As a result, Paris Agreement targets (eg, net zero by 2070) are no longer aligned with GDP growth (7%+), as priority is given to employment in the old economy rather than discontinuous changes.
Fiscal Efficiency and Incentives
• Fiscal efficiency: CCUS is capital-intensive. Global standards put costs at 50-100 per tonne of CO2 captured (IEA). In India, pilot projects are likely to cost more due to infrastructural challenges. Hence, the Rs 20,000-crore allocation in the Budget 2026–27 could alternatively fund 10–15 GW of solar capacity (at an estimated Rs 40 crore per GW) and support energy retrofits, together delivering significantly greater emission reductions. There are also no cost-per-tonne targets in the Survey, nor any opportunity-cost analysis compared with other options like green hydrogen or electrification. Without dynamic modelling, this allocation may cause fiscal drag at the expense of more scalable and cost-effective solutions, especially as India requires at least $10 trillion in climate investments by 2030.
• Incentive structure: Subsidies favour incumbents. Steel and cement giants get tax credits and grants, thus setting the pathways of fossil fuels in stone. Weak signals on source reduction, such as the absence of stronger carbon taxation, create moral hazard, allowing firms to delay investments in efficiency while relying on CCUS subsidies. Evidence from the EU ETS suggests such delays can postpone mitigation by 5-10 years. From the point of efficiency, CCUS diverts focus from long-term solutions and reinforces high-carbon lock-in pathways.
Tech Uncertainty, Carbon Lock-in
CCUS as an emission reduction technology and means for continued industrial growth is a practical way to meet India’s climate goals. However, in terms of a transitional climate strategy, it raises critical issues. For example, there is no evidence that CCUS has been proven at scale across countries. Most projects around the world remain experimental, costly, and their long-term safety and reliability of carbon storage remain uncertain. The Economic Survey suggests caution in adopting policies based on technologies that lack institutional and technological maturity, an argument that applies directly to CCUS in India.
Most CCUS projects around the world remain experimental, expensive, and their long-term safety and reliability continue to be uncertain
Another concern relates to long-term liability. Captured carbon must be stored safely for decades to prevent leakage. The Budget does not clarify who will monitor storage or bear liability in case of failure. Without a clear framework, environmental and financial liabilities could fall on the government, straining resources.
Large investments in CCUS infrastructure may also create carbon lock-in for fossil fuel-based industries. Instead of creating incentives to encourage a transition to clean alternative sources of energy, CCUS may slow down the rate of investment in renewable energy, electrification and energy efficiency. Furthermore, if CCUS is implemented without provisions for a clear exit, it may hinder the transition to deeper structural changes needed for long-term decarbonisation.
Political Economy of CCUS
The inclusion of CCUS in the Budget can be understood through political economy considerations. At its core, the government’s choice to support CCUS reflects an attempt to signal commitment to climate action while avoiding near-term disruptions to industrial production processes, employment, and energy supply. Policies that require changes to production processes or reductions in energy use can disrupt the continued operation of industrial activities and risk altering the existing structure of industry.
However, political feasibility does not guarantee policy effectiveness. While CCUS may postpone immediate disruptions, it increases the long-term risk associated with climate change. International climate finance also plays a role. With limited access to external funding, developing countries such as India may be forced to find alternative financing methods domestically, such as CCUS, even if these only defer rather than reduce long-term climate risks.
Making CCUS Credible
But these concerns do not mean we should abandon CCUS. Rather, it underscores the need for better design. First, support for CCUS should be time-bound with sunset clauses linked to declining greenhouse gas emissions intensities. Second, projects that use CCUS must disclose costs per tonne of CO2 captured and compare these costs with alternative measures to reduce or mitigate GHG emissions. Third, support for CCUS should depend on parallel investments in renewable energy efficiency. And fourth, long-term storage risks should be borne by private companies.
CCUS is a viable method of achieving climate policy goals while maintaining economic stability. However, given technological uncertainties, the possibility of carbon lock-in and poor design, CCUS is unlikely to be effective as an interim strategy. Without clear safeguards, it is very likely that CCUS will interfere with (as opposed to facilitating) the development of structural decarbonisation.
(Tuhina Bawa and Stuti Dashora are students, and Dr Barun Kumar Thakur teaches economics at FLAME University, Pune. Views are personal)
