Budget 2026 Proposes Massive Rs 20,000 Crore Outlay for Carbon Capture Technology
In a significant move to combat climate change and protect Indian industries from international trade barriers, the government has announced a substantial financial commitment in the Union Budget 2026-27. Finance Minister Nirmala Sitharaman proposed an outlay of Rs 20,000 crore dedicated to scaling up Carbon Capture Utilization and Storage (CCUS) facilities over the next five years.
Strategic Response to EU's Carbon Border Tax Threat
This ambitious decarbonisation push comes at a critical juncture when several high-emission Indian industries face the looming risk of the European Union's Carbon Border Adjustment Mechanism (CBAM). The EU's carbon border tax imposes additional costs on carbon-intensive goods such as cement, aluminium, iron, steel, and fertilizers entering its 27 member nations.
Without decisive action to reduce emissions, Indian exports in these sectors would continue to bear tariff burdens, potentially affecting the country's competitive position in international markets. The CCUS initiative represents a proactive strategy to address this challenge while advancing India's climate commitments.
Focus on Five Key Industrial Sectors
During her Budget speech, Finance Minister Sitharaman referenced the CCUS roadmap launched in December 2025, emphasizing that these technologies at scale would achieve "higher readiness levels in end-use applications across five industrial sectors." The targeted sectors include:
- Power generation
- Steel production
- Cement manufacturing
- Refineries
- Chemical industries
For the initial phase in the 2026-27 financial year, the government has allocated Rs 500 crore specifically for the CCUS scheme under the power ministry's purview.
Aligning with India's Net Zero 2070 Target
The substantial budgetary allocation for CCUS technologies aligns perfectly with India's long-term climate objective of achieving 'net zero' emissions by 2070. CCUS is widely recognized as a crucial technological tool that enables emission reduction targets to be met without compromising industrial development and economic growth.
The first comprehensive research and development roadmap to facilitate India's net zero ambition through CCUS was unveiled by the government on December 2 last year. This strategic document recommended establishing carbon capture utilization testbeds in real industrial environments, with particular emphasis on power, cement, and steel sectors.
Understanding CCUS Technology Components
Carbon Capture Utilization and Storage encompasses two primary mechanisms with distinct functions:
The 'Storage' Component: This involves processes that separate carbon dioxide generated by energy or industrial applications, followed by compression, transportation, and injection into depleted oil reservoirs or other suitable geological formations for permanent storage.
The 'Utilization' Mechanism: This approach directly employs captured CO2 as an input or feedstock for manufacturing industrial and consumer products, bypassing the storage processes entirely. This creates economic value from what would otherwise be waste emissions.
Testbed Initiatives and Industry-Academia Collaboration
As part of a national initiative to address industrial carbon emissions, the government approved the establishment of five carbon capture and utilization testbeds in the cement sector last year. These facilities will demonstrate practical 'net zero' decarbonisation pathways for industries.
The Budget's enhanced financial support will accelerate such efforts, with the Department of Science and Technology spearheading the development of integrated CO2 capture and utilization units within industrial settings through innovative public-private partnership funding models.
Initial translational research and development testbeds under academia-industry collaboration will be established through partnerships including:
- National Council for Cement and Building Materials, Ballabhgarh, Haryana with JK Cement
- IIT Kanpur with JSW Cement
- IIT Bombay with Dalmia Cement
- CSIR-IIP, IIT Tirupati and IISc with JSW Cement
- IIT Madras and BITS Pilani, Goa with Ultratech Cement
Comprehensive Approach Beyond Technology
The government's CCUS roadmap adopts a holistic perspective that extends beyond technological development. It seeks to balance advancing current technologies toward commercial readiness with supporting breakthrough scientific research for next-generation solutions.
Additionally, the roadmap emphasizes the necessity of supportive frameworks including:
- Development of skilled human capital
- Establishment of appropriate regulatory and safety standards
- Creation of early-shared infrastructure
This comprehensive approach ensures that India's decarbonisation efforts through CCUS technologies are sustainable, scalable, and integrated with broader industrial and economic objectives.
