Budget signals India’s strategic bet on CCUS for deep decarbonisation
Union Budget 2026–27 marks a quiet but consequential inflection point in India’s climate and industrial policy. While much of the global discourse continues to revolve around renewable capacity additions and long-term net zero pledges, this Budget signals something more structural.
It recognises that India’s pathway to climate leadership will be determined not only by clean energy expansion, but by its ability to decarbonise hard-to-abate industries without eroding economic competitiveness. At the centre of this recalibration sits Carbon Capture, Utilisation and Storage (CCUS).
The commitment of INR 20,000 crore over five years positions CCUS not as an experimental add-on, but as a central instrument of India’s deep decarbonisation strategy. As India pursues rapid economic growth alongside its net zero objectives, this allocation marks a clear shift away from incremental efficiency gains towards structural emissions reduction in sectors where alternatives remain limited. Steel, cement, power generation, refining, fertilisers, and chemicals account for a substantial share of industrial emissions and form the backbone of India’s manufacturing economy. These sectors cannot be bypassed in the transition; they must be transformed. What makes this allocation particularly significant is both its scale and its intent. The funding is directed towards scaling CCUS projects and raising technology readiness levels, enabling wider deployment across end-use applications.
By targeting carbon-intensive sectors where direct electrification or renewable substitution remains technically difficult or commercially unviable, the Budget acknowledges the real constraints of industrial decarbonisation rather than offering idealised solutions.
The sequencing of support reinforces this pragmatism. The Budget introduces India’s first dedicated CCUS budget line with an initial INR 500 crore allocation under the Ministry of Power, building on the CCUS Roadmap released in December 2025.
That roadmap outlines a phased approach, beginning with research and development, moving through pilot and demonstration projects, and ultimately progressing towards commercial deployment. The anticipated expenditure of approximately INR 4,500 crore over the next two years reflects a deliberate focus on de-risking early projects rather than forcing premature scale-up.
This design choice matters. Multi-year funding is less about immediate emissions reductions and more about long-term positioning. Sustained capital support helps absorb early-stage risk, enables demonstration facilities, and provides clarity for long-lead infrastructure planning. In doing so, it creates the conditions for CCUS to evolve from pilot initiatives into a viable industrial solution, particularly as India develops its domestic carbon market.
The strategic context is equally important. Global carbon standards are tightening, and mechanisms such as the European Union’s carbon border adjustments are turning emissions performance into a determinant of trade competitiveness. For India’s export- oriented industrial sectors, CCUS is rapidly becoming a strategic necessity rather than a discretionary climate option. Without it, Indian manufacturers risk facing carbon penalties even as they fuel domestic growth and employment.
The Economic Survey 2025–26 provides the analytical backbone for this shift. It highlights that India finances 83 per cent of its mitigation and 98 per cent of its adaptation domestically, underscoring the limits of international climate finance. This reality has pushed India towards solutions that align emissions reduction with economic resilience. CCUS fits squarely within this framework, complementing energy efficiency and clean power expansion by addressing residual emissions that cannot be eliminated through electrification alone.
From a financial perspective, the CCUS allocation signals a maturing climate investment strategy. Sovereign green bonds and the anticipated push for municipal green bonds enhance capital availability, but emerging technologies like CCUS require more than balance-sheet funding. They need risk-sharing mechanisms, long-tenor capital, and predictable policy signals.
Equally critical is infrastructure planning. CCUS cannot succeed through isolated projects. Cluster-based hubs, shared transport networks, and common storage sites are essential to achieve cost efficiencies. India’s geological potential is significant, but storage governance, liability frameworks, and monitoring protocols must evolve in parallel.
Taken together, the Budget’s CCUS commitment reflects a pragmatic approach to climate action. By earmarking sustained support, the Government is signalling that CCUS is expected to become a structural pillar of India’s industrial decarbonisation pathway rather than a niche or transitional tool. Following the renewable energy push that enabled India to meet its climate commitments ahead of schedule, CCUS now emerges as the next logical focus for hard-to-abate sectors.
Union Budget 2026–27 does not frame CCUS as a silver bullet. It positions it as a system enabler. Alongside support for energy efficiency, grid resilience, clean energy, and strategic minerals, it reflects a broader truth: India’s climate transition will succeed not by dismantling its industrial base, but by modernising it with realism, discipline, and long-term intent.
Manoj Kumar Bansal, Partner, Energy and Climate Practice, Grant Thornton Bharat LLP Pradeep Singhvi, Executive Director, Energy and Climate Practice, Grant Thornton Bharat LLP; views are personal
