Context
The Union Budget 2026’s allocation of ₹20,000 crore for a “carbon credit programme” has ignited a debate that juxtaposes a progressive, high-tech industrial agenda against a narrative grounded in agrarian climate solutions. This dichotomy highlights the tension between industrial carbon management and the broader ecological responsibilities that come with agriculture, raising questions about the most effective strategies for reducing carbon emissions across different sectors.
CCUS for Hard-to-Abate Sectors
At the heart of the ₹20,000 crore carbon credit programme lies the Department of Science and Technology’s (DST) “R&D Roadmap for CCUS” (2025), which focuses on the decarbonization of “hard-to-abate” industries. These sectors include steel, cement, thermal power generation, refineries, and chemicals—each of which presents unique challenges in mitigating carbon emissions.
- Target Sectors: The strategy specifically targets industries where carbon emissions arise from both fossil fuel consumption and industrial processes, leading to significant CO2 output.
- Technical Logic: The emissions from these sectors are classified as “process emissions”—these CO2 emissions result not just from energy use but also from chemical reactions that cannot simply be addressed by transitions to renewable energy sources.
- Mechanism: Implementing Carbon Capture, Utilization, and Storage (CCUS) technology involves capturing CO2 emissions directly from factory flues. This captured CO2 can then be reused for creating products like urea or converted into fuel, or stored permanently in geological formations.
CCUS vs. CDR
A crucial distinction often overlooked is the difference between CCUS and Carbon Dioxide Removal (CDR). Many assume that the funding will support farmers through climate-smart agricultural practices. However, the DST roadmap distinctly excludes agricultural applications due to two fundamental scientific differences:
- Emission Profile: Agricultural emissions, primarily methane and nitrous oxide, are diffused and biologically mediated. They do not align well with the point-source capture hardware used in CCUS, which is tailored for concentrated emissions from industrial processes.
- Avoidance vs. Removal: CCUS functions as an Emission Avoidance strategy—its goal is to prevent new CO2 emissions from entering the atmosphere from industrial sources. In contrast, agriculture is focused on Carbon Dioxide Removal (CDR), actively sequestering existing atmospheric CO2 into soil and biomass.
Critical Challenges
- Policy Conflation: The broad terminology of “carbon credit programme” muddles the distinction between funding for industrial CCUS initiatives and voluntary market solutions that emphasize natural, nature-based strategies.
- Technological Cost: While the ₹20,000 crore allocation is a significant step, it may only cover the initial R&D and infrastructure needs for a handful of pilot projects. The broader industrial transition to CCUS technology presents daunting financial challenges.
- Verification and Permanence: The ongoing challenge of accurately measuring and ensuring the permanence of Soil Organic Carbon (SOC) across the diverse agricultural landscapes of India adds another layer of complexity for any potential agricultural credits.
- Additionality: Ensuring that carbon credits are issued solely for new, sustainable practices—as opposed to existing ones—is critical to maintain the integrity and efficacy of the credit system.
Way Forward
- Bifurcated Policy Framework: There is a pressing need for the government to clearly differentiate between “Smokestack” (Industrial CCUS) and “Soil” (Agricultural CDR) pathways. This demarcation would facilitate targeted investments; capital subsidies would support industrial CCUS while a robust regulatory framework would govern agricultural practices.
- Standardization of Protocols: Developing affordable, reliable monitoring and verification (MRV) tools is essential. These tools will ensure that Indian farms can be effectively transformed into viable carbon sinks capable of contributing to CDR goals.
- Incentivizing Private Capital: Beyond the initial ₹20,000 crore fund, the government could introduce “Carbon Contracts for Difference” (CCfDs). Such contracts would assure a minimum carbon price for industries investing in the costly CCUS technology, bridging funding gaps.
- Extension Services: To support farmers effectively, the Ministry of Agriculture should incorporate carbon-farming training into the infrastructure of existing Krishi Vigyan Kendras (KVKs), equipping farmers with the necessary knowledge and tools to adopt sustainable practices.