Union Budget 2026 Allocate ₹20,000 Crore for Carbon Capture Utilisation and Storage Initiatives for Climate Action

At a time when Indian high-emission industries face rising exposure to the European Union’s carbon border tax, Union Budget 2026 has announced a major decarbonisation push through funding support for Carbon Capture Utilisation and Storage (CCUS) technologies. 

₹20,000 Crore CCUS Push Over Five Years 

The government has proposed an outlay of ₹20,000 crore over the next 5 years to accelerate CCUS deployment at industrial scale. The programme is aimed at improving technology readiness and real-world adoption across key emission-intensive sectors. 

In her Budget speech, Finance Minister Nirmala Sitharaman referred to the CCUS roadmap released in December 2025 and said scaled deployment would help achieve higher readiness levels in end-use applications across 5 sectors: power, steel, cement, refineries and chemicals. 

For FY 2026–27, an initial allocation of ₹500 crore has been provided for the CCUS scheme under the power ministry. 

Link to Net Zero and Industrial Decarbonisation 

The CCUS scale-up aligns with India’s long-term climate commitment to achieve net zero emissions by 2070. The technology is seen as a practical pathway to cut emissions from hard-to-abate industries without slowing industrial growth. 

The government’s first dedicated R&D roadmap for CCUS, released on December 2, 2025, proposed industry testbeds and applied research platforms, especially for power, cement and steel segments, to move solutions toward commercial readiness. 

How CCUS Works Across Storage and Use 

Under CCUS systems, carbon dioxide produced from industrial or energy processes is captured and separated, then compressed and transported. In the storage pathway, the CO₂ is injected into depleted oil fields or other geological formations. 

Under the utilisation pathway, captured CO₂ is reused directly as an input material in industrial and consumer products instead of being permanently stored, creating value-added use cases alongside emission reduction. 

Export Competitiveness and EU Carbon Border Tax 

Decarbonising production is increasingly important for export-facing sectors such as steel, aluminium, cement and fertilisers.  

Lower embedded emissions can help Indian producers reduce exposure to the EU’s Carbon Border Adjustment Mechanism (CBAM), which imposes border taxes on high-emission imports including cement, aluminium, iron & steel and fertilisers. 

Without emission reduction measures, exporters risk higher tariff costs and reduced competitiveness in European markets. 

Testbeds and PPP-Based Deployment Model 

As part of the national CCUS effort, the government last year approved 5 carbon capture and utilisation testbeds in the cement sector to demonstrate net-zero-aligned industrial pathways.  

The initiative is being driven by the Department of Science & Technology using a public–private partnership funding model focused on integrated CO₂ capture and utilisation units in live industrial settings. 

These translational R&D testbeds are being developed through academia–industry collaborations involving the National Council for Cement and Building Materials with JK Cement; IIT Kanpur with JSW Cement; IIT Bombay with Dalmia Cement; CSIR-IIP, IIT Tirupati and IISc with JSW Cement; and IIT Madras and BITS Pilani Goa with UltraTech Cement. 

Read More: Union Budget 2026: India Allocates ₹1,000 Crore to Bolster AI via IndiaAI Mission! 

Conclusion 

The Budget’s CCUS allocation marks a structured shift toward industrial decarbonisation, combining technology funding, pilot infrastructure and sector partnerships to reduce carbon risk and protect export competitiveness. 

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