A bit of a blur over India’s new carbon credit plan

UPSC Syllabus: Gs Paper 3-Environment

Introduction

The Union Budget 2026 announced a ₹20,000 crore carbon credit programme, creating confusion about its purpose. One view links it to industrial Carbon Capture, Utilization, and Storage (CCUS), while another sees it as income support for farmers. Official evidence supports the industrial focus, but a parallel narrative has led to uncertainty and mixed expectations.

What is DST’s (Department of Science and Technology) CCUS Roadmap

1. What is CCUS: It is a process of capturing carbon dioxide (CO₂) from industrial sources, transporting it, and then using it or storing it underground to prevent its release into the atmosphere.
2. Policy basis and intent: The programme is based on the DST’s CCUS roadmap (Dec 2025), which clearly defines its industrial focus and technical scope.
3. Target sectors: It focuses on hard-to-abate industries such as power, steel, cement, refineries, and chemicals where emissions are concentrated and measurable.
4. Nature of emissions: These sectors have process emissions that are difficult to reduce through renewable energy alone, making them key targets.
5. Financial allocation: The ₹20,000 crore over five years is meant for large-scale deployment of CCUS technologies.
6. Technology focus: It aims at large-scale deployment of technologies to capture CO₂ from industrial sources and manage it effectively.

Exclusion of Agriculture

1. Not part of CCUS sectors: Agriculture is not included in the roadmap’s target sectors, showing a clear boundary of the programme.
2. Nature of agricultural emissions: Agricultural emissions are diffuse and biologically mediated, mainly methane and nitrous oxide.
3. Technical limitation: These emissions are not suitable for point-source capture technology, which is central to CCUS.
4. Conceptual distinction: The roadmap separates CCUS (industrial emission prevention) from CDR (removal of atmospheric CO₂).
5. Role of agriculture in CDR: Agriculture contributes through soil carbon sequestration, biochar, and agroforestry, but this is outside CCUS.

What are the concerns with DST’s CCUS Roadmap

1. Terminology confusion: The use of the term “carbon credit programme” created ambiguity about the scheme’s actual scope.
2. Conflation of concepts: There is confusion between CCUS (industrial carbon capture) and voluntary carbon markets (agriculture-based credits).
3. Media-driven narrative: Reports and discourse promoted the idea of farmers earning carbon credits from this fund, which is not accurate.
4. Communication gap: The technical clarity of the roadmap was not matched by clear public communication, leading to misinterpretation.
5. Expectation mismatch: The mention of a “programme” led to expectations of a funded scheme for farmers, which is not part of this allocation.

What are the opportunities

1. Growing carbon market demand: There is rising global and domestic demand for nature-based carbon credits, especially from agriculture.
2. Existing pilot initiatives: Private sector and State-level projects are already testing models where farmers earn from sustainable practices.
3. Scope for soil carbon enhancement: Practices that improve soil organic carbon can generate measurable benefits and credits.
4. Policy readiness: The Agriculture Ministry has been working on soil health and climate-resilient farming, creating a base for future policy.
5. Potential income source: A structured framework can create a new income stream for farmers, aligning climate action with livelihoods.

Way Forward

1. Ensure policy clarity and effective communication: The confusion shows a gap between technical design and public understanding, so there must be a clear separation between CCUS (industry) and carbon farming (agriculture), along with precise communication to avoid misinterpretation.
2. Develop a separate policy framework for agriculture: The absence of a structured agricultural carbon system highlights the need for dedicated institutions, funding, and mechanisms for carbon farming.
3. Align policy with emerging narrative: The growing farmer-centric climate narrative should be aligned with actual policy design to prevent mismatch between perception and reality.
4. Adopt a parallel strategy: Both industrial decarbonisation and agricultural carbon sequestration should be promoted through separate but coordinated approaches.

Conclusion

The ₹20,000 crore programme clearly targets industrial decarbonisation through CCUS, not agriculture. At the same time, agriculture offers a strong but separate opportunity in carbon markets. India needs a dual-track approach, with clear policy separation and equal focus on industry and farming, to ensure effective climate action and avoid confusion.

Question for practice:

Discuss the confusion surrounding India’s ₹20,000 crore carbon credit programme announced in Union Budget 2026, and explain its actual focus, concerns, opportunities, and the way forward.

Source: The Hindu