To decarbonise India’s industrial and power sectors, which account for over half of its CO2 emissions, creating an institutional financing mechanism on the lines of the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) is critical.
Such a financing mechanism is important for scaling up carbon capture, utilisation and storage (CCUS) in a bid to make industrial decarbonisation financially viable, Dastur Energy CEO Atanu Mukherjee pointed out.
Speaking with businessline, he stressed on setting up a Carbon Capture Finance Corporation (CCFC), which blends government incentives with private and international finance to unlock largescale investments in CCUS. “CCUS projects need scale to be viable and financing is key. Government should consider repurposing coal cess and introducing targeted incentives to lower costs. A structured financing body like CCFC can enable climate bonds and other financial instruments, unlocking $7-10 billion required over the next decade,” he explained.
Dastur Energy, which has been closely associated with NITI Aayog in shaping India’s CCUS policy framework, had developed a draft policy framework in 2022 to establish CCUS prospects in India.
“Government should consider repurposing coal cess and introducing targeted incentives to lower costs” – Atanu Mukherjee, CEO, Dastur Energy
FUNDING STRATEGY
The government is developing a CCUS mission to support decarbonising industries such as thermal power plants, iron & steel, and cement. However, commercial viability remains a major challenge, said Mukherjee.
To address this, Mukherjee emphasised on the need for incentives such as tax credits, viability gap funding (VGF) and targeted subsidies — similar to the incentives that drove India’s solar energy boom — Production Linked Incentive (PLI) scheme.Integrating CCUS into India’s Emissions Trading Scheme (ETS) would create a structured carbon pricing mechanism to encourage industrial participation, he added.
Given the scale of investments required, Mukherjee highlighted the criticality of tapping into international climate finance, green funds, and multilateral lending institutions such as the World Bank and Asian Development Bank. “India should explore collaborations with global CCUS leaders such as the US, Norway, and Japan to fast-track technology deployment and create an export-driven carbon management ecosystem,” he noted. For instance, among the global policy models there is the US 45Q tax credit, which provides up to $85 per tonne for CO2 sequestration.
India has an estimated 600 billion tonnes of CO2 storage capacity, though only 100–150 billion tonnes are currently technically and economically feasible, he said.
STORAGE OPTIONS
Key storage options include deep saline formations, basalt formations, and depleted oil and gas fields.
However, detailed mapping and feasibility assessments are necessary to utilise these resources effectively.
Regions such as the Krishna-Godavari Basin, Deccan Trap, and mature oil and gas fields offer substantial CO2 storage capacity.
Mukherjee suggested a hub-and-cluster approach — where industries in regions such as Gujarat, Odisha-Jharkhand, and Andhra Pradesh share sequestration sites to optimise costs and infrastructure.
He also emphasised on the need to develop CO2 transportation infrastructure, pointing to successful pipeline networks in the US and Europe as models for India.
“Beyond storage, captured CO2 can be converted into high-value products like methanol, synthetic fuels and chemicals. However, CCUS-based products remain expensive, with CO2-derived methanol costing $1,000 a tonne compared to conventional methanol at $300. To bridge this gap, subsidies and targeted incentives can be utilised,” he added.
As India moves toward its net-zero emissions target by 2070, CCUS has emerged as a crucial tool to decarbonize hard-to-abate sectors such as steel, cement, chemicals and thermal power, Mukherjee said.
These industries contribute around 30–35 per cent of India’s total emissions.
Unlike the power sector, where renewables and green hydrogen offer alternatives, many industrial processes — such as steel making and fertilizer production — do not yet have commercially viable replacements.
“While renewables and hydrogen are promising, industrial processes will continue emitting CO2 for years, making carbon capture an indispensable solution.
“Unlike alternative methods that require a complete overhaul of industrial processes, CCUS allows industries to significantly reduce emissions while maintaining operational continuity,” he explained.