At present, India has estimated annual emissions of 2.6 gigatonne per annum (gtpa), making it the third largest emitter in the world, only behind China and the US. To address the issue, the Indian government has set an ambitious target of achieving carbon neutrality by 2070 along with a commitment to reduce carbon emissions by 50 per cent by 2050. Currently, the country relies on coal to meet 70 per cent of its electricity needs, leaving immense scope for greening the grid. The growth in the renewable energy sector over the past decade shows that India is on the right path to achieve its goals. However, the power sector only makes up a third of the overall aggregate carbon emissions. While the greening of the grid will continue to reduce the proportion of carbon emissions in the power sector, it would not be sufficient to achieve net-zero emissions.
The industrial economy in India is developing rapidly and accounts for another third of the aggregate carbon emissions. The share of industries in carbon emissions is likely to increase as India continues to urbanise and develop its manufacturing and infrastructure sector. Consequently, technological innovations and carbon neutralising mechanisms would be crucial for abating the existing and expected higher level of emissions over the coming years. Despite greening of the grid, India’s dependence on coal and other fossil fuels is likely to remain prominent over the next decade or two in order to provide reliable and affordable baseload power as renewable sources such as solar and wind are intermittent and non-despatchable in nature.
Carbon capture, utilisation and storage (CCUS) is a critical tool in India’s decarbonisation mission, especially as the industrial sector entails heavy utilisation of fossil fuels, not only as a source of power but also as a raw material in several industrial processes. While CCUS is critical in decarbonising the power sector, the carbon dioxide released in industrial processes is harder to abate as compared to that in the power sector.
Against this backdrop, NITI Aayog released a report titled “Carbon Capture, Utilisation and Storage (CCUS): Policy Framework and its Deployment Mechanism in India”, highlighting the potential, technologies, policy framework and outlook of CCUS in India over the coming years.
Renewable Watch presents the key highlights of the report…
Technologies
Industrial processes such as power generation in power plants, chemical production, cement production or steelmaking release carbon dioxide into gas streams. Carbon capture technologies separate carbon dioxide from gas streams and are broadly characterised under three segments including post-combustion capture, pre-combustion and oxy-fuel combustion.
Post-combustion technologies utilise carbon dioxide from flue gas after combustion. In this process, fossil fuels such as coal, oil and natural gas are burnt in the presence of air. The flue gas tends to be rich in nitrogen and the percentage of carbon dioxide usually varies between 3 per cent and 15 per cent. Post-combustion technologies utilise high amounts of energy as the partial pressure of carbon dioxide in the flue gas is quite low which requires very high-volume chemical solvent circulation for carbon capture. As a result, this process is highly cost intensive.
Under pre-combustion technologies, carbon dioxide is removed through the upstream treatment of fossil fuels prior to combustion. Pre-combustion technologies are preferred over post-combustion in cases such as gasification of fossil fuels where the gas stream possesses a higher partial pressure of carbon. In such a case, the physical solvent can be regenerated by reducing pressure.
Another type of technology is oxy-fuel combustion, which burns the fuel in pure oxygen rather than air. This technology is still at the research and development stage but seems to be a promising tool in achieving near-zero emissions. Direct air capture is also an emerging form of carbon capture. This technology can be deployed for wide-ranging applications as it is independent of the source and concentration of the emission stream. However, it is still at the pilot stage as economies of scale have not yet been achieved.
Various types of commercial-scale carbon capture technologies are also segregated into different categories with respect to their suitability for different applications depending on the composition of the gas stream. Chemical solvent-based carbon capture technologies are used where the gas streams are lean in carbon dioxide and have low pressure levels. This technology is primarily utilised in gas streams of refineries, chemical plants, steel plants and flue gas streams from power plants. Regenerating the chemical solvent also requires large quantities of steam, making the cost and availability of steam a crucial factor in opting for this technology. Physical solvent-based carbon capture technologies are suitable for gas streams with relatively higher carbon dioxide concentration and pressure, such as pre-combustion capture in the case of gasification projects. Adsorption-based carbon capture technologies are suitable for gas streams with moderate to high pressure and moderate carbon dioxide concentration. Finally, cryogenic carbon capture technologies are used in applications where the cost of power is low. The technology can be applied for carbon capture from gas streams for producing hydrogen and can also increase the yield and recovery of hydrogen production from the same quantity of natural gas.
Policy framework
The report presents a review of carbon capture projects across the world which highlight the criticality of a robust policy framework in the success of CCUS. Government support in the form of policies and regulations is the key to managing project costs and risks, incentivising the private sector and establishing the CCUS value chain comprising carbon capture, transportation and storage. In India, a carbon credits-based policy is found to be best suited to seed and encourage CCUS deployment. This would reduce the cost of carbon capture, create a market for low carbon products and help green the budding industrial and manufacturing sector of India by offsetting the cost of carbon capture.
Six crucial factors associated with the formulation of CCUS policies in India have been recommended. First, the policy path to promote CCUS should ideally focus on taking the carbon credits route or incentivising CCUS using tax and cash credits. Provision of early-stage financing and funding mechanisms for CCUS projects would also go a long way in creating confidence in the initial phase of development. Second, a hub- and -cluster model can enable the achievement of economies of scale across the value chain of carbon capture by specifying defined roles for various stakeholders such as emitters, aggregators, hub operators, disposers and conversion agents. Third, a production-linked incentive scheme can be introduced for low-carbon or carbon-abated products. Policies that protect communities most affected by environmental and climate change must also be established. This will ensure that the economic value created by CCUS is equally distributed while the means of livelihood of those dependent on traditional sectors affected by migration to clean energy sectors are also protected. Creating an accounting and regulatory framework will also incentivise carbon capture in different sectors. This can be done by outlining a baseline of regulated emission levels and allowances for different sectors. Moreover, a life cycle analysis framework may be adopted to take a holistic look at the carbon abatement and associated costs and benefits throughout the life cycle of a CCUS project. Finally, mitigation of risk by limiting the liability and ownership of carbon dioxide across the CCUS value chain and monitoring risks will also be effective in promoting adoption of CCUS on a large scale in the country.
Finance
Financing CCUS projects in India will be a challenge even with government support and incentives. The most crucial aspect of financing CCUS projects would be the provision of adequate funding in the initial demonstration phase. Moreover, the capital costs associated with carbon capture would vary widely between different applications and sectors. Thus, financing must be provided accordingly.
Capturable carbon emissions are expected to reach 2,400 mtpa by 2050, when India aims to reduce its carbon emissions by 50 per cent. To achieve this target, India would need to capture at least 30 per cent of the said value, amounting to roughly 750 mtpa of carbon. To incentivise CCUS projects on such a massive scale, subsidies for various purposes have also been proposed. For instance, for carbon sequestration and storage, a subsidy of Rs 4,100 per tonne till 2040 and Rs 3,000 per tonne till 2050 has been suggested. For carbon utilisation, a subsidy of Rs 2,300 per tonne till 2050 and for carbon EOR a subsidy of Rs 3,000 per tonne till 2040 and Rs 2,400 per tonne till 2050 has been proposed.
The report also envisages two alternative mechanisms to finance these projects. The first mechanism entails CCUS funding through a “clean energy cess” only. The clean energy cess levied on coal will be diverted towards carbon capture-related projects. As the GST compensation cess has been extended till March 31, 2026, the cess on coal will be reintroduced from April 2026 at a rate of Rs 400 per tonne. The second mechanism is CCUS financing through government budgetary support and bonds. These can be utilised to finance the subsidy, both in the form of cash and tax credits, required for CCUS.
Outlook
CCUS can go a long way in helping achieve India’s climate commitments and transition to cleaner energy systems. It can not only decarbonise the operations of the existing emitters such as large industries like steel, cement, refineries and thermal power plants, but also promote the decarbonisation of hard-to-abate sectors such as agriculture. These projects are also expected to lead to significant employment generation, both during the construction phase and the operating phase, thereby defining the future economic prospects of areas surrounding CCUS projects. The push to CCUS is in line with strengthening India’s hydrogen economy. Going forward, the development of CCUS in India at the desired scale would entail the development of a holistic policy framework, financing tools, technology transfer of commercially proven technologies and promoting R&D.
