India Launches Major Carbon-Capture Incentive Initiative While Keeping Coal Central to Power Strategy

Setting the stage: energy trade-offs and climate ambition

India stands at a pivotal juncture in its energy policy and climate strategy. The country has committed to achieving net-zero emissions by 2070, while steering rapid economic growth, industrialisation and electrification. One of the core dilemmas has been how to reconcile the reliance on coal — still the predominant source for electricity generation — with increasingly stringent global and domestic climate goals.

This week’s announcement, made by a senior advisor at NITI Aayog, signals a bold effort to bridge the gap: rather than reducing coal generation overnight, the government is pivoting toward decarbonising it through CCUS technologies. By offering very substantial funding support to projects that capture, store or utilise carbon dioxide emissions, the policy reflects a dual-track strategy: retain energy-security by keeping coal in the mix, while decarbonising through new tech and incentivised investment. The initiative underscores the recognition that simply phasing coal in India is not realistic in the near term, and so innovation must carry the load of transition. :contentReference[oaicite:1]{index=1}

Details of the CCUS initiative

The policy framework specifies that selected capital-intensive CCUS projects will receive funding support ranging between **50% and 100%** of qualifying cost. Priority will be given to coal-based projects, coal-to-synthetic-gas conversions, and industrial emissions sources (such as cement, steel, refineries) that are otherwise hard to abate.

A senior advisor to NITI Aayog was quoted as saying that coal remains central — in fact the country plans to expand coal-based capacity by roughly 97 GW by 2035 (taking total to about 307 GW) — but that using CCUS could significantly reduce the carbon footprint of that generation. :contentReference[oaicite:2]{index=2}

The government is also exploring how synthetic natural-gas (SNG) from coal with CCUS could reduce India’s dependency on imported natural gas. In essence, the policy views coal not only as an energy source but as a feed-stock for advanced processes when paired with CCUS and gasification. This reflects a techno-optimistic view of the energy transition in India.

Why the timing matters

The global energy context has been shifting: supply-chain uncertainties, commodity price volatility, and geopolitical shocks have made energy security a dominant imperative. India’s growing electricity demand, industrialisation push (via programmes such as “Make in India” and green manufacturing) and the clean-energy transition ambition all collide here. By introducing strong incentives for CCUS now, India is signalling that it wants to capture the next wave of low-carbon technology investment even while shielding itself from near-term energy-security risks.

Moreover, the international climate arena is paying attention. With coal still dominant globally, large emerging economies like India have faced criticism for lagging on climate action. A policy that puts serious money behind CCUS offers a response: India is not shunning coal, but investing in ways to make it sustainable. This may help the country navigate the twin pressures of climate diplomacy and developmental imperatives.

Implications for industry and investors

The policy opens up several world-scale investment opportunities:

• Energy companies: Firms operating coal-power plants must now evaluate retrofitting CCUS systems, or new builds with carbon-capture integrated. The capital-cost support may shift project economics significantly.
• Petrochemicals and gas-industries: With a push toward coal-to-synthetic-gas conversion, gas-importers and downstream firms may face competitive disruption or new alliances.
• Technology and service providers: Providers of CCUS equipment, monitoring systems, storage facilities, and capture-materials stand to gain. The policy supports demand for innovation and deployment at scale in India.
• Finance sector: With government co-funding, risk for early-stage terminals is reduced. This may unlock private-capital flows, green-bonds financing CCUS infrastructure, and blended-finance models.

Challenges and risks

Despite the policy promise, several risk-factors and implementation issues loom:

• Technology readiness and cost-curve: CCUS remains expensive globally and deployment in India’s context (coal-heavy, logistical constraints, land-use issues for storage) is challenging.
• Geological storage and environmental risks: Identifying secure, long-term storage sites (for CO₂) is complex; regulatory frameworks and liability mechanisms must be built.
• Dependence on coal perpetuation: By doubling down on coal (with CCUS), there is a risk that fewer incentives will accrue for transitioning to renewables; some critics argue it risks locking in fossil-infrastructure for decades.
• Capital-intensity and timeline risk: Even with strong subsidies, project financing, procurement, land-clearances, and technology import challenges may delay realisation. The funding may not immediately translate into large scale when compared with renewables initiative.
• Global trade and carbon-pricing dynamics: With potential future carbon-tariffs or international linkage, India’s coal-+-CCUS strategy may face competitiveness or regulatory risk if global markets evolve faster.

Policy coherence and broader climate roadmap

This CCUS push connects with India’s broader climate-energy agenda. India’s target of installing 500 GW of non-fossil energy capacity by 2030 is widely known; the CCUS initiative complements it by addressing the “hard-to-abate” emissions from industrial and fossil-fuel sectors. :contentReference[oaicite:3]{index=3}

The announcement also conveys that India sees its energy future as plural: renewables, nuclear, and cleaner fossil-fuel technologies (via CCUS) all have a place. The government is effectively saying that energy-security and climate-ambition are two sides of the same coin—not sequential, but simultaneous.

Regional and global significance

Globally, India is among the few large-emitting countries to explicitly put incentive weight behind CCUS at this scale. For the coal-heavy architecture of many economies, India’s model may become a template—especially in regions where coal remains dominant but clean-energy transition pressures are rising.

Regionally in South Asia, India may help anchor supply‐chain and technology-ecosystem development in CCUS, helping neighbouring countries build capacity and lowering unit costs through learning-curve effects. That may position India not only as a market but as a technology-hub for carbon-management solutions.

Next steps and what to watch

In the coming months, the following will be key to gauge whether the policy transitions from announcement to action:

• Selection of first-mile CCUS projects in India—who wins the incentives, timelines, funding disbursement.
• Roll-out of regulatory frameworks for CO₂-transport, storage, monitoring, liability and third-party verification.
• Integration of CCUS plans with domestic coal-expansion projects and industrial clusters—whether coal-power plants under construction include capture units.
• Private-sector participation—how many domestic and foreign firms commit capex, technology licences, joint-ventures for CCUS in India.
• Tracking of additionality—whether the funding results in net incremental carbon-reduction, or only supports business-as-usual with subsidised tech. Ensuring real climate impact will matter.

Conclusion

India’s decision to launch large-scale incentives for carbon-capture projects while continuing to rely on coal signals a pragmatic, albeit controversial, path in the transition. On one hand, it demonstrates ambition: technology is being leveraged to reduce emissions from the heavy fossil-fuel base. On the other hand, it reflects the challenge many emerging economies face—how to move fast on climate without undermining development and energy access.

If the implementation is strong, the initiative could become a marker of India’s climate-innovation leadership. If not, it may be viewed as a policy accommodation of fossil-fuel interests under the banner of low-carbon tech. As many countries watch, the coming 12-24 months will test whether the policy becomes a catalyst for emissions abatement or a symbolic move with limited impact.