Decarbonizing India’s Development Journey

• 25 Feb 2026

This editorial is based on “From budget provision to national capability: Why India’s CCUS commitment matters” which was published in The Hindustan Times on 23/02/2026. This editorial provides a comprehensive status on India's multidimensional decarbonization strategy, it critically examines the friction between coal-based energy security and the ambitious leap toward a technology-led, net-zero industrial landscape.

For Prelims: Carbon Credit Trading Scheme (CCTS),CCUS, PM Surya Ghar Muft Bijli Yojana,Perform Achieve and Trade ,Battery Energy Storage Systems.

For Mains: Key developments in the decarbonisation process, persisting issues in decarbonisation and measures needed.

India is driving a multi-pronged decarbonization strategy to reach Net Zero by 2070, anchored by an ambitious target of 500 GW of non-fossil fuel capacity by 2030 and a record 24% budget increase for the Ministry of New And Renewable Energy in 2026. This push integrates the National Green Hydrogen Mission (targeting 5 MMT annual production) with a new ₹20,000 crore commitment to CCUS for hard-to-abate sectors like steel and cement. By launching a domestic Carbon Credit Trading Scheme (CCTS) by mid-2026 and establishing "Rare-Earth Corridors" for EV supply chains, India is evolving from simple energy substitution to a comprehensive, technology-led industrial transformation.

What Strides is India Taking Towards the Decarbonisation of Its Development Trajectory?

• Heavy Industry Decarbonization (CCUS): India is pragmatically addressing hard-to-abate industrial emissions by shifting from pure energy substitution to deep industrial transformation. 
  • Carbon Capture, Utilisation, and Storage (CCUS) allows the nation to preserve its young manufacturing asset base while aligning with climate imperatives. 
  • By deploying cluster-based capture facilities in industrial corridors, India minimizes unit costs and regulatory friction without stalling economic growth. 
    • The 2026-27 Union Budget allocated a landmark ₹20,000 crore to scale CCUS infrastructure and de-risk private capital. 
• Massive Scaling of Non-Fossil Power: The rapid scaling of utility-scale and decentralized renewable generation capacity forms the bedrock of India’s strategy to decouple economic growth from fossil fuels. 
  • India is advancing aggressively toward its 500 GW non-fossil capacity target by 2030, with total renewable capacity surpassing the 200 GW milestone. 
    • As of late 2025, India achieved a landmark in its energy transition, with non-fossil fuel sources accounting for over 51% of its total installed electricity capacity.
  • The PM Surya Ghar Muft Bijli Yojana  is driving rapid rooftop solar adoption reaching the 30 lakh (3 million) households milestone as of February, 2026.
• Expansion of Green Hydrogen Ecosystem: Green hydrogen is positioned as the critical vector for decarbonizing heavy mobility, fertilizers, and refining sectors where direct electrification falls short. 
  • By heavily subsidizing domestic electrolyser manufacturing and molecule production, the government aims to establish India as a dominant global green export hub. 
    • This systemic transition ensures long-term energy security by replacing imported liquefied natural gas and ammonia with indigenously generated clean molecules. 
  • The ₹19,744 crore National Green Hydrogen Mission is executing massive tenders to hit a 5 MMT annual production capacity by 2030. 
    • Also, the Ministry of New and Renewable Energy has formally recognised three major ports Deendayal Port Authority (Gujarat), V.O. Chidambaranar Port Authority (Tamil Nadu), and Paradip Port Authority (Odisha) as Green Hydrogen Hubs under the National Green Hydrogen Mission (NGHM).
• Industrial Decarbonization via Carbon Markets: India is institutionalizing a market-driven approach to emissions reduction through the establishment of a domestic cap-and-trade compliance mechanism. 
  • Carbon Credit Trading Scheme (CCTS) in India is a mechanism designed to reduce greenhouse gas (GHG) emissions through carbon pricing
    • By monetizing verified emissions reductions, the system ensures that private capital flows efficiently toward the most cost-effective decarbonization technologies. 
    • The framework is divided into two streams, a mandatory Compliance Mechanism and an Offset Mechanism.
  • As of January 2026, the Indian carbon market covers 490 obligated entities across India's most emission-intensive industries. 
  • The Government of India is notifying Greenhouse Gas Emission Intensity (GEI) targets under the CCTS for major carbon-intensive sectors, including Aluminium, Cement, Refineries, and Petrochemicals, thereby expanding the Indian Carbon Market’s compliance framework.
• Push for E-Mobility and Battery Supply Chains: The electrification of surface transport is fundamentally disrupting urban mobility patterns and curbing the nation's systemic macroeconomic reliance on imported crude oil. 
  • Supply-side production-linked incentives are synergizing perfectly with demand-side subsidies to exponentially accelerate the adoption of two-wheelers and commercial fleets. 
    • Concurrent investments in localized battery supply chains mitigate the geopolitical risks associated with critical mineral dependencies and secure domestic manufacturing. 
  • Sustained initiatives like the PM E-DRIVE scheme are driving EV penetration targets toward 30% of total vehicle sales by 2030. 
    • Domestic advanced chemistry cell (ACC) battery manufacturing capacity is currently scaling up rapidly under a dedicated ₹18,100 crore PLI scheme.
• Advancing Grid Energy Storage Infrastructure: Managing the inherent intermittency of utility-scale renewables requires robust, round-the-clock grid stabilization infrastructure and advanced peak-load shifting capabilities. 
  • Policy focus has aggressively pivoted toward Battery Energy Storage Systems (BESS) and pumped hydro projects to ensure long-term national grid resilience. 
    • Targeted viability gap funding is unlocking early-stage private investments, effectively turning variable green energy into dispatchable, firm power baseloads. 
  • For instance, the Ministry of Power approved a massive second VGF scheme targeting 30 GWh of standalone BESS. This is funded with ₹5,400 crore from the Power System Development Fund (PSDF).
• Promoting Biofuels and Circular Economy: Maximizing the utility of agricultural residue and municipal waste through biofuels provides a dual solution for urban waste management and rural energy transition. 
  • Ethanol blending directly reduces transport tailpipe emissions and import bills while injecting massive additional revenue streams into the agrarian economy. 
  • The strategic promotion of compressed biogas (CBG) creates decentralized, low-carbon energy networks that are completely independent of global supply chain shocks. 
    • For instance, India successfully hit its 20% ethanol blending in petrol (E20) target ahead of schedule, cutting millions of tonnes of carbon emissions annually. 
    • Further, India-led Global Biofuels Alliance is standardizing international markets and deploying technology-sharing protocols to scale global biofuel adoption.
• Green Finance and Taxonomy: Mobilizing vast pools of domestic and international capital is absolutely critical to funding the massive infrastructure overhaul required for a net-zero trajectory. 
  • The issuance of sovereign green bonds establishes an authoritative pricing benchmark for private sector green borrowing and long-term risk assessment. 
  • Regulatory advancements toward a standardized national green taxonomy prevent corporate greenwashing.
  • For instance, India has issued ₹15,000 crore in sovereign green bonds in FY26, taking total issuances to ₹72,697 crore since FY23. Municipal green bonds could mobilize USD 2.5–6.9 billion for climate action by urban local bodies over the next decade.
• Energy Efficiency & Demand Optimization: Curbing overall energy intensity through demand-side optimization acts as the absolute most cost-effective and immediate lever for national decarbonization.
  • Mandatory energy efficiency standards for appliances and heavy industrial processes drastically shrink the aggregate power demand curve before new generation is needed. 
  • Smart grid deployments and advanced metering infrastructure empower consumers to actively optimize their consumption based on real-time grid pricing signals. 
    • The Perform, Achieve and Trade (PAT) scheme alone has avoided approximately 110 million tonnes of CO2 emissions annually. 
    • It has saved energy worth ₹55,000 crore per year by reducing specific energy consumption in energy-intensive sectors.
  • Further,through the UJALA scheme, the government aims to save 85 lakh kWh of electricity and 15,000 tonnes of CO2 by replacing 77 crore traditional bulbs & CFLs and 3.5 crore streetlights with LEDs.

What are the Persisting Issues in India’s Decarbonization Push? 

• The Coal "Phase-Down" vs. "Phase-Out" Dilemma: India’s rapidly accelerating economic growth mandates an insatiable demand for reliable baseload power, making a near-term pivot away from thermal generation practically impossible. 
  • Despite aggressive renewable capacity additions, the national grid's stability remains firmly tethered to coal to prevent mass outages during peak demand hours. 
  • Coal still accounts for about 72% of India's total electricity generation. To meet the projected electricity demand of India’s rapidly expanding economy, 13.32 GW of new coal- based thermal capacity has been awarded in FY 2025-26.
  • Also, millions of people in mineral-rich states such as Jharkhand, Chhattisgarh, and Odisha depend directly or indirectly on the coal value chain for their livelihoods.
  • Failing to engineer a highly managed "just transition" through aggressive reskilling and economic diversification will inevitably trigger massive localized unemployment and severe political blowback. 
• The Staggering Green Finance Deficit: The sheer scale of capital required to fund India’s net-zero trajectory heavily outstrips both domestic fiscal capacity and the current velocity of foreign direct investment. 
  • Persistently high domestic costs of capital and currency hedging risks severely deter international institutional investors from committing long-term debt to Indian green infrastructure. 
    • Macroeconomic estimates indicate India requires over $10 trillion by 2070 to achieve net-zero, translating to an annual funding gap running into hundreds of billions of dollars. 
• Supply Chain Vulnerability in Critical Minerals: The rapid transition from fossil fuels to clean technologies replaces a historical reliance on oil cartels with an acute vulnerability to localized critical mineral supply chains. 
  • Domestic scarcity of essential elements like lithium, cobalt, and rare earth metals exposes India to significant geopolitical leverage from dominant global refiners (like China) and hostile state actors. 
  • Developing indigenous processing capabilities and securing overseas mining assets is a highly capital-intensive, multi-year process that constantly threatens to bottleneck domestic EV and storage deployment.
    • For instance, despite the much-publicized discovery of 5.9 million tonnes of lithium-inferred resources in Jammu & Kashmir, commercial extraction and battery-grade refining remain years away from viability.
• Grid Intermittency and High Storage Costs: Expanding variable renewable energy inherently destabilizes national grid frequency, necessitating massive parallel investments in firming infrastructure and dispatchable storage solutions. 
  • However, the current levelized cost of storage (LCOS) for utility-scale batteries remains prohibitively expensive, deterring distribution companies from signing round-the-clock (RTC) green power purchase agreements. 
  • As per the National Electricity Plan (NEP) 2023, India will require around 411.4 GWh of energy storage capacity by 2031–32, of which 236.22 GWh is expected from Battery Energy Storage Systems (BESS). 
  • However, the current pace of storage capacity development remains inadequate to meet this target.
• Land Acquisition and Socio-Ecological Friction: Megawatt-scale solar and wind parks are inherently land-intensive infrastructure projects, inevitably sparking severe socio-economic friction with agrarian communities and indigenous populations.
  • Ambiguous land titling, protracted environmental clearances, and fierce right-of-way disputes for transmission lines constantly derail project timelines and inflate execution costs. 
    • For instance, in February 2026, a massive 700-km march was conducted in Rajasthan to protest the diversion of Orans (sacred groves) for solar plants.
    • Furthermore,major high-voltage transmission projects in Rajasthan frequently face multi-year legal injunctions due to local agrarian protests and overlapping habitats of the critically endangered Great Indian Bustard.

• Market Credibility in the Carbon Trading Scheme: As the Indian Carbon Market (ICM) begins its compliance phase in 2026, concerns persist regarding "over-supply" of credits and weak price signals that might fail to incentivize actual technology shifts. Without a robust price-stability mechanism, there is a risk that companies will buy cheap, low-quality offsets rather than investing in deep decarbonization of their industrial processes.
  • Between 2010 and 2022, India already issued 278 million credits in the voluntary carbon market, accounting for 17% of global supply. Experts warn that without a Price Adjustment Mechanism, credit prices (currently ₹500-700) may stay too low to drive the adoption of expensive green technologies like Carbon Capture.

What Measures are Needed to Accelerate India’s Decarbonisation Efforts ?  

• Maturing the Carbon Pricing Architecture: Accelerating decarbonisation demands a rapid tightening of domestic carbon markets through declining emission caps and a credible price floor. 
  • India must shift from voluntary, intensity-based targets to absolute emission caps, especially for hard-to-abate sectors, to create real scarcity and strong price signals.
  • Linking domestic markets with international carbon frameworks, backed by robust third-party MRV systems, will prevent carbon leakage, curb greenwashing, and mobilise global capital, forcing industries to internalise climate externalities and adopt deep decarbonisation technologies.
• Scaling Dispatchability and Ancillary Grid Markets: Addressing renewable intermittency requires aggressive incentives for energy storage through dedicated ancillary service markets. 
  • Grid regulators must mandate time-of-day pricing and reward peak shifting and frequency regulation.
  • Allowing revenue stacking, standardising interoperability, and mandating storage co-location in large solar and wind parks will reduce curtailment losses and convert variable renewables into reliable round-the-clock clean power.
• Institutionalising Blended Finance and Green Taxonomy: Bridging the climate finance gap requires blended finance vehicles that combine sovereign guarantees with concessional multilateral capital to de-risk private investment. 
  • India must operationalise a legally binding green taxonomy to prevent capital misallocation.
  • Stricter ESG disclosures and targeted sovereign green bonds for high-risk technologies like offshore wind will lower the cost of capital, unlocking large-scale green infrastructure deployment.
• Mandating Green Public Procurement (GPP): The state must leverage public spending to create assured markets for low-carbon steel and cement through mandatory Green Public Procurement. 
  • Setting rising embedded-carbon thresholds in public projects bridges the green premium constraining heavy industry.
  • Guaranteed long-term offtake visibility de-risks private investment, allowing public capital to act as a market-maker that drives scale and accelerates cost reductions.
• Accelerating CCUS Hub-and-Spoke Deployment: Scaling CCUS requires shared infrastructure across industrial clusters via a hub-and-spoke model. Government participation as an anchor tenant in pipelines and storage facilities reduces prohibitive upfront costs.
  • Pooling emissions from steel, cement, and petrochemicals, alongside faster right-of-way approvals and clear long-term liability rules, cuts abatement costs and preserves the competitiveness of India’s industrial base.
• Indigenizing Circular Economy and Urban Mining: Supply-chain security demands mandatory closed-loop recycling for batteries and solar components and the formalisation of urban mining. 
  • Strong Extended Producer Responsibility (EPR) norms must enforce rising use of secondary materials.
  • Subsidising recovery technologies and integrating the informal waste sector will reduce dependence on volatile global mineral markets and decouple clean-tech growth from ecologically destructive extraction.
• Decentralizing Energy via Peer-to-Peer Trading: Grid democratization requires regulatory sandboxes for P2P electricity trading among prosumers and microgrids.
  • Enabling households to sell rooftop solar power locally reduces reliance on inefficient utility monopolies.
  • Mandatory bidirectional charging and V2G integration can transform EVs into a distributed storage asset, cutting transmission losses, enhancing grid resilience, and accelerating rural energy autonomy.
• Engineering a Managed “Just Transition”: Phasing down fossil fuels demands a legally anchored just transition framework to protect coal-dependent regions.
  • Dedicated sovereign transition funds must finance economic diversification and industrial restructuring.
  • A national green skills taxonomy, retraining programs, and repurposing mines into solar parks or pumped hydro can generate alternative livelihoods, easing political resistance and ensuring socially inclusive decarbonisation.
• Optimizing the Agricultural Energy-Water Nexus: Decarbonising agriculture requires integrating solarised rural feeders with groundwater conservation. Solar pumps and microgrids must be paired with smart metering to prevent aquifer depletion.
  • Incentivising farmers to sell surplus power and expanding compressed biogas (CBG) from crop residue can curb stubble burning, boost rural incomes, and transform agriculture into a pillar of India’s net-zero strategy.

Conclusion : 

India’s decarbonization journey has evolved from aspirational targets into a high-precision industrial strategy, marked by the 2026 budgetary commitment to CCUS and the operationalization of the domestic carbon market. Achieving Net Zero by 2070 is thus no longer just an environmental mandate but a fundamental blueprint for India’s future macroeconomic sovereignty.

Drishti Mains Question 

"The transition from energy substitution to deep industrial transformation is critical for India's Net Zero 2070 goal." In this context, evaluate the role of Carbon Capture, Utilisation, and Storage (CCUS) in decarbonizing India’s hard-to-abate sectors.

 

FAQs 

1. What is the primary focus of the 2026 CCUS budget allocation?

To scale infrastructure and de-risk private capital for hard-to-abate sectors like steel, cement, and refineries with a ₹20,000 crore outlay.

2. How does the Carbon Credit Trading Scheme (CCTS) function?

It is a cap-and-trade mechanism where 490 obligated entities trade credits based on meeting specific Greenhouse Gas Emission Intensity (GEI) targets.

3. What is the "Green Premium"?

The additional cost of choosing a clean technology (like  green hydrogen) over a traditional fossil-fuel-based one.

4. What are "Rare-Earth Corridors"?

Specialized industrial zones (proposed in the 2026 budget) designed to secure and process critical minerals for the EV and battery supply chain.

5. What is the significance of the PM Surya Ghar Muft Bijli Yojana?

It is a flagship scheme for rooftop solar, which recently hit the 30 lakh (3 million) household milestone to decentralize energy production.

UPSC Civil Services Examination Previous Year Question (PYQ)

Prelims

Q. Consider the following statements (2023)

Statement—I: Carbon markets are likely to be one of the most widespread tools in the fight against climate change.  

Statement—II: Carbon markets transfer resources from the private sector to the State.  

Which one of the following is correct in respect of the above statements?  

(a) Both Statement—I and Statement—II are correct and Statement—II is the correct explanation for Statement—I  

(b) Both Statement—I and Statement—II are correct and Statement—II is not the correct explanation for Statement—I  

(c) Statement—I is correct but Statement—II is incorrect  

(d) Statement—I is incorrect but Statement—II is correct  

Ans: B  

The concept of carbon credit originated from which one of the following? (2009)

(a) Earth Summit, Rio de Janeiro  

(b) Kyoto Protocol  

(c) Montreal Protocol  

(d) G-8 Summit, Heiligendamm  

Ans: B