Budget 2026 Carbon Credit Programme: Rs 20,000 Crore for CCUS, Not Farm Carbon Credits – Explained with Facts

Context

• A Rs 20,000 crore allocation in Union Budget 2026 for a “carbon credit programme” triggered debate over its intent – industrial decarbonisation through CCUS or carbon income for farmers.
• Two competing interpretations circulated; official evidence indicates the primary focus is industrial carbon capture technologies, not agriculture.

What CCUS Is

• Carbon Capture, Utilisation and Storage: capturing CO2 from industrial flue gases, using it in industrial processes (chemicals, building materials, enhanced oil recovery) or storing it permanently underground in depleted oil fields and saline aquifers.
• A technology-based solution for emissions that cannot be removed simply by switching to renewable electricity.

Which Sectors CCUS Targets

• Hard-to-abate industries with concentrated, point-source emissions that are technically difficult to eliminate: power plants and refineries, steel and cement, and chemicals and fertilisers.
• These sectors produce a large share of industrial CO2 and cannot fully decarbonise through renewables alone because the CO2 comes from the process itself (limestone in cement, coke in steel).

Why Agriculture Is Not a CCUS Target

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• Diffuse sources: farm emissions come from millions of fields, soils and animals – there is no single point to capture.
• Biological gases: the main farm gases are methane (CH4) from paddy and livestock and nitrous oxide (N2O) from fertiliser, produced by biological processes, not combustion.
• Technological mismatch: CCUS works on concentrated CO2 streams; agriculture deals with low-density, scattered emissions.

Agriculture's Real Role: Carbon Dioxide Removal

• Instead of capture at source, farms can remove CO2 already in the atmosphere through soil carbon sequestration, agroforestry, biochar and regenerative farming.
• Such removals can earn credits under India’s Carbon Credit Trading Scheme (2023) and voluntary markets, but that is a separate mechanism from the Budget’s CCUS outlay.

India's Carbon Market Framework

• The Carbon Credit Trading Scheme, 2023 under the Energy Conservation (Amendment) Act, 2022 creates a compliance market for designated industries and an offset mechanism for voluntary projects, run by the Bureau of Energy Efficiency with the Grid Controller of India as registry.
• CCUS is part of the Net Zero 2070 roadmap; NITI Aayog’s 2022 CCUS policy framework estimated the need for hundreds of million tonnes of capture capacity by 2050.

FAQs

Can farmers earn from carbon credits at all?

Yes, through offset projects – agroforestry, improved rice cultivation, soil carbon – under the CCTS offset mechanism or voluntary standards, but not from the Budget’s CCUS programme.

What is a hard-to-abate sector?

An industry whose emissions come from the chemistry of its process or from very high-temperature heat, so that renewable electricity alone cannot eliminate them.

Why is this asked in NABARD and RBI exams?

Climate finance, carbon markets and Budget allocations are frequent ESI and ARD questions.