India Plans Major Carbon Capture Incentives to Support Coal-Based Energy

India is set to introduce a national carbon capture initiative offering 50% to 100% government funding for selected projects. The move aims to encourage industries to adopt carbon capture, utilization, and storage (CCUS) technologies while continuing to rely on coal for energy.

CCUS technology captures carbon dioxide emissions from industrial processes or directly at the source, helping reduce environmental impact. Officials believe these incentives will promote sustainable use of coal in India’s energy sector.

Despite plans to increase non-fossil fuel capacity to 500 GW by 2030, coal will remain a significant part of the energy mix for the next two decades. The government is planning to expand coal-based capacity by 97 GW by 2035 to meet energy security needs.

The initiative also explores converting coal to synthetic natural gas to cut natural gas imports and integrating CCUS with gasification projects. Globally, CCUS is seen as essential for meeting climate targets, and India aims to align with these efforts while addressing its energy demands.

Carbon capture, utilisation and storage remains one of the more contested technology pathways in climate policy. The IEA and IPCC scenarios almost universally include some CCUS deployment, but the technology has struggled to reach commercial viability at scale outside a small number of specific applications. India's 50–100 percent funding structure recognises that market-only investment has not delivered CCUS at required pace.

The coal-plus-CCUS strategy also reflects a pragmatic acknowledgement: coal will remain part of India's energy mix through the 2030s and beyond, given the pace of demand growth and the scale of existing thermal-generation assets. Making that coal capacity as low-emitting as technologically feasible - while continuing to expand renewables - is a rational near-term response, even if the long-term trajectory ultimately favours displacement over decarbonisation.

For power generators, industrial emitters and technology providers evaluating CCUS opportunities, Cognitud's climate action, energy transition and responsible investment teams help clients build investment cases that reflect both the technical uncertainty and the emerging carbon-market frameworks that will ultimately determine whether captured emissions translate into commercial value - including alignment with Article 6, TCFD and ISSB expectations.