India Bets $2.2B on Carbon Capture to Boost Trade Competitiveness

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India has allocated $2.2 billion over the next five years to support the development and deployment of Carbon Capture, Utilization and Storage (CCUS) technologies across key industrial sectors like steel, cement, power, refining, and chemicals. This strategic investment is driven not just by climate goals, but also by the need to maintain India's trade competitiveness, particularly in the face of the European Union's Carbon Border Adjustment Mechanism (CBAM).

Why it matters

India's CCUS investment reflects a shift in how countries are approaching climate action, driven by the intersection of climate policy and global trade rules. As the U.S. struggles to maintain a coherent federal climate strategy, India and the EU are shaping the rules of a low-carbon global economy through strategic industrial policies and trade agreements.

The details

India's CCUS budget targets the deployment of carbon capture technologies in its hardest-to-abate industrial sectors, which collectively account for a substantial share of the country's emissions. Unlike renewable energy technologies, CCUS remains expensive and commercially unproven at scale, which is why public funding is critical to bridge the gap between pilot projects and commercial deployment. By subsidizing CCUS, India aims to de-risk private investment and enable its industries to comply with the EU's CBAM, a carbon tariff on imported goods.

• On February 1, 2026, India's Finance Minister announced the $2.2 billion CCUS investment in the Union Budget.
• On January 27, 2026, India and the European Union finalized a landmark Free Trade Agreement that does not exempt Indian exports from the EU's CBAM.

What’s next

The Indian government will need to work on developing the necessary infrastructure, storage hubs, and carbon accounting systems to support the large-scale deployment of CCUS technologies across its heavy industries.