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The Union Budget 2026 announcement of a ?20,000 crore carbon credit programme based on the Department of Science and Technology (DST) roadmap has triggered a debate over its scope and intent. The confusion stems from the overlapping use of the term carbon credits, blurring the distinction between industrial decarbonisation through Carbon Capture, Utilisation and Storage (CCUS) and agriculture-based carbon farming initiatives.

Understanding CCUS and Carbon Farming

CCUS: Industrial Decarbonisation Tool

Carbon Capture, Utilisation and Storage (CCUS) is a technology-driven approach aimed at reducing emissions from hard-to-abate sectors such as:

• Power and refineries
• Steel and cement
• Chemicals

It involves capturing carbon dioxide from concentrated emission sources, followed by its utilisation in industrial processes or permanent storage underground. CCUS is particularly relevant for sectors that cannot fully transition to renewable energy.

Carbon Farming: Nature-Based Solution

Carbon farming refers to agricultural practices that enhance carbon sequestration in soil and biomass, thereby removing carbon dioxide from the atmosphere. It includes:

• Agroforestry
• Biochar application
• Conservation agriculture

Unlike CCUS, carbon farming is part of Carbon Dioxide Removal (CDR) strategies and is linked to voluntary carbon markets, offering potential income streams for farmers.

Why Agriculture is Not Part of CCUS

The DST roadmap clearly excludes agriculture from CCUS due to fundamental differences:

• Diffuse Emissions: Agricultural emissions are spread across large areas, unlike concentrated industrial sources
• Biological Nature: Emissions such as methane and nitrous oxide are biologically generated and cannot be mechanically captured
• Technological Mismatch: CCUS captures CO? from flue gases, whereas agriculture focuses on absorbing atmospheric carbon
• Strategic Distinction: CCUS prevents new emissions, while carbon farming removes existing carbon

Key Opportunities

1. Industrial Decarbonisation: CCUS offers a crucial pathway to reduce emissions from sectors contributing significantly to India’s carbon footprint. The ?20,000 crore investment aims to scale up industrial carbon capture and storage infrastructure.

2. New Income Streams for Farmers: A robust carbon farming framework could enable farmers to earn through carbon credits by adopting sustainable practices, integrating climate action with rural development.

3. Soil Carbon Sequestration: India’s vast agricultural land holds immense potential to act as a carbon sink, improving soil fertility and long-term productivity.

4. Growth of Carbon Markets: There is increasing demand for nature-based carbon credits, with private sector initiatives already piloting farmer-linked carbon credit models.

5. Climate-Resilient Agriculture: Carbon-friendly practices align with broader goals of sustainable and climate-resilient farming systems.

Challenges and Concerns

1. Policy and Communication Gaps: The use of the term carbon credit in the Budget has created confusion between industrial and agricultural pathways, leading to misplaced expectations.

2. High Cost of CCUS: CCUS is capital-intensive and technology-heavy, requiring sustained investment and infrastructure development.

3. Monitoring and Verification Issues: Measuring soil carbon and agricultural emissions is complex, requiring robust verification mechanisms to ensure credibility in carbon markets.

4. Policy Conflation: Lack of clear distinction between emission reduction (CCUS) and carbon removal (carbon farming) has hindered policy clarity.

5. Stakeholder Expectations: Farmers may expect direct financial benefits from the announced programme, whereas the current allocation is primarily targeted at industry.

Way Forward

• Clear Policy Demarcation: Separate industrial CCUS initiatives from agricultural carbon farming policies
• Dedicated Framework for Carbon Farming: Develop targeted funding, institutions, and verification systems for agriculture-based carbon credits
• Strengthen Communication: Use precise terminology to avoid confusion between mitigation approaches
• Scale Industrial CCUS Deployment: Ensure effective implementation in hard-to-abate sectors
• Integrated Climate Strategy: Promote both industrial and nature-based solutions for a balanced pathway to net-zero

Conclusion

India’s carbon credit strategy stands at a critical juncture, balancing technology-driven industrial decarbonisation with the emerging promise of nature-based carbon farming. While the ?20,000 crore allocation is clearly aimed at CCUS, the growing interest in agricultural carbon markets highlights the need for a parallel, well-defined policy framework. A coherent and differentiated approach will be essential to achieving India’s climate goals while ensuring economic and social benefits.