There is also a need to create a funding institution such as the Carbon Capture Finance Corporation (CCFC) to support CCUS projects
There is also a need to create a funding institution such as the Carbon Capture Finance Corporation (CCFC) to support CCUS projects

Kolkata, March 19 A supportive PLI (Production Linked Incentive) scheme and a tax and cash credit-based policy from the government are critical to kick-start carbon capture, utilisation, and storage (CCUS) in India and supporting early-stage financing and funding mechanisms for such projects.

According to CEO, Dastur Energy, Atanu Mukherjee, policy support is also required to develop the market for carbon dioxide utilisation and low-carbon products. These measures could include extending the PLI scheme, incentivising R&D, and introducing preferential public procurement and offtake of low-carbon products.

“A PLI mechanism for the national policy framework for carbon capture, will help to drive more applications for CCUS, which will allow scale up entire carbon capture framework many fold over time. There are two aspects to it, and both are complementary in terms of driving scale and economics and the profitability of carbon capture,” Mukherjee told businessline.

CCUS will play an important role in the march towards India’s decarbonisation goal of halving emissions by 2050 and reaching net zero by 2070. It offers an industrial scale solution to decarbonise important sectors of the economy, such as coal-based power generation and industrial sectors such as steel, cement, oil and gas refineries, fertilizers, and chemicals. It is also essential to enable the sunrise sectors of gasification and blue hydrogen.

A recent study report titled “Carbon Capture, Utilisation, and Storage Policy Framework and its Deployment Mechanism in India,” authored by Dastur Energy, released by the Niti Aayog explores the importance of CCUS as an emission reduction strategy to achieve deep decarbonisation from hard-to-abate sectors. The report outlines broad policy-level interventions needed across sectors for its application.

“The report was released in November, and based on the conversation we had with the folks in the G20 meetings, the government, the Power Ministry, the different agencies, Niti Aayog and others, there is a strong likelihood of incentives for the government to move forward in terms of deploying the policy framework over time. There is also a strong incentive to make this happen because a lot of the potential funding support for carbon capture incentives would come from climate funds or sovereign funds outside India. It has been committed by governments as part of the COP agreement in terms of supporting funds to be able to help countries moving in the direction of reducing CO2 emissions,” he said.

Also read: Carbon capture and global warming

Funding demonstration scale projects

The government should support and fund initial demonstration scale projects in various sectors; the capital cost support required for demo scale projects in different sectors (coal-based power plants, steel, cement, oil and gas refineries, hydrogen generation, and the sunrise sector of coal gasification) is expected to be ₹8,600–10,000 crore.

There is also a need to create a funding institution such as the Carbon Capture Finance Corporation (CCFC) with a corpus fund to support CCUS projects across their lifecycle. The CCFC could fund capital grants for demonstration-scale CCUS projects in different sectors and subsidise operational expenditure, with the aim of reaching CO2 capture rates of 240 mtpa by 2050 and 750 mtpa by the year 2070.

The total funding support requirement by 2070 is estimated at Rs 210,000 crore per year. This can be financed either by usingClean Energy Cess on coal or by spending about 0.5 per cent of the government’s spending, or the Gross Budgetary Support (GBS), to create an initial corpus, supported with a reinvestment return on the corpus funds, and floating green bonds in the international bond market, he said.

Government funding for CCUS projects will be channelised through the CCFC. This will attract private sector investment, leading to the deepening and expansion of the CCUS markets, he added.