CCUS and other low-carbon technologies are economic decisions, and they need a price signal to be viable, said Atanu Mukherjee, CEO of Dastur Energy Inc. and M.N. Dastur & Co (P) Ltd., in an interview with nergetica India.
CCUS and other low-carbon technologies are economic decisions, and they need a price signal to be viable
Q What, according to you, is the fundamental logic behind India’s CCTS?
Atanu Mukherjee: Any system of trading — whether in carbon or anything else — must begin with price discovery. Without a market-based mechanism to discover price, there can be no meaningful trading. The idea of the Carbon Credit Trading Scheme (CCTS) is not to create a new tax but to establish a system of price discovery for carbon, much like we do for commodities such as coal or iron.
Once there is a price, you can build incentives or deterrents around it. But that price must be discovered through a market mechanism, not administered by the government. That’s how a market for carbon begins to function.
Q Why do you believe a market-determined carbon price is better than an administratively set price?
Atanu Mukherjee: When prices are administratively determined, they are often suboptimal and can lead to misallocation of capital. A government-set price doesn’t necessarily reflect the true cost of carbon mitigation or the value of avoided emissions.On the other hand, a market-determined price is dynamic — it evolves based on demand and supply for emission allowances and credits. This allows capital to flow where it is most
efficient in achieving emission reduction. In essence, it’s the market — not an administrator — that decides where carbon reduction is most economical. If we have a market where carbon has a discovered price, that price will guide whether CCUS investments are feasible or not. It will also determine the kind of projects that attract capital. In that sense, a carbon market provides the economic logic for technology adoption.
Q How should sectors like agriculture or small industries be treated within the CCTS framework?
Atanu Mukherjee: In sectors like agriculture, particularly among small farmers, the approach has to be incentive-based, not punitive. You cannot impose a tax on small farmers and expect them to sustain it — they operate on extremely thin margins and are price takers, not price makers.The right approach would be to incentivise efficiency improvements — for instance, through better practices or technologies that reduce emissions or enhance productivity. Once carbon has a price, you can structure benefits for farmers to
adopt such improvements, with returns accruing over time as efficiency increases. The purpose should be to make the system productive and enabling, not extractive.
Q How can we ensure that carbon trading leads to real emission reductions rather than just shifting emissions around?
Atanu Mukherjee: The key lies in making the system compliance-based rather than purely voluntary. In a voluntary framework, participation and enforcement are weak, which can lead to emission displacement rather than reduction.In a compliance system, entities are mandated to stay within caps. There are penalties for non-compliance, and transactions are governed by strict monitoring and verification protocols. This ensures that reductions are genuine, measurable, and enforceable.
Q What are the essential components of a credible carbon trading architecture?
Atanu Mukherjee: For the system to function effectively, it must have four critical layers:
1. Caps on Emissions: There must be defined caps on emissions across sectors like power, steel, cement, or agriculture. These caps represent the supply constraint that enables price discovery.
2. Institutional Coordination: A central coordinating body must oversee cap allocation, trading, and compliance. It should act as the orchestrator of the entire system.
3. Trading Exchange: A carbon exchange needs to exist to facilitate the trading of emission certificates, which are the financial representation of allowable emissions.
4. Regulation and Enforcement: A strong regulatory framework is non-negotiable. There must be mechanisms for monitoring, reporting, and verification — and clear consequences for non-compliance.
Together, these layers make the system credible and capable of delivering real emission reductions.
Q How do technologies like CCUS fit into such a system?
Atanu Mukherjee: Carbon Capture, Utilisation and Storage (CCUS) and other low-carbon technologies are economic decisions, and they need a price signal to be viable. Today, we have mechanisms like 45Q in the US, which assign an administrative price to carbon capture. But such administrative pricing often leads to inefficiencies.
Q Which sectors in India should be prioritised under CCTS initially?
Atanu Mukherjee: The iron and steel and cement sectors are logical starting points. They contribute significantly to India’s industrial emissions and are foundational to the econo my. Take the example of India’s secondary steel sector, which accounts for about 45 percent of the country’s steel production. These are mostly small and medium units, many of which are highly carbon-intensive. Shutting them down is not the
answer — that would be socially and economically disruptive.Instead, these industries should be brought into the carbon market framework, where price discovery guides the modernisation process. Over time, as they adapt, the scope can expand to other sectors like power and agriculture.
Q What, according to you, will make India’s CCTS both effective and sustainable?
Atanu Mukherjee: The success of CCTS depends on its design and enforcement. It must function as a price discovery system, with well-defined emission caps, institutional oversight, and a transparent trading exchange.It should be compliance-based, ensuring accountability, but also flexible enough to enable innovation and investment. If designed right, CCTS can become a cornerstone for India’s low-carbon industrial future — aligning economic efficiency with environmental responsibility.