Climate change and decarbonization to net zero are perhaps the biggestchallenges facing mankind; it is a challenge that transcends borders andrequires the implementation of pragmatic solutions for controllingfuture temperature rise within 1.5 to 2 degrees Celsius from pre-industrial levels. Global man-made CO2 emissions are at about 37 giga-tonnes per annum today, with about one-third of the emissions comingfrom the industrial sector, consisting of steel, cement, oil & gas,petrochemicals, and fertilizers. These sectors are critical to the worldeconomy for ensuring prosperity, material well being and food, material,and energy security. Most of the industrial sectors are very difficult toelectrify and hard to decarbonize due to the integral role of fossil fuels,both as part of the process and as a source of energy. At the same time,global renewable power capacity has more than doubled in the lastdecade to over 3,600 GW. However, the intermittency of renewablesrequires either energy storage or fossil fuel based power support toprovide continuous electricity baseload. Given the high cost of energystorage, fossil fuel (both coal and natural gas) based power generation,which accounts for another third of CO2 emissions, is expected to play an important role in the baseload power mix for the next few decades.
As the clock keeps ticking on the burning issue of climate change, a robust CCUS policy framework makes not only climate sense but also economic sense.
Given the likely continued reliance on fossil fuels for the next fewdecades, carbon capture
utilization and storage (CCUS) perhaps providesthe only scalable and viable solution for decarbonizing baseload powergeneration and the hard-to-abate industrial sectors, thus substantiallyreducing the global carbon footprint. CCUS consists of a value chain ofclosely linked activities, consisting of CO2 capture, processing, transportand disposition/conversion of CO2 to value-added products. CCUS isstill in its nascency, with only 30 operating CCUS projects largelyconcentrated in North America and accounting for only about 42 mtpaof carbon capture, or a mere 0.1 per cent of global CO2 emissions.
As a fossil fuel reliant economy, the Government of India has rightlyrecognized the role of CCUS in the future roadmap toward realizing thevision of halving CO2 emissions by 2050 and achieving net zero by 2070.Towards this end, the apex policy think tank of the nation, the NITIAayog, has recently published a report on the policy and implementationframework required for CCUS in India. Policy-enabled adoption ofCCUS is critical to long-term sustainability and continuedcompetitiveness of critical sectors such as coal-based power generation,steel, cement, oil & gas, fertilizers and chemicals, as well as the nascent sunrise sectors of gasification and blue hydrogen, leading to a self-reliant Indian economy.
Government Support: CCUS requires an enabling policy framework andGovernment support that includes supportive policies in the form ofgrants, subsidies, incentives and preferential procurement for carbon-abated products as well as incentives for carbon dioxide storage. CCUScan be incentivized through a tax & cash credits-based policy frameworkand institutional funding mechanisms for providing for early-stagefinancing and funding of CCUS demonstration projects. It is estimatedthat the capital cost to be funded by the Government of India for demoscale CCUS projects for coal-based power plants, steel, cement, oil & gasrefineries and the sunrise sector of coal gasification would be in a rangebetween Rs 8,500 crore and Rs 10,000 crore. A Carbon Capture FinanceCorporation (CCFC) can be the Government’s nodal institutionalmechanism to fund and kickstart CCUS in India.
For CCUS to make a meaningful decarbonization impact on India’sexpected economic growth and future CO2 emissions, CCUS needs togrow to 750 mtpa by 2050 from near zero today. The total tax & cashcredits to be subsidized by the CCFC are estimated to be about Rs210,000 crore per year by 2050. The Union Budget can seed CCUS funding in India by creating the CCFC and providing a fundingmechanism for the CCFC, either by using the Clean Energy Cess or bydedicating about 0.5 per cent of the Government’s Gross BudgetarySupport. The remaining amount can be mobilized through floating greenbonds in the international bond market and re-investment returns on theinitial surplus of the corpus.
Further, reaching 750 mtpa of CCUS capacity by the year 2050 requiresthe Government to subsidize US$ 100 – 150 billion of capital investmentsover the next 30 years. Our estimates indicate that this subsidy will payfor itself, as the multiplier effect of this subsidy on the GDP would be of asimilar – if not larger – magnitude. CCUS will also enable the buildout ofthe clean coal to chemicals ecosystem and help in replacing the importof chemicals and crude derivatives to the tune of US$ 7–10 billion peryear, thus increasing the GDP, reducing current account volatility, andstrengthening the nation’s energy security. Importantly, for a youngcountry like India, CCUS projects will lead to significant employmentgeneration to the tune of 8-10 million jobs.
Building a thriving CCUS ecosystem in India can be accelerated throughsupportive Government policies around the transfer & indigenization ofcommercially established carbon capture technologies, R&D inrelatively nascent CO2 utilization technologies, funding pore spacemapping programs for CO2 storage assessment, and creating a commonCO2 transportation infrastructure so that CO2 hubs and clusters andmarkets can develop and evolve.
As the clock keeps ticking on the burning issue of climate change, arobust CCUS policy framework makes not only climate sense but alsoeconomic sense. It bolsters our energy and material security, and itensures the continued sustainable growth of the Indian economy in anincreasingly carbon-constrained world.