This year’s Union Budget set aside Rs 20,000 crore over five years for carbon capture, utilisation and storage, or CCUS, spanning power, steel, cement, refineries and chemicals. It sounds like a straightforward climate fix. It is actually closer to a half-built supply chain, with one working link and several missing ones.

Here is what CCUS really involves, why India has only solved the easy part so far, and what this means for anyone tracking energy stocks on the exchanges.

What CCUS Actually Means

When a factory burns fuel, it releases CO2. CCUS is about catching that gas before it escapes the chimney, and then either reusing it or burying it underground permanently.

India already has working examples of the reuse part:

An NTPC plant in Madhya Pradesh converts captured CO2 into methanol
A Tamil Nadu chemicals plant uses captured CO2 to make soda ash
A JSW Steel plant in Maharashtra sends captured CO2 to the food and beverage industry

That is the “utilisation” half of CCUS, and where nearly all of India’s current activity sits. The “storage” half, burying carbon in rock for centuries, is a different scale of problem. India is only now drilling its first test wells to find out whether the rock underground can actually hold the gas.

Catching the Gas Is the Cheap Part

CO2 rarely shows up alone. At a cement kiln, it comes mixed into a hot stream of nitrogen, water vapour, sulphur and dust. At a fertiliser plant, it often arrives already concentrated. The more diluted the gas, the more expensive it is to separate.

The mechanics are simple enough. Exhaust passes through a liquid solvent that grabs the CO2. That solvent is heated to release a concentrated CO2 stream, which is then dried and compressed until it can move through a pipeline.

According to NITI Aayog and the IEA, the cheapest sources to capture from are gas processing, hydrogen and fertiliser units. Cement and coal cost more. Refineries cost the most.

But cheap on paper does not mean easy in practice. A capture unit is essentially a custom chemical plant bolted onto a factory that was never designed to share its steam or power. Running it takes energy, which creates emissions of its own. A “90 percent capture” claim can also be misleading if it only applies to one exhaust stack while the rest of the plant keeps venting freely.

Moving It Is a Chicken and Egg Problem

Captured CO2 still has to travel, usually by pipeline over land or ship offshore.

CEEW has modelled what an Indian pipeline network could look like:

Saline rock formations are spread across much of the country, keeping pipes shorter
Basalt rock is concentrated in Maharashtra and Madhya Pradesh, requiring longer pipes
Odisha, Jharkhand and Chhattisgarh look like the cheapest starting corridor, since emitters cluster there

Pipelines cost a lot to build but little to run once busy. The problem is that capture plants need pipelines, pipelines need volume, and storage sites will not get funded until both are ready. Nobody wants to go first.

Burying It for Good Is the Hardest Part

This is where the challenge stops being mechanical and turns geological.

CO2 can be injected into saline aquifers, depleted oil fields, or basalt rock. Basalt has one advantage: injected carbon slowly turns into solid mineral, removing the leak risk over time. But every site needs its own seismic surveys and test wells before anyone knows if injection will actually work there.

Government estimates put India’s storage potential at 400 to 600 gigatonnes of CO2. But when researchers tested the Deccan basalt formations directly using seismic data and boreholes, the usable estimate fell to just 41 to 76 gigatonnes, based on only three test wells in one area.

There is also a long tail of liability. Someone has to monitor a storage site for years after injection stops. If the company that buried the carbon no longer exists by the time a leak surfaces, who is responsible? India has no rulebook for this yet.

The Business Problem Nobody Talks About

Here is the part that gets skipped in most policy discussions: a carbon capture certificate proves pollution did not happen. That has real value to the planet, but no natural buyer willing to pay full price for it at scale.

For years, oil companies bought captured carbon to pump more oil out of the ground. That revenue is fading as the goal shifts toward permanent storage. Norway’s Sleipner project has run for almost 30 years for one reason: a heavy carbon tax that makes storage profitable on its own.

Without a similar policy push, capture plants tend to shut down. America’s Petra Nova plant closed in 2020 when oil prices fell, restarting only in 2023.

Where the Rs 20,000 Crore Should Actually Go

Not every industry is an equally good CCUS candidate.

Gas and fertiliser plants are cheap to fit and useful for proving the technology works, but they are not where it matters most for India’s emissions
Cement may be the strongest case, since half its emissions come from the chemistry of making clinker, not from fuel, and cannot be solved by switching fuels alone
Steel is a weaker case, since electric furnaces and hydrogen-based methods are genuine alternatives
Coal power, despite being the biggest emitter, is the worst fit: dilute exhaust, high capture costs, and a process that can consume a third of the plant’s own energy output

Even under ideal conditions, results are unpredictable. Chevron built the world’s largest CCUS facility next to a gas plant in Australia, about as favourable a setup as exists anywhere. Last year, it still only stored a quarter of the CO2 its own reservoir produced.

What This Means for the Energy Trade

For anyone watching energy stocks, CCUS is a slow-burn story rather than a quick trigger. The near-term winners, if the scheme works, are likely to be public sector refiners, cement majors experimenting with capture, and engineering firms that build pipelines and capture units. The bigger structural shift, though, is happening on the renewable side, where solar, wind and green hydrogen already have working economics without needing a carbon tax to survive.

That is worth remembering the next time a CCUS headline moves a stock. Traders on the Alice Blue platform tend to see two very different reactions to energy transition news: a short-lived pop in companies linked to a new capture project, and a steadier trend in renewable energy names that do not depend on unresolved storage economics or a future carbon tax to make sense.

If you are trying to separate the two, it helps to look at how renewable energy stocks with strong fundamentals have historically performed against policy announcements, rather than treating every clean energy headline the same way.

The Real Test Ahead

Rs 20,000 crore is a meaningful start, but it does not solve the coordination problem at the heart of CCUS. Capture, transport, and storage all depend on each other moving forward at the same time, and India currently has no approved method for even earning a carbon credit through capture.

The right question is not whether carbon capture works in a lab or a pilot plant. It is whether it beats cheaper alternatives, like renewables or fuel switching, once the subsidies eventually run out. As solar and wind costs keep falling and CCUS costs stay stubbornly high, that answer looks less certain every year.