A bit of a blur over India’s new carbon credit plan

A significant policy announcement in the Union Budget 2026, involving a massive ₹20,000 crore outlay for a carbon credit programme, has sparked a wave of confusion and conflicting reports, pitting a clear-cut governmental road map for heavy industry against a burgeoning narrative of a new income stream for India’s farmers. At the heart of the debate is a fundamental question. Is this Budget allocation designed to fund Carbon Capture, Utilization, and Storage (CCUS) technologies for smokestack industries? Or is it a pioneering scheme to help farmers earn carbon credits through sustainable agriculture? Evidence from official documents suggests the first, but a persistent parallel narrative, echoed in several media reports, insists on the second.

The first is the CCUS for “Hard-to-Abate” Industries. The unambiguous anchor for the Budget announcement is the “R&D Roadmap for CCUS”, released by the Department of Science and Technology (DST) in December 2025. This technical document, which forms the basis of the budgetary provision, leaves little room for ambiguity regarding its scope and intent. The road map explicitly identifies its target sectors, power, steel, cement, refineries, and chemicals. These are labelled as “hard-to-abate” industries where process emissions are concentrated, measurable, and technically challenging to eliminate through renewable energy alone. The proposed ₹20,000 crore over five years is earmarked for large-scale deployment of CCUS technologies, essentially capturing carbon dioxide from factory flue gases and either using it industrially or storing it underground.

Not on the list

Crucially, agriculture is conspicuously absent from this list of CCUS sectors. The road map acknowledges agriculture as a source of greenhouse gases (primarily methane and nitrous oxide) but only in an inventory context. It explicitly excludes agriculture from CCUS strategies because agricultural emissions are diffuse, biologically mediated, and not suited to the point-source capture technology that defines CCUS. The road map draws a clear line between CCUS (preventing new industrial emissions) and Carbon Dioxide Removal or CDR (drawing down existing atmospheric CO2), where agriculture, through soil carbon sequestration, biochar, and agroforestry, plays a starring role.

The second is the persistent counter-narrative of farmers as climate solutionists. Despite this clear industrial focus, articles and social media discourse have propagated a different story. This narrative posits that the budgetary outlay will directly enable farmers to participate in carbon markets by adopting regenerative practices, turning “farms into climate solutions”.

The root of the confusion

This interpretation appears to conflate two distinct concepts. The Budget’s CCUS fund (for industrial carbon capture) and the broader, evolving voluntary carbon market in India, where agriculture and forestry projects are already beginning to generate credits for global and domestic buyers. Proponents of the “farmer” narrative point to the growing global and domestic demand for nature-based carbon credits. Several private sector initiatives and State-level programmes are already piloting models where farmers are compensated for practices that enhance soil organic carbon. The confusion likely stems from the Budget’s use of the term “carbon credit programme” in a broader sense, while its detailed architecture, as per the DST road map, is exclusively industrial.

Analysts say the confusion highlights a communication gap and a policy opportunity. The DST road map is is a technically sound, sector-specific document, but the Budget’s use of the more familiar term ‘carbon credit’ has blurred lines. Mention of a “programme” amid discussion of agricultural carbon credits has led some to expect a funded scheme for farmers. This expectation is plausible, as the Agriculture Ministry has been exploring soil health and climate-resilient farming for years. A structured carbon farming programme is a logical next step, but it would need separate policy, funding, and institutional frameworks distinct from the costly, tech-heavy CCUS initiative.

The government faces the task of clarifying this distinction to manage expectations. The ₹20,000 crore CCUS programme is a critical pillar for decarbonising industry, a sector vital for growth but also responsible for a quarter of India’s emissions. Its success is non-negotiable for meeting net-zero goals.

Simultaneously, the powerful narrative around farmers and carbon credits highlights a massive parallel opportunity. India’s vast agricultural lands hold immense potential for carbon sequestration. A separate, well-designed policy to create a trusted domestic carbon market for agriculture could unlock enormous economic and environmental benefits, truly creating a “new income stream” for farmers.

A multi-sectoral approach is needed

The current debate underscores a pivotal moment in India’s climate strategy. Budget 2026 has firmly placed its ₹20,000 crore bet on industrial decarbonisation through CCUS. The “farmer carbon credit” story, while not funded by this specific outlay, reflects a powerful and growing reality in the voluntary carbon space and a compelling demand for a parallel policy initiative. The path ahead requires the government to clearly demarcate these two crucial fronts in the climate fight — smokestack and soil — while advancing both with equal ambition. The confusion may be born of conflation today, but it points to the comprehensive, multi-sectoral approach India will need to forge a sustainable future.

Arkalgud N. Ganeshamurthy is Fellow of the National Academy of Agricultural Sciences (NAAS), the Indian Society of Soil Science (ISSS), former Emeritus Scientist, Indian Institute of Horticultural Research (IIHR), Bengaluru, and former Dean, Central Agricultural University, Imphal, Manipur

Published – March 18, 2026 12:08 am IST