India’s carbon removal sector to strengthen further in 2025 as projects scale up

India is likely to consolidate its position as a key emerging player in the carbon dioxide removal [CDR] space with more projects and incremental improvement in demand in 2025, sources told S&P Global Commodity Insights.

Traditionally, India has been the biggest exporter of voluntary carbon credits, but much of that has been restricted to the avoidance category, particularly for the renewable energy segment.

With a bearish tone in global prices for avoidance-based credits and integrity concerns continuing to plague the larger market, more development has been seen in the CDR space, which has a higher price point.

Platts, part of Commodity Insights, assessed the CAC current year price on Jan. 16 at $1.30/mtCO2e, while the CRC current year price was assessed at $14.40/mtCO2e.

The Platts CAC is a basket assessment that reflects the most competitive of the Platts Household Devices, Platts Industrial Pollutants and Platts Nature-based avoidance prices. Similarly, Platts CRC reflects the most competitive of Platts Natural and Technological Carbon Capture assessments.

Indian corporates are prioritizing sustainability while also exploring carbon removal pathways to offset emissions, said Shrey Agarwal, co-founder and chief operating officer at Alt Carbon.

"This shift reflects a broader trend of corporates responding to investor and consumer expectations for credible decarbonization efforts, thereby driving demand for CDR credits," Agarwal said.

Platts earlier reported the Indian government announced a list of 10 sectors that it had identified for the domestic offset mechanism, which also includes removal technologies such as biochar and afforestation.

"This is the first acknowledgment and inclusion of any CDR methods under the ICM [Indian Carbon Market] regime. Other CDR methods, particularly ERW [Enhanced Rock Weathering], should also be included in the list in the near future," said Asitava Sen, co-founder and CEO at Carbon Removal India Alliance.

Sources said such a push on the policy front is likely to incentivize corporates to include CDR credits in their compliance strategies, while international agreements under Article 6 of the Paris Agreement may also open lucrative investment opportunities and access to advanced technologies for Indian project developers to set up removal projects.

"With Article 6.4 to include removals in the standard, this underscores the validity of CDR as an approach, which will provide an overall tailwind to further development of CDR projects on the supply side and give confidence to demand on the efficacy and validity of these methods," said Alvin Lee, regional head – APAC, Puro.Earth.

Growing CDR supply from Indian developers

As more investment opportunities spring up and the scope of demand from market participants expands, the scale of projects is also likely to maximize as project developers in India have an edge over their counterparts in the West in terms of competitive capital expenditure, sources said.

"I believe India will be the leading country across all CDR pathways. Biochar is currently expecting a peak, but the country has perfect conditions to also house ERW and DAC [Direct Air Capture] projects," said Flo Oberhofer, managing director of PyroCCS India Pvt Ltd.

Several participants said India is ideally located to set up removal projects because of conducive weather, availability of required feedstock, significant presence of agricultural lands, and affordable capital and operating costs.

Additionally, the space is attracting interest from project developers because carbon sequestration offered by removal projects is easier to quantify compared to avoidance projects.

Interest among developers for technology-driven removal projects was prominent as compared to nature-based projects due to the absence of inherent risk of damage from natural calamities in the former, sources said.

A combination of such factors is likely to further accelerate the scaling up of existing and new projects in the country in the upcoming year.

While a large portion of interest is focused on biochar projects, other high-technology methods such as ERW and DAC are also gaining traction among Indian developers, although the pace of scaling up remains slow.

"The scalability of ERW projects by 2025 depends on overcoming challenges related to material sourcing, the logistics of land acquisition and widespread application as well as the limited availability of laboratory infrastructure and skilled talent for efficient MRV," Agarwal said.

While Sen echoed a similar sentiment, he further added that conventional large-scale DAC projects are capital, land-use, and renewable energy intensive, thus posing an initial challenge to their viability.

Platts assessed the tech-based carbon capture price on Jan. 16 at $145.00/mtCO2e, unchanged from the previous session.

Demand for CDR credits mostly from international buyers

Recently, demand for high-durable CO2 credits from India-based buyers has been at low, with more interest stemming from advanced economies such as Europe and the US.

According to data from CDR.fyi, leading tech-carbon removal developers in India, such as Mash Makes, Varaha, and Alt Carbon, collectively sold around 360,000 mt of tech-based credits in 2024.

"There is negligible purchase of CDR credits by Indian corporates to meet their offset targets. High price of the credits and low awareness about CDR methods are the two key barriers," Sen said.

However, the situation in 2025 is expected to improve slightly, sources said, as the upcoming domestic carbon market in India and subsequent increased interest from Indian corporates may be key drivers of improved demand.

Sen and Agarwal agree that the upcoming Carbon Credit Trading Scheme by the Indian government will potentially drive up demand for CO2 credits from Indian buyers.

"At the moment, we do see a general curiosity in India about CDR from various large MNCs. However, it's in very, very nascent, and exploratory stages with unrealistic pricing expectations," Oberhofer said.

Further, buyers' due diligence has improved significantly due to recent integrity-related concerns in the global voluntary carbon market, which is also likely to result in an improvement in the standard of projects going ahead.