Union Budget 2026
Union Budget 2026: What It Actually Means for Carbon Finance and Nature-Based Projects Like Ours at FCF India
When I read Union Budget 2026, I was not looking for climate intent. India has had climate intent for years. We have participated in carbon markets since the CDM era, and more recently through Perform-Achieve-Trade and now the Carbon Credit Trading Scheme. What I was looking for was something simpler: a signal that nature-based carbon removal, through forests, agroforestry, and regenerative land use, is being treated as core infrastructure for India’s climate strategy. That signal was largely absent. Instead, the Budget makes one thing clear: India’s immediate carbon priority is industrial emissions management. For those of us at FCF India working directly with farmers, degraded lands, and restoration projects, this does not invalidate the carbon market opportunity. But it clarifies where public capital is going and where nature-based solutions must continue to rely on private capital, execution quality, and market credibility.
The ₹20,000 Crore CCUS Allocation Shows Where Government Carbon Spending Is Going
The most prominent carbon-related announcement in Budget 2026 is the ₹20,000 crore allocation for Carbon Capture, Utilisation and Storage (CCUS) over five years.
This funding targets industrial sectors such as steel, cement, power, and refining. These sectors are emissions-intensive and difficult to decarbonise rapidly, which explains the policy focus.
It also makes the current prioritisation clear. Public carbon finance is currently directed toward carbon capture in hard-to-abate sectors such as steel, cement, power, and refining, rather than toward scaling biological carbon removal through forests, soil, or ecosystem restoration.
From a systems perspective, this investment strengthens carbon accounting infrastructure. It helps build registries, measurement frameworks, and compliance systems, all of which contribute to the broader carbon market.
However, it does not directly fund or scale nature-based carbon projects.
The Carbon Credit Trading Scheme Will Create Demand, But It Will Not Automatically Scale NBS
India’s Carbon Credit Trading Scheme continues to expand, bringing more industrial sectors under emissions intensity targets.
Companies that outperform their emissions targets earn Carbon Credit Certificates, while those that exceed their limits must purchase credits.
This is a necessary step in building a domestic compliance carbon market and will create long-term demand for carbon credits.
However, the compliance framework is currently designed around industrial emissions accounting. Nature-based credits will only participate at scale if methodologies, registries, and verification systems fully integrate biological carbon removal.
From our perspective at FCF India, this means the existence of a carbon market alone does not guarantee demand for our projects.
Demand will ultimately flow to credits that are credible, verifiable, and trusted.
The Budget Strengthens Market Infrastructure, Not Nature-Based Project Finance
Beyond CCUS, the Budget continues to strengthen climate and carbon infrastructure indirectly through:
- Expansion of green bond financing
- Incentives for renewable manufacturing and deployment
- Strengthening of MRV and carbon accounting systems
- Continued rollout of carbon registries and trading frameworks
- These measures improve market credibility.
Capital flows toward projects that meet buyer expectations on integrity, scalability, and verification. Nature-based projects must therefore compete directly with industrial carbon solutions for that capital.
There is no policy shortcut around execution quality.
What This Means for Us at FCF India
This Budget reinforces several realities we are already experiencing on the ground.
Demand for credits will grow, but only for credible projects
As compliance markets expand, more companies will require carbon credits. However, buyers are increasingly selective. They seek credits that are scientifically sound, independently verified, and transparently monitored.
This raises the importance of building strong MRV systems into projects from day one.
MRV is now core infrastructure, not an optional layer
Measurement, Reporting, and Verification determines whether a project can participate in carbon markets at all.
At FCF India, we are making significant long-term investments in building a robust tech ecosystem to strengthen how our projects operate, measure impact, and report outcomes.
Our focus areas include remote sensing for landscape-level monitoring, automated data validation to improve accuracy and reduce manual errors, digital systems to streamline field operations, and transparent reporting frameworks that ensure every impact claim is evidence-backed and traceable.
This technology backbone is designed to improve efficiency, enhance credibility, and enable scalable growth across our programs.
Aggregation and execution capacity are decisive advantages
Nature-based projects involve farmers, landowners, and communities. They cannot be scaled without strong aggregation models.
Our ability to work directly with communities, aggregate projects, and ensure long-term implementation is not just an operational function. It is a market advantage.
Carbon credits are ultimately a byproduct of land-use change. Execution determines whether that change happens.
Private capital and international markets remain essential
Domestic compliance markets will take time to fully integrate nature-based credits.
In the near term, private buyers and international voluntary carbon markets remain critical sources of demand and capital for nature-based projects.
Waiting for policy alone to scale NBS is not a viable strategy. Scaling depends on building credible projects now.
The Reality Is Clear
Union Budget 2026 strengthens India’s carbon market infrastructure.
However, its financial focus is on industrial decarbonisation rather than ecosystem restoration.
For organisations such as FCF India, this means our path forward remains execution-led.
We cannot rely solely on policy announcements to scale nature-based carbon.
We scale by building projects that are scientifically credible, operationally scalable, and trusted by buyers.