A critical analysis of the novel sewage treatment concept of anaerobic digestion followed by CO2 capture by microalgae has been carried out, with particular reference to India. The anaerobic process would convert the sewage COD into methane and CO2, the latter being converted into microalgae in a photobioreactor process, using sunlight as an energy source. The microalgae can be used to produce biofuels, co-fired with high yielding fuels (like coke) or just recycled back into the anaerobic digestion cycle as a substrate for methane production. Overall, this process would allow, at least in principle, the conversion of all the carbon in the municipal wastewaters into fuels. This study reports data on municipal wastewater generation and treatment facilities across the globe. The focus is then given to sewage generation and treatment in Indian cities, classified into metropolitan, Class-I and Class-II cities. Aerobic and anaerobic digestion processes for sewage treatment are then compared with a discussion on the advantages of the anaerobic membrane bioreactor (AnMBR). The advantages and limitations of photobioreactors for microalgae growth are discussed. Mass balances are then carried out with reference to sewage flows and concentrations in India, and the potential energy generation from the process is estimated. Overall, the complete process is envisaged to produce about 1.69×10 8 kWhd-1 of energy from biogas and microalgae. This has the potential to replace 3% of the recent total petroleum product consumption in India. The study goes towards "zero discharge" of waste to the environment, thus representing a promising sustainable development.