The recent net-zero carbon emission pledges of major economies across the world respond to the growing threat of global warming and associated climate change. There is, however, a significant difference. While many developed economies have already peaked in their annual carbon emissions decades ago—some of them in the 1970s—it is an enormous task for developing economies such as India, which have a small share in the planet’s cumulative emissions and are yet to reach peak levels, to achieve carbon neutrality. The green energy-based low-carbon development strategy now being advocated globally marks a paradigm shift from the fossil fuel-backed industrial growth of the past. Developing countries such as India have to address this challenge through access to appropriate technology and financial resources at a reasonable cost.
Contrary to commitments made in the relevant multilateral environment agreement, the resource flow from developed to developing countries is inadequate and needs to be more robust in the face of actual requirements running into trillions of US dollars. Access to appropriate technology has also been a casualty.
Nevertheless, India is determined to decouple emissions and economic growth in its development story. With a domestic strategy guided by the ambitious Nationally Determined Contributions adopted in 2015 and further updated in 2022, as well as the country’s net-zero carbon emission target for 2070, India is contributing more than its fair share in worldwide efforts against climate change.
Action is being taken to mainstream the country’s climate vision by incentivizing responsible production, moderating consumption, and strengthening government regulation as well as the financial system. Economic Survey 2022-23 outlines the measures undertaken in this direction. More than 40% of India’s existing installed electric capacity is already based on non-fossil fuel sources—and is envisaged to reach 50% by 2030. The total carbon stock in the country’s forests has been increasing, and carbon emissions sequestrated through forest and tree cover is estimated at 30.1 billion tonnes of CO2 equivalent. The formulation of the comprehensive Long-Term Low Emission Development Strategy postulates the vision of ‘LiFE’, seeking rational utilization of natural resources with a transition from fossil fuels to cleaner sources of energy in a manner that is both just and sustainable. The rapid expansion of green hydrogen, increased use of biofuels and climate-resilient urban development are expected to take centre-stage in accordance with this strategy.
The coming years will be action-oriented, in line with India’s vision to attain net-zero carbon emissions by 2070, and access to affordable funds at scale will hold the key. Several measures have been taken by the government at the domestic level to channel resources into environmental projects and the renewable energy sector.
The renewable energy sector is covered under the country’s provisions for priority sector lending. Thematic bonds, like green bonds, are now gaining traction in global and domestic financial markets. These bonds are expected to raise funds earmarked for specific project types at costs lower than plain vanilla bonds. The Securities and Exchange Board of India has enhanced the scope of green debt securities, improving investor sentiment towards a larger set of environmentally responsible investments.
Recently, the first tranche of sovereign green bonds worth ₹80 billion was issued by the Reserve Bank of India at a ‘greenium’ of 5-6 basis points over other government securities.
Considering that $2.5 trillion is required to meet India’s NDC commitments by 2030 and substantially more is required to meet future targets, greater mobilization of finance from all sources, public and private, including from multilateral development banks, would be vital.
Going forward, a holistic approach is essential for further scaling up resources for climate action. Domestically, an umbrella strategy that conventionalizes climate investments in the financial system will help. An enhanced role played by multilateral development banks in catalysing private finance at scale and reasonable cost, including through the de-risking of green projects, is imperative.
There are bound to be challenges as we reach for our climate goals. Resources are also required for our bread-and-butter developmental priorities. We are now on the verge of adopting an innovative and untested low-emission development strategy. This would expose the country to some uncertainties, including but not limited to access to critical minerals needed for the production of electric vehicle batteries and other such products. The path taken may have little space for falling behind.
Developed countries should assume the responsibility of playing a pivotal role in enabling access to affordable financial and mineral resources and technology. The G20 presidency offers India a unique opportunity to highlight the need for global cooperation in access to technology and resources for dealing with climate change and nudge the international community to address those needs.
Chandni Raina & Ritika Bansal are Indian Economic Service officers in the ministry of finance. These are the authors’ personal views.
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