World over the governments are urged to treat climate change with the same kind of urgency as was shown in dealing with Covid. No doubt, India keeps saying that Climate crises remains one of its foremost priorities but still; Can India walk its climate talk with its current climate finance structure?
The issue of climate change is daunting upon everyone whether in developing country or developed. Along with severe health impacts, it has led to a number of consequences like floods, heat waves, droughts, excessive pollution, among others. India, being a developing country faces another challenge of stringent poverty and deep-rooted inequalities, but is still, working hard to control its carbon emissions. The good news, however, is that there are solutions available today and India had successfully started leaning towards use of clean power, low-carbon transport, energy efficient buildings, and climate-smart agriculture; that can create clean, healthy, and safe jobs for millions, leading the way to a greener future.
On its path to achieve greener and sustainable future for all, recently, India announced its target to reach 450 GW of renewable energy generation capacity, and also pledged for 33-35 percent reduction in emission intensity by 2030, making these one of the most ambitious targets in the world. India’s Nationally Determined Contribution (NDC) estimates that the country will require INR 162.5 lakh crores (USD 2.5 trillion) by 2030 or roughly around, INR 11 lakh crores (USD 170 billion) per year for climate action.
In the Third Biennial Update Report (BUR-3) to the United National Framework Convention on Climate Change (UNFCCC), India stated that it had achieved a 24 per cent reduction from the 2005 levels in emission intensity of its GDP. Also, the recent IPCC report rated India among the top countries to limit the warming below 2 degrees Celsius. These definitely marks significant progress for India. However, to completely meet the country’s climate goals and to achieve carbon neutrality, it will require proportionate, transformative investment in this sector.
According to UNFCCC, Climate finance refers to “local, national or transnational financing, drawn from public, private and alternative sources of financing, that seeks to support mitigation and adaptation actions that will address climate change.” Green finance includes climate finance along with investment made for other resource conservation projects to support sustainability. The Landscape of Green Finance in India is a one-of-a-kind study undertaken by Climate Policy Initiative that presents the most comprehensive information on green investment flows in the country.
The tracked green finance for mitigation for financial year 2018, was only about 10% of what the country actually required. The report clearly establishes that, post 2018 also, the finance has been significantly dropped. All in all, the tracked green finance falls far short of India’s green finance needs and there is a need for transformational upscaling of green finance across all low-carbon sectors.
An IFC study suggests that there is an opportunity for USD 3.1 trillion climate-smart investments in key sectors between 2018 and 2030 to fully meet India’s NDCs (IFC, 2017). This is equivalent to USD 400-533 billion on a yearly basis. Such a huge spread in estimates causes uncertainty in the required policy action and necessitates the undertaking of a detailed tracking exercise to identify the current trail of investments. Most importantly, the landscape demonstrates that the current scope and extent of green finance is grossly insufficient to mitigate the effects of climate change in India and there is, therefore, a need for transformational scaling up of green finance in the country. Also, there is a requirement for a comprehensive climate budget tagging framework to track climate-related expenditures in national budget systems.
Besides, the Green Climate Fund (world’s largest dedicated fund) also provides support to developing countries to reduce their greenhouse gas emissions and enhance their ability to respond to climate change. It does this by channelling climate finance to developing countries, which have joined other nations in committing to climate action. GCF’s activities are aligned with the priorities of developing countries through the principle of country ownership, and the Fund has established a direct access modality so that national and sub-national organisations can receive funding directly, rather than via international intermediaries. Thereby, “It advocated the need for developed countries to commit to a goal of mobilising jointly 100 billion dollars a year by 2020”. But still finance destined for India amounts to only 177 million dollars, of which only 77.8 million is grant-based.
This shows, responding to the climate challenge requires collective action from all countries, including by both public and private sectors. Also, there is a dire need to pay more attention to the needs of societies that are highly vulnerable to the effects of climate change, like India.
Our innovation is to use public investment to stimulate private finance, unlocking the power of climate-friendly investment for greener development. To achieve maximum impact, Indian government should seek to catalyse funds, multiplying the effect of its initial financing by opening markets to new investments.
Lastly, for India to be able to meet its NDCs and SDG goals, it needs proper and efficient channels to finance its climate resilient development. Together, our concerted efforts can help drive a paradigm shift in the global response to climate change. Unless the green finance accelerates, the carbon neutrality remains a distant goal even by 2050.
