|Introduction: Contextual introduction.|
Body: Explain some financial roadblocks to India’s dream to achieve net-zero by 2070.
Conclusion: Write a way forward.
In the recent Glasgow climate summit (COP26), India announced new climate targets. One such ambitious target is achieving Net Zero by 2070. According to the ‘Getting India to Net Zero’ report, India will require an economy-wide investment of $10.1 trillion from now if it is to achieve its net-zero emissions target by 2070.
Financial roadblocks in achieving net-zero by 2070:
- India needs over $400 billion in capital annually to accelerate emissions reduction, much of which is risky because it involves new technologies, and requires state support.
- India is home to some of the world’s most polluting cities led by Delhi. Despite that, the outlay for the environment ministryis only Rs70 billion.
- India’s renewable energy companieshave raised only around $6.8 billion in debt from offshore capital markets since January 2021. This is less than 2% of India’s annual decarbonising costs.
- Last year, the green bond issuance in India was a mere $750 million.
- Lack of cost-competitive technology alternativesin India.
- The government is silent on financially supportingany decarbonisation efforts, except an Rs.100 billion subsidy scheme for EVs.
- In 2021 India’s renewable sector attracted only $12-$15 billion in investment. Further, funding costs are the largest expense for renewable projects.
- Indian banks are reluctant to provide funds for decarbonisation. For instance, India’s biggest bank, SBI, rarely funds commercial and industrial renewable projects.
- Traditional domestic and foreign sources and debt capital markets will not be able to fund the massive investments needed for decarbonising and they have limited access to foreign capital on concessional terms.
Renewable projects are an easier way for corporates to reach net zero. So, emission reduction projects should be funded by banks. India should facilitate access to low-cost, long-term and diversified capital to facilitate decarbonising the Indian industry.