India Needs Four Times the Money It Has Allocated to Meet Climate Goals: Study

The report estimates that India requires approximate INR 162.5 lakh crores till 2030 to achieve its NDCs.

Saving the Earth from further ramifications of climate change needs money. 

The Quint

Green investment has been falling far short of the country’s current need for its ambitious climate targets, says a recent study. Climate Policy Initiative (CPI) has released an update on India’s first-ever efforts to track green investment flows.

The tracked green finance in 2019-2020 was INR 309 thousand crores per annum, which is less than a fourth of what India would require, according to the new report, titled ‘Landscape of Green Finance in India’,

India Requires Approximately 162.5 Lakh Crores to Achieve Climate Action Goal

Green finance is integral to the overarching discussion on the sustainability of economic growth. Rapid economic development is frequently gained at the cost of the environment, said an RBI report on green finance in India.

The CPI study estimates that for India to achieve its Nationally Determined Contributions (NDCs) under the Paris Agreement, the country requires an approximate INR 162.5 lakh crores till 2030 which is roughly INR 11 lakh crores per year.

Diminishing natural resources, degrading environment and unchecked pollution are dangerous for public health and sustainable economic growth, the RBI report says.

With the aim of protecting and substantially improving the environment, nations around the world have been turned their focus on the use of green technology.

In the recent CPI study the evaluation of finance flows has been estimated for key economic sectors like clean energy, clean transport and energy efficiency.

The study tracks both public and private sources of capital (domestic as well as international). It builds a framework to track the flow of finance right from the source to the end beneficiaries through different instruments.

The study emphasizes on approaches based on actual flows rather than commitments and provides the most accurate analysis of where India’s climate finance stands, the finance gaps it faces, and the opportunities that lie ahead.

This year, the study also provides a first-of-its kind evaluation of 'Adaptation Financing' for select sectors.

“The report shows increased flows to renewable energy sectors. This indicates the positive role policy support has had on the renewable sector. We would also in the future hope to see a similar role being played in other sub-sectors like Distributed Renewable energy – rooftop solar and clean mobility”

Neha Khanna, Project Manager and Lead Author, Climate Policy Initiative

Green Investments have Increased Finance Flow

While the scenario for green investments does not look promising, in the two years since CPI’s initial report, finance flows increased by 150% from 2017-2018 to 2019-2020.

In the overall increase, public sector flows increased by 179% and private sector flows by 130%. This shows increased commitment from public sources – both domestic and international.

However, domestic sources continue to account for the majority of green finance, with 87% in 2019 and 83% in 2020, respectively. Of these domestic sources, the private sector contributed about 59%.

The public sector flows were evenly distributed between Government Budgetary spends at approximately 54% and Public Sector Undertakings (PSU) at 46% respectively.

The share of international sources increased from 13% in 2019 to 17% in 2020, but it is still a far cry from Prime Modi’s demand of a trillion dollars of climate finance at Glasgow last year.

“Continuing with our aim to provide a comprehensive information of actual finance flows, the report tracks mitigation in more detail by increasing sectoral coverage and collecting granular data. We have also done a partial tracking of adaptation finance and we hope that this report helps in bridging the information gap. This is very important due to India’s high climate vulnerability.”

Dhruba Purkayastha, India Director, Climate Policy Initiative

Current NDCs Require Much Faster Mobilisation of Green Finance

India needs approximately INR 716 lakh crores to meet the current goal of Net-Zero emissions by 2070.

By conservative estimates, the current tracked green finance in India represents less than 25% of the total requirement just to meet the NDCs. This accounts for mitigation only. Adaptation flows are even more muted.

India is one of the most vulnerable countries to climate change, and there is a pressing need for funds to flow into the Adaptation sector.

Tracked finance for the sector stood at INR 37 thousand crores in Financial Year (FY) 2020, which fell extremely short of the required needs. The major source of Adaptation funding was domestic at 94%, and it was fully funded by Central and State government Budgets.

Collaboration and planning is key to increasing finance flows to the sector, as is the development of Adaptation investment plans at State level.

The current Nationally Determined Contributions recent announced by the Indian Government sets a majority of their Climate Action Goals to be achieved by 2030. Such enhanced ambition requires mobilization of green finance at a much faster pace.