The report titled “A Roadmap for Green and Transition Finance in India” emphasizes the need for India to develop a comprehensive strategy to address climate change and achieve its net-zero goals. The report highlights the increasing urgency for a low-carbon economy, focusing on green and transition finance mechanisms. Green finance is defined as funding activities aligned with the Paris Agreement, such as renewable energy projects, while transition finance aims to decarbonize hard-to-abate sectors like steel, cement, and transport, where green alternatives are not yet feasible.
India, being one of the top greenhouse gas (GHG) emitters globally, faces significant challenges in decarbonizing energy-intensive sectors. Although India’s per capita emissions remain below the global average, its growing industrial and transportation sectors contribute to rising emissions. Notably, India’s power sector is the largest emitter, followed by agriculture and manufacturing. By 2050, emissions from sectors like iron and steel, cement, and transport are expected to increase nearly 2.6 times from 2020 levels.
Despite its commitment to achieving net-zero emissions by 2070, India requires substantial capital investment, estimated at USD 10.1 trillion by 2070, to facilitate the green transition. Currently, the tracked finance flow towards mitigation is about 25% of the necessary total. Addressing this gap will require scaling up investments in renewable energy, electrification, and new-age technologies such as carbon capture, utilization, and storage (CCUS).
The report underscores those decarbonizing industries, particularly in the steel and cement sectors, is complicated due to the nature of industrial processes that produce emissions independent of energy consumption. For example, in cement production, nearly half of the emissions result from the chemical decomposition of limestone, a process with few green alternatives. Transitioning these industries will necessitate a blend of strategies, including energy efficiency, circularity, clean hydrogen, and CCUS.
In the financial sector, mobilizing green and transition finance is seen as critical to supporting the decarbonization of hard-to-abate sectors. The report also discusses the roles of banks, capital markets, and other financial institutions in channeling funds toward sustainable projects. It stresses the importance of innovative financial instruments like transition bonds, which fund projects that reduce emissions in industries with no immediate green alternatives.
The regulatory environment plays a crucial role in fostering the growth of green and transition finance. Establishing clear taxonomies, regulatory guidelines, and incentives for green investments will enhance the flow of capital toward climate-resilient sectors. Additionally, developing market mechanisms like carbon credit trading systems will support industries in meeting emissions reduction targets more cost-effectively.
Overall, the roadmap advocates for a holistic approach to financing the green transition in India, one that involves collaboration between policymakers, financial institutions, and the private sector to develop scalable, sustainable solutions for reducing GHG emissions.
Please view the full report here for more details.
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