Adequate and affordable finance, a constraint in India’s clean energy transition

Ruing lack of “adequate and affordable finance” to accelerate transition towards green energy, the Economic Survey on Tuesday pointed out that availability of funds at reasonable cost, to be made available by developed countries, is yet to materialise.

“The availability of adequate and affordable finance remains a constraint in India’s climate actions. The country has so far largely met its requirements from domestic sources only,” the Economic Survey for FY23 pointed out.

Emphasising that finance is a critical input for its climate actions, it noted that India has scaled up its efforts in mobilising private capital, including through sovereign green bonds, to meet climate action goals.

While several estimates of the required investments are indicated in the Long-Term Low Energy Development Strategy (LT-LEDS) report prepared by India, it is important to note that all allude to a need for tens of trillions of dollars.

“The understanding in the Convention and Paris Agreement has been that developed countries will mobilise resources through public and other sources, including by catalysing private finance to enable a flow of financial resources at a reasonable cost. While these are yet to materialise, India has scaled up its efforts towards greater mobilisation of private capital to meet its ambitious climate action goals,” the survey said.

Challenge before developing nations

The survey also highlighted the challenges before developing countries. “Today’s developing nations are therefore caught in the horns of a dilemma. How much resources to devote to bread-and-butter developmental priorities and to adapting to the already changing climate, and how much to dedicate to mitigating emissions of GHGs,” it countered.

Today’s developed nations have prospered through the unrestricted use of fossil fuels, including coal, crude oil and natural gas. It is theoretically elegant to argue that switching to renewable or non-fossil fuel energy would generate investments and jobs. Still, it seldom works out so smoothly in practice, it added.

Furthermore, the survey emphasised that the science is “not very clear” on whether further emission reduction would necessarily guarantee a stoppage or reversal of global warming.

“The reason being much carbon dioxide and other GHGs have already been emitted over the last two-and-a-half centuries of industrialisation-led economic growth in today’s advanced nations, principally in North America and Europe. The share of developing countries in the stock of GHGs (usually measured as carbon dioxide equivalent) has been minimal compared to developed countries,” it added.

This is corroborated by the Inter-Governmental Panel on Climate Change (IPCC), which highlights that the challenges faced due to global warming are mainly due to cumulative historical and current GHG emissions of developed countries. The impact of the accumulation would also be iniquitous, with the developing countries not only bearing the brunt of climate change, but also constrained by their capacity to respond to its challenges.

The survey in a nuanced narrative stressed that it does not seem so strange or irresponsible that developing countries must put their own growth and development aspirations ahead of their global climate obligations when one considers that developed countries set aside their obsessive concerns about climate change and global warming to burn more coal to generate electricity this year.

“Aiming to reduce their dependence on Russian crude oil and natural gas, countries in Europe had to switch to coal to keep their homes warm and well-lit. The behaviour of European nations in 2022, eminently understandable, demonstrates the return of energy security as a prime requirement for countries. Therefore, it stands to reason that it would be no different for developing economies too,” it added.

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