Funding is core to ‘net zero’ emission drive

With US climate envoy John Kerry’s visit to India last week, a rumour of a potential net zero announcement by India is doing the rounds. A recent flurry of reports and commentary has thrown the spotlight on India’s emerging ‘net zero’ emissions position. Whether net zero is slated for 2050 to beat China by a decade, 2047 to help mark 100 years of Independence, or some other year matters less than the trajectory India follows to achieve it.

What is desirable is a net zero plan that combines credibility and realism with ambition. In framing a policy, the year in which India can achieve net zero needs to be identified based on a detailed roadmap for all sectors. Until now it was a grey area. But detailed analyses from the CEEW and a joint report by TERI and Shell chart the pathways, providing insights as to what net zero entails in terms of action required.

India needs to adopt a sectoral approach for achieving carbon neutrality. In sectors and industries like power, transport, new building construction and energy efficient appliances, where there are cost-competitive clean energy alternatives available, net zero can be achieved much earlier.

Also, India needs to establish whether to take a top-down or bottom-up approach. Already, companies such as the Tatas, Reliance, Mahindra, ITC, Adani and Dalmia Cement have made net zero announcements and are pledging to move voluntarily towards carbon neutrality. Various government corporations like Indian Railways and Chhattisgarh Health Department have also committed to achieving net zero carbon emissions by 2030 and 2050, respectively. Last week, Ladakh announced its quest for carbon-neutral status with a first-of-its-kind battery storage-based solar project.

Phase out inefficient plants

In addition to deployment of clean energy technologies, the government needs to accelerate the phasing out of inefficient older coal plants. The government has extended the 2022 timeline for adoption of environmental norms by the thermal power plants by a further three years, despite being one of the biggest contributors to local air pollution. UN Secretary-General Antonio Guterres also emphasised that India needs to stop supporting fossil fuels and instead reap the benefits of renewable power.

While net zero is technologically feasible, what is required is the investment to adopt those lower cost, domestic technologies at unprecedented scale. While such technologies are aimed specifically at reducing greenhouse emissions, they could also help tackle long-standing challenges such as air and water pollution and deforestation, jump-start action on important policy reforms and provide an investment framework attractive to domestic and overseas funders, while building India’s energy security.

There is no dearth of investment funding availability, but what is required is political willingness and policy certainty to attract both national and global capital to renewable energy technologies. Investment into these technologies will also help India to not only meet its environmental objectives, but social objectives as well through job creation, improved health and well-being, increased productivity, etc.

India requires $400-500 billion to achieve its 2030 renewable energy target of 450-gigawatt (GW). The CEEW report talks about a 55-fold increase over 2019’s renewable capacity. Extrapolating the investment numbers to 2050, this translates to up to $6 trillion of investments for the power sector. Given the deflationary renewable energy prices, the investment requirement could be less than that. However, new and emerging technologies could also attract more investment, and massively enhance India’s energy self-reliance.

To achieve even the 2030 target, the Indian government rightly calls for a serious increase in overseas funding, collaboration and investment. In this respect, an enhanced partnership with US will be key. As climate change takes centre-stage in the US-India relationship, the nature of the Strategic Energy Partnership (SEP) between the two countries in terms of both financial and knowledge transfer will come into increasing focus.

India needs to exploit the rapidly growing pool of global capital from sovereign wealth funds, global pension, private equity and infrastructure funds, as well as global utilities plus oil and gas majors that are pivoting to clean energy, but struggling to find infrastructure projects at scale.

The local Infrastructure Investment Trust (InvIT) market is increasingly considered a key facilitator of this domestic-foreign equity capital interplay. The rising importance of the global green bond markets for long tenor, low cost dollar bond access, and the growing list of green bond issuances by these institutions is perfectly aligned.

Internationally, the role of the Network for Greening the Financial System (NGFS) is helping to build a global framework of collaboration. As a priority, the RBI should join this network and design policies that incorporate environment and climate risk resilience in the country’s finance sector, steering limited public capacity to leverage private sector investments towards a green recovery.

It is strongly in India’s interest to support and enhance climate action. Climate diplomacy should focus on channelising the funds that India requires for meeting its objective of a more sustainable, low carbon economic growth model.

The writer is IEEFA Energy Economist, Lead India

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