Central to India’s proposed approach at 28th Conference of the Parties (COP) is the recognition that adaptation and equity are cornerstones in the fight against climate change. Climate justice mandates that vulnerable countries receive the financial support and robust infrastructure needed to combat the far-reaching impacts of climate change.

Yet, the road ahead is not without its formidable financial challenges. The task of addressing the climate crisis demands massive financial commitments. Estimates reveal that the global transition to a low-carbon economy will require an annual investment of $4-6 trillion until 2050. To achieve net-zero emissions targets by 2030, the renewable energy sector alone necessitates a yearly investment of at least $4 trillion. Moreover, developing countries will require approximately $6 trillion between 2022 and 2030 to successfully implement their climate action plans. To meet these staggering challenges, at least 5 per cent of the global GDP must be channelled towards climate action each year.

As we approach 2030, reports indicate that external climate finance of $1 trillion per year will be required, significantly exceeding the current mobilised amount of $50-80 billion annually. Furthermore, in 2020, only $83.3 billion was provided to developing and emerging economies, often in the form of concessional and non-concessional loans.

Significant initiative

India has embarked on significant initiatives to address the issue. Notably, the establishment of the National Adaptation Fund for Climate Change (NAFCC) and the National Clean Energy Fund serve as shining examples of India’s commitment to promoting clean energy and supporting climate-resilient infrastructure. However, despite these commendable efforts, significant funding gaps persist.

The Climate Finance Working Group’s estimation that ₹118 trillion will be needed to address climate change, with only ₹64 trillion currently available and ₹54 trillion rupees unrestricted, necessitates innovative financing solutions. In this regard, development financial institutions (DFIs) and commercial banks must play a pivotal role in raising domestic funds and channelling resources from abroad to effectively bridge this gap. Moreover, it is essential for Indian corporates to take a stride forward in bolstering the carbon market, consequently prompting the need for greater innovation.

Even within the bounds of the Paris Agreement, it remains crucial for India to implement and strengthen actions prescribed under Article 6.4. This involves establishing a Clean Development Mechanism. By doing so, India can benefit from carbon credits obtained through the cap-and-trade system, which has proven effective in mitigating sulphur pollution during the 1990s, thereby balancing the wheels of development with climate change.

As the curtain rises on COP28, the imperative for global collaboration on climate financing is clearer than ever before. India’s proactive engagement, collaborative efforts with developed and emerging economies, and unwavering dedication to confronting climate challenges position the nation as an exemplary advocate for climate financing. Nevertheless, the fulfillment of financial commitments by developed countries and transformative changes in the international financial system are pivotal to delivering climate financing at the scale necessary to address the global climate crisis.

G20 leadership

As the G20 presidency, India can contribute to delivering a clear political framework and shaping the outcomes expected at COP28. With G20 countries responsible for over 80 per cent of global emissions, their policy decisions will undoubtedly play a pivotal role in driving the necessary transformation.

At COP28, the key areas of focus will revolve around mitigation, adaptation, loss and damages, and finance. Stronger emission reduction commitments are urgently required to combat the alarming trajectory of global warming. Climate finance remains a critical issue, necessitating the mobilisation of funds and reform of the global financial system to support climate action. In this transformation, private finance and the reform of multilateral development banks are indispensable components.

India, alongside other developing nations, is championing a new global climate finance target, acknowledging the mounting costs of addressing and adapting to climate change. India, in this context, should also take a lead in carbon pricing by setting a base price (reflective of the external costs of GHG emissions), as an effort towards mitigation and reduction of GHG emissions. The G20’s leadership in driving change and scaling up climate finance is pivotal for achieving the progress needed by COP28.

Anil is Member of Parliament, Rajya Sabha, and Kaviraj is Founder and Managing Director, Earthood