Overview of India's Climate Financing Challenges
The power sector is a significant challenge for India's climate financing goals due to its size and impact on the economy. Achieving India's net zero target by 2070 requires a $22.7 trillion investment, with the power sector accounting for nearly half of this need.
Investment Needs and Current Progress
- Total Investment Requirement: $22.7 trillion needed for net zero by 2070.
- Sectoral Investment Breakdown:
- Power sector: Nearly half of total investment needs.
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- Transport: 25% of investment needs.
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- Industry: 20% of investment needs.
- Current Progress: Emissions intensity reduced by 36% from 2005 levels; 50% non-fossil power capacity achieved ahead of NDC target.
- Current Annual Investment: $135 billion, with $80–90 billion towards clean energy projects.
Challenges in Financing
- High capital costs and limited concessional finance deter fresh investments.
- Energy transition involves technologies at varying maturity levels:
- Mature renewables needing scale-up capital.
- Mid-stage options like storage and e-mobility needing concessional finance.
- Frontier areas like green hydrogen and carbon capture needing grants and blended capital.
- Additional $8.1 trillion needed for the transition from CPS to NZS by 2070.
Financial System Reforms
Niti Aayog suggests reforms in the financial system to mobilize $16.2 trillion for net zero transition by 2070. This includes deeper capital markets and better integration with global capital markets.
Financing Gaps and Needs
- Power sector financing needs by 2050: $4.32 trillion; available finance: $2.34 trillion.
- By 2070, the gap grows to $5.4 trillion with requirements at $12.33 trillion.
Steps for Optimal Transition
- Strengthen power discoms' finances and reduce counterparty risk.
- Address structural inefficiencies in discoms, like high AT&C losses and weak billing systems.
- Consider fossil fuel taxation as a funding tool for climate finance.
Funding Energy Efficiency and Renewable Transmission
- Rs 75,166 crore needed annually for energy efficiency in HTA sectors and renewable transmission systems.
- Potential funding sources include excess GST revenue and oil and gas taxes.
- Rs 1.32 lakh crore needed for HTA sectors and Rs 2.44 lakh crore for renewable transmission systems by 2030.
