Ambitious mitigation and adaptation strategies have been laid out by governments across the world, through their Nationally Determined Contributions (NDCs) as per the Paris Agreement in 2015. However, meeting these NDCs require investments. Public finance would not be enough in developing countries to undertake the required adaptation and mitigation strategies. For instance, India’s first NDC estimated that between 2015 and 2030, the country would need $2.5 trillion worth of investments (at 2015 prices) to finance its adaptation and mitigation strategies. For context, the size of the Indian economy was $3.1 trillion in 2021. These are mammoth investments that cannot be met from public sources of funding alone. Recognition of this investment gap has existed for some time now.

However, at the same time, it is also true that developing countries have not been responsible for the bulk of historical emissions. For instance, the US, Russia, Canada, Japan, and the European Union (EU) accounted for 60 per cent of the total carbon emissions between 1751 and 2017. This has left very little carbon space for the rest of the world. Consider the 1.5 degrees warming scenario. Given these historic emissions, only 14 per cent of the carbon space is left for developing countries. Continuing with the 1.5 degrees scenario, India has utilised only 1.8 per cent of the carbon space available.

If the globally available carbon space is divided equitably, then India’s available carbon space would have been 17.5 per cent of the total space. If we consider total CO2 emissions (kiloton/kt), India comes up as the third-largest emitting country in the world. However, factoring in population, our country has the lowest emissions among G20 countries on a per capita basis, coming in at 1.8 metric tonnes (MT) per capita. In comparison, this figure stood at 15.2 MT per capita for Australia, 14.7 for the US, 11.7 for Russia and Korea, and 8.5 for Japan.

Historically, India’s per capita incomes come out to be even lower.

Recognising the need for developed nations to pay their fair share, the Copenhagen Accord of 2009 saw developed countries pledge to collectively raise $100 billion in climate finance annually till 2020. The Paris Agreement of 2015 reiterated this commitment, extending the annual flows till 2025, and setting $100 billion as the floor for the contributions of developed nations. However, since the Paris Agreement, the annual flows have averaged $74 billion a year, with 2020 seeing $83 billion worth of climate finance mobilised.

Analysis by the Organisation for Economic Co-operation and Development (OECD), in their report, Climate Finance Provided and Mobilised by Developed Countries in 2016–20, shows that public finance continues to dominate, with a limited role for private capital as of now. In funds mobilised through public finance, loans tend to dominate. Mitigation sees more fund flows than adaptation efforts, with the energy and transport sectors receiving the most funding. The OECD report notes that mitigation efforts attract financing due to the size and scale of the projects on offer. A ready pipeline, along with maturing technology, is another factor. Within developing countries, the capacity to absorb loans from multilateral agencies is quite varied. Governance issues, along with domestic capital are key constraints. Given the scale of financing required, countries cannot rely on public and multilateral funds alone.

While the gap has been narrowing, a large cumulative shortfall of commitments still exists. Developed countries have not been doing enough in providing financing for climate change. These countries were able to experience socio-economic transformations during the Industrial Era. Asian countries went from being among the richest in the world to the poorest by the time World War II ended. Colonialism, no doubt, played a key role in the transfer of this wealth. Burning of fossil fuels was another key factor – a source of cheap energy and transport, and the source of plastics, among others. An era of consumerism was also ushered in with increasingly unsustainable lifestyles. A use-and-throw culture thrived. Even the Asian transformations of the past century had similar characteristics. India has recognised that its transition cannot take the same path seen before in the world.

Considering our population and growth prospects, the demand for energy domestically is set to explode. We cannot rely on fossil fuels to burn the fires of industrialisation. Rather than shy away from taking responsibility, India has emerged as a leader in the battle against climate change.

In 2015, India submitted its first NDC, which pledged that 40 per cent of its electric power capacity would come from non-fossil sources by 2030. Second, India pledged to reduce the emissions intensity of GDP by 33–35 per cent compared to the 2005 levels. Finally, an additional carbon sink of 2.5–3 billion tonnes would be created through additional forest and tree cover.

India not only delivered but overachieved on its commitments. 40 per cent of our power capacity came from non-fossil sources nine years ahead of schedule. The approach taken by India is one that sees the private sector as leading these efforts, through an enabling policy environment, bolstered by diffusion of frontier technologies. At the COP26 in Glasgow in 2021, PM Modi announced India’s even more ambitious climate goals, through a five-point agenda or panchamrit. Based on these announcements, in August 2022, India submitted its first updated NDCs. By 2030, emissions intensity of GDP would be reduced by 45 per cent of the 2005 levels, and 50 per cent electric power installed capacity would come from non-fossil sources.

The market for renewable energy has seen phenomenal growth in our country. In fact, among large economies, we have seen the fastest addition of renewables capacity. Between 2014 and 2021, our solar capacity increased by 18 times. Renewables 2022 Global Status Report reveals that between 2014 and 2021, India’s renewables market saw cumulative investments of $78.1 billion. The year 2021 alone saw $11.3 billion worth of investments. These investments have seen India become the third-largest renewables market in the world, becoming globally competitive. Our country offers the second-lowest cost of solar energy at $0.035/kWh, not far behind China, at $0.034/kWh.

The same report notes that India offers the lowest photovoltaic (PV) project costs at $590 per kilowatt of generation capacity installed. It is private investment that has led the way. Take for instance, ReNew Power, which is now among the largest renewable energy producers in India. Relying on both wind and solar energy, ReNew has a combined capacity of 7.7 GW, with a further 5.5 GW committed. Through ReNew Green Solutions, they are enabling other companies to go green as well.

Existing players such as Tata Power are diversifying aggressively into renewable energy too. By 2027, they plan to increase the share of renewables in their generation capacity to 60 per cent, and 80 per cent by 2030. Investments worth Rs 75,000 crore have been planned to meet these ambitious targets. Greenko has not only done path-breaking work on energy storage but has built one of the largest solar parks in the world.

Corporate India has also been able to capitalise on the availability of green finance as well. For instance, ACME Solar, Adani Green Energy Ltd and ReNew, were all able to tap into global markets and issue green bonds. By creating an enabling environment, India has seen investments thrive in the renewable energy space and has set a precedent for other countries. We took the lead in establishing the International Solar Alliance, to which 110 countries are signatories. Domestic manufacturing of solar PV panels is being given a huge push through the PLI scheme. Initially launched with an outlay of Rs 4,500 crore, the scheme aims to build domestic capabilities in solar PV manufacturing. The 2022–23 Budget announced additional outlay of Rs 19,500 crore and was approved by the Cabinet in September 2022. Other key initiatives include the solar parks scheme and the rooftop solar programme.

Reducing emissions requires actions across the economy, not just in the electricity sector. The transport sector, for instance, is estimated to account for 15 per cent of energy-related CO2 emissions in India, with the road sector alone accounting for 85 per cent of all emissions. Within roads, it is heavy-duty freight that produces the most emissions. Considering India’s per capita incomes, demand for personal transport is expected to grow substantially, which, in turn, will fuel energy demand. At the same time, roads also dominate in freight, accounting for close to 65 per cent of all freight movement in India. In this context, decarbonising our transport network is of paramount importance.

Excerpted with permission from 75 Years of Business and Enterprise: 75 Years of Business and Enterprise, Amitabh Kant, Rupa.