Climate finance is defined by the UNFCCC as multi-source public and private funding that supports mitigation and adaptation to climate change. For India, climate finance is indispensable to meet its net-zero by 2070 pledge and Nationally Determined Contributions (NDCs).
India’s progress and opportunities:
- Renewable Capacity Growth: India added 24.5 GW of solar capacity in 2024 which is 3rd highest globally after China & US.
- Institutional Initiatives:
- International Solar Alliance (ISA): India-led global platform for solar cooperation.
- National Clean Energy Fund (NCEF): Uses coal cess for clean technology.
- Green Finance Expansion:
- Green, Social, Sustainability & Sustainability-linked (GSSS+) bonds reached $55.9 bn by Dec 2024(186% rise since 2021).
- Sovereign green bonds and RBI’s Sustainable Finance Group (SFG) institutionalised disclosure norms.
- Employment & Growth: Renewable energy employed 1 million+ workers (2023) and contributed 5% of GDP growth through clean energy expansion.
Gaps in Climate Finance:
- Scale of Requirement: India needs $1.5–2.5 trillion by 2030 to align with a 1.5°C pathway. But current flows remain far below requirement.
- Skewed Distribution: 84% of green bond issuance goes to large corporations while MSMEs, agri-tech innovators, and rural infrastructure left out.
- Sectoral Funding Deficit: Huge capital is required in battery storage, hydrogen tech, decentralised grids, and EV infrastructure.
- Access & Governance Issues: Climate finance mechanisms are complex and bureaucratic. Tier II/III cities and rural areas face delivery risks and limited institutional capacity.
Global Experiences:
- Brazil’s Amazon Fund: Unified national fund model for transparency and focus.
- UAE’s $30 bn Concessional Fund (COP28): Attracts private capital through concessional public finance.
- Just Energy Transition Partnerships (JETP): Mobilised billions for coal transition in South Africa, Indonesia, Vietnam.
Strataegies for India:
- Blended Finance Models: Combine concessional loans + private capital using guarantees, subordinated debt, and risk-sharing mechanisms.
- Mobilising Domestic Capital: Pension funds (EPFO), insurers (LIC), and sovereign wealth funds to allocate portfolios to green investments.
- Policy & Governance Reforms:
- Budget tagging (Chile model) for transparent green expenditure.
- Strong ESG guidelines, predictable project pipelines, and risk-mitigation instruments.
- Unified National Climate Fund: Similar to Brazil’s Amazon Fund which centralises disbursal, enhances credibility.
Conclusion:
Climate finance is both an enabler and bottleneck in India’s green transition. India must scale up blended finance, mobilise domestic institutional capital, and streamline governance frameworks, while developed nations must honour CBDR-RC commitments.
‘+1’ Value Addition:
Ø Under Article 9 of the Paris Agreement, developed countries committed to mobilise USD 100 billion annually till 2025.
- India was recognised in UN Secretary-General’s 2025 Climate Report as a leader in solar and wind expansion.
- India’s GDP projected to touch $17 trillion by 2050, requiring sustainable infrastructure.
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