Financing India’s Green Growth: Strategies and Challenges;

India’s ambitious green structural transformation program is crucial for addressing climate change and achieving sustainable development. However, mobilizing adequate resources remains a challenge. In this post, Ejaz Ghani outlines key strategies to finance India’s green growth, emphasizing the need for global risk pooling, fiscal reforms, public-private partnerships (PPPs), and innovative financial instruments.

India’s Climate Change Challenges: India ranks among the top 10 countries most adversely affected by climate change, with over 80% of its population residing in climate-risk districts. The impacts of climate change are evident in extreme weather events, food insecurity, and other socio-economic challenges.

India’s Green Structural Transformation: India has initiated a green structural transformation program focusing on energy efficiency, renewable energy, and green urbanization. Notable achievements include improvements in energy efficiency and significant expansion in renewable energy capacity.

Challenges in Financing Green Growth: Despite progress, India faces a substantial financing gap, with conventional sources projected to provide only a fraction of the required capital. To achieve its net-zero emissions target by 2070, India needs an estimated US$10.1 trillion between 2020 and 2070.

Strategies for Financing Green Growth:

1. Global Risk Pooling: Establishing multi-sovereign loan guarantees and pooling mechanisms can lower financing costs for climate-related infrastructure projects. This approach aggregates risks across projects, cities, and countries, enhancing investor confidence and reducing financing barriers.
2. Fiscal Reforms: Modernizing the tax system to raise revenue and increase taxes on emissions can create fiscal space for environmental investments. Phasing out subsidies for fossil fuels and promoting renewables through tax incentives can further align government expenditures with environmental goals.
3. Public-Private Partnerships (PPPs): PPPs offer a mechanism for leveraging private sector expertise and capital for green infrastructure projects. Sector-specific PPP frameworks and independent regulatory mechanisms can enhance the effectiveness of PPPs in promoting green growth.
4. Innovative Financial Instruments: Green sovereign bonds, climate stress testing, and sustainable capital markets strategies can mobilize private capital for green investments. Encouraging foreign participation, developing green taxonomies, and ensuring clarity on taxation can attract international investors and promote domestic green finance markets.

Conclusion: India’s pursuit of green growth presents significant opportunities for economic development and climate risk mitigation. By scaling up global risk pooling, implementing fiscal reforms, fostering PPPs, and leveraging innovative financial instruments, India can mobilize the resources needed to achieve its climate goals while promoting sustainable development.

Disclaimer: The views expressed in this post are solely those of the author and do not necessarily reflect those of the I4I Editorial Board.

For ongoing and detailed coverage of legal developments, business news, and real-time updates on law and politics, visit Kanishk Social Media. If you found this news article informative, please share it with a friend!

Source:

• Ghani, E., & Goswami, A. G. (2014). Spatial Dynamics of Electricity Usage in India. World Bank Policy Research Working Paper 7055.
• International Trade Administration (2024). India – Renewable Energy. Country Commercial Guide.