INVEST IN GREEN INITIATIVES

The effects of climate change on the economy, enterprises, and environment cannot be ignored, despite the fact that it may seem weird for a central bank report to discuss it. A significant portion of the Reserve Bank of India’s most recent report on currency and finance for the fiscal year 2022–2023 is devoted to climate change. The paper, titled “Towards a Greener Cleaner India,” explores the possible obstacles to sustainable growth in India that the extraordinary pace and scope of climate change may present, as well as its macroeconomic repercussions, implications for financial stability, and policy solutions to reduce climate risks. The Climate Change Performance Index 2023 indicates that India is now leading the G-20 nations in terms of carbon emission reduction. This is thanks to a targeted and time-bound climate action plan. However, to achieve its goals, the report estimates that India will require green financing equivalent to at least 2.5 percent of its gross domestic product (GDP) annually until 2030. The RBI emphasized that India must accelerate the reduction of its energy intensity by about 5 percent each year and significantly improve its energy mix to include 80 percent renewables by 2070-71 to reach its net zero target by 2070. The report estimates that India will need investments worth 2.5% of the gross domestic product in green initiatives to achieve its net-zero goal of 2070. The report warns that if India fails to act, it could lose anywhere from 3 to 10% of its GDP annually by 2100 due to climate change. Heat stress associated with productivity decline could lead to 34 million job losses by 2030. Therefore, the central bank underscored the need for a well-balanced policy approach that makes progress across all policy levers to enable India to meet its green transition targets by 2030 and ultimately achieve the net zero goal by 2070.

India has made significant efforts to combat climate change in recent years, committing to reducing its greenhouse gas emissions intensity by 33-35 percent by 2030 compared to 2005 levels. The country has implemented several measures, including the promotion of renewable energy, energy efficiency, and sustainable transportation. The government has set ambitious targets for renewable energy, aiming to achieve 450 GW of installed renewable energy capacity by 2030. The country has also launched several initiatives to increase the uptake of electric vehicles, including tax incentives and subsidies for buyers, the development of charging infrastructure, and the creation of a national policy framework. However, there are several challenges to achieving these goals, with funding being a major one. Considering the fiscal scenario, government spending is likely to be constrained, and private funding will have to take the lead. To encourage this, a supportive policy framework is needed. In addition, non-fossil fuel technologies, including hydrogen-based energy, will have to be promoted, while the capacity for storage of green energy also requires a bump-up. Although India is faring better in this transition than many other countries, the gravity of the crisis means nobody can afford to fail. The policy mix must get it right.

In short, the Reserve Bank of India’s report on climate change highlights the importance of addressing this issue for sustainable growth in India. India’s efforts to combat climate change are commendable, but more needs to be done, especially with regard to funding and policy frameworks. It is essential that India continues to prioritize the transition to green energy and accelerates the reduction of its energy intensity to achieve its net zero targets by 2070.