Can Carbon Market Be a Credible Source of Climate Finance in India?

Readers will agree, potential of carbon market as a source of climate financing for India is quite substantial, and very much forms the subject matter of this article. the contents make us aware of both the need and relevance of the climate finance, notably in the Indian context. In other words, how India can capitalize on this market.

- Gopal K. Sarangi and Shingle Sebastian

In Need of Climate Finance: size and magnitude

The net-zero emissions trajectory set by many countries including India, cannot be achieved without adequate financial resources. IEA (2023) estimates suggest a sizeable magnitude of clean energy investment to be made to meet stated goals of net zero by countries. Projections indicate that it has to be tripled by 2030 and further to be scaled up by five times annually from 2030 to 2050 to keep countries on net-zero trajectory. Other estimated numbers indicate the ballpark figure to be around USD 8 to 9 trillion dollars by 2030 (Monar, 2024a). These projected figures may escalate to new highs depending on the degree of climate inactions and future uncertainties associated with climate hazards.

India is no exception to these realities. Our country is highly vulnerable to climate hazards due to its unique geography characterized by highly fragile mountainous regions like the Himalayas and long coastlines prone to cyclonic disturbances and storm surges. Studies point to the fact that 80% of the districts in India are highly vulnerable to climate hazards and extreme climate conditions (Mohanty and Wadhawan, 2021). Given the degree and intensity of climate vulnerability, the size of climate funds required for meeting the climate-related costs is projected to be quite humongous. In order to achieve Net-zero Goal by 2070, India requires a sizeable quantum of funds estimated to be around USD 10 trillion. Even the much prioritized and policy emphasized energy transition implementation trajectories require more than 2 trillion USD for the country (Singh, et al., 2024). However, there is a significant dearth of the required funds to meet such ambitious climate goals for the country.