The climate finance puzzle

The power sector is the biggest challenge in mobilising long-term climate finance in India

- SUDHEER PAL SINGH

The power sector is emerging as the single largest problem facing India’s ambitions of climate financing. Its sheer size and the multitude of interfaces with other segments of the economy ensure that almost all big-ticket economy-level challenges have at least one finger in the power pie.

India will have to invest $22.7 trillion over the next 35 years to meet its net zero target by 2070, according to an analysis released earlier this week by government think-tank Niti Aayog, which noted that the capital mobilisation required is “urgent, massive, and long-term”.

Not surprisingly, the power sector dominates the estimate, accounting for nearly half the total investment needed through large-scale deployment of renewables, storage, and transmission projects. The other two problem areas, transport and industry, account for 25 per cent and 20 percent of that investment requirement, respectively.

Global picture

India has made strong progress, reducing emissions intensity by 36 per cent over 2005 levels and achieving 50 per cent non-fossil power-capacity five years ahead of its Nationally Determined Contribution target. However, its annual investment flow from domestic sources in tackling climate change stands at a mere $135 billion, including $80-90 billion towards clean energy projects.

For comparison, India will need $8 trillion between 2026 and 2050 alone, and an additional $14.69 trillion between 2050 and 2070 to meet the Net Zero goal.