25 July 2024
The Hindu
Op-eds
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Centre’s commitment in the Budget reflects a smart
approach to integrate climate finance into energy transition
Through the Union Budget 2024,
the Government of India has demonstrated increased political and public finance
commitment towards climate change. It was encouraging to see energy security as
one of the nine Budget priorities, along with the 60% increase in allocation
towards the Ministry of New & Renewable Energy from ₹12,850 crore in the
interim Budget to ₹19,100 crore. It is well recognised that most of the climate
action will be private sector funded. The targeted measures announced in the
Budget that span across the entire clean energy value chain will spur investor
confidence and create substantial opportunities for the movement of both
domestic and international finance to India, moving us to a low-carbon economy.
Notably, four major initiatives stood out.
First, the continuation of the
Pradhan Mantri Surya Ghar Muft Bijli Yojana. It is a visionary initiative that
will empower millions of households in residential solar adoption. The
overwhelming response of 1.28 crore registrations underscores the immense
potential of solar energy in India. This surge in demand will facilitate
further investments into the solar sector, fostering innovation, and job
creation.
Second, the imposition of
duties on goods like solar glass and removal of duties on equipment for
manufacturing of solar cells and panels will help to boost domestic
manufacturing across the full supply chain for solar. Many Indian companies,
including ReNew, have ventured into solar manufacturing sector to fulfill the
government’s ‘Make in India’ vision and to make India the future manufacturing
hub for solar energy components. The policy measures announced will reduce
production costs for manufacturing in India, make it more competitive globally
and thereby attract private capital. Third, the announcement by the Finance
Minister on Critical Mineral Mission. This will be a key component in ensuring
energy security. As we pivot towards renewable technologies, the exemption of
basic Customs duty on 25 essential minerals used in renewable energy
technologies such as copper, silicon, and vanadium, will secure our domestic
supply chain and make it globally competitive. We need significant capital and
technological expertise to develop a processing and refining industry for
critical minerals and the duty exemptions will go a long way towards that.
Finally, the development of
climate finance taxonomy is a crucial step in channelling investments towards
climate-friendly projects. Raising capital for climate adaptation and
mitigation signals the serious commitment of this government in achieving its
renewable energy targets. It also aligns with the G20’s recommendation in their
Sustainable Finance Report about the expansion of domestic capital flows for
adaptation and mitigation projects.
By establishing clear definitions
and standards for climate finance, this initiative will provide transparency
and assurance to investors, facilitating the flow of funds into sustainable
projects and supporting India’s climate commitments. Moreover, it will also
accelerate the emerging green bonds market in India, which has faced challenges
in lowering its cost of issuance.
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