The Indian Budget 2024-25, and the preceding Economic Survey, have some notable developments in the climate landscape.
It started with the pretext that India’s annual per capita carbon emission is only about one-third of the global average. India’s GDP between 2005 and 2019 has grown at a CAGR of about 7%, whereas the emissions grew at a CAGR of about 4%. i.e., the rate of emissions growth is lower than the rate of growth of our GDP. In this context, it is ironic that emerging economies like ours are being exposed to carbon tax by developed countries, that contributed the most to climate change in their race to industrialisation. Though not part of the problem, developing countries are a big part of the solution.
India envisions a 'Viksit Bharat' by 2047, with the goal of achieving Net Zero carbon emissions by 2070. While the government already has a slew of national and international initiatives in place, here are some developments that were talked about:
Energy Transition
The Hon’ble Finance Minister (FM) emphasized on ensuring sustainable economic growth by accelerating the adoption of clean energy. The Economic Survey further expounded that India’s high dependency on imports (mainly petroleum) for its energy needs, now shifts to high import dependency for solar PV panels and critical minerals (systemic risks), whose supply chain and geopolitics may be even trickier. And therefore, it highlighted that India needs to target diversified energy sources, including renewables (solar, wind, large and small hydro), green hydrogen, nuclear, and biofuels. Such diversification will help minimise risks associated with energy systems while pursuing low-emission pathways in line with national commitments.
Climate Finance Taxonomy
The FM announced the development of a Climate Finance Taxonomy, which will essentially define criteria for economic activities that align with the net-zero trajectory and our broad environmental goals. This is a very important step for investors, who will be able to better identify assets that can deliver on key climate, green, social and/or sustainable objectives.
Solar Energy
The government shall continue with the PM Surya Ghar Muft Bijli Yojana to enable 10 million households to get free electricity upto 300 units monthly. The scheme has already garnered remarkable response with over 12.80 mn registrations 1.40 mn applications.
The government shall expand the list of exempted capital goods for use in the manufacture of solar cells and panels in the country, while also scrapping customs duty exemptions provided for the import of solar glass and tinned copper interconnects used to make solar cells and modules, in a move to promote domestic manufacturing.
The budget set aside a sum of INR 10,000 crores for solar infrastructure development, including solar parks and grid integration, a pivotal step towards achieving renewable energy targets.
Nuclear Power
The Economic Survey noted that nuclear energy is the cleanest and safest option amongst other renewable energy sources. The FM confirmed its importance by announcing a PPP to set-up ‘Bharat Small Reactors’, conduct related R&D and build nuclear power generation technologies indigenously.
Thermal Energy
The Budget proposed a JV between state-owned NTPC Ltd and BHEL Ltd for setting up an 800 MW advanced ultra super critical (AUSC) technology-based power plant, promoting indigenous thermal technology with much higher energy efficiency.
Critical Minerals Mission
The Critical Minerals Mission was proposed for promoting domestic manufacturing, acquiring overseas resources, and promoting recycling, of key minerals necessary in energy transition. The FM proposed to fully exempt custom duties on 25 critical minerals and reduce basic custom duty on two of them.
Water Management:
The Department of Water Resources’ budget was increased by 55% to INR 30,233.83 crores for FY 2024-25. Further, INR 11,500 crore was set aside for flood control and irrigation projects.
PAT to Carbon Credits Market
Carbon Credit Trading Scheme (CCTS) 2023 will subsume the existing Perform, Action, Trade (PAT) scheme, where the Designated Consumers (DCs) under the PAT scheme will gradually transition to CCTS by 2028-30. Under the CCTS, the Government shall set entity-wise GHG emission intensity targets to enable a per-output emissions limit (i.e., GHG emissions intensity target) in place of specific energy consumption targets under the existing PAT scheme.
Climate Resilience
The government shall ramp up farm research to boost productivity and ability of crops to withstand climate challenges. The government also plans to introduce 109 high-yielding and climate resilient varieties of 32 crops, amongst other financial aid.
The Economic Survey further noted that the total climate adaptation relevant expenditure was 5.60% of the GDP in 2021-2022, growing from a share of 3.7% in 2015-16, indicating integration of climate resilience and adaptation into development plans.
With these reforms, and many others already in application, India is well poised to meet its Nationally Determined Contributions (NDS). In fact, a recent report by the International Finance Corporation recognises India’s efforts to achieve committed climate actions, highlighting that it is the only G20 nation in line with 2-degree centigrade warming. Now that’s something positive.
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