India’s Green Transition and Financing Strategy

Context

Uncertainty over climate action has increased after the withdrawal of the United States from the Paris Agreement and reduction in climate finance commitments by several developed countries. The earlier global commitment of $300 billion per year by 2035 is now doubtful. In this situation, India needs to continue its path toward achieving net zero emissions by 2070 with a strong domestic strategy.

What is Decarbonisation?

Decarbonisation means reducing carbon emissions by shifting from fossil fuels to clean energy sources, improving energy efficiency, and increasing electrification in all possible sectors.

Why Should India Stay Committed to Net Zero?

India must continue pursuing net zero for two main reasons:

1. Decarbonisation does not conflict with economic growth
   1. Continuing to depend on fossil fuels has high environmental and health costs, especially severe air pollution in Indian cities.
   2. Green transition opens opportunities for new industries, jobs, and export potential, rather than slowing growth.
   3. Delaying decarbonisation will force continued investment into coal and fossil fuel infrastructure, which will later become stranded assets and financially wasteful.
   4. New technology now enables clean alternatives without heavy cost.
2. India can finance the transition largely from domestic and private capital
   1. External climate assistance may remain limited or uncertain.
   2. India’s private sector has proven capability to develop large, bankable renewable projects.
   3. The world has sufficient private capital available for strong investment proposals.
   4. What India needs most is policy reforms, not concessional grants.

How India Can Reduce Emissions While Growing?

Emissions can fall even while GDP grows through three strategies:

1. Energy efficiency improvements across industries and households.
2. Electrification of sectors that currently depend on fossil fuels.
3. Increasing renewables in electricity generation instead of coal.

Emissions Model Projection

The REMIND-India model, developed with the Potsdam Institute, shows two possible trajectories:

Business-as-usual (BAU) -Red curve

1. Emissions keep rising and peak around 2045.
2. Even by 2070, emissions will remain much higher than today.

Net-zero pathway – Blue curve

1. Emissions rise for the next ten years.
2. After 2035, emissions begin to decline sharply.
3. Reach net zero by 2070 if correct policies are followed.
4. GDP growth remains the same (average 25% per year between 2025-2050) in both scenarios.

This shows that high growth and emission reduction can happen together.

How India Can Finance Net Zero Without Relying on Foreign Grants?

1. India must mobilise investment primarily from domestic sources.
2. External finance will mainly come from private investment, FDI, and multilateral development banks (MDBs).
3. To attract capital, India must:
   1. Make state electricity distribution companies financially viable.
   2. Increase private participation and reform tariff and pricing systems.
   3. Strengthen regulatory frameworks and dispute resolution for investors.
4. MDBs should expand long-term lending and support risk-sharing to leverage large flows of private money.

Implications

1. India can pursue net-zero while maintaining strong economic growth.
2. The transition will generate jobs, manufacturing opportunities, and export potential.
3. India should rely on self-driven reform and private capital, rather than waiting for uncertain foreign aid.
4. G20 leadership must push MDBs to support private capital mobilisation.

Challenges and Way Forward

Conclusion

India can achieve net zero by 2070 without sacrificing growth. The pathway requires policy reforms, domestic financing, and private sector leadership, rather than relying heavily on foreign concessional funds. Early action will prevent stranded assets, improve air quality, generate jobs, and allow India to lead the global green economy.