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Financing India’s Transition to Net Zero: A Primer for Journalists

Smokestacks against a pink-hued sky

India is a critical country in the global efforts to ensure climate change is addressed effectively and carbon emissions are reduced. However, the pathway to achieving net zero is marred by various factors like a lack of climate finance, which is a crucial requirement for India. There are many estimates of the amount of money that India requires to decarbonize its economy, rapidly scale up renewable energy, achieve the climate goals it has set for 2030, and then net zero by 2070. But every estimate shows that trillions of dollars are required to achieve these goals. In the absence of a steady flow of adequate international financial support, India is increasingly focusing on raising climate finance through different mechanisms. 

This tipsheet will introduce journalists to the basics of climate finance: How much India requires, how much financial support it is getting, what financial instruments the government is using to raise finance and why journalists should focus on closely tracking funding flows. Be sure to take a look at its companion tipsheet: Understanding India’s Net Zero Policies: A Primer for Journalists.  

Where is the money for India’s climate and net zero goals? 

Over the last decade, major developed economies at most of the global annual climate summits have been talking about the urgency of climate action. There have been plenty of promises to finance climate action in developing economies. But the money actually provided has been only a small fraction of what has been promised. 

Though solid climate action by a country such as India has been called critical by developed countries if the world is to have any realistic chance to arrest climate change, the South Asian country is mostly on its own in raising climate finance to power its 2030 renewable energy goals and 2070 net zero plans. In August 2022, a report said that “for FY2019 and FY2020, the total finance raised was 44 billion USD” but about 85% of that, nearly 37 billion USD, was raised domestically. 


A red and blue bar chart
Green finance raised by India in FY2019 and FY2020 by domestic and international sources / Credit: Climate Policy Initiative.


Before we move ahead, let us be clear that climate finance in a broad sense refers to the funds required for a net zero economy, whether it is to implement plans to decarbonize heavy industry and transport sectors, reduce emissions, switch to more energy-efficient systems, cover loss and damage, adapt to climate change, achieve a just transition, etc. 

According to the United Nations Framework Convention on Climate Change (UNFCCC), climate finance refers to “national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change.” 

Climate finance is urgent but what is the ground reality? 

In 2009, at the Conference of Parties to UNFCCC, the developed world had promised developing nations including India at least 100 billion USD every year by 2020, but so far, the target has not been met even as the requirement of funds to reduce emissions and tackle climate change has increased manifold.  

India has been vocal in highlighting the gap in financing, seeking clarity in the definition of climate finance and transparency in finance claims by developed countries and pointing to the need for climate finance in the form of grants rather than loans.  

In February 2021, in its Third Biennial Report to the UNFCCC, India noted that despite its commitments and responsibilities, the contribution of the developed world to climate finance “suffers on account of scale, scope and speed.”  

“They are largely not new and additional, highly inadequate in scale, misplaced in scope without balance favoring mitigation strongly over adaptation, and dominated by loans rather than grants. Annex-I Parties (developed countries) are tardy in implementation of the goal of providing USD 100 billion annually, the target year having been pushed back from 2020 to 2025.”  

The document noted that the internationally available climate finance to India remains skewed towards mitigation rather than adaptation, and towards concessional loans instead of grants and more importantly that it must be accompanied by “co-financing that India has to generate internally, often from public funding.” Both mitigation, which primarily refers to reducing greenhouse gas emissions and adaptation, which focuses on adjusting to the current and future adverse impacts of climate change, are key to achieving net zero goals. Mitigation measures include the shift to cleaner public and private transport and renewable energy; adaptation measures include programs to encourage energy efficiency or tackle extreme weather events. 

India noted that domestic mobilization of funds overshadows the sum total of funding by the UN’s Green Climate Fund (GCF) and the Global Environment Facility (GEF). “While GEF and GCF have provided grants to a total of 165.25 million USD, the corresponding domestic mobilization amounts to 1.374 billion USD. Thus, domestic mobilization amounts to 8.3 times the grants provided by GCF and GEF.” 

At the 2015 UN climate summit (COP 21), it was also decided that, prior to 2025, a New Collective Quantified Goal (NCQG) on climate finance from a floor of 100 billion USD per year will be set that will take into account the needs and priorities of developing countries. But how far this will advance remains to be seen considering the 100 billion USD goal has still not been met. 

Tip for journalists: There is no single source which offers clear and deep insight into how climate funds are being provided. But journalists can track different sources such as OECD, Climate Policy Initiative, Climate Funds Update or documents released by UNFCCC and their own national governments to understand the flow of funds to countries and sectors. However, they should be wary of relying on such documents as the final word. For example, there is wide variance between the figures claimed by OECD and the figures put out by most developing countries, including India. 

What does India need to do to fulfill its RE and net zero goals?  

India has a plan to generate 450 gigawatts of renewable energy by 2030. It announced its target of reaching net zero greenhouse gas emissions by 2070 at the Glasgow climate summit in 2021.  

In 2021, Prime Minister Narendra Modi noted that India expects to receive USD trillion in climate finance  “at the earliest.” In November 2022, India released its Long-Term Low-Carbon Development Strategy which highlighted various estimates that put the required investments for low-carbon growth to the tune of tens of trillions of dollars by 2050. 

In August 2022, a report by the think tank Climate Policy Initiative estimated that to achieve its Nationally Determined Contributions (NDCs) under the Paris Agreement, India requires approximately USD 2.5 trillion from 2015 to 2030 (USD 170 billion per year).  

Tip for journalists: Journalists need to note that often reports by different think tanks or organizations come out with different estimates. In such cases, they should carefully check the methodology to arrive at estimates and reach out to the authors of such reports for clarification 

In February 2022, a report by a committee of the Indian parliament revealed that to achieve 500 gigawatts of installed capacity of non-fossil-fuel-based energy projects (including transmission projects) by 2030, the country needs about Rs 17 trillion (USD 207.63 billion). This amounts to about Rs 1.5-2 trillion (USD 18.32-24.43 billion) of investment every year. The committee noted that the annual investment in the renewable energy sector over the past few years was estimated to be at Rs 750 billion only (USD 9.14 billion), or about half of what is required. 

There are many estimates on how much money is needed from developed countries for India to reach its climate goal. But there is very little of the money itself. 

What is India doing? 

As noted earlier on in this tipsheet, India has repeatedly expressed disappointment at the lack of international support and has highlighted that it relies heavily on domestic mobilization of finances.  

“The country has so far largely met its requirements from domestic sources only. Finance is a critical input for its climate actions. Therefore, the country has scaled up its efforts towards mobilizing private capital, including through sovereign green bonds, to meet climate action goals,” the Indian government said in its economic survey released in January 2023. 

The survey noted that securing funding from either developed country governments or multilateral organizations is difficult because “public finances in developed countries are stretched and do not seem to have the intent to mobilize adequate resources for climate action in developing countries.” 

So far, according to the Indian government, India’s climate actions are largely driven through domestic sources including government budgetary support, taxation and a mix of market ​​mechanisms (e.g. renewable energy certificates and the Perform, Achieve, Trade scheme), fiscal instruments (green bonds, etc.) and policy interventions (such as the Production Linked Incentive (PLI) scheme).

According to data from the Securities and Exchange Board of India (SEBI), during 2017-2022, 15 Indian corporates issued green bonds worth Rs 4,539 crore (USD 553 million) with most of those related to renewable energy. In early 2023, the Indian government also issued Sovereign Green Bonds (SGB) worth USD 2 billion USD (about Rs 16,000 crore).

In a recent paper on climate finance published by a think tank, Council for Strategic and Defense Research, Vibhuti Garg, energy economist at the Institute for Energy Economics and Financial Analysis (IEEFA), said that “the issuance of SGB will further catalyze Indian corporates to issue green bonds, adding to the current USD 1.86 trillion pool of global green bond investments.” 

Experts have also argued that in addition to the central government, state government and local municipal bodies should opt for the bonds market. Indore Municipal Corporation recently raised over USD 80 million through green municipal bonds. 

India also emphasizes that it heavily taxes all fossil fuels at various stages from extraction to final consumption—a​​​​n effective carbon tax that is higher than in many developed countries—and this yielded about Rs 5.5 trillion (USD 67 billion) in the financial year 2019-20. It maintains that since public sector distribution companies also have Renewable Purchase Obligations (RPO), these increase their running costs and these additional costs “should constitute further investment by India in climate mitigation.” Under the RPO scheme, state-owned electricity distribution companies are obliged to buy a pre-agreed amount of renewable energy at a price determined through a long-term power purchase agreement. 


Carbon credit infographic
Infographic explaining carbon credits / Credit: Davy.


Carbon credits are tradable certificates or permits that set a maximum level of carbon emissions for industries, companies, or countries. 

India is no stranger to carbon credits. It is already among the top producers and exporters of carbon credits in the world. In August 2022, India banned the export of carbon credits so that they can be used domestically to meet India’s NDCs. Selling carbon credits is certainly a lucrative proposition and in India, by 2030, the market for voluntary carbon credit is estimated to cross over 500 million units. 

Read: How carbon credits can help India reach its net-zero goals - BusinessToday 

Carbon taxes are a price tag put on fossil fuels to disincentivize their use and promote a switch to green energy. A carbon tax is a type of carbon pricing—the other primary type of carbon pricing is emissions trading systems or ETS. A carbon tax sets an exact price on carbon by specifying a tax rate on greenhouse gas emissions or on the carbon amount found in fossil fuels, with the latter becoming more common. 

In May 2023, the Reserve Bank of India (RBI) published a Report on Currency and Finance 2022-23: Towards a Greener Cleaner India which sought a carbon-pricing system to meet the country’s climate goals. “India needs to introduce a broad-based carbon pricing system in line with emerging global best practices to meet its climate goals. A carbon tax may need to be accompanied by complementary redistributive policies due to its regressive nature, in view of the inability of the weaker sections of the society to move to eco-friendly modes of production and patterns of consumption,” said the RBI report. It also advocated for an ETS (Emissions Trading System) covering all sectors of the economy which can partly balance subsidies (wherein less polluting industries receive carbon credits for trading) and taxes (wherein more polluting industries would have to buy carbon certificates). Carbon taxes are considered regressive because they end up hurting marginalized members of society more than the wealthy; that is why it is crucial to have a robust redistributive policy to ensure the fruits of such taxes help the poor. 

Tip for journalists: Journalists need to closely follow the central government ministries dealing with energy to understand how they are developing a domestic carbon market. They should also closely follow the government and RBI to track progress on carbon pricing, with a keen eye to monitoring how revenues from these sources are being utilized. Journalists reporting on climate finance should work with and be in close contact with ministry officials, RBI, think tanks and international research groups so that they can stitch together information from different sources. 

Can a Just Energy Transition Partnership (JETP) help India?  

A woman gestures as a man films her
Journalists in conversation with community members from Topsi village, near a closed coal mine in West Bengal / Credit: Aarushi Tanwar.


In very basic terms, a just transition can be explained as the shift to renewable energy and decarbonization of the economy while ensuring that the workers and communities involved are not adversely impacted by the transition, and their welfare is taken care of. 

In 2022, some developed countries reached separate JETPs with three developing countries—South Africa, Indonesia and Vietnam. Under this agreement, rich nations will mobilize billions of dollars to boost the energy transition programs of these countries and accelerate phasing out of coal. The JETP deals with South Africa, Indonesia and Vietnam are worth USD 8.5 billion, 20 billion and 15.5 billion, respectively.   

These deals, however, have attracted strong criticism from different stakeholders for a range of reasons—including the fact that most of the money is being offered as loans (not grants) and there is a lack of transparency as far as the details of the deals are concerned. Climate Home News reported that in South Africa’s USD 8.5 billion deal, around 97% of the money is via loans and only 3% as grants. Some of the provisions of these deals are also dependent on the three countries undertaking a series of reforms

With India assuming the G20 presidency, at the beginning of 2023 there was an expectation in some developed countries that India would accept a similar deal. But India has so far remained wary of one-sided terms by rich nations and maintains that its coal usage is yet to peak and nowhere close to phase-out.  

A news report in February 2023 highlighted that instead of JETP, India wants a clean energy transition deal. India’s coal production is expected to double to 1.5 billion tons by 2030 and its coal usage peak is expected in the mid-2030s. Thus, a JETP deal, India believes, would be unrealistic and unjust. India desires a clean energy deal that supports its ambitious renewable energy goals minus any mention of a coal phase-out. 

The scale of India’s coal economy means that massive funding will be required to finance India’s just transition. A recent report published by iForest, a think tank, said that at least USD 900 billion would be required over the next 30 years for the country to achieve a just transition in the fossil fuel sectors alone. 

In conclusion, although India is not responsible for historical global carbon emissions, the reality is that India is among the top carbon emitters in the world today. With its aggressive and ambitious renewable energy policies, schemes to improve energy efficiency and efforts to decarbonize industry, India is involved in efforts at many levels to combat climate change.  

Read: India Leads in LEED Zero Green Building Projects, Outperforming US and China  

​​​However, climate finance remains a huge area of concern. Though the developed world has consistently fallen short of fulfilling its climate negotiations, India has taken a series of steps on the domestic front to raise climate finance.  

Tip for journalists: Journalists need to closely track the schemes that the government is undertaking but be careful of falling into the trap of only looking at data/numbers in isolation. They should take note of the larger landscape of climate change conversations including those on finance, and consider the actions of different multilateral organizations, and their implications. While dealing with finance-related data, it is critical to understand who is producing those numbers and the motive behind it. ​​​​​​​

Questions to consider:  

  • How much finance does India exactly need sector-wise to boost its climate action? How much international finance has it received in the last 20 years? 
  • Adaptation or mitigation—where does India need urgent financial support? 
  • Which are the sectors of the Indian economy that urgently require a proper flow of funds to tackle climate change? 
  • Is there space to fine-tune the role of international bodies as far as climate finance is concerned? Do mechanisms like UNFCCC and G20 need reforms to ensure a smoother flow of climate finance? 
  • India says it is already taxing fossil fuels heavily. Is there space for a new tax for climate finance?  
  • What are the innovative models of financing India can develop to achieve climate and net zero goals? 
  • Will the lack of financial resources for India’s sunrise sector—renewable energy—derail the country’s ambitious clean energy plan? 
  • Can sovereign green bonds solve India’s climate finance woes? How much money can Indian industry, states and municipal bodies raise money via green bonds? 
  • Can India afford a Just Energy Transition Partnership (JETP) deal? Does India require a JETP deal? 



This tipsheet was produced by Mayank Aggarwal.  

Banner image: A power plant in Haryana, India / Credit: Vikramdeep Sidhu via Flickr