The government may set up a dedicated national green bank to bridge the finding gap in the renewable energy sector, and fast-track the green transition.
The Niti Aayog is examining the possible structures for a National Green Financing Institution. The model of National Bank for Financing Infrastructure and Development or National Bank for Agriculture and Rural Development is also being studied.
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“The primary purpose of the Institution will be to aggregate green capital from different sources and lower the cost of capital,” the top government think-tank said in its annual report for 2024-25.
Besides a dedicated bank, Niti Aayog is examining repurposing existing institutions like IREDA; Climate Fund in GIFT city, Green InvIT, etc. (non-exhaustive) along with analysing best practices from Green Banks around the world.
To support India’s developmental aspirations and Net Zero target by 2070, the present finance flows are much lower than the desired levels.
Preliminary estimates indicate that the aggregate investment support required by India to achieve its 2070 net-zero target will be USD 1.4 trillion at an average of USD 28 billion per year, according to the Economic Survey for 2023-24.
Raising financial resources for climate change adaptation and mitigation actions of this scale is an unprecedented challenge, especially given that India’s climate action has been largely financed through domestic resources and the flow of international finance has been very limited.
As per the Reserve Bank of India, bridging this substantial funding gap necessitates allocating 2.5% of India’s annual GDP to green finance.
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A 2022 report by the Climate Policy Initiative8 found that domestic sources accounted for the majority of green finance in India, at 87% and 83% in fiscal years 2019 and 2020, respectively. While international sources are increasing (from 13% in 2019 to 17% in 2020), they are still insufficient to meet India’s net-zero target.
Niti Aayog is developing a comprehensive decarbonisation roadmap for the cement, aluminium, and MSME sectors to guide their transition toward sustainability. The roadmap will identify emission sources along the production value chains and pinpoint key areas for decarbonisation across the end-to-end value chain. It will assess the sectors’ competitiveness in light of global developments such as the Carbon Border Adjustment Mechanism (CBAM) and evaluate the readiness of infrastructure and technologies to support decarbonisation.
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