The world is increasingly aware of the rising temperatures and changing weather patterns. It has become common to read news of loss of lives and property due to erratic weather events throughout the year. These events underline the urgency of taking immediate action to mitigate the effects of climate change and protect our planet for future generations.
Against this backdrop, India’s 2024-25 budget brings hope and demonstrates the government’s commitment to reducing carbon emissions and dependency on fossil fuels. However, as a finance professional, I see the real challenge not in the policy announcements but in the massive capital requirements to bring these initiatives to fruition.
To implement these ambitious projects over the coming years, a huge amount of capital will be required. For instance, the allocation to the Ministry of New and Renewable Energy (MNRE) has increased to Rs 19100 crore, aimed at supporting various projects including the expansion of solar and wind energy capacities. However, beyond the initial funding, scaling up manufacturing capacity, installing solar panels, and integrating them into the national grid will necessitate continuous and substantial financial support.
Moreover, the tenure of these projects is long, requiring long-term project funding commitments. Viability gap funding for an initial offshore wind energy capacity of one gigawatt is a welcome move, but it will require sustained investment to cover initial project costs and ensure financial viability until these projects become self-sustaining. Similarly, the proposed coal gasification and liquefaction capacity of 100 MT by 2030 will need consistent funding for research, infrastructure development, and technology implementation.
Beyond the long-term capital requirements, there are immediate working capital needs that must be addressed. For example, expanding electric bus adoption in public transport will necessitate financial support for procurement, infrastructure, and operational costs. The same applies to biomass aggregation machinery for compressed biogas blending in transport and domestic gas supplies.
This is where impact finance becomes crucial. Impact finance involves investments made with the intention to generate positive, measurable social and environmental impacts alongside a financial return. These financial instruments can attract both domestic and international investors, providing the necessary funding to drive these initiatives forward. Green bonds, climate funds, and socially responsible investing are excellent examples of how to secure the needed capital.
Several funders and fund houses, such as the Green Climate Fund, the World Bank, and various international climate finance institutions, are keen on providing both short and long-term financing to projects that contribute to combating climate change. Green bonds, for instance, are used to raise capital for projects with environmental benefits and have been issued by both governments and corporations. Climate funds like the Global Environment Facility provide grants and concessional loans for environmental projects. Socially responsible investing (SRI) is gaining traction among investors who prioritize companies and projects with strong environmental, social, and governance (ESG) practices.
The financial requirements for these ambitious projects are substantial, but the availability of impact finance and the growing interest from global funders and investors offer a promising path forward. Continued collaboration between the government, private sector, and international partners will be essential in realizing these ambitious goals. By leveraging these financial instruments and investments, India can ensure that it meets its environmental targets and emerges as a global leader in renewable energy and sustainable development.
India’s 2024-25 budget marks a significant step towards achieving Net Zero by 2070. The government’s commitment to renewable energy projects, support for private sector involvement in nuclear energy development, and promotion of innovative technologies demonstrate a clear vision for a sustainable future. However, the success of these initiatives hinges on securing and effectively utilizing the necessary capital. The focus on impact finance or socially responsible investing will be pivotal in meeting these capital needs, supporting India’s journey towards a sustainable and resilient energy future.
Union Budget 2024-25 and Its Environmental Vision: A Roadmap of Climate Action
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