To identify sustainable green assets and activities and lower the risk of greenwashing, India needs an efficient green taxonomy
The annual amount of green funding needed to close the infrastructure gap brought on by climate events might be as high as 2.5% of GDP. This has been highlighted in a new report on money and finances for the fiscal year (FY) 2022–2023, published by the Reserve Bank of India (RBI). The report's focus is on creating a cleaner, greener India.
According to the analysis, India needs to significantly alter its energy mix in favour of renewables by 2070–2071 in order to reach the net zero target by 2070. This will need an accelerated drop in GDP's energy intensity of roughly 5% yearly.
The report is based on the findings and conclusions of the contributors from the Department of Economic and Policy Research. It covers four major aspects of climate change, including the unprecedented scale and pace of climate change, its macroeconomic effects, implications for financial stability, and policy options to mitigate climate risks, to assess future challenges to sustainable high growth in India.
"India has embarked on a targeted and time-bound climate action plan to reduce carbon emissions and currently ranks the best amongst G-20 countries as per the Climate Change Performance Index, 2023. India’s green financing requirement is estimated to be at least 2.5 percent of gross domestic product (GDP) annually till 2030," the bank has stated in its press release.
In order to better direct investment through better-designed policies and improve the monitoring of progress, it was stated that India urgently needed a "green taxonomy". It also added that an effective green taxonomy was required to identify sustainable green assets and activities and reduce the risk of greenwashing.
Additionally, it advocated for the implementation of an emissions trading system (ETS) that would apply to all economic sectors and be linked to a green taxonomy. This system would help to partially balance subsidies (less polluting industries receiving carbon credits for trading) and taxes (polluting industries being required to purchase carbon certificates).
The central bank emphasised that for India to accomplish its green transition targets by 2030 and later make the net zero goal by 2070 achievable, there is a need for a balanced policy intervention with progress ensured across all policy levers.
The report also recommended increasing domestic capacity for rare earth element mining or acquiring them through long-term contracts and outward foreign direct investment; domestic manufacturing of vital equipment such as batteries, electrolysers, and other associated components; advancing application of AI and ML for better resource management; combining green building standards with IoT-based monitoring and AI and ML to manage and reduce energy demand; and enhancing climate resilience.