India mustn’t lose time on a climate finance taxonomy

livemint.com:

India’s climate ambitions are as vast as its challenges. The threats of rising sea levels, erratic monsoons and extreme heatwaves loom large. Trillions in investment are needed to mitigate these and transition to a low-carbon economy.

The announcement in the latest budget of developing a climate finance taxonomy is a crucial step in this direction. The government aims to unlock a floodgate of private capital by creating a standardized framework for identifying climate-aligned projects. The taxonomy will be able to achieve this by developing a set of standardized regulations to inform investing actors of the activities or businesses working towards combating climate change.

Achieving India’s net-zero target by 2070 requires investment far in excess of the domestic and international funding available. India has primarily relied on domestic resources, as mobilizing global capital for emerging economies has been a challenge, due to perceived risks, lengthy project timelines and high capital costs. The Economic Survey notes that India faces a “wall" of capital rather than a “flood." Despite being historically low-emitters compared to developed nations, developing countries are expected to play a delicate balancing act in juggling their economic growth prospects with reduced emissions.

A report by the International Finance Corporation estimates that India would require clean-energy investments ranging from $253 billion to $263 billion during 2026-30. Significant gaps persist, as the current investment available is only around $44 billion per year. The report further estimates that India has a $3.1 trillion climate-smart investment potential between 2018 and 2030.