- February 13, 2022
- Posted by: Bastion team
- Category: World News
In the Union Budget, the government announced its intention to promote green bonds with a view to support investments in climate-friendly projects. This is a timely move as India needs to urgently scale up the quantum of finance to meet her climate obligations and finance low-carbon development.
Latest estimates published by the Ministry of Finance (2018) project that the cumulative cost of India’s current Nationally Determined Contributions (NDCs) is roughly $ 3.5 trillion. Going by the available statistics, not more than 10 per cent of this is likely to come from the multilateral and international channels. The rest has to be mobilised through the domestic financial system. But green finance continues to remain scarce in India and low in scale, even though India is emerging as a big player in the green bonds market after the US and China.
India’s green finance landscape has three notable characteristics. First, the cost of green capital is higher due to its unconventional nature, the risks involved and the absence of a conducive regulatory framework. Second, there is a lack of sound and verifiable green financial products in the market. The existing ones are skewed in favour of debt instruments which only partially cover the risk and scale of long-term finance. Last, there is a predominance of projects for renewable energy capacity addition, with small allocations for energy efficiency. Difficult sectors like infrastructure, industry, resource efficiency, and…