States’ support is crucial to unleash the full potential of the market and mitigate climate change
Published Date – 4 March 2024, 11:59 PM
By Ganesh Manjhi, Manuj Jha
The Government of India added Climate Change to the ‘Ministry of Environment and Forest’ in 2014. It stresses the importance of climate change and the focus of the government. According to the European Commission Report, India accounted for 4.32% of the global CO2 emissions in 1990, which rose to 7.33% in 2022. China with 29.2%, US (11.2%), EU27 (6.7%), Russia (4.8%) and Brazil (2.4%) were the major contributors to the CO2 emissions by 2022. The rest of the world accounted for 38.4%. Despite constituting 17% of the global population, India’s contribution is much lower than China’s.
India has been spending approximately 5% of its GDP on climate change as compared with the general government expenditure on environmental protection in Europe which ranged from 0.2% to 1.5% in 2021. These data points are put forth to highlight the contribution of India to climate change and its effort to solve the same. Climate budgeting is a new necessity of governments worldwide. In the case of India, none of the States have done substantial work in climate budgeting except Odisha. In terms of shared responsibility to mitigate climate change, what is required is cooperative climate federalism.
Imminent Disaster
Let us try to understand climate change, mitigation and politics in the current context. Consider a scenario in which two candidates, A and B are competing in an election. A pledges to cut the tax rate by 10%, while B vows to lower greenhouse gas (GHG) emissions and contain the temperature rise to no more than 1.5°C above pre-industrial levels, in line with the Paris Climate Agreement. Who will likely win the election? In the contemporary world, A seems to be winning because humans are yet to realise the importance of environment and climate change as a part of their consumption basket.
We may not fully grasp the imminent disaster due to climate change. Weitzman (2014) introduced the concept of ‘tail risk,’ signifying the probability of substantial loss from an infrequent and gradual event. We can postpone the occurrence of this tail risk by adopting eco-friendly strategies and implementing resilient policies.
To combat climate change, shared global action needs to be taken to avoid or delay the tragedy of commons. Most of the sovereign nations have been switching to renewable energy from conventional sources (fossil fuels such as coal and petroleum). But the effort has been too slow. India’s strategy to combat climate change is multifaceted and involves a combination of policy initiatives, international commitments and the development of renewable energy sources. The Indian government has set an ambitious target of establishing 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.
India’s Targets
According to the Ministry of Power, the percentage of fossil fuel-based power has reduced to 57% from 69% in the last 10 years. India has 424 GigaWatts (GW) of power generation capacity which includes around 180 GW from non-fossil fuels (as of November 2023). As per the Central Electricity Authority, India has set an ambitious target to add a total of 472 GW of installed capacity during 2022-32. Almost 80% of this would be from two prominent sources — solar (279 GW) and wind (94 GW). This is well aligned with India’s pledge to have 500 GW of non-fossil generation capacity by 2030. These will require heavy investments of about Rs 32 lakh crore.
In 2023-24, the Ministry of Environment, Forests and Climate Change was allocated Rs 3,079 crore, a 24% increase over the revised estimates of 2022-23. The budgetary allocation often tends to be skewed towards revenue expenditure (95% of total allocation) rather than capital expenditure. Revenue expenditure includes costs associated with the functional aspects of the ministry such as administrative expenses, salaries, maintenance, subsidies and the operational funding of various environmental programmes.
In 2020, the Ministry of Finance estimated the overall expenditure required for India to adapt to climate change at around Rs 85 lakh crore at base year (2012) prices. This requires heavy investment (public and private) in the renewable energy sector. But India has been getting investment — around 50% of the required fund — primarily from domestic sources. The banking sector has exhibited a hesitancy to fund renewable energy initiatives. States play a pivotal role in unleashing the full potential of the market. These two elements should be seamlessly integrated.
At the 15th Conference of the Parties in Copenhagen in 2009 (COP 15), one of the contentious issues was the financial support ($100 billion per year till 2020) that developed countries had promised to provide to developing countries to help them tackle climate change. However, the actual disbursement of the promised fund was delayed and often lower than the amounts pledged, leading to a trust deficit between the developed and developing countries.
Notable Schemes
In the interim Budget for 2024-25, the word climate was used twice – ‘climate challenges’ and ‘climate resilience’. There was nothing much in the Budget on climate finance and its budgeting perhaps because of the nature of the interim Budget. However, a few schemes worth mentioning are rooftop solarisation, green energy and blue economy.
Rooftop solarisation is an ambitious project that aims to empower one crore households, providing them with the opportunity to receive up to 300 units of free electricity every month. The implementation of this initiative is anticipated to yield a two-fold impact. Firstly, beneficiary households stand to save up to Rs 18,000 annually, significantly reducing their electricity expenses. And, the surplus energy generated can be sold to distribution agencies (discoms), creating an additional source of income for the households.
Furthermore, this scheme is expected to play a crucial role in driving the electric vehicle (EV) charging ecosystem. By encouraging the adoption of rooftop solar panels, there will be a concurrent boost in the infrastructure necessary for charging electric vehicles. The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme was launched to incentivise the production and promotion of eco-friendly vehicles. This aligns with the broader goals of promoting sustainable and clean energy practices.
The rooftop solarisation scheme aligns with the Pradhan Mantri Suryodaya Yojana, which was announced on January 22. As of December 2023, approximately 8 lakh households have already embraced solar panels, resulting in a cumulative installed capacity of around 11 GW.
The government seems to be confident about the outcome of the upcoming general elections and hence did not go for a politically ballooned Budget. However, pushing for rooftop solar panel installations massively before the Lok Sabha elections can only create some visual effects to show a resplendent picture.
Ganesh Manjhi is Assistant Professor and Manuj Jha is Research Scholar, Centre for Mathematical and Computational Economics, School of Artificial Intelligence & Data Science, Indian Institute of Technology Jodhpur.
