Climate finance challenge: India needs $467 billion by 2030, here’s what new study reveals
India will require $467 billion in climate finance by 2030 to put four of its most carbon-intensive sectors — power, steel, cement and transport — on a low-carbon growth path, a new study has found.The working paper titled –India’s Climate Finance Requirements: An Assessment– authored by economists Janak Raj and Rakesh Mohan for the Centre for Social and Economic Progress (CSEP) and the Task Force on Climate, Development and the IMF, was released on Thursday, PTI reported. The study takes a bottom-up approach, mapping sector-wise financial requirements to present what the authors called a “granular understanding” of India’s decarbonisation challenge.The findings show that meeting the climate goals of these four sectors, which together accounted for more than half of India’s CO2 emissions in 2023, would demand average annual funding of $54 billion between 2022 and 2030, amounting to 1.3% of GDP. According to the authors, steel and cement will drive most of the funding needs, requiring over 80% of the estimated $467 billion, while the power sector’s requirement is comparatively lower at $57 billion due to falling renewable energy costs.‘Steel and cement hard to abate’“Contrary to the common narrative, the study finds that it is not the power sector, but the steel and cement sectors which need large climate finance,” Raj said. He added that both industries are “hard to abate” and depend heavily on costly carbon capture and storage (CCS) technology, currently the only feasible option.The transport sector, too, will require significant investments to accelerate the shift from internal combustion engine vehicles to electric mobility, including building charging infrastructure and developing viable financing mechanisms.Mohan emphasised that while the overall numbers appear large, they are not beyond reach. “The incremental financial resources needed for climate change mitigation in India for four key emitting sectors — energy transition, steel, cement and road transport — at an annual average of 1.3% of GDP up to 2030, are within reach,” he said.Financing gap and policy pushThe paper underlined a financing gap that will need to be bridged through both domestic and external sources. It suggested that India may need to expand its fiscal deficit prudently up to 2.5% of GDP to absorb foreign climate finance, while simultaneously mobilising more domestic resources.Among the policy recommendations are incentives for private investment in steel and cement, targeted subsidies, R&D support, and international technology transfers. The report also called for a national framework to accelerate EV adoption and strengthen the power grid through expanded storage and hydro-pump capacity.“The bottom line: Steel and cement are the financial linchpin in India’s decarbonisation efforts. With a carefully calibrated economic strategy, India can navigate the dual challenge of sustaining rapid growth while tackling climate vulnerabilities,” the study noted.The authors warned that any delay in mobilising resources could lock the economy into high-emission pathways that would be expensive to reverse. They said the findings are intended to inform domestic policy and international dialogue as India prepares for COP30 in Belem, Brazil, later this year.
