NATIONAL INSTITUTE OF TECHNOLOGY KARNATAKA, SURATHKAL
SM300: Engineering Economics Project
Empowering India’s Net Zero Journey
by 2070: Renewable Energy Revolution
and the Catalyst of Green Finance
Team Members:1. GUNASHREE V
211CS219
2. MALOTH LAHARI
211CS230
3. MOHAMMED KHALID AHMED
211CS233
4. POORNIMA M PATGAR
211CS236
5. RUSTAM MAHILANE
211CS247
6. THAKER HARSH LINESH
211CS263
7. Y SUPRADHA BHAT
211CS265
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1. Net Zero Target Analysis:
The net-zero emission target refers to the state of balance in which the amount of greenhouse
gas produced in the atmosphere is equal to the amount of emission removed from the
atmosphere. Achieving a net-zero target is a crucial step in order to combat the issue of
climate change and reduce the adverse effects that it can have on our planet. The Paris
Agreement is an international treaty designed to bring nations together to combat global
warming and its effect on climate change collectively. It was adopted in the 21st Conference
of the Parties (COP 21) on December 12, 2015. In accordance with the 2015 Paris
Agreement, India presented its initial set of Nationally Determined Contributions (NDCs).
These represent a collection of extended-term objectives aimed at reducing carbon emissions
and enhancing resilience to climate-related effects.
India, as an emerging economy, is likely to experience a growth in Greenhouse Gas emissions.
Even though India constitutes about 17 percent of the global population, the emission of
greenhouse gas amounts to less than 4 percent of cumulative carbon dioxide emissions of the
world. Also, its current annual per capita emissions are only about one-third of the global
average. India has taken many necessary steps in order to reach its goal by 2070. From
launching programmes to improve quality of air across different states to setting up
Compressed Biogas production plants to experiment with alternative resources, India has
shown its active involvement in the matter. By 2030, it is targeted that the projected carbon
emissions of India would be reduced by 1 billion tonnes, and the carbon emissions relative to
its GDP would be curbed by 45% from 2005 level. The government is planning reforestation
by analyzing the degraded lands across the country. Starting from July 1, 2022, a prohibition
has been enforced on specific single-use plastic items. Apart from this, many initiatives have
been taken to improve the quality of air. These steps are crucial since India has already
suffered an economic loss of USD 37 billion in 2018 due to climate change.
Challenges:
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According to CEEW’s ‘Implications of a Net-zero Target for India’s Sectoral Energy
Transitions and Climate Policy’ study, India’s total installed solar power capacity
would need to increase to achieve net-zero by 2070.
The country would need to bear economic losses due to shifts in investment patterns
across sectors needed to achieve the peaking and net-zero targets.
Since the transportation sector is one of the major contributors to carbon emissions,
adoption of electric vehicles might seem like a good idea. But, shifting to electric
vehicles and improving public transportations are challenges that require high
investments and a certain period of time.
Addressing potential job displacements in high-emission industries can lead to
unemployment which is already a major prevailing problem in the country.
Encouraging and educating about sustainable practices at the individual level can be
challenging and may require effort.
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Opportunities:
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Technological Innovation: Pursuing a net-zero target can drive innovation and
development in clean energy technologies. India could become a leader in renewable
energy, energy storage, and carbon capture and utilization.
Energy Security: Reducing reliance on imported fossil fuels and transitioning to
domestic renewable energy sources can enhance India's energy security and reduce
vulnerability to global oil price fluctuations.
Sustainable Development: A net-zero emissions target can be aligned with broader
sustainable development goals, including improving air quality, reducing poverty, and
enhancing public health and reducing healthcare costs.
Job Creation: The shift to renewable energy and sustainable practices can lead to the
creation of new jobs in industries like solar and wind power, energy efficiency, and
green infrastructure development.
Enhanced Quality of Life: The reduction in pollution and the promotion of sustainable
practices can contribute to an improved quality of life for citizens, with benefits
ranging from better health outcomes to a more pleasant living environment.
Implications:
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Global Commitment: Setting a net-zero emissions target for 2070 would show India's
commitment towards solving the problem of climate change and indicate its
willingness to align with the international community's efforts to limit global
warming.
Economic Transition: In order to achieve net-zero emissions by 2070 it would be
required to implement measures that promote sustainable growth in the world. This
could lead to the development of new industries and technologies, leading to economic
growth in the country.
Self-reliance: By adopting measures such as solar, wind energy as alternatives, India
could become self-reliant by reducing dependency on other countries for fuel
requirements.
Air Quality and Public Health: Many measures to reduce carbon emissions also result
in improved air quality especially in states like Delhi can improve quality of life as
well.
Investment Opportunities: The transition to a low-carbon economy presents
investment opportunities in clean energy and sustainable infrastructure. India could
attract international investments in these sectors, increasing the economic growth.
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2. Renewable Energy's Central Role:
The main sources of energy such coal, oil and natural gas are the significant contributors of
greenhouse gasses on the planet. India is one of the top consumers of coal since it is said that
around 74% of demand is supplied by coal and oil. In order to reduce the dependency on coal
and oil it is necessary to develop alternatives that are sustainable and don’t affect climate
negatively. Renewable energy is one of them. They are not only sustainable but also emit less
gasses compared to other resources. India is aimed to attain 175 GW of renewable energy by
the end of the year 2022. This consisted of 100 GW from solar energy, 60 GW from wind
power , 10 GW from bio-power and 5 GW from small hydropower plants. The demand for
electricity has significantly increased over the years. The main reasons are urbanization,
increase in income level, increased development of infrastructure. It is said that the increase
in energy consumption in India will increase the country’s share of global energy demand
from 5% in the year 2016 to 11% by the year 2040. This demands for more energy resources
in the future but with the depletion of non-renewable resources such as fossil fuels posses a
main challenge to the country. Therefore, it is necessary to develop to adapt to resources
that are sustainable and also don’t cause harm to the environment. Shifting to renewable
energy sources significantly reduces carbon emissions, as these sources generate electricity
without the combustion of fossil fuels. Beyond carbon reduction, renewable energy sources
contribute to improved air and water quality, biodiversity conservation, and overall
environmental sustainability.
Solar:
India receives a good amount of sunlight, making solar energy a readily available and
abundant resource. The sun's energy is expected to last for billions of years, providing a
sustainable and long-term solution to meet global energy needs. Additionally solar energy is
scalable and can be made available even in villages. It produces no greenhouse gas emissions,
making it suitable for environment-friendly initiatives. Economically speaking, solar energy
has the potential to create job opportunities in future since design and fabrication of solar
panels is no easy job.
Under the National Solar Mission, India's Ministry of New and Renewable Energy (MNRE)
has significantly scaled up its objective for grid-connected solar power projects to an
ambitious 100 GW. India has made significant progress, currently ranking fifth globally in
solar installed capacity. The aggressive capacity addition strategy reflects India's
commitment to rapidly expanding its solar energy sector. Solar energy is one of the leading
contributors in the renewable energy category and contributes around 13.22% of India's total
installed power capacity.
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Wind:
Wind energy plays a significant role in the transition to a sustainable and low-carbon energy
landscape. Firstly, wind power is a renewable resource that uses the natural motion of the
wind to generate electricity without emitting harmful pollutants or greenhouse gases. This
characteristic makes wind energy an environmentally friendly alternative to traditional fossil
fuels, contributing to the global effort to combat climate change. As a cost-effective and
scalable solution, wind energy promotes economic growth and job creation.
India's wind industry has improved, featuring a great ecosystem, project execution
capabilities, and a diverse manufacturing base. The sector attracts global players, with over
12 companies manufacturing more than 24 wind turbine models. India exports wind turbines
and components worldwide, with strong domestic manufacturing accounting for 70–80% of
the production which is financially beneficial for the country.
Hydropower:
Hydropower utilizes the energy from flowing water, which is a renewable resource. Unlike
fossil fuels, water is continuously replenished through the water cycle, making hydropower a
sustainable and long-term energy solution. It is a clean resource as it generates electricity
with minimal greenhouse gas emissions, contributing to the reduction of air pollution and
mitigating climate change. Hydropower can be used in remote areas, providing a reliable
source of electricity for rural India. Once constructed, hydropower plants can operate for
several decades with proper maintenance, providing a stable and long-term energy solution.
Hydropower projects in India are categorized into large hydro, small hydro (2 to 25 MW),
micro-hydro (up to 100 kW), and mini-hydropower (100 kW to 2 MW) projects.
Hydroelectric power shares 22 percent of the total electricity production in the country.
Biofuel:
Biomass and bioenergy technologies can utilize agricultural residues and organic waste,
contributing to waste management and reducing methane emissions. Biomass energy can be
generated locally, providing opportunities for distributed power generation. These fuels can
be used as alternatives to traditional fossil fuels, reducing greenhouse gas emissions and
promoting sustainability in the transportation sector. Biomass is considered carbon-neutral
when used sustainably. As plants grow, they absorb carbon dioxide from the atmosphere.
When the biomass is used for energy and the carbon is released, it theoretically balances the
carbon cycle, making it a potentially sustainable and low-carbon energy source.
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3.Policy and Regulatory Framework:
3.1Existing Policies and Regulations
3.1.1 Electricity Act, 2003:
The Electricity Act, 2003 is a landmark legislation that has transformed the electricity
sector in India. It provides a legal framework for the sector, including provisions for
renewable energy.
One of the key provisions of the Electricity Act for renewable energy is the Renewable
Purchase Obligation (RPO) mechanism. The RPO mechanism requires electricity
distribution companies (discoms) to purchase a certain percentage of their electricity from
renewable energy sources. This mechanism helps to create a market for renewable energy
and encourage investment in renewable energy projects.
The Electricity Act also provides for the development of renewable energy through other
mechanisms, such as feed-in tariffs and tariff caps.
3.1.2 National Electricity Policy, 2005:
The National Electricity Policy, 2005 sets out the government's vision for the electricity
sector in India. It includes a target of 30% renewable energy by 2022. This target has
been revised to 50% by 2030 and 80% by 2070.
The National Electricity Policy also provides for the development of renewable energy
through a number of initiatives, such as the Jawaharlal Nehru National Solar Mission and
the National Offshore Wind Energy Policy.
3.1.3 Tariff Policy, 2006:
The Tariff Policy, 2006 provides guidelines for the setting of tariffs for electricity. It
includes provisions for renewable energy, such as feed-in tariffs and tariff caps.
Feed-in tariffs are guaranteed prices that are paid to renewable energy generators for
their electricity. This mechanism helps to make renewable energy projects more
financially viable.
Tariff caps are limits on the prices that can be charged for renewable energy. This
mechanism helps to protect consumers from high electricity prices.
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3.1.4 Integrated Energy Policy, 2006:
The Integrated Energy Policy, 2006 sets out the government's vision for the entire energy
sector in India. It includes a target of 15% renewable energy by 2020. This target has
been surpassed, with India now having over 43% renewable energy in its total installed
power capacity.
The Integrated Energy Policy also emphasizes the importance of energy efficiency and
energy conservation. It provides for a number of initiatives to promote energy efficiency
and energy conservation, such as the establishment of the Bureau of Energy Efficiency
and the Energy Conservation Act, 2001.
3.1.5 Rural Electrification Policy, 2006:
The Rural Electrification Policy, 2006 aims to provide electricity to all rural households
in India by 2012. This target has been achieved, and all rural households in India now
have access to electricity.
The Rural Electrification Policy also includes provisions for the use of renewable energy
in rural areas. For example, the policy provides for the provision of subsidies for solar
home systems.
3.1.6 National Action Plan on Climate Change (NAPCC), 2008:
The National Action Plan on Climate Change (NAPCC) is a comprehensive plan to
address climate change in India. It was released in 2008 and includes a target of 175 GW
of renewable energy by 2022. This target has been surpassed, with India now having over
179 GW of renewable energy installed capacity.
The NAPCC also includes a number of other initiatives to promote renewable energy,
such as the Jawaharlal Nehru National Solar Mission and the National Offshore Wind
Energy Policy.
3.1.7 National Biofuel Policy, 2009:
The National Biofuel Policy, 2009 aims to promote the use of biofuels in India. Biofuels
are renewable fuels that are produced from biomass. They can be used to replace fossil
fuels in transportation and other sectors.
The National Biofuel Policy provides for the production of ethanol and biodiesel from
renewable sources. Ethanol is produced from sugarcane and other agricultural crops,
while biodiesel is produced from vegetable oils and animal fats.
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The National Biofuel Policy is expected to help India reduce its reliance on fossil fuels
and improve its energy security. It is also expected to create jobs and boost rural
economies.
3.1.8 Jawaharlal Nehru National Solar Mission, 2010:
The Jawaharlal Nehru National Solar Mission was a flagship program of the Indian
government to promote solar energy. It was launched in 2010 with the aim of installing
20 GW of solar power by 2022.
The Solar Mission was a major success, and India has now exceeded its target. As of July
2023, India has over 67 GW of installed solar power capacity.
The Solar Mission has helped to make solar power more affordable and accessible in
India. It has also created jobs and boosted the solar industry.
3.1.9 National Offshore Wind Energy Policy, 2015:
The National Offshore Wind Energy Policy aims to promote the development of offshore
wind power in India. Offshore wind power is a renewable energy source that can generate
large amounts of electricity.
The National Offshore Wind Energy Policy provides for the setting up of offshore wind
parks and providing financial assistance to developers. It also includes provisions for
research and development in offshore wind energy.
The National Offshore Wind Energy Policy is expected to help India harness its offshore
wind potential and reduce its reliance on fossil fuels. It is also expected to create jobs and
boost the economy.
3.1.10 Production Linked Incentive Scheme (PLI) for High Efficiency Solar
PV Modules, 2020:
The Production Linked Incentive Scheme (PLI) for High Efficiency Solar PV Modules
aims to boost domestic manufacturing of high efficiency solar PV modules in India.
The PLI scheme provides financial assistance to manufacturers on a per watt basis. This
assistance is intended to help manufacturers reduce their costs and become more
competitive.
The PLI scheme is expected to help India reduce its reliance on imports of solar PV
modules and become a global leader in solar PV manufacturing.
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Conclusion:
The Indian government has a number of existing and proposed policies and regulations to
promote renewable energy. These policies and regulations are significant and ambitious, and
if implemented effectively, they have the potential to help India achieve its goal of becoming
a global leader in renewable energy.
3.2 Proposed Policies and Regulations
3.2.1 National Electricity Plan, 2022:
The National Electricity Plan (NEP) 2022 is a comprehensive plan for the development of
India's electricity sector. It is under development by the Ministry of Power and is
expected to be released in 2023.
The NEP 2022 is expected to set out a more ambitious target for renewable energy than
the previous NEP, which set a target of 175 GW of renewable energy by 2022. The new
target is likely to be at least 50% of India's total installed power capacity by 2030.
The NEP 2022 is also expected to address the challenges of integrating large-scale
renewable energy into the grid. This includes developing new technologies and grid
infrastructure to manage the intermittent nature of renewable energy sources.
3.2.2 Green Hydrogen Policy:
The Green Hydrogen Policy is a policy that is being developed by the Ministry of New
and Renewable Energy (MNRE) to promote the production and use of green hydrogen in
India. Green hydrogen is produced using renewable energy, such as solar and wind power.
The Green Hydrogen Policy is expected to provide financial incentives to producers of
green hydrogen, as well as to promote the use of green hydrogen in various sectors, such
as transportation, power generation, and industry.
3.2.3 Green Building Policy:
The Green Building Policy is a policy that is being developed by the Ministry of Housing
and Urban Affairs (MoHUA) to promote the construction of energy-efficient and
environmentally friendly buildings.
The Green Building Policy is expected to set standards for energy efficiency and
environmental performance for buildings. It is also expected to provide financial
incentives to developers who construct green buildings.
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3.2.4 Green Finance Policy:
The Green Finance Policy is a policy that is being developed by the Ministry of Finance
to encourage investment in renewable energy and other sustainable projects.
The Green Finance Policy is expected to provide tax breaks and other incentives to
investors in renewable energy and other sustainable projects. It is also expected to
develop new financial instruments to make it easier for investors to invest in these
projects.
Conclusion:
The government of India is developing a number of new policies and initiatives to
promote renewable energy in India. These policies and initiatives are expected to help
India achieve its ambitious target of 50% renewable energy by 2030.
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4. Current Renewable Energy Landscape:
The renewable energy sector in India is still in its early stages of development, but it is
growing rapidly. The government's ambitious targets for renewable energy deployment are
achievable, but they will require significant investment and coordination. The private sector
is playing a major role in the development of the renewable energy sector in India. Foreign
investors are also showing interest in the sector, attracted by the country's large renewable
energy potential and supportive government policies. The integration of renewable energy
into the grid is a major challenge in India. Renewable energy sources are intermittent,
meaning that they do not produce electricity at a constant rate. This can pose problems for
the grid, which is designed to operate with a steady supply of electricity.
The current renewable energy landscape in India is characterized by rapid growth,
ambitious targets, and a supportive policy and regulatory environment.
4.1 Installed capacity
The installed capacity of renewable energy in India has grown rapidly in recent years. In
2012, India had only 20.2 GW of installed renewable energy capacity. By 2023, this had
increased to 179.3 GW, an increase of over 880%.
The growth of renewable energy in India has been driven by a number of factors,
including:
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Declining costs of renewable energy technologies: The cost of renewable energy
technologies, such as solar and wind power, has fallen dramatically in recent years.
This has made renewable energy more competitive with fossil fuels.
Government policies: The Indian government has put in place a number of policies
to support the growth of renewable energy. These policies include renewable
purchase obligations (RPOs), feed-in tariffs, and production linked incentive (PLI)
schemes.
Public support: There is strong public support for renewable energy in India. This
is due to the fact that renewable energy is seen as a clean and sustainable source
of energy.
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The following table shows the installed capacity of renewable energy in India by source:
Source
Installed capacity (GW)
Solar
67.07
Wind
42.8
Small hydro
12.3
Biomass
34.2
Waste-to-energy
22.9
The following table shows the growth of renewable energy installed capacity in India from
2012-2023:
Year
Installed capacity of renewable energy (GW)
2012
20.2
2013
24.5
12
2014
29.8
2015
36.1
2016
43.4
2017
51.7
2018
61.0
2019
71.3
2020
82.6
2021
94.9
2022-23
179.3
The growth of renewable energy in India is expected to continue in the coming years. The
government of India has set a target of achieving 50% renewable energy by 2030 and 80%
renewable energy by 2070.
The growth of renewable energy in India is a major achievement. It is helping India to
reduce its reliance on fossil fuels, improve its energy security, and create jobs. It is also
helping India to become a global leader in renewable energy.
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4.2 Energy Mix
Renewable energy has a growing share of India's energy mix. In 2022-23, renewable
energy accounted for 24% of India's total electricity generation. This share is expected to
increase to 50% by 2030 and 80% by 2070.
The growth of renewable energy in India's energy mix is being driven by a number of
factors, including:
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Declining costs of renewable energy: The cost of renewable energy technologies,
such as solar and wind power, has fallen dramatically in recent years. This has
made renewable energy more competitive with fossil fuels.
Government policies: The Indian government has put in place a number of policies
to support the growth of renewable energy. These policies include renewable
purchase obligations (RPOs), feed-in tariffs, and production linked incentive (PLI)
schemes.
Public support: There is strong public support for renewable energy in India. This
is due to the fact that renewable energy is seen as a clean and sustainable source
of energy.
The following table shows the share of renewable energy in India's energy mix from 20122023:
Year
Share of renewable energy in India's energy mix (%)
2012
10.9
2013
12.3
2014
13.7
2015
15.1
14
2016
16.5
2017
17.9
2018
19.3
2019
20.7
2020
22.1
2021
23.5
2022-23
24.0
The following table shows the projected share of renewable energy in India's energy mix
by 2030 and 2070:
Year
Share of renewable energy in India's energy mix (%)
2030
50
15
2070
80
The growth of renewable energy in India's energy mix is expected to have a number of
benefits, including:
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Reduced reliance on fossil fuels: The shift to renewable energy will help India
reduce its reliance on fossil fuels, which are a major source of air pollution and
greenhouse gas emissions.
Improved energy security: Renewable energy sources are indigenous and abundant
in India. This means that India will be less reliant on imports of fossil fuels, which
can be volatile and expensive.
Economic growth: The renewable energy sector is a growing sector that is creating
jobs and generating investment.
Improved public health: The reduction in air pollution from fossil fuels is expected
to lead to improved public health.
The growth of renewable energy in India's energy mix is a major challenge, but it is also
a major opportunity. By overcoming the challenges and seizing the opportunities, India
can create a clean, sustainable, and prosperous future for its citizens.
4.3 Regional variations
The regional variations in renewable energy adoption in India are due to a number of
factors, including:
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Renewable energy potential: Some states have more renewable energy
potential than others. For example, states with a lot of coastline have more
potential for offshore wind energy, while states with a lot of sunshine have more
potential for solar energy.
Government policies: Some states have more supportive government policies for
renewable energy than others. For example, some states have set ambitious targets
for renewable energy deployment, while others have offered financial incentives to
renewable energy developers.
Land availability: Some states have more land available for renewable energy
projects than others. For example, some states have designated large areas of land
for renewable energy development, while others have more stringent land use
regulations.
Public acceptance: Public acceptance of renewable energy varies across states.
For example, some states have a strong public support for renewable energy, while
others have more concerns about the environmental impact of renewable energy
projects.
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Here is a more detailed look at the renewable energy landscape in some of the leading and
lagging states:
Leading states:
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Karnataka: Karnataka is a leader in solar energy development. The state has
installed over 20 GW of solar capacity, and it is aiming to install 25 GW of solar
capacity by 2025. Karnataka has also set a target of achieving 100% renewable
energy by 2050.
Tamil Nadu: Tamil Nadu is a leader in wind energy development. The state has
installed over 9 GW of wind capacity, and it is aiming to install 10 GW of wind
capacity by 2025. Tamil Nadu has also set a target of achieving 30% renewable
energy by 2030.
Gujarat: Gujarat is a leader in both solar and wind energy development. The state
has installed over 10 GW of solar capacity and over 7 GW of wind capacity.
Gujarat has also set a target of achieving 30% renewable energy by 2030.
Lagging states:
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Uttar Pradesh: Uttar Pradesh is a laggard in renewable energy development. The
state has only installed about 3 GW of renewable energy capacity. Uttar Pradesh
has set a target of achieving 10% renewable energy by 2025, but it is facing
challenges in meeting this target.
Bihar: Bihar is another laggard in renewable energy development. The state has
only installed about 1 GW of renewable energy capacity. Bihar has set a target of
achieving 5% renewable energy by 2025, but it is also facing challenges in meeting
this target.
The government of India is taking steps to address the regional variations in renewable
energy adoption. For example, the government has launched a number of programs to
provide financial assistance to renewable energy developers in lagging states. The
government is also working to develop a more harmonized regulatory framework for
renewable energy across all states.
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Policy and regulatory environment
The Indian government has put in place a number of policies and regulations to support
the expansion of renewable energy. These include:
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Renewable Purchase Obligation (RPO): The RPO mechanism requires electricity
distribution companies to purchase a certain percentage of their electricity from
renewable energy sources.
Feed-in tariffs: Feed-in tariffs are guaranteed prices that are paid to renewable
energy generators.
Tariff caps: Tariff caps are limits on the prices that can be charged for renewable
energy.
Production Linked Incentive Scheme (PLI) for High Efficiency Solar PV Modules:
The PLI scheme provides financial assistance to manufacturers of high efficiency
solar PV modules.
Green finance
Green finance is essential for supporting the transition to a clean energy future. The
Indian government is developing a number of green finance initiatives, such as the Green
Hydrogen Policy, the Green Building Policy, and the Green Finance Policy. These
initiatives aim to mobilize private investment in renewable energy and other sustainable
projects.
Conclusion
The current renewable energy landscape in India is promising. The government has put in
place a supportive policy and regulatory environment, and there is growing private
investment in renewable energy projects. However, there are still some challenges that
need to be addressed, such as the need to reduce the cost of renewable energy and to
improve the integration of renewable energy into the grid. This information can be used
to develop recommendations for policies and programs that can support the further
expansion of renewable energy in India and help the country achieve its net zero goals by
2070.
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5. Green Finance Mechanisms:
What is green finance?
Green Finance is a term which refers to financial investments for those projects that support
sustainable development. As the world deals with climate change, businesses and investors
are finding new ways to use money for good things. It's like organized money activities that
aim to make the environment better and help us prepare for the future. Green finance
includes different money actions, like giving loans, using special kinds of money plans, and
investing in projects that are good for the environment. All of this is part of a big shift in the
world's economy, moving away from using a lot of fossil fuels.
Typical initiatives that fall under the green finance umbrella include renewable energy and
energy efficiency, pollution prevention and control, biodiversity conservation, circular
economy initiatives and the sustainable use of natural resources and land. In this
assignment, we are dealing with green finance in renewable energy revolution.
Its benefits are
· Encourages sustainable business through green financing
· Ensures regular flow of investments into environmental objective
Its major challenges are
· Lack of coordination between the financial and environmental objectives
· Short-term time horizon of investors doesn’t match with long-term green investments
Role of green finance in channeling investments into renewable energy projects.
It plays a pivotal role in accelerating the adoption of renewable energy sources, which is
essential for combating climate change and protecting the environment. However, the
transition to renewable energy requires significant investment. This is where green financing
comes in.
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Green finance is like the superhero guiding money to save the day for renewable energy
projects. Here's how it plays a crucial role:
·
Funding Friend: Green finance provides the money needed for renewable energy projects.
It's like the piggy bank that says, "Here's cash to build that solar farm or wind turbine."
·
Encouraging Loans: With green loans, banks say, "Hey, if you're making clean energy, we'll
give you a loan with good terms." It's like giving a boost to businesses or projects that are
good for the environment.
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Green Bonds: Think of these as special promises. People buy these bonds, and the money
goes straight to renewable energy projects. It's like a direct ticket for funds to reach the right
place.
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Reducing Risks: Renewable energy projects can be risky. Green finance steps in with tools
like insurance and risk-sharing to say, "Don't worry, we've got your back even if something
unexpected happens."
·
Government Support: Green finance joins forces with governments, using incentives like tax
breaks or subsidies. It's like the government saying, "Do good for the environment, and we'll
make it worth your while."
·
Making Investments Attractive: By creating green investment funds and portfolios, green
finance makes it cool for investors. It's like saying, "You can make money and save the
planet at the same time!"
·
Simple Savings: Green savings accounts at banks make it easy for people to save money
while supporting green projects. It's like saying, "Your money will help make the world a
better place."
·
Crowdfunding Cheers: Online crowdfunding platforms gather people willing to chip in small
amounts for renewable energy projects. It's like saying, "We're all in this together, making a
big impact with small contributions."
·
Setting Standards: With reporting frameworks, green finance says, "Let's be clear about
where the money goes and how it helps." It's like creating a roadmap for transparent and
accountable investments.
·
Innovation Ally: Green finance supports new ideas with challenges and rewards. It's like
saying, "Come up with smart solutions, and we'll make sure you get the support you need."
In a nutshell, green finance is the engine that drives money toward renewable energy
projects, making sure they get the support they need to shine and contribute to a greener,
cleaner future.
Examine financial instruments, incentives, and innovative funding mechanisms.
Green financing is a broad term that encompasses a variety of financial instruments, such as
green bonds, green loans, and sustainability-linked bonds. These instruments are designed to
fund projects that have a positive environmental impact.
The predominant financial instruments in green finance are debt and equity. To meet the
growing demand, new financial instruments, such as green bonds and carbon market
instruments, have been established, along with new financial institutions, such as green
banks and green funds. These are few of the financial mechanisms:
·
Green Bonds: It's like a promise to use the money only for projects that help the
environment, such as building wind farms or solar power plants.
·
Renewable Energy Certificates (RECs): These are like certificates showing that someone
made clean energy, and you can buy them to support green power.
20
·
Carbon Credits: You can think of these as points for doing good things for the
environment. When people or companies reduce their carbon footprint, they earn these
credits.
·
Green Loans: Banks can give special loans with good terms to businesses or projects that
are good for the environment, like making buildings more energy-efficient.
·
Government Incentives: Sometimes, the government gives rewards, like tax breaks or
money, to encourage businesses and people to do eco-friendly stuff.
·
Green Investment Funds: These are like groups of people putting their money together to
invest in companies or projects that are good for the planet.
·
Crowdfunding Platforms: Imagine a bunch of people on the internet chipping in small
amounts of money to support a green project, like planting trees or creating a community
garden.
·
Green Insurance: This is like protecting investments in green projects from unexpected
problems. It helps make sure that even if something goes wrong, the project can still keep
going.
·
Green Savings Accounts: Some banks have special accounts where the money you deposit is
used only for eco-friendly projects. It's like saving money while helping the environment.
·
Yieldcos: These are like companies that own and operate renewable energy projects. When
you invest in them, you get a share of the money they make from these projects.

Carbon markets: Carbon markets provide financial incentives for companies to reduce
their carbon emissions. Renewable energy projects can generate carbon credits, which
can be sold on carbon markets to generate revenue.
Innovative financing strategies are also being explored. For instance, African countries are
starting to experiment with innovative financing approaches such as ‘green market-ready
products’, a green growth fund that will be replenished through proceeds from trading credits
from emission reduction projects, crowd-funding for clean energy and green bond financing,
etc, to finance adaptation and sustainable development projects. The World Bank has been
instrumental in the growth of the green, social, and sustainability bonds (GSS) market since
its first green bond issuance in 2008.
Here are a few real-life examples of innovative funding mechanisms in green finance:
1.
Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP): IF-CAP is a
multi-donor financing facility that uses guarantees for ADB’s sovereign loan portfolios for
leverage to accelerate billions in much-needed climate finance. For every $1 that is
guaranteed, up to $5 in new climate loans could be generated .
2.
Energy Transition Mechanism (ETM): ETM is a scalable, collaborative initiative that
uses concessional and commercial capital to retire or repurpose existing coal and other fossil
fuel plants on an accelerated schedule, replacing them with clean power capacity .
1
1
21
Green Market-Ready Products: African countries are starting to experiment with
innovative financing approaches such as ‘green market-ready products’, a green growth fund
that will be replenished through proceeds from trading credits from emission reduction
projects, crowd-funding for clean energy and green bond financing, etc, to finance adaptation
and sustainable development projects .
4.
Emission Reduction-linked Bond: One of the World Bank’s latest innovations is the
Emission Reduction-linked bond designed to provide clean drinking water to about two
million Vietnamese schoolchildren .
3.
2
3
These innovative mechanisms are helping to bridge the gap between the development needs and the
amount of funding currently available, thereby accelerating the transition to a more sustainable and
environmentally-friendly future.
22
6. Financial Inclusion and Accessibility:
In the pursuit of India's ambitious net-zero emissions target by 2070, the integration of green
finance mechanisms emerges as a pivotal aspect of the nation's transition to a sustainable and
environmentally conscious future. This section delves into the crucial domain of Financial Inclusion
and Accessibility, aiming to dissect the landscape of accessible green finance options for a diverse
spectrum of stakeholders. To make Green Finance accessible to a diverse range of stakeholders, it is
imperative to implement several major schemes and steps.
1. Accessibility of Green Finance Options for Government Bodies
Government bodies in India have access to a number of green finance options, including:

Budgetary allocations: The Indian government has allocated significant budgetary resources
to support renewable energy and other green initiatives.

Debt financing: The government can borrow money from domestic and international lenders
to finance green projects.

Grants and subsidies: The government can provide grants and subsidies to businesses and
individuals who invest in green projects.

Public-private partnerships (PPPs): The government can partner with private sector entities
to finance and implement green projects.
However, there are a number of challenges that government bodies face in accessing green finance.
These challenges include:

Lack of awareness: Many government officials are not aware of the full range of green finance
options available to them. This knowledge gap not only hampers decision-making processes
but also inhibits the exploration of innovative and sustainable financial instruments that
could contribute substantially to India's net-zero aspirations.

Complex application processes: The application processes for green finance can be complex
and time- consuming. The complexity and time-consuming nature of these processes become
impediments, discouraging potential applicants from exploring and utilizing green finance
avenues effectively.

Insufficient capacity: As government bodies aspire to embrace sustainable initiatives, they
frequently encounter a critical roadblock in the form of insufficient capacity. The lack of
specialized personnel and resources within these organizations hinders their ability to
comprehensively assess, manage, and oversee green finance projects, limiting the successful
implementation of environmentally conscious endeavors. Government bodies often lack the
capacity to assess and manage green finance projects.
23
2.
Accessibility of Green Finance Options for the Private Sector
The private sector in India has access to a growing range of green finance options, including:

Green bonds: Green bonds are debt securities that are specifically used to finance green
projects. Prior to 2015, there were no large-scale issuances. Today, India has increased
capital for renewable energy projects and has become the world’s second-largest market for
green bonds, with $28.2 billion worth of bonds issued.

Sustainable loan products: Some banks and financial institutions offer sustainable loan
products that are designed to support green projects. A green loan is similar to a green bond
in that it raises capital for green eligible projects. However, a green loan is based on a loan
that is typically smaller than a bond and done in a private operation.

Venture capital and private equity: Some venture capital and private equity firms invest in
green startups and companies. A green company claims to act in a way which minimizes
damage to the environment.

Carbon markets: Businesses can earn carbon credits by reducing their greenhouse gas
emissions. These carbon credits can then be sold on carbon markets to other businesses.
However, there are also a number of challenges that the private sector faces in accessing green
finance. These challenges include:

Higher cost of green finance: Green finance products are often more expensive than
traditional finance products. This is because green projects are often riskier and more
complex to finance.

Lack of long-term financing: Many green projects require long-term financing, which can be
difficult to obtain.

Lack of green skills: Green skills are the knowledge, skills, and abilities required to develop,
implement, and operate green technologies and processes. Many businesses don't have the
in-house expertise to develop and implement green projects.
24
3.
Accessibility of Green Finance Options for Small and Medium-Sized Enterprises (SMEs)
SMEs in India have more limited access to green finance options than large businesses. This is due
to a number of factors, including:

Lack of collateral: SMEs often have less collateral to offer lenders than large businesses.

Lack of track record: SMEs may have a shorter track record of financial performance than
large businesses.

Higher risk perception: Lenders may perceive SMEs as being riskier borrowers than large
businesses.
25
Despite these challenges, there are a number of green finance products and programs specifically
designed for SMEs. These programs include:
4.

The National Clean Energy Fund (NCEF): In 2010-11 NCEF was created to invest in
entrepreneurial ventures and research in the field of clean energy technologies. The NCEF
provides grants and loans to SMEs for renewable energy projects.

The Small Industries Development Bank of India (SIDBI): SIDBI offers a range of green
finance products and programs for SMEs. SIDBI is a national entity focusing on promoting
and financing the development of micro-, small- and medium-sized enterprises (MSMEs),
primarily those in the manufacturing and services sectors. SIDBI also supports national
action plans on climate change and has taken initiatives to promote responsible business
practices, including sustainable financing, energy efficiency and cleaner production in the
MSMEs sector through both financial and non-financial support

The National Bank for Agriculture and Rural Development (NABARD): NABARD offers a
range of green finance products and programs for rural SMEs. NABARD is also acting as
the NIE of the National Adaptation Fund for Climate Change (NAFCC), instituted by the
Government of India. These accreditations have enabled NABARD to become a leader in
climate change adaptation programmes in the country and to be an integral part of national
policies on climate change.
Overall Assessment
The accessibility of green
are still some challenges
financial institutions all
affordable for all.
Here are some specific
in India:

finance options for diverse stakeholders in India is improving, but there
that need to be addressed. The government, the private sector, and
need to work together to make green finance more accessible and
recommendations for improving the accessibility of green finance options
Increase awareness of green finance options:
The government and financial institutions need to do more to raise awareness of the full range
of green finance options available to businesses and individuals.

Simplify application processes:
26
The application processes for green finance need to be simplified and made more streamlined.
By reducing complexity and bureaucratic hurdles, the financial landscape can become more
navigable, encouraging wider participation in eco-friendly financial initiatives.

Provide capacity building support:
The government and financial institutions need to provide capacity building support to
businesses and individuals so that they can better understand and access green finance. This
support should equip businesses and individuals with the knowledge and skills required to
understand, navigate, and effectively engage with green finance options, thereby promoting
informed and sustainable financial decision-making.

Develop targeted green finance products for SMEs:
Recognizing the unique challenges faced by small and medium-sized enterprises (SMEs),
targeted green finance products should be developed. This tailored approach ensures that the
financial instruments align with the specific needs and capacities of SMEs, facilitating their
active participation in the green finance landscape.
By addressing these challenges, India can make green finance more accessible and affordable for
all, and accelerate the transition to a clean energy future. This collaborative effort is not just a
pathway to sustainability; it is a catalyst for expediting the nation's transition toward a cleaner
and more resilient energy future.
27
7. Case Studies:
1. Gujarat Solar Park – Charanka
This park was launched on 30.12.2010 and commissioned on 31.12.2011. Gujarat Power Corporation
Limited (GPCL) is the Nodal Agency for the development of "Solar Park" in Gujarat. This "Solar
Park" is located at village Charanka, District Patan in Gujarat spread across 5,384 acres of unused
land.
Green Finance Utilization: The project received financial support from various sources, including
the World Bank, Asian Development Bank, and the Indian Renewable Energy Development Agency
(IREDA) and 36 other developers.
Impact on Emissions Reduction:



It has a total capacity of over 790 MW and has become one of the largest solar parks in Asia.
Having large concentration/cluster of Solar Power generating units at single location, thereby
reducing cost substantially (40%), and bringing down lower Solar Tariff to pave way for large
scale development of Solar Power Projects.
Further, projects of 20 MW power capacities are under implementation. Solar Park has the
capacity to generate 4.2 MW of Wind Power and two WindMills each of 2.1 MW has been
commissioned making the Park.
Economic Sustainability: The project has created employment opportunities, stimulated the local
economy, and showcased the economic viability of large-scale solar projects.
28
2 Tamil Nadu Wind Farm – Muppandal
The Muppandal Wind Farm is India's largest operational onshore wind farm. This project is located
in Kanyakumari district, Tamil Nadu. The project was developed by Tamil Nadu Energy
Development Agency. Its installed capacity is 1,500 MW, which makes it the 3rd-largest operational
onshore wind farm in the world.
Green Finance Utilization: The wind farm was developed by a consortium of Indian and
international companies, and was financed through a combination of green bonds and commercial
loans including the State Bank of India (SBI) and the Clean Development Mechanism (CDM).
Impact on Emission reduction



With an installed capacity of 1500 MW, the farm has played a significant role in displacing
conventional fossil fuel-based energy sources.
Accounts for about 25% of India’s total installed wind power capacity of 40.12 gigawatts
(GW).
Reducing emissions by an estimated 50,000t CO₂ equivalent a year.
Economic Sustainability:



Job creation: The wind farm has created over 1,000 jobs in the local community. These jobs
include positions in construction, operation, and maintenance.
Tax revenue: The wind farm generates over ₹1 billion in tax revenue for the government.
Feed-in tariff (FiT): The project has a guaranteed price for the electricity it generates,
which helps to reduce the risk for investors and makes the project more attractive to lenders.
29
8. Barriers and Challenges:
Financial barriers:




High upfront capital costs: Renewable energy projects, such as solar and wind
farms, typically require high upfront capital costs. This is because the technology
required to generate renewable energy is still relatively expensive.
Long payback periods: The payback periods for renewable energy projects can be
long, ranging from 5 to 10 years. This is because the cost of generating renewable
energy is typically higher than the cost of generating electricity from fossil fuels.
Lack of financial instruments: There is a lack of specialized financial instruments
for renewable energy projects in India. This makes it difficult for developers to
raise the necessary capital for their projects.
Risk perception: Renewable energy projects are perceived as being risky by some
investors. This is because the technology is still relatively new and untested, and
there is a risk that the projects may not generate the expected returns.
Non-financial barriers:




Complex regulatory framework: The regulatory framework for renewable energy
projects in India is complex and cumbersome. This can make it difficult for
developers to navigate and can discourage investment.
Lack of awareness and understanding: There is still a lack of awareness and
understanding of green finance among many investors in India. This can make it
difficult to attract investment for renewable energy projects.
Skilled workforce shortage: There is a shortage of skilled workers in the renewable
energy sector in India. This can make it difficult for developers to implement their
projects.
These barriers have made it difficult for renewable energy projects in India to
attract the necessary financing. As a result, the growth of the renewable energy
sector in India has been slower than expected.
30
Addressing the barriers and challenges:




Government support: The government can play a key role in addressing the
barriers to green finance for renewable energy projects. This can be done by
providing financial incentives to investors, such as tax breaks or subsidies. The
government can also streamline the regulatory framework and make it easier for
investors to access green finance.
Development of green financial products: There is a need to develop innovative
green financial products that are tailored to the needs of investors in India. This
could include products such as green bonds, green loans, and green equity funds.
Capacity building: There is a need to build capacity among investors in India to
understand and invest in green finance. This could be done through training
programs and awareness campaigns.
Public-private partnerships: Public-private partnerships can be used to bring
together the resources of the government and the private sector to finance
renewable energy projects.
31
Empowering India's Net Zero Journey by
Revolution and the Catalyst of Green Finance:
2070:
Renewable
Energy
Green finance can play a catalytic role in empowering India's net zero journey by 2070.
By addressing the barriers and challenges outlined above, the government, private sector,
and financial institutions can work together to scale up green finance for renewable
energy projects. This will help to make renewable energy more affordable and accessible,
and accelerate India's transition to a net zero future.
Here are some specific examples of how green finance can be used to support renewable
energy projects in India:



Green bonds: Green bonds are a type of debt instrument that is used to finance
projects that have environmental benefits. The government can issue green bonds
to raise capital for renewable energy projects.
Green loans: Green loans are a type of loan that is specifically designed to finance
projects that have environmental benefits. Banks and other financial institutions
can offer green loans to renewable energy developers.
Green equity funds: Green equity funds are investment funds that invest in
companies that are involved in renewable energy or other environmentally friendly
businesses. Investors can invest in green equity funds to support the renewable
energy sector.
By using green finance to support renewable energy projects, India can reduce its reliance
on fossil fuels, create jobs, and improve air quality. This will help India to achieve its net
zero goals and build a more sustainable future for all.
32
9. Recommendations for a Sustainable Transition:
Achieving net zero by 2070 requires a comprehensive approach involving policymakers,
financial institutions, and industry stakeholders. Here are some recommendations:
1.
Policy Framework:




2.
Develop and implement robust policies that incentivize and mandate the adoption of
renewable energy sources.
Set clear and ambitious targets for reducing carbon emissions, with intermediary
milestones to track progress.
Establish a stable and predictable regulatory environment to attract investments in
the renewable energy sector.
Example: Germany's "Energiewende" policy is a comprehensive strategy to transition
to a low-carbon, nuclear-free economy. It includes targets for renewable energy
adoption, energy efficiency improvements, and emissions reduction. India can draw
inspiration from such a holistic approach.
Financial Incentives:




3.
Provide financial incentives such as subsidies, tax credits, and low-interest loans to
encourage investments in renewable energy projects.
Create a green bond market to channel funds specifically into sustainable and ecofriendly initiatives.
Encourage financial institutions to develop and offer innovative green financial
products.
Example: The United Kingdom's Green Finance Institute works to align private
financial sector practices with clean, sustainable, and resilient investments. India can
establish a similar institution to drive green finance initiatives, connecting financial
institutions with sustainable projects.
Regulatory Improvements:




Streamline and simplify regulatory processes for obtaining permits and approvals for
renewable energy projects.
Ensure transparency in regulations to build investor confidence and attract foreign
direct investment.
Regularly review and update regulations to keep pace with advancements in
technology and industry best practices.
Example: Denmark has a transparent and efficient regulatory framework for wind
energy projects. India can learn from Denmark's success in streamlining approval
processes and creating a conducive environment for renewable energy investments.
33
4.
Capacity Building:



5.
Invest in training programs and educational initiatives to build a skilled workforce for
the renewable energy sector.
Foster collaboration between educational institutions and industry players to ensure
that the workforce is equipped with the latest knowledge and skills.
Example: Sweden's focus on education and skill development has contributed to a
skilled workforce in the renewable energy sector. India can invest in vocational
training and collaborate with educational institutions to build a workforce with
expertise in green technologies.
Technology Innovation:



6.
Support research and development in green technologies to drive innovation and
improve the efficiency of renewable energy systems.
Establish partnerships between the government, private sector, and research
institutions to accelerate the deployment of cutting-edge technologies.
Example: China's aggressive investment in research and development has made it a
leader in solar photovoltaic technology. India can establish research partnerships and
provide grants for technology innovation, fostering the development and deployment
of cutting-edge renewable energy solutions.
Public Awareness and Participation:



7.
Launch public awareness campaigns to educate citizens about the benefits of
renewable energy and the importance of transitioning to a sustainable lifestyle.
Encourage public participation in renewable energy projects through communitybased initiatives and investment opportunities.
Example: Costa Rica's "Peace with Nature" initiative engages citizens in
reforestation projects and promotes sustainable practices. India can initiate
community-based programs that encourage public participation, creating a sense of
ownership in the transition to a sustainable future.
International Collaboration:



Collaborate with international organizations, governments, and businesses to share
best practices and access global expertise.
Participate in international forums to negotiate and advocate for policies that support
a global transition to a low-carbon economy.
Example: The European Union's cooperation on the "Green Deal" involves multiple
countries working together to achieve common environmental goals. India can actively
participate in international forums, share experiences, and collaborate on initiatives
that support the global transition to a low-carbon economy.
34
8.
Green Bonds and Sustainable Finance:




9.
Establish a Green Finance Institute or a similar entity to facilitate collaboration
between financial institutions, businesses, and government agencies.
Introduce tax incentives or subsidies to encourage the issuance and purchase of green
bonds.
Develop a robust framework for tracking and reporting the environmental impact of
projects funded through green bonds.
Example: Sweden issued one of the world's first green bonds, directing funds to
environmentally beneficial projects. India can develop its green bond market,
encouraging financial institutions to issue bonds that fund renewable energy and
sustainability projects.
Feed-in Tariffs and Power Purchase Agreements:




10.
Implement FiT mechanisms for various renewable energy sources to ensure a stable
and attractive return on investment.
Streamline the PPA approval process to reduce bureaucracy and encourage private
sector participation.
Introduce innovative pricing models within PPAs, such as auction-based approaches,
to promote cost-competitive renewable energy projects.
Example: Spain's successful use of feed-in tariffs stimulated rapid growth in its solar
energy sector. India can consider similar mechanisms to guarantee long-term revenue
for renewable energy producers, attracting more investments.
Carbon Pricing:




Explore the implementation of a carbon tax or a cap-and-trade system to put a price
on carbon emissions.
Start with a phased approach, gradually increasing the stringency of carbon pricing
mechanisms over time.
Allocate revenues generated from carbon pricing to fund renewable energy projects
and climate adaptation initiatives.
Example: Canada has implemented a carbon pricing system, putting a price on
carbon emissions to incentivize companies to reduce their environmental impact. India
can explore the implementation of a similar system to encourage industries to adopt
cleaner technologies.
By studying and adapting successful initiatives from around the world, India can tailor its
approach to meet the unique challenges and opportunities in its journey toward net zero by
2070. The combination of effective policies, financial incentives, regulatory improvements,
and international collaboration will play a crucial role in achieving sustainability goals.
35
References
1.
Net zero emissions target
Press Release
Available at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1945472
2.
Climate Action Tracker
Available at: https://climateactiontracker.org/countries/india/net-zero-targets/
3.
World Economic Forum
Available at: https://www.weforum.org/agenda/2022/09/net-zero-challenges-india-target/
4.
Times of India
Available at: https://timesofindia.indiatimes.com/blogs/voices/india-2070-net-zero-commitmentspriorities-enablers-for-india-to-realise-the-targets/
5.
https://blogs.worldbank.org/climatechange/india-incorporates-green-bonds-its-climate-finance-strategy
6.
https://pib.gov.in/PressReleasePage.aspx?PRID=1923458
7.
https://en.wikipedia.org/wiki/Gujarat_Solar_Park-1
8.
https://en.wikipedia.org/wiki/Muppandal_Wind_Farm
36