Will Climate Fuel Green Globalisation: Looking Ahead of G20

Manu Maudgal , September 25, 2023

Climate change is at the heart of development plans today. All major economies have adopted PM Modi’s national commitments on net zero and aim to propel economic development and raise overall standard of living keeping in mind the principle of common but differentiated responsibilities.

The recent G20 meeting in Delhi, India, resulted in the Delhi Declaration with a consensus to ‘urgently accelerate’ actions to address environmental crises and challenges including climate change and recognising that the crisis is real and here. This declaration backed by 85 percent of the global GDP and two thirds of the global population carries weight.

GIFs Programme by Shakti, AFD and SIDBI
The Green Indian Financial Systems (GIFS) Initiative by SIDBI, AFD and Shakti seeks to facilitate dialogue and discussions on greening the Indian financial system to accelerate the development of sustainable finance within the Indian economy.

Amongst the bouquet of commitments made include (inter-alia):

• Triple renewable energy capacity globally by 2030.
• Effective implementation of the Paris Agreement / achieve net-zero emissions by around 2050.
• Facilitation of low-cost financing for clean energy transitions (over $4 trillion globally till 2030).

The Delhi declaration’s transformational capacity is, however, dependent on its implementation. With key outcomes being voluntary action by countries there is a risk of falling short of the targets. Such voluntary development transformation would be based on a strong societal consensus, and collective trade-offs for net zero led development action by stakeholders. The key enabling inputs to the transition are technology and capital. Will domestic sources be sufficient to service these requirements?

As per the G20 Delhi declaration, there is a need for increased global investment towards climate goals. US $ 4 trillion for clean energy technologies by 2030 to reach net zero emission by 2050. India’s current $3 trillion economy is projected to become $12-13 trillion by 2040. The economy built over the past 75 years would need radical decarbonised growth transition in just the next 15 years. According to the International Finance Corporation (IFC), India alone requires climate investments worth $3.1 trillion through 2030. The sectors under consideration include renewable energy, green buildings, climate-smart agriculture, and electric vehicles. The annual investment requirement by India is thus 16% of its annual GDP. A tough ask.

Domestic capital thus needs to be augmented with global capital to match the tremendous investment requirements.

On the technology front, the decade of 2010s saw the dramatic shift away from legacy fossil fuel-based energy systems to those based on renewables such as solar and wind. This shift was driven by enhanced affordability of renewable costs making them competitive to fossil fuel sources. Much of this technology was derived from global technology access, rather than ‘moon-shot’ inventions based in a laboratory which face long development timelines.

Even today with an existing commissioned renewable base of 175 GW and demand visibility of another 300 GW, research, and innovation for clean technologies in India is dispersed across government and limited private sector entities. This has resulted in:

• Dispersed and uncoordinated funding for R&D and pilots across national and local governments, industry, and investors
• Low confidence on field/ commercial efficacy of crucial technologies (generation, storage, transmission, and distribution)
• Low understanding of enabling policy and practice approaches to scale

This needs to change. Borrowing a leaf from the renewable adoption of the previous decade, we need early adoption of global clean technology options to understand which ones to scale.

The private sector can play a seminal role in raising and augmenting investments towards new clean technologies and delivering on the new India economic development paradigm. Substantive intellectual and financial capital spending is vital over the next decade to translate innovation, disruptive ideas, and game changing paradigms towards economic on ground action and development. While doing so, pooled collaborative efforts promise superior efficiency through limiting duplication of efforts, lowered transactional and administrative cost, and provides better risk management through a structured governance mechanism.

Conclusion

The transition to net zero aligned development is arguably one of the greatest challenges for the world. This not only calls for an overhaul on the way we produce, consume, and move, but a fundamental transformation of nearly all major industries.

Considering business and national commitments, pooling in ideas, business power and influence, and funding is a must to support the evolution of policy and practice eco-system to support and guide new India’s economic and development paradigm.

Access to Technology and finance to enable the transition are key input imperatives. Globalization is the underlying bedrock on which global access to technology and capital can be unleashed at scale and speed.

The coming decade is going to be decisive in enabling climate innovation.