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Sansad TV: Perspective- Green Finance

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Introduction:

Finance Minister Nirmala Sitharaman has called upon the fintech industry to take advantage of specific opportunities in green finance and play its part in building a sustainable financial environment. Speaking at the Global Fintech Fest, she asked fintech players to break the distance barrier and have more engagements with the government and its agencies to enhance trust. She said everyone in the government, whether the Prime Minister, ministers, or think-tank Niti Aayog, is constantly available for engagement, discussions, and exchange of ideas. Speaking at the same event, RBI Governor Shaktikanta Das expressed commitment to supporting innovation for fintech companies, but not at the cost of consumer interest. India today is among the fastest growing fintech markets in the world, with market size of 31 billion dollars in 2021, and this is expected to reach $1 trillion by 2030. The next wave in the fintech sector, their role in sustainable finance & innovation opportunities, plus the challenges to green finance.

Climate finance has remained skewed towards mitigation

  • Climate finance has also remained skewed towards mitigation, despite the repeated calls for maintaining a balance between adaptation and mitigation.
  • The 2016 Adaptation Gap Report of the UN Environment Programme had noted that the annual costs of adaptation in developing countries could range from $140 to $300 billion annually by 2030 and rise to $500 billion by 2050.
  • According to OECD, currently available adaptation finance is significantly lower than the needs expressed in the Nationally Determined Contributions submitted by developing countries.
  • It is energy that comes from renewable, zero emission sources that do not pollute the atmosphere when used, as well as energy saved by energy efficiency measures. In other words, it is the energy derived from renewable, zero-emissions sources (“renewables”), as well as energy saved through energy efficiency (“EE”) measures.
  • Clean energy is energy gained from sources that do release air pollutants, while green energy is energy derived from natural sources.
  • There is a degree of crossover between clean energy and green or renewable energy sources, but they are not exactly the same.
  • The perfect clean energy mix occurs where green energy meets renewable energy, such as with solar energy and wind energy.

Need for Building Green finance ecosystem:

  • As part of the initial commitments to the Paris Climate Accord, India plans to reduce its carbon emission intensity – emission per unit of GDP – by 33-35% from 2005 levels over 15 years.
  • It is working towards producing 40% of its installed electricity capacity by 2030 from non-fossil fuels. This would lead to a significant shift from coal-based power generation to renewable energy sources.
  • To achieve these challenging statistics, it has to produce 100 gigawatt from solar, 60 gigawatt from wind, 10 gigawatt from biomass and 5 gigawatt from small hydropower by 2022. By 2022, India’s renewable capacity will more than double.
  • According to the World Bank, 70% of the global greenhouse gas emissions comes from infrastructure development, construction, power plants and transport system operations.
  • The World Health Organization projects that the number of deaths attributable to the harmful effects of emissions from key infrastructure industries will rise from the current 150,000 per year to 250,000 by 2030.
  • Therefore, the challenge before developing economies is: how to modernize societies, build quality infrastructure and provide efficient transportation services while minimizing the damage to the environment.

Green Projects: Only Solar or Wind Energy?

  • Let’s not confine the “green projects” status only to solar or wind energy. Sustainable land use, water and urban waste management, green buildings, clean transportation, pollution prevention and control systems, and energy efficiency projects are some of the areas that are globally eligible to receive green financing.
  • The electric vehicles play a complementary role to biofuels, which represent 80% of growth in renewable energy consumption in transport. However, it said the share of renewables in total road transport energy consumption remains limited, increasing only from 4% in 2016 to almost 5% in 2022.
  • With success of electric vehicles, there can be a situation where road transport is free of fossil fuels. There can be a situation of carbon free economy.
  • India has to think and act strategically and try in leapfrog in forefront. Leapfrogging also helps in creating domestic manufacturing For now, India’s most of solar equipment are imported from china.
  • However, India produces wind power which cannot satisfy adequate energy needs.

Role of Investment from Private sector:

  • It has been estimated that approximately $100 trillion of additional investment will be required between 2016 and 2030 to sync the imperatives of global development with that of addressing the challenge of climate change.
  • Banks and financial institutions are key intermediaries between investors who are keen to put more of their cash into low-carbon, sustainable projects and those requiring capital.
  • Globally, green finance is gaining prominence as a medium to raise funds for environment-friendly and climate-resilient projects.
  • The appetite for green investment opportunities is growing with European and US investors, in particular, committed to increasing their climate-related holdings