India’s Net-Zero Pathway: Ambition, Investment, and Reform

Syllabus: GS3/Environment

Context

• According to the NITI Aayog’s Scenarios Towards Viksit Bharat and Net Zero, India can achieve net-zero emissions by 2070 while becoming a developed economy by 2047, but this transition will require massive financial and structural shifts.

What is Net Zero?

• Net Zero refers to the state where the amount of GHGs released into the atmosphere is balanced by the amount removed over a given period.
• It is achieved through a combination of:
  • Emissions reduction by shifting from fossil fuels to renewable energy, improving energy efficiency, electrifying transport and industry, adopting cleaner technologies; and
  • Emissions removal by natural sinks such as forests, soils, and wetlands, and technological solutions like carbon capture, utilisation, and storage (CCUS).
• It covers all greenhouse gases (CO₂, methane, nitrous oxide, etc.) and focuses on deep, economy-wide decarbonisation.

Why Net Zero Matters?

• It is essential to limit global warming to 1.5–2°C, as outlined in the Paris Agreement.
• It helps reduce climate risks such as extreme weather, sea-level rise, and ecosystem loss.
• It encourages clean energy transition, innovation, and sustainable economic growth.

Key Concerns Highlighted in NITI Aayog’s Report

• Large Financing Gap: Achieving net zero by 2070 requires $22.7 trillion, leaving a $6.53 trillion gap even after domestic mobilisation.
  • Heavy dependence on international climate finance raises risks around availability, timing, and conditionalities.
• Insufficient Current Climate Investment: Present climate investment flows (~$135 billion annually) are far below what is needed for long-term decarbonisation.
  • Clean energy funding remains inadequate relative to future demand growth.
• Power Sector Transition Risks: Scaling renewables to 6,500–7,000 GW poses challenges related to grid stability, storage, and transmission infrastructure.
  • Continued reliance on coal as a transitional fuel creates tension between energy security and emissions reduction.
• Rising Energy Demand: Rapid growth in cooling, industry, and data centres could offset efficiency gains.
  • Cooling alone emerged as a major driver of residential electricity demand.
• Technology Uncertainty in Industry: Hard-to-abate sectors depend on green hydrogen, carbon capture, and other emerging technologies that are still costly and not widely deployed till now.
• Dependence on Critical Minerals: Transition to clean energy increases reliance on lithium, copper, nickel, and other critical minerals.
  • Risks linked to import dependence, supply chain concentration, and price volatility.
• Financial System Constraints: India’s corporate bond market and financialisation of household savings are currently too shallow to support the scale of investment required.
  • Lack of a dedicated green finance institution limits coordinated capital deployment.
• Policy and Implementation Challenges: Achieving net zero requires long-term policy consistency, cross-sector coordination, and strong enforcement.
  • Delays in reforms could significantly raise transition costs.

Key Suggestions Made in NITI Aayog’s Report

• Establish a National Green Finance Institution: Create a dedicated National Green Finance Institution to mobilise, aggregate, and deploy large-scale capital for India’s net-zero transition.
  • The institution would help de-risk projects and attract private and international investment.
• Mobilise International Climate Finance: Developed countries should provide $6.53 trillion in climate finance to bridge India’s funding gap.
  • Strengthen India’s integration with global capital markets to increase the share of international finance.
• Deepen Domestic Financial Markets: Expand the corporate bond market from ~16% of GDP to ~30% by 2070.
  • Increase financialisation of household savings from ~60% to 75% to unlock long-term capital.
• Accelerate Renewable Energy Expansion: Scale solar and wind capacity to 6,500–7,000 GW by 2070.
  • Invest in battery storage and pumped hydro to ensure grid stability.
• Promote Electrification Across Sectors: Make electrification the backbone of decarbonisation, especially in transport and industry.
  • Target over 70% electrification of road transport under the net-zero pathway.
• Strengthen Demand-Side Management: Implement stricter appliance efficiency standards and building energy codes.
  • Encourage behavioural changes to manage rising energy demand, particularly for cooling.
• Support Industrial Decarbonisation: Improve energy efficiency and promote circular economy practices.
  • Accelerate adoption of green hydrogen and carbon capture for hard-to-abate sectors.
• Ensure Critical Mineral Security: Boost domestic exploration, recycling, and diversified import sources for critical minerals like lithium, copper, and nickel.
• Maintain Energy Security During Transition: Use coal as a transitional fuel while expanding nuclear and renewables to ensure reliable power supply.

Conclusion

• NITI Aayog’s analysis underscores that India’s net-zero ambition is achievable, but only with bold reforms at home and substantial financial support from developed countries. 
• Coordinated action across finance, energy, industry, and global cooperation will determine whether India can align climate leadership with economic development.

Source: DD News