New Delhi: India needs to invest $12.7 trillion in its energy system, which is over three times its GDP, to achieve net-zero emissions by mid-century and help prevent catastrophic global warming, according to BloombergNEF.

To reach this goal ahead of its official target of 2070, India needs to clean up its coal-dependent electricity sector. This entails significant investments in grid infrastructure to handle renewable energy sources and a substantial increase in funding for green energy initiatives.

Currently, India relies on coal for approximately 70% of its electricity production, which also supports heavy industries like steel, cement, and aluminum. It is the world’s third-biggest emitter of greenhouse gases. This despite a rapid expansion in the renewable energy sector, with a record 16 gigawatts of solar added in 2022.

A substantial funding is required to shift this reliance on fossil fuels. To meet the 2050 spending target aligned with global climate objectives, India needs to invest $438 billion annually until 2050, a substantial increase compared to the $17 billion invested in energy transition technologies last year, Bloomberg reported.

Separately, a working paper of International Monetary Fund (IMF) has ranked India fourth in offering fossil fuel subsidies with around $350 billion (approximately Rs 28 lakh crore). This is over 10% of the GDP, the paper said.

The IMF paper placed China at the top, followed by Russia and the US.

It cited the 'Ujjwala' scheme, under which subsidy is given for domestic LPG.

The need for global capital

Shantanu Jaiswal, head of India research at BNEF, said, "Building all the necessary infrastructure would require investments at an unprecedented scale and speed, which the Indian banks alone may not be able to meet."

According to BNEF, global capital has been cautious as eight of the global top 10 pension and sovereign wealth funds are yet to invest in India’s renewable energy sector. Meanwhile, India’s own pension and life insurance funds face restrictions.

India has raised the question of global capital repeatedly, but has been hampered by inefficiencies in its power market and, more recently, by the indirect impact of the US Inflation Reduction Act and European moves to woo clean-power investors, the report added.

Under BNEF’s ambitious 2050 scenario, power-related emissions in the country would peak in 2024.

Transport sector emissions would reach an upper limit in 2028 with a rapid deployment of electric vehicles. Industrial emissions are expected to reach a maximum in 2031 followed by a sharp decline.

According to BNEF, technology will play a role, whether that’s green hydrogen in steel or carbon capture, which could alone reduce 56% of emissions from cement manufacturing.

"For road transport, electrification will require both charging infrastructure and clean, affordable power to feed increased demand. Under BNEF’s net zero scenario, the impact on demand means India could end fossil fuel imports by 2050, almost fulfilling Prime Minister Narendra Modi’s goal of becoming self-reliant in energy by 2047, the year marking a century since independence," the report added.

“India needs to set sector-specific decarbonisation pathways and to develop enabling policies to tap all sources of global and domestic financing,” BNEF’s Jaiswal said.

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