Sansad TV: Green Finance | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Introduction

• During the Global Fintech Fest, Finance Minister Nirmala Sitharaman encouraged fintech industry players to participate in building a sustainable financial environment, particularly in green finance. She urged them to engage more with the government and its agencies to increase trust and enhance cooperation.
• At the same event, RBI Governor Shaktikanta Das showed support for innovation in fintech companies, but not at the expense of consumer interest. India's fintech market has grown rapidly and is expected to reach $1 trillion by 2030.

Climate finance has remained skewed towards mitigation

• Despite the need for balance between adaptation and mitigation, climate finance has been skewed towards the latter. The UN Environment Programme's 2016 Adaptation Gap Report projected that developing countries will need $140 to $300 billion annually by 2030 and $500 billion by 2050 for adaptation costs.
• However, available adaptation finance falls short of what developing countries require, according to the OECD. Clean energy refers to energy derived from sources that do not release air pollutants, while green energy is obtained from natural sources. While there is some overlap between the two, they are not interchangeable. An optimal clean energy mix is achieved when green energy and renewable energy intersect, such as with wind and solar power.

Need for Building a Green Finance Ecosystem:

• India has committed to reducing its carbon emission intensity by 33-35% from 2005 levels over 15 years as part of its initial commitments to the Paris Climate Accord. The country aims to produce 40% of its installed electricity capacity from non-fossil fuels by 2030, which requires a significant shift from coal-based power generation to renewable energy sources.
• To achieve this, India aims to produce 100 gigawatts from solar, 60 gigawatts from wind, 10 gigawatts from biomass, and 5 gigawatts from small hydropower by 2022, which will more than double its renewable capacity. The World Bank estimates that 70% of global greenhouse gas emissions come from infrastructure development, construction, power plant operation, and transport system operation.
• The World Health Organization predicts that the number of deaths attributable to the harmful effects of emissions from these industries will rise from 150,000 per year to 250,000 by 2030. Developing economies face the challenge of modernizing societies, building quality infrastructure, providing efficient transportation services, and minimizing environmental damage.

Green Projects: Not Just Solar or Wind Energy

• Green projects are not limited 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 globally eligible to receive green financing. 
• Biofuels, which represent 80% of growth in renewable energy consumption in transport, and electric vehicles both play complementary roles. However, the share of renewables in total road transport energy consumption remains limited, increasing only from 4% in 2016 to almost 5% in 2022. 
• Success in the adoption of electric vehicles could lead to a situation where road transport is free of fossil fuels, potentially leading to a carbon-free economy. India must think and act strategically and aim to leapfrog in the forefront of green technology. Leapfrogging can also help create domestic manufacturing for green technology. India currently imports most of its solar equipment from China, while wind power production in India cannot satisfy adequate energy needs.

Role of Investment from Private sector

• To achieve both global development and address climate change, it is estimated that around $100 trillion of additional investment will be necessary between 2016 and 2030.
• Financial institutions and banks are crucial in connecting investors who want to invest in low-carbon sustainable projects with those who need capital. Green finance is increasingly being used as a way to raise funds for projects that are environmentally friendly and resilient to climate change, gaining recognition worldwide. 
• European and US investors are particularly interested in increasing their holdings in climate-related investments, indicating a growing appetite for green investment opportunities.