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– By Sankar Chakraborti
The pace at which global climate change is happening is alarming. Leaving a better planet for our future generations is a shared responsibility for all of us. In the global pursuit of net-zero emissions, India emerges as a unique protagonist. Like a tree deeply rooted in the earth, taking its time to grow, India symbolizes enduring resilience. While the path that India follows, might not boast the speed of others, our methodical approach positions us to cleverly harness international financing. This will propel the adoption of efficient, low-emission technologies, an approach that lays the bedrock for a sustainable, long-term future, rather than just curbing existing emissions.
Carbon Credits: Smart funding for a sustainable future
Key to this sustainability strategy is India’s innovative use of carbon credits. One of the most effective mechanisms India is leveraging in its quest for net-zero emissions is the carbon credit market. Leading global organizations, such as Shell, Michelin Group, Microsoft, and Amazon, among others, are proactively purchasing carbon credits from Indian entities. These credits offset the greenhouse gas (GHG) emissions of buying organizations. One Carbon Credit (CC) allows an organization to offset one tonne of carbon dioxide or the equivalent GHG emissions. This offers a twin advantage, allowing buyers to meet their zero-emission goals and facilitating much-needed financing for sellers.
Indian carbon credits, which comprise 15-20% of global credit supplies, have generated an inflow of USD 2 billion in 2023. This influx of funds is crucial for enabling Indian companies to adopt and utilize low-carbon technologies effectively. The financial support helps bridge the gap between the high initial costs of these technologies and their long-term benefits, creating a positive ripple effect of environmental and economic gains. World Bank estimates that in 2023, revenues from carbon pricing crossed USD 104 billion. India’s steady transition to a low-emission regime, with significant budgetary allocation and high private participation makes growth potential for carbon credits immense.
Emissions Control: An Unpalatable Transition
While the benefits of this approach are apparent, achieving net-zero emissions in a rapidly developing economy like India requires a fine balance between economic growth and sustainability. Advanced technologies, though effective, are expensive to deploy and may not be within reach for Indian industries. As per an estimate, the bill for the low carbon development pathway could burn a hole of ~USD 5.8-11.5 trillion by 2030, at a global level.
The inflow of funds from the sale of carbon credits can ease some of these challenges for India. Investments in new technologies are gradually helping Indian producers adopt cleaner practices without sacrificing growth. This incremental approach ensures that the transition is both economically viable and environmentally meaningful.
Agriculture and Climate Change
India has historically been an agrarian economy. Agriculture contributes approximately 17% to the country’s GDP and employs around 58% of the population. Recognizing its pivotal role, the government has allocated ₹1 lakh crore to the PM Rashtriya Krishi Vikas Yojana (PM-RKVY) and the Krishonnati Yojana (KY), which aim to promote sustainable agriculture, while ensuring food security.
Favorable climatic conditions this year have led to increased crop yields and less carbon-intensive agricultural practices. This progress has renewed the interest of international companies in purchasing green credits from Indian agricultural players. As a result, the sector is rapidly emerging as a key player in reducing global carbon footprints. Organized players such as Bayer and Grow Indigo are helping Indian farmers adopt sustainable practices and generate these credits.
The Long-Term Vision
While India is likely to remain a net supplier of carbon credits for some time, this position comes with significant advantages. The continuous inflow of capital from carbon credit sales is crucial for financing the transition to a low-emission economy. Over the long term, this strategy will enable India to build a robust infrastructure that supports sustainable development. Investments in efficiency-enhancing technologies are expected to accelerate India’s progress toward a net-zero future.
Net Zero is a journey, not a destination
India’s journey towards net zero emissions is a long-term affair, more akin to a marathon than a sprint. India’s leveraging of carbon credits to strategically adopt low-emission technologies is incremental but promising. With government initiatives and accelerated private participation, the country’s relentless efforts in emission control and international financing make the net-zero goal within reach. The final stretch of this enduring journey will be marked by the rapid deployment of efficient technologies, ushering in a more sustainable environmental future.
(Sankar Chakraborti is the Chairman ESGrisk.ai and Group CEO at Acuité.)
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