The word Net Zero is a little intriguing to comprehend, isn’t it? Well, in layman’s language, it means to do less harm to the environment by emitting less carbon dioxide. India has a Net Zero Ambition to accomplish by at least 2070. Although it didn’t lay clear policies on how it would achieve it, let’s understand the Net Zero concept better while also looking into how the finance sector can contribute to this initiative!
What is Net Zero after all?
Net Zero means to curb from adding the number of greenhouse gases in the environment (atmosphere). How is it plausible to make carbon emissions zero?
The concept is simple, think of an equation where you want the output to be zero. To make it zero, the amount that’s added must be nullified by removing the same amount and that’s when you achieve a Net Zero.
And in our concept, the number of greenhouse emissions added by humans has to be nullified by the plan of reduction of these greenhouse gases by the same amount.
How is CO2 emission being generated?
Burning of items like oil, coal, and gases at home, factories, and transport facilities are emitting CO2 whereas methane gas is out from landfills and farming. Thus leading to the greenhouse gases that trap the energy of the sun and cause Global Warming.
On the other hand, fewer trees remain to combat the emissions by absorption. And it isn’t sufficient to end it all rather newer technologies have to come out to get this right which might turn out to be costlier.
But the fact is that India is the third largest emitter of greenhouse gases and it heavily relies on coal. It is very critical at the moment to tackle these emissions, as scientists have warned of the worst consequences due to rising temperatures.
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The present scenarios of India
India currently can accommodate generating power from 40% of renewable energy which means 50% of the target can be met by 2030. But somehow India can’t live without coal though it is rapidly increasing the renewable source of energy.
And about greening India, it wants to bring a part of its land area under the cover of the forest to increase the carbon absorption from the environment. Hence, they have the plan to absorb 2.5 to 3 billion carbon tonnes by planting more trees by the year 2030. But yet the northeastern side of the country has lost the cover of green vegetation.
What does India call this mission?
Have you heard the term “Panchamrit”? With a little Ayurvedic perspective, it’s been named. Technically it’s a mixture of curd, milk, honey, jaggery, and ghee. Well, it has nothing to do with the mission, but the name comes from there referring to “Five Ambrosia”.
Under this scheme, it represents,
- By 2030, it wants to get non-fossil energy capacity to around 500 Giga Watts.
- Using renewable energy alone it wants to meet its 50 percent of the energy requirement.
- By 2030 reduce 20 billion tonnes of carbon emissions.
- Reduce the density of carbon by 45 percent of its economy by 2030.
- And of course, reach the mission of Net Zero by 2070.
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How does the Net Zero Ambition help?
If you think of the benefits of the mission, there are a plethora of them:
- It’ll boost India’s GDP by 4.7 percent by around 2036 and that’s the estimate.
- Creating around 15 million jobs by 2047.
- Energy costs could be saved by $9.7 billion in the household by 2060.
- It can open up a global manufacturing hub to contribute to the Net zero economy.
- This act is like a model for a healthy and sustainable nation to encourage other countries to follow the suit.
- Thus reducing the extremes of pollution, heat, deaths, flood, and many more impacts due to it.
Green Financing to the Net Zero Ambition
The financial market acknowledged this mission through green financing long back in 2007 and the policies were designed to support this act. In line with it, the small renewable energy projects were included under the scheme of Priority Sector Lending. As a result of which, the banks came up with internal policies to limit lending to sectors that are carbon intensive and inculcate giving credit to green finance. And turned out to leave a thought in their mind to consider switching to green production methods.
Well, on the other hand, the issuance of green bonds has been undertaken to support the projects of sustainable development. In the year of 2018, it has been successful in issuing $8 billion worth of green bonds which is 0.7% of the worth of total bonds issued. Though small, it is a great initiative. With that being said if you wondered about the first bank that issued this bond, then it’s banks like “Yes Bank” who was the initiator in 2015-2016.
The cruciality of finance in the Net Zero Ambition
India at least needs $2 trillion for a transition that is faster toward the ambition. The banks need to buckle up to tie up with global institutions of finance in helping India to set up relevant financing models to foster developments through technology.
The need for an apt taxation policy to increase lending is much needed, and a structured policy framework must come into the act, and investment trusts for green infrastructure to innovate and deeper the green bond market must be taken care of. Besides this, of course, the awareness of the act matters that brings the urge to all of the interdependent sectors to make a real impact through the mission.
While the entire mission is to decarbonize the transport, industrial, and power sectors, the paramount investment needed to accomplish it must be supported by investors by taking an initiative to invest in Green Bonds that are working towards sustainability.
The crippling effect of the changes in the climate can not only disrupt the economy, and businesses but lives as well. Let’s look forward to the world of sustainability where we all want to live.
