Report on Currency & Finance 2022-23: Adapting to climate change to cost India ₹85.6 lakh crore by 2030’

Source: The post is based on the article “Adapting to climate change to cost India ₹85.6 lakh crore by 2030” published in The Hindu on 4th May 2023

What is the News?

Reserve Bank of India’s (RBI) Department of Economic and Policy Research (DEPR) has released a report titled “Report on Currency & Finance 2022-23”. The theme of the report is ‘Towards a Greener Cleaner India’.

What are the key findings of the report?

Net zero target: India aims to achieve the net zero target by 2070. But this would require an accelerated reduction in the energy intensity of GDP by around 5% annually and a significant improvement in its energy mix in favour of renewables to around 80% by 2070-71.

– The cumulative total expenditure for adapting to this climate change in India is estimated to be Rs 85.6 lakh crore (at 2011-12 prices) by the year 2030.

Implications for Financial Stability: The financial sector faces the dual challenge of recalibrating its operations and business strategies to support the green transition process while also strengthening resilience to rising vulnerability to adverse climate events so as to safeguard financial stability.

– On the first challenge, estimates suggest that the green financing requirement in India could be at least 2.5% of GDP annually to address the infrastructure gap caused by climate events.

– On the second challenge, the results of a climate stress-test reveal that public sector banks may be more vulnerable than private sector banks in India.

What are the suggestions given by the report?

– Introduce an Emissions Trading System (ETS) linked to green taxonomy, covering all sectors of the economy which can partly balance subsidies (less polluting industries getting carbon credits for trading) and tax (more polluting industries that should have to buy carbon certificates). 

– Ramp up domestic capacity to mine rare earth elements or procure them through long-term contracts and outward FDI; 

– Complementing green building standards with IoT-based monitoring and AI and ML to manage and reduce energy demand; 

– Boost climate-resilient agriculture; 

– Production of green hydrogen using renewable energy; and 

– Investment in carbon capture and storage technologies.