Why in News: India added 24.5 GW of solar capacity in 2024, becoming the 3rd largest contributor globally after China and the US.
Introduction
- India is emerging as a global clean energy leader, adding 24.5 GW solar in 2024 (3rd after China & USA).
- The UN Climate Report 2025 recognises India, alongside Brazil and China, for scaling renewables. Yet, a climate finance gap threatens this momentum.
Progress So Far
- Economic & Social Impact: Renewables employ >1 million (5% of GDP growth); off-grid solar alone created 80,000 jobs in 2021.
- Global Leadership: Founder of International Solar Alliance (ISA).
- Financial Flows:
- $55.9 bn GSS+ debt issuance by Dec 2024 (83% green bonds).
- Green bonds ($45 bn in 2025), sovereign issuances, SEBI-regulated social bonds.
- Solar Park Scheme auctions successful in attracting private capital.
- Technological Opportunity: Battery-integrated renewables, decentralised grids, green hydrogen → inclusive, future-ready growth.
The Financing Gap
- Requirement: $1.5–2.5 trillion by 2030 for 1.5°C pathway (IRENA & Finance Ministry).
- Current flows insufficient for grid expansion, storage, green hydrogen, sustainable agriculture & transport.
- IRENA estimate: 1.5°C pathway could yield 2.8% annual GDP growth till 2050 (double G20 average).
Way Forward
- Public Finance as Catalyst: Budget support, fiscal tools, de-risking.
- Blended Finance: Partial guarantees, subordinated debt, loan guarantees for Tier-II/III projects.
- Domestic Capital: Pension funds, LIC, EPFO → need ESG-aligned reforms.
- Carbon Markets: New carbon credit scheme must be transparent & equitable.
- Innovation: Blockchain tracking, AI-driven risk assessment, sector-specific blended models.
- Beyond Mitigation: Expand climate finance to adaptation & loss-and-damage resilience.
Conclusion
India’s clean energy momentum is strong, but without dramatic expansion of climate finance, its targets and inclusive growth prospects remain at risk. Unlocking diverse financing streams is central to sustaining India’s climate leadership.
UPSC Relevance
GS Paper II
- International institutions and groupings (International Solar Alliance, UN Climate Report).
Mains Practice Question (15 Marks, 250 Words)
Q. India’s clean energy transition is globally recognised, but its momentum hinges on bridging the climate finance gap. Analyse the opportunities and challenges in expanding climate finance and suggest a way forward.