India's Decarbonization Journey: Economic Growth with Climate Action

India can accelerate decarbonization at scale while pursuing economic growth.

India's Net-Zero Commitment

At COP26, India committed to becoming a net-zero emitter by 2070, marking a significant step in addressing climate change. Despite having low per-capita emissions (1.8 tons CO2), India is the third-largest emitter globally, releasing 2.9 gigatons of carbon dioxide equivalent (GtCO2e) annually as of 2019.

The main contributors to these emissions (about 70%) come from six key sectors:

• Power
• Steel
• Automotive
• Aviation
• Cement
• Agriculture

India has to speed up its shift to a low-carbon economy, lower emissions, and support sustainable growth. The impact will extend across multiple sectors, helping India achieve its climate goals while driving innovation and economic progress focusing on these efforts.

Key Opportunities for Decarbonization

The following areas highlight key opportunities that can accelerate decarbonization across various industries:

Green Hydrogen

Green hydrogen can serve as a clean energy carrier and is vital for sectors like heavy industry and transport, where direct electrification is difficult.

Carbon Capture, Usage, and Storage (CCUS)

CCUS technologies can capture CO2 emissions from industrial processes and power generation and either use or store them, preventing them from entering the atmosphere.

Natural Climate Solutions

Solutions like reforestation, soil carbon sequestration, and sustainable agriculture practices absorb CO2 and enhance carbon storage in natural systems.

Material Circularity

Moving toward a circular economy, including recycling, reusing, and repurposing materials, to reduce waste, resource extraction, and emissions from manufacturing.

India's Net-Zero Scenarios

India's net-zero journey has been shaped along two distinct scenarios:

Despite India's ambitious goals, the pace of emissions intensity reduction is not enough to meet future targets given the country's expected growth. India needs substantial efforts to accelerate its decarbonization process.

India's Global Carbon Impact

India has the potential to create 287 gigatons of carbon space for the world, nearly half of the global carbon budget required to limit warming to 1.5°C. This underscores the significant role India can play in global decarbonization efforts. However, there are critical challenges and opportunities for India to realize this potential.

Key Actions Needed to Meet Targets

• Electric Vehicles - Progressive policies, such as implicit carbon taxes on transportation fuels, are helping to electrify mobility. However, further action is needed to drive mass adoption.
• Renewable Energy Expansion - India needs to increase renewable capacity additions from 10 GW to 40–50 GW per year to meet future decarbonization goals.
• Green Hydrogen & Steel - To make green steel competitive, hydrogen cost reductions and a carbon price of $50/ton CO2 by 2030 are needed. This could shift 211 metric tons of steel capacity to a low-carbon hydrogen route by 2045 instead of coal-based methods.
• Battery and Hydrogen Cost Reductions - To accelerate clean energy adoption, battery costs need to decline by 40% by 2030, and green hydrogen costs need to fall by two-thirds by 2035.
• Charging Infrastructure Rollout - A nationwide rollout of EV charging infrastructure is essential to support the growing demand for electric vehicles.
• Sustainable Agriculture Practices - For agriculture to align with decarbonization goals, farmers must adopt new practices—for example, low-emission rice cultivation techniques to reduce methane emissions.
• Material Circularity - India must meet targets for material circularity, with higher targets for waste reduction, recycling, and reuse set for future years.

Urgency for India's Accelerated Decarbonization by 2030

India must prepare for orderly and accelerated decarbonization methods within the current decade to meet its climate goals. With over three-fourths of India's infrastructure for 2050 yet to be built, this presents a significant opportunity for India to grow sustainably and lead the way in green industries.

India's infrastructure growth will drive massive demand across several key sectors:

• Power: 8x increase
• Steel: 8x increase
• Cement: 3x increase
• Automobile: 3x increase
• Food: 2x increase

By setting up the right policy this decade, India can build low-carbon capacities in the upcoming decades.

To ensure India remains on track to meet its ambitious climate commitments and economic growth, accelerating the adoption of green technologies and progressive policies is critical. If India succeeds in implementing these changes, it can significantly contribute to global decarbonization while fostering economic growth and job creation in green industries.

Benefits of India's Clean Energy Transition

India's transition from fossil fuels to clean energy offers substantial benefits:

• Lower Power Costs: Transitioning from thermal power to renewables will reduce the average cost of power supply from INR 6.15/kWh in 2020 to INR 5.25/kWh by 2050 (LoS scenario) and INR 5.4/kWh in the accelerated scenario.
• Increased Farmer Income: Sustainable farming could lead to an additional income of INR 3,400 per hectare/year in the LoS scenario, rising to INR 4,800 per hectare/year in the accelerated scenario.
• Energy Import Savings: India could save a cumulative $1.7 trillion in foreign exchange that would otherwise be spent on energy imports until 2070.
• Minimising Asset Stranding: Focusing on sustainable infrastructure, India can avoid stranded assets and build efficiently from the start.
• Global Leadership Potential: India has the opportunity to become a global leader in green technologies, such as batteries, electrolyzers, and green steel if it starts manufacturing these technologies now.

A Future Without Fossil Fuels - Impact on Energy Infrastructure

Today, fossil fuels comprise 75% of India's commercial energy mix. However, by 2050:

• In the LoS scenario, fossil fuels would decline to 50% of the energy mix.
• In the accelerated scenario, they would fall to just 16%.

By 2050, in an accelerated scenario, over 60% of India's refining capacity, 90% of coal mining, and 100% of coal-based power generation may become unnecessary. India's tax revenue from auto fuels could decrease from $85 billion today to $36 billion as the transportation sector shifts to electric vehicles. Additionally, resources like biomass, currently used for cooking, may need to be redirected to more difficult-to-decarbonize sectors, such as cement production, as part of the transition.

Pressure on Land Systems

In the accelerated decarbonization scenario, India may require 45 million more hectares of land than is currently available:

• 10 million hectares for renewable energy infrastructure (e.g., solar and wind farms).
• 8 million hectares for carbon sinks and forests to offset emissions.

To meet these demands, innovative techniques will be essential, such as:

• Maximising barren or unused land for renewable energy projects.
• Vertical urbanisation to save space and reduce land use for buildings.
• Improved agricultural productivity to increase food production without expanding land use.

Impact on Households and Jobs

By 2040, the impact of decarbonization on household spending is expected to be moderate. Housing costs may increase, but these could be balanced by:

• Lower energy and transport costs due to increased electrification and renewable energy adoption.
• Limited impact on food costs, except for potential yield impacts from climate change.

Accelerated decarbonisation could result in the transformation of over 30 million jobs by 2050:

• 24 million new jobs could be created, primarily in green industries like renewable energy, electric vehicles, and sustainable agriculture.
• The job shifts from decarbonisation will be significant but smaller in scale compared to other macro trends, such as 60 million new workers entering the workforce by 2030.

Specific regions, like coal mining, could be more heavily impacted (e.g., Eastern India), requiring support, re-skilling programs, and the development of alternative industries in these areas.

Funding India's Decarbonization

India will need an estimated $7.2 trillion in green investments by 2050 for the LoS scenario (current policies and technology). The accelerated scenario would require an additional $4.9 trillion, totalling $12.1 trillion.

50% of the required investment for decarbonization is already in the money, particularly in:

• Renewable energy
• Electric vehicles
• Sustainable agriculture

Other sectors will require additional government policy support to ensure sufficient investment.

A significant portion of the required funds will be front-loaded, particularly in the earlier decades (2030-40):

• $1.8 trillion needed from 2030-40 for net capital expenditure (capex minus operational savings).
• $600 billion required from 2040-50 for further investments in green technologies and decarbonization efforts.

Path to Sustainable Growth

All stakeholders must come together and take action now. The government can help by offering policy support and incentives, such as tax breaks for electric vehicles (EVs) and fuel-cell EVs. The government can also simplify rules for building new power and grid infrastructure, encourage the use of more expensive green materials like eco-friendly steel, and support the development of technologies like electrolyzers. Additionally, it's important to make sure that this transition is fair, especially for low-income households, to prevent energy shortages and rising prices.

For India to make progress, both the public and private sectors need to invest in new technologies. Business leaders and policymakers must be open to adopting innovations such as long-duration storage to better use renewable energy, improve fuel cell technologies, and advance recycling techniques. These breakthroughs will be crucial for achieving decarbonization goals in the country.

Ten Actions to Accelerate India's Decarbonisation

1. Create a Clear Decarbonization Plan: Develop a detailed plan that includes specific actions for each sector, considering their interconnectedness and providing clear signals to businesses to guide their investments.
2. Fast-Track a Carbon Market: Set up a compliance carbon market within three years, especially targeting hard-to-reduce sectors, with incentives for investing in new technologies like Carbon Capture, Utilisation, and Storage (CCUS).
3. Support Banks in the Transition: Help banks finance the green transition by creating a green-transition bank, encouraging them to develop investment plans within the next one to two years and build the skills to assess environmental risks.
4. Boost Renewable Energy in the Power Sector: Increase renewable energy capacity by four times and reform the power market to ensure long-term stability, with a focus on integrating variable renewable energy sources into the grid.
5. Create a National Land-Use Plan: Establish a national authority to set clear guidelines for land use, balancing urban development, industrial needs, agriculture, carbon storage, and renewable energy projects.
6. Strengthen Local Manufacturing and R&D: Build domestic capabilities for manufacturing clean technologies, such as solar panels and wind turbines, and invest in research to secure key materials like rare earths.
7. Set Up Carbon Capture Hubs: Explore setting up carbon capture and storage hubs in key locations like Gujarat, Odisha, Rajasthan, Maharashtra, and Andhra Pradesh through public-private partnerships for effective carbon storage.
8. Launch a National Recycling Initiative: Create a circular economy by setting up recycling hubs in the top 20 cities and mandating recycling targets, the use of recycled materials, and levies on landfill use.
9. Expand the National Hydrogen Mission: Increase the focus on hydrogen energy by promoting its use through government mandates, providing subsidies and funding for research, and opening up international trade opportunities.
10. Encourage Companies to Invest in Green Opportunities: Motivate businesses to identify investment opportunities in green technologies in line with India's decarbonization goals and global market trends like green hydrogen exports.

Conclusion

India has immense potential to decarbonize, but reaching net-zero emissions by 2070 will require bold actions and coordinated efforts across various sectors. By focusing on developing low-carbon infrastructure and promoting clean energy adoption, India can not only meet its own emissions reduction goals but also play a key role in global climate action. The next decade is crucial for laying the foundation for a sustainable, low-carbon future, positioning India as a leader in green technologies and climate solutions.

Successfully transitioning to a low-carbon economy will require strategic planning, substantial investments, and strong policies. Challenges such as land availability, household spending, and job shifts must be addressed with innovative solutions. While the investment required is significant, many areas—such as renewable energy, electric vehicles, and agriculture—already present viable funding opportunities. With the right approach, India can unlock its potential for sustainable growth and lead the way in green industries, benefiting both its people and the global climate.

India must take careful steps now to prepare for a smooth and fast transition to a low-carbon future. Focusing beyond the short-term goals and building the necessary foundations over the next decade is crucial for achieving a decarbonized India and a sustainable world.