India's Climate Finance Strategy

Context

India is actively revising its climate finance approach in response to evolving global dynamics, particularly following the United States' withdrawal from the Paris Agreement in January 2025.

US’s Emission Levels (UNEP Report 2024)

The US is the second largest carbon dioxide emitter in the world currently (after China), but historically remains the largest polluter.
The US is responsible for 20% of historical CO2 emissions globally between 1850 and 2022, with per capita emissions of 18 tCO2e/capita compared to the global average of 4.7 tCO2e/capita, according to the United Nations Environment Programme’s Emissions Gap report of 2024.

US Withdrawal & Impact

The United States' exit from the Paris Agreement has created a substantial void in global climate finance.
Notably, the US had pledged significant contributions to the USD 300 billion annual climate finance goal and was a key participant in the Loss and Damage Fund, designed to support countries severely affected by climate change.
The absence of US support places additional pressure on other developed nations, especially the European Union, to fulfill financial commitments.

India's Climate Finance Landscape

India's climate initiatives have predominantly been financed through domestic resources. As of February 2024, India received approximately USD 1.16 billion from international climate funds, including:
- Green Climate Fund (GCF): USD 803.9 million
- Global Environment Facility (GEF): USD 346.52 million
- Adaptation Fund: USD 16.86 million
Despite these contributions, the funding remains insufficient relative to India's climate action requirements.
Domestic Financial Commitments: India has made substantial domestic investments in climate adaptation and mitigation:
Adaptation Expenditure: In 2021-22, India allocated 5.6% of its GDP to climate adaptation efforts, amounting to approximately Rs 13.35 lakh crore.
Future Requirements: The Economic Survey 2024-25 estimates that India will need around Rs 56.68 lakh crore (approximately USD 700 billion) by 2030 for climate adaptation measures.

Strategic Financial Instruments

To bolster climate finance, India is leveraging various instruments:

Sovereign Green Bonds: The Reserve Bank of India issued Rs 1,697.40 crore in 10-year Sovereign Green Bonds in the first half of 2024-25 to fund green infrastructure projects.
Blended Finance Models: India is exploring concessional financing to attract private investments, thereby amplifying the impact of public funds.
Climate Finance Taxonomy: The government is developing a taxonomy to standardize and enhance the transparency of climate-related financial flows.

Loss and damage

“Loss and damage” is a term used in UN climate negotiations to refer to the consequences of climate change that go beyond what people can adapt to; for example, the loss due to rising sea levels or the loss of homes and lives during extreme floods.
It covers both immediate climate disasters and slow onset events including cyclones, droughts and heatwaves, sea level rise, desertification, glacial retreat, land degradation, ocean acidification and salinization.

Other important Global Climate Funds

Green Climate Fund (GCF): It was established to limit or reduce Greenhouse Gas (GHG) emissions in developing countries and to help vulnerable societies adapt to the unavoidable impacts of climate change.
Adaptation Fund (AF): It was established under the Kyoto Protocol in 2001 and has committed USD 532 million to climate adaptation and resilience activities.
Global Environment Fund (GEF): GEF has served as an operating entity of the financial mechanism since the Convention came into force in 1994.
It is a private equity fund focused on seeking long-term financial returns through investments in clean energy under climate change.