COP29: What should be India’s strategy on climate finance?

As the world gears up for COP29, pre-conference discussions have already spotlighted a critical issue—climate finance. In a recent roundtable titled “The Road Ahead: Building on Global South Strengths at COP29 & G20,” organised by New Delhi-based advocacy group Climate Trends, experts explored how India and the broader Global South can navigate the complex landscape of climate negotiations.

The discussions highlighted the financial gap, global political dynamics, and India’s strategic role in shaping climate action.

Montek Singh Ahluwalia, economist and former advisor to India’s Ministry of Finance, opened the discussion by underscoring the sheer scale of the financial challenge. “In numerical terms, the G20 and the N K Singh-Larry Summers report states that emerging markets need about $3 trillion annually. Of this, $1.2 trillion is for other SDGs, and $2.4 trillion for climate-related SDGs,” said Ahluwalia.

This enormous financial requirement underlines the urgency for developed nations to fulfill their climate finance commitments, particularly in light of the failures to deliver on the $100 billion annual pledge made during the Paris Agreement. The Organisation for Economic Co-operation and Development (OECD) claims this target was met in 2023, but Ahluwalia was quick to cast doubt.

While the Paris Agreement’s pledge has been seen as a milestone in global climate action, it is still woefully inadequate compared to the $2.4 trillion required for climate-related SDGs alone. This financial shortfall has left many developing nations, including India, questioning whether they should push for climate leadership without the assurance of necessary funds.

Ahluwalia raised concerns about the upcoming US elections, which could significantly affect climate finance negotiations at the G20. “The G20 controls the Multilateral Development Banks, and the dominant player in that is the United States. Given the political landscape, we can’t expect any strategic gains until after the US presidential and Senate elections,” he noted.

This uncertainty could stall progress on climate finance and frustrate efforts by developing nations to secure the external funding they need. Ahluwalia suggested that India, as a key player in the Global South, must be realistic about what can be achieved at COP29 and the G20. “Should India exhaust its firepower in a COP where nothing financially significant will be achieved?” he asked, pointing to the potential futility of pushing for more funding under these conditions.

Instead, Ahluwalia recommended that India focus on laying the groundwork for long-term climate leadership, including setting ambitious nationally determined contributions (NDCs) by COP30, scheduled for 2025 in Brazil. “By 2025, India should come forward with a set of NDCs that make people say we are really serious,” he suggested.

Experts also dwelled upon how India should tackle the dual challenge of promoting economic growth while dealing with climate change. Kirit Parikh, chairman of Integrated Research and Action for Development (IRADe), argued that India’s growth must not be sacrificed for climate goals. “We must address human development and bear the burden of extreme climate events, but also manage our need for growth,” Parikh said.

India, with its growing economy and relatively low per capita emissions, faces a unique dilemma. While it must continue to develop, it is also set to become one of the largest global emitters in the near future, especially if Western countries fulfill their net-zero commitments. Parikh emphasised the importance of demanding that developed nations take responsibility for their past emissions. He proposed, “A logical approach would be to consider the total cumulative emissions that countries have produced since 1990,” and that an equitable redistribution of climate finance could provide funds for mitigation and adaptation.

Parikh further highlighted the financial difficulties in mitigating climate change, especially in areas like renewable energy, which require significant upfront investments. “For instance, we can install gigawatts of solar capacity, but this requires significant initial finance. Over time these investments will pay for themselves, but we need financing at low interest rates with long-term repayment plans to ensure these efforts succeed,” he said.

While India has set ambitious renewable energy targets, it has struggled to meet them. Saurabh Kumar, Vice President of the Global Energy Alliance for People and Planet (GEAPP), acknowledged the gap between goals and achievements. “We set a goal of 175 gigawatts of wind and solar by 2022 but didn’t even cross 100,” Kumar stated, adding that India’s broader goal of reaching 500 gigawatts of non-fossil fuel capacity by 2030 appears far off. “At this pace, we’ll only reach 300, maybe 350 gigawatts by 2030.”

This shortfall raises concerns about India’s ability to meet its 2070 net-zero target. According to Kumar, achieving the 500-gigawatt goal is critical for India’s broader energy transition, particularly in phasing out coal and expanding renewable energy. However, private sector investment and climate finance will play an essential role in closing the gap. “Without private capital, the shortfall will be much harder to address,” he warned.

Amit Jain, senior energy specialist at the World Bank, expressed similar sentiments, calling for greater involvement from both the private and public sectors. “India requires $150 billion annually for green finance, but we’re currently receiving just $50 billion, half from the government and half from the private sector,” Jain pointed out. This imbalance in funding must be corrected if India is to make significant progress toward its renewable energy and climate goals.

The role of Multilateral Development Banks (MDBs) in bridging the climate finance gap was another focal point. Experts argued that MDBs need to evolve and focus on blended finance structures to attract private sector investment. “If we are looking for the private sector to come in a big way, particularly in emerging economies, MDBs should focus more on blended finance,” Kumar argued.

Amitabh Kant, India’s G20 Sherpa, also pitched for the need for stronger partnerships between governments, MDBs, and the private sector. “The challenge is that today’s world is confronted with multiple global crises, and protectionism is at its height. Despite this, India must drive its own agenda and focus on becoming a global leader in renewable energy,” said Kant.

As COP29 approaches, the stakes for India and the Global South are higher than ever. While the financial commitments made by developed nations have fallen short, India’s leadership role in shaping the global climate agenda remains critical. Ahluwalia’s advice to be pragmatic, combined with Parikh’s insistence on equitable climate finance and Kumar’s call for greater renewable energy investment, paints a complex but hopeful picture. India has the potential to lead, but it must strategically align its actions and expectations at COP29 and beyond.

In Kant’s words, “India must be clear about its objective: by 2030, we must aim to become an exporter of clean energy rather than an importer of fossil fuels. This vision will shape our climate agenda for years to come.” COP29 might not offer all the solutions, but it will certainly set the stage for the Global South’s next steps in the global climate battle.

India’s climate financing gap is substantial

1. As per estimates in India’s updated NDCs, the country needs a substantial amount of climate finance in order of tens of trillions of dollars by 2050 to achieve its ambitious sustainability targets.

2. From 2026-2030, India will require annual clean energy investments in the range of $253- $263 billion (rising to $325-$355 billion over 2031-2035) to align with sustainable development and climate goals.

3. Other estimates, which take into account the investment gap (the difference between what is required and what could reasonably be made available from conventional sources) to achieve net-zero by 2070, suggest that the total funds required amount to $10.1 trillion.

4. However, the current investment available for climate action in India is only $44 billion per year, as per Climate Policy Initiative report.

This week in Baku

1. The COP29 Presidency of Azerbaijan will be hosting a series of critical climate negotiations in Baku this week across both technical and political tracks of the UN talks.

2. Pre-COP” week began with progress on the technical work needed to agree on and establish Article 6 at COP29, the basis for implementing effective carbon markets, which could provide up to $250 billion of annual efficiency savings by 2030 in the identification and rollout of climate mitigation projects.

3. The COP29 Presidency has appointed ministerial and high-level pairs across key areas including the New Collective Quantified Goal (NCQG) for climate finance, Article 6, adaptation, mitigation, and transparency.

4. The High-Level Ministerial Dialogue on the NCQG and political engagements around this week’s meeting serve as crucial junctures where technical expertise and political will converge.

5. The NCQG remains the top negotiating priority for the COP29 Presidency. It is essential for enabling climate action, particularly for developing nations, and must address both the urgency and scale of the problem.