The coordination of climate finance in India

Vyoma Jha, Centre for Policy Research

The Indian government recently announced the enhancement of solar energy targets under the National Solar Mission to 100 GW by 2019 as compared to the initial aim of 22 GW by 2022, targeting nearly US$100 billion in renewable energy investments over the next five years. It also established a National Adaptation Fund with an initial funding of Rs.100 crore (approximately US$16 million) as budgetary support towards climate change. While this flurry of activity indicates a commitment on part of the government towards low-carbon and climate resilient development, it also establishes a strong case for identifying the existing and future sources of climate finance to support such activities.

Increasing role of ‘climate’ in mainstream policy and investment decisions

Well-defined policies in the solar energy and energy efficiency markets, triggered by national climate policy, have spurred climate related finance through a variety of domestic and international, both public and private, sources. Most significantly, there has been an emergence of major public and private sector banks and development finance institutions in supporting climate mitigation or adaptation related efforts, lending itself to a ‘mainstreaming’ of the climate agenda within national financial actors. However, there still remains a need to engage these diverse sub-national and financial actors in national agenda setting around accessing international funds.

With no formal coordinating mechanism around climate finance in India, multiple processes for financing thrive within the country that can be broadly categorized into two distinct arrangements – one, mobilizing funding labelled climate finance, and two, mainstreaming public finance that has climate benefits. Our latest study on ‘The coordination of climate finance in India’ suggests the national climate finance landscape is highly fragmented with a wealth of stakeholders at the national and sub-national level, in both the public and private sectors playing important roles. The government needs to recognise these roles and engage these stakeholders, in order to develop a clearer sense of opportunities and priorities using both domestic and international finance.

Making good use of international ‘climate finance’

Key findings from India’s past experiences accessing international climate funds suggest that while Ministry of Environment and Forests (MoEF) is the obvious choice for making decisions on climate-related activities requiring funding, the Ministry of Finance (MoF) is better suited at negotiating large sums of international funding as it is the nodal department for receiving financial assistance from multilateral and bilateral funds. In the context of the Green Climate Fund (GCF), where India continues to play an important role in its operationalization, it is imperative that the two ministries work closely if finance accessed through the GCF is to make its way into domestic efforts on climate in a meaningful way.

One idea that has attracted a lot of interest is the creation of a new National Climate Fund, which could channel international funding. However, India already has a lot of climate funds – for instance, the coal cess-driven National Clean Energy Fund that has done little to scale up investment in clean energy though it is now getting to work; the National Adaptation Fund created during the last national budget – and Indian stakeholders will need to develop a strategy for how best to make use of the available funds to channel new and additional funding through international funds.

Ways forward on coordination around climate finance in India

A concerted strategy needs to emerge around how India could effectively link existing channels of national and international climate finance. One useful immediate step could be for the Climate Change Finance Unit and MoEF to initiate a process of engagement and interaction with other line ministries, state government, banks and businesses to consider options for maximising strategies and optimising the use of international finance from the GCF. This could help the National Designated Authority of the GCF to develop and maintain a steady roster of projects or programmes that would require new or supplemental funding.

The central objective of any national coordination mechanisms around climate finance should be to encourage the incubation of fundable ideas from relevant actors, particularly beyond the core governmental set up, about how to take meaningful domestic actions on climate change. For India, engagement with the GCF presents an opportunity to take much needed steps to better integrate international funding with emerging national development objectives in the context of a climate response.

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