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Union Budget Lacks Focus on Climate Change Adaptation

The announcements on low-carbon development are encouraging but don’t stipulate a strategy for climate-responsive budgeting
Union Budget

The Union Budget 2022-23 underpinned climate action among the four priority areas of the government along with PM Gati Shakti, inclusive development and energy transition. By including clean energy and electric mobility in the list of sunrise sectors, the Budget has tried to send an important signal to investors, financial institutions and the workforce alike. The announcements may pave the way for the reduction of carbon intensity in the economy. 

increased outlays for Low-Carbon Development 

The government has shown its intent to outpace fossil fuel-based power generation by increasing the outlays and introducing provisions to strengthen the demand and supply side of the clean energy transition. Moving towards the target of 500 gigawatt (GW) of installed electricity capacity from non-fossil fuel sources by 2030, India recently hit 104 GW.

The allocation for Central schemes of the ministry of new and renewable energy was increased by 16.8% compared to the Budget Estimates (BE) of last year, and the intra- and extra-budgetary resources support of the ministry’s primary arm Indian Renewable Energy Development Agency was hiked threefold

The Budget also gave a concerted push to facilitate domestic manufacturing of 280 GW of installed solar capacity by 2030 by allocating an additional Rs 19,500 crore to the production linked incentive with a priority to fully integrate manufacturing units to Solar Photovoltaic modules. However, the uptake of the scheme by the investor community remains a question.

The revised estimates (RE) of spending on the Faster Adoption and Manufacturing of Electric Vehicle, 2015, scheme was increased by Rs 800 crore to Rs 2,908 crore. The battery swapping policy with interoperability standards announced in the Budget will further promote the thriving ecosystem for the electric or hybrid vehicles market. Furthermore, the government has emphasised reducing emissions in urban and infrastructure development, a high carbon-intensive sector, through many policy provision announcements. 

New mechanism for leveraging Climate financing

Leveraging climate finance through the launch of a sovereign Green Bond for urban infrastructure development seems to be a promising initiative to complement public-climate finances. However, there is a need for a robust policy direction to mitigate the risk of “green washing” of investment and channelise the proceeds of such bonds towards projects with positive climate benefits.

skills for harnessing Green Jobs 

The Budget has a new provision for green jobs creation in the clean energy transition, which is encouraging for those looking towards a stronger sustainability thrust. According to an estimate, India’s renewable energy sector has the potential to employ around one million people by 2030, which would be 10 times more than the existing workforce of an estimated 1.1 lakh people.  However, there is a need to ramp up efforts on skilling youth and women towards harnessing the employment opportunity offered.

Climate Adaptation needed alongside Mitigation 

While a number of initiatives have been announced to mitigate climate change, adaptation seems to have lost its focus. This outlays for adaptation-oriented programmes such as the National Adaptation Fund on Climate Change, Climate Change Action Plan and Green India Mission seem stagnant. Financing climate-resilient action requires a significant financing commitment from governments as well as private investors who are yet to look at adaptation as an investment opportunity. 

Overall, the Budget shows the government’s intent for a low-carbon economy. However, the idea has to permeate to the states and motivate them to take similar steps to become climate-responsive in development planning and economic service deliveries. Therefore, following a uniform national strategy for ‘climate-responsive budgeting”, a long-standing demand as mentioned by many experts in the past, needs to be evoked in the budgetary process.

The authors work with the Centre for Budget and Governance Accountability, New Delhi. The views are personal.

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