General Studies Paper 3
Context: Recently, the Reserve Bank of India’s (RBI) Department of Economic and Policy Research (DEPR) released a Report on Currency & Finance 2022-23.
About the report
- The report, themed ‘Towards a Greener Cleaner India’,does not represent the views of the RBI, and is based on the findings and conclusions of the contributors from the Department of Economic and Policy Research.
- It covers four major dimensions of climate change to assess future challenges to sustainable high growth in India.
- The areas are the unprecedented scale and pace of climate change; its macroeconomic effects; implications for financial stability; and policy options to mitigate climate risks.
- The cumulative total expenditure for adapting to climate change in India is estimated to reach ?85.6 lakh crore (at 2011-12 prices) by 2030.
- India’s goal of achieving the net zero target by 2070 would require an accelerated reduction in the energy intensity of GDP by about 5% annually and a significant improvement in its energy mix in favour of renewables to about 80% by 2070-71.
- India’s green financing requirement is estimated to be at least 5% of GDP annually till 2030 to address the infrastructure gap caused by climate events.
- Results of a climate stress test reveal that public sector banks (PSBs) may be more vulnerable than private sector banks.
- Globally, however, the measurement of climate-related financial risks remains a work in progress.
- CBDCs can be more energy efficient than much of the current payment landscape, including credit and debit cards.
- The CBDC helps curb emissions by nullifying operations such as printing, storage, transportation, and replacement of physical currency.
- In order to speed up and drive green finance in the country and meet climate goals, India needs to put in place a broad-based carbon pricing system in-line with emerging global best practices and introduce a carbon tax.
- It also recommended introducing an Emissions Trading System (ETS) linked to green taxonomy, covering all sectors of the economy, which can partly balance subsidy and tax.
- There is a need to properly record public spending on climate change and related issues and report them in a climate budget report as a supplement to the annual budget.
- India should explore ways to improve access to technology and critical mineral resources through multilateral, regional, and bilateral strategic partnerships, and step up efforts to address the variability in wind and solar power supply through appropriate energy storage technology and demand management mechanisms using smart grids.
- Other suggestions: Complementing green building standards with the Internet of Things (IoT)-based monitoring and AI and ML to manage and reduce energy demand;
- Boosting climate resilient agriculture;
- Production of green hydrogen using renewable energy; and investment in carbon capture and storage technologies.
- Central banks could mandate banks and other financial institutions to consider climate and environmental risks through various regulations.
- A balanced policy intervention with progress ensured across all policy levers would enable India to achieve its green transition targets by 2030, making the net zero goal by 2070 attainable.