The World Bank has made a significant commitment to accelerating India’s transition to low-carbon energy sources by approving USD 1.5 billion in funding for a second initiative. This substantial financial support underscores the urgency and importance of addressing climate change while promoting sustainable economic growth in rapidly developing nations.
This initiative is part of a broader global effort to combat climate change and align with the objectives set forth in the Paris Agreement. As countries worldwide strive to meet their commitments to reduce greenhouse gas emissions and shift towards cleaner energy sources, India’s progress in this area is particularly crucial given its size, population, and growing energy needs.
The World Bank’s funding will be strategically allocated to three primary areas of focus:
1. Green Hydrogen Development: A significant portion of the funds will be directed towards fostering a robust market for green hydrogen. This clean fuel, produced using renewable energy sources, has immense potential to revolutionise various sectors, including transportation and industrial processes. By investing in green hydrogen infrastructure and technology, India can position itself at the forefront of this emerging field.
2. Expansion of Renewable Energy: Building upon existing efforts, the funding will support the continued scaling up of renewable energy sources, with a particular emphasis on solar and wind power. This expansion is critical for reducing India’s dependence on fossil fuels and decreasing its carbon footprint.
3. Stimulating Private Sector Investment: Recognising the importance of private sector participation in driving the low-carbon transition, the World Bank’s funding will aim to catalyse additional investment in low-carbon energy projects. This approach can help leverage public funds to attract significantly more private capital, accelerating the pace of change.
This latest funding initiative is the second in a series of two similar-sized operations. The first, known as the Second Low-Carbon Energy Programmatic Development Policy Operation, laid the groundwork for this follow-up effort.
To provide context, it’s worth noting that the World Bank approved the initial USD 1.5 billion First Low-Carbon Energy Programmatic Development Policy Operation in June 2023. This earlier operation supported several key initiatives:
1. It waived transmission charges for renewable energy in green hydrogen projects, enhancing their economic viability and attractiveness to investors.
2. It established a clear roadmap for launching 50 GW of renewable energy tenders annually, providing a stable and predictable pipeline for renewable energy projects.
3. It created a legal framework for a national carbon credit market, which can incentivise emissions reductions across various sectors of the Indian economy.
The reforms supported by this latest operation are expected to yield significant and measurable outcomes:
1. From the fiscal year 2025-2026 onwards, it is projected that at least 450,000 metric tons of green hydrogen will be produced annually.
2. Starting in the same fiscal year, there are plans to install 1,500 MW of electrolysers annually, which are crucial for green hydrogen production.
3. A substantial increase in renewable energy capacity is anticipated, though specific targets are not mentioned in the given information.
4. The initiative aims to support emissions reductions of 50 million tons per year, a significant contribution to India’s climate goals.
Moreover, this operation will bolster efforts to expand India’s carbon credit market. This market-based mechanism can provide financial incentives for reducing emissions across various sectors of the Indian economy, from industry to agriculture. By creating a robust carbon trading system, India can align economic incentives with environmental goals, potentially accelerating the transition to a low-carbon economy.
This USD 1.5 billion funding approval by the World Bank represents a substantial and strategic investment in India’s low-carbon future. By focusing on key areas such as green hydrogen, renewable energy expansion, and private sector engagement, this initiative has the potential to significantly accelerate India’s transition to cleaner energy sources.
The expected outcomes, including increased green hydrogen production, expanded renewable energy capacity, and substantial emissions reductions, underscore the transformative potential of this funding. As India continues to grow and develop, such initiatives will be crucial in ensuring that this growth is sustainable and aligned with global climate objectives.