Presenting the full budget for FY25, Sitharaman also said, “We will develop a taxonomy for climate finance for enhancing the availability of capital for climate adaptation and mitigation. This will support achievement of the country’s climate commitments and green transition.”
The finance ministry would be assisted by the ministry of new and renewable energy (MNRE) to work out the taxonomy.
Addressing the media on Tuesday after the budget speech, MNRE secretary Bhupinder Singh Bhalla said: “It will largely define what are the elements, what are the sources of energy or energy transition elements which would be eligible to be called green.”
Rating agency Crisil said, “Taxonomy for climate finance will facilitate the development of the market for green bonds and fund sectors such as renewable energy, battery storage and other emerging sustainable technologies.”
“Taxonomy for climate finance will enhance green finance availability. This measure is likely to have an effect only indirectly in the medium term unless it is accompanied by a mandate,” said R.R. Rashmi, distinguished fellow at The Energy and Resources Institute (TERI).
Promoting a mix
To maintain a balanced approach, along with mentioning the PM Surya Ghar scheme to set up rooftop solar installation on 10 million houses, and announcing that the Centre would come up with a policy for pumped storage projects (PSP) to boost green energy supplies, Sitharaman also mentioned the government’s plans to set up an 800 MW advanced ultra super critical (AUSC) thermal plant using indigenously developed technology.
The power plant would be developed by the joint venture of NTPC and BHEL. This is also in tandem with the government’s focus on energy security.
“In the area of solar energy, the budget promises exemption from customs duty to solar capital goods but has significantly refused to provide any exemption from customs duty on solar glass and copper interconnects,” Rashmi said.
India already has taken up a diversified approach and along with the target to achieve 500 GW of installed non-fossil power capacity by 2030, the government also plans to add about 80 GW of coal-based power generation capacity by 2032, in a bid to meet the near-term surge in demand and provide stability to the grid. These efforts to boost thermal power gains significance as India is looking at achieving uninterrupted power availability and energy security along with its green targets.
Speaking on the plan to roll out a policy for promotion of PSP, Sitharaman said the policy will be brought out for electricity storage and facilitating smooth integration of the growing share of renewable energy with its variable and intermittent nature in the overall energy mix.
Storage technologies such as battery and pump storage help in maintaining intermittency of renewable power and eventually providing grid stability.
Addressing global mechanisms
Further, at a time when global mechanisms like European Union’s Carbon Border Adjustment Mechanism (CBAM) have come into effect bringing in more regulations and climate compliances for Indian industries, mostly exports to EU member countries, the minister announced the formulation of a roadmap for moving ‘hard to abate’ industries, which include steel and cement, from ‘energy efficiency’ targets to ‘emission targets’.
The government would come up with regulations for transition of these industries from the current ‘perform, achieve and Trade’ mode to ‘Indian carbon market’ mode.
Pointing out that India aims to launch its India carbon market (ICM) in 2026, Zerin Osho, director of India programme at the Institute for Governance & Sustainable Development said the initiative could help the country achieve its nationally determined contribution (NDC) goals and potentially become the world’s largest emissions trading system by 2030.
“A well-developed carbon market in India could avoid $35 trillion in climate-related costs over the next 50 years,” Osho said.
Energizing small businesses
Further, in a bid to ensure a climate friendly ecosystem in smaller businesses, the Centre would facilitate an investment-grade energy audit of traditional micro and small industries in 60 clusters, including brass and ceramic sectors.
These smaller businesses will be provided financial support for shifting to cleaner forms of energy and implementation of energy efficiency measures. This scheme would be extended to 100 MSME clusters in the second phase.
The nuclear push
In another move to boost power generation from cleaner sources, the budget has announced support for research and development (R&D) of small, modular nuclear reactors. Sitharaman said the government will partner with the private sector to develop SMRs.
“Nuclear energy is expected to form a significant part of the energy mix for Viksit Bharat. Towards that pursuit, our government will partner with the private sector to set up Bharat Small Modular Reactors and research and develop newer technologies for nuclear energy.” The R&D funding of ₹1 trillion announced in the Interim Budget 2024-25 will be made available for the purpose, the finance minister added.
Mentioning the much touted rooftop solar scheme—PM Surya Ghar Muft Bijli Yojana—she said that against its target of 10 million installations, the scheme has generated remarkable response with more than 12.8 million registrations and 1.4 million applications son far.
“The 2024 Budget announcements—from clean energy markets, to green industry, to quality of life—can benefit from a focus on loss prevention from climate events, promoting new business models for households and small industry, a circular economy of resources, and innovative financing beyond budgetary support,” said Arunabha Ghosh, CEO, Council on Energy, Environment and Water, adding that in that regard, the budget’s proposal to define climate finance is a positive step towards mobilising capital for sustainability.
