A prolonged heatwave followed by a monsoon when it rained heavily or not at all—leading to a vicious cycle of droughts, floods, landslides, storms—that was climate-changed India 2024. The situation has been getting worse for around three decades, as the global average temperature has climbed to 1.2 degrees Celsius above pre-industrial levels. With business as usual, it is projected to rise by at least 2.7 degrees by the end of the century.

India finds itself in a peculiar position. It is the world’s third largest emitter of greenhouse gases—mainly carbon dioxide—that are warming up the atmosphere. Only China and the US emit more. But India’s per capita emission is among the world’s lowest, though it is projected to go up as more people use more electricity. At the same time India is among the world’s ten-worst impacted countries, with around Rs 13.35 lakh crore spent on climate adaptation in 2021-22, just over 5.5% of its GDP, according to the government. It expects to spend another Rs 57 lakh crore for the same purpose by 2029. This does not include the money being spent on renewable energy—the main way to control greenhouse gas emissions—by central and state governments, private firms and individuals.

The United Nations Framework Convention on Climate Change (UNFCCC) has coordinated global efforts to combat this menace since 1995, when its first conference of parties (COP) was held. Since then, India has argued that developed countries—with 20% of the world’s population—have placed 80% of the greenhouse gases in the atmosphere since the start of the Industrial Age, so developed countries must pay developing countries to deal with the problem.

This has led to protracted and ongoing debates at the annual COPs, with developed countries saying China and India now emit more and that rich countries are already paying as much as they can. India has stuck to its guns. At the 2023 COP in Dubai, it asked rich countries to provide at least $1 trillion per year to developing countries from 2025, primarily through grants and concessional finance rather than commercial loans.

UNFCCC reported this September that developing countries will need between $5.01 and $6.85 trillion by 2030 to support the activities they have pledged to deal with climate change.

A study by New Delhi-based International Forum for Environment, Sustainability and Technology (iFOREST) has estimated that India itself will need more than $1 trillion (Rs 84 lakh crore) by 2050 just to move away from coal mining and thermal power plants.

The 2024 COP in Baku—the capital of Azerbaijan—started with this backdrop of large finance requirements. The main aim was to finalise the “New Collective Quantified Goal” (NCQG) of climate finance. 

Mukhtar Babayev, Azerbaijan’s Minister for Ecology and Natural Resources and the President-designate for this year’s COP, pointed out that between December 023 and May 2024, extreme weather caused damage worth $41 billion. More recent was Hurricane Helene, which alone is estimated to have caused damage worth $250 billion in the US. There is really no option but to control greenhouse gas emissions, and to find the money to move towards cleaner energy sources. Babayev said, “We need to work together to deliver fair and ambitious climate finance first and foremost.” 

UNFCCC Executive Secretary Simon Stiell said before the COP, “Over a trillion dollars was invested in climate action last year globally. Up from a few hundred billion a decade ago…But relative to where we need to be—this is nowhere near enough. This year we’ve seen hundreds of billions of dollars of damage to countries rich and poor. So, we know trillions more are needed. Doing so is a crucial investment to protect the global economy, and will be a fraction of the costs every nation will pay if we allow the climate crisis to keep running rampant, devastating more and more lives and livelihoods every year.”

Many developing countries—including India—hold that climate justice demands payment from rich nations in the form of grants and soft loans. Developed countries have made it clear that they cannot afford anywhere near such amounts. So, where is the money to come from? It is now agreed by many countries that most of the money will have to come from private investors, while grants and soft loans from governments and organisations like the World Bank can play the crucial role of standing guarantor for the loans. The big tussle now is on four counts. First, how much will rich nations pay? Second, should large developing countries like China and India pay as well? Third, how low can the interest rates for private loans be? Fourth, which developing countries will have a preference over getting the money?

Stiell said in October, “Just this week the World Bank announced more concessional lending for climate. And the IMF is looking at ways to incorporate climate action and risks right across their work. This is good news. But incremental increases won’t lead to an exponential surge of investment and green growth. On climate finance, we have a need for speed, and without much larger scale, all economies will fail. So many countries are facing debt crises that amount to fiscal straight-jackets, making it near-impossible to invest in climate action.”

“At COP29 in Baku all governments must agree a new goal for international climate finance that truly responds to the needs of developing countries,” the UNFCCC chief added. “It’s not my job to prejudge what the new goal will look like. But it’s clear public finance must be at the core. As much of this finance as possible needs to be grant or concessional, and must be made more accessible to those who need it most…It’s also important we put in place mechanisms to track and ensure that the promised funds are delivered.”

Right now, that is the core problem. There are lots of climate funds—the Green Climate Fund under UNFCCC, the Climate Investment Fund of the World Bank, the Adaptation Fund, the Loss and Damage Fund, the LDC Fund and so on. The trouble is these funds have nowhere near the amount they need or have been promised by rich countries. Pledges have been made with fanfare, and then routinely unmet.

This is especially true for the money needed to adapt to climate change impacts. Most of the money goes into mitigation, in the form of solar and wind projects. But even there, “The world is at risk of missing the target of tripling renewable energy capacity by 2030,” according to Francesco La Camera, Director General of International Renewable Energy Agency (IRENA). A few weeks before the 2024 COP, he said in Baku, “The world is projected to deliver only half of the required growth in renewable power by 2030.” IRENA estimated that to reach the goal, investment in renewables needs to triple to an annual $1.5 trillion between now and 2030.

India has arguably the world’s largest renewable energy addition target in this decade, 500 gigawatts (GW) of installed capacity by 2030. It had crossed 154 GW by the end of this September. But to reach the 500 GW target, annual investments in the sector must be tripled from the $11.4 billion invested in 2023-24. Vibhuti Garg, Energy Economist and Lead India of the Institute for Energy Economics and Financial Analysis, wrote in 2022 that investments would have to be $30-40 billion annually.

India started a green bonds scheme, and has participated in other programmes to raise money for renewables. Today, there are dozens, if not hundreds of solar and wind energy entrepreneurs all over India. They still have a problem—getting paid by the government-run distribution companies for the electricity they generate—but getting a loan for the project at a reasonable rate of interest is relatively easy. The bigger problem is finding money for adaptation and to pay for the losses and damages being constantly worsened by climate change. This money has to come from the government.

Realistically, India can expect little public money from rich countries, especially since the government likes to call itself an emerging rather than a developing country. To that contrary, India is under considerable pressure to contribute more to the various funds meant mainly for smaller developing economies. The structure of the NCQG is not going to solve that problem, but it can help catalyse much-needed funding from international private sources such as investment funds.