India require to invest $12.1 trillion till 2050 for decarbonization

Climate change is a major concern. Despite emitting only 1.8 tonnes of CO2e per capita (compared to 14.7 tonnes in the US and 7.6 tonnes in China), India is the world's third largest emitter, accounting for 2.9 gigatonnes of CO2 equivalent (GtCO2e), or 4.9% of annual global emissions. Nonetheless, India has pledged to achieve net zero emissions by 2070. India, which is expected to play a critical role in the global fight against climate change, must take immediate action to lay the groundwork for a low-carbon economy. According to McKinsey & Company, decarbonizing India in an accelerated scenario will require an estimated $12.1 trillion (5.9% of GDP) in green investments until 2050. The accelerated scenario includes more far-reaching policies such as carbon pricing and faster technological adoption (including of emerging technologies like carbon capture and storage). According to the report, with current (and announced) policies and foreseeable technology adoption, India will require an estimated $7.2 trillion in green investments until 2050 to decarbonize in the line-of-sight scenario. (An additional $4.9 trillion for the 'Accelerated' scenario equivalent to 3.5% and 2.4% of India's GDP during this period). Especially in the areas of renewable energy, transportation, and agriculture, 50% of the investment needed for decarbonization is economically feasible; the remaining 50% would require policy support. The investment's net spending (CAPEX minus OPEX) is front-loaded; as an example, net of operational savings, $1.8 trillion would be required in the 2030s and $0.6 trillion in the 2040s, respectively. Currently, India emits 2.9 GTCO2e annually, of which power, transportation, steel, cement, and agriculture account for 70%. Coal, oil, and gas are the three fossil fuels that make up 34% of all carbon emissions. 28% of the total is made up of cement, steel, iron, mining, lime, and refineries. 18% of all emissions are attributed to agriculture, primarily from the production of rice and methane from cattle. According to the report, India has the ability to free up 287 Gt of carbon for the rest of the world (under the Accelerated scenario). For an equal chance of keeping global warming to 1.5 degrees Celsius, this equates to almost half of the global carbon budget. The carbon space is the maximum amount of carbon that can be released into the atmosphere by the year 2100 while still limiting the increase in global temperature to 2 degrees Celsius. With the anticipated growth outlook, the current rate of emissions intensity reduction is insufficient to cause a bend in India's emissions curve. By 2070, growth would increase demand across all sectors by eight times, including power, steel, cement, automotive, and food (double). India can increase its low-carbon capacity in the following two decades if the proper demand signalling policies are put in place within this decade. Among the many advantages, a smooth switch to RE can save India $1.7 trillion in foreign exchange that would otherwise be spent on energy imports (oil and coking coal) until 2070. The average cost of electricity in India is predicted to drop from Rs 6.15/kWh in FY20 to Rs 5.25/kWh and Rs 5.4/kWh by 2050 in the LoS and Accelerated scenarios, respectively, as the country switches from thermal power to renewable sources. To lay the groundwork for an expedited and orderly transition to a low-carbon economy, India needs to take urgent but well-considered action this decade. Rajat Gupta, Senior Partner and Asia leader of the Sustainability Practice, McKinsey & Company, says, “The benefits of a well-planned, orderly, accelerated transition would outweigh the downsides, given India’s growth outlook. But it would require the nation to act within this decade, using its growth momentum to build India right for the decades thereafter. While actions needed are challenging, most of them are economically viable, and hence the journey is doable.” See also: India plans to achieve net zero by 2070 Mumbai aims to achieve net-zero emissions by 2050