Climate Change
Initiatives In India:
Convergence of Actions
2015
Foreword
D. S. Rawat
Secretary General
ASSOCHAM
For arriving on consensus to achieve a legally binding and
universal agreement on reducing emissions, Conference of
the Parties (COP 21) and Kyoto Protocol (CMP 11) will be held
in Paris, France from 30 November to 11 December 2015.
In addition to the macro policy framework, the fact remains
that there is a pressing need to enhance mitigation initiatives
and adaptation responses to address issues in protecting
vulnerable from climate change. This calls for a convergence
among public and private development agencies who have
long been tackling the issue of vulnerability reduction through
their respective activities such as disaster risk reduction,
mitigation of climate change, environmental management and
poverty elevation.
Climate change is a pressing issue globally and it calls for
a strong governing framework which makes the roles and
responsibilities more transparent at every stage. In reality,
climate change is here now, and it is as much opportunity
as risk for those who are wise enough to adapt early on. We
should be beyond merely recognising the scientiÕc fact of
climate change. Credit crunch or not, now is the time to Õnd
the right response and act. The long-term stability of our
environment and economy depend on it.
I am pleased to present this ASSOCHAM Publication on
‘Climate Change’ which provides focused solutions on
Õnancing climate change initiatives in India, which are critical
for our environment, health and livelihood.
I sincerely thank our Knowledge Partner Ernst & Young for its
signiÕcant effort in preparing the report on this critical topic of
Climate Change Initiatives in India : Convergence of Actions.
I appreciate the efforts and contribution of Dr. Om S Tyagi,
Ms Purnima Dhingra, Mr Amit Bunger and Mr Nitesh Sinha for
organizing this Conference.
I believe this publication will serve as an invaluable resource,
providing the necessary framework to inform various
stakeholders on the risks of climate change and to engage
them in the crucial debate on how to manage these risks
going forward.
Contents
Vulnerability to climate change and
its solutions
1.1 Climate change vulnerability in the Indian subcontinent
1.2 Evolution of market-based solutions to combat climate change
IndiaËs current hractices related to Ônancing
climate change vulnerability solutions
2.1 India’s position and current practices
2.2 Domestic climate Õnance mechanisms and Öows
2.3 Role of banks
2.4 Green Bonds
15
2.5 International funding
Convergence of climate initiatives
and way forward
3.1 International convergence initiatives
3.2 Mechanism of convergence within India
3.2.1 Emphasizing on centre-state-municipal collaborations
3.2.2 Encouraging public private partnerships
3.2.3 Encouraging the private sector and non-proÕt'civil society
organizations
3.3 Success story
3.4 Recommendations
4
09
27
Dist of Ôgures
Figure 1: Climate change and environmental risk atlas 2014
- 10
Figure 2: Global Climate Change Risk Index
- 10
Figure 3: Evolution of market & non-market mechanisms
under the UNFCCC
- 11
Figure 4: Illustrative representation of carbon markets
- 12
Figure 5: Illustrative representation of Öow of climate Õnance
- 19
Figure 6: Budget requirements of state governments for
implementing SAPCCs for Õve years (in INR billion)
- 21
Figure 7: Cost estimates for Implementing State Climate
Action Plans
- 22
Figure 8: Convergence of the solutions
- 29
Figure 9: Project stakeholders for Rajasthan Sun Technique plant
- 31
5
Executive
summary
There is growing evidence that providing businesses and
consumers with market-based mechanisms for addressing
environmental problems can achieve equal or better
compliance while reducing costs and improving technological
innovation. In the context of climate change, countries
have agreed to use several market-based mechanisms in
implementing greenhouse gas emissions reductions through
emissions trading. In the light of adaptation and mitigation
actions across the globe, the major barrier is lack of Õnance.
The incentive to invest a large of sum of money in a business,
which is not tangible, does not attract a large number of
entrepreneurs. More often than not, it becomes the role of
the regulator to force in the actions through market based or
regulatory mechanisms.
Used by governments for decades, market-based mechanisms
are used to control environmental pollution at various leverage
points. They work by changing relative prices — raising the
cost of emissions-intensive activities and'or lowering the
cost of lower-emitting alternatives — to provide producers
and consumers with a Õnancial incentive to adopt the latter.
Adopted in 1997 by UNFCC, the Kyoto Protocol deÕnes a
66 | Climate Change Initiatives In India: Convergence of Actions
target for GHG emission reductions for the period between
2008 and 2012 of 5.2% as compared with 1990 level
through established international market-based mechanism,
such as emissions trading, joint implementation and clean
development mechanism (CDM) to meet the targets.
India has voluntarily committed itself to reducing its
emissions intensity by 20%–25% of its 2005 levels by 2020.
Furthermore, in June 2008, the Prime Minister’s Council
on Climate Change announced the adoption of the National
Action Plan on Climate Change (NAPCC) to identify measures
that promote development objectives while also yielding
co-beneÕts for addressing climate change effectively. This
plan has identiÕed eight core Énational missionsÊ and calls
for Éidentifying measures that promote our development
objectives while also yielding co-beneÕts for addressing
climate change effectivelyÊ (Prime Minister’s Council on
Climate Change 2008). In addition to the National Action
Plan on Climate Change, the Government of India has taken
several other measures to promote sustainable development
and address the threat of climate change. These initiatives
operate at the national and sub national level and span
domains that include climate change research, clean
technology research and development, Õnance, and energy
efÕciency and renewable energy policy and deployment.
What is essentially required, over and above the initiatives is
a convergence. Convergence not only among institutes and
panels but among the various approaches that lead to solutions
regarding climate change. The Government and private sector
needs to work hand-in-hand to develop better infrastructure
and research on innovative techniques to curb pollution and
global warming at a micro-level. The incentive mechanism
needs to develop in the society, which inculcates intangible
beneÕts of the environmental safeguard as a direct cost. India
also needs to design a dedicated Õnancial and governance
instrument to link national government climate plans and statelevel expenditures on climate change, to improve the delivery
of domestic climate Õnance. Furthermore, India needs to put in
place a domestic MRN mechanism on various Õnancial Öows.
It needs to go beyond mere reporting, but also look into the
qualitative aspects of Õnancial Öows.
The decentralized international approaches of Carbon Pricing
Leadership Coalition and Partnership for Market Readiness
can be replicated in India, which is structurally a decentralized
democracy. India needs to focus on channelling it funds and
providing incentives to different players in the economy to
form a consortium to tackle climate change. The primary
motive worldwide is to price carbon and it surfaces into
the grassroots of the economy through a regulatory
channel. India should choose a mechanism, which suits
the appropriate actions required for the country. There
have been quite a few initiatives already taken by the
Government. We take a few examples to highlight the
approach. Private sector and non-proÕt organizations in
India have competency to bring innovative solutions and
scale to various models for climate change adaptation
shaped by the civil society and'or govt. There is a vital need
for the Government to involve them through innovative
and alluring partnerships, while on other hand induce
them to take it as their prime responsibility. Globally, many
community-focused social venture capital funds have
emerged in recent years seeking to strike a balance between
social beneÕt and Õnancial returns. Green Bonds were
identiÕed as one of the key Õnancial instruments that can
provide Indian RE project developers with access to scalable,
long-term, low-cost debt capital from institutional investors.
Climate Change Initiatives In India: Convergence of Actions | 7
8 | Climate Change Initiatives In India: Convergence of Actions
Vulnerability to climate change
and its solutions
The scale of international climate change negotiations has
grown constantly, since the 1992 Rio Earth Summit, which was
an important milestone in international climate negotiations.
This was followed by the Kyoto Protocol in 2005 followed by
the Bali Action Plan in 2007, which had a long-term vision. The
Copenhagen Climate Summit in 2009 saw the world validating
the common goal of limiting global warming to 2°C. In 2010,
the Cancun Conference enabled countries to make this goal
effective through the creation of dedicated institutions for
key points, including those for adaptation, the Green Climate
Fund and the Technology Mechanism. This will be further
strengthened by the 21st Session of the Conference of the
Parties (COP-21), which will be hosted and presided over by
France. COP 21 aims to achieve, for the Õrst time in more than
20 years of UN negotiations, a binding and universal agreement
on climate, from all the countries of the world. The overarching
goal of the Convention is to reduce greenhouse gas emissions to
limit the global temperature increase to 20C above
pre-industrial levels.
Considering China’s agreement to the Convention, it may
be expected that India is not lagging behind in the trial. The
GHG-mitigation challenge comes at a time when India already
faces extremely pressing challenges, such as the urgent
need to expand its energy sector to fuel economic and social
development and enhance energy access for all citizens.
Nonetheless, India, like all other major economies, will also have
to alter its GHG-emissions trajectory, despite the fact that India’s
energy economy will be strained by these efforts.
Concerns regarding fairness, equity and burden-sharing are
the central theme of negotiations on international climate
agreements. More so, considering the problems of sharing of
responsibility, lack of Õnancial capability and the tremendous
direct and indirect economic, human, and environmental cost
involved. It has been argued that a per-capita based allocation
framework will be the appropriate approach to think about
GHG emission reduction commitments. Not surprisingly,
this argument has not found much traction in industrialized
countries, given their high per-capita emissions. On the other
hand, India being a developing country will have a plethora
of opportunities for development and investments driving
the economy under this umbrella of climate change
through the medium of climate change funds from various
international funding institutes and private agencies
channelling their investment as loans.
1.1 Climate change vulnerability in
the Indian subcontinent
Future estimates of the overall cost of climate change on
the global economy include a wide spectrum of opinions.
What cannot be disputed is that the ÉhighÊ and Êextreme
riskÊ countries include emerging and developing markets,
whose importance to the world economy is ever increasing.
More than 530,000 people died as a direct result of almost
15,000 extreme weather events, and losses of more than
US$2.5 trillion (in public private partnership) occurred
from 1993 to 2012 globally1. According to the Climate
Change Vulnerability Index (CCVI), 67 countries have
been identiÕed who come under increasing threat from
physical impacts of more frequent and extreme climaterelated events, such as severe storms, Öooding or drought.
The economic impacts of climate change will be most
keenly felt by Bangladesh (Õrst and most at risk) whereas
important growth markets at risk include — India (20th),
Pakistan (24th) and Vietnam (26th) all classiÕed at Êhigh
riskÊ2.
Ź CCVI has been developed to identify climate-related
risks to populations, business and governments over
the next 30 years.
Ź It includes exposure to extreme climate-related
events, the sensitivity of populations, and the adaptive
capacity of countries to combat the impacts of climate
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Climate Change Initiatives In India: Convergence of Actions | 9
Figure 1: Climate change and environmental risk atlas 2014
Ź CCVI has been developed to
identify climate-related risks
to populations, business and
governments over the next 30
years.
Ź It includes exposure to extreme
climate-related events, the
sensitivity of populations,
and the adaptive capacity of
countries to combat the impacts
of climate change.
Source: http://www.indiaenvironmentportal.org.in
Figure 2: Global Climate Change Risk Index
Ź The Global Climate Risk Index
2014 analyzes to what extent
countries have been affected
by weather-related loss events
(storms, Öoods, heat waves
etc.).
Ź The most recent data available
from 2012 and 1993–2012
were taken into account.
Source: www.germanwatch.org/en/cri
10 | Climate Change Initiatives In India: Convergence of Actions
Both the indices highlight the Indian subcontinent to be highly
at risk. The ability of highly vulnerable countries to manage
the direct impact of extreme events on infrastructure will
be a signiÕcant factor in mitigating the economic impacts of
climate change and may present opportunities for investment.
Adaptive measures, such as building Öood defenses and
increased infrastructure resiliency, will, however, require the
sustained commitment of governments. A warming planet
and changing climate will have signiÕcant but varied global
affects. India has around 4,400 miles of coastline, more
frequent and intense coastal storms could cause enormous
damage to human settlements and coastal ecosystems, while
resulting in loss of life. Similarly, an increase in sea levels,
driven by increases in the global mean temperature, will
have signiÕcant implications for coastal communities. The
substantial number of poor in India, who are particularly
vulnerable to these kinds of climatic impacts, will be exposed
to signiÕcant risk (IPCC, 2001). India’s economic exposure
to the impacts of extreme climate related events was
recently highlighted by Cyclone Phailin. The storm caused
an estimated US$4.15 billion of damage to the agriculture
and power sectors alone in the state of Odisha, which is also
India’s most important mining region. Up to 1 million tons
of rice were destroyed, while key infrastructure, including
roads, ports, railway and telecommunications were severely
damaged, causing major disruption to company operations
and the supply chains of industrial users of minerals.
1.2 Evolution of market-based solutions
to combat climate change
There is growing evidence that providing businesses and
consumers with market-based mechanisms for addressing
environmental problems can achieve equal or better compliance
while reducing costs and spurring technological innovation. In
the context of climate change, countries have agreed to use
several market-based mechanisms in implementing greenhouse
gas emissions reductions through emissions trading.
In the light of adaptation and mitigation actions across the
globe, the major barrier is the lack of Õnance. The incentive for
investing a substantial of sum of money in a business, which is
not tangible, does not attract a large number of entrepreneurs.
More often than not, it becomes the role of the regulator
to force in the actions through market-based or regulatory
mechanisms. With increasing importance of India as a global
economy and its role at crucial international forums dealing
with economic and climate change issues, climate change and
Õnancing thereon has been included in the scope of the annual
Economic Survey by the Ministry of Finance.
The drive for giving incentives to private players to indulge
in mitigation and adaptation actions was served through the
introduction of market-based mechanisms. These mechanisms
gave private agents an incentive for doing business in the new
market called carbon market, where pollution levels could be
curbed through the act of pricing the pollution and setting a
market for it. The evolution of the market is illustrated in the
Õgure below.
Maturity of mechanism
HIGH
Figure 3: Evolution of market & non-market mechanisms
under the UNFCCC
Coventional
CDM
Kyoto track
(1997/COP3)
CDM
Programme of
activites
(POA)-(2007)
CDM
(2001/COP7)
LCA
(Bali action plan
2007/COP13)
Autonomous
NAMAs (2009/
COP15)
Supported
NAMAs (2009/
COP15)
REDD+
(2009/COP15)
Sectoral
mechanisms
LOW
New market
mechanism
(CO17)
1997
2001
2007
2009
2011
Source: Perspectives Analysis; UNEP Risoe 2012
Climate Change Initiatives In India: Convergence of Actions | 11
Used by governments for decades, market-based mechanisms
are used to control environmental pollution at various leverage
points. They work by changing relative prices — raising the cost of
emissions-intensive activities and/or lowering the cost of
low-emitting alternatives — to provide producers and consumers
with a Õnancial incentive to adopt the latter. Adopted in 1997
by UNFCC, the Kyoto Protocol deÕnes a target for GHG
emission reductions for the period between 2008 and 2012
of 5.2% as compared with 1990 level through established
international market-based mechanism, such as emissions
trading, joint implementation and clean development
mechanism (CDM) to meet the targets.
Figure 4: Illustrative representation of carbon markets
Carbon Market
Carbon Trading
Carbon Crediting
Threshold
for Credit
Emission
Allowance
Credit
bought
Buyer:
Low Emission
Seller:
High Emission
Original
emission
Emission
post-credit
Source: EY
CDM works by having a polluter in a poor nation accept CDM
money and then compares their actual situation to a story
about what might have been if they had not been paid that
12 | Climate Change Initiatives In India: Convergence of Actions
money. The claim then undergoes a certiÕcation process.
However, the process generates a CertiÕed Emissions
Reduction (CER), which can be used as permission to pollute
within rich Kyoto signatories.
Carbon Markets are failing due to at least three systematic failures.
Lack of Environmental Integrity
Corruption and Non-Transparency
Unsustainable Practices
Government ofÕcials claimed that none
of the CDM projects in India (the second
biggest host of CDM projects after
China) can be considered ‘additional’.
The GFL gas project in Gujarat, India,
for example, has been one of the
biggest producers of CDM carbon
offset credits in the world, selling them
to many of the biggest polluters in
the EU. GFL has proÕted immensely
from the CDM, and Europe’s polluters
have had a cheap way to offset their
climate responsibilities without actually
greening their way at all.
Carbon markets have created a lot of
income for consultants, carbon brokers
and project developers, not to mention
the validators, policy makers, NGO
professionals and academics who have
made a living from these markets.
There is very little independent and
democratic oversight in the system.
Instead, there are many revolving doors
between the business, policy, NGO and
university worlds, fuelling accusations of
corruption.
AT Biopower, a Thai company that
generates renewable electricity by
the burning of rice husk is able to sell
carbon credits to Japanese and other
polluters. AT Biopower presents rice
husk as a waste product, but, it is
actually a vital source of fertilizer
in the local, sustainable economy
of subsistence farmers. Farmers
now have to buy petroleum-based,
chemical fertilisers, which makes
them worse off and creates negative
environmental impacts.
New market mechanisms (NMM) were established as a part
of post-2012 Bali Action Plan under the UNFCCC for the
consideration of Évarious approaches, including opportunities
for using markets, to enhance the cost-effectiveness, and
to promote, mitigation actions, bearing in mind different
circumstances of developed and developing countries.Ê
NMM is designed to scale-up mitigation activities beyond
project and program-level activities. The new scale is
called Ébroad segments of the economy,Ê which may cover
sectors, subsector and cross-sectoral policies. NMM were
comprehensive processes to enhance implementation
action on mitigation of climate change through ÉNationally
Appropriate Mitigation Actions (NAMA) by developing country
parties in the context of sustainable development, supported
and enabled by technology, Õnancing and capacity-building,
in a measurable, reportable and veriÕable mannerÊ (UNFCCC,
2007). In order to facilitate provision of support to prepare
and implement NAMAs, Cancun Agreements set up Éa registry
to record nationally appropriate mitigation actions seeking
international support and to facilitate matching of Õnance,
technology and capacity-building support for these actionsÊ.
What is essentially required, over and above the initiatives is
a convergence. Convergence not only among institutes and
panels but among various approaches that lead to solutions
regarding climate change. The government and private sector
needs to work hand-in-hand to develop better infrastructure
and research on innovative techniques to curb pollution and
global warming at a micro-level. The incentive mechanism
needs to develop in the society, which inculcates the intangible
beneÕts of the environmental safeguarding as a direct cost.
Climate Change Initiatives In India: Convergence of Actions | 13
14
14 | Climate Change Initiatives In India: Convergence of Actions
Financing climate change actions in India: convergence of climate initiatives |
IndiaËs current practices related to Ônancing
climate change vulnerability solutions
Adaptation and mitigation responses are underpinned by
common enabling factors, which include effective institutions
and governance, adequate and long-term Õnancing in
environmentally sound technologies and infrastructure,
sustainable livelihoods and behavioral and lifestyle choices.
India has chalked out ambitious plans and policies to tackle
climate change and environmental issues that reÖect India’s
strong will to address this global public issue. However, given
the scarcity of resources and other competing demands,
Õnding matching resources is a challenge. In its Interim Report,
the Expert Group on low carbon strategies has also stated that
aggressive mitigation cannot be achieved without substantial
international Õnancial support, both in terms of Õnancial
resources and technology transfer. Domestic momentum
for addressing climate change also critically depends on
multilateral negotiations and actual disbursement of
long-term Õnance.
2.1 India’s position and current
practices
India being a developing country is categorized as a non-Annex
1 country in the international climate negotiations. This status
means that currently India is not required to take up any legally
binding commitments for countering climate change. However,
India has voluntarily committee itself to reducing its emissions
intensity by 20%–25% of its 2005 levels by 2020. Furthermore,
in June 2008, the Prime Minister’s Council on Climate Change
announced the adoption of the National Action Plan on
Climate Change (NAPCC) to identify measures that promote
development objectives while also yielding co-beneÕts for
addressing climate change effectively. This plan has identiÕed
eight core Énational missionsÊ and calls for Éidentifying
measures that promote our development objectives while also
yielding co-beneÕts for addressing climate change effectivelyÊ
(Prime Minister’s Council on Climate Change 2008).
India’s current stand on climate change: highlights
Ź The Prime Minister has stated that India’s per capita
emission levels will never exceed that of the per capita
emission levels of developed countries
Ź India cannot and will not take on emission reduction
targets because:
• Poverty eradication and social and economic
development are the Õrst and over-riding priorities
• Each human being has equal right to global
atmospheric resources (i.e., Principle of Equity)
• ÉCommon but differentiated responsibilityÊ is the basis
for all climate change actions
Ź India will continue to be a low-carbon economy,
according to ÉIndia: Strategies for Low Carbon GrowthÊ3
Ź India’s primary focus is on ÉadaptationÊ, with speciÕc
niches for ÉmitigationÊ4
Ź India has already started work on a comprehensive
National Action Plan on Climate Change whose activities
are in the public domain.
Ź Only the Nationally Appropriate Mitigation Actions
(NAMAs) can be subject to international monitoring,
reporting and veriÕcation that are enabled and
supported by international Õnance and technology
transfer.
Ź India advocates collaborative research in future lowcarbon technology and access to intellectual property
rights (IPRs) as global public goods.
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Climate Change Initiatives In India: Convergence of Actions | 15
Points of concern for India
Ź Differentiation among developing countries sought to be
introduced
Ź Sectoral approaches to mitigation actions outside Bali
Plan being advocated
Ź Making all nationally appropriate mitigation actions
(NAMAs) subject to international monitoring, reporting
and veriÕcation
Ź Requirement for quantiÕcation of emission reductions
from baseline scenario
Ź Ambiguity in responsibility for Õnance and
technology transfer
India’s Proactive Contribution to Climate Change
Negotiations
Ź Actively involved with G77 and China to evolve common
position on negotiations
Ź Made 9 submissions to UNFCCC on Õnance, technology,
forestry and other areas, e.g.,
• Suggested a mechanism for technology transfer and
development
• Suggested a Õnancial architecture for climate change
Ź Presented a proposal for comprehensive approach to
REDD+
Ź Worked with China, Brazil, South Africa and 33 other
countries to present a joint proposal for emission
reduction targets by Annex 1 countries in second
commitment period
The Government of India has introduced and implemented
several initiatives, policies, regulations and undertaken
missions to mitigate climate change and face the adaptation
challenges. Following is the list of initiatives/missions taken
by the government of India to combat climate change and its
objectives:
Ź Jawaharlal Nehru National Solar Mission: The mission
aims to establish India as a global leader in solar energy,
by creating the policy conditions for its diffusion across
the country as quickly as possible. The Mission has
adopted a three phase approach.
Ź National Mission for Enhanced Energy EfÔciency:
This Mission aims to achieve growth with ecological
sustainability by devising cost-effective and energyefÕcient strategies for end-use demand side management.
Ź National Mission on Sustainable Habitat: To promote
sustainability of habitats though improvements in
energy efÕciency in buildings, urban planning, improved
16 | Climate Change Initiatives In India: Convergence of Actions
management of solid and liquid waste including recycling
and power generation, modal shift toward public
transport and conservation.
Ź National Water Mission: It aims to conserve water,
minimize wastage and ensure equitable distribution
both across and within states through integrated water
resources development and management.
Ź National Mission for Sustainable Agriculture: It aims
to transform agriculture into an ecologically sustainable
climate resilient production system while at the same
time, exploiting its fullest potential and thereby ensuring
food security, equitable access to food resources,
enhancing livelihood opportunities and contributing to
economic stability at the national level.
Ź National Mission for Sustaining the Himalayan
Ecosystem: It plans to evolve management measures for
sustaining and safeguarding the Himalayan glaciers and
mountain ecosystem and attempt to address key issues
namely impacts of climate change on the Himalayan
glaciers, biodiversity, wildlife conservation and livelihood
of traditional knowledge societies.
Ź National Mission for a Green India: This Mission plans to
use a combination of adaptation and mitigation measures
in enhancing carbon sinks in sustainably managed
forests and other ecosystems, adaptation of vulnerable
species/ecosystems, and adaptation of forest-dependent
communities.
Ź National Mission on Strategic Knowledge for Climate
Change: This mission aims to identify challenges and
responses to climate change through research and
technology development and ensure funding of high
quality and focused research into various aspects of
climate change.
In addition to the National Action Plan on Climate Change,
the Government of India has taken several other measures
to promote sustainable development and address the threat
of climate change. These initiatives operate at the national
and sub national level and span domains that include climate
change research, clean technology research and development,
Õnance, and energy efÕciency and renewable energy policy
and deployment.
Ź National Clean Energy Fund
Ź State Action Plan on Climate Change
Ź NABARD: Progressing Adaptation Actions
Ź Auto Fuel Vision and Policy 2025
Ź Indian Network for Climate Change Assessment
Ź Expert Group on Low Carbon Strategies for Inclusive
Growth
Ź Bilateral Cooperation on Environment and
Clean Technology
Details of a few important initiatives have been summarized in the table below.
Mission
Targets
Responsible Entity
Allocation of funds for twelfth
Ôve Qear Plan Period
(2012–2017) (in billion)
Mission focused on mitigation
Ź National solar mission
Ź National mission for
enhanced energy efÕciency
Ź National mission for
sustainable habitat
Mission
20,000 MW of solar power by
2020
Ministry of new & renewable
energy
INR87.95
10,000 MW of EE savings by
2020
Ministry of power
INR1.90
EE in residential and commercial
buildings, public transport, Solid
waste management
Ministry of urban development
INR 9.50
Objectives
Responsible entity
Allocation of funds for twelfth Ôve
year plan period (2012–2017)
(in billion)
Mission focused on adaptation
Ź National water mission
Ź National mission for
sustaining the Himalayan
ecosystem
Ź National mission for a green
India
Ź National mission for
sustainable agriculture
Ź National mission on strategic
knowledge for climate
change
Water conservation, river basin
management
Ministry of water resources
INR891
Conservation and adaptation
practices, glacial monitoring
Ministry of science & technology
INR16.95
6 million hectares of
afforestation over degraded
forest lands by the end of Twelfth
Plan
Ministry of environment &
forests
INR460
Drought prooÕng, risk
management, agricultural
research
Ministry of agriculture
INR1080
Ministry of science &
technology
INR9.5
Vulnerability assessment,
research and observation, data
management
Source: Ministry of environment, forests and climate change, government of India
Climate Change Initiatives In India: Convergence of Actions | 17
Climate Õnance provides the means to reconcile equity with
effectiveness and efÕciency in actions to reduce emissions
and adapt to climate change. However, current levels fall
far short of estimated needs. Climate Õnance concerns any
Õnancing that is tied speciÕcally to projects and programs for
climate change mitigation (reduction of GHG emissions) or
adaptation (actions to minimize the effects caused by climate
change). With the need to alleviate climatic changes on the
environment, India has committed itself to various renewable
energy projects and energy efÕciency projects to reduce
carbon emissions. Through CDM, India was able to make
money by creating and trading carbon credits to developed
countries. The National Action Plan on Climate Change
was also developed to give impetus to the development and
climate change adaptation and mitigation objectives that India
is pursuing. As with every project, funding it is a key element.
The most obvious source of Õnancing is government budgetary
support. Since some of the resources for adaptation and
mitigation are built into ongoing schemes and programs, most of
the funds are expected to come as sectoral Õnance. However, in
spite of the support of the Government, India will need external
support for meeting its ambitious commitments. Channelizing
international Õnance through NAMAs plays a key role in helping
India meet its climatic aspirations.
Source EY
Climate relevant sectors and its
subsectors
Waste
Management
Cleantech
Energy
Products and
servics that
improve
operational
performance,
productivity
or efÕciency
related to
pollution
Renewable
energy
Afforestation
& reforestation
Energy
efÕciency
Forest
management
Fuel switch
Reduced
deforestation
Waste
incineration
and energy
recovery
Forestry
products for
bioenergy
Compsting
recycling and
minimization
CHP, CHS
Forestry
Technology
LF methane
recovery
Building
Technology
Transport
Industrial
Applications
Vehicular
efÕciency
Energy
eggiciency
EfÕcient
lighting
Electric
vehicles
Heat & power
recovery
Appliances
Hybrid
vechicles
Recycling
Biofuels
Modal shift
Emission
control
Improved
insulation
Solar heating
Fluorinated
gases
Transport
planning
The usual framework for climate Õnance Öow in India is illustrated in the diagram below. Domestic and International funds are
channelled to the implementing agencies through various programmes planned by the government.
18 | Climate Change Initiatives In India: Convergence of Actions
Figure -: Illustrative representation of Öow of climate Õnance
Climate Finance
Private
Sector
Financing
Climate Finance coordinating agency functions:
National Governance
Delivery Bodies
Domestic
Budget
Funds
International
Funds
Coordinates CF access from a variety of sources
Needs assessment & CBA to prioritise actions
Mainstream climate Õnance solutions into national-level plans
SAPCCs
(Through Line
Ministries)
NAPCC Missions
(Through Line
Ministries)
STATE
GOVERNMENTS
DFIs
National
Development
Plans
PRIVATE
FINANCE
INSTITUTIONS
K][lgjKh][aÕ[<>Ak
CLEAN
ENERGY
Implementing &
Executing
bodies
Local
Govt
NGOs
TRANSPORT
ENERGY
EFFICIENCY
Civil
society
FORESTRY
Internationsl
organizations
Private
sector
Source: Ricardo-AEA/R/ED59216/Final Report
Climate Change Initiatives In India: Convergence of Actions | 19
*&*<ge]kla[[daeYl]ÕfYf[]
e][`YfakekYf\Ögok
The estimated actual expenditure (by national public
sources) to the adaptation needs of India, covering the
sectors of health, water, rural development and forestry,
was approximately at 2.6% of GDP in 2009–10. To meet the
requirements of NAPCC’s plans, programs and activities, being
voluntary in nature, Finance Minister Arun Jaitley announced
an increase in the target for renewable energy generating
capacity, to 175,000 megawatts by 20225 . However, the
funding for the Ministry of New and Renewable Energy is
expected to reduce by more than two-thirds in 2016, to INR3
billion (US$48 million). Nevertheless, India has expressed its
willingness to take on more ambitious mitigation projects if
there is Õnancial aid from the Green Climate Fund. Mechanisms
and initiatives undertaken by the Government of India:
The Perform, Achieve and Trade (PAT) scheme is a marketbased energy efÕciency program adopted by the NAPCC to
enhance energy efÕciency in large energy-intensive industries
and facilities, reducing speciÕc energy consumption by
approximately 5%.
Renewable Energy CertiÔcate (REC) Mechanism was
established to enable states to economically achieve their
Renewable Purchase Obligations (RPOs). Through this
mechanism, state distributors who lack adequate renewable
sources had Öexibility to meet their RPOs as a market-based
trading mechanism had been established.
The National Feed-In Premium for Wind Power was
implemented with the objectives to give different types of
investors a Õghting chance, especially since some of them were
eligible to claim accelerated depreciation beneÕt3 to encourage
autonomous power manufacturers and overseas investors to
invest in the Indian wind industry. The subsidy is disbursed only
to eligible projects, which have to meet several requirements.
ϱ
The feed-in tariff is a policy mechanism designed to accelerate
investment in renewable energy technologies. A range of feedin tariffs are operating at both the federal and state levels
in India for a variety of different sources. The MNRE’s use of
auctions to set tariffs for renewable energy projects is leading
states to re-examine their feed-in tariffs and potentially adopt a
similar process.
Guaranteed tariffs set through auctions awarded to solar
projects by the Government to meet ambitious targets of the
NAPCC’s solar mission. The projects are awarded in various
rounds through a competitive bidding process.
Preferential Ônancing instruments such as Partial Risk
Guarantee Fund (PRGF) for energy efÕciency is a mechanism
by which lending risk associated with energy efÕciency
projects can be lowered. Through this instrument, up to half
of the principal loan amount is guaranteed, in case of default
by the borrower. Complementary to the PRGF is the Venture
Capital Fund for Energy EfÕciency (VCFEE), which injects
equity funding into energy efÕciency projects. VCFEE has
been established with seed capital from the Government along
with other institutions. It provides risk capital, leverage other
private venture capital investments, and set a reasonably lower
rate of return expectation on its share of investment.
National Clean Energy Fund was created to fund research
and innovative projects in clean energy technologies. Review
of project proposals, as submitted by all types of companies
and organizations are done by the government and decisions
on disbursement of funds lie with various ministries or
committees.
Taxes in the form of Clean Energy Cess are levied on per ton
of domestic and imported coal, lignite and peat. The revenue
generated thereon is channelized into the National Clean
Energy Fund. India has gradually removed fossil fuel subsidies
for petroleum, liberalizing prices and reducing duty.
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20 | Climate Change Initiatives In India: Convergence of Actions
The budgetary requirements to meet the plans under the
NAPCC for a period of Õve years are estimated to be US$31
billion. To translate the National Policy into action, especially at
local levels, the State Action Plan for Climate Change (SAPCC)
was adopted to decentralize NAPCC objectives into local
context. In line with NAPCC, SAPCC can help states address
climate change issues. So far majority of the states have
submitted their SAPCC to the environment ministry, which has
been endorsed by the National Steering Committee on Climate
Change whilst SAPCC of three states are being considered by
Expert Committee on Climate Change.
Figure 6: Budget requirements of state governments for implementing SAPCCs for Õve years (in INR billion)
West Bengal
Uttarakhand
Tripura
182.71
INR BILLION
88.33
234.28
Tamil Nadu
4029.28
Sikkim
Rajasthan
760.95
2.62
Punjab
Puducherry
Odisha
587.96
8.25
170.32
Nagaland
37.78
Mizoram
36.75
Meghalaya
62.98
Manipur
39.17
Madhya Pradesh
47.08
Kerala
29.38
Karnataka
71.2
Jharkhand
31.79
673.94
Jammu and Kashmir
H i m a c h a l P ra d e s h
15.6
565.65
Haryana
Gujarat
Chhattisgarh
Bihar
Arunachal Pradesh
210.59
99
21.42
113.32
3194.71
Andhra Pradesh
Andaman & Nicobar Islands
4.4
Source: Ministry of Environment, Forests and Climate Change, Government of India
Climate Change Initiatives In India: Convergence of Actions | 21
Figure 7: Cost estimates for implementing state climate action plans
Sources
Intermediaries
Instruments
Uses
Focus
Sector
Disaster Recovery
INR 68754
Agriculture
Bilateral Funds
INR 245855
INR 1196
Technical
Assistance
International
Finance
INR 187488
INR 544224
Loans
Forest & Biodiversity
INR 6247
Adaptation
INR 119723
INR 344455
Multilateral
Funds
Cross Cutting Areas
INR 733
Grants
INR 12398
INR 298369
Water
INR 24043
Mitigation
INR 424501
Energy
INR 402136
Industry
INR 7348
Transport
INR 14724
Source: EY
The National Action Plan on Climate Change (NAPCC), which
was released by the then Prime Minister of India in June
2008, mainly looks into protecting the poor through inclusive
sustainable development and inclusion of civil society and
public-private partnerships in the process. However the
country needs to work out operational guidelines for detailing
scope of PPP in each sector as well as various national
development schemes.
2.3 Role of banks
Banks have been assigned a special role in the economic
development of the country and the Reserve Bank of India
has prescribed certain percentage of bank lending to be
allocated to the developmental sector called the ÉPriority
SectorÊ. Additionally, banks have begun to realize their role
as ÉmultipliersÊ for responsible and sustainable business as
they increasingly integrate evaluation on sustainability as one
of the key inputs to their decision on Õnancing and valuation
of projects. Banks play an indispensable role in mobilizing
Õnancial resources across the economy — in particular,
providing capital for large-scale infrastructure and low carbon
technology deployment. To date, climate change impacts have
only inÖuenced Õnancial decisions at the margins, if at all.
22 | Climate Change Initiatives In India: Convergence of Actions
All values in Millions
Ź The HSBC Climate Partnership is a ground-breaking, Õveyear partnership between HSBC and The Climate Group,
Earth-watch Institute, Smithsonian Tropical Research
Institute and WWF. HSBC’s US$100 million investment — the
largest ever corporate donation to each of these four worldclass environmental charities — aims to combat the urgent
threat of climate change by inspiring action by individuals,
businesses and governments worldwide.
Ź IndusInd Bank inaugurated Mumbai’s Õrst solar-powered
ATM as part of its green ofÕce project campaign ÉHum
aur HariyaliÊ. It also unveiled a ÊGreen OfÕce Manual - A
Guide to Sustainable PracticesÊ, prepared in association
with the Centre for Environmental Research and Education
(CERE). IndusInd’s new Solar ATM replaces the use of
conventional energy for eight hours per day with ecofriendly and renewable solar energy. It is expected to save
1,980 kW hrs of energy every year and will be accompanied
by a simultaneous reduction in CO2 emissions by 1,942
kgs. In terms of costs, the savings will be substantial,
approximately INR20,000 per year in case of a commercial
user with grid power supply. And in areas with erratic power
supply the solar will replace diesel generators and translate
into savings as high as INR40,200 every year.
Ź The State Bank of India (SBI), as part of its Green Banking
Policy, will set up windmills to generate 15 MW of power
in Tamil Nadu, Maharashtra and Gujarat for its own
consumption. SBI was the Õrst Bank in the country to
think of generating green power.
The issue of climate Õnance is important to several
departments and ministries both at the GoI as well as at the
state government level. It is, therefore, important that all
decisions on climate Õnancing, whether related to Éneed
assessmentÊ or Éproject and Õnancing determination,Ê are
made in coordination with all concerned departments and
ministries, and should involve the state planning commissions.
It is also important that the GoI put in place a mechanism to
involve civil society groups and other stakeholders in decisions
regarding climate Õnance. India needs to put in place a
mechanism that is capable to raise domestic Õnance to meet
the climate change needs of the country. As of now, there
seems to be only one dedicated fund, the NCEF, with just one
revenue source stream, which is Écess on coalÊ.
India also needs to design a dedicated Õnancial and
governance instrument to link national government climate
plans and state level expenditures on climate change, so as to
improve the delivery of domestic climate Õnance. Furthermore,
India needs to put in place a domestic MRV mechanism on
various Õnancial Öows.
2.4 Green Bonds
India’s renewable energy (RE) potential is estimated to exceed
3,000 GW, yet currently only a fraction of this amount,32.8
GW, is used. The Government aims to dramatically increase
the amount of installed RE, and has set a target of 165 GW of
additional RE capacity installation by 2022. The Government
focus is currently on methods of arranging and facilitating
the needed capital investment to achieve this target, which is
estimated at US$200 billion. However, even with the variety of
project Õnancing mechanisms for RE that are prevalent in India,
there are some fundamental challenges for RE developers in the
Õnancial marketplace:
Ź Asset-liability mismatch: This limits project Õnancing
tenure to Õve to seven years except in cases of institutions
such as Indian Renewable Energy Development Agency
(IREDA), PTC Financial Services, etc., which have access to
lines of credit from multi-lateral and bi-lateral agencies with
extended tenures.
Ź High interest rates: It is estimated that high interest
rates and inferior terms of debt in India raise the cost of
renewable energy by 24%–32% compared to similar projects
Õnanced in the US or Europe.
Ź Sector limits: With renewable energy categorized under the
power sector by the banks, there is an increased competition
for RE projects to access capital vis-à-vis thermal power
projects.
In this context, innovative Õnancing mechanisms are required
for the development of the RE sector in India. To address these
challenges, the USAID Partnership to Advance Clean Energy
– Deployment (PACE-D) Technical Assistance (TA) 3 Program
prepared comprehensive reviews of Õnancing mechanisms for
renewable energy and energy efÕciency in 2013. Green Bonds
were identiÕed as one of the key Õnancial instruments that can
provide Indian RE project developers with access to scalable,
long-term, low-cost debt capital from institutional investors.
Climate Change Initiatives In India: Convergence of Actions | 23
Process Õow for issurance of green bonds
Identify high
quality assets
Mitigate residual
risks
Resource risks
Additional insurance
covers, for unmitigated
risks-such as RE
resource or plant
performance
Stable operating
performance vis-a-vis
design performance
PPA quality
Currency hedge
OEM quality
OPIC, MIGA or equivalent
covers for regulatory
risks in the country, for
bond holders
Low regulatory
risks in the states
where assests are
located
Enhance credit
rating
Get green
certiÕcation
DFIs such as WB or
ADB may give such
credit enhancement at
same cost
For ex; Climate bond
Standards Board
(CBSB) or Climate bonds
Initiatve (CBI)
Design securitization
mode (pledges,
mortages, cash low
charge, SPV etc)
Green Bonds Principles
(2014) announced by a
consortium of leading
banks outlines principles
of designing, disclosing,
managing and reporting
2.5 International funding
Over and above the national budget, there are various
international Õnancing institutes who channel their funds to
India in the form of grants, loans or technical assistance.
1. Grants
The key sources of bilateral assistance in the form of grants are:
Ź USAID
Ź Canadian international development agency (CIDA)
Ź IDRC, Canada
Ź DFID and British high commission
Ź SDC
Ź Indo-German development cooperation
Ź GIZ
Ź SIDA
Ź NORAD
Ź Indo-french development cooperation
Ź Australian-Aid (Government of Australia)
Ź European commission
Ź Japan – green id plan
24 | Climate Change Initiatives In India: Convergence of Actions
Select appropriate
listing
The bonds may be
listed or unlisted
issued to a few QFIs
London, Luxembourg,
NY are proven places
for listing
2. Multilateral grants
The key sources of multilateral assistance to India in the form of
grants and project support in the recent past are:
Ź UNDP
Ź GEF
3. Multilateral loans and technical assistance
Other multilateral agencies that support India through project
loans, both soft as well as market-based loans and technical
assistance, which can be a component of a loan and also can be
in the form of a grant are:
Ź The world bank
Ź ADB
Ź International fund for agricultural development (IFAD)
Organization
Total project budget amount
Focus Areas
2014–15
DFID
ADB
•
•
•
•
•
•
Health
Government
Education
Multi sector
Social
Other
•
•
•
•
•
•
•
•
•
Water
Transport
Education
Multi Sector
Trade & Industry
Health
Finance
Energy
Agriculture
|
US$2855.86
MILLION
2015–16
2016–17W
US$200
MILLION
2017–18
US$50
MILLION
S$1661
MILLION
US$ 15
MILLION
|
• Public Sector
WORLD BANK
JICA
•
•
•
•
•
•
Education
Health
Infrastructure
Water Supply &Sanitation
Vocational Training
Rural Livelihood
•
•
•
•
•
•
•
Power/ Energy
Infrastructure
Social Services
Water, Sewerage & Sanitation
Agriculture, Forestry
Mining & Manufacturing
Irrigation & Flood Control
US$5236
MILLION
US$1519
MILLION
US$2500
MILLION
US$580
MILLION
|
US$13.88
MILLION
|
|
|
|
|
|
• Responsive Institutions 33%
• Inclusive & Sustainable Growth
21%
• Development Impact &
Effectiveness 20%
UNDP
• Democratic Governance 15%
• South-South 9%
• Climate Change & Disaster
Resilience 2%
• Crisis Prevention & Recovery <1%
• Gender Equality <1%
India is concentrating its efforts on ensuring that rich
industrialized countries provide predictable and adequate Õnance
and technology to developing countries to tackle climate change6.
There has been a plethora of initiatives undertaken globally to
tackle the climate change and its impact. The United Nations
Framework Convention on Climate Change (UNFCCC) treaty
was signed at the Earth Summit to Éstabilize greenhouse gas
concentrations in the atmosphere at a level that would prevent
dangerous anthropogenic interference with the climate
systemÊ (Article 2 of UNFCCC). There have also been wide
climate change legislative actions in 16 major economies.
155 laws, regulations, policies, and decrees of comparable
status that relate to climate change, energy efÕciency, lowcarbon energy, sustainable transport, forestry management,
or adaptation to climate change have already been identiÕed
by a study conducted by members of Globe International.
6
ŚƩƉ͗ͬͬĂƌƟĐůĞƐ͘ĞĐŽŶŽŵŝĐƟŵĞƐ͘ŝŶĚŝĂƟŵĞƐ͘ĐŽŵͬϮϬϭϱͲϬϯͲϬϳͬŶĞǁƐͬϱϵϴϲϵϯϰϮͺϭͺ
ĐůŝŵĂƚĞͲĐŚĂŶŐĞͲŐƌĞĞŶͲĐůŝŵĂƚĞͲĨƵŶĚͲĐĂƌďŽŶͲŝŶƚĞŶƐŝƚLJ
Climate Change Initiatives In India: Convergence of Actions | 25
26
26 | Climate Change Initiatives In India: Convergence of Actions
Convergence of climate initiatives and
way forward
Combating climate change will require mobilization of
substantial resources. Success will depend on the
establishment of mechanisms and approaches that incentivize
the mobilization of resources for cost-effective and ambitious
climate action at all levels. Cooperation between countries and
between private and public-sector stakeholders is considered
crucial.
3.1 International convergence
initiatives
The international convergence initiatives have shown
integration between regulatory tiers and henceforth been
capable to have a broader outreach. A few examples have been
listed as follows:
A. Carbon Pricing Leadership Coalition7
The Carbon Pricing Leadership Coalition brings together
leaders from across government, the private sector and civil
society to share experience working with carbon pricing and
to expand the evidence base for the most-effective carbon
pricing systems and policies. The coalition formed from a
groundswell of support for carbon pricing at the 2014 UN
Climate Summit, where 74 countries and more than 1,000
companies expressed support for carbon pricing. Its goal is
to expand the use of effective carbon pricing policies that can
maintain competitiveness, create jobs, encourage innovation,
and deliver meaningful emissions reductions.
Part of the coalition’s role is to deepen understanding of the
business and economic case for carbon pricing. In that role,
it is developing scenarios that will illustrate plausible outlooks
under a variety of carbon pricing policies and timelines.
The scenarios are being developed for use by governments,
companies, and investors and will be released in mid-2015.
The coalition’s initial work also includes developing a set of
principles to help guide best practices for carbon pricing,
building from lessons learned through the Partnership for
Market Readiness and experiences in jurisdictions around the
world.
B. Partnership for Market Readiness (PMR)8
A global partnership, the Partnership for Market Readiness
(PMR) brings together different countries, organizations,
and experts to spark innovative approach to GHG mitigation
using markets and carbon pricing. Through grant funding and
technical assistance, the PMR helps countries explore and
address the technical capacity gaps to assess, design, and
adopt innovative and cost-effective approaches to greenhouse
gas (GHG) mitigation. Particular focus is on mitigation
approaches that lead to a price on carbon — such as domestic
ETS and carbon taxes. Importantly, the PMR supports
countries to move forward with national action plans that
reduce carbon emissions while also stimulating growth and
competitiveness.
Seventeen implementing country participants are middle
income countries that receive funding and technical support
from the PMR. Thirteen contributing participants contribute
funding and share relevant experience. Together, these two
groups make up the Partnership Assembly (PA), the PMR’s
decision-making body.
The partnership also includes a third participant category —
the technical partner. Technical partners represent countries
or sub-national jurisdictions that are at an advanced stage
of carbon mitigation policy development. While they do not
participate in decision making, they provide valuable lessons
and are an important contribution to the PMR’s knowledge
exchange.
The PMR also beneÕts from the knowledge, experience and
participation of observers. PMR observers are countries,
multilateral development banks, UN organizations and other
non-governmental organizations that join the dialog on market
readiness and market-based approaches at PMR meetings
and events. A growing group of Technical Experts provides
feedback on country proposals and facilitates learning during
workshops and training.
ϳ
ŚƩƉ͗ͬͬǁǁǁ͘ĐĂƌďŽŶƉƌŝĐŝŶŐůĞĂĚĞƌƐŚŝƉ͘ŽƌŐ
ŚƩƉƐ͗ͬͬǁǁǁ͘ƚŚĞƉŵƌ͘ŽƌŐͬĐŽŶƚĞŶƚͬƉŵƌͲĂĐƚŽƌƐ
ϴ
Climate Change Initiatives In India: Convergence of Actions | 27
+&*E][`Yfakeg^[gfn]j_]f[]oal`af
India
The decentralized international approaches can be replicated
within the country, which is structurally a decentralized
democracy. India needs to focus on channelling its funds and
providing incentives to the different players in the economy
to form a consortium to tackle climate change. The primary
motive worldwide is to price carbon and it surfaces into the
grassroots of the economy through a regulatory channel.
India should choose a mechanism, which suits the appropriate
actions required for the country. There have been quite a few
initiatives already taken by the Government. We take a few
examples to highlight the approach.
3.2.1 Emphasizing on centre-state-municipal collaborations
Under the new guideline of 14th Finance Commission, states
are given 42% of divisible revenue pool collected by the
Union Government of India. In addition to that, FC-XIV also
recommended the state’s forest cover as a factor with 7.5%
weightage in terms of deriving revenue share. Grant-in-aid
to the states is under two major headings — basic grant and
performance grant. Issuing Municipal Bonds as a source of
additional revenue is also another option. National nodal
ministries would have to allocate funds under the respective
National missions through the outlays of respective ministries.
For example, in Sikkim, Mahatma Gandhi Rural Employment
Guarantee Scheme (MNREGA) funds were used to recharge
hilltop lakes as well as revive springs.
Other centrally funded schemes such as Raj Krishi Vikas Yojna
and National Horticulture Mission could also help the SAPCC
link with, and scale up ongoing sustainable development work
in the state, while Delhi discovered an innovative way to tax
residents to fund sustainable development programs. Other
suggested funding options were from bilateral and multilateral
agencies. Various activities listed under individual SAPCCs
are placed under different individual implementing agencies.
It is required that the various potential ground level activities
and initiatives to combat climate change be identiÕed. The
decentralized structure of the Indian Government gives the
opportunity for the Government to realize the needs and
assess the potential risks.
ϵ
3.2.2 Encouraging public private partnerships
To promote private sector Õnancing for clean energy projects,
through the use of concessional funds to catalyze investments
in renewable, low-carbon technologies that would not otherwise
happen, PPP models need to be set up.
There have been several infrastructural PPP initiatives9
undertaken in India. Some of the initiatives include the
following:
Ź Alandur Sewerage Project10 in Tamil Nadu to avoid ground
water contamination is initiated by the Government with
a consortium of private developers on a Built-OperateTransfer basis.
Ź Timarpur Okhla Integrated Municipal Solid Waste
Management Project by IL&FS Infrastructure Development
Corporation Limited and M/s Jindal Urban Infrastructure
Limited (The project was registered with the UNFCCC for
the CDM to earn 2.6 million CertiÕed Emission Reductions
(CERs) over a ten-year period).
Ź Sun Edison and Azure Power with the Gujarat Government
launched the Gandhinagar (Solar) Photovoltaic Rooftop
Programme11.
Climate-conscious PPPs make sense for several reasons.
Ź PPPs are an excellent vehicle to promote cost-effective
projects that spur innovation.
Ź PPPs can contractually set minimum performance
standards that can result in lowering GHG emissions.
Ź PPPs are also important for climate initiatives because
these partnerships can efÕciently organize, under a single
project umbrella, numerous and complex arrangements
that make a renewable energy (or any other climaterelated) project work. It is critical to consider the role of
PPPs in addressing adaptation to the effects of climate
change. Adaptation initiatives, which would partially accept
or avoid the climate risk, can be implemented by designing
projects that look forward, examining the potential effects
of a changing climate in its infrastructure. Adaptation is
gaining prominence as new funds are being negotiated to
assist countries that need it most —especially developing
countries, which see the impact of climate literally on the
ground. Many of these governments feel that adaptation
is in their immediate interest because results can help
improve people’s lives right away.
ŚƩƉ͗ͬͬƚŽŽůŬŝƚ͘ƉƉƉŝŶŝŶĚŝĂ͘ĐŽŵͬ
ŚƩƉ͗ͬͬŝŶ͘ƌĞƵƚĞƌƐ͘ĐŽŵͬĂƌƟĐůĞͬϮϬϭϱͬϬϯͬϭϮͬŝŶĚŝĂͲďƵĚŐĞƚͲĞŶĞƌŐLJͲŝĚ/E<EϬDϴϭϮϮϬϭϱϬϯϭϮ
11
ǁǁǁ͘ĞŶĞƌŐĞƟĐĂͲŝŶĚŝĂ͘ŶĞƚ
ϭϬ
28 | Climate Change Initiatives In India: Convergence of Actions
Ź PPPs, with possible 25-year (or longer) concessions, have
the advantage of providing a structure for addressing
medium- and long-term issues. Currently, we need a
public sector that is engaged and can provide an enabling
environment, funds that can catalyze progress, and a
private sector committed to innovation and cost efÕciency.
Most important, the private sector must prioritize working
with governments to continue building sustainable PPPs.
From the symbolic embrace of government and the private
sector, the future generation of climate-conscious
business emerges12.
3.2.3 Encouraging the private sector and non-proÔt'civil
society organizations
Private sector and non-proÕt organizations in India have
competency for bringing innovative solutions and scale to the
various models for climate change adaptation shaped by the
civil society and/or Government. There is a vital need for the
Government to involve them through innovative and alluring
partnerships, while on the other hand induce them to take it as
their prime responsibility. Globally, many community-focused
social venture capital funds have emerged in recent years
seeking to strike a balance between social beneÕt and
Õnancial returns.
Figure 8: Convergence of the solutions
Public Sector
Advantage
Facilitator, Regulator
Private Sector
Services, Finance
Non-ProÕt/Civil
Society Organizations
Community Level
Outreach
Transfer and sharing of Risks
Key Roles
Designing and
Planning the Õow of
funds3 Incentive
design
Technical solutions,
RD, building
partnerships and
market linkages
Sensitization capacity building3
implementation
mediators
Building the structure
Major
Responsibilities
Framework
regulations and
policy
Planning and
implementation of
projects and
indentiÔcation of
potential
Post-implementation
responsibilities3
policy advocacy
Convergence of Solutions to climate change vulnerability
Source EY
ϭϮ
ǁǁǁ͘ŝĨĐ͘ŽƌŐ
Climate Change Initiatives In India: Convergence of Actions | 29
India should work toward unique and innovative PPP models
in the climate change sector and bring together resources
and expertise of diverse stakeholders. Public sector and the
Government can play a role of facilitator and regulator and
earmark funds through national development schemes. The
private sector can play a role in lining up sources of new
funds, shaping risk management mechanism and innovative
technological solutions. Civil society organizations on the other
hand can play a major role as mediator between public sector,
private sector and communities to enable scaling up
of initiatives.
3.3 Success story
A combination of National Policy, Public Co-Financing
and Private Risk Management Enabled Investment in the
Rajasthan Sun Technique CSP plant
The Rajasthan Sun Technique plant is one of the most advanced
Concentrated Solar Power (CSP) plants under the National
Solar Mission (NSM) despite using a technology that has never
been deployed at this scale. Not only is it among the largest
projects under the National Solar Mission and the secondmost advanced in terms of planned commissioning, it is also
the only one that uses the more innovative linear Fresnel
instead of the more common parabolic trough technology.
In addition to the subsidized PPAs offered by the NSM, the
Rajasthan Sun Technique project also beneÕted from the
Rajasthan Solar Energy Policy (RSEP) from 2011, which
reduced VAT for solar products from 14% to 4% and exempted
solar project equipment from the entry tax13 . The project also
beneÕtted from leasing earmarked land at subsidized rates
under the RSEP. The other measures under the RSEP — 33kV
transmission lines for plants within 15 kilometers from the next
substation — did not beneÕt the project, as developers built a
dedicated 220 kV transmission line for the plant.
The project involves a series of public and private stakeholders,
each having a speciÕc role in Õnancing the CSP plant.
Reliance ADA, a large Indian conglomerate, developed the
project through its subsid¬iary Reliance Power, holds the full
equity in the special purpose vehicle and is responsible for
engineering, procurement and construction (EPC) through
Reliance Infrastructure, another Reliance ADA subsidiary. A
US-based subsidiary of a large French energy company (Areva)
provides the Linear Fresnel technology and ensures operation
and maintenance through an India subsidiary. The other key
stakehold¬ers are two national public bodies (MNRE and NVVN)
responsible for policies and power purchase, and a consortium
of domestic private and international public investors, including
FMO (Dutch Development Bank), Asian Development Bank and
Export-Import Bank of the US.
The 100 MW Rajasthan Sun Technique CSP plant gath¬ered
total Õnancing of approximately US$414 million. We attempt
to quantify cost inputs, returns, and impacts that will derive
from the investment to the extent possible using information
about proj¬ect speciÕcs if it is publically available, or industry
standard assumptions if it is not. Foreign investors provided
for 70% of Õnancing, a local Indian bank 5%, and the project
developer 25% in equity contributions. Financing from foreign
investors is denominated in US dollar and mostly in the form
of senior debt with long-term maturities of 18 years. The
Export-Import Bank of the United States (Ex-Im Bank of the
US) provided a loan tied to US Treasury pricing, provided that
the project purchase goods from US exporters, in this case
Areva Solar Inc. Conversely, the debt provided by the ADB and
the FMO did not contain any subsidies. They provided loans at
rates consistent with the cost of capital for these Development
Finance Institutions (DFIs).
Rajasthan Sun Technique capital structure
SOURCE OF FUND
FINANCING TYPE
AMOUNT (in million)
US EX-IM Bank
Export Credit Loan
US$80
ADB
Senior Loan
US$103
FMO
Senior Loan
US$90
FMO
Subordinated Loan
US$15
Axis Bank
Senior Loan
INR1140
Reliance Power
Equity
INR5500
ϭϯ
DĂŬŚŝũĂ͕ϮϬϭϮ
30 | Climate Change Initiatives In India: Convergence of Actions
Figure 9: Project stakeholders for Rajasthan Sun Technique plant
DEBT-USD 312 M
GOVERNMENT INSTITUTIONS IN INDIA
Asian Development Bank
USD 103 M in senior debt
FMO (Netherlands)
USD 90 M in senior debt,
USD 15 M in Sub-ord debt
US Ex-Im Bank
USD 80 M in senior debt
Ministry of new and
renewable energy
Government of India
National solor mission:
subsidized PPA, Tax
exemptions
Majority
owner
Government of Rajasthan
Axis Bank (India)
USD 22 M in senior debt
Land, water,
tax breaks
NTPC
Payment security
scheme
100% Owner
Operation and Maintenance
POWER OFF-TAKER
Areva renewables India
Areva solar Inc.
USA
Rajasthan sun
technique energy
pvt ltd
Main
Technology
Reliance
Infrastructure
Majority
Owner
INR
NVVN
State discoms
Power trader
Distribution
companies
Equity 104 M
Reliance power
Reliance ADA
Engineering, procurement and construction
INR
Majority
Owner
PROJECT SPONSOR
EQUITY-USD 104 M
Source: The-Role-of-Public-Finance-in-CSP-Rajasthan-Sun-Technique-India
Climate Change Initiatives In India: Convergence of Actions | 31
3.4 Recommendations
The government can plan to follow a certain path towards
arranging the funds which provides incentive for the private
sector.
Ź The convergence will benchmark on the key advantages of
the different agencies. While the community involvement
and grassroot-level problems which can be identiÕed by
the social organizations, there problems can be addressed
through project development and provision of sufÕcient
funds from public and private funding. Channelling and
incentivizing green funds is essential in this context.
Working groups, speciÕc to industries, can be set-up
for prioritizing inclusion of DRR and climate change
adaptation. Government should give incentives to private
sector for innovative PPP adopting green technologies
through tax beneÕts, revenue subsidies etc. Such
PPP models could be useful for pooling resources and
expertise and for up-scaling climate change mitigation and
adaptation initiatives.
Ź Corporate level disaster policy and climate change
adaptation compliance can also be formulated at
national level by Government. Tool kits for PPP models
for concerned sectors should be made available by
Government – such kits need to be comprehensive dossiers
indicating model concession agreements, risk and revenue
sharing framework etc.
Ź Market place and incubation facilities to upscale small
and grass root innovations for sustainable models for
climate change adaptation should be promoted by
Government. Small infrastructure projects promoting
alternative energies, non-conventional waste
management technologies and green technologies can
be promoted with active participation of private sector
and civil society organizations. Development of Öagship
programmes to promote and support the establishment
of a global network of national clean technology
accelerator programmes as an effective platform to
catalyse and accelerate innovations in clean energy
and environmental technology in the SME sector, by
leveraging the knowledge assets accrued.
Ź A public policy for corporate social responsibility should
be formulated at national level considering disaster risk
reduction and climate change adaptation measures. Out
of 50 companies, 38% have supported disaster relief
and rehabilitation activities as part of CSR14. Ministry of
corporate affairs, CII (Confederation of Indian Industries
and FICCI (Federation of Indian Chambers of Commerce
and Industry) need to take the lead in formulating the
policy recommendations.
Ź Detailed action plans under NAPCC should be prepared
by Government in collaboration with private sector and
civil society organizations. It is important that all decisions
on climate Õnancing are made in coordination with all
concerned ministries and departments, and involve state
planning commissions to align action plans. Government
can create a welcoming investment environment through
overall policies geared to the ease of doing business by
giving incentives to private sector for innovative PPP
adopting green technologies through tax beneÕts, revenue
subsidies etc. They must work together closely to reduce
vulnerability to climate change while enhancing economic
growth and development for the country.
14
ŚƩƉ͗ͬͬǁǁǁ͘ĞLJ͘ĐŽŵͬWƵďůŝĐĂƟŽŶͬǀǁ>hƐƐĞƚƐͬzͲ'ŽǀĞƌŶŵĞŶƚͲĂŶĚͲWƵďůŝĐͲ^ĞĐƚŽƌͲŽƌƉŽƌĂƚĞͲ^ŽͲ
ĐŝĂůͲZĞƐƉŽŶƐŝďŝůŝƚLJͲŝŶͲ/ŶĚŝĂͬΨ&ŝůĞͬzͲŽƌƉŽƌĂƚĞͲ^ŽĐŝĂůͲZĞƐƉŽŶƐŝďŝůŝƚLJͲŝŶͲ/ŶĚŝĂ͘ƉĚĨ
32 | Climate Change Initiatives In India: Convergence of Actions
ASSOCHAM
L`]cfgod]\_]Yj[`al][lg^
corporate India
ASSOCHAM initiated its endeavor of value creation for Indian
industry in 1920. Having in its fold more than 400 Chambers
and Trade Associations, and serving more than 4,50,000
members from all over India. It has witnessed upswings as well
as upheavals of Indian Economy, and contributed signiÕcantly
by playing a catalytic role in shaping up the Trade, Commerce
and Industrial environment of the country.
Today, ASSOCHAM has emerged as the fountainhead of
Knowledge for Indian industry, which is all set to redeÕne the
dynamics of growth and development in the technology driven
cyber age of ‘Knowledge Based Economy’.
ASSOCHAM is seen as a forceful, proactive, forward looking
institution equipping itself to meet the aspirations of corporate
India in the new world of business. ASSOCHAM is working
towards creating a conducive environment of India business to
compete globally.
ASSOCHAM derives its strength from its Promoter Chambers
and other Industry/Regional Chambers/Associations spread all
over the country.
Vision
Empower Indian enterprise by inculcating knowledge that will
be the catalyst of growth in the barrierless technology driven
global market and help them upscale, align and emerge as
formidable player in respective business segments.
Mission
As a representative organ of Corporate India, ASSOCHAM
articulates the genuine, legitimate needs and interests of its
members. Its mission is to impact the policy and legislative
environment so as to foster balanced economic, industrial
and social development. We believe Education, IT, BT, Health,
Corporate Social responsibility and Environment to be the
critical success factors.
Members-our strength
ASSOCHAM represents the interests of more than 4,50,000
direct and indirect members across the country. Through
its heterogeneous membership, ASSOCHAM combines the
entrepreneurial spirit and business acumen of owners with
management skills and expertise of professionals to set itself
apart as a Chamber with a difference.
Currently, ASSOCHAM has more than 100 National Councils
covering the entire gamut of economic activities in India. It
has been especially acknowledged as a signiÕcant voice of
Indian industry in the Õeld of Corporate Social Responsibility,
Environment & Safety, HR & Labour Affairs, Corporate
Governance, Information Technology, Biotechnology, Telecom,
Banking & Finance, Company Law, Corporate Finance, Economic
and International Affairs, Mergers & Acquisitions, Tourism, Civil
Aviation, Infrastructure, Energy & Power, Education, Legal
Reforms, Real Estate and Rural Development, Competency
Building & Skill Development to mention a few.
Afka_`laflgËf]oZmkaf]kkeg\]dkÌ
ASSOCHAM has been a signiÕcant contributory factor in
the emergence of new-age Indian Corporates, characterized
by a new mindset and global ambition for dominating
the International business. The Chamber has addressed
itself to the key areas like India as Investment Destination,
Achieving International Competitiveness, Promoting
International Trade, Corporate Strategies for Enhancing
Stakeholders Value, Government Policies in sustaining India’s
Development, Infrastructure Development for enhancing India’s
Competitiveness, Building Indian MNCs, Role of Financial Sector
the Catalyst for India’s Transformation.
ASSOCHAM derives its strengths from the following Promoter
Chambers: Bombay Chamber of Commerce & Industry,
Mumbai; Cochin Chambers of Commerce & Industry, Cochin:
Indian Merchant’s Chamber, Mumbai; The Madras Chamber of
Commerce and Industry, Chennai; PHD Chamber of Commerce
and Industry, New Delhi.
Together, we can make a signiÕcant difference to the burden
that our nation carries and bring in a bright, new tomorrow for
our nation.
The Associated Chambers of Commerce and Industry of India
ASSOCHAM Corporate OfÔce:
5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021
Tel: 011-46550555 (Hunting Line)
Fax: 011-23017008, 23017009
Email: [email protected]
Website: www.assocham.org
Climate Change Initiatives In India: Convergence of Actions | 33
34 | Climate Change Initiatives In India: Convergence of Actions
34
List of Abbreviations
CCVI
Climate Change Vulnerability Index
CDM
Clean Development Mechanism
CERE
Centre for Environmental Research and Education
CIDA
Canadian International Development Agency
CII
Confederation of Indian Industries
FICCI
Federation of Indian Chambers of Commerce and Industry
GHG
Green House Gas
GW
GigaWatt
IFAD
International Fund for Agricultural Development
INR
Indian National Rupee
IPCC
Intergovernmental Panel on Climate Change
IREDA
Indian Renewable Energy Development Agency
MNREGA
Mahatma Gandhi Rural Employment Guarantee Scheme
NAMA
Nationally Appropriate Mitigation Actions
NAPCC
National Action Plan on Climate Change
NMM
New Market Mechanism
PACE-D
Partnership to Advance Clean Energy – Deployment
PAT
Perform Achieve and Trade
PPMV
Parts Per Million By Volume
PPP
Purchasing Power Parity
RE
Renewable Energy
RECM
Renewable Energy CertiÕcate Mechanism
RPO
Renewable Purchase Obligation
SAPCC
State Action Plan for Climate Change
UNFCCC
United Nations Framework Convention for Climate Change
USD
United States Dollar
VCFEE
Venture Capital Fund for Energy EfÕciency
Climate Change Initiatives In India: Convergence of Actions | 35
Notes
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36 | Climate Change Initiatives In India: Convergence of Actions
Notes
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Climate Change Initiatives In India: Convergence of Actions | 37
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RB
As a representative organ of Corporate India, ASSOCHAM
articulates the genuine, legitimate needs and interests of its
members. Its mission is to impact the policy and legislative
environment so as to foster balanced economic, industrial and social
development. We believe Education, IT, BT, Health, Corporate Social
responsibility and Environment to be the critical success factors.
ASSOCHAM represents the interests of more than 4,50,000
direct and indirect members across the country. Through
its heterogeneous membership, ASSOCHAM combines the
entrepreneurial spirit and business acumen of owners with
management skills and expertise of professionals to set itself apart
as a Chamber with a difference
ASSOCHAM Corporate Office:
5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021
011-4655 0555 (Hunting Line). Fax: 011-2301 7008, 2301 7009
[email protected] I www.assocham.org