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Economy at Risk from Move to Clean Energy

In News: India’s financial sector is highly exposed to the risks of the economy transitioning from being largely dependent on fossil fuel to clean energy, says a study in the Global Environmental Change journal.

Clean Energy

  • Clean energy refers to the energy that comes from generation systems that do not produce any kind of pollution, especially greenhouse gases like CO2, which cause climate change.
  • Examples of clean energy include solar energy, wind energy, geothermal energy, hydropower, ocean energy etc.

About the Findings of the Study

  • Statistics
    • Lending for the mining sector: An analysis of individual loans and bonds found that 60% of lending to the mining sector was for oil and gas extraction, while one-fifth of manufacturing sector debt is for petroleum refining and related industries.
    • Lending for electricity: Electricity production accounted for 5.2% of outstanding credit, but only 17.5% of this lending is to pure-play renewables.
  • Issues Highlighted
    • Financial decisions: The financial decisions of Indian banks and institutional investors are locking the country into a more polluting, more expensive energy supply.
    • Lack of expertise: There was a shortage of experts in India’s financial institutions, who had the expertise to appropriately advise the institutions on the transition.
    • Dependence on carbon sources:  India produces higher electricity from carbon-sources than the world average, despite its vast potential for cheap solar, wind and small hydropower.
  • Recommendations
    • Focus on renewables: Shifting resources towards renewables would deliver huge benefits: cheaper electricity, cleaner air and fewer emissions,
    • Planned shift:  There is a need for financiers, regulators and policymakers in emerging and developing economies to act swiftly in order to ensure an orderly transition to net-zero.
Clean Energy
Clean Energy

Measures by India to Transition to Clean Energy

  • Net-zero goal: India has committed to reach net-zero emissions by 2070, and has also announced plans to source half of its electricity needs from non-fossil fuel sources by 2030.
  • FDI in clean energy sector: Permitting Foreign Direct Investment (FDI) in clean energy ventures up to 100 percent under the automatic route.
  • Adoption of electric vehicles: Adoption of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) II scheme to reduce Mobility emissions.
  • Renewable energy parks: Setting up of Ultra Mega Renewable Energy Parks to provide land and transmission to RE developers on a plug and play basis.
  • Infrastructure creation: Laying of new transmission lines and creating new substation capacity for evacuation of renewable power.
  • Skill development: Conducting skill development programmes to create a pool of skilled manpower for implementation, operation and maintenance of RE projects.
  • Sovereign Green bonds: The Ministry for Finance & Corporate Affairs, has approved the final Sovereign Green Bonds framework of India.
  • Cleaner coal utilization: The Government of India has announced plans to implement a US$ 238 million National Mission on advanced ultra-supercritical technologies for cleaner coal utilisation.

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What is Clean Energy?

Clean energy refers to the energy that comes from generation systems that do not produce any kind of pollution, especially greenhouse gases like CO2, which cause climate change. 

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