4 min readMay 18, 2024 12:02 PM IST
First published on: May 18, 2024 at 07:15 AM IST
The recent heatwave has reminded us of the stark risks posed by climate change and highlighted the criticality of the efforts taken by the Conference of Parties (COP). The World Meteorological Organisation has confirmed that 2023 was the warmest year on record. This has brought the focus back on sectors like power and industry, which account for the bulk of carbon emissions. India is the third-largest carbon-emitting country and sectors like power, steel, cement, chemicals, fertilisers, refineries are facing heightened scrutiny.
The government has been supporting a shift to green energy with initiatives such as the PLI scheme in the renewable energy (RE) sector launched for manufacturing solar modules, viability gap funding schemes for offshore wind and battery storage projects, and the Faster Adoption & Manufacturing of Electric Vehicles (FAME) scheme. It has also launched the National Green Hydrogen Mission, made amendments to the Energy Conservation bill, launched green bonds, etc.
Though it has not mandated the shift to green technology yet, some entities are taking voluntary steps and stakeholders have also started asking for the same. During the green transformation, an entity may face several transition risks like policy, regulatory, technology, market, reputation, legal, etc. The technological risk is the major risk entities will immediately face while taking voluntary steps for green technology.
Fossil fuel-based power is the major source of carbon emissions in India. With the government’s climate target of enhancing non-fossil power to 50 per cent by 2030, various schemes have been launched to boost renewable energy. ICRA projects India to achieve the climate goal with the share of non-fossil fuel-based installed capacity in overall installed capacity rising from 41 per cent in 2022-23 to 59 per cent by 2029-30. However, this transition will need huge investments. We project that India would need an estimated Rs 11-12 lakh crore of investments in RE power until 2030, along with over Rs 5-6 lakh crore towards investments in transmission infrastructure and storage capabilities.
The availability of round-the-clock supply from RE sources remains important to achieve the targeted level of its share, given their intermittent generation. This can be made possible through the use of hybrid RE projects (wind and solar) complemented with energy storage systems. For hard-to-abate sectors like steel and cement, the government needs to explore more ways of carbon sequestration. Installation of carbon capture utilisation and storage (CCUS) will be inevitable.
After water, concrete is the second-most used substance on Earth, in which cement is the main component. The cement manufacturing process is highly resource and energy-intensive. While producing one tonne of cement, an equivalent amount of carbon dioxide is released. As maximum emissions are generated while producing clinker, CCUS will reduce more than 60-70 per cent of the emissions in the process of cement manufacturing. Niti Aayog’s report on CCUS estimates that the cement sector would need two million tonnes per annum CCUS capacity by 2030. Its capital cost will be Rs 1,600-1,800 crore.
Given the abundance of virgin iron ore and lack of domestic scrap, the domestic steel industry overarchingly uses coal as a reducing agent, leading it to remain high on the emission curve. However, following India’s 2070 net zero target and policies on carbon tax implemented by some countries, domestic steel-makers have sharpened their focus on reducing their carbon footprint by as much as 25-30 per cent through various technological interventions by 2030.
With the launch of the National Green Hydrogen Mission, Green Hydrogen usage is being planned in refining, chemical and fertiliser sectors along with transport. The capex for this will be about Rs 8-9 lakh crore. Many Indian entities have launched pilots/announced plans to set up production facilities for Green Hydrogen/Green Ammonia.
Several entities in these high-carbon emitting sectors are taking voluntary steps to become more green. Nevertheless, the government’s support will be critical to hasten the technology transition in these hard-to-abate sectors. Such support could come in the form of policy interventions, subsidies, duty exemption or tax benefits. Perhaps, this will form part of the policy agenda after the elections.
The writer is Chief Economist, Head- Research & Outreach, ICRA
During the green transformation, an entity may face several transition risks like policy, regulatory, technology, market, reputation, legal, etc. The technological risk is the major risk entities will immediately face while taking voluntary steps for green technology. 
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