What climate change impacts is India facing?

Climate change is impacting India’s natural environment, economy and society with increased frequency and intensity. Heatwaves, floods, monsoons and declining groundwater reserves are some of the extreme challenges that India is facing today. Heatwave risks to wellbeing and GDP have been particularly costly. In 2022, 15 states across India (as of 26th April 2022) struggled with the impacts on health, agriculture and the availability of water from heatwaves. Floods have cost India US$26.3 billion, with damages exceeding approximately 0.5% of its GDP. Several studies point to the devastating economic and social costs of climate-related damages in India due to climate inaction – which could total US$35 trillion over the next 50 years – with particular impacts in the health and agriculture sectors.

The increasing frequency of such disasters is felt most by the local communities inhabiting India’s ‘climate frontiers’ – areas that are more susceptible to climate-related disasters. A climate-induced refugee crisis from bordering nations like Bangladesh and Pakistan is likely, while internal migration and losses to livelihoods are already occurring.

India is already struggling with the health implications of local air pollution; in 2019, a study estimated this led to an annual loss of over US$36 billion to India’s GDP. Rising emissions from human activities sees India consistently ranking lowest in global air quality assessments.  

What is India doing to tackle climate change?

India’s domestic policy on climate and environmental action includes protecting regional glaciers, greening the railway system, reducing single-use plastic and producing clean cooking fuel. India aims to reach net zero by 2070 and has been able to decouple its economic growth from its emissions. According to the 2022 IPCC report, it has a good track record of low emissions per capita in comparison to other major world economies.

India has condensed the targets of its Nationally Determined Contributions (NDCs) for the achievement of the Paris Agreement into a set of ‘enhanced targets’ to reach net zero by 2070. These goals are on a par with those made by other industrialised nations and, considering its low historical contribution to greenhouse gas emissions, India has an ambitious net zero agenda

According to its current NDC, submitted in August 2022, India will reduce the emissions intensity of its GDP by 45% (compared with 2005 levels), achieve 50% total installed electric power capacity from non-fossil fuel energy sources and focus on building momentum for its LiFE Movement (Lifestyle for Environment). This citizen-centric programme to combat climate change promotes a heathy, low consumption and sustainable lifestyle using a circular economy approach.

While India’s NDCs provide a clearer picture of the energy portfolio it is aiming for, no sector-specific mitigation actions have been included. In particular, a strategy to phase out coal is absent. This is essential for India’s energy transition, considering the nation’s coal portfolio comprises over 50% of its total installed power station capacity. This is also especially critical from an energy security perspective considering the world’s “unhealthy” dependence on fossil fuels, as noted by India’s Minister of Power and New and Renewable Energy.

A just transition approach to phasing out coal – which would aim to address regional disparities and manage job losses in an equitable and inclusive manner – is yet to be embedded in Indian policy. However, the concept is gaining more traction in the lead-up to COP27 (at the time of writing), with interest shown by various Government Ministries (including the Ministry of Coal, Ministry of Environment, Forest and Climate Change and the Ministry of Petroleum and Natural Gas). India’s involvement in the G7’s Just Transition Energy Partnership (JETP) is also an important step towards the development of an official policy framework to move away from coal use and production.

How is India funding climate action?

Like for other developing countries, India’s current climate action plans are propelled by a recognition of the risks and economic costs that may result in the case of inaction. India’s 2021-22 Economic Survey highlights that investments made in green technology and resilient infrastructure can safeguard the economy from future climate-induced uncertainties. To date, India’s climate adaptation and mitigation work has predominantly been funded by domestic sources of green finance. Now, it is also actively working to organise its investment platform to channel the growing pool of international sources of climate finance.

India’s private sector has been playing a key role in reducing the cost of existing technologies like solar photovoltaic (PV) panels as well as emerging technologies for clean energy and transport solutions such as carbon capture and storage (CCS), green hydrogen and battery storage solutions. The Securities and Exchange Board of India has further bolstered India’s sustainable finance flows by strengthening its regulatory regime around green bonds, introducing the concept of ‘blue bonds’ – focusing on ocean health –  and improving incentives around disclosures to avoid greenwashing of bonds by issuers.

Through initiatives like the Leadership Group for Industry Transition co-founded by India, the country aims to develop green hydrogen value chains and their industrial applications in high-emitting industries like steel and cement. The National Infrastructure Pipeline is one such initiative that provides a repository of infrastructure projects to be connected with investors. The Government is also supporting small and medium-sized enterprises (SMEs) in their sustainable transitions through collaborations with the European Investment Bank, for example.

The 2022 Energy Conservation (Amendment) Bill sets in motion the creation of a domestic market for carbon trading for India which can help minimise the country’s energy consumption and incentivise the deployment of clean technologies. Mumbai aims to become South Asia’s first zero-carbon city by 2050, using green bonds, public–private blended finance and global lenders. Such tax and price measures, when balanced with investments in clean infrastructure assets and research innovation, can help nations to act quickly and at scale on climate mitigation.

India estimates that US$4.5 trillion is required until 2040 to ensure intergenerational equity and sustainability is honoured alongside the country’s poverty eradication and growth agenda. India’s NDC is now conditional on wealthier countries providing it with adequate climate finance and facilitating requisite technology transfers.

What is India’s role within international climate diplomacy?

The Paris Agreement goal to stay “well below 2 degrees” of warming was reflected in the commitments India made at COP26 in Glasgow in 2021.

India plays a critical leadership role for other emerging markets and developing economies (EMDEs) in the Global South and will demonstrate this through its upcoming G20 Presidency in 2023 and by having co-founded initiatives like the International Solar Alliance, One Sun One World One Grid and the Coalition for Disaster Resilient Infrastructure.

India’s ‘global net zero’ approach is informed by the principle of Common but Differentiated Responsibilities, which holds developed countries and international financial institutions liable for financing the clean transition of the developing world. It is part of the Like-Minded Developing Countries (LMDC), a group that advocates for more control in how finance is used for adaptation and mitigation to prevent future loss and damage.

India will be an important influence in how to operationalise the ‘US$100 billion commitment’ – the climate finance pledged to developing countries by wealthier nations. India will also push for improvements in the pace and scale of climate finance to help developing countries meet their goals. According to estimates by LSE, US$100 billion a year is not sufficient to cover the costs of avoiding climate change: by 2025, bilateral donors must double their climate finance commitments while multilateral development banks must triple their financing from 2018 levels.

This Explainer was written by Kamya Choudhary.

The author would like to thank Danae Kyriakopoulou and Eleonore Soubeyran for their helpful review comments.

The author acknowledges the European Climate Foundation for its generous support for research on India at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science.

Keep in touch with the Grantham Research Institute at LSE
Sign up to our newsletters and get the latest analysis, research, commentary and details of upcoming events.