Hottest Year, Larger Climate Deal!

What’s the Point? (A Brief Summary)

2023 was reported as the hottest year so far in recorded history. Average temperature for the year was 15.1°C, which was 1.46°C above the pre-industrial average – highlighting the continuing risks from global warming and climate change*. The world is increasingly becoming cognizant of these risks, and the recently concluded COP28 (28th Conference of Parties) furthered global action towards the climate. Notable takeaways were the inclusion of ‘transitioning away from fossil fuels’, goal setting for tripling of renewable energy capacity in 8 years, among others. India is expected to perform a balancing act as it aims for higher levels of growth with aspirations to become a manufacturing leader, while keeping climate considerations in place, and has avowed to continue doing so.

*apart from climate change, cyclical effects like El-Nino also were a likely reason in higher temperatures in 2023

Putting Data into Perspective

Source: Copernicus Climate Change Service

Meanwhile,

Source: International Renewable Energy Agency (IRENA)

• Key takeaways from final text on energy transition

The COP28 set out 4 pillars: (i) fast-tracking a just, orderly, and equitable energy transition; (ii) fixing climate finance; (iii) focusing on people, lives and livelihoods; and (iv) underpinning everything with full inclusivity. Energy transition from fossil-fuel based sources to renewable sources is a key element to reaching climate goals. In the Global Renewables and Energy Efficiency Pledge, signatories committed to work to triple the world’s renewable energy generation capacity by 2030, and increase energy efficiency improvements. A key energy transition announcement was the inclusion of ‘transitioning away from fossil fuels’ (apart from just coal), a key demand from India.

• Financial Commitments for Climate Action - Funding for Green Energy to increase globally

A key report at the COP28 highlighted that a significant push is still required to meaningfully improve the scale, quality and pace of investment and finance for projects supporting the climate change agenda, particularly in developing countries. In this regard, developments such as the Loss and Damage Fund (that helps developing nations against losses due to climate change), Credit Enhancement of Sustainability-Linked Sovereign Financing, increasing declarations from private sector players (including traditional energy players) are significant improvements. Quite clearly, investments towards green / renewable energy are going to see acceleration in this decade.

• India’s Priorities: Remove targeting of just coal, and balance growth and climate considerations

India's active participation at COP28 positioned the country as a proactive and influential player in the global fight against climate change, showcasing a commitment to collaborative, innovative, and localized solutions. Its demand for energy transition to include all fossil fuels was given heed to, even as the coal abatement agenda moved forward.

• India’s recent steps towards climate action

As highlighted in India’s national statement at COP28, highlights from India’s climate actions include:

- India has successfully reduced the emission intensity vis-à-vis its GDP by 33% between 2005 and 2019, thus achieving the initial NDC target for 2030, 11 years ahead of the scheduled time

- India achieved 40% of electric installed capacity through non-fossil fuel sources 9 years ahead of 2030 target

- India’s contribution to climate action has been significant through international efforts such as International Solar Alliance, Coalition for Disaster Resilient Infrastructure, creation of LeadIT, Infrastructure for Resilient Island States and the Big Cat Alliance

- India has also led the effort to build the Global Biofuel Alliance, launched in India at the G20 earlier this year. Read our recent note titled “Global Biofuel Alliance

- A G20 Initiative for a Sustainable Future” to know more.

Conclusion

Green energy is seeing rapid growth in India and the world, and will continue to see further investments. For growing countries like India, traditional sources of energy add to energy security, and will continue to see some additions. Climate risks are a key threat to our collective future, and it is promising to see continuous action and agreement on the way forward. At the same time, it is important that growth does not take a back seat for countries like India, as there is much to be achieved on that front as well. In that light, the declarations from COP28 allow flexibility to countries, while pushing countries towards climate action.

Sources: Copernicus Climate Change Service, PIB, IRENA, and other publicly available information.

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