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Green bonds, push for indigenous solar panels, EVs: Spotlight on climate change in Budget 2022

New Delhi: Finance Minister Nirmala Sitharaman Tuesday announced a slew of measures to reduce India’s dependence on non-renewable energy sources in its fight against climate change, as she presented the Union Budget for 2022-23.

These included allocation for increased domestic manufacturing of solar photovoltaic panels, use of biomass pellets in coal-fired thermal power plants, promoting a shift towards higher use of public transport and electric vehicles in urban areas, and ‘green bonds’ to finance projects that will have a positive impact on the environment.

Budgetary allocation to the environment ministry saw an uptick as Rs 3,030 crore was set aside for it, compared to Rs 2,869.93 crore in Union Budget 2021-2022. Last year, the Centre had slashed the ministry’s budget from Rs 3,100 crore (2020-2021).

The Narendra Modi government will allocate Rs 19,500 crore as ‘Production-Linked Incentive (PLI)’ for the manufacture of high-efficiency solar modules, with “priority to fully integrated manufacturing units from polysilicon to solar PV modules”, the finance minister announced Tuesday.

Polysilicon is an essential component in the manufacturing of solar PV panels. India’s solar power sector relies heavily on the import of solar panel components. The push for domestic manufacturing will facilitate “India’s ambitious goal of 280 GW of installed solar capacity by 2030”, Sitharaman said. 

At last year’s COP26 the United Nations’ Climate Change Conference Prime Minister Narendra Modi had pledged to increase India’s non-fossil-fuel-based energy capacity to 500 gigawatts (GW), and meet 50 per cent of India’s energy requirements through renewable energy sources. Solar energy accounts for the largest share of these, the others being wind and hydro. 

India had also pledged to reduce carbon emissions by 1 billion tonnes by 2030.

During her speech Tuesday, Sitharaman called climate change “the strongest negative externalities that affect India and other countries”, adding that to reduce carbon emissions, 5-7 per cent of biomass pellets would be “co-fired in thermal power plants”. 

This will result in a saving of 38 million metric tonnes of carbon dioxide a year, she further said.

Sitharaman also introduced four pilot projects for the gasification of coal and its conversion “into chemicals required for the industry” as a measure to reduce carbon emissions, apart from the promotion of agro-forestry and “private forestry”.

“By referring to climate action as a sunrise sector and employment generator, Budget 2022 has sent an important signal to markets, financial institutions and the workforce,” Ulka Kelkar, director for climate at the World Resources Institute (WRI) India, said in a statement. 

“We now need the power of government incentives, aggregation and de-risking for clean energy to be complemented by standards for low-carbon materials, skilling for battery recycling, and consultative processes for green infrastructure projects,” she added. 

On the move to push for more in-house manufacturing of solar modules, Rishabh Jain, programme lead at the Council for Energy, Environment and Water’s Centre for Energy Finance (CEEW-CEF), said that while the PLI could push India to become a global manufacturing hub, the country has “no experience in polysilicon and wafer manufacturing, and limited experience in solar cell manufacturing”.

“To leverage this opportunity, manufacturers would need to invest significantly in upskilling manpower and R&D. Institutes of higher education would also need to align their courses to match the skill requirements of the industry,” he said in a statement.

Also Read: ‘Won’t dilute safeguards’, Modi govt defends environment clearance ranking system for states

Push for electric vehicles & circular economy

The finance minister said that the government would “promote a shift” towards public transport in urban areas, which will be “complemented by clean tech and governance solutions, special mobility zones with zero fossil-fuel policy, and electric vehicles (EVs)”. Because of a dearth of charging facilities, a “battery swapping” policy will be introduced. 

She also stressed on the importance of transitioning to a circular economy, whereby all forms of waste are returned to the economy or used more efficiently. “The focus for 2022-2023 will be reverse logistics, technology upgradation and integration with informal sector,” Sitharaman said, adding that this “will be supported by active public policies covering regulations, extended producers’ responsibilities framework and innovation facilitation”.

Green bonds and single window clearance

The government will expand the PARIVESH portal a website tracking proposals for environment, forest, coastal and wildlife clearance to “enable application for all four approvals through a single form, and tracking of the process through Centralised Processing Centre-Green (CPC-Green)”, Sitharaman said. 

She also announced the introduction of ‘green bonds‘, debt instruments in which the issuer pledges to use the proceeds to finance projects with positive environmental or climate effects. 

“Sovereign green bonds will be issued for mobilising resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy,” the minister said.

Gagan Sidhu, director, CEEW-CEF, said in a statement that “India will now join a select group of countries, primarily European, which have issued such bonds”.

“We can also expect this move to catalyse the development of the domestic corporate green bond market,” Sidhu added.

Madhav Pai, executive director of the Ross Center for Sustainable Cities at the WRI India, said there is a need to “create a pipeline of bankable projects that can be funded by green bonds”. 

“This is a great opportunity for MoHUA (Ministry of Housing & Urban Affairs) to set up a project preparation facility around topics of water, sewerage, storm water, sanitation and transport,” he told ThePrint.

River linking

Sitharaman also made an announcement about the controversial river-linking projects. The Ken-Betwa river linking project has been allocated Rs 4,300 crore in the revised estimate for 2021-22 and Rs 1,400 crore in 2022-23 budget. The total cost of the project is estimated to be Rs 44,605 crore. 

Five other river-linking projects have been drafted, Sitharaman said, adding, “Once a consensus is reached among the beneficiary states, the Centre will provide support for implementation.”

Congress Rajya Sabha member Jairam Ramesh, who also chairs the standing committee on science and technology, environment, forests and climate change, said the river-linking projects would put the Modi government on a “destructive path”.

In a tweet Tuesday, he said that the Budget talked of “climate action and protecting the environment” on one hand, and pushed the “ecologically disastrous” river-linking projects on the other. 

(Edited by Gitanjali Das)

Also read: No changes in tax slabs, deductions — FM Sitharaman gives middle class a skip in Budget 2022

Source: The Print

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