India Highlights Climate Finance Gap at COP29 #IndiaFinance

The 29th Conference of Parties (COP29) in Azerbaijan left behind a mixed outcome for India’s climate ambitions. While hailed as a “finance COP,” its outcomes have drawn both applause and criticism from developing nations like India. As the world grapples with the urgency of climate action, India faces both challenges and opportunities to reshape its policies and strengthen its leadership on the global stage.

Advocating for Equitable Climate Finance

COP29 was anticipated to deliver robust climate finance commitments, but the results fell short. Developed nations agreed to provide $300 billion annually by 2035—an increase from the current $100 billion—but this commitment barely scratches the surface of the $1.3 trillion requirement set by developing countries. Unsurprisingly, the Alliance of Small Island States (AOSIS), Least Developed Countries (LDCs), and countries like India, Nigeria, and Bolivia voiced their dissent. India’s negotiators termed the deal as merely an “optical illusion”, i.e., a token gesture that fails to address the immediate needs of vulnerable nations.

Without substantial funding, India’s ambitious decarbonization efforts—ranging from a transition to renewable energy to electrifying transport—risk stagnation. Former Principal Economic Advisor Dipak Dasgupta stressed that the $300 billion commitment is meaningful only if structured as grants or highly concessional public finance, not as loans or private sector investments. The lack of a solid roadmap for scaling up to $1.3 trillion further underlines the inadequacy of COP29’s actionable outcomes.

India’s Role in Championing the Global South

India’s strong objections at COP29 highlight its role as a leading voice for the Global South. Developing nations continue to bear the brunt of climate change despite contributing the least to global emissions. Consequently, India has been vocal about the inequities in climate finance and has called for fair mechanisms to bridge the gap. The discussions at Baku also emphasized the need for public, grant-based financing, but no binding commitments were made—a glaring omission that India is likely to bring up at COP30 in Brazil.

The Birth of the Indian Carbon Market (ICM)

Amid the frustrations, COP29 also marked a positive turn with the progress on carbon markets. In this regard, India is moving towards operationalizing its own Indian Carbon Market (ICM), backed by comprehensive guidelines introduced by the Bureau of Energy Efficiency (BEE). These regulations aim to ensure transparency, compliance, and accountability in trading carbon credits.

The ICM is set to target ten key sectors, including renewable energy and transport, incentivizing businesses to adopt cleaner technologies. By 2030, India aims to reduce the emission intensity of its GDP by 45%, and the ICM is expected to play a pivotal role in achieving this target. While promising, delays in defining the market’s structure and compliance measures under Article 6 of the Paris Agreement could hamper progress.

Global Carbon Markets and Concerns

The COP29 agreement also introduced two types of international carbon markets under Article 6. Article 6.2 enables bilateral trading between nations, while Article 6.4 establishes a global crediting mechanism. Notwithstanding that these frameworks present opportunities, India remains cautious. The lessons from the Clean Development Mechanism (CDM) reveal risks of low-quality credits, often dubbed “junk credits”, diluting the impact of such markets. Robust regulatory frameworks will be crucial in ensuring environmental integrity and preventing exploitation.

India’s Solar Energy Revolution

India’s commitment to solar energy took center stage at COP29 with the country emphasizing solar energy as a cornerstone of its energy security, economic growth, and climate action. By 2050, India aims to meet over 75% of global grid energy needs through solar power, tapping into its vast potential of 750 GW.

This transition is not just about reducing emissions; it’s about reducing dependence on imported fossil fuels, creating millions of green jobs, and driving economic growth. Solar energy represents a chance for India to lead by example, addressing developmental challenges while contributing to global sustainability goals.

Tackling Climate-Related Trade Barriers

India also raised concerns about trade policies that undermine climate efforts. Developed nations’ mechanisms, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), impose additional costs on imports from developing countries, reducing their competitiveness in global markets. India, along with other nations, argued that such barriers contradict the principles of a “just transition”.

Leena Nandan, India’s Environment Secretary, highlighted the barriers to transferring clean technologies to developing countries, a clear violation of the Paris Agreement’s provisions. Encouragingly, COP29 agreed to include discussions on trade barriers in future agendas, signaling some progress toward equitable climate negotiations.

Countdown to COP30: A Critical Opportunity

As the world looks toward COP30 in Belém, Brazil, India has a clear agenda. Beyond pushing for robust climate finance, it aims to address systemic inequities, particularly in technology transfer and trade policies. The inclusion of these topics in the next summit’s discussions is a win for India and other developing nations.

India’s proactive stance at COP29 reaffirmed its commitment to balancing growth with sustainability. As the country prepares for Belém, the focus will remain on securing meaningful commitments that align with its development priorities. The path ahead may be fraught with challenges, but India’s leadership in shaping a fairer global climate framework is worth lauding.