India needs $401B Capex to fight climate change: Report

The country needs over $400 billion in capital investment, which could save over 100 GW of energy and 1.1 billion tonnes of greenhouse gases between 2015 and 2030 if it goes ahead with the measures to control pollution under the Paris Climate Agreement, says a report.

Since the country is set to far exceed most of its 2015 Paris Agreement targets on climate change, analysts are keenly watching whether India raises its pollution curtailment targets or signals a 'net carbon neutrality' deadline at the two-day climate summit that began on Thursday.

The government's push towards blending ethanol up to 25 percent and move towards green hydrogen are encouraging, Bank of America Securities said in a note on Thursday — also the Earth Day and the opening day of the two-day climate summit being pushed by US President Joe Biden.

"Over 2015-30, India could drive $401 billion in Capex, which could lead to over 106 GW in energy savings, and 1.1 billion tonnes per annum reduction in Co2, impacting 99 stocks with a market capitalisation of $1.4 trillion," BofA said in a note.

It expects India to step up its emission curtailment targets by 2047 and announce the same at the summit. Several global economies have committed to being carbon neutral by 2050, and China has set a 2060 target. The US has rejoined the Paris Agreement under Joe Biden and could make major announcements at the summit.

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The BofA has identified two more new themes in India's fight against pollution — blending ethanol and green hydrogen — adding to the seven themes already identified.

The government had ramped up ethanol blending within petrol ratio from 1.4 percent in 2014 to 5 percent in 2020, 10 percent by 2022, and 25 percent by 2025.

However, achieving 25 percent ethanol blending by 2025 could be a challenge as it will require 10 billion litres of ethanol per annum versus the current production of only 3 billion litres. On the green hydrogen drive, the report expects India to gain traction for green hydrogen sometime soon as the government is finalising the National Hydrogen Energy Mission, which would require fertilisers, steel, and petrochemicals industries to shift to green hydrogen.

The government has indicated plans to blend hydrogen with CNG and leverage the CNG pipeline infra to reduce hydrogen transportation costs. A pilot project with 50 buses running on hydrogen-CNG fuel is underway in New Delhi.

Another pilot on hydrogen vehicles is planned by the NTPC, which could set up 1 MW electrolysers in New Delhi and Leh as a part of the project. Besides, Reliance, too, has indicated plans to use green hydrogen.

The Wall Street brokerage feels that these nine climates/pollution control themes can impact 99 stocks with a cumulative market cap of $1.3 trillion.

It can be noted that the Indian Railways — which has set a 100 percent electrification target by FY23 — has already recorded its highest ever route electrification in FY21 at 6,000 km, about 14 percent higher than the previous best in FY19, taking the electrified route to 71 percent of the total.

Also, 23 percent or 657 km of the mega rail project, the dedicated freight corridor (DFC) is already live since December last, and another 12 percent will go live by April end.

On the renewable energy front driven by one of the largest RE programmes globally (175 GW/450 GW target by 2022/2030), the share of non-fossil fuel-based energy in installed power capacity has already reached 38 percent as against the Paris Agreement target to achieve 40 percent by 2030.

To further support this, the government has approved a Rs 4,500 crore production-linked incentive scheme to create a 10 GW solar PV manufacturing capacity versus the current capacity of just 3 GW for solar cells and 5 GW for modules.