National carbon budget: India has positioned itself as a prominent voice on climate action, even as it chases rapid economic growth. As the country sets its sights on net-zero emissions by 2070, it is betting heavily on a low-carbon development strategy to reconcile the goals of environmental sustainability with those of poverty reduction and industrial expansion. The country’s first nationwide climate action plan, expected later this year, will attempt to align India’s domestic efforts with those of other major emitters such as China, the EU, and the United States.
A low-carbon development strategy offers a framework for integrating climate mitigation with national growth ambitions. It encourages the adoption of green technologies, cleaner energy sources, and sustainable practices in sectors ranging from energy and industry to agriculture and transport. The aim is to reduce greenhouse gas (GHG) emissions without compromising economic growth or development outcomes, in line with commitments under the Paris Agreement.
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India’s long-term low-emission development strategy (LT-LEDS), submitted to the UN Framework Convention on Climate Change (UNFCCC), adopts a tailored approach. It focuses on expanding renewable energy, boosting energy efficiency, promoting low-emission transport and industrial practices, and building climate-resilient agriculture. It also emphasises equity, seeking to ensure that the benefits of the green transition are widely shared across income groups and regions.
The missing piece: A carbon budget
Despite the ambitious targets and sectoral interventions, a crucial policy gap remains — India does not yet have a national carbon budget. This absence is emerging as a structural weakness in its climate planning. A carbon budget, already adopted by many developed economies, provides a long-term emissions cap aligned with global temperature goals. It helps allocate emissions allowances across states and sectors, guiding investment, regulation, and behavioural change.
India’s energy consumption is growing at a pace that exceeds the global average—4.6% last year compared to the global rate of 1.8%—driven largely by coal. While recent initiatives such as the Carbon Credit Trading Scheme (CCTS), Renewable Energy Certificates, and Perform-Achieve-Trade (PAT) schemes have provided building blocks for a market-based transition, they remain fragmented. A coherent national framework, backed by a carbon budget, is yet to materialise.
Why a carbon budget matters
A national carbon budget would send a clear and credible signal to investors and industries, helping to unlock capital for emerging low-carbon technologies like green hydrogen, sustainable aviation fuel, and clean manufacturing. It would also allow the government to make more strategic trade-offs—allocating limited emissions allowances based on state-level development needs and sectoral readiness.
As India emerges as the fastest-growing large emitter, the pressure to systematise its climate policies will only grow. According to UNFCCC officials, India must accelerate the development of a coherent, economy-wide LCDS to meet both its development goals and global responsibilities.
Lessons from global strategies
Other major economies have moved decisively. The European Union’s Green Deal, announced in 2019, aims for climate neutrality by 2050 and a 55% cut in net emissions by 2030 relative to 1990 levels. The “Fit for 55” legislative package encompasses everything from industrial emissions trading to building codes and mobility rules, offering a comprehensive strategy for greening the economy.
China’s LCDS, launched under its “1+N” policy framework in 2020, targets peak emissions by 2030 and carbon neutrality by 2060. As the world’s largest emitter—accounting for 27% of global CO₂ emissions—China’s approach blends green industrialisation with energy security and technological self-reliance. These objectives are embedded in its 14th Five-Year Plan and longer-term ecological civilisation goals.
In both cases, carbon budgets, legislative mandates, and state-driven industrial strategies have underpinned the transition to cleaner economies.
Financing the transition
India’s low-carbon transition will require significant financial and institutional support. Recognising this, the World Bank last year approved $1.5 billion in financing to accelerate India’s clean energy shift. This followed an earlier $1.5 billion policy operation that helped eliminate transmission charges for renewable energy used in green hydrogen projects, supported the launch of 50 GW annual renewable energy tenders, and laid the legal groundwork for a national carbon credit market.
These funding lines must now be deployed strategically. Creating predictable regulatory frameworks and clear investment signals will be key to ensuring that public and private capital flows into the right sectors.
The challenge before India is not a lack of commitment, but the absence of a unified framework to channel its efforts. The adoption of a national carbon budget, calibrated to allow development while gradually reducing emissions, is no longer optional. It is central to credibility—both at home and abroad.
As the global race towards net-zero intensifies, India’s next climate plan will be closely watched. It must not only speak to ambition but show the institutional readiness and policy clarity needed to deliver. The real test lies not in setting goals but in building a roadmap that businesses, investors, and citizens can follow.