India’s cost of adapting to climate change needs seen at $1 trillion by 2030, report says
India’s central banking system said that approximately it will spend more then 85.6 trillion rupees (about $1.05 trillion) to follow its industries to comply with climate change standards policies by 2030.
The Reserve Bank of India (RBI) Report on currency and finance stated that central banks as financial regulators have several policy tools at their disposal to affect investment decisions, resource allocation and credit in order to achieve sustainability targets.
The report was written by the Department of Economic and Policy Research, according to the RBI.
According to estimates, green financing in India may require at least 2,5% of the GDP each year to cover infrastructure gaps caused by climate events.
A sector-specific approach is needed to mitigate climate risks, the report stated. This is due to the difficulty of balancing the policy choices between limiting the near-term negative output impact caused by NDCs (nationally-determined contributions) and the larger medium-term output losses due to inaction.
It said that different sectors of the economy emit at different intensities. Therefore, it was not advisable to have a uniform strategy for climate mitigation across all sectors.
Soon, the RBI will be releasing a framework for disclosing climate-related financial risk and providing guidance on scenario analysis and stress tests.
In the report released on Wednesday, it was stated that bad loans within the banking system must be reduced prior to the introduction of green capital regulations to reduce potential financial risks.
It added that “if green capital regulation amplifies the non-performing assets it could hinder monetary policy transmission.”
The report states that the impact of current policies and NDCs on inflation will be minimal even though its volatility will increase.
“Overall, delayed or lenient policies have adverse effects on growth and inflation prospects in the medium to long term.”
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