Union Budget and India's Climate Commitments

As extreme weather events increase and climate commitments become urgent, the FY26 Budget presents both challenges and opportunities. With five years left to achieve India's interim Net Zero targets, decisive steps are needed to protect those vulnerable to climate change impacts.

Past Initiatives

• PM Surya Ghar Muft Bijlee Yojana
• Support for electric vehicle charging infrastructure
• Viability gap funding for offshore wind energy
• Increased allocations for the National Green Hydrogen Mission

Renewable Energy Goals

India's current renewable energy capacity stands at 203.18 GW, short of the 2030 target of 500 GW, highlighting the need for accelerated investment and policy support.

Key Policy Measures

• PM Surya Ghar Muft Bijli Yojana Review:
  • Completion rate is only 4.37% with significant gaps.
  • Fiscal allocations should prioritize the Renewable Energy Service Company (RESCO) model.
  • Expand production-linked incentives (PLI) across the solar module supply chain.
  • Encourage public-private partnerships for renewable energy generation on railway land and corridors.
• European Union's Carbon Border Adjustment Mechanism (CBAM):
  • India's exports of CBAM products to the EU total $8.22 billion annually.
  • Create a ‘Climate Action Fund’ for industrial decarbonization.
  • Support capacity-building initiatives for MSMEs.
• Transition to a Circular Economy:
  • Potential annual profit of ₹40 lakh crore by 2050.
  • Encourage investments in recycling infrastructure with tax benefits.
  • Establish a sovereign green bond framework for financing.
• Strengthening Climate Resilience:
  • Insurance penetration is low at 3.7% in FY24.
  • Offer tax deductions on climate-linked insurance policies.
  • Advocate lower GST rates on premiums for climate resilience products.
• Standardizing Green Finance Definitions:
  • Allocate funds for implementing climate finance taxonomy.
  • Introduce differential tax treatment for taxonomy-aligned investments.
  • Classify government expenditure according to green criteria.

Conclusion

The FY26 Budget is pivotal in integrating climate competitiveness into India's fiscal framework to maintain international trade and investment flow competitiveness. The government's commitment to these measures will be closely watched.