World Bank’s Board of Executive Directors approved $1.5 billion in financing to accelerate India’s development of low-carbon energy. The financing will help India promote low-carbon energy by scaling up renewable energy, developing green hydrogen, and stimulating climate finance for low-carbon energy investments. The First Low-Carbon Energy Programmatic Development Policy Operation, the first in a series of two envisaged operations will support India in developing green hydrogen. The financing required to implement India’s energy transition is such that public sector funding alone will not be sufficient.
Based on recent successes, this operation will help stimulate private financing and other support by addressing viability funding gaps, reducing off-taker risks, boosting grid integration of renewables, and stimulating demand for renewable energy.
“The program will support successful implementation of the National Green Hydrogen Mission that aims to stimulate $100 billion in private sector investment by 2030,” said Auguste Tano Kouame, World Bank Country Director for India.
The program aims to scale up renewable energy supply thereby reducing costs and improving grid integration. This will help India reach its committed 500 GW of renewable energy capacity by 2030. The government plans to issue bids for 50 GW of renewable energy each year from 2023-24 to 2027-28, which will avoid carbon emissions of 40 million tons per annum by 2026. A national carbon market is essential to provide a level playing field between low-carbon energy and fossil fuels. This program will support policies for a national carbon credit trading scheme to launch a national carbon market. In January 2023, India issued its first sovereign green bond. The program will support policy actions for the issuance of $6 billion in sovereign green bonds by 2026.
“India can decouple emissions from growth through improved energy efficiency and switching to clean energy,” said Xiaodong Wang, Dhruv Sharma, and Surbhi Goyal, Team Leaders for the project. “Through sustained policy reforms India can mobilize private sector investments, create jobs and achieve net-zero targets.”
This operation is only one piece of the Bank’s comprehensive support to energy transition in India. It is aligned with the Government of India’s energy security strategy. The operation is also aligned with the Bank’s Hydrogen for Development Partnership launched at CoP27. The $1.44 billion loan is from the International Bank for Reconstruction and Development and is facilitated by a United Kingdom $1 billion backstop aimed at boosting the World Bank’s climate change financing to India. A $56.57 million credit from the International Development Association is from a recommitment of cancelled IDA credit balances.
