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India’s Climate Tech Landscape
Context:
India is at a pivotal juncture in addressing climate change, grappling with the escalating impacts of global warming. The nation’s vulnerability to extreme weather events, rising sea levels, and temperature increases poses significant challenges to its socio-economic stability.
About India’s Climate Crisis:
- Flood Risks: By 2040, severe flooding is projected to threaten an additional 13–34 million people, with 18 million at risk of annual flooding due to rising sea levels. These risks necessitate proactive disaster preparedness and resilient urban planning.
- Heatwave Impacts: Projected temperature increases of 1.1–1.4°C by the century’s end could expose 200 million individuals to annual heatwaves, resulting in productivity losses equivalent to 34 million jobs.
- Economic Consequences: A global temperature rise of 1°C could shrink GDP by 12%, with catastrophic reductions exceeding 50% under a 3°C rise scenario.
India’s Climate Tech Ecosystem:
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- Sector Overview: India’s climate-tech ecosystem has grown significantly, with over 2,600 start-ups registered in the past decade and 800 currently active. However, funding gaps persist, with only 25% (220 companies) securing funding totaling $3.6 billion.
- Funding Gaps:
- Most funded start-ups (67%) are at the seed stage, while only 2.5% have reached growth-stage funding.
- The majority of investments focus on electric mobility, leaving other critical sectors underfunded.
- Global Trends:While global climate-tech investments reached $22.5 billion in 2022, they fell by 40% in 2023, highlighting the need for sustained investment and alignment with India’s unique challenges.
Green Innovation and Investment Dialogue 2024:
In September 2024, the Observer Research Foundation and Theia Ventures hosted the ‘Green Innovation and Investment Dialogue’ to strategise on climate resilience through innovative technologies.
The key focus areas included:
- Agriculture
- Promoting adaptive farming practices and climate-resilient crops.
- Leveraging technology for efficient water use and soil health improvement.
- Water Management
- Developing smart water systems for conservation and equitable distribution.
- Enhancing flood preparedness and drought mitigation strategies.
- Disaster Preparedness:
- Innovating early-warning systems for extreme weather events.
- Scaling disaster-resilient infrastructure.
- Circular Economy:
- Scaling recycling technologies and waste-to-value solutions.
- Promoting sustainable production and consumption models.
Roadblocks to India’s Climate Tech Development:
- Climate Financing Challenges
- Investment Needs
- $385 billion annually is required to achieve 2030 renewable energy targets.
- $7.2–12.1 trillion is needed by 2050 for net-zero targets.
- Current Funding Gap: India’s climate finance stands at $44 billion annually, far below the Reserve Bank of India’s recommendation of 2.5% of GDP annually until 2030.
- Existing Barriers:
- Overemphasis on mature sectors like renewable energy and electric mobility.
- Limited financing for early-stage start-ups.
- Regulatory uncertainty and perceived high operational risks.
Proposed Solutions:
- Comprehensive Evaluation Framework: Assess technical feasibility, financial viability, scalability, and environmental impact.
- Support for Green Premium: Implement government subsidies and transparent risk-assessment tools.
- Strategic Financial Interventions: Introduce government-backed incentives and standardised impact measurement to attract investors.
- Role of Venture Debt: Venture debt can provide non-dilutive capital for scaling capital-intensive sectors like renewable energy. However, streamlining access to affordable venture debt remains critical.
- Blended Finance Mechanisms: Leveraging public and private capital to de-risk investments is essential. Tax reforms, green finance frameworks, and lessons from models like Kenya’s Renewable Energy Fund can help address investor timeline mismatches.
- Role of Development Finance Institutions (DFIs) and Banks: DFIs and banks play a crucial role in:
- Providing long-term, low-interest capital for large-scale projects.
- De-risking investments through co-financing and partial credit guarantees.
- Supporting inventory funding and capacity-building for start-ups.
