​Intent and outcome: On India’s climate budget for 2026-27

Context & The Gist

The article discusses India’s climate budget for 2026-27, noting a continuation of the trend seen since 2021 – increased attention to climate concerns within the Union Budget, but with cautious and fragmented allocations. The budget highlights investments in areas like Carbon Capture, Utilisation and Storage (CCUS), rooftop solar schemes (PM Surya Ghar Muft Bijli Yojana), and green hydrogen, but the provisions are considered modest given the scale of the challenge and the need to enhance export competitiveness in light of the EU’s Carbon Border Adjustment Mechanism (CBAM).

Essentially, while India is demonstrating a commitment to climate action, the financial backing isn't yet commensurate with its ambitious goals, and significant private capital mobilization remains a hurdle.

Key Arguments & Nuances

• Modest CCUS Allocation: The ₹20,000 crore outlay for CCUS over five years is seen as a pilot phase investment, acknowledging the technology’s cost and complexity. Scaling CCUS remains a global challenge.
• CBAM & Decarbonization: The EU’s CBAM is a key driver for India to decarbonize its industrial sector, particularly steel and aluminum, not just for environmental reasons but also to maintain export competitiveness.
• Rooftop Solar Push: The substantial increase in funding for the PM Surya Ghar Muft Bijli Yojana is positive, but implementation challenges related to discom cooperation and financing need to be addressed.
• Nuclear Energy & Private Participation: Extending duty exemptions for nuclear plant equipment is helpful, but attracting private investment remains uncertain due to security, safety, and liability concerns.
• Green Hydrogen Gap: Despite policy support, actual spending on green hydrogen remains low, indicating a gap between ambition and execution.
• Pattern of Intent vs. Action: The budget reflects a recurring pattern of strong policy intent coupled with cautious financial allocations and difficulties in attracting private investment.

UPSC Syllabus Relevance

• GS Paper II: Governance – Government policies and interventions related to climate change and sustainable development.
• GS Paper III: Economy – Industrial policy, infrastructure, energy security, and the impact of international trade regulations (like CBAM).
• GS Paper III: Environment – Climate change, pollution control, and sustainable development goals.

Prelims Data Bank

• Carbon Border Adjustment Mechanism (CBAM): An EU policy that imposes a carbon tax on imports of certain goods (steel, aluminum, cement, fertilizers, electricity, hydrogen) based on their carbon emissions during production. It will be fully implemented by 2026.
• PM Surya Ghar Muft Bijli Yojana: A rooftop solar scheme providing subsidies for residential solar installations.
• PM-KUSUM: Pradhan Mantri Kisan Urja Suraksha Evam Utthan Mahabhiyan – a scheme for solar irrigation pumps.
• SHANTI Act: The Nuclear Safety Regulatory Authority (SHANTI) Act, 2012, provides for the establishment of the Nuclear Safety Regulatory Authority (NSRA) to ensure safe nuclear operations.

Mains Critical Analysis

India’s climate budget for 2026-27 presents a mixed picture. While the intent to address climate change is evident, the allocations remain insufficient to achieve the ambitious goals set by the country. A PESTLE analysis reveals the following:

• Political: The budget aligns with India’s Nationally Determined Contributions (NDCs) under the Paris Agreement, but requires stronger political will for bolder allocations and faster implementation.
• Economic: The CBAM poses a significant economic challenge, necessitating investments in decarbonization to maintain export competitiveness. Attracting private capital for green technologies is crucial.
• Social: Schemes like PM Surya Ghar Muft Bijli Yojana have the potential to improve energy access and reduce household energy costs, but require effective implementation and public awareness.
• Technological: CCUS and green hydrogen are promising technologies, but require further research, development, and scaling up.
• Legal: The SHANTI Act provides a regulatory framework for nuclear energy, but concerns regarding liability and safety need to be addressed to attract private investment.
• Environmental: The budget’s focus on renewable energy and decarbonization is essential for mitigating climate change and improving air quality.

A critical gap lies in the mobilization of private capital. The government needs to create a more conducive investment climate by addressing regulatory hurdles, providing financial incentives, and de-risking green projects. Furthermore, a more holistic approach is needed, integrating climate considerations across all sectors of the economy.

Value Addition

• Expert Committee on Climate Change (2007): Headed by Dr. Kirit Parikh, this committee provided recommendations on India’s climate change strategy.
• SC Judgment on Environmental Clearance (2022): The Supreme Court emphasized the need for strict enforcement of environmental clearance procedures for infrastructure projects.
• International Solar Alliance (ISA): An initiative launched by India and France to promote solar energy deployment globally.
• “India is not historically responsible for the climate crisis, but we are determined to be part of the solution.” – Prime Minister Narendra Modi.

Context & Linkages

This past article directly relates to the current discussion by highlighting the looming threat of the EU’s CBAM on Indian exports, particularly steel and aluminum. The current budget’s focus on decarbonization can be seen as a response to this challenge, aiming to mitigate the potential impact of the CBAM by reducing the carbon footprint of Indian industries.

This article provides a broader context by showcasing India’s progress in renewable energy deployment. The current budget builds upon this momentum by further incentivizing rooftop solar and exploring green hydrogen, reinforcing India’s commitment to a low-carbon pathway.

The article on nuclear power expansion complements the current discussion by highlighting the challenges and opportunities associated with scaling up nuclear energy in India. The budget’s extension of duty exemptions for nuclear equipment aligns with the need to promote nuclear power as a low-carbon energy source, but the concerns regarding private investment remain pertinent.

The recent India-EU FTA, while positive, failed to secure concessions regarding the CBAM. This underscores the need for India to proactively address the CBAM challenge through domestic decarbonization efforts, as highlighted in the current budget.

The Way Forward

• Increase Climate Budget Allocation: Significantly increase budgetary allocations for climate-related initiatives, particularly for CCUS, green hydrogen, and renewable energy infrastructure.
• Mobilize Private Capital: Create a favorable investment climate for private sector participation in green projects through policy reforms, financial incentives, and risk mitigation measures.
• Strengthen Implementation: Improve the implementation of existing schemes like PM Surya Ghar Muft Bijli Yojana and PM-KUSUM by addressing logistical challenges and ensuring effective coordination between government agencies and discoms.
• Invest in R&D: Prioritize research and development in emerging green technologies like CCUS and green hydrogen to reduce costs and improve efficiency.
• Promote Decarbonization of Industry: Provide financial and technical assistance to industries, particularly steel and aluminum, to adopt cleaner production processes and reduce their carbon footprint.
• International Collaboration: Engage in international collaborations to access technology, finance, and best practices for climate action.