WASHINGTON, June 29, 2023 - The World Bank's Board of Executive Directors today 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.
India is one of the fastest-growing large economies in the world. While the country's energy consumption per capita is only one-third of the global average, India's energy demand is expected to grow rapidly as the economy expands. This calls for a phasing down of fossil-based energy sources in line with India's goal of achieving net-zero by 2070. The industrial sector is the main driver for future growth of energy demand and emissions, and green hydrogen can play a critical role in initially decarbonizing the hard-to-abate industrial sectors, such as fertilizer and refinery industries, and later heavy industries, including iron and steel. India has achieved impressive progress in renewable energy installed capacity and a decline in costs. Scaling up the production of renewable energy will accelerate the transition to low-carbon electricity and support the emergence and expansion of the green hydrogen sector.
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 low-carbon energy is produced by electrolysis of water powered by renewable energy. The financing required to implement India's energy transition is such that public sector funding alone will not be sufficient. Building 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 the 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 World Bank remains committed to supporting India's low-carbon transition by complementing public financing and enabling private sector investments."
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 FY23-24 to FY27-28, 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 (H4D) Partnership launched at CoP27.
The $1.44 billion loan is from the International Bank for Reconstruction and Development (IBRD) 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 (IDA) is from a recommitment of cancelled IDA credit balances.
