In February 2022, the finance minister in her budget speech announced that India would issue sovereign green bonds to fund green infrastructure (public sector projects). These green bonds will play an important role in the government’s borrowing programme for the financial year 2023.
| Looking for study material to prepare for the upcoming Civil Services Exam?
Refer to the links below and complement your UPSC exam preparation: |
Green Bonds and Standard Bonds
- Green bonds debuted in 2007.
- What are Green Bonds?Green bonds are like any other debt instrument except for the fact that the issuer of the green bond pledges to use its proceeds to finance projects that will have a positive impact on the climate and environment.
- Who can issue green bonds? Green bonds can be issued by countries, companies and multilateral organisations to only fund projects that have positive impacts on the climate and environment and provide investors with fixed income payments.
- Examples of green projects: Renewable energy, clean transportation, green buildings, etc.
- How are green bonds different from standard bonds? When it comes to standard bonds, its proceeds can be used for various purposes as per the choice of the issuer, whereas proceeds of green bonds are earmarked for green projects or projects that benefit the environment. Issuers of green bonds also have to give information regarding the project they wish to finance and its expected climate and environmental impacts.
How will the Sovereign Green Bonds Benefit the Indian Economy?
The issue of sovereign green bonds will benefit the Indian economy in the following ways:
- The proceeds from the sovereign green bonds will be used in environment friendly public sector projects, which will in turn help in decreasing the carbon intensity of the economy.
- These green bonds will also help in attaining ambitious targets decided by the government, for instance achieving 175 gigawatt of renewable energy capacity by the year 2022 and net zero carbon emissions by 2070.
Other Measures on Climate Action Announced in the Budget
Some other measures on climate action announced in the budget 2022 are given below:
- Battery swapping policy
- Additional allocation of Rs 19,500 crore under the PLI scheme for manufacturing high efficiency solar modules
- Four pilot projects for coal gasification and conversion of coal into chemicals
- A focus on agroforestry and private forestry
- Blended finance (with the government’s share limited to 20 per cent) to be promoted for climate action, agriculture and other clean technology.
- Promoting transit-oriented development for cities
- A proposal to co-fire 5-7 percent biomass pellets in thermal power plants, resulting in estimated carbon dioxide (CO2) reduction of 38 million tonnes annually. This will ideally provide an income to farmers and reduce stubble burning.
- Energy efficiency and savings promoted for large commercial buildings through the energy service company model, via capacity-building and awareness about energy audits
Moreover, the Government is introducing a new bill in the Parliament i.e. The Energy Conservation (Amendment) Bill, 2022 — which aims “to provide regulatory framework for:
- Carbon Trading in India
- Encouraging penetration of renewable in energy mix
- Effective implementation and enforcement of the Energy Conservation Act, 2001
