India's Experience with Carbon Financing: Issues and Concerns | Original Article

ABSTRACT:

India is one of the highly affected economies by the climate changes in the recent past. Continuously rising temperatures, deteriorating weather conditions, unexpected floods, storms and other unfavorable environmental situations are result of changing climatic atmosphere. Carbon emission is among the most important reasons for the climate change. Thus low carbon emitting activities have become the dire need of the day. Although RBI mandated the banks to devote some loans for financing green or eco- friendly projects as priority lending, banks normally take a back step taking much interest in these projects due to the credit risk reputational risk and legal risks associated with these projects. On the other hand there has been a lukewarm response towards the low carbon infrastructure, as there are limited options available to finance the projects leading to low carbon emission. In this context, the present study is an attempt to discuss the issue of climate change and the role of Indian Financial Institutions in carbon financing. The study also discusses the barriers in financing the low carbon emitting projects. The study also suggests the need for more carbon linked financial products are needed to float in the existing financial system so as to create more investible opportunities for the investors. It concludes by calling for a separate regulatory framework to finance green projects and the need for the existing financial institutions must be moulded in such a way, so as to create a separate department relating to climate change and related developments, in the existing structure. These efforts could go a long way in developing a low carbon emission economic model to take the planet and in general and India in particular towards the sustainable and eco -friendly economy.