Why in News?

The Finance Ministry has released a draft document titled ‘Framework of India’s Climate Finance Taxonomy’ aimed at guiding investments towards clean energy and climate-resilient infrastructure.

The taxonomy is intended to provide clear definitions and criteria for identifying environmentally sustainable projects.

What’s in Today’s Article?

• India’s Draft Climate Finance Taxonomy Framework
• India’s Climate Adaptation and Energy Investment Targets

India’s Draft Climate Finance Taxonomy Framework

• The Finance Ministry has released a draft ‘Framework of India’s Climate Finance Taxonomy’ to guide investments into clean energy and climate-resilient infrastructure.
• It aims to:
  • Classify economic activities as sustainable or transitional.
  • Encourage climate-friendly technologies.
  • Prevent greenwashing.
    • Greenwashing refers to the deceptive practice of making unverified or exaggerated claims about environmental or climate-friendly actions.
    • It misrepresents actual progress on climate change, encouraging irresponsible actions while falsely rewarding entities for their "environmental efforts."
• Align with India’s twin goals: Net Zero by 2070 and Viksit Bharat by 2047.
• Principles of the Climate Finance Taxonomy
  • 
• Purpose and Global Relevance
  • It acts as a tool for investors and banks to identify credible green investments.
  • Supports India’s stance in global climate negotiations by setting a national standard for defining ‘climate finance.’
  • Responds to international disputes where developed countries often overstate contributions to developing nations.
• Categories of Climate Activities
  • Climate Supportive: Activities that directly reduce greenhouse gas emissions or improve climate resilience.
  • Climate Transition: Activities that help reduce emissions intensity in hard-to-abate sectors like iron, steel, and cement.
• Key Sectors Covered
  • Power generation
  • Buildings and infrastructure
  • Mobility/transport
  • Agriculture and food systems
  • Water security and resource management

India’s Climate Adaptation and Energy Investment Targets

• Massive Scale-Up in Power Generation Capacity
  • Target Capacity: Increase installed power capacity from 470.4 GW (Feb 2025) to 777.14 GW by 2029–2049.
  • Technology Focus: Prioritize investment in Advanced Ultra Super Critical (AUSC) thermal power plants.
    • AUSC plants offer 46% efficiency, compared to:
      • Subcritical: ~38%
      • Supercritical: ~41–42%
    • Goal: Achieve higher efficiency and lower emissions in thermal energy generation.
• Climate Adaptation Investment Requirement
  • Total Investment Needed: Based on India’s Initial Adaptation Communication to the UN (December 2023), India needs ₹56.68 trillion (≈ USD 648.5 billion) by 2030 (based on 2023–24 prices).
  • Sectors Covered:
    • Agriculture
    • Forestry
    • Fisheries
    • Infrastructure
    • Water resources
    • Ecosystems
  • Purpose: Fund adaptation actions to minimize adverse impacts of climate change.