{"id":33084,"date":"2023-01-23T06:28:34","date_gmt":"2023-01-23T00:58:34","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=33084"},"modified":"2025-04-19T18:33:27","modified_gmt":"2025-04-19T13:03:27","slug":"economy-at-risk-from-move-to-clean-energy","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/economy-at-risk-from-move-to-clean-energy\/","title":{"rendered":"Economy at risk from move to clean energy"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in news?<\/strong><\/li>\n<li><strong>News summary: Key highlights of the report<\/strong><\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>Why in news?<\/strong><\/h2>\n<ul>\n<li>India\u2019s financial sector is highly exposed to the risks of the economy transitioning from being largely dependent on fossil fuel to clean energy.<\/li>\n<li>This was revealed by a study published in the Global Environmental Change journal.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>News summary: Key highlights of the report<\/strong><\/h2>\n<ul>\n<li><strong>\u00a0Analysis of individual loans and bonds exposed to sectors dependent on fossil fuel<\/strong>\n<ul>\n<li>The report revealed that 60% of lending to the mining sector was for oil and gas extraction.<\/li>\n<li>One-fifth of manufacturing sector debt is for petroleum refining and related industries.\u00a0<\/li>\n<li>Electricity production \u2013 by far the largest source of carbon emissions \u2013 accounted for 5.2% of outstanding credit.<\/li>\n<li>This reveals that India\u2019s financial sector is highly exposed to the activities related to fossil fuels.<\/li>\n<li>Hence, any transition from fossil fuel to clean energy will have a negative impact on this sector.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>Shortage of experts to advise the institutions on such a transition<\/strong><\/h2>\n<ul>\n<li>The report noted that there was a shortage of experts in India\u2019s financial institutions who had the expertise to appropriately advise the institutions on such a transition.<\/li>\n<li>Very few financial institutions collect information on environmental, social and governance (ESG) risks and these firms do not systematically incorporate that data into financial planning.<\/li>\n<li>This will affect the countries who are planning for orderly transition to net-zero.<\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>High-carbon industries have less financial capacity to respond to shocks and stresses<\/strong><\/h2>\n<ul>\n<li>High-carbon industries &#8212; power generation, chemicals, iron and steel, and aviation &#8212; account for 10% of outstanding debt to Indian financial institutions.\u00a0<\/li>\n<li>However, these industries are also heavily indebted, and therefore have less financial capacity to respond to shocks and stresses.<\/li>\n<li>This will further expose India\u2019s financial sector to the risk associated with the transition.<\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>Financial decisions are locking the country into a more polluting, more expensive energy supply<\/strong><\/h2>\n<ul>\n<li>The financial decisions of Indian banks and institutional investors are locking the country into a more polluting, more expensive energy supply.\u00a0<\/li>\n<li>For example, only 17.5% of bank lending to the power sector has been to pure-play renewables.\u00a0<\/li>\n<li>\u00a0Consequently, India has much higher electricity from carbon-sources than the world average.\n<ul>\n<li>Coal currently accounts for 44% of India\u2019s primary energy sources and 70% of its power ge\u00a0neration.\u00a0<\/li>\n<li>The country\u2019s coal-fired power plants have an average age of 13 years and India has 91,000 MW of new proposed coal capacity in the works, second only to China.<\/li>\n<li>According to the Draft National Electricity Plan 2022, <strong>coal\u2019s share in the electricity generation mix will decrease to 50% by 2030<\/strong>, compared to the current contribution of 70%.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>Tremendous opportunity for financial sector if they ramp up their capacities relatively quickly<\/strong><\/h2>\n<ul>\n<li>The current lending and investment patterns reveals that India\u2019s financial sector is heavily exposed to potential transition risks.<\/li>\n<li>However, the other side of risks is the tremendous opportunity to move finance towards sustainable assets and activities.\n<ul>\n<li>In 2021, PM Modi committed India to reach net-zero emissions by 2070.\u00a0<\/li>\n<li>India has also announced plans to source half of its electricity needs from non-fossil fuel sources by 2030.<\/li>\n<li>This will require financing to the order of at least a trillion dollars to meet these commitments.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1)<\/strong>\u00a0<strong>What is environmental, social, and governance (ESG) investing?<\/strong><\/h3>\n<p><strong>\u00a0<\/strong>Environmental, social, and governance (ESG) investing refers to a set of standards for a company\u2019s behavior used by socially conscious investors to screen potential investments.Environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change, for example. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company\u2019s leadership, executive pay, audits, internal controls, and shareholder rights.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2)\u00a0What are green bonds?<\/strong><\/h3>\n<p>\u00a0Green bonds are bonds issued by any sovereign entity, inter-governmental groups or alliances and corporates with the aim that the proceeds of the bonds are utilised for projects classified as environmentally sustainable.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:\u00a0<\/strong><a href=\"https:\/\/www.thehindu.com\/sci-tech\/energy-and-environment\/study-warns-of-risk-to-indian-financial-institutions-from-transition-to-clean-energy-economy\/article66419679.ece#:~:text=India&#039;s%20financial%20sector%20is%20highly,journal%2C%20published%20online%20last%20week.\" target=\"_blank\" rel=\"nofollow noopener\"><u>Economy at risk from move to clean energy: study<\/u><\/a>\u00a0|\u00a0<a href=\"https:\/\/www.iea.org\/reports\/india-energy-outlook-2021\/energy-in-india-today\" target=\"_blank\" rel=\"nofollow noopener\"><u>IEA<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Transitioning of the economy from fossil fuel to clean energy will affect India\u2019s financial sector.<\/p>\n","protected":false},"author":5,"featured_media":33085,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-33084","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33084","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=33084"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/33084\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/33085"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=33084"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=33084"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=33084"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}