Navigating the Path to Net Zero by 2070: Investment Required for India's Sustainable Future

India’s journey toward achieving net-zero carbon emissions by 2070 represents an ambitious yet critical endeavor for both the nation’s growth and global climate goals. According to comprehensive reports from NITI Aayog and IIM Ahmedabad, meeting this target will require unprecedented investment across various sectors. Here's an in-depth overview of the financial needs and sector-specific strategies essential for this transformative transition.

Sectoral Investment Breakdown

1. Gasification (Hydrogen Production)

Gasification is a method that converts carbon-based materials into hydrogen and carbon dioxide under high temperatures and controlled oxygen levels. For hydrogen production plants with a capacity of 70 kilotons per annum (ktpa), this technology can effectively capture 1 million tons of CO2 annually, making it an important player in reducing carbon emissions. The CO2 intensity of such plants is estimated to range between 13 to 15 tons of CO2 per ton of hydrogen produced, with a capture efficiency of around 90%. This high efficiency allows for significant reductions in greenhouse gas emissions. The estimated capital investment required to establish such facilities is between Rs. 80-100 crore, a figure derived from Dastur estimates and similar projects. This sector is pivotal in the transition to cleaner industrial practices, particularly in decarbonizing hydrogen-dependent industries like chemicals, refining, and energy production.

2. Natural Gas (NG)-Based Steam Methane Reforming (SMR) for Hydrogen Production

Steam Methane Reforming (SMR) is the most widely used method for hydrogen production. This process involves reacting methane with steam to produce hydrogen and carbon dioxide. A typical SMR plant with a capacity of 130 ktpa can capture up to 0.7 million tons per annum (mtpa) of CO2, achieving a capture rate of 60-65%. This technology has a relatively lower CO2 intensity at 8-9 tons of CO2 per ton of hydrogen (T/TH2) when compared to gasification, indicating it is more efficient in terms of lower emissions per unit of hydrogen produced. However, the capital investment is significant, ranging from Rs. 700-800 crore, based on data from the Dastur project database and the IEA Technical Report. This sector, while offering lower CO2 intensity, is costlier to establish due to the complexity and energy requirements of the SMR process, but it remains a key player in hydrogen production and the transition to a low-carbon economy.

3. Cement Industry (Clinker Production)

The cement industry is a major emitter of CO2, primarily due to the energy-intensive nature of clinker production. Plants with a production capacity of 2.5 million tons per annum (mtpa) can capture around 2 million tons of CO2 annually, achieving a high capture efficiency of 90%. The CO2 intensity in clinker production typically ranges from 0.7-0.9 tons of CO2 per ton of clinker (T/TClinker), highlighting the importance of this sector in emission reduction. The capital investment for setting up these facilities is estimated between Rs. 1,600 to 1,800 crore, supported by Dastur’s project database and IEA Technical Reports. Decarbonizing the cement sector is crucial as it contributes significantly to global industrial emissions, and advances in CO2 capture technology are essential to achieving net-zero emission targets in the construction sector.

4. Iron and Steel Industry (BF-BOF Based Integrated Steel Plants)

The iron and steel industry, particularly integrated steel plants (ISPs) using the blast furnace-basic oxygen furnace (BF-BOF) method, are among the most carbon-intensive industrial sectors. For plants with a production capacity of 2.0 mtpa, up to 2 mtpa of CO2 can be captured, but the capture efficiency is lower, around 50%, due to the inherent CO2 emissions during the iron and steelmaking process. The CO2 intensity for these plants ranges from 1.8-2.2 tons of CO2 per ton of steel (T/TSteel), indicating the need for targeted decarbonization strategies. Capital costs for establishing these facilities are estimated to be between Rs. 1,600 and 2,000 crore, based on Dastur project database and IEA reports. Decarbonizing the steel sector is challenging due to its high energy demands and CO2 output, but it is necessary for achieving global climate targets and reducing the carbon footprint of infrastructure and manufacturing.

5. Refinery (Crude Processing - CDU & FCC Units)

In the refining sector, plants processing 5 million tons per annum (mtpa) of crude oil using crude distillation units (CDU) and fluid catalytic cracking (FCC) units are capable of capturing 1 mtpa of CO2. These facilities have a relatively low CO2 intensity of 0.2 tons of CO2 per ton of crude (T/TCrude), and they achieve a capture rate of around 90%, showcasing their potential for substantial emission reductions. The investment required to establish these facilities is between Rs. 1,100 and 1,300 crore, with data sourced from Dastur estimates and the IEA Technical Report. Refineries play a crucial role in the energy sector, and advancements in CO2 capture in this sector can contribute significantly to reducing overall emissions from fossil fuel processing.

6. Coal-Based Power Generation

Coal-based power generation is among the most carbon-intensive industries, contributing heavily to global CO2 emissions. An 800 MW coal-based power plant can capture up to 5 million tons of CO2 annually, with a CO2 intensity between 0.85-1.1 tons per megawatt-hour (T/MWh). The capture rate in such facilities is typically around 90%, demonstrating that carbon capture, utilization, and storage (CCUS) can play a significant role in reducing emissions from coal power. However, the capital investment for establishing such a facility is high, ranging from Rs. 3,500 to 4,000 crore, as per data from the Integrated Environmental Control Model (IECM) and IEA reports. This sector is critical for emission reduction, given the reliance on coal for power generation in many countries, making CCUS an essential technology for sustainable energy transitions.

Financial Requirements and Challenges

India’s ambitious goal of achieving net-zero carbon emissions by 2070 requires a significant and sustained financial commitment. The aggregate capital investment needed for this transition between 2020 and 2070 is estimated to be Rs. 150-200 lakh crore (USD 2-2.5 trillion), translating to approximately USD 40-50 billion annually. This funding is essential to drive the shift towards low-carbon technologies, develop sustainable infrastructure, and support various industrial decarbonization efforts.

For scenarios involving a transition heavily reliant on nuclear power or a renewable energy-dominated strategy, the total costs could escalate significantly, reaching USD 11.2-15.5 trillion. This stark figure underlines the sheer scale of the financial commitment required and the need for a multifaceted approach to meet these targets.

While the private sector has been actively contributing to emission reduction through investments in renewable energy, green technologies, and energy-efficient practices, there is a gap that must be bridged. To achieve net-zero targets, it is estimated that an additional USD 100 billion annually is needed, beyond current investment levels. This gap highlights the urgent need for enhanced financial mechanisms, policies to attract investments, and collaborative efforts between the government, private sector, and international organizations.

The Role of MSMEs and Government Initiatives

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in India’s economy but face unique challenges when it comes to participating in the net-zero transition. These challenges include limited access to finance, lack of awareness about available funding opportunities, and insufficient technical expertise to implement sustainable practices. Addressing these challenges is vital for inclusive growth and ensuring that the entire economy contributes to the net-zero target.

Government and parliamentary initiatives have been directed at bridging these gaps through a combination of regulatory enhancements, financial inclusion programs, and capacity-building efforts. The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) are expected to play key roles in directing capital flows toward sustainable projects. This includes implementing policies that encourage banks and financial institutions to provide green financing and develop sustainability-linked loans that can help MSMEs invest in eco-friendly technologies and practices.

In addition to these financial initiatives, the government has been promoting sector-specific policies that offer subsidies, tax incentives, and grants to support MSMEs in adopting renewable energy solutions, energy efficiency measures, and carbon-reduction technologies. These efforts are designed to make sustainable investments accessible and economically viable for smaller enterprises, which are critical to achieving comprehensive emission reductions.

Conclusion: A Call to Action

India’s journey to net-zero by 2070 is undeniably challenging but remains within reach with the right mix of policies, investments, and partnerships. Achieving this ambitious goal requires a collective push from the government, private sector, financial institutions, and international collaborators.

The integration of innovative technologies such as green hydrogen production and carbon capture solutions will be crucial in reducing emissions across key sectors, including power generation, manufacturing, and transportation. To support this, it is imperative to foster a conducive environment for research and development and create pathways for these technologies to scale effectively.

Moreover, empowering MSMEs with tailored financial solutions and capacity-building initiatives will enable them to play their part in the net-zero mission, promoting equitable growth and widespread adoption of sustainable practices.

India’s success in transitioning to net-zero depends on mobilizing investments, strengthening regulatory frameworks, and fostering a cooperative ecosystem that supports green growth. With the right commitment, India can emerge as a global leader in sustainable energy and a model for other countries aiming for similar climate goals.

Sources:

1. Carbon Capture, Utilization and Storage (CCUS) - Policy Framework and its Deployment Mechanism in India Report by NITI Aayog, Nov. 2022.

2. “Synchronizing energy transitions toward possible Net Zero for India: Affordable and clean energy for all”, Supported by: Office of the Principal Scientific Adviser to the Government of India and Nuclear Power Corporation of India Ltd. Prepared by: Indian Institute of Management Ahmedabad, April, 2024

3. Reuters Article ( https://www.reuters.com/world/india/india-needs-invest-up-100-blnyr-more-achieve-2070-net-zero-goal-lawmaker-2023-01-09/ )