When Wallace S. Broecker first coined the term global warming in 1975, it was considered a far-fetched challenge. Decades later, climate change is no longer an imaginary phenomenon but a living reality, with its disturbing effects felt around the world. Although nations are working to reduce emissions, climate change is causing widespread destruction. Among the most vulnerable are India and the Global South, given its dense population and geographical diversity. Although India has taken significant steps towards the green transition, the focus has always been more on climate mitigation than adaptation. This imbalance is exacerbated by the reluctance of the private sector to invest in rehabilitation programs, which puts a burden on government-led public spending to address these critical needs.
India’s public investment in climate initiatives is heavily focused on mitigation, leaving adaptation measures underfunded. For example, the National Adaptation Fund for Climate Change (NAFCC), which was established to support adaptation projects, has experienced a steady decline in funding. Allocations have come down from INR 115.36 crore in 2017-18 to just INR 34 crore in 2022-23. At the same time, India’s energy transition is advancing rapidly, with the country ranked 63rd in the World Economic Forum’s Energy Transition Index and moving steadily towards its 2030 goal of 500 GW of renewable energy capacity.
While these advances in renewable energy are important, they are primarily aimed at reducing emissions rather than addressing the immediate and long-term effects of climate change. Even if net-zero emissions were to be achieved today, the residual effects of greenhouse gases persist for decades. This surprising fact makes it imperative to invest in building resilience and building adaptive systems that can withstand the ongoing impact of climate change.
The prioritization of mitigation over adaptation is not unique to India and is seen worldwide. This choice is mainly reflected in private investment practices. According to a Boston Consulting Group (BCG) study, only 36% of investors in India see potential in adaptation-related projects, compared to 42% who favor mitigation themes such as renewable energy production. Additionally, part of these investors show little inclination to finance projects aimed at aid responses and social resilience.
This reluctance stems from the complex nature of adaptation projects, which are considered too risky due to uncertain outcomes and indirect benefits. Unlike mitigation, which often produces measurable results such as reduced pollution, remediation efforts often focus on public welfare and have no direct financial return. Therefore, the responsibility to implement these important measures falls heavily on governments. Recent events, such as catastrophic floods in Uttarakhand and severe heat waves in northern India, underscore the urgency of intensifying climate response efforts.
The climate crisis must be tackled using a multi-pronged approach that goes beyond emissions reduction targets. Building resilience requires integrating adaptation measures into comprehensive development policies and financial strategies. Public budgets play an important role in determining how climate goals are aligned with national economic priorities such as GDP, employment, and income. The challenge lies in reforming government spending structures to adequately adapt and prioritize climate change.
India’s commitment to the concept of green GDP, as emphasized by the Prime Minister, represents a promising step. However, domestic fiscal policies must go beyond abstract ideas and redefine development itself to embed adaptation mechanisms in all sectors. Investments in renewable energy technologies and energy storage alone will not be enough unless government spending structures address the challenges of mitigation and adaptation.
In essence, budgeting is about balancing competing priorities and allocating limited resources to maximize public welfare. However, adaptation continues to receive insufficient attention within this process. Estimates from the Climate Policy Initiative suggest that India needs an annual investment of between USD 14 billion and USD 67 billion for adaptation-related development interventions between 2015 and 2030. However, allocations to the Ministry of Environment, Forests, and Climate Change (MoEFCC) have remained constant. remained at 0.1% of the total budget.
To redress this imbalance, India must incorporate climate risk into its financial planning. Another effective approach involves integrating the physical and economic risks of climate change into macroeconomic forecasting. Development projects often ignore long-term climate impacts, such as recurring floods or heat waves, leading to unsustainable debt and incomplete projects. Accurate financial models can enable governments to project these risks and allocate resources appropriately, creating a realistic and sustainable planning framework.
Successful adaptation requires cooperation at all levels and institutions. The transition from labor-intensive industries to low-carbon sectors will require retraining and training workers to participate in the production, installation and operation of renewable energy technologies. Such measures require coordinated planning and interdisciplinary spending, which India’s current single-agency governance structure does not adequately support. Adjusting the program budget to facilitate multi-agency collaboration is essential to creating a strong framework for adaptation.
One of the biggest obstacles to securing adaptation finance is the lack of mechanisms to track climate-related costs. Climate budget tagging (CBT) offers a possible solution. By segmenting and monitoring funds allocated to climate-related projects, CBT helps identify gaps and ensure that resources are directed to underfunded areas. Nepal’s CBT system, for example, tracks climate expenditures and assesses their alignment with national climate goals. Adopting a similar approach in India, with its diverse climate challenges, could establish more flexible spending and improve accountability in public spending.
The Union Budget 2024-25 reflects the challenge of balancing economic growth with environmental sustainability. However, the imbalance in funding continues—mitigation efforts increased by 48.15% in 2023-24, while adaptation spending increased by a meager 1.63%. Such approaches highlight a fundamental flaw in India’s climate system, where adaptation continues to be an afterthought. To address this, India must adopt budgeting practices that balance the long-term benefits of climate-resilient development. Integrating adaptation into financial systems will not only be consistent with domestic policies and global climate commitments but will also ensure that public spending supports sustainable growth. By institutionalizing these changes, India can pave the way for a strong and sustainable future, ensuring that the country is ready to face the challenges of a changing climate.
Further Studies in E-International Relations
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