Structural Reform and Policy Credibility: Private Sector Mobilisation for Green Transition in India

India has a critical role to play in the global green transition. It can strengthen its position as a global leader in promoting green technology, encompassing renewable energy, waste management, and green hydrogen, and contribute to global decarbonisation efforts by participating in green value chains. These green transition efforts are particularly important as India is currently the third-largest emitter of greenhouse gases (GHGs).

In view of the fiscal constraints, private sector participation will be the key for achieving both the development and diffusion of green technology and for attaining the national emission targets. In this context, it is imperative to identify and implement the policy action that can help mobilise the private sector in a middle-income country. While the significance of economic incentives for climate action from advanced economies such as R&D subsidies and carbon pricing policies is well understood, there is also a need to address the gap in the propagation of policy interventions in emerging markets characterised by structural deficiencies. Further, it is important to understand how and to what extent structural deficits impede the functioning of market signals.  

The research programme will investigate the role of structural reform and credibility of policy commitments and emission targets for improving the effectiveness of market signals emanating from price-based and regulation-based climate action in an emerging market context. It will attempt to fill critical knowledge gaps in order to enable India to strengthen its role as a leader in green technology and to mitigate low-carbon transition risks.

As part of the study, The World Bank and NCAER will jointly produce impactful research papers on the following topics:

• The economic gains pertaining to the credibility of emission targets;
• The challenges faced by the private sector and policy implications with regard to green value chains; and
• The adoption of a Federative Emission Trading Scheme (FETS) to enhance Nationally Determined Contribution (NDC) for green transition.

This study will be conducted under The World Bank Knowledge for Change Umbrella Program—Phase IV (KCP IV).  The World Bank team will be led by Dr Christian Schoder.