In this episode of Interpreting India, Varad Pande joins Anirudh Suri to discuss India's climate finance and technology strategy. Which areas of climate technology should India prioritize? Will India’s EV, solar, green hydrogen, and biofuels push suffice to position it as a climate leader? What lessons can India learn from the journeys, strategies, and priorities of other countries?
Climate finance and technology is one of India’s priorities as part of its ongoing G20 presidency. Financing the climate transition of developing countries and the Global South is a complex but critical issue, as is the development, transfer, and sharing of critical climate technologies. What should India’s climate finance and technology strategy be? What role will the various pools of capital—private, public, philanthropic, impact, and multilateral development banks—play in mobilizing the necessary climate financial support for this transition? Will the new World Bank president, Ajay Banga, succeed in leveraging private capital for climate and ultimately make the Bank fit for purpose for the coming decades? Which areas of climate technology should India prioritize? Will India’s EV, solar, green hydrogen, and biofuels push suffice to position it as a climate leader? What lessons can India learn from the journeys, strategies, and priorities of other countries?
In this episode of Interpreting India, Varad Pande joins Anirudh Suri to discuss these key issues around India's climate finance and technology strategy.
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Episode Contributors
Varad Pande is a partner at BCG. Formerly, he was a partner with Omidyar Network India.
Anirudh Suri is a nonresident scholar with Carnegie India. His interests lie at the intersection of technology and geopolitics, climate, and strategic affairs.
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Additional Reading
A Comprehensive Framework for India’s Climate Finance Strategy by Anirudh Suri
The Case for a Comprehensive Indian Climate Bill by Anirudh Suri
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Key Moments
(00:00); Introduction
(02:03); Varad's diving experience in the Andaman Islands and India's ocean ecosystem
(05:45); The Indian Ocean Initiative at Carnegie India
(06:27); Anirudh speaks on his observations on climate change
(07:45); Going from net zero to nature positive
(10:11); Change in climate finance trends
(12:17); Varad explains why climate finance is such a tricky problem to solve
(18:31); Making India more lucrative to global climate finance capital
(28:34); Varad on the role of private and public finance in climate change
(30:45); Leveraging the newly elected council of the World Bank for climate finance needs
(36:55); India's climate tech strategy—EVs and green hydrogen
(45:40); Anirudh on the consumption aspect of climate technology strategies
(47:13); What can India learn from the climate transition journeys of other countries?
(54:34); Outro
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Anirudh Suri
Hello and welcome to a new season of Interpreting India. Geopolitical realignments, sustainable growth, healthcare financing, inclusive digital transformations, climate change, supply chain disruptions, urbanization, and several other critical global matters envelope the world today as India holds the G20 presidency. We at Carnegie India continue to bring voices from India and around the world to examine the role of technology, the economy, and international security in shaping India's future. [In] today's episode, we dive deep into one of my personally favorite topics, climate, and specifically climate tech and climate finance, what India should be thinking about as we develop our own climate transition strategy to meet not just the goals and the targets we've committed internationally, but also to make use of climate technology as a way for India to leapfrog in its own development journey. Joining me today is Varad Pandey, a fellow Harvard Kennedy School graduate, and someone I've known for several years now. Varad, as some of you might already know, was earlier a partner at Omidyar Network India and is now a partner at BCG and has seen the issue of climate from various vantage points, from within government, from the private sector, and also now from a consulting standpoint. And so today, I'm excited to have Varad join us on this episode of Interpreting India. Varad, welcome to Interpreting India!
Varad Pande
Thank you, Anirudh. It's delightful to be here with you again.
Anirudh Suri
Thanks again for taking the time, Varad. Today, I look forward to talking to you about climate finance, climate technology, lessons in the climate journey from other countries that India could learn from, and of course, many other things. But to get started, I believe you just went diving. So why don’t you tell us a little bit about how that experience was?
Varad Pande
Thank you! So, I, you know, I took on this with the objective of trying to pick up a real skill, which I haven't done for a long time. I thought I'll challenge myself and go become an open-water diver. So, I was in the Andamans for about a week. I had a delightful time seeing the undersea life. And to be honest Anirudh, part of the motivation was also that you know, somebody who speaks about, advocates for climate action, not knowing what more than half of planet Earth really consists of, was some sort of a big gap, and so getting a tiny glimpse of it, with your own eyes, was actually quite rewarding. And I must say, in our very own Andaman and Nicobar Islands, we have done a fantastic job. You know they have... they don't allow commercial fishing, which is the reason that there are both plentiful marine life and large size marine life, which was validated to me by experienced divers who were there. And so that was great to see. We'll delve into problems, but we must also celebrate, you know, islands of excellence that we have and the Andamans definitely count for that. I think not a topic for today, but, you know, the role of oceans in climate change, I feel, is a topic that has been severely under studied and underemphasized. It has a massive role in both mitigation and adaptation. It's a wonderful carbon sink, absorbing 90 percent of the excess heat caused by carbon, by climate change, and a fourth of CO2 emissions. Its absorptive capacity is actually far better than forests. In terms of adaptation, you know, mangroves not only support fisheries and biodiversity, but also strengthen the ability of our coasts and our coastal communities [to] withstand the impacts of climate change as natural walls. And of course, it's a massive economy, the ocean’s economy. This morning I was seeing something which was a story in the NPR, the National Public Radio of the US, on a story of these elderly women divers in Tamil Nadu, in India, who are in their 50s and 60s, who do this free diving to collect seaweed from the bottom of the ocean. If you have show notes, I'll share the link to that story with you. But just to say they are, you know, oceans, while so important, are also under deep danger and threat—this is called the trifecta of crisis of ocean acidification, of increasing sea temperatures, and increasing sea level rise. And so, I think both the opportunity and the threat to the oceans is immense. There has been a recent win, which was that in March this year, the countries of the world signed a new treaty to protect the open seas, the high seas. It's called the Biodiversity Beyond Natural Jurisdictions Treaty. It's almost like the Paris Accord to protect the high seas by creating marine protected areas, protecting marine genetic resources as an intellectual property for the whole world, and, you know, mandating environmental impact assessments for large projects in the open seas. So, there is hope, but a lot more needs to be done, and I'm glad I could start understanding that ecosystem a little bit thanks to my diving.
Anirudh Suri
I see that you didn't take diving only as a pure holiday. Clearly, you’ve linked it back to work. But, you know, I have to mention on this, that, two things, one, you know, one of our colleagues at Carnegie, Darshana Baruah, has been doing great work, she directs the Indian Ocean Initiative at Carnegie South Asia program in Washington. And the piece that you mentioned about the islands, right, I think is a very important one in which Darshana convenes the annual Indo-Pacific Islands Dialogue also, which being together the islands of the Indian Ocean and the Pacific, to discuss the issues that are important to small island nations from a climate standpoint as well. So, it's a topic that I think is close to our heart at Carnegie as well; as you also rightly pointed out, something that maybe doesn't get as much attention as some of the bigger topics around, you know, climate finance or new climate tech innovations like green hydrogen etc. do but is an important one from a resilience and adaptation standpoint for sure. And the second thing I'll mention, right, is from a personal standpoint. So, I spend as much time I think in Delhi as I do outside of Delhi, and, you know, usually either vacation or work would take me up either to the mountains or to the beach and the oceans, and I absolutely agree with you about the point that you made about the life that exists on more than 50 percent of the earth, that sometimes we don't think enough about because we happen to be sitting on land most of the time. But really, I think the way, [the role] the mountains—you know, in the Indian case, the Himalayas—but also the other mountain ranges of the South Asian subcontinent, as well as the oceans, right, play in preserving our biodiversity, preserving our overall climate ecosystem is something that we've got to take into account much more than we do because just land is not, you know, the 100 percent of the problem or the solution, right? I think as you rightly started to point out, the ocean will also provide actually a lot of solutions that we might not find on land, right? So, I think your points are well taken.
Varad Pande
And Anirudh, I'll just, I'll just add that, I think, you know, it's a very interesting thing. I think a lot of the climate change discussion is (a) focused on land as you said, right, so oceans don't get the emphasis, the second aspect, it's also focused a lot on, you know, mitigation and how do you reduce emissions and get to net zero or decarbonization—if you do a word cloud of what is the climate change discussion, you will get mitigation, decarbonization, net zero as popping up as the big words. And you'll get much less on adaptation, resilience, biodiversity, oceans, etc. And I think it's very important to make nature, more broadly speaking, a much more central part of the climate change conversation. Otherwise, it can feel a little bit academic and technical and technological, whereas, as people have argued, your best and the biggest ally in the fight against climate change is nature. So, I love the mantra that we have to go from net zero to nature positive as our calling cry for humanity.
Anirudh Suri
Absolutely, I think nature is, I think what we're trying to protect and preserve, and I think we do need nature as an ally there. And I think nature-based solutions are something that I'm seeing now startups also try and adopt as a strategy or as a solution to scale up, right. Whether it's, you know, regenerative forests, whether it's, as you were saying, you know, kelp and various other pieces I think that nature can offer to us, that hopefully then startups and entrepreneurs and governments and investors can take forward and try and scale up to a level that they can counter the human-driven adverse effects we've had on nature to begin with, right, so completely agreed on the nature-based solutions and the importance they have, especially in the adaptation and resilience piece. And I think especially important for a country like India given where we are in our own socioeconomic development journey and the mix that we have in our own population in India, right. I think mitigation will not just be enough. You've got to have the adaptation and resilience part of the strategy right as well. And of course, one of the main constraints, Varad, that for India that exists in its climate transition journey is finance, right. And we'll try and make this conversation into finance and tech separately, though obviously, they're very much interlinked—without one the other doesn't really exist as I've tried to argue even in my book. They're really the climate and... the tech and capital as the two factors of production today are like the main duopoly of our world. But we'll try, still try and keep climate finance as the first focus of our conversation, then we'll try and move to climate tech. But on climate finance, right, the traditional argument and the thinking in India has been that we have not been responsible historically for the majority of the emissions. The industrialized world, the West, has been responsible for the cumulative emissions over the last century and a half, and hence the responsibility to fix this problem lies squarely on the shoulders of those who have created the problem, who've caused the problem, or the bulk of the problem. And hence, they should actually, through opening up their pockets, through finance, finance the climate transitions of the developing world that has not been responsible for the bulk of the emissions. This strategy, I think as many of us know, though this negotiation strategy rather, has not worked fully right, in the sense that the results have not necessarily been there to justify that strategy or its success, right. The West has said a lot of things about, you know, $100 billion commitments, and here and there they’ve discussed how to aggregate those funds as well. But I think as you have also seen, those funds have not necessarily met... the reality has not met the talk sometimes and the talk sometimes has not met the expectations of the South, so to say. As a result of which that problem becomes a hard problem to solve, right? So, I first wanted to ask you, how do you see that problem working itself out overtime or are we going to remain in that kind of limbo that has often plagued negotiations at COP and other forums—are we destined to be stuck in that limbo, or is there a way out?
Varad Pande
Yeah, great question, Anirudh, and let me start by first, you know, just at a more... and I'll come to your points on the Global North versus Global South in a bit... but why is this such a tricky problem, climate finance, right? And really at the heart of this is the fact that climate change is everyone's problem but no one person's problem, right? So we're all stuck in this together. We are all... it's a commons problem and so, “Who should pay for it? Should I pay for it? Should I not pay for it?” is a matter of great debate and disagreement, and it's been since the climate negotiations started twenty thirty years ago, right. And I have a lot of empathy for the argument of the developing countries, that hey, we didn't cause the problem, so don't ask us to show up and pay for it. In fact, the Barbados Prime Minister Mia Mottley, who's become a folk hero these days for the voice of the developing countries, has said, you know, you developed countries are putting us in a double jeopardy—first, they colonized us, plundered us, and essentially the industrial revolution was built on the back of colonialism. And now you're asking us to pay for it, by asking us to pay the cost of the clean up essentially. So it's a double jeopardy as she puts it, right, and I think it's a fantastic sort of framing. And so I think the developing countries have rightfully over the years demanded that, of course, we need to solve this problem, but it requires large transfers of finance and technology from the Global North to the Global South. Now, there has been some progress in this, but some is the operative word, right? You mentioned the number which is often touted in climate negotiations, that a $100 billion should flow every year from the developed world to the developing world for this problem—this was first discussed in 2009 in the Copenhagen climate talks when I was a part of this whole thing, and we still haven't reached 100 billion, right. And 100 billion, Anirudh, is a drop in the ocean as you have also argued in your paper. What we need is actually trillions of dollars. Janet Yellen has put it really well when she says, you know, the funding needs are in trillions and we have so far been talking about billions, so we are an order of magnitude away. All the estimates I've seen tell us we need $3 to $5 trillion a year from now every year until 2050, and currently we are investing about $600 billion—so we are investing 20 percent of what we need. So, imagine 3 to 5 trillion, we are saying 100 billion the developed world should give developing countries and even that's not happened, right, so that's the reality of the situation. And of course, we have... developing countries have very strong arguments around climate justice, around the fact that our per capita emissions are very low, the fact that climate change is determined by the stock of carbon, the stock of GHG gases, and not the flow, not this year. So, it doesn't... saying that India is today the third or the fourth-largest emitter in 2022 is meaningless because what really is the cumulative emissions that developed countries have done since 1850 or thereabouts in industrial revolution started is what is determining how much of the carbon space is remaining if we are to stick to the 1.5 degree or 2 degree celsius thing. So, I think we need to continue; we need to continue to put pressure on the Global North for finances, but—and this is an important but—we cannot only rely on that as our strategy, and I think this has been the big change in our approach to climate negotiations over the last decade is that we have realized that we will negotiate hard on the global table, but we will act, and we will act for our own sake, for two reasons. One, because you know the kind of issues you were mentioning earlier, Anirudh—we are uniquely vulnerable as a country. We have multiple points of great vulnerability to climate change. We have the Himalayan glaciers which are melting at an alarming pace. Four hundred million Indians live on the downstream of the Himalayan glaciers, who depend on their livelihood, on the Himalayan rivers. We have our, we have the sea level rise and the sea temperature increase, which we started this discussion with. We have 200 million people living near the coast in India, right? We have the monsoon’s patterns, and there's enough scientific evidence now to show that the monsoon patterns are getting drastically affected by climate change. We are still largely a rain-fed country, highly dependent on monsoons for our food security, and we have this additional problem of having to grow our energy supply dramatically over the next thirty years as we become a wealthier and fast-growing economy. So, we have these unique vulnerabilities because of which we cannot only rely on the West or the developed world to come to our rescue. The second reason, Anirudh, that we should not rely is because this is also a massive opportunity for us, right? We are often, you know, India is often spoken of as somebody which has missed the bus, missed the China bus on things like manufacturing, etc., and, you know, not being able to take advantage of that. But climate technology, and we’ll come to the second part of your discussion, is an opportunity for us to also leapfrog and take technology leadership and create green new jobs of the kind that we were not able to do over the last thirty or forty years. So, both because it's a unique threat for us and because it's a massive opportunity for us is the reason we should take this topic seriously and work on all fronts to raise climate finance to chart our way forward, and happy to go into what that strategy might look like.
Anirudh Suri
Yeah, no, absolutely. So, I think I agree with you on the threat piece as well as the opportunity piece. In fact, you know the paper I'd written, which you kindly mentioned, for Carnegie, called India's, you know, “A Comprehensive Framework for India’s Climate Finance Strategy.” In that I lay out, you know, four pieces that I'd love to get into with you as well, which all are making underlying the same argument, right? So, the underlying argument is that this is an opportunity for India. We’ve missed not just the China bus, in fact, as I’ve argued even in my book, The Great Tech Game, we've missed several great games in the past, right? The China piece is a more recent story of the last twenty thirty years, but really, we've missed the industrialization boat, we’ve missed, you know, [the] global trade great game. We've missed, I would say, even the great capitalism game of the last fifty to hundred years, we've missed the bus, so to say, on various occasions in the past. And as this imperative, the climate imperative, reshapes the global economy, reshapes the way it’s structured, reshapes the energy that's powering the economy but also the kind of companies that will now emerge, we'll see, almost like the digital economy, a new climate economy emerge. And for India to win at this, we cannot continue to just rely as, I think you also say, on waiting for the finance to come through. We've got to figure out our own way forward because at no point in the great games of the past also... the winner has never, at least intentionally, helped the loser of that game, right, to come up in the next game. So, if we think of climate, the climate economy as a new great game that's emerging, I would personally have very little faith in the winners of the existing game of the industrial economy to help the emerging economies to possibly become winners in the new great climate game, right? And hence, that strategy of self-reliance, of figuring out our own way I think becomes very important. And I've laid out four pillars, right? One is that I think this cannot be done without the private sector, the private sector must be at the helm of the climate finance problem, because governments have various imperatives, obviously from a political standpoint domestically as well as otherwise. But the private sector, where it smells opportunity, will open up its purse strings. Second is that of international institutions and partnerships, whether it's with multilateral institutions or MDBs etcetera, or bilateral partnerships with other countries or even particular private sector firms. This is obviously something we've discussed in the past at the Global Tech Summit that Carnegie hosted, which was the blend of instruments that we need to use to finance this journey, which is blended finance and various other innovative instruments that we'll have to come to think of so we can reduce the cost of this finance that we need. And then finally, the financing of the climate tech innovation journey, right? Without R&D, without innovation, India is not going to win or, you know, at least be amongst the leading nations of the new climate economy. So, let me go through those four very briefly with you. From the private sector side, how do you think India can best leverage the private sector again globally now to finance this climate transition journey? What's needed? In a couple of minutes let's talk about what do we need to change to make India more attractive for global private sector capital?
Varad Pande
So, I think, I really liked your framing in your paper, because I think it covers on all the important elements that need to come right and I think it also emphasizes the point that there is no silver bullet here, right? There's no one trick that we can rely on, there's no one pool of capital we can rely on to solve this problem. It is an existential problem that touches every aspect of our life, and it is also a problem that needs us to tap every type of capital, right? And I think maybe just before going into the private sector piece, which I think is super important for scaling, the way I've also been looking at it, Anirudh, is what are the different pools of capital and what can they do in this journey, right? So, you know, let's start with the government, of course, as you said government capital is not sufficient and so on, but it is very important capital for climate change. I think it's like, it lays the foundational bricks for things like R&D, which the private investor will not invest in, for things like adaptation and just transition, which again is something not really amenable in many cases, things like city action plans, transitioning out of coal, what happens to livelihoods, those kind of things, right, as well as what I would like to call “market making capital” right, and sending the right signal to... so, for example, India's National Infrastructure Investment Fund, which has a large allocation for green finance, which is partly held by the Government of India and partly by sovereign wealth funds and long-term investors, right? So that kind of fund is something the government comes in, strategically, to sort of send the message that we're serious about this, we’ll coinvest together. So, there is an important role for government capital to start out, right? Then I think your point on the—in your partnerships piece, right—there's a massive, massive role for multilateral development banks and development finance institutions and there the one-line summary I see for their role is to say, they are the north-south or the public-private finance highway. Because they're in a very unique position, they have deep trust with governments in the Global South, they have boots on the ground, they have teams working in all these countries for the last fifty sixty years and they have trust of the global financial markets, right? They're able to borrow from global financial markets because they are sovereign guaranteed at near sovereign rates and so this is a unique combination, and you know, you mentioned blended capital, I think that's where they become super important and we can go into that a little bit more. So that's the second piece. The third pool of capital is what I call patient capital, and this comes in various forms—many people call it impact capital and many other things, but their role really is, what I say, “making moon shots a reality.” So, you know, they have higher risk appetite, they have longer time horizons than typical private capital. So, you know, like the Breakthrough Energy Ventures, which is funded by, initially funded by Bill Gates, and then he managed to crowd in more than a billion dollars, you know, they define their problem statement very, very nicely. They say we are looking for solutions that if they scale can solve 1 percent of the decarbonization problem, we are willing to have a twelve-to-fifteen-year horizon, not the four-to-eight-year horizon that venture capitalist firms typically have. And we have a high tolerance for failure, and because of that they have funded more than seventy early-stage companies who are doing everything from, you know, removing methane emissions from cows using vaccinations, to, sort of, thinking about carbon storage through natural mineralization, etc. So, there's a massive role then for patient capital of the kind that I just described. And then lastly, I would say, your commercial capital that you mentioned, just because, you know, the scale of money, we, remember we need to go up five X from where we are today. That's not going to happen unless private commercial capital comes to the party in a big way across sectors. And really the secret sauce for this is, one, in sectors where things have already proven out, let's say wind and solar because those are the most pertinent examples, there we just have to focus on ease of doing business and making it easy to deploy projects, but in everything else, we need blended capital approaches to get large-scale private capital to make sense. So, we need this entire continuum, Anirudh, and I missed out one because I spent a lot of time in philanthropic capital, which I think also is super important because it can go where others fear to tread, you know, it can take a systems change view of things it can take an ultra-long-term view of things. And the way I see it, good philanthropic capital is more nimble than government money and more patient than commercial money. So, it brings the best of private capital and public capital. And so, things like supporting foundational research, Carnegie Endowment’s climate program, for example, would be a great use of philanthropic capital, probably already is. Supporting Lighthouse Initiatives, which can show the way, create confidence amongst market participants, you know. I recently was at an event hosted by the World Resources Institute (WRI), on doing carbon market simulations for India, where a number of industry participants from across sectors had shown up, and that was funded by philanthropic capital, giving confidence to large companies in India to play in the carbon market and not feeling shy and opposing it as a result of that Lighthouse Initiative, right? Also, things like ecosystem building... you know, we have the India Climate Collaborative, which has come together in India using philanthropic money, which is trying to build a broader ecosystem of action. And lastly, consumer behavior changes. What can we do with nudges and those kind of things? So, those are the kind of things philanthropical capital can fund. So, Anirudh, I gave a long answer to your short question, but I think the way to see this is we need every kind of capital—what's the best use of different kinds of capital, whether it's government, MDB, or DFI capital, patient capital, commercial, and lastly, philanthropic capital? And then the question is how do you bring these together and blend these to create what we need for the future?
Anirudh Suri
No absolutely—I think that broadly that's absolutely right. I agree with you that different pools of capital exist, different pools of capital will serve different purposes, will have different time and risk horizons and as a result will be better matched with specific kinds of opportunities, some better for moon shots, some better for scaling, some better for R&D, etc. But I think the question then is, okay, so what proportion can we, right, so if you want to move forward now from this, and this is one of my favorite questions, which I often don't get an answer to from most people, both in the field of climate finance and outside, is if you were to today, and I'm going to ask you this almost as a lightning round question, give me the split of the, of, let's say we wanted $100 from these, broadly three or four pools of capital, what is the proportion you expect needs to come from the private sector, how much from the government, how much from philanthropic, and how much from, let's say, impact cap?
Varad Pande
Yeah, yeah, I can give you a one-minute answer or I can give you a three-month answer. But, you know, I think a lot depends on the time frame, Anirudh. So today, if you ask me, you know, the... how should the, where should bulk of the money come [from], I think it will be over indexing on government and MDB and DFI capital, and I think increasingly we'll see much more coming from patient capital, venture capital, NPE, and then eventually pure commercial, large commercial capital, right. So, let's, just to answer your question more directly, let's say scenario 2023 and scenario 2033, today I would say, you know, private capital is maybe 75 percent of the 600 billion that I mentioned to you, right?
But the problem is, we need to take this 600 billion to 3 trillion, right, and we probably need to keep that 75 percent at 75 percent of 3 trillion. And so, I think all of these will need to rise in massive proportions. I don't expect the percentages to change dramatically, but I think we need to have this 5X increase across all of these pools of capital.
Anirudh Suri
So, my worry is that, you know, we are really talking a lot more about government capital, which will, you know, more likely than not form a much, much smaller chunk, right—I think 80 percent, 75 to 80 percent, I think as you also indicated, will have to come from the private sector. And, you know, to that extent let me ask you another question. So, you know, the spring meetings of the World Bank that just happened—our finance minister was there, part of the conversations, she recently also asked the Asian Development Bank to come up with ways to give cheaper finance to climate projects in India. The same conversation is obviously happening at the World Bank level as well. Are you one hopeful of the fact that now a person like Ajay Banga is at the helm of the World Bank? If you look at the circumstances, the statements, the conversations around his appointment, or his nomination, and then his election as president of the World Bank, you'll see that climate has been a big part of the statements coming from President Biden and several others. And of course, the other piece that's in there is the reason why President Biden has nominated him, is that he comes from the private sector, he doesn't come from a traditional World Bank or a, you know, development finance organization, he comes from the private sector. And, hopefully, he can mobilize the private sector capital that I’ve also emphasized in my framework, but I think from the numbers as we were just discussing also is important. So, are you hopeful that someone like him can now deliver on the promise that the World Bank and other entities can be used to leverage that $10 of private capital on the back of that $1 of government capital, the argument that you were also making that needs to happen?
Varad Pande
So, I think, first of all, I think Mr. Banga’s selection is an inspired choice for the reasons that you said. I think he has a wealth of experience, both in the Global South and the Global North, in the private sector, in the public sector, in financial markets, in other industries, etc. So, that’s great. I however feel that you know it's... there is no silver bullet in these things, and I think the choice of a great leader for these organizations is a necessary but not sufficient condition for the kind of change that we need, right? I think, to be very candid, I think these organizations require massive reform. I think all of them have been talking a lot about climate change, but the talk is well ahead of the walk, and I don't blame these organizations entirely, right, they are creatures of the Bretton Woods period, which was seventy-five years ago. They are... they have a certain culture and way of doing work, but they also have a governance that is, I think, hindering their reforms. So, you have the large countries of the world, which have geopolitical issues and other dimensions that tend to show up when you have conversations on the MDB reform, right? So, you have... China and US are the biggest shareholders of the World Bank, and when you are, you know, arguing on so many other platforms, it's unlikely you are going to agree on the massive reforms that the MDBs require. So, you know, I think the... the what of what kind of reforms are needed, I think that has now been well studied, well documented. There's a G20 task force report on this, whether it's improving, increasing, basically increasing capital or allowing their capital to leverage a lot more capital on their books and various other reforms around their operations. All of these things are well documented, it's about now getting it done. But, Anirudh, I keep coming back to this point of we don't have the luxury of time, right? And we know there is a ticking time bomb that we are facing if we want to meet our net zero by 2050 or 1.5 degree or even 2-degree goal. And so, we need to work on MDB reform but again, we can't only rely on MDB reform. And I think in this context, one of the ideas that, you know, I've been sort of thinking a lot about it, is whether there is a need for a new sort of a “Climate World Bank,” right, for want of a better word, which is fundamentally different from the existing World Bank and the Asian Development Banks of the world, with a charter which is exclusively focused on leverage instruments, right, such as... which will enable blended finance, so things like first loss guarantees, mezzanine capital, project insurance, climate insurance, and technical assistance—all of these things are being talked about as the unlocks for blended finance for catalytic finance. But asking the MDBs to do this as a new business line or an additional piece of work is going to take time. So, could we come up with something like a new World Bank that can be capitalized by the governments of the world and, in addition to the capital from these countries, by the SDRs of the IMF, the special drawing rights of the IMF, which can also be leveraged to get a lot more capital on their back. And this is not my idea, Anirudh, so I won't claim credit for it. This is an idea which has been put forward by something called the Bridgetown Initiative, which again came from the Prime Minister of Barbados, Mia Mottley. I think it's time to think about leveraging the SDR capital in potentially a new institution that from day one is born as a leverage institution and can allow much more pools of private capital on the back of their capital to be deployed for projects, especially in the global South. I think that's the kind of... while we continue to work on MDB reform, we do need to work on some of these radical, innovative ideas to unlock the kind of climate finance you're talking about.
Anirudh Suri
No, that's right. I think that, you know, while MDB reform will suffer possibly as, I think, you [were] alluding to because of the geopolitical conflicts that we're currently part of, you know, in the world. Unfortunately, I think it will also possibly slow down the development of any truly world, truly global climate bank as well, right? So, I think the problem that geopolitics might present for existing MDBs, existing institutional frameworks to be reformed, or for progress to happen even within CoPs and other platforms, I think might plague any new institution that also gets set up unfortunately. But let's talk about climate technology also now, right? So, we've spoken a little bit about the climate finance piece, and obviously I think there's a lot more that we can go into depth, but for lack of, you know, time, let me now move to the climate tech piece of our conversation. So, if you look at India's climate tech strategy, so to say, we don't have an explicit one out there, but if you can put one together, at least the way I put it together is to say that there are two or three large pieces that we are relying on. One is, we are going for electrification of our mobility, right? So, the EV-driven strategy to electrify our cars and our trucks and our scooters on one end, and then we have a green hydrogen mission, the National Green Hydrogen Mission, for which I believe 6000 crores have been allocated by the government, which is obviously a big chunk for a country like India but if you compare it to the amounts that other countries are putting behind green hydrogen, you know, might pale in comparison. But still, I think it's a substantial amount. So, we have this green hydrogen strategy which might help us with our hard to beat industries, possibly, if that technology story plays out. And then we have the EV story on the other hand, which is now very quickly starting to play out and then a small part of the story that we can also mention is the biofuel story. You know, India is becoming a large ethanol manufacturer, and along with Brazil and the US at the Indian Energy Week in Bangalore, which I was at a few months ago, India and Brazil and the US launched a global biofuels alliance. But that obviously is not a very big chunk of our total requirements but that's broadly what I'm seeing is the focus of India's climate tech strategy. Now, however, if you look at it from a venture capital standpoint, you know the framework we use for climate technology includes various other technologies, right? So, you have green buildings and technology for that, you have smart grids and technology for that, you have smarter agriculture and technology for that. Of course, you have space and analytics and data that have to be part of it, and then lots of moonshot technologies that, you know, various companies and institutions are working on around the world, as you also mentioned. Breakthrough is funding some of them, but really there's lots of those projects going out around the world. What's your sense of the key technology areas that India needs to focus [on]?
Varad Pande
So, I think you know, before going into what they need to focus on, I think there's a little bit of a, I think, hat tip I want to do to the fact that... what we have accomplished over the last decade. I think whether it is in the global negotiations where we moved from you know, we didn't cause the problem so don't ask us to do anything to now, I think, you know, a confident dealmaker on the back of our commitments, Panchamrit and those things. Similarly in domestic policy, I think, you know, smelling the coffee and starting out with the low carbon expert group in 2012, which I was a part of, to now the long-term low emission strategy which was released at Sharm El-Sheikh, a lot has been done, right? And similarly, action on the ground especially on things like you mentioned. Firstly, just the solar story in India is quite remarkable and unlike what India has accomplished in... I can't think of any other space where over a space of ten years we have gone from really a minor dot to a major global player in the solar space, right? So, I think first of all, let's recognize what we have accomplished and use that as a base for what to do in the future. And, Anirudh, as, you know, as you're also an investor and you understand this well, the way I like to think about the role of government in all this is not so much to pick winners of policies but really, to think about what is the market shaping or the market making role they can play at different stages of the valley of death, right? And so, the value...
Anirudh Suri
Let me, let me clarify one thing, Varad, let me clarify one thing, when I say India, I mean all players in India. I don't mean the Indian Government alone, right? So, I completely agree with you that the government only has X part to play, right, in various technology pieces, whether it's research, innovation, scaling, adoption, the money needed to scale it, and then of course final consumer or customer adoption. My question is really like if you look at it from a broader standpoint than just the Indian Government, India, whether it's the private sector or philanthropic capital or, you know, innovators, these institutions, the focus is largely, I agree with you, on renewable energy, solar, wind, green hydrogen, and electric mobility, right. So, my question is really like... I agree with you also on, you know, acknowledging that we have had a massive success story in solar energy product... renewable energy production as a percentage of our total production. We also, I think, are seeing great adoption of EVs over the last year or two especially. Green hydrogen, you know, there's some commitments to, and hopefully that mission works out. But the question is what might we be missing.
Varad Pande
So, I'll tell you, I mean, this is something [where] you'll get different answers from different people. I’ll give you my five top candidates other than solar, wind, and EV. So, the first I would say steel, clean steel is a big opportunity for us. We are already a major exporter of steel. We are seeing the global trend on movement towards green steel. Europe putting the new border adjustment mechanism in place, so we... It's both a necessity and an opportunity, right? So that's one. The second I would say is long duration energy storage, because if we want to go beyond EVs, and if we really want solar and wind to be part of large grid scale solutions, we need to figure out long duration energy storage if we want to wean ourselves out of coal, otherwise, it's not happening, right? So that's the second. The third is, I would say, in a similar vein, the smart grid piece and really rethinking what we mean by a modern grid. This is a problem not unique to us, but every... even US is right now struggling with this question. But basically, the point is we can keep ramping up solar and wind production but unless we figure out both long duration storage and the grid, this will not become a major part of the energy mix, and we will not be able to wean ourselves outside cold. So that's the third. The fourth I would say is nuclear, a bit controversial, but I think modular, small-scale modular reactors, I think there's a lot of hope resting on that. I think this is an opportunity for us. We have kept nuclear, of course, for strategic reasons exclusively in the public sector. I think, as Montek Ahluwalia and others have recently argued, it is time for us to think about maybe a joint venture approach to advancing nuclear to be part of our energy mix. If you want to get nuclear up to 10 percent of our energy mix by 2035, we need to scale up nuclear by 10X. That's not a small means and we need to be innovative on that space. And the last for me is regenerative agriculture, because I think there's an opportunity here to both transform the way we do agriculture for this and move away from the highly intensive green revolution agriculture that we've been doing for the last forty fifty years, which has now begun to plateau and actually diminish in its returns, [and] at the same time, create large scale carbon sequestration potential and monetize it using the carbon market. So, you know, this, clean steel, long energy duration storage, revamp grid, small modular nuclear, and regenerative agriculture would be my top five picks.
Anirudh Suri
I think those are five great options for, I think, everyone to think about, from entrepreneurs to policy makers to people in this space broadly. I'll add one more, right, at least one more there [are] many that could come to mind, but I guess in priority setting, I think there's the energy efficiency piece here that often gets missed, right? So, in fact, just today I was reading in The Economic Times, Alok Kumar, the secretary in the Power Ministry, he has a piece in there that talks about the three main priorities from his standpoint. And he mentions obviously the hard-to-reach sectors—steel we’ve discussed, but there's others, cement etcetera. There's the EV story in the mobility story that's playing out, of course, currently only on the commercial passenger side, but really needs to be extended to the railways and freight and, you know, many other pieces of the transportation puzzle. And then the third piece that he mentions, which according to him is a big chunk that also gets missed, and I completely agree with him, is managing the consumption aspect of this, right? How do we actually reduce the consumption of energy as well? How do we get smarter homes? How do we get greener buildings? How do we get people to be much smarter about their energy choices? Goes to the, you know, the life mission that, of course, Prime Minister Modi has also spoken about, how do we reduce the demand of energy in the first place? I think it’s the sixth piece I would add to maybe the five you’ve very nicely laid out. Let me move to just the last piece that I think I'd like to cover before we wrap up our conversation today, Varad, is, you know, like any other country, I think we've got to learn from the journeys of other countries as well if we want to move as fast as we can on this climate transition. Any lessons that you've seen, in terms of either climate finance strategies or climate tech, either innovation or climate tech adoption from other countries that you've seen that you would like to highlight? Where India could learn from that and say, hey, listen, this is an interesting strategy that this X country has adopted, maybe this is something we can pick up on and build and scale upon.
Varad Pande
So, I think the good... you can call it the bad news or the good news, Anirudh, is that I think this is such a nascent space that there are no templates to copy just yet, right? And I think that's what also makes this exciting and part of the reason that I'm going back deeper into what I would call the problem-solving engine room of the climate finance and climate tech problem in my new role is because I think there are no ready answers that you can transplant. That said, I think it's interesting to see the paths that different countries or regions have taken. I think the EU, of course, has been a trailblazer on both, you know, domestic actions and regulation as a lever for action, right? So, they were the original folks who did the energy trading scheme back in the earlier [days] under the Kyoto Protocol, they are also the most advanced in terms of regulations on their own businesses and now through their buying power and through the border adjustment mechanisms on other countries in the world. So, the EU has chosen a regulation-led path. In contrast, I think US, which typically you know generally is a little more averse to too much regulation, has chosen a more, what you can call an incentive path. So, the entire Inflation Reduction Act, which has nothing to do with inflation and everything to do with climate change, is really a large incentive program to get actors both on the investment side and the consumption side to change their behaviors right, to your point in your, in the previous question. So, they have chosen a more incentive-based path as the lead strategy. And so, we have to also, I think, choose a mix of these things. We don't have unlimited resources, and even the level of resources that the US has—ours cannot be a subsidy-heavy or an incentive-only strategy. We need to choose a combination of these levers. I think the general lessons, Anirudh, are quite clear in my mind, right. One is this, we need a whole-of-government, whole-of-society approach here because climate change is not a sector or a domain. It is something that cuts across everything we do. That has implications for what kind of institutional mechanisms we need as a country. Navroz, Dubash, and others have called upon setting up a Low Carbon National Commission, which I think is a great idea because it could bring together both the government, civil society, industry, everything together and be the apex body to sort of guide and direct... non-executive apex body to guide and direct action. I think we need to tap on every door of finance like we discussed. There's a role for all those pools of capital, all of them need to scale up dramatically. And we need to invest in institutions for a sustainable future. We need a lot more climate schools. I sit on the Advisory Board of something called the Ananta School of Sustainability at the Ananta National University in Ahmedabad, which is India's first full-time program on climate in India. We need several more of those and we need to really understand the opportunity framing that we talked about here, and, you know, grab it with both our hands because it is one of those remarkable moments in history which is both a threat and a massive opportunity.
Anirudh Suri
Yeah, you know, absolutely, I agree with you. I think I'll add a couple of lessons that I see that India can draw from other countries, right? One is, I think from the US besides obviously the IRA, which when I wrote about, and I said that India might want to also have a comprehensive climate legislation that we might want to bring about at some point, though right now, obviously we're doing it in, you know, pieces, which sometimes is easier to pass. You know, the IRA as, as anyone who followed it, who knows was a massive legislation that was extremely hard to pass and hence is also named something that does not, as you rightly said... It's seems like it's about inflation but it’s about climate but it took a while to pass and was very hard. But the other lesson I think that we can draw from the US is that, and I say this as someone in the technology venture capital world, is that they are going deep into the climate tech innovations, they really are. They're spending a lot of R&D and really, IRA, I see it also as an R&D act. They’re basically saying that, you know, we’ll give you incentives to change your behaviors, yes, but we'll really also give you the money to do the core R&D that you need to develop the next wave of technologies in climate, right, and climate again broadly defined. Because I think the US realizes that they've missed the bus on certain technologies vis-a-vis its main geopolitical competitor today, China, right. I think the Europeans are starting to do something similar. They’re also talking about the New Green Deal. And I think from what I've seen the European VC world also, they’re also starting to really think about, OK, how do we invest in innovative climate startups, right? So, while there is the regulation piece, but I think there's the innovation piece that we can learn from. The second, I would say again, drawing on certain European countries, right, there are countries who have been in the clean tech, this entire space used to be called clean tech, they've been clean tech powers, whether it's on wind or various other aspects of agriculture, energy production, etc. And I think we need to also figure out, okay, where in our own manufacturing or Made in India strategy, does climate fit, right, and what pieces of maybe climate-related manufacturing, climate tech-related manufacturing we need to adopt. And third is the scale of adoption, and this is where I think we can learn from China. One thing, if you look at solar, there was a very interesting piece I came across a couple of weeks ago—the amount of solar that we are putting up, Varad, in an entire year, thirty gigawatts, is something that China is today putting up in a quarter. They’re doing 60+ gigawatts in a year, it’s sixty-three I think the number I came across. And so, I think the lesson for me there is actually the speed of adoption. As you rightly mentioned, time is short, I think both from a risk as well as an opportunity standpoint. So, I think India must also scale up its space, not just adoption, but I think pace of adoption I think is going to be very important, whether it's EVs, whether it's rooftop solar, whether it's any other piece of the five or six priorities, the technologies we discussed. I think the pace of adoption is going to be a real game changer for countries here, right, for both entrepreneurs as well as governments. But great, no, this has been a great conversation. We've covered lots of pieces of climate tech, climate finance here today, Varad. So, thank you for your time. I think that there are lots of threads here that we can go deeper on which we'd love to, I think, as Carnegie India, we start to work more on climate as well. We'd love to pick up some of these threads that we've discussed today, I think at a macro level and go deeper as well on. So, thank you for sharing your thoughts and [we] look forward to continuing to engage.
Varad Pande
Fantastic, great to do this with you, Anirudh, and you know as I think the conversation told us, I think we ran out of time, and I felt like we were just about getting started. So, let's do this more often and great to exchange notes.
Anirudh Suri
Great, thank you so much! We'll be back in two weeks with a new episode. To make sure you don't miss it, be sure to subscribe on Apple Podcasts, Spotify, Stitcher, or wherever you get your podcast from. To learn more about our research and teams, you can visit us at carnegieindia.org. You can also find us on social media, on Twitter, Facebook, and Instagram. Thank you for listening and see you next time!