When Wallace S. Broecker first coined the term global warming in 1975, it was considered a distant challenge. Decades later, climate change is no longer a hypothetical concern but a lived reality, with its disruptive impacts felt globally. As nations work to mitigate emissions, current climate change is already causing widespread devastation. Among the most vulnerable countries are India and the Global South, given their population density and geographic diversity. Although India has taken significant steps towards a green transition, the focus remains heavily skewed towards climate change mitigation rather than adaptation. This imbalance is further exacerbated by the hesitancy of the private sector to invest in adaptation projects, placing the responsibility squarely on government-led public spending to address these pressing needs.
Indian public investments in climate initiatives have primarily focused on mitigation, leaving adaptation measures underfunded. For example, the National Adaptation Fund for Climate Change (NAFCC), established to support adaptation projects, has seen a steady decline in funding. Allocations have fallen from INR 115.36 crore in 2017-18 to just INR 34 crore in 2022-23. Simultaneously, India’s energy transition is progressing rapidly, with the country ranking 63rd on the World Economic Forum’s Energy Transition Index and making steady progress toward its 2030 target of 500 GW of renewable energy capacity.
While these advances in renewable energy are essential, they are primarily aimed at reducing emissions rather than tackling the immediate and long-term consequences of climate change. Even if net zero emissions were achieved today, the residual effects of existing greenhouse gases would persist for decades. This harsh reality makes it imperative to invest in building resilience and creating adaptive systems that can withstand the ongoing impacts of climate change.
The prioritization of mitigation over adaptation is not unique to India and is evident across the world. This preference is particularly pronounced in private investment trends. According to a study by the Boston Consulting Group (BCG), only 36% of investors in India see the potential in adaptation-related projects, compared to 42% who prioritize mitigation themes such as renewable energy production. Furthermore, half of these investors are reluctant to finance projects intended for humanitarian responses and community resilience.
This hesitation stems from the complex nature of adaptation projects, perceived as riskier due to their uncertain outcomes and indirect benefits. Unlike mitigation, which often produces measurable results like emissions reductions, adaptation efforts typically focus on public welfare and lack direct financial returns. Therefore, the responsibility for implementing these crucial initiatives lies primarily with governments. Recent events, such as catastrophic floods in Uttarakhand and severe heatwaves in northern India, highlight the urgency of strengthening climate adaptation efforts.
The climate crisis must be addressed through a multidimensional approach that goes beyond emissions reduction targets. Building resilience requires integrating adaptation measures into broader development policies and fiscal strategies. Public budgets play a central role in determining how climate goals are aligned with national economic priorities such as GDP, employment and income. The challenge is to reshape public spending frameworks to adequately account for and prioritize climate adaptation.
India’s commitment to the idea of a green GDP, as highlighted by the Prime Minister, represents a promising step. However, national fiscal policies must go beyond abstract concepts and redefine development itself to integrate adaptation measures across all sectors. Investments in renewable energy and energy storage technologies alone will not be enough unless public spending frameworks coherently respond to mitigation and adaptation challenges.
At its core, budgeting is about balancing competing priorities and allocating limited resources to maximize public welfare. However, adaptation continues to receive insufficient attention in this process. Estimates from the Climate Policy Initiative suggest that India will need annual investments of between $14 billion and $67 billion for adaptation-related development interventions between 2015 and 2030. Yet allocations to the Ministry of Health Environment, Forestry and Climate Change (MoEFCC) have been steadily increasing. remained at only 0.1% of the total budget.
To correct this imbalance, India must integrate climate risks into its budgetary planning. An effective approach is to integrate the physical and economic risks of climate change into macroeconomic forecasts. Development projects often neglect long-term climate impacts, such as flooding or recurring heatwaves, leading to unsustainable debts and unfinished projects. Accurate tax models can enable governments to predict these risks and allocate resources accordingly, creating a more realistic and sustainable planning framework.
Effective adaptation requires collaboration across sectors and institutions. The transition from labor-intensive industries to low-carbon sectors will require reskilling and training workers for roles in the production, installation and operation of renewable energy technologies . Such initiatives require coordinated planning and cross-sectoral spending, which India’s current single-agency administrative structure does not adequately support. Reforming program budgeting to facilitate multi-agency collaboration is essential to creating a robust adaptation framework.
One of the main obstacles to effective adaptation financing is the lack of mechanisms to track climate-related spending. Climate budget labeling (CBT) offers a potential solution. By categorizing and monitoring funds allocated to climate-related projects, CBT helps identify gaps and ensures resources are directed to underfunded areas. Nepal’s CBT system, for example, tracks climate spending and assesses its alignment with national climate goals. Adopting a similar mechanism in India, tailored to its diverse climate challenges, could institutionalize adaptation spending and strengthen accountability for public spending.
The Union Budget 2024-25 reflects the challenge of reconciling economic growth and environmental sustainability. However, disparities in fund allocation persist: mitigation efforts saw an increase of 48.15% in 2023-2024, while adaptation spending increased by only 1.63%. Such trends highlight a fundamental flaw in India’s climate strategy, where adaptation continues to be an afterthought. To address this, India must adopt budgeting practices that quantify the long-term benefits of climate-resilient development. Integrating adaptation into budgetary planning will not only align national policies with global climate commitments, but will also ensure that public spending supports sustainable growth. By institutionalizing these changes, India can pave the way for a resilient and sustainable future, ensuring that the country is well prepared to face the challenges of climate change.
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