Why in the News?
To channel investments into clean-energy projects and climate-resilient infrastructure, the Finance Ministry has released a draft document titled ‘Framework of India’s Climate Finance Taxonomy’.
What is a Climate Finance Taxonomy?
- A CFT is a classification system that defines which economic activities qualify as climate-friendly or sustainable investments.
- It helps investors, financial institutions, and policymakers channel funds into low-emission and climate-resilient projects.
- It acts as a safeguard against green-washing, where non-sustainable initiatives are falsely labelled as green.
- It supports the mobilization of finance necessary to achieve global climate goals, including Net Zero targets.
- It offers a structured decision-making framework to ensure that investments deliver measurable environmental benefits.
About India’s Draft ‘Climate Taxonomy’ (May 2025)
- The Finance Ministry released the draft ‘Framework of India’s Climate Finance Taxonomy’ to help meet India’s Net Zero by 2070 goal while maintaining energy access.
- It categorizes activities as:
- Climate Supportive Activities: Those that reduce GHG emissions, enable adaptation, or promote clean tech R&D.
- Climate Transition Activities: Those that encourage gradual progress, especially in hard-to-abate sectors like steel, iron, and cement.
- It aligns with the national vision of ‘Viksit Bharat 2047’.
- It includes key sectors such as power, mobility, buildings, agriculture, food, and water security.
- The framework was first announced in the Union Budget 2025.
Global Context and Negotiation Relevance:
- A standard taxonomy is critical in global forums like the Conference of Parties (COP) to resolve disputes over climate finance commitments.
- Developing nations, including India, advocate for grants and technology transfers, while developed countries often include private investments in their finance counts.
- At the Baku Climate Conference, developed countries pledged $300 billion annually by 2035, far below the $1.35 trillion required.
- India’s taxonomy aims to provide a clear benchmark for climate-related financial flows, promoting transparency, credibility, and trust in international climate funding.
| [UPSC 2015] With reference to ‘Green Climate Fund’ is/are correct?
1. It is intended to assist the developing countries in adaptation and mitigation practices to counter climate change. 2. It is founded under the aegis of UNEP, OECD, Asian Development Bank and World Bank. Select the correct answer using the code given below. Options: (a) 1 only* (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 |
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