India – a key country for climate protection

India is moving in the fast lane. It has recently overtaken China as the most populous country in the world. The economy in the subcontinent is also growing at a high pace. The International Monetary Fund anticipates that the Indian economy will grow at least 6 percentage points in GDP per year over the next few years and thereby achieve the world's strongest growth. In the next 20 to 30 years, the country will be advancing just as fast as China has over the past ten years. Investors are therefore referring to India as "the next big thing".

Is India "the new China"?

However, these growth forecasts have a downside: rising CO₂ emissions. Assuming that India will emit the same amount of CO₂ per capita as China today over the next 20 to 30 years, India will become the largest CO₂ emitter in the world. Global CO₂ emissions would rise by more than 9 gigatonnes (GT) or more than 25 percent compared to today. Following these assumptions, the global goal of climate neutrality, also known as net zero, is moving further from reach. Net zero means that the same amount of greenhouse gases emitted are reabsorbed via reduction measures.

Annual CO₂ emissions per capita since 2000 (China, India and developed countries)

Serious climate protection demands that strong economic growth in emerging countries such as India be decoupled from the consumption of fossil fuels. This was not the case for established developed countries or for China. China's economic growth was the main driver, which is why total global CO₂ emissions have increased massively since 2000, while greenhouse gas emissions in developed countries have been declining since 2008.

Balancing economic growth and climate protection

India is particularly vulnerable to climate change. Increasing heat waves and heavy rainfall are causing problems, especially for rural populations. Not least because of this, the country has committed to reducing CO₂ emissions per dollar of gross domestic product by 45 percent by 2030 compared to 2005 in the Paris Climate Agreement. Climate neutrality should be achieved in 2070.

The International Energy Agency (IEA) calculated how much investment needs to be made in the energy transition by 2030 in order to achieve global climate neutrality by 2050. The IEA also points out which technologies are to be invested in and how much is to be invested in each country. Globally, annual investments in green technologies must rise from USD 1.7 trillion to USD 4.5 trillion. Chart 2 shows the investments required for China and India.

Necessary investment in China and India to reach the net zero target

The chart shows:

• China needs to invest much more in clean energy than India. This is because the economy and CO₂ emissions there are currently much larger.
• India must massively expand investments in low-emission electricity, grids and storage as well as energy efficiency over the next ten years. Each of these three areas must be allocated at least USD 100 billion per year at the beginning of the next decade.
• For China, the investment in these areas should even exceed USD 250 billion per year.
• Investments in grids and storage systems in China must increase significantly. Competition in this area is lower than in the market for renewable energies, for example. This makes grids and storage appealing to investors.

Summary

For the sake of equal opportunities, strongly growing emerging countries such as India must not be denied the right to economic prosperity. However, in order to remain within the target range of net zero, growth must be achieved with clean technologies. This offers investment opportunities in emerging countries and related technology sectors. Investments in emerging market companies always require in-depth analysis of the specific firms. As an alternative, deposits in emerging market funds that concentrate on the selection of profitable companies with a focus on sustainability technologies can be used.