Key Insights | Fossil Taxes Funding India’s Decarbonisation: An Impact Analysis

This study asks: What if India redirected some part of fossil fuel taxes back into decarbonisation investments? Specifically, it examines funding energy-efficiency technologies in hard-to-abate (HTA) sectors, i.e., cement, iron and steel, aluminium, and building renewable energy (RE) transmission systems to meet the 500 gigawatt (GW) non-fossil-fuel-based energy target by 2030.

Objectives of the study:

1. Estimate the investment requirements for industrial decarbonisation and renewable power infrastructure.
2. Assess economic, environmental, and social impacts of redirecting fossil fuel-based tax revenues into green uses.

Conclusion:

Redirecting some fossil fuel taxes represents a strategic opportunity for India, as these funds could:

• Finance green investments in HTA sectors and RE infrastructure.
• Boost GDP and employment, creating a green growth trajectory.
• Cut emissions intensity, advancing India toward its NDC and Net-Zero targets.
• Improve social equity, particularly in rural households, when invested in RE systems.

The study demonstrates that this reallocation can generate a triple dividend, i.e., economic, environmental, and social, aligning fiscal policy with the nation’s climate commitments and sustainable development goals.