India will need $467 billion in additional capital spending by 2030 to decarbonize four of its most carbon-intensive sectors — steel, cement, power and road transport — according to a new assessment of the country’s climate finance needs.

The study, “India’s Climate Finance Requirements: An Assessment,” estimated the annual requirement to be $54 billion, equivalent to 1.3 percent of the country’s gross domestic product, from 2022 to 2030.

Heavy Industry Leads the Bill

Steel, one of the hardest sectors to decarbonize, will account for the largest chunk of the required spending at $251 billion, followed by cement at $141 billion.

Both sectors are expected to rely heavily on carbon capture and storage, a technology that remains expensive but is currently the only feasible option at scale.

By contrast, the power sector will need an additional $57 billion, including $47 billion for renewable energy capacity and $10 billion for storage systems to stabilize the grid.

Road transport is projected to require $18 billion, primarily for the adoption of electric vehicles and the development of charging infrastructure.

Climate and Economic Impact

The decarbonization of these four sectors could reduce the use of 291 million tonnes of coal and 72 billion liters of petrol and diesel, cutting 6.9 billion tonnes of carbon dioxide emissions by 2030, the report said.

The average cost of abatement across power, steel and cement is estimated at $61 per tonne of CO2, with cement emerging as the most expensive at $70 per tonne.

Fiscal Constraints

The report warns that India’s fiscal space is limited. The general government’s debt-to-GDP ratio stood at 82.6 percent at the end of March 2025, well above the mandated target under the Fiscal Responsibility and Budget Management Act.

Even if spending is reprioritized, public sources alone will not be sufficient, the study said. The bulk of the financing will have to come from private investment, supported by incentives, subsidies and regulatory frameworks.

External Financing Challenge

India’s external climate finance inflows remain modest, with the country receiving less than $8 billion in 2023 from multilateral and bilateral sources.

The report noted that while New Delhi has called for developed nations to provide at least $1 trillion annually in climate finance to developing economies starting 2025, the ability to absorb large external inflows will depend on managing macroeconomic stability, particularly the current account deficit.

Policy Push Needed

The study urged targeted incentives for the private sector to invest in low-carbon technologies, particularly in heavy industries, along with stepped-up research and development to bring down the costs of CCS and alternative solutions like green hydrogen.

“India faces the dual challenge of sustaining rapid economic growth while meeting its climate ambitions,” the authors wrote. “A carefully calibrated strategy combining domestic reforms, international cooperation and private sector participation will be essential.”