How Signing the Clean Economy Pact can Accelerate India’s Green Transition

The Indo-Pacific Economic Framework (IPEF) represents a significant multilateral initiative aimed at enhancing economic cooperation among countries in the Indo-Pacific region. Launched on May 23, 2022, in Tokyo, the IPEF comprises 14 member countries, including India and collectively accounts for 40% of global gross domestic product (GDP) and 28% of the world’s trade. Structured around four key pillars—trade, supply chain resilience, clean economy and fair economy, this framework aligns with India's sustainable development ambitions and long-term climate goals. 

India's commitment to sustainable development is evident in its alignment with the United Nations Sustainable Development Goals (SDGs) and the country's ambitious net-zero emissions target by 2070. As part of its Nationally Determined Contributions (NDCs), India aims to reduce the carbon intensity of its economy by 45% by 2030 and achieve 500 gigawatts (GW) of installed renewable energy capacity by the same year.  

Attract Green Investments 

With over 197 GW of renewable energy capacity already installed, including 87 GW from solar and 47 GW from wind, India is making notable progress. However, to meet its 2030 target, an estimated $1.4trn is required for further investments in green infrastructure and energy transition. The IPEF presents a unique opportunity for India to leverage international partnerships and accelerate investments toward these goals. 

Under the Clean Economy (Pillar III) Agreement, IPEF partners aim to catalyse investment in green technology and reduce greenhouse gas (GHG) emissions through various means, including annual business matching events under the Investor Forum. The First Investor Forum was held in Singapore on June 5-6, 2024. One significant outcome was a Memorandum of Understanding (MoU) among companies from India, Singapore and Japan, leading to Singapore-based Sembcorp investing Rs 36,238 crore in a state-of-the-art green ammonia plant in Thoothukudi.  

The IPEF provides platforms for technical assistance, concessional funding and viability gap funding. The IPEF Catalytic Capital Fund, with an initial grant of $33mn (Rs 273.9 crore) from Australia, Japan, Korea and the United States, aims to catalyse private investments totalling $3.3bn (Rs 27,390 crore). Further, the Partnership for Global Infrastructure and Investment (PGI) Investment Accelerator under IPEF has received initial funding of $300mn (Rs 2,490 crore) from the DFC. 

For the world order, IPEF provides a means to counter China’s dominant supply chains and provides India with avenues to diversify trade partnerships, especially in green technologies. By signing the Clean Economy Agreement under Pillar III in September 2024, India has opened pathways for collaborations that will drive investments in climate-friendly infrastructure.   

India’s participation in the framework includes efforts to develop resilient supply chains for critical minerals such as lithium, cobalt and rare earths, essential for manufacturing electric vehicle (EV) batteries, solar panels and other renewable energy technologies. By strengthening trade ties with member countries which possess rich deposits of cobalt, nickel, copper and rare earths, India can reduce its dependence on imports from non-IPEF members and enhance domestic manufacturing.  

The Clean Economy Agreement within IPEF emphasises reducing greenhouse gas (GHG) emissions, enhancing energy security and promoting renewable technologies. India has proactively proposed several Cooperative Work Programs (CWPs) under this agreement, including a CWP on “e-waste urban mining”, which aims to establish sustainable e-waste management systems across the Indo-Pacific. 

Key Challenges 

Despite the opportunities the IPEF offers, India faces several challenges. The country is heavily reliant on external supply chains for renewable energy technologies, with 80% of its solar PV modules imported from China. Reducing this dependency will be critical to ensuring supply chain resilience in the green energy sector. 

Another challenge is aligning India's domestic policies with the stringent trade and environmental standards set by the IPEF. This will require balancing national economic priorities with international commitments, particularly regarding trade regulations, labour laws and environmental impact assessments. Additionally, India must navigate the geopolitical complexities of the Indo-Pacific region, particularly its relations with China, which is not part of the IPEF but remains a key regional player. 

Financing is another significant hurdle. While the IPEF Catalytic Capital Fund offers a platform for investment, India's National Infrastructure Pipeline estimates that the country needs over $4.5trn in infrastructure investments by 2030 to realise the vision of a $5trn economy by 2025, and to continue on an escalated trajectory until 2030, much of it directed toward sustainable development projects. 

Speed and agility of the IPEF member nations will truly determine how far this agreement will go to fully capitalise on the benefits that the agreement has to offer. The decision making would have to be fast and decisive—formulating partnerships and implementing them at speed and scale. Further, alignment of domestic trade policies with IPEF standards, particularly in areas such as clean energy, labour rights and decarbonisation will be particularly crucial. 

The writer is director, Climate Policy Initiative. Views expressed are personal.