
Climate Change and the New Green Economy: The big questions for 2025

Summary
Summer 2024 was the hottest recorded, with India facing extreme weather events. There's a call for developed nations to lead fossil fuel phaseout as developing countries struggle with economic pressures. India is making strides in renewable energy, but faces challenges in the global green economy.The summer of 2024 was the hottest on record. The global-average temperature between September 2023 and August 2024 was the highest on record for any 12-month period.
Data from the Centre for Science and Environment and Down to Earth showed that India recorded extreme weather events on 93% of days in the first nine months of the year. Events which occurred a few times every century are now happening every five years or less. The frequency adds to the severity of impact by not allowing sufficient time to recover from the cycle of losses and damages, the report noted. The economic impacts of the climate crisis on the developing world cannot be underestimated.
Climate ambition needs to be ramped up dramatically and for this, fossil fuel demand and supply, responsible for about 90% of global CO2 emissions, have to decline substantially. But divorcing our economies from easily transportable, tradeable and hoardable fuels like coal, oil and gas is proving very difficult to do in practice.
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CSE’s report titled Equitable Fossil Fuel Phaseout: Science and Responsibility shows that developed countries such as the US and Canada must take the lead in the phaseout of fossil fuels—having both the historical responsibility and capability to make the transition. Both have announced new climate pledges this month—but neither commit to ending the production and use of fossil fuels.
Clean energy strides
On deploying clean energy, there has been progress. In 2023, renewable sources provided 30% of global electricity supply, with over 500 GW of capacity addition worldwide. The cost of lithium-ion batteries saw a drop of 40% this year—the declining trend is expected to continue. Electric car sales in 2023 neared 14 million, or 18% of all cars sold—a majority of these were concentrated in China, Europe and USA.
For the wealthy countries of the world, the challenge is to break their fossil fuel dependence without inciting violent domestic reactions. Europe has seen a fierce backlash to its climate-adjacent policies from agriculture and automobile lobbies. In the US, Donald Trump’s resurgence has been fueled by chants of “drill, baby drill".
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For the rest of the world, the question is how to decarbonize whilst simultaneously meeting complex developmental goals. While various efforts to accelerate low-carbon transitions are underway, the larger landscape with which the Global South needs to cope is marked with growing challenges: continued and newer armed conflict; growing polarization in multilateral platforms meant for globally coordinated climate action; and a shirking of responsibilities by the Global North to name a few.
More importantly, developing countries are tasked with growing without significantly adding to the global stock of GHG emissions, but the conditions to do so are not nearly supportive enough – the world’s poorest and most climate-vulnerable countries spent twice as much on repaying external debt than what they received as climate finance in 2022; several developing countries face far higher costs of capital, particularly for green technologies compared to their developed counterparts; unilateral trade measures such as the EU’s Carbon Border Adjustment Mechanism are likely to disproportionately hurt developing economies, hindering economic growth in key sectors and placing the onus of decarbonisation on the South.
Taking the low-carbon route
Despite this, developing countries are attempting to take on the low carbon transition, albeit in an ad hoc and fragmented way by introducing various policy levers. India’s total renewable-based electricity generation (RE) capacity stands at 203.18 GW—the fourth in the world for RE capacity addition. This capacity accounts for over 46% of India’s total installed capacity—but clean power generation lags at 13%, while coal still generates over 70%. India became the first country to release a green steel taxonomy this year.
While schemes like the Production Linked Incentive saw limited subsidies offered to a handful of players, the effort to boost domestic manufacturing for green technologies continues. This is crucial both to meet domestic demand as well as participate in a global green economy, where countries like the US are looking to diversify their supply chains away from China. In fact, the share of supply from India in US solar module imports increased from 2.5% in 2022 to 10.7% in 2024.
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Scaling up finance to enable the green transition remains one of the biggest open questions for the remaining part of this decade. A disappointing COP 29 outcome saw a paltry $300 billion committed for developing countries. Estimates suggest that India’s green finance needs alone stand at about $2.5 trillion by 2030 to fully implement its NDCs. It is yet unclear if private finance—which holds trillions of dollars globally—can be deployed meaningfully to fund the green transition in the Global South.
Raising the stakes
Moreover, China’s record-breaking rise in the global green goods supply chain and its accelerating green transition have raised the economic and geopolitical stakes of building a green economy in other countries. Accounting for 80% of global solar PV manufacturing, 85% of the production capacity for critical minerals, and 60% of all EV sales in the world in 2023, China has cornered the market on many goods that are more sought after than ever before.
India must navigate this monopolistic might of its neighbour in the global supply chain of green goods. For the world and India, this reality means the need to ensure their own planned green industrial strategies and secure supply chains for critical minerals.
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The domestic imperatives of sustaining high rates of economic growth,doubling down on the manufacturing sector, increasing labour participation coupled with the pressing need to decarbonise its economy, and battle extreme weather events present an uphill task for India. But it is also an opportunity—to reinvent its growth along bottom-up, planned, low carbon and climate resilient pathways.
Simultaneously, a seamless coordination with the rest of the developing world to push for transformation of multilateral spaces that are today hamstrung by the global imbalance of power, would serve it well carve out an equitable, green future for all. Simultaneously, a seamless coordination with the rest of the developing world to push for transformation of multilateral spaces that are today hamstrung by the global imbalance of power, would serve to carve out an equitable, green future for all.
Sehr Raheja and Trishant Dev are programme officers, climate change, at the Centre for Science and Environment (CSE). Avantika Goswami is programme manager, climate change, at CSE.