RBI’s report on currency and finance for the financial year (FY) 2022-23.

CBDC and Environment

CBDC can be more environment-friendly compared to alternative cashless methods. Payments effected through CBDC would be instantaneous and final, and reduced reliance on clearing corporations and other settlement infrastructure could cut down energy consumption.

Climate stress test

Public sector banks (PSBs) may be more vulnerable than private sector banks (PVBs) in India on the basis of Climate stress tests (loss to the financial system due to climate-related risks)

Financing requirements by India

An additional annual investment of about 2.5 per cent of GDP by 2030 would be required to fill the infrastructure gap due to Climate change.

Macroeconomic Impact of Climate Change in India

India could lose anywhere around 3 to 10% of its GDP annually by 2100 due to climate change.
Job loss: 34 million job losses from heat stress associated with productivity decline by 2030.

RBI and Climate Change

RBI joined Network for Greening the Financial System (NGFS) which aims to strengthen the global response to meeting Paris Agreement goals. It issued sovereign green bonds (SGBs) for green infrastructural investments and released a framework for mobilizing green deposits by regulated entities.

Policy Options to Mitigate Climate Risks

Fiscal Policy Initiatives: Carbon pricing using carbon taxes, Emission Trading System; green taxonomy to identify sustainable green assets and activities, etc. Technology adoption: targeted R&D investments by Governments; addressing variability in wind and solar power supply, developing an indigenous renewables supply chain, etc.

Monetary Policy: Higher use of Central Bank Digital Currency (CBDCs) can help lower carbon footprint, Lower margin requirements for SGBs when used as collateral, etc.

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