The Government of India has taken a significant step towards accelerating the nation’s green transition by releasing the draft framework of India’s Climate Finance Taxonomy. Announced by the Ministry of Finance in line with the 2024-25 Union Budget, the draft aims to channel much-needed capital into climate adaptation and mitigation efforts, supporting India’s commitment to achieve net zero emissions by 2070 and the developmental vision of ‘Viksit Bharat’ by 2047.
The draft framework serves as a classification system to identify activities, projects, and technologies that are in harmony with India’s climate action goals and the broader green transition pathway. Its main objective is to facilitate greater resource flow to climate-friendly sectors, ensuring both emission reduction and long-term access to reliable, affordable energy.
India’s climate ambitions are vast, with targets to reduce the emissions intensity of its economy by 45% by 2030 and transition to about 50% electric power from non-fossil sources in the same period. Meeting these goals will require enormous investments-preliminary government estimates peg the need at around $2.5 trillion by 2030 for the climate transition, with the energy sector alone requiring $250 billion annually till 2047.
The draft taxonomy is designed to address these challenges by providing clarity to investors, banks, and policymakers on what qualifies as a climate-aligned or transition-supportive activity. It seeks to prevent “greenwashing”-the misrepresentation of activities as being environmentally friendly without genuine impact-by establishing clear, science-based, and transparent criteria for inclusion.
The taxonomy will classify activities into two main categories. “Climate-supportive” activities are those that directly contribute to emission reduction, adaptation to climate impacts, or research and development in these areas. “Transition-supportive” activities are those that help sectors-especially hard-to-abate ones like cement, steel, and aluminium-move towards lower emissions, even if absolute emissions avoidance is not yet feasible. The framework also covers sectors such as power, mobility, and buildings for mitigation and adaptation, as well as agriculture, food, and water security for resilience building.
Supporting Indigenous Technologies
A unique feature of the Indian taxonomy is its emphasis on supporting indigenous technologies and recognising the specific developmental needs of the country. It aims to be consistent with international frameworks while maintaining flexibility to address India’s national priorities and circumstances.
The Ministry of Finance has invited comments and suggestions from stakeholders and the public on the draft framework until 25th June 2025. The feedback received will be considered before finalising the taxonomy, which will later be expanded with sector-specific annexures detailing eligible activities and measures.
Officials highlight that this taxonomy will not only guide investment towards impactful climate solutions but also serve as a blueprint for other developing countries facing similar challenges. The government hopes that, by providing a clear and credible framework, it will unlock both public and private finance at the scale required for India’s ambitious green transition.
