Introduction and Background:
The industry sector is responsible for approximately 25% of the world’s total CO2 emissions. In India the sector accounts for around 22% of the country’s total GHG emissions. The project will enter into low carbon emission pathways for decarbonisation of Small Medium Enterprises (SMEs) in selected Indian industries in 6 large industrial clusters in North and West India spanning eight states. India’s updated NDC outlines 8 commitments and has a long-term goal to reach net-zero by 2070. DeepDC aligns closely with India’s commitment to reduce Emissions Intensity of its GDP by 45% by 2030 from 2005 level. Nationally, SMEs are responsible for about 110 million tons of CO2e, which is at least 15% of India’s industrial emissions. By making the sub sector more energy efficient, the project will significantly contribute to the NDC goal.
Project Goals and Approach to Transformational Change:
The project, “Deep Decarbonisation (DeepDC) of Selected Industrial Clusters in India” has the objective to foster rapid and cost-effective decarbonisation of the manufacturing industry in India focusing on the SME sector. The project plans to demonstrate the feasibility, business case, and wide scale uptake of 9 existing but not mainstreamed Mitigation Technologies (MT) in 6 selected industrial clusters.
To enable the establishment of a pipeline of bankable investment projects in energy efficiency and renewable energy, DeepDC will set up a NetZero Platform to facilitate the linking and matching of experts/consultants, technology providers, financial institutions, and companies. A scalable innovative financial mechanism, which will incentivise GHG mitigating investments and ensure actual benefits at company level will address financial barriers.
All measures will reduce transaction costs and have a sustainable impact on the flow of funds towards carbon-neutral investments. In terms of scope initially 1800 factories will be targeted and a total of 1240 mitigation projects will be financed and implemented at factory level.
By creating an ecosystem and market for investment in energy efficiency (EE), significant emission reductions are expected even after project end.
Project Components and Support Mechanisms:
The core financial mechanism under the financial component (FC) is a results-based grant comprised of two sub-components. The first sub-component of EUR 0.7 million will be used to finance 10 “lighthouse” projects to demonstrate credible business cases. The second sub-component of EUR 14.4 million will be used to reward the manufacturing factories for investing in appropriate decarbonisation technologies by borrowing from private/public lenders. Both sub-components will follow the same financial mechanism. The grant will be paid on a results-based mechanism in cooperation with financial institutions and directly be linked to the “mitigation success”.
EUR 7.6 million will be allocated to the technical corporation (TC) component of the project. Under this component the project will develop a continuous pipeline of projects, establish one Technical Support Cells per cluster, develop a NetZero Platform, and provide technical assistance and capacity building to energy services consultants, technology solution providers and financial lenders. It will also include gender equality and social inclusion as a cross-cutting scheme and facilitate multistakeholder public-private dialogue sessions to address the identified regulatory barriers.
Mitigation Potential and Long-Term Impact:
Total GHG emission reductions during the project are expected to reach over 1.4 million tCO2e. GHG emissions 10 years after project end are expected to reach over 7 million tCO2e reductions. Cost effectiveness is about 3,2 EUR/tCO2e over the course of the project plus ten years.