World Bank approves $1.5 billion loan for low carbon energy sector

The World Bank’s Board of Executive Directors in June 2024 approved a $1.5 billion loan to the government of India to develop the low-carbon energy sector in the country. This is the second such loan granted by the World Bank of India. Last year, in 2023, the World Bank sanctioned $1.5 billion to India for the development of the low-carbon energy sector.

What is the Low Carbon Energy  Sector?

Low Carbon energy sector refers to the energy source which when burned releases less carbon as compared to the burning of fossil fuels(coal, petroleum oil and gas). 

Hydrogen or ammonia are considered as zero carbon emission fuels and amongst the low carbon fuels comes biofuels. Biofuels are made from biomass like plants (wood,straws,molasses, agricultural wastes etc ) , algae.

The government of India has set a target to achieve net zero carbon emission status by 2070. To realise this goal, the government of India launched the National Green Hydrogen Mision.

Green Hydrogen refers to the production of hydrogen by breaking down water through electrolysis. The electricity needed for electrolysis is produced by using renewable sources of energy like the sun, hydropower, wind, etc.  

Break up of the Loan Amount Provider  

• Out of the total $ 1.5 billion loans, $1.44 billion will be provided by World Bank’s International Bank for Reconstruction and Development (IBRD).
• $56.57 million will be provided by the International Development Association (IDA) of the World Bank.
• The rest of the amount will come from the United Kingdom's $1 billion backstop aimed at boosting the World Bank’s climate change financing to India.

Support for National Green Hydrogen Mission 

According to the World Bank, the loan will support India's government’s National Green Hydrogen Mission.

On 4 4 January 2023, the government of India launched the National Green Hydrogen Mission. The total outlay on the mission is Rs 19,744 crores and the mission will continue till 2029-30. 

One of the main aims of the mission is to  

• Develop green hydrogen production capacity of at least 5 Million Metric Tonne per year  by 2030,
• By 2030, the renewable energy capacity shall increase by 125 gigawatts.
• Attract $ 100 billion in investment from the private sector.

The Mission aims to attract $ 100 billion investment in the sector till 2030. The loan from the World Bank will supplement the government effort to achieve the target set under the National Hydrogen Mission.

International Bank for Reconstruction and Development (IBRD)

IBRD is a part of the World Bank Group and it is the world’s largest development bank.

The IBRD was set up in 1944 to provide loans,guarantees, risk management products, and advisory services to middle income member countries and credit worthy low income countries. 

It provides loans at commercial rates and finance development projects in the member countries.

International Development Association (IDA)

The IDA is also part of the World Bank Group and was set up in 1960.

It provides loans and grants to low-income member countries for development projects. 

Unlike IBRD, it provides grants to countries and offers loans at almost zero percent interest with repayment durations of over 30 to 40 years.

Grants mean that the borrower will not return the money to the lender.

Headquarters of the World Bank Group: Washington D.C, the United States of America 

President of World Bank Group: Dr Ajay Banga (American citizen) 

Member Countries: 189