India’s Union Budget 2026–27 may not carry a standalone climate chapter, but its green intent runs deep through the fine print. From carbon capture and battery storage to critical minerals and clean manufacturing, the budget signals a strategic shift: climate action is no longer framed as an environmental add-on, but as industrial policy and economic risk management rolled into one.

Presented by Finance Minister Nirmala Sitharaman on February 1, 2026, the budget places clean energy and climate-aligned manufacturing at the heart of India’s growth narrative. With a GDP growth target of around 7 percent and a sharp focus on fiscal discipline, sustainability is being embedded into supply chains, cities, transport and finance—quietly but deliberately.

Carbon Capture Takes Centre Stage

The most striking climate-linked announcement is the Rs 20,000 crore allocation over five years for Carbon Capture, Utilisation and Storage (CCUS), aimed at hard-to-abate sectors such as power, steel, cement, refineries and chemicals. For the first time, industrial decarbonisation is being backed at scale through public finance, signalling recognition that renewables alone cannot carry India’s net-zero journey.

As Arunabha Ghosh of CEEW notes, the budget’s “prioritisation of carbon capture, utilisation and storage across power, steel, cement, refineries, and chemicals” places these sectors squarely at the centre of India’s long-term climate pathway. This marks a decisive move from aspiration to infrastructure.

Building the Clean Energy Ecosystem

The energy transition is supported by coordinated allocations across key ministries: Rs 32,915 crore for New and Renewable Energy, Rs 29,997 crore for Power, and Rs 24,124 crore for Atomic Energy. Customs duty exemptions have been extended to lithium-ion cells used in battery energy storage systems, inputs for solar glass manufacturing, and nuclear power project imports till 2035.

Aarti Khosla of Climate Trends captures this shift succinctly: “Coupled with the exemption given to battery manufacturing, VGF for BESS and grant to CCUS, the focus of the government is rightly tilting towards building an energy transition ecosystem.” She adds that continued reforms in power distribution could bring “360-degree improvement in India’s green energy supply chain.”

At the household level, the PM Surya Ghar Muft Bijli Yojana receives a major boost, reinforcing decentralised clean energy as a pillar of inclusive growth. Rooftop solar is increasingly being positioned not just as a climate solution, but as a competitiveness tool for small businesses and urban households.

Supply Chains, Not Just Solar Panels

Rather than headline-grabbing renewable capacity targets, Budget 2026–27 leans into industrial resilience. Duty exemptions for critical minerals processing equipment, solar glass inputs, and battery storage components underline a focus on domestic value addition.

Energy analyst Duttatreya Das of Ember observes that while there are “no big-ticket announcements for renewables,” the continued duty exemptions and manufacturing reforms are expected to “quietly strengthen clean energy supply chains.” This reflects a broader policy philosophy: competitiveness before capacity, foundations before scale.

Rare Earth Corridors and incentives for mineral-rich coastal states further indicate a push to secure upstream inputs essential for EVs, batteries, wind turbines and electronics—areas where geopolitical vulnerabilities are growing.

Clean Mobility and Greener Cities

Sustainability also shapes transport and urban planning. The budget proposes 20 new national waterways over five years, aims to double the share of inland and coastal shipping by 2047, and identifies seven high-speed rail corridors as environmentally sustainable growth connectors. Municipal finance incentives—such as Rs 100 crore support for cities issuing large bonds—open space for green urban infrastructure, including pollution control and climate-resilient services.

Labanya Prakash Jena,Director, Climate and Sustainability Initiative, highlights that such incentives can catalyse “green municipal bonds, particularly for pollution control and urban environmental projects,” linking fiscal reform directly with urban sustainability.

The Gaps That Remain

Despite these advances, the budget remains notably silent on climate adaptation. Heat stress, floods, water scarcity and climate-resilient agriculture receive no scaled-up fiscal roadmap. Vibhuti of IEEFA points out that while support for decentralised renewables and bioenergy has increased, spending on transmission and energy storage has stagnated or declined—areas that are “not optional but indispensable” for a high-renewables grid.

The absence of strong EV demand-pull measures and limited risk-sharing instruments for private capital also signal unfinished business in India’s clean transition.

A Budget of Signals, Not Slogans

Budget 2026–27 is not a climate manifesto. Instead, it is a signal budget—one that rewires incentives, de-risks clean manufacturing, and treats decarbonisation as an economic strategy rather than a moral appeal. Its strength lies in industrial tools and fiscal realism; its weakness, in adaptation and social resilience.

Whether this quiet green turn translates into measurable emissions reductions and climate resilience will depend on execution, state capacity, and private investment. But one thing is clear: India’s clean-tech transition has now entered the core of its economic planning.

A new study from the University of Oxford has issued a stark warning about the future of global temperatures, finding that nearly half of the world’s population could be living under conditions of extreme heat by 2050. If global warming reaches 2°C above pre-industrial levels—a scenario climate scientists see as increasingly likely—around 3.79 billion people could experience dangerously high temperatures, reshaping daily life across the planet.

The findings, published in Nature Sustainability, suggest that the impacts of rising temperatures will be felt much sooner than expected. In 2010, approximately 23% of the global population lived with extreme heat; this figure is projected to rise to 41% in the coming decades. The study warns that many severe changes will occur even before the world crosses the 1.5°C limit set by the Paris Agreement.

Central African Republic, Nigeria, South Sudan, Laos, and Brazil are expected to see the largest increases in dangerously hot temperatures

According to the study, countries such as the Central African Republic, Nigeria, South Sudan, Laos, and Brazil are expected to see the largest increases in dangerously hot temperatures. Meanwhile, some of the world’s most populous nations—including India, Nigeria, Indonesia, Bangladesh, Pakistan, and the Philippines—will have the highest numbers of people exposed to extreme heat.

The research also shows that colder countries such as the United Kingdom, Canada, Sweden, Finland, Norway, and Ireland could experience relatively dramatic increases in the number of hot days. Compared with the 2006–2016 period, warming to 2°C could lead to a 150% increase in extreme heat days in the UK and Finland, and more than a 200% increase in countries such as Norway and Ireland.

This raises concerns because infrastructure in colder regions is largely designed to retain heat rather than release it. Buildings that maximise insulation and solar gain may become uncomfortable—or even unsafe—during hotter periods, placing additional strain on energy systems and public health services.

Dr Jesus Lizana, lead author of the study and Associate Professor of Engineering Science at the University of Oxford, said the most critical changes will occur sooner than many expect. “Our study shows most of the changes in cooling and heating demand occur before reaching the 1.5°C threshold, which will require significant adaptation measures to be implemented early on,” he said. He added that many homes may need air conditioning within the next five years, even though temperatures will continue to rise if global warming reaches 2°C.

Dr Lizana also emphasised the need to address climate change without increasing emissions. “To achieve the global goal of net-zero carbon emissions by 2050, we must decarbonise the building sector while developing more effective and resilient adaptation strategies,” he noted.

Dr Radhika Khosla, Associate Professor at Oxford’s Smith School of Enterprise and the Environment and leader of the Oxford Martin Future of Cooling Programme, described the findings as a wake-up call. “Overshooting 1.5°C of warming will have an unprecedented impact on everything from education and health to migration and farming,” she said, adding that sustainable development and renewed political commitment to net-zero emissions remain the most established pathway to reversing the trend of ever-hotter days.

Rising temperatures will have far-reaching impacts beyond discomfort. Demand for cooling systems is expected to rise sharply, particularly in regions that already struggle with access to electricity. At the same time, demand for heating may decline in colder countries, leading to uneven shifts in global energy use.

Dr Luke Parsons, a senior scientist at The Nature Conservancy, said the study adds to evidence that heat exposure in vulnerable communities is accelerating faster than previously predicted. He noted that communities least responsible for climate change often face the harshest impacts, underscoring the environmental justice dimensions of the crisis. Addressing the challenge, he said, will require urgent action on both mitigation and adaptation, including rapid emissions reductions and the expansion of equitable cooling solutions.

As global temperatures continue to rise, extreme heat is no longer a distant threat. It is a present and growing challenge that will shape health, livelihoods, and living conditions for billions of people unless decisive action is taken.

The long-awaited free trade agreement (FTA) between India and the European Union is being billed as a trade breakthrough. But viewed through a climate and geopolitical lens, it is also a signal moment in how two major economic blocs are attempting to stabilise growth, supply chains, and decarbonisation pathways in a fractured global order.

According to a note by Climate Trends, the FTA arrives at a time when tariffs, carbon taxes, and industrial policy are increasingly weaponised, making the deal as much about strategic alignment as about market access.

The scale of the agreement is hard to miss. Together, India and the EU touch the lives of nearly 1.9 billion people — about 1.4 billion in India and close to 500 million in the EU. Combined, they account for around 30 percent of the world’s population and roughly 25 percent of the global economy, making this one of the most consequential bilateral trade pacts in recent years.

India and the EU together account for 11–12 percent of global trade

In trade terms, the partnership is already substantial. India and the EU together account for 11–12 percent of global trade, amounting to nearly $11 trillion out of an estimated $33 trillion global trade volume. Bilateral trade between the two currently stands at €124 billion ($136 billion) and is expected to double within five years.

India’s Commerce Minister Piyush Goyal and Ursula von der Leyen, President of the European Commission, have described the agreement as the “mother of all deals”.

Trade, geopolitics and climate converge

Beyond headline numbers, the agreement reflects a deeper geopolitical recalibration. With renewed uncertainty around US trade policy and rising economic nationalism globally, both India and the EU are seeking predictable, rules-based partnerships.

For India, the FTA provides diversification away from volatility in Western markets while strengthening its role as a manufacturing alternative under “China Plus One” strategies. For the EU, it secures long-term access to one of the world’s fastest-growing major economies at a time when supply chain resilience and strategic autonomy are becoming policy imperatives.

“The deal signifies strategic alignment at a moment of high geopolitical uncertainty,” said Aarti Khosla, Founder-Director of Climate Trends. “The EU has been the reigning power and India is a rising power. Their coming together, especially on climate goals, green industry and clean technology, signals where money and markets are going,” she said, adding that the agreement offers renewed space for multilateralism shaped by strategic choices rather than pure ideology.

Climate quietly embedded in the trade pact

While the FTA is not explicitly framed as a climate treaty, climate considerations run through the broader India–EU relationship. Cooperation under the Clean Energy and Climate Partnership (CECP), signed in 2016, continues across renewable energy, energy efficiency, and clean hydrogen.

Green hydrogen, in particular, has emerged as a key point of convergence. India has positioned itself as a potential exporter to Europe, backed by a growing domestic electrolyser manufacturing ecosystem. India is targeting $10 billion in foreign direct investment for 10 GW of electrolyser capacity by 2030, a scale that could help meet Europe’s future clean fuel import requirements, the Climate Trends note highlighted.

This cooperation is further reinforced through the EU–India Trade and Technology Council (TTC), which focuses on clean-energy technologies, regulatory interoperability, and joint research and development. India’s presence at European Hydrogen Week in Rotterdam last year underscored these ambitions.

Carbon borders and friction points

One of the most sensitive issues shaping the climate-trade interface is the EU’s Carbon Border Adjustment Mechanism (CBAM) — the world’s first carbon tariff on imports. Once fully implemented in 2026, CBAM could impose costs of $2–4 billion annually on Indian exporters in carbon-intensive sectors.

According to the Climate Trends note, while the FTA does not neutralise CBAM, it creates negotiating space. India has secured a most-favoured nation clause, ensuring it will not be treated less favourably than other trading partners under EU carbon rules. The agreement also includes support for Indian exporters to meet climate-related trade requirements, including cooperation on recognising India’s carbon pricing and verification systems, and assistance to cut emissions.

Beyond tariffs

The strategic significance of the deal lies in its long-term implications. From New Delhi’s perspective, the FTA could boost exports by up to $50 billion by 2031, particularly through services and diversified markets. For Brussels, it offers a pathway to build clean-energy industries without creating concentrated dependencies.

“The EU is already India’s largest trading partner. Conclusion of the FTA, long in the making, is a landmark moment,” said Madhura Joshi, Programme Lead – Asia at E3G. “It can be the building block for something more ambitious — a strategic partnership that goes beyond trade, providing a stable anchor for growth, resilience, and energy security,” she said. “A deeper partnership with clean technology as its foundation would strengthen global clean-energy supply chains,” she added.

Backing trade with finance, the European Investment Bank has already committed €2 billion towards climate-resilient infrastructure in India through the Coalition for Disaster Resilient Infrastructure, signalling that the EU is willing to support its trade ambitions with patient capital.

Taken together, the India–EU FTA represents more than a tariff-cutting exercise. As the Climate Trends note argues, it is both a hedge against protectionism and a springboard for climate-integrated growth — one that links nearly a third of humanity and a quarter of the global economy in an era of uncertainty.

Why the India–EU FTA Raises Eyebrows in a Trump World

While the India–EU free trade agreement is not explicitly targeted by Washington, it intersects with several trade and climate positions closely associated with Donald Trump, making it strategically relevant in the event of a second Trump presidency.

1. A powerful bloc outside US leverage

Together, India and the EU represent nearly 30 percent of the world’s population, around 25 percent of the global economy, and over 11 percent of global trade. Large, rules-based economic alignments formed outside US leadership have historically drawn Trump’s opposition, as they dilute Washington’s ability to use bilateral pressure.

2. Reduced impact of US tariff threats

Trump has relied heavily on tariffs as a negotiating and enforcement tool. The India–EU FTA gives both partners greater market diversification, reducing dependence on the US and limiting the effectiveness of future tariff-based pressure.

3. Climate-linked trade rules Trump opposes

The agreement unfolds alongside the EU’s Carbon Border Adjustment Mechanism (CBAM), which links climate policy directly to trade. Trump has consistently criticised carbon pricing and climate regulations, viewing them as economic constraints. India’s willingness to engage with EU climate-linked trade norms signals a shift towards a global trade architecture shaped by climate rules — even without US leadership.

Why it matters

The India–EU FTA reflects a move toward a multipolar, climate-integrated trade order. While Trump may not challenge the deal directly, its underlying logic runs counter to his preference for bilateral, tariff-driven negotiations — and could face friction in a more protectionist global environment.