Industry Odisha Bureau, Oct 07: War-driven energy shocks expose India’s costly reliance on imported oil and gas. Economist Nicholas Stern says the answer is to accelerate clean investment. Financing that shift will demand vast pools of patient capital.
The US-Iran war has driven up commodity and energy prices worldwide. It has fed inflation and threatened growth in fuel-importing economies. For many governments, such shocks could justify a pause in climate spending. Economist Lord Nicholas Stern argues the opposite. He says energy shocks are a reason to accelerate climate action, not delay it.
Stern is IG Patel Professor at the London School of Economics. He spoke to Mint at the Kautilya Economic Conclave in New Delhi. Retreating from green investment now “would be a mistake”, he warned.
The cost of imported fuel
India is especially exposed as a net energy importer. Stern estimates the country spends about 5% of its GDP on oil and gas purchases. Reliance on oil and gas, he argues, brings recurring risks of disruption and slower growth.
Wind, solar and hydro power, by contrast, are domestic resources. Shifting towards them would strengthen India’s energy security, Stern said. In his framing, energy security and decarbonisation point the same way.
A $22.7 trillion question
The scale of investment is daunting. NITI Aayog estimates India needs cumulative investment of about $22.7 trillion by 2070. That figure assumes a net-zero scenario, in line with India’s 2070 target. Stern rejects treating this sum as a burden. He calls it an investment in 21st-century technologies rather than older ones.
Banks cannot carry it alone
The harder question is who supplies the capital. Stern says banks alone cannot fund infrastructure with such long gestation periods. He points instead to life insurance and pension funds. These hold substantial savings, much of it currently lent to the government. Directing more of this patient capital to green projects could help, he argued. Stern also wants deeper corporate bond and equity markets.
Growth and green, together
Stern sees climate investment and Viksit Bharat, India’s 2047 development goal, as mutually reinforcing. Smart electricity grids would improve how the power system functions, he said. Metros, electric buses and space for cycling and walking could raise urban productivity.
Air pollution sharpens the argument. Stern noted that over 90 of the world’s 100 most polluted cities are in India. Pollution damages health and drags on productivity and growth, he said.
Room for new leaders
Uncertainty over US climate commitments adds a geopolitical dimension. The US exited the Paris Agreement again in 2026 after Donald Trump returned to office. Stern says other nations can step forward when a major power retreats. He sees India and the European Union as possible partners in climate leadership.
He cited a recent meeting where External Affairs Minister S. Jaishankar joined European leaders. Both sides agreed to cooperate on climate action, among other areas. Such a partnership could draw significant investment into India, Stern argued. He also pointed to China, where about 75% of cars sold last year were electric.
Shocks change the calculation
Stern’s argument recasts clean energy as a strategic economic choice. For India, the task goes beyond adding renewable capacity. It means mobilising patient capital at enormous scale. It also means building cities, grids and markets that support growth. Energy shocks, in his view, make that case harder to ignore.
