India’s energy sector is witnessing a significant shift in carbon dioxide emissions. In the first half of 2025, CO2 emissions from the power sector fell by 1%, only the second such decline in nearly five decades. As a result, the overall growth rate of emissions from non-fossil fuels and cement has been the slowest since 2001. This reflects India’s tilt towards clean energy and the favourable impact of weather conditions.
Let us understand what this achievement means for the global climate crisis, given India is the world’s most populous country, and what it signifies from an investor’s perspective.
What’s Happening?
To understand the state of CO2 emissions in India, it is important to look at the broader picture. India accounts for 8% of global energy sector CO2 emissions while housing 18% of the world’s population. This shows that per capita emissions are lower than the global average, yet they are rising rapidly.
About half of India’s power sector CO2 emissions come from coal, the largest contributor to power generation.
By 2024, India had contributed 31% to the growth of global energy sector emissions over the decade, which rose to 37% in the last five years. More than half of India’s total CO2 emissions come from coal-based power and heat generation.
From 2019 to 2023, India’s emissions from fossil fuels and cement grew by 8% annually. However, from the second half of 2024, the trend began to shift, as emissions growth slowed to 2%, and in the first half of 2025, it fell further to just 1%.
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Record Expansion of Clean Energy
In the first half of 2025, India added a record 25.1 GW of clean energy capacity, 69% higher compared to the previous year. This new capacity can generate about 50 TWh of electricity annually, nearly sufficient to meet the average increase in total demand.
The growth of solar, wind, and other clean energy sources is now nearly enough to meet rising power demand.
Solar energy saw the largest growth, with 14.3 GW from utility-scale projects and 3.2 GW from rooftop solar. Solar accounted for 62% of the new clean energy capacity, followed by hydropower at 16%, wind at 13%, and nuclear at 8%.
In the first half of 2025, total power generation increased by 9 TWh, but non-fossil fuel generation declined by 29 TWh. In contrast, generation from solar rose by 17 TWh, wind by 9 TWh, hydropower by 9 TWh, and nuclear by 3 TWh.
Sluggish Oil Demand Growth in India
In the first half of 2025, India’s oil demand nearly stagnated. After consistent 6% annual growth until 2023, the rate slowed to 4% in 2024 and fell to zero in 2025. The main reason was weak diesel consumption, affected by an industrial slowdown, abnormal monsoon, reduced road construction, and the growing adoption of CNG and electric vehicles. Petrol demand remained stable, but passenger vehicle sales grew only 1.3%, significantly lower than in the past two years.
The impact of EVs on diesel consumption is gradually becoming visible. However, EV adoption in heavy trucks remains very slow, and more than 9% growth in truck sales has supported diesel demand. Meanwhile, the rising popularity of EVs in two- and three-wheelers could affect petrol consumption in the future.
Rise in Emissions from Steel and Cement
In the first half of 2025, India’s steel and cement sectors were the only major industries where emissions grew rapidly. In 2024, they together accounted for about 12% of total CO2 emissions, with an average annual growth of 6% over the past five years. In the first half of 2025, this rate accelerated further, as cement production rose by 10% and steel production by 7%. A major reason was government infrastructure spending, which tripled between 2019 and 2024 and recorded a 52% year-on-year increase in the second quarter of 2025.
The government has set a target to increase domestic steel capacity to 300 million tons by 2030, along with stricter import tariffs and quality standards. Housing schemes and rapidly growing automobile sales are also supporting strong demand for steel and cement.
What Does This Mean for Investors?
The decline in India’s emissions opens several new opportunities for investors. The rapid growth of the clean energy sector indicates that renewable energy will expand even faster in the coming years. At the same time, advances in battery storage technology have reduced the cost of integrated battery storage with solar energy by 50–60% between 2023 and 2025, signalling a bright future for the Battery Energy Storage System (BESS) sector.
Increasing renewable capacity is creating more investment opportunities in solar and wind projects. Meanwhile, the decline in coal-based power generation could put pressure on traditional power companies. On the other hand, government infrastructure spending has boosted steel and cement production by 7% and 10%, respectively, signalling positive prospects for shares in these sectors.
What’s Next?
Emissions from India’s power sector could peak before 2030, marking a significant turning point. According to estimates by the Central Electricity Authority (CEA), the share of non-fossil power generation will rise to 44% in FY2029–30, up from 25% in FY2024–25.
CO2 emissions from India’s power sector could peak before 2030, after which the contribution of clean energy is expected to increase further.
India is making steady progress toward its target of 500 GW of non-fossil fuel capacity by 2030. As of April 2025, 234 GW of renewable capacity was in the pipeline, with contracts already awarded for 169 GW.
India’s Nationally Determined Contribution (NDC) under the Paris Agreement for 2035 has not yet been published, leaving the pathway to the net-zero target by 2070 uncertain. Nevertheless, India reached its 2030 target five years early in July, when 50% of installed power generation capacity came from non-fossil sources.
*The article is for information purposes only. This is not investment advice.
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