Issue Brief

Initiatives by G20 countries to integrate renewable energy into Industrial Applications

Introduction

One of the most expansive corporate and industrial trends globally is the adoption of renewable energy and clean technologies into manufacturing processes to decrease the carbon footprint and emissions typically associated with industrial activity. The movement towards clean, renewable energy sources is primarily incentivised by the negative consequences of global climate change and associated global warming. Global Warming is an existential threat for our society and businesses at large because it catalyses extreme weather events, which have significant potential to disrupt and destroy commercial property and communities.

Subsequently, the member nations of the G20 alongside multilateral agencies like the United Nations (UN) have taken it upon themselves to regulate emissions from commercial entities and invest into developing renewable energy infrastructure. Subsequently, these actions have stimulated the utilisation of renewable energy by industrial and commercial entities for their business operations, which, in turn, has made global industry more sustainable.

Policy Incentives for Renewable Energy in G20 countries

G20 members have catalysed this trend towards the uptake and implementation of renewable energy into industrial workstreams by offering significant incentives or imposing trade barriers based on sustainability in merchandise trade. One key example is the Carbon Border Adjustment Mechanism (CBAM), which is a policy tool imposed by the European Union that aims to levy a carbon tax on merchandise imports based on the amount of emissions that transpire during the assembly of merchandise. The CBAM, while controversial, has placed pressures on industrial firms to "clean up" their supply chains and levels the playing field. Proponents of the scheme argue that CBAM imposes stringent carbon regulations regardless of the origin of imported products, which prevents exporters from relocating to countries with relaxed environmental regulations. However, at the same time, detractors argue that CBAM unfairly punishes exporters from countries in the global south and Micro, Small, and Medium sized enterprises (MSMEs) that may not have as extensive of regulatory oversight as the EU. While CBAM may need some retooling, it is, overall, a correct step in the direction of incentivising firms to use clean energy in their overall processes.

Another example of G20 nations incentivising firms to use clean energy is favourable tax practices. Indonesia, a G20 member, offers several concessions to firms investing in renewable energy in Indonesia. Presently, the Government of Indonesia offers firms that invest in the renewable energy of the country with income tax deductions of up to 30 per cent and extended tax loss carry-forward for up to 10 years. Moreover, there are other incentive programs offered by the Government of Indonesia, such as land and building tax reductions, to help offset development costs for builders constructing renewable energy projects within the country.

Both Indonesia and the European Union serve as examples of G20 member groups or nations leveraging administrative and regulatory power to influence and incentivise corporate entities within their nations to increasingly adopt sustainable practices and incorporate renewable energy within their supply chains. However, at the same time, both public and private entities in G20 member states are significantly investing into renewable energy infrastructure.

Investment into developing Renewable Energy capacity in G20 countries

Moreover, G20 members have invested significantly into developing manufacturing capacity of clean technology. For example, China has executed one of the world's largest mass industrial investment programs for renewable energy globally. In fact, in 2024, China invested more than USD 625 billion into clean energy related infrastructure, which is nearly double the figure that it invested ten years ago. Since prioritization and intensive investment into renewable energy, China has achieved its 2030 wind and solar capacity target six years ahead of schedule in 2024.

Presently, Chinese investments into renewable energy and related infrastructure are concentrated on grid, storage, and smart infrastructure with an investment total of USD 88 billion. While, traditionally, Chinese expenditures into renewable energy have been primarily facilitated through state owned enterprises and backed by government financing, the Chinese government has increasingly welcomed private sector investment into the country, and, as a result, over 8000 renewable energy related projects have been undertaken in China by the private sector.

Another G20 country that has actively invested into developing renewable energy capacity is India through the National Green Hydrogen Mission (NGHM). The NGHM is a mission undertaken by the Ministry of New and Renewable Energy of the Government of India. The scheme was passed to help India target 5 MMT of Green Hydrogen production annually by 2030 with an initial outlay of approximately INR 19,744 crores, which was broken down into four key categories: INR 17,490 crores for the Strategic Interventions for Green Hydrogen Transition (SIGHT) programmes, INR 1,466 crores for pilot projects; INR 400 crores for research and development (R&D); and INR 388 crores for mission related infrastructure. Ultimately, the NGHM aims to position India as a leader in the Green Hydrogen production space, and several firms have started to incorporate the source of energy into their operations. Specifically, Indian conglomerate JSW has leveraged Green Hydrogen by establishing a green hydrogen manufacturing facility that supplies 3,800 tons of Green Hydrogen to the JSW steel manufacturing facility per annum alongside more than 30,000 tons per annum of Green Oxygen.

Conclusion

Overall, to stave off the negative effects of global climate change and subsequent global warming, G20 countries across the world, and particularly those that are heavily industrialized, require both regulatory frameworks and deep investment into clean energy infrastructure. On the regulatory front, programs like the Carbon Border Adjustment Mechanism and the Government of Indonesia's economic incentive programs have stimulated greater adherence to clean energy standards and adoption of renewable energy commercial activities and investments in their respective regions. At the same time, nations like China and India have been investing significant amounts of capital into building their clean energy infrastructures and production for industrial uses. China's massive investments in large scale renewable energy production facilities have allowed the country to achieve its clean energy targets well in advance. Similarly, India's investments in Green Hydrogen have directly improved the sustainability of its companies' manufacturing processes.