Five key climate and energy announcements in India’s budget for 2026
AI Analysis
Summary
<p>On 1 February, India’s finance minister Nirmala Sitharaman unveiled the government’s budget for 2026, which...</p> <p>The post <a href="https://www.carbonbrief.org/five-key-climate-and-energy-announcements-in-indias-budget-for-2026/">Five key climate and energy announcements in India’s budget for 2026</a> appeared first on <a href="https://www.carbonbrief.org">Carbon Brief</a>.</p>
<p>On 1 February, India’s finance minister Nirmala Sitharaman unveiled the government’s budget for 2026, which included a new $2.2bn funding push for carbon capture technologies. </p>
<p>In the absence of its new international <a href="https://www.carbonbrief.org/explainer-what-are-intended-nationally-determined-contributions/" rel="noreferrer noopener" target="_blank">climate pledge</a> under the <a href="https://www.carbonbrief.org/interactive-the-paris-agreement-on-climate-change/" rel="noreferrer noopener" target="_blank">Paris Agreement</a>, the budget offers a glimpse into the key climate and energy security priorities of the world’s <a href="https://www.carbonbrief.org/the-carbon-brief-profile-india/" rel="noreferrer noopener" target="_blank">third-largest emitter</a>, amid increasing <a href="https://www.carbonbrief.org/experts-what-are-the-biggest-geopolitical-risks-to-climate-action-in-2024/" rel="noreferrer noopener" target="_blank">geopolitical tensions</a> and <a href="https://www.carbonbrief.org/experts-what-do-trumps-tariffs-mean-for-global-climate-action/" rel="noreferrer noopener" target="_blank">trade challenges</a>.</p>
<p>While Sitharaman’s budget <a href="https://www.indiabudget.gov.in/doc/budget_speech.pdf" rel="noreferrer noopener" target="_blank">speech</a> did not mention climate change directly, she said: “Today, we face an external environment in which trade and multilateralism are imperilled and access to resources and supply chains are disrupted.” </p>
<p>Sitharaman emphasised that “new technologies are transforming production systems while sharply increasing demands on water, energy and critical minerals”. </p>
<p>The budget sets out: support for the mining and processing of <a href="https://www.carbonbrief.org/explainer-these-six-metals-are-key-to-a-low-carbon-future/" rel="noreferrer noopener" target="_blank">critical minerals</a> and <a href="https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/executive-summary" rel="noreferrer noopener" target="_blank">rare earths</a>; import duty exemptions for nuclear power equipment; and support for renewables, particularly rooftop solar. </p>
<p>However, unlike in some <a href="https://www.hindustantimes.com/india-news/fmannounces-misthi-scheme-in-union-budget-for-mangrove-plantations-101675265659103.html" rel="noreferrer noopener" target="_blank">previous years</a>, the 2026 budget does not include specific climate adaptation measures.</p>
<p>Below, Carbon Brief runs through five key climate- and energy-focused announcements from the budget.</p>
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<li><a href="#carbon" id="#carbon" type="internal">Carbon capture, utilisation and storage</a></li>
<li><a href="#critical" id="#critical" type="internal">Critical minerals and rare earth ‘corridors’</a></li>
<li><a href="#nuclear" id="#nuclear" type="internal">Nuclear energy</a></li>
<li><a href="#renewables" id="#renewables" type="internal">Renewables</a></li>
<li><a href="#adaptation" id="#adaptation" type="internal">Adaptation</a></li>
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<h2 class="wp-block-heading">Carbon capture, utilisation and storage</h2>
<p>The biggest climate-related budget announcement was $2.2bn to support <a href="https://www.carbonbrief.org/guest-post-the-state-of-carbon-dioxide-removal-in-seven-charts/" rel="noreferrer noopener" target="_blank">carbon capture, utilisation and storage</a> (CCUS) technologies in India over the next 5 years. </p>
<p>These are technologies that capture carbon dioxide (CO2) as it is released, then use or store it underground or under the sea.</p>
<p>This funding is aimed at decarbonising five of India’s <a href="https://www.carbonbrief.org/analysis-indias-power-sector-co2-falls-for-only-second-time-in-half-a-century/" rel="noreferrer noopener" target="_blank">high-emitting</a> industrial sectors – power, steel, cement, refineries and chemicals. These sectors are “<a href="https://timesofindia.indiatimes.com/business/india-business/union-budget-2026-indias-carbon-capture-utilization-and-storage-initiative-gets-rs-20000-crore-push-for-climate-action/articleshow/127843022.cms" rel="noreferrer noopener" target="_blank">staring at the risk</a>” of coming under the EU’s <a href="https://www.carbonbrief.org/qa-can-carbon-border-adjustment-mechanisms-help-tackle-climate-change/" rel="noreferrer noopener" target="_blank">carbon adjustment mechanism</a> (CBAM), <a href="https://www.moneycontrol.com/news/business/india-eu-fta-offers-no-relief-from-eu-s-carbon-border-tax-as-cbam-stays-13792815.html" rel="noreferrer noopener" target="_blank">even after</a> a recent EU-India trade deal, according to Sitharaman.</p>
<p>The funding is meant to align with a roadmap <a href="https://dst.gov.in/sites/default/files/DST-CCUS-Roadmap-2025.pdf" rel="noreferrer noopener" target="_blank">released</a> last year that sees CCUS as a “core technological pillar” of <a href="https://unfccc.int/sites/default/files/resource/India_LTLEDS.pdf" rel="noreferrer noopener" target="_blank">India’s 2070 net-zero strategy</a>, particularly for “decarbonising sectors where viable alternatives are limited”, notes the government’s <a href="https://dst.gov.in/sites/default/files/DST-CCUS-Roadmap-2025.pdf" rel="noreferrer noopener" target="_blank">roadmap</a>.</p>
<figure class="wp-block-image size-full"><img alt="An aerial view of steel plants in Jamshedpur, described as India’s “steel city”. " class="wp-image-61130" height="872" src="https://www.carbonbrief.org/wp-content/uploads/2026/02/3D0BWRW.jpg" width="1550" /><figcaption class="wp-element-caption">An aerial view of steel plants in Jamshedpur, described as India’s “steel city”. Credit: ZUMA Press / <a href="https://www.alamy.com/jamshedpur-jharkhand-india-18th-oct-2025-editors-note-image-taken-with-a-drone-aerial-view-of-tata-steel-ltd-plant-in-jamshedpur-showing-the-full-industrial-complex-and-infrastructure-supporting-the-companys-steel-production-tata-steel-india-reported-a-7-year-on-year-rise-in-crude-steel-production-in-q2-fy26-following-furnace-relining-at-its-jamshedpur-plant-anchoring-the-companys-global-output-amid-strong-domestic-demand-in-europe-tata-steel-netherlands-ijmuiden-plant-faces-pressure-to-curb-toxic-emissions-with-activists-protesting-and-a-proposed-65-billion-de-image705886829.html?imageid=7DFD7F58-A1C7-469C-890C-5C985B5F247C&pn=1&searchId=fcb9e9287853bc6138b083a418499a8f&searchtype=0" id="https://www.alamy.com/jamshedpur-jharkhand-india-18th-oct-2025-editors-note-image-taken-with-a-drone-aerial-view-of-tata-steel-ltd-plant-in-jamshedpur-showing-the-full-industrial-complex-and-infrastructure-supporting-the-companys-steel-production-tata-steel-india-reported-a-7-year-on-year-rise-in-crude-steel-production-in-q2-fy26-following-furnace-relining-at-its-jamshedpur-plant-anchoring-the-companys-global-output-amid-strong-domestic-demand-in-europe-tata-steel-netherlands-ijmuiden-plant-faces-pressure-to-curb-toxic-emissions-with-activists-protesting-and-a-proposed-65-billion-de-image705886829.html?imageid=7DFD7F58-A1C7-469C-890C-5C985B5F247C&pn=1&searchId=fcb9e9287853bc6138b083a418499a8f&searchtype=0" rel="noreferrer noopener" target="_blank" type="link">Alamy Stock Photo </a></figcaption></figure>
<p>According to the <a href="https://www.ipcc.ch/" rel="noreferrer noopener" target="_blank">Intergovernmental Panel on Climate Change</a> (IPCC) <a href="https://www.carbonbrief.org/in-depth-qa-the-ipccs-sixth-assessment-on-how-to-tackle-climate-change/" rel="noreferrer noopener" target="_blank">sixth assessment report</a>, however, the need for CCUS to mitigate industrial emissions “may be overestimated”, compared to measures such as energy and material efficiency and electrification.</p>
<p>Speaking to Carbon Brief, <a href="https://www.geos.iitb.ac.in/index.php/vv/" rel="noreferrer noopener" target="_blank">Dr Vikram Vishal</a>, a professor of earth sciences at the <a href="https://www.iitb.ac.in/" rel="noreferrer noopener" target="_blank">Indian Institute of Technology, Bombay (IIT-B)</a>,, describes the budget move as a “big welcome step for industrial decarbonisation and India’s net-zero ambitions as a whole”. </p>
<p>Vishal says that the funding could go towards getting “big demonstration plants to near-commercial plants” that could entail even bigger investments in the future.</p>
<p>He tells Carbon Brief:</p>
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<p>“India is blessed with both onshore and offshore availability for carbon storage. But while utilisation exists, storage has not happened, per se, even at a decent scale. We [would] need to build transportation infrastructure from the point source of capture at scale, on land and offshore. While offshore storage is very low risk, onshore presents a closer proximity to emission sources.”</p>
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<p>However, that could also mean <a href="https://www.carbonbrief.org/guest-post-how-the-role-of-carbon-storage-has-been-hugely-overestimated/" rel="noreferrer noopener" target="_blank">closer proximity</a> to densely populated or protected areas.</p>
<p>Vishal adds that India has a very large theoretical <a href="https://www.sciencedirect.com/science/article/abs/pii/S0921344921004389" rel="noreferrer noopener" target="_blank">storage potential</a>, even a quarter of which would allow for up to 150bn tonnes of CO2 to be stored. This could sustain CCUS for hundreds of years, Vishal says, adding: “And by that time, the energy transition would have happened, right?”</p>
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<h2 class="wp-block-heading">Critical minerals and rare-earth ‘corridors’</h2>
<p>Mining, sourcing and processing “<a href="https://mines.gov.in/admin/download/649d4212cceb01688027666.pdf" rel="noreferrer noopener" target="_blank">critical minerals</a>” and rare earths is another key area of India’s 2026 budget.</p>
<p>It <a href="https://www.indiabudget.gov.in/doc/budget_speech.pdf" rel="noreferrer noopener" target="_blank">proposes</a> establishing “dedicated rare-earth corridors” in the “mineral-rich” coastal states of Odisha, Kerala, Andhra Pradesh and Tamil Nadu to “promote mining, processing, research and manufacturing”. These corridors are intended to complement a $815m rare-earth permanent-magnet scheme <a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2194684&reg=3&lang=2" rel="noreferrer noopener" target="_blank">announced</a> in November.</p>
<p>In addition, the budget supports “incentivising prospecting and exploration” for rare-earth minerals, such as <a href="https://en.wikipedia.org/wiki/Monazite" rel="noreferrer noopener" target="_blank">monazite</a>, as well as others that the government wants to include in its <a href="https://mines.gov.in/admin/download/649d4212cceb01688027666.pdf" rel="noreferrer noopener" target="_blank">list</a> of “critical minerals”. </p>
<p>Last week, for instance, India <a href="https://coal.nic.in/sites/default/files/2026-01/29-01-2026a-wn.pdf" rel="noreferrer noopener" target="_blank">classified</a> coking coal – which is predominantly used in making steel – as a “critical and strategic mineral”, <a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2219947&reg=3&lang=2" rel="noreferrer noopener" target="_blank">removing</a> regulatory measures such as the need to consult <a href="https://interactive.carbonbrief.org/india-coal-mines/index.html" rel="noreferrer noopener" target="_blank">affected communities</a> before developing new mines. </p>
<p><a href="https://www.downtoearth.org.in/author/sehr-raheja" rel="noreferrer noopener" target="_blank">Sehr Raheja</a>, programme officer at New Delhi thinktank <a href="https://www.cseindia.org/" rel="noreferrer noopener" target="_blank">Centre for Science Environment</a>, tells Carbon Brief that “moving up the critical-minerals value chain” is “<a href="https://www.cseindia.org/towards-a-new-green-world-critical-minerals-moving-up-the-value-chain-12922" rel="noreferrer noopener" target="_blank">increasingly essential</a>” for the energy transition in developing countries. </p>
<p>She adds that some of the measures announced in India’s budget “point in that direction”, explaining: </p>
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<p>“Globally, developing countries often stay stuck in the extraction stages of value chains and capture the least value. While duty exemptions for critical mineral processing and battery manufacturing signal intent to build domestic manufacturing capacity, the extent to which these new efforts deliver sustained value will only become apparent over time.”</p>
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<p>Rahul Basu, research director at the <a href="https://goafoundation.org/the-gfs-advocacy-on-mining/" rel="noreferrer noopener" target="_blank">Goa Foundation</a>, which advocates for “intergenerational equity” in mining, tells Carbon Brief:</p>
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<p>“Rare earths are not particularly rare. What is difficult is separating and refining them. China imports ore from around the world, including [the] US. Their competitive advantage lies in processing, including the ability to tolerate high pollution levels. </p>
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<p>“India should perfect the processing technology with imported ores first. It is the critical piece. Not mining. We seem to want to mine the same beaches that are already seeing sea-level rise.”</p>
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<h2 class="wp-block-heading">Nuclear energy</h2>
<p>The Indian government has also lifted customs duties on imports of nuclear power equipment within the 2026 budget.</p>
<p>Under the changes, equipment for all nuclear power plants will not be subject to customs duties until 2035, irrespective of capacity.</p>
<p>The announcement follows India enacting a landmark new nuclear act, dubbed the “<a href="https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/dec/doc20251222741701.pdf" rel="noreferrer noopener" target="_blank">Shanti</a>” act, in December 2025. This seeks to privatise and <a href="https://thehill.com/opinion/energy-environment/5690605-nuclear-power-india-us-partnership/" rel="noreferrer noopener" target="_blank">invite</a> <a href="https://www.dw.com/en/india-nuclear-sector-to-expand-attract-foreign-capital/a-75267587" rel="noreferrer noopener" target="_blank">foreign participation</a> in the country’s nuclear energy sector, which has been <a href="https://economictimes.indiatimes.com/industry/energy/power/maharashtra-signs-mou-with-russias-rosatom-to-develop-thorium-based-small-modular-reactor/articleshow/120208725.cms?from=mdr" rel="noreferrer noopener" target="_blank">largely</a> <a href="https://www.npcil.nic.in/content/302_1_AllPlants.aspx" rel="noreferrer noopener" target="_blank">state-run</a> for decades and has a <a href="https://journals.sagepub.com/doi/abs/10.1177/02627280211054795" rel="noreferrer noopener" target="_blank">long history</a> of <a href="https://journals.sagepub.com/doi/abs/10.1177/02627280211054795" rel="noreferrer noopener" target="_blank">public protests</a> over safety and land-acquisition concerns.</p>
<figure class="wp-block-image size-full"><img alt="Protests against India’s Kudankulam nuclear power plant in Tamil Nadu." class="wp-image-61131" height="987" src="https://www.carbonbrief.org/wp-content/uploads/2026/02/2RKTFKW.jpg" width="1550" /><figcaption class="wp-element-caption">Protests against India’s Kudankulam nuclear power plant in Tamil Nadu. Credit: Imago/Xinhua / <a href="https://www.alamy.com/bildnummer-58467896-datum-13092012-copyright-imagoxinhua-120913-kudankulam-sept-13-2012-xinhua-activists-and-residents-stand-in-the-waters-of-the-bay-of-bengal-and-shout-slogans-as-they-protest-against-the-russian-built-kudankulam-atomic-power-project-background-at-kudankulam-about-700-kilometers-from-chennai-tamil-nadu-state-on-sept-13-2012-villagers-in-india-s-southern-state-of-tamil-nadu-have-renewed-their-protest-against-a-newly-built-nuclear-plant-on-monday-demanding-to-halt-the-loading-of-nuclear-fuel-in-the-reactors-which-is-likely-to-get-done-over-the-next-image562949405.html?imageid=771EEDE4-E94B-4049-863D-93F92F49A81E&pn=1&searchId=71d54afab4c8db781699f15bd8b645f6&searchtype=0" id="https://www.alamy.com/bildnummer-58467896-datum-13092012-copyright-imagoxinhua-120913-kudankulam-sept-13-2012-xinhua-activists-and-residents-stand-in-the-waters-of-the-bay-of-bengal-and-shout-slogans-as-they-protest-against-the-russian-built-kudankulam-atomic-power-project-background-at-kudankulam-about-700-kilometers-from-chennai-tamil-nadu-state-on-sept-13-2012-villagers-in-india-s-southern-state-of-tamil-nadu-have-renewed-their-protest-against-a-newly-built-nuclear-plant-on-monday-demanding-to-halt-the-loading-of-nuclear-fuel-in-the-reactors-which-is-likely-to-get-done-over-the-next-image562949405.html?imageid=771EEDE4-E94B-4049-863D-93F92F49A81E&pn=1&searchId=71d54afab4c8db781699f15bd8b645f6&searchtype=0" rel="noreferrer noopener" target="_blank" type="link">Alamy Stock Photo</a></figcaption></figure>
<p>The <a href="https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/dec/doc20251222741701.pdf" rel="noreferrer noopener" target="_blank">Shanti</a> act – which is an acronym for “sustainable harnessing and advancement of nuclear energy for transforming India” – aims to help India increase its nuclear capacity tenfold to 100 gigawatts (GW) by 2047.</p>
<p>This coincides with 100 years since India’s independence and is “the year India aims to attain developed-nation status”, <a href="https://www.newsonair.gov.in/pm-narendra-modi-spells-out-blueprint-to-transform-india-into-developed-nation-by-2047/" rel="noreferrer noopener" target="_blank">according</a> to prime minister Narendra Modi.</p>
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<h2 class="wp-block-heading">Renewables</h2>
<p>Support for renewables in India’s budget this year is significant, but “uneven”, experts tell Carbon Brief.</p>
<p>Allocations to India’s <a href="https://mnre.gov.in/" rel="noreferrer noopener" target="_blank">Ministry of New and Renewable Energy (MNRE)</a> grew by <a href="https://www.financialexpress.com/business/news/mnre-allocation-jumps-24-budget-sharpens-indias-clean-energy-push/4127677/lite/" rel="noreferrer noopener" target="_blank">24%</a> to a “record high” in the 2026 budget, with the bulk going to the prime minister’s flagship <a href="https://solarrooftop.pmsuryaghar.gov.in/" rel="noreferrer noopener" target="_blank">rooftop solar scheme</a>. The government also cut import duties on lithium-ion cells for battery storage systems, as well as on inputs for solar-panel glass manufacturing. </p>
<p>However, <a href="https://ieefa.org/people/vibhuti-garg" rel="noreferrer noopener" target="_blank">Vibhuti Garg</a>, South Asia director for the <a href="https://ieefa.org/" rel="noreferrer noopener" target="_blank">Institute for Energy Economics and Financial Analysis</a>, tells Carbon Brief that spending on wind energy and – “more critically” – on <a href="https://www.downtoearth.org.in/energy/50-gw-of-clean-energy-stranded-as-transmission-bottlenecks-stall-indias-green-shift-ieefa" rel="noreferrer noopener" target="_blank">transmission and energy storage</a> has either “stagnated or declined” this year. </p>
<p>Garg says grid infrastructure is “fundamental” to renewable expansion. She explains: </p>
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<p>“Transmission infrastructure and storage are fundamental to integrating higher shares of renewable energy into the grid. As renewable penetration rises, these elements become not optional but indispensable, and the current level of support falls short of what is required.”</p>
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<h2 class="wp-block-heading">Adaptation</h2>
<p>The budget does not announce any <a href="https://www.downtoearth.org.in/climate-change/specific-mention-of-and-measures-for-climate-change-adaptation-missing-from-budget-2026-speech" rel="noreferrer noopener" target="_blank">specific</a> adaptation measures or schemes, although it does <a href="https://www.indiabudget.gov.in/doc/budget_speech.pdf" rel="noreferrer noopener" target="_blank">mention</a> a plan to develop and rejuvenate reservoirs and water bodies and to “strengthen” fisheries value chains in coastal areas.</p>
<p>The budget does not mention or include measures related to heat stress or its impact on productivity and workers in sectors such as agriculture. </p>
<p>According to India’s national <a href="https://www.indiabudget.gov.in/economicsurvey/doc/eschapter/echap10.pdf" rel="noreferrer noopener" target="_blank">economic survey</a> tabled ahead of the budget, adaptation and “resilience-related” domestic spending “surged” from 3.7% of the country’s GDP in 2016-17 to 5.6% in 2022-23.</p>
<figure class="wp-block-image size-large"><img alt="Salt pan workers in south India endure high occupational heat stress." class="wp-image-61132" height="654" src="https://www.carbonbrief.org/wp-content/uploads/2026/02/AGJF2W-1024x654.jpg" width="1024" /><figcaption class="wp-element-caption">Salt pan workers in south India endure high occupational heat stress. Credit: Alex Armitage / <a href="https://www.alamy.com/stock-photo-workers-at-salt-fields-near-mamallapuram-between-chennai-and-pondicherry-14223696.html?imageid=DC30F7CA-1ECC-47FF-B30B-4D0C9D2227CA&pn=1&searchId=66cbb51cb883849514abbc44a8bce295&searchtype=0" id="https://www.alamy.com/stock-photo-workers-at-salt-fields-near-mamallapuram-between-chennai-and-pondicherry-14223696.html?imageid=DC30F7CA-1ECC-47FF-B30B-4D0C9D2227CA&pn=1&searchId=66cbb51cb883849514abbc44a8bce295&searchtype=0" rel="noreferrer noopener" target="_blank" type="link">Alamy Stock Photo</a></figcaption></figure>
<p>Yet, unlike <a href="https://www.indiabudget.gov.in/budget2017-2018/ub2017-18/eb/sbe27.xlsx" rel="noreferrer noopener" target="_blank">earlier budgets</a>, allocations to and expenditure from India’s <a href="https://www.nabard.org/content.aspx?id=585%20%20%20%20%20%20%20%20%20%20%20%20&csrt=8964929516654896236" rel="noreferrer noopener" target="_blank">National Adaptation Fund for Climate Change</a> are <a href="https://www.indiabudget.gov.in/doc/eb/sbe28.pdf" rel="noreferrer noopener" target="_blank">not separately visible</a> in the 2026 document. </p>
<p><a href="https://www.linkedin.com/in/harjeetsingh11/?originalSubdomain=in" rel="noreferrer noopener" target="_blank">Harjeet Singh</a>, climate adaptation expert and founding director at the <a href="https://www.satatsampadaclimate.org/" rel="noreferrer noopener" target="_blank">Satat Sampada Climate Foundation</a>, tells Carbon Brief that this budget was a “missed opportunity” and a response “not commensurate to the needs [for adaptation] on [the] ground or investment at the scale of crisis that we are facing”.</p>
<p>Singh adds that it fails to recognise the “huge” economic impacts already being felt in India. He says:</p>
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<p>“If a budget doesn’t recognise how climate change is already eroding India’s development – causing huge economic losses – and is going to affect our GDP growth, it means that you aren’t really acting, or nudging states to do more.</p>
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<p>“It was a missed opportunity to tell the world that we do see adaptation as a problem and we are acting on it, but we also need international cooperation.”</p>
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<p>The post <a href="https://www.carbonbrief.org/five-key-climate-and-energy-announcements-in-indias-budget-for-2026/">Five key climate and energy announcements in India’s budget for 2026</a> appeared first on <a href="https://www.carbonbrief.org">Carbon Brief</a>.</p>