Energy shocks should accelerate, not delay, climate action, economist Stern says

Highlighting risks of dependence on fossil fuels, Lord Nicholas Stern urges increased green investments, particularly for India, to enhance energy security and achieve net-zero emissions by 2070.

New Delhi: Geopolitical conflict and high energy prices are reasons to accelerate, rather than delay, the global shift away from oil and gas, economist Lord Nicholas SternLord Nicholas SternLord Nicholas Stern said, warning that pulling back on green investment amid the current uncertainty "would be a mistake."

His comments come as the US-Iran war has pushed up commodity and energy prices, adding to inflationary pressures worldwide while threatening economic growth and energy security for countries dependent on imported fuels.

"What that (latest global turmoil) tells us is that reliance on oil and gas is very risky and brings the potential for disruption and slowing of growth," Stern, IG Patel Professor at the London School of Economics, said in an interview with Mint on the sidelines of the Kautilya Economic Conclave in New Delhi.

With uncertainty over US climate commitments, Stern sees an opportunity for India and the European Union to provide greater global climate leadership.

India, a net energy importer, is particularly vulnerable to global energy shocks, with about 5% of its gross domestic product spent on oil and gas purchases, Stern said. A steady shift towards domestically available renewable energy sources is therefore crucial, he added.

"The wind and the sun, and the hydro, will come, and it's internal, it's available to the country. So, in my view, the right lesson from this is to accelerate the move to cleaner technologies—both for energy security, and the fact that they are cleaner technologies and help you create cities where you can move and breathe," Stern said.

Air pollution is a tragedy for India, he said, noting that more than 90 of the world's 100 most polluted cities are in the country. "It kills, it maims, and it reduces the ability of people to be productive, reduces productivity and growth," he said, underscoring the need to build sustainable cities.

Such cities, with smart electricity grids, public transport and other infrastructure, would be better for India's future, both in terms of economic growth and quality of life, he said.

“The history of the world, at least since the 1940s, has been a history of riskiness, economic slowdown or depression, war arising from dependence on oil and gas. And India can break away, as other countries can break away from that, by investing in the new,” he said.

India’s capital needs

On the massive investment required for India to achieve its net-zero emissions target by 2070, Stern said resource mobilisation should be viewed alongside the country’s goal of becoming a developed economy by 2047.

NITI Aayog estimates that India will need cumulative investment of about $22.7 trillion by 2070 under a net-zero scenario.

Stern said the investment requirement should not be viewed as a burden, but as an investment in India’s future, “using the technologies of the 21st century, not the 19th and 20th”. India can do it, he added.

India’s investment rate as a share of GDP is higher than it was a few years ago, Stern said. On the availability of funds, he noted that a significant amount of savings is tied up in life insurance and pension funds, which mostly goes towards government borrowing. This long-term capital could instead be directed towards sustainable and productive investments.

He also called for channelising patient capital held by insurance and pension funds towards green investments and deepening the corporate bond market to support steady climate initiatives.

On whether the Viksit Bharat goal of sustained high growth and climate objectives are compatible, Stern said building smart electricity grids would improve the functioning of the power system, while smart urban public transport—including metros, electric buses and infrastructure for cycling and walking—could significantly increase the productivity of cities.

“So, both Viksit Bharat and climate investments are ‘inter-woven, they drive each other forward’,” he said.

Stern said the banking system alone cannot fund the additional investment needed for sustainable infrastructure with long gestation periods. Developing financial markets, including equity and corporate bond markets, will therefore be important, he added.

India, EU climate leadership

Asked whether there is a leadership vacuum after the US stepped back from climate leadership, Stern said other countries can step forward when a major country retreats. He highlighted the possibility of greater climate cooperation between India and the EU.

He referred to a recent meeting at which external affairs minister S. Jaishankar spoke alongside European leaders, with both sides agreeing to work together on climate action, among other areas.

“And that would be an act of climate leadership,” he said. “I think politically in the world, for the EU and India to come together around climate leadership is possible, would be very valuable, and it would lead to a lot of investment in India.”

China, he said, is moving rapidly on climate action, adding that about 75% of cars sold in the world’s second-largest economy last year were electric vehicles.

US President Donald Trump has remained sceptical about climate change, calling it a “con job”. The US withdrew from the Paris Agreement twice, first in 2020 and again in January 2026, both times under Trump.

US President Donald Trump has remained sceptical about climate change, calling it a “con job”. The US withdrew from the Paris Agreement for the first time in 2020 under Trump, rejoined in 2021, and exited again in 2026 after Trump returned to office.