Sri Lanka is committed to achieving net zero emissions by 2050 to help address the global climate crisis, but it must navigate the unique challenges of a developing economy. Despite contributing just 0.03% of global emissions, according to the Carbon Net Zero Road Map 2023, the nation recognizes its interconnected role in the international climate agenda. The path to net zero is neither straightforward nor solely a national endeavour, as the challenges span policy, finance, technology, and governance.
The recent Navigating the Net Zero Transition: Integrating Policy, Economy, Technology, and Finance in Sri Lanka’s Journey, hosted by HSBC in collaboration with Janathakshan GTE and the Ministry of Environment, underscored these themes. The forum at the Galle Face Hotel on July 30, 2024, brought together stakeholders around the urgent need to align climate action with economic development.
Defining Net Zero and the Path Ahead
Achieving net zero means balancing the Greenhouse Gases (GHGs) emitted into the atmosphere with an equivalent amount removed through mitigation strategies such as emissions reduction, renewable energy adoption, and carbon sequestration through nature-based solutions. According to the Paris Agreement, this balance is critical to limiting global warming to 1.5°C above pre-industrial levels.
However, Mark Surgenor, Chief Executive Officer, HSBC Sri Lanka and Maldives, noted that nations like Sri Lanka are vulnerable to climate impacts, and the stakes cannot be any higher. Surgenor emphasized that achieving this balance is not solely an environmental necessity but a business and economic imperative for Sri Lanka’s export-led economy.
As global efforts to combat climate change intensify, financial institutions are aligning their operations with net zero ambitions. HSBC’s core approach is to engage clients to support their transition to decarbonise and diversify their energy supply, production and business models. This initiative is part of a broader commitment to phase down fossil fuel financing in line with the pathways necessary to achieve net zero emissions by 2050. HSBC is channelling investments into infrastructure and innovations driving the transition. The HSBC strategy underscores the need for collaboration between financial institutions and industry stakeholders to enable the systemic changes required for a sustainable future.
Sri Lanka’s Road Map
Sri Lanka has taken significant steps to embed climate action into its policy landscape. The Ministry of Environment, in its Carbon Net Zero 2050 Roadmap, outlines a phased strategy for emissions reduction, with rolling five-year plans to ensure alignment with evolving data and circumstances. These plans cover six key sectors: energy, transport, industry, waste, forestry, and agriculture.
Dr Sunimal Jayathunga, former Additional Secretary (Environment Development) at the Ministry of Environment, highlighted the institutional mechanisms underpinning this strategy. A National Steering Committee, chaired by the former Secretary to the President, provides overarching governance, while sectoral planning and monitoring committees ensure accountability. Moreover, aligning these plans with the Nationally Determined Contributions (NDCs) under the Paris Agreement underscores a commitment to international climate goals.
Sri Lanka’s targets include a 14.5% reduction in emissions by 2030 and a 70% share of renewable energy in electricity generation. However, according to Dr Jayathunga these ambitions require concerted efforts to address policy coherence and operational challenges. The need to create an enabling environment for private sector participation, streamline approval processes, and strengthen inter-agency coordination remains critical.
Financial Challenges and Opportunities
The financial requirements for net zero transition are significant. According to the Climate Change Secretariat of Sri Lanka, the Climate Prosperity Plan estimates a need for $140 billion to fund renewable energy projects, infrastructure upgrades, and nature-based solutions. Accessing these resources, however, remains a challenge, particularly in the context of the sovereign debt crisis Sri Lanka is grappling with.
Dr Gina Maswabi, Commonwealth National Climate Finance Advisor, highlighted innovative mechanisms such as green bonds, blue bonds, and debt-for-climate swaps as potential solutions. Debt-for-climate swaps, for instance, offer a pathway to redirect financial resources from debt servicing to climate-resilient investments. These instruments alleviate fiscal pressures and channel funds into high-impact projects, such as renewable energy expansion and ecosystem restoration.
Additionally, Maswabi noted the importance of developing bankable project proposals to access international climate finance while strengthening institutional capacity to navigate complex funding landscapes to ensure Sri Lanka can mobilize resources effectively.
The Role of Technology in Decarbonization
Technology and securing investments in renewable energy, energy efficiency, and sustainable transportation are critical. The Sri Lankan roadmap prioritizes electrification of the transport sector, with plans to transition to electric all two- and three-wheelers and explore hydrogen-fuelled solutions for buses and trains.
However, these initiatives present significant technical challenges. Integrating renewable energy into the grid requires advancements in energy storage solutions, grid management, and demand-side response mechanisms. Addressing intermittency issues in solar and wind power is critical for ensuring a stable and reliable energy supply.
Dr Ananda Mallawatantri, keynote speaker and former advisor to the Presidential Secretariat, emphasized the need for technology transfer and innovation. Partnerships with international technology providers could accelerate the adoption of advanced systems while building local capacity, he suggested.
Harnessing Nature-Based Solutions
Sri Lanka is endowed with rich biodiversity, presenting opportunities for carbon sequestration and climate adaptation, with mangrove restoration, afforestation, and sustainable land management central to the mitigation strategies. These efforts align with the target of increasing forest cover to 32% by 2030, as outlined in the NDCs.
Nature-based solutions also provide socio-economic benefits by creating jobs in rural areas and enhancing community resilience. However, implementing these initiatives requires careful consideration of land rights, equitable resource allocation, and the potential for unintended socio-economic impacts. Forum participants called for a safeguards framework to ensure these projects support a just transition.
Implementation is Key
The forum identified several barriers to achieving net zero goals. Financial constraints, technological gaps, and institutional inefficiencies emerged as recurring themes, while the lack of robust data management systems remains a critical impediment. Accurate measurement, reporting, and verification (MRV) frameworks are essential for tracking progress and ensuring accountability.
Public awareness and engagement also remain significant challenges. Participants stressed the importance of fostering a broader understanding of climate issues among citizens and businesses. Integrating climate considerations into education and capacity-building initiatives could play a pivotal role in addressing this gap.
The private sector has a transformative role in enabling the net zero journey, uniquely positioned to drive innovation, mobilize investments, and implement sustainable practices across value chains in Sri Lanka. Opportunities for engagement include renewable energy projects, carbon markets, and resource efficiency initiatives.
The government is exploring policy instruments to facilitate private sector participation, such as tax incentives, green financing mechanisms, and investment-ready project pipelines. Forum discussions emphasized the need for a collaborative approach, where businesses and policymakers work together to align economic incentives with climate objectives.
Integrating Climate Action with Development Goals
Sri Lanka has linked its net zero ambitions with its broader sustainable development goals (SDGs). Efforts to decarbonize industries, promote circular economy principles, and enhance resource efficiency complement SDG 12 (sustainable consumption and production) and SDG 13 (climate action).
Sanjay Vashist, Director of the Climate Action Network South Asia, underscored the importance of integrating climate and development agendas. He highlighted resource efficiency and circular economy as high-impact areas for investment, noting that these approaches reduce emissions while supporting economic resilience and job creation.
Achieving net zero requires addressing the socio-economic dimensions of climate action. A just transition framework ensures that the shift to a low-carbon economy is inclusive, equitable, and socially sustainable. Forum participants highlighted the need to protect vulnerable communities from the potential negative impacts of climate policies, such as displacement or loss of livelihoods.
Efforts to incorporate safeguards into project planning and placing mechanisms for stakeholder engagement are critical for fostering trust and ensuring that climate action benefits all segments of society.
The forum concluded with a call for collective action. Achieving net zero by 2050 requires sustained collaboration among government agencies, private sector entities, civil society, and international partners. Building institutional capacity, fostering innovation, and ensuring policy coherence are priorities for the coming years.
Moreover, as an island nation, Sri Lanka has unique opportunities to showcase leadership in climate resilience and sustainable development. By leveraging its natural resources, biodiversity, and renewable energy potential, Sri Lanka can emerge as a model for other developing nations navigating similar challenges.
The journey towards net zero is a complex but necessary endeavour that transcends environmental goals. It represents an opportunity for Sri Lanka to redefine its economic trajectory, strengthen social resilience, and contribute to global climate action.
While significant challenges remain, the Navigating the Net Zero Transition forum underscored the importance of an integrated approach. By aligning policy, technology, finance, and equity, Sri Lanka can transform its ambitions into tangible outcomes, ensuring a sustainable future for generations.
