India’s goal of sustainable GDP growth faces a formidable challenge in the form of climate change. According to a study, it’s estimated that global warming has caused the Indian economy to be 31 percent smaller than it would have otherwise been. The government needs to overcome this challenge not just to meet its commitment under the Paris Agreement but also keeping in mind the welfare of general public. Further, the government should realise that to overcome the climate change challenge a key factor it has to pay attention to is the finance.
There is an urgent need on the part of the government to develop a comprehensive strategy and an integrated policy approach that aligns the country’s financial systems with the long-term needs of the economy while incorporating environmental risks. Perhaps there is no other better opportunity for the government to meet this objective than the occasion of the presentation of the first budget of this decade. If need be, the government can learn from the experience of other nations like China who have made much progress in Green Financing. It should be noted that unless the entire financial system in the country participates in this exercise, it would be impossible for India to achieve its objectives under climate change.
India has made a commitment to reduce its greenhouse gas (GHG) emissions by 33-35 percent (from 2005 levels), increase the share of non-fossil fuel-based electricity to 40 percent and enhance forest cover to absorb 2.5 to 3 billion tonnes of carbon dioxide by 2030. In order to achieve this objective, financing need will be huge and according to one estimate (made in 2014-15) around US$206 billion (at 2014-15 prices) would be required between 2015-2030, for implementing adaptation actions in key areas like agriculture, forestry, fisheries, infrastructure, water resources and ecosystems. Beyond these, additional investments will be needed for strengthening resilience and disaster management, pegging the total fund requirement at US$2.5 trillion between 2015-2030.
Till date most of the actions taken in regard to green financing is only on paper with little action one could see on the ground. For example, India launched the National Action Plan on Climate Change in 2008 which provided for broad policy framework. However, till date no implementable strategy has been chalked out till date. The scenario is worse at the state and local body level where the matter is not even being discussed.
In 2011, the Climate Change Finance Unit (CCFU) within the Department of Economic Affairs, Ministry of Finance was created as a coordinating agency for climate finance in India. Though the Unit was created with a noble objective of creating a strong platform for conducting analyses on issues related to climate finance, it does nothing but representing the Finance Ministry in all climate change financing related issues in international and domestic forums as well as providing input on issues of climate finance in economic surveys.
The government need to be extra careful while framing its strategy regarding Green Finance and should ensure that it takes into account the concerns of all stakeholders like government, financial institutions, and regulatory agencies. The government’s responsibility doesn’t end by just listing the guidelines for others to follow but it extends to creating a friendly atmosphere for investment by providing suitable incentive and restrictive mechanism. There is need for incorporating green elements into laws and regulations of the country including fiscal, taxation, monetary, credit and industrial policies. This cannot be done in isolation and will need a well-coordinated approach amongst various actors including the Ministry of Finance, Ministry of Environment Forest and Climate Change, State Governments, and regulatory bodies such as the Reserve Bank of India (RBI) for laws on commercial banks and financial institutions, the Securities Exchange Board of India (SEBI) for securities law, and the Insurance Regulatory and Development Authority of India (IRDAI) for insurance law.
Hardly 10 years are left for the government to meet its commitments under Paris Protocol and it should not waste further time on this matter anymore. The forthcoming budget will be a golden opportunity for the government to express its seriousness to meet the climate change challenge.