This article is authored by Anil Agrawal, Member of Parliament, Rajya Sabha and Kaviraj Singh, founder and managing director, Earthood.
As the world confronts the pressing reality of the climate crisis, the need for robust climate financing has never been more urgent. With the 28th Conference of the Parties (COP) under the auspices of the United Nations Climate Change Conference on the horizon, India stands ready to take a resolute stance, advocating for adaptation, equity, and financial assistance in the battle against the climate crisis. At this pivotal moment in history, the timeless words of Mahatma Gandhi resound powerfully, reminding us that the future hinges on the actions we take in the present. In this present moment, India’s unwavering participation at COP28 underscores the paramount importance of climate financing in shaping a sustainable future for all.
Central to India’s proposed approach at COP28 is the profound recognition that adaptation and equity are cornerstones in the fight against climate change. While global efforts to mitigate greenhouse gas emissions are vital, equal weight must be placed on bolstering resilience and adapting to the challenges that arise from a changing climate. Climate justice mandates that vulnerable countries receive the financial support and robust infrastructure needed to combat the far-reaching impacts of climate change. Secretary of the ministry of environment, forest and climate change, Leena Nandan, rightly emphasised the necessity for action and discussions on loss and damages, along with the operationalisation of the Loss and Damages fund. These endeavours underscore India’s steadfast commitment to addressing the human and economic toll of climate change.
Yet, the road ahead is not without its formidable financial challenges. The task of addressing the climate crisis demands massive financial commitments. Estimates reveal that the global transition to a low-carbon economy will require an annual investment of $4-6 trillion until 2050. To achieve net-zero emissions targets by 2030, the renewable energy sector alone necessitates a yearly investment of at least $4 trillion. Moreover, developing countries will require approximately $6 trillion between 2022 and 2030 to successfully implement their climate action plans. To meet these staggering challenges, at least 5% of the global Gross Domestic Product (GDP) must be channeled towards climate action each year.
The celebrated goal of developed countries pledging $100 billion annually by 2020 to support developing nations in their climate action endeavors, though commendable, falls short of addressing the full scope of the climate challenge. As we approach 2030, reports indicate that external climate finance of $1 trillion per year will be required, significantly exceeding the current mobilised amount of $50-80 billion annually. Furthermore, in 2020, only $83.3 billion was provided to developing and emerging economies, often in the form of concessional and non-concessional loans.
India, cognisant of the urgency surrounding climate financing, has embarked on significant initiatives to address the issue. Notably, the establishment of the National Adaptation Fund for Climate Change (NAFCC) and the National Clean Energy Fund serve as shining examples of India’s commitment to promoting clean energy and supporting climate-resilient infrastructure. However, despite these commendable efforts, significant funding gaps persist. The Climate Finance Working Group’s estimation that ₹118 trillion will be needed to address climate change, with only RS 64 trillion currently available and ₹54 trillion unrestricted, necessitates innovative financing solutions. In this regard, India’s Development Financial Institutions (DFIs) and commercial banks must play a pivotal role in raising domestic funds and channeling resources from abroad to effectively bridge this gap. Moreover, it is essential for Indian corporates to take a stride forward in bolstering the carbon market, consequently prompting the need for greater innovation.
Even within the bounds of the Paris Agreement, it remains crucial for India to implement and strengthen actions prescribed under Article 6.4. This involves establishing a Clean Development Mechanism, which was previously formed under the Kyoto Protocol. By doing so, India can benefit from carbon credits obtained through the cap-and-trade system, which has proven effective in mitigating sulphur pollution during the 1990s, thereby balancing the wheels of development with the climate crisis.
As the curtain rises on COP28, the imperative for global collaboration on climate financing is clearer than ever before. India’s proactive engagement, collaborative efforts with developed and emerging economies, and unwavering dedication to confronting climate challenges position the nation as an exemplary advocate for climate financing. Nevertheless, the fulfillment of financial commitments by developed countries and transformative changes in the international financial system are pivotal to delivering climate financing at the scale necessary to address the global climate crisis.
India’s partnership with the United Arab Emirates (UAE), the host of COP28, holds significant promise for achieving success at the conference. During his recent visit to the UAE, Prime Minister Narendra Modi reaffirmed the commitment of both nations to ensure the conference’s success. As the G20 president, India’s influential role can contribute to delivering a clear political framework and shaping the outcomes expected at COP28. With G20 countries responsible for over 80% of global emissions, their policy decisions will undoubtedly play a pivotal role in driving the necessary transformation.
At COP28, the key areas of focus will revolve around mitigation, adaptation, loss and damages, and finance. Stronger emission reduction commitments are urgently required to combat the alarming trajectory of global warming. Climate finance remains a critical issue, necessitating the mobilisation of funds and reform of the global financial system to support climate action. In this transformation, private finance and the reform of multilateral development banks are indispensable components.
India, alongside other developing nations, is championing a new global climate finance target, acknowledging the mounting costs of addressing and adapting to the climate crisis. India, in this context, should also take lead in carbon pricing by setting a base price (reflective of the external costs of GHG emissions), as an effort towards mitigation and reduction of GHG emissions. The G20’s leadership in driving change and scaling up climate finance is pivotal for achieving the progress needed by COP28.
As we embark on the journey to COP28, the eyes of the world are upon India and its vision for climate financing. In this defining moment, the nation’s unwavering commitment and dedication serve as a beacon of hope for a sustainable future. The time for action is now, and the global community must come together, united in the pursuit of climate financing and a harmonious dance towards a sustainable future for generations to come. In the words of Rabindranath Tagore, “The same stream of life that runs through my veins night and day runs through the world and dances in rhythmic measures.” Let us heed these profound words and dance in harmony, coalescing our efforts in the noble fight against climate change. India’s focus on climate financing sets a powerful example, urging the world to act decisively and collaboratively in this defining moment for humanity and the planet.
This article is authored by Anil Agrawal, Member of Parliament, Rajya Sabha and Kaviraj Singh, founder and managing director, Earthood.