Incentivise decarbonisation for lasting results

A recent media report quoted concerns of various ministries of the Government, notably the Steel and Mines ministries, on the Carbon Border Adjustment Mechanism (CBAM) proposed by the EU. It envisages imposition of an additional duty on imports of products from countries which have historical high per capita carbon emissions. This is likely to impact Indian exports to the EU. While this levy is to be imposed from January 1, 2026, the Government plans to negotiate this on various counts – standards and benchmarks, exemption for MSMEs and several other parameters. This is part of the carrot and stick policy being adopted all over to achieve rapid and lasting decarbonisation of economic activity.

Such carbon tax (penalising of emitters), and carbon credits (rewarding the emission reducers), is now getting firmly entrenched within countries and across borders. While this economic reward and penalty mechanism is being pursued, there is also need for the developed world to adopt a more fair and just approach. Many in the developing world have argued that some smaller developing nations are facing disproportionately larger impacts of climate change though they have been historically emitting less. To address this asymmetry, there has been a call for the richer nations to bear a large part of the climate action costs. Therefore, at the Conference of the Parties (COP) 15 in 2009, developed countries pledged to provide
Climate Finance of US$ 100 billion per year from 2020 onwards towards mitigation and adaptation in vulnerable countries. Sadly, this pledge is yet to be fulfilled. Likewise, the Indian Government in its talks with the EU on the proposed CBAM may explore binding commitment on technology transfer and mobilisation of finance by the EU for mitigation action.

As regards the carbon trading mechanism it definitely needs to be pursued and encouraged. Indian industry is capable of much creativity and innovations, especially where such efforts are rewarded like through the carbon credits. These will be essential to realise India’s ambitious goal under the Nationally Determined Contributions (NDC) of reducing emissions intensity of the GDP by 45 per cent by the year 2030 against 2005 levels. The Bureau of Energy Efficiency (BEE), along with others, is developing the Carbon Credit Trading Scheme for the Indian Carbon Market (ICM) planned by the Government. This will surely go a long way in decarbonising the Indian economy. It will provide incentives to climate participants to adopt low-cost options by leveraging technology and will make available finance towards projects that generate carbon credits.

A wide range of projects could be encouraged under carbon/green credit systems. Tree plantation, water conservation, waste management (reduction, treatment and reuse), sustainable agriculture (organic inputs, soil/water conservation, improved nutrition value), green buildings (sustainable materials and design) are all projects which can deliver substantial benefits in our endeavour towards a low carbon future. Additionally efforts are needed to create meaningful markets for the carbon credits so that those earning such credits are able to monetise their credits. One is confident that the proposed Indian Carbon Market will achieve this.

This issue of Urban Update brings you several reports and views on this subject. We are sure readers will find these engaging.