COP28: Looking ahead, India is preparing a carbon trading system to create an Indian Carbon Market (ICM). This programme aims to offset the greenhouse gas emissions of the economy by pricing greenhouse gas emissions through trading carbon credit certificates
As the UN Conference of Parties (COP28) proceedings are in progress in Dubai, it’s appropriate to assess the efficacy of the COP platform in building a global consensus on taking timely, co-ordinated and material actions for climate risk mitigation.
A recent report by UN Environment Programme says the world is warming much more rapidly than expected, and to even have a moderate likelihood of keeping the warming levels within the Paris target of 1.5 degrees, nations have to curtail their emissions sharply by 42 percent by the end of the decade. Over last year, global carbon emissions from fossil fuels have actually rose by 1.2 percent.
COP27 in Egypt did bring about a sense of urgency by urging governments to revisit and reinforce the 2030 targets in their national climate plans by the end of 2023. It also called for accelerated efforts to phase out subsidies for inefficient fossil fuels. COP 27 Action Plan further highlighted that the global transition to a zero-carbon economy requires significant investments and urged developed countries to replenish the green climate fund.
Notwithstanding the disappointments on climate finance, where the annual target is pegged at USD 100 billion, a "Loss and Damage" Fund (LDF) had been announced. The fund aims to help vulnerable countries offset the rising costs of climate change caused by extreme weather events and rising sea levels, also covering impacts such as forced displacement and loss of cultural heritage.
India’s commitment to addressing climate change is underscored by major initiatives such as the National Adaptation Fund for Climate Change (NAFCC). Established to support vulnerable states and union territories, NAFCC focuses on adaptation activities, particularly in coastal regions of states like Kerala, Tamil Nadu, and Andhra Pradesh. With 30 projects sanctioned across 27 states and UTs, NAFCC aims to enhance climate change adaptation and sustainable livelihoods.
In the domain of clean energy, India's National Clean Energy Fund supports innovative projects in clean energy technology; recently, over $8 billion has been allocated to the fund, reinforcing India's dedication to sustainable energy practises, covering projects such as mangrove restoration and waste-to-biogas conversion.
Looking ahead, India is preparing a carbon trading system to create an Indian Carbon Market (ICM).
This programme aims to offset the greenhouse gas emissions of the economy by pricing greenhouse gas emissions through trading carbon credit certificates. A report on “The State of Climate Finance in India 2023” estimates that India would require USD 120 billion annually to tackle climate change, with only USD 32 billion currently available from various sources with a funding gap of USD 88 billion that needs to be mobilised from both domestic and global sources.
In this context, the pivotal responsibility falls on India's Development Financial Institutions (DFIs) and commercial banks to actively mobilise domestic funds and attract resources from international sources, effectively closing the funding gap. Additionally, it is crucial for Indian corporations to proactively contribute to strengthening the carbon market, thereby stimulating a demand for increased innovation.
COP28 has started on an encouraging note with the official launch of the “Loss and Damage” fund proposed in COP27. The initial funding is estimated to be $475 million: UAE - $100 million, EU $275 million, $17.5 million from the US, and $10 million from Japan, to be managed by the World Bank. However, the requirement is in trillions of dollars, and the fund needs to see much more significant contributions going forward from both the developed and developing nations.
Closing the emissions gap to bring global warming to 1.5°C is urgent, an important challenge that requires immediate action. While the conference aims to intensify the transition to sustainable energy, it also needs to ensure that it is well managed in affected communities, balancing environmental objectives with social equity.
The summit represents an important moment for international cooperation, moving countries towards a more sustainable and resilient future in the face of the complex challenge of climate change.
(Suman Chowdhury, Chief Economist and Head of Research, Acuité Ratings & Research Limited.)