Krishna Raj

INDIA’S commitment at COP26 to achieve net-zero carbon dioxide emissions by 2070 and anticipation of $1 trillion climate finance from developed countries are far removed from reality in the absence of timely transfer of technology and adequate international climate finance for mitigation and adaptation.

The world has missed many targets in the past and India’s resolve to achieve the climate target entails a highly challenging proposition to reduce 2,533 million tonnes of CO2 emission to zero by 2070. In fact, India’s global share of CO2 emissions has increased from 3 percent in 2000 to 7 percent in 2016, with the annual average growth rate being 4.71 percent. India is embroiled in one of the biggest public policy challenges of the 21st century to realize the twin goals which are virtually at loggerheads — economic development and climate change.

India, being a lower-income country, is under tremendous pressure to lift millions of people out of poverty, whereas it is required to reduce dependence on greenhouse gas-emitting fossil fuels to address the challenge of climate change.

India’s socio-economic and environmental indicators in comparison with other countries have been worsening in recent years. India’s per capita income, as per World Bank data, is $1,900.7, which is lower than the global average of $10,909.3, America’s $63,543.6, and China’s $10,500.4. India has slipped to the 131st rank out of 189 countries on the Human Development Index.

The highest number of poor people are in India, with 37.2 percent (50 crores) of the population below the poverty line. India is ranked 168th out of 180 countries on the Environment Performance Index. This data shows the stark reality of India’s worsened developmental status in the world. The recurrent natural disasters, specifically Covid-19 and climate-induced cyclones, have further impacted the livelihood of millions of people and the economy.

High-carbon economic growth already poses a great threat to India’s development with the increase in the world’s average temperature by 1°C. It is projected by the UN IPCC-6 Report that if the present rate of increase in greenhouse gases continues, the world would obviously fail to limit the average temperature rise to less than 2°C. This trend spells a catastrophe for the economic development and well-being of the people in India.

Climate change is a recipe for economic disaster due to the growth of a high-carbon economy, which is linked to the neo-liberal economic policy of capitalism of mass production and mass consumption that led to economic inequality in India. However, the carbon footprint varies with income inequality. The rich produce more carbon footprint than the poor. Already, many sectors of the economy, regions, and millions of poor people are affected by the increasing number of cyclones, high precipitation, floods, severe droughts, forest fires, acute shortage of drinking water, and destruction of social and economic infrastructure.

The economic cost of climate change is estimated to be around 5 to 10 percent of India’s GDP annually. With about 60 percent of the population in the country dependent on the agricultural sector, climate change affects agriculture and water resources. The scarcity of water is very high as the per capita water availability in India has drastically been reduced to 1,486 cubic meters.

The scarcity of water limits economic growth and costs the economy in terms of pollution control, water recycling, and drinking water purification. As a result, climate change imposes a high cost on society and impoverishes economic wellbeing.

Further, there is a huge gap between understanding poverty from the perspective of the poor and understanding it from the developmental perspective of the State in India. This is reflected in India’s failure in realizing the most prominent objectives of economic and environmental policies. Economic policies have created greater income inequality and poverty, whereas environmental policies have failed to conserve and enhance the resource base of the country.

In India, policy-makers view the roles of economic and environmental policies as antagonistic or a trade-off — seemingly diverging and not converging. Of course, economic and environmental policies have quite different objectives to achieve, but their convergence or integration benefits each other in realizing both economic development and environmental conservation that is succinctly called ‘sustainable development’.

The pursuit of sustainable development is constrained by the challenge of mobilizing financial resources for the mitigation of greenhouse gases and financing adaptation activities. However, a cohesive policy for sustainable development from both the Ministry of Finance and the Ministry of Environment, Forest, and Climate Change is glaringly absent.

For example, the objective of Pradhan Mantri Ujjwala Yojana is to help the environment and the health of the rural poor by distributing clean cooking fuel. However, acute poverty among the rural people has made them rely on fuelwood, compounded by the non-affordability of LPG due to ever-increasing prices in recent times. Therefore, both ministries need to work in tandem to achieve sustainable development goals by effective application of economic instruments as public policy instruments.

Economic instruments such as pollution taxes, effluent taxes, emission taxes, input taxes, product taxes, export and import tariffs, and tax differentiation can help in enhancing the government’s capacity to mobilize financial resources to fight climate change. The economic instruments not only help in raising government revenue but also influence consumption and production patterns, redistribute wealth and manage the economy by discouraging undesirable industrial behavior and promoting technological innovation.

Economic instruments also provide market signals about resource scarcity and induce efficient use of natural resources. Therefore, economic instruments can act as a catalyst to achieve the twin goals: economic development vis-à-vis financing climate change mitigation and adaptation. However, India’s trajectory in development and climate change depends on its policy commitments towards realizing Sustainable Development Goals, particularly Goal 1 — End poverty in all its forms everywhere.

First Published in The Tribune Shadow of Poverty on India’s Climate Goals on November 4, 2021.

Read another piece on Economic Development by Krishna Raj titled Economic Development at Whose Cost? Who Pays for Climate Change’s Impact on Public Health and Covid 19? in IMPRI Insights

About the Author

Krishna Raj, Professor, Centre for Economic Studies and Policy (CESP), Institute for Social and Economic Change (ISEC), Bangalore