India’s Caution and Climate Finance Challenges: Navigating COP28 Outcomes

A Amarender Reddy
Tulsi Lingareddy

Climate Finance Challenges

The biggest concern for India and other developing countries is scaling up of climate finance for adopting transition pathways towards achieving net-zero emissions.

India, while remaining a strong supporter of climate action measures towards mitigation and adaptation, has rightly adopted a cautious approach during the 28th annual Conference of Parties (COP28) held in the UAE from November 30 to December 12, 2023.

Although the COP28 initiated a number of historic climate action measures and commitments, the lack of clarity on the framework to ensure their successful implementation has remained a cause for concern for developing countries like India that are more vulnerable to climate change.

The major historic development at the COP28 was the successful launch and operationalising of Loss and Damage Fund (LDF), which was first suggested way back in 1991. But, so far, it received only around USD 700 million funding commitments against the estimated requirement of about USD 150 billion per year with commitment to progressively increase the replenishment to USD 300 billion per year by 2030 as per the ReportTaking Responsibility Towards a Fit-for-Purpose Loss and Damage Fund, by the United Nations Conference on Trade and Development (UNCTAD) released in November 2023.

In addition, no clarity was provided on the framework and mechanism for effective implementation of the LDF ensuring transparency, inclusivity and governance. Further, there is no clear indication of the specific quantity or target and the source of the funds to be generated for LDF.

Declaration on Agriculture, Food Systems, and Climate Action, on the other hand, was another significant decision at COP28 that mobilised about USD 3.1 billion funding and received endorsement from more than 150 countries.

However, with concerns to protect the livelihoods of a vast majority (80 per cent) of smallholder farmers and to address concerns of domestic food security, India remained as a non-party to any commitments with specific timelines and targets related to agriculture. The country needs to feed about 17 per cent of the world’s population with about 2.4 per cent of the world’s geographical area. Nevertheless, India has launched a green credit initiative and led the launch of Global River Cities Alliance at COP28 towards conservation and sustainable management of rivers.

Another important first at COP28 decisions is acknowledgement of the fact that fossil fuels have been the cause for global warming. The final outcome report of the global stock take (GST) at COP28 indicated “transition away from fossil fuels by 2050”, as the major oil producing countries, including the OPEC opposed the term “phase-out of fossil fuels”.

Further, there were no clear time-schedule and targets for ensuring the smooth transition away from fossil fuels. At the same time, the outcome report calls for accelerating the efforts towards phase-down of unabated coal power. But, any further acceleration in phasing out of coal based power plants is a major cause for many emerging countries including India and China, as more than 60 per cent of their power generation is sourced from coal.

Nevertheless, the proposal for no new coal based power plants without carbon capture and storage facilities was strongly opposed by developing economies including India, China and South Africa.

The final outcome report of the GST COP28 also suggests “accelerating and substantially reducing non-carbon-dioxide emissions globally, including in particular methane emissions by 2030”. While it is imperative to cut methane emissions, it is a cause for concern for India as the major source of methane is agriculture and livestock sectors.

In view of the vulnerability of agriculture and livestock sectors to any sudden significant changes in their production pattern, India has strongly expressed its concerns against agreeing for any specific mandate to reduce methane emissions.

However, in this regard, India indicated that it has successfully reduced the emission intensity vis-à-vis its GDP by 33 per cent between 2005 and 2019 as per the earlier Nationally Determined Contributions (NDC) target for 2030.

Another climate action commitment called for efforts is tripling renewable energy capacity globally and doubling the global average annual rate of energy efficiency improvements by 2030. Since the commitment is at global level, targets and implications of this commitment for individual countries are not very clear.

In this regard, the Indian government stated that the country has achieved 40 per cent of electric installed capacity through renewable sources, nine years ahead of the target for 2030. While proactively raising the renewable energy capacities, India remained cautious to commit for any specific targets, particularly when such commitment is linked with phase-out of coal.

Nevertheless, one crucial and first ever is the inclusion of “just transition” to net-zero emissions in the outcomes of the COP28. This is an extremely positive and important outcome for developing countries. Further, the COP28 also affirms the Work Programme on just transition pathways towards achieving the goals of the Paris Agreement. This is a significantly positive decision of COP28 towards ensuring transition of economies and their workforce in a just and equitable manner.

Way Forward

The biggest concern for India and other developing countries is scaling up of climate finance for adopting transition pathways towards achieving net-zero emissions. According to a recent research report by McKinsey, Solving the Climate Finance Equation for Developing Countries, released in December 2023, developing countries require an additional finance of about USD 2 trillion per year by 2030 to meet the Paris Agreement goals of capping the global warming at 1.5°C above pre-industrial level. In order to commit and comply with the necessary climate actions, developing countries need the required funding.

In this regard, it is pertinent to note that the commitment of USD 100 billion climate finance per year by developed countries by 2025, as per COP21 in 2015, is yet to be fulfilled. Further, a new collective quantified goal to raise the floor of climate finance above the USD 100 billion per year to be agreed at COP29 in 2024 as decided at COP21.

However, there is still no clarity and consensus on the modalities to ensure the flow of agreed funding to developing countries. Hence, there is an urgent need for bringing transparency and framework for ensuring the flow of funds for developing economies to adopt net-zero transition pathways, as developing countries are crucial for achieving global transition to net-zero emissions.

A Amarender Reddy is Joint Director, School of Crop Health Policy Support Research (SCHPSR), ICAR-National Institute of Biotic Stress Management (ICAR-NIBSM), Raipur. Tulsi Lingareddy is Senior Economist, Financial Markets, Sustainable Finance and Agriculture. 

The article was first published in Firstpost as COP28 highlights concerns of India, developing world towards sustainable transition on December 28, 2023.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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Acknowledgement: This article was posted by Aasthaba Jadeja, a research intern at IMPRI.