India to have climate change budgetary supplement from next year
From next year, India will start climate budgeting — a practice to account for budgetary measures that support climate change-related actions across the country. Along the lines of gender budgeting, the government will prepare a supplementary report to go with the main Budget documents accounting for how much money India is annually investing on climate change.
The government has also begun groundwork for a detailed and granular greenhouse gas emissions inventory, which will be generated annually, to meet one of India’s climate change commitments towards greater transparency, under the Paris Agreement.
“We initially thought of doing it for the FY17-18 Budget. But, we realised it’s important to have a robust methodology that can withstand international scrutiny as well. This would take some time so we decided to implement climate budgeting from FY18-19,” a senior official
Business Standard spoke with said. “One way is to develop a method to assess if an expenditure head has a climate change attribute and if it does, how much of that expenditure can really be said to be funding our climate actions. The other route is to use specific budget heads where the functions being served through that expense are explicitly marked for climate change actions,” a second official said. “The finance ministry is going to soon finalise a status paper on this, which will provide guidance on which method is the best and most robust,” the official added.
The government will have to walk a fine balance in preparing this climate budget. A methodology that produces too conservative a figure will lead to pressure from the global community for lack of commitment. And, a methodology that suggests India is already investing a lot in climate action will sit incongruous with the country’s demand at global forums for a pie of the international climate finance.
In parallel to the climate budget, the government is working on a template for a national greenhouse gas (GHG) emissions inventory. This inventory is meant to quantify the annual GHG emissions from each economic sector and industry in order to help measure the impacts of emission reduction actions over time. So far, India has sporadically prepared such an inventory. But, substantial parts of it have so far been based on statistical extrapolations and not primary level data collection. Under the Paris Agreement, starting 2020, India would have to provide a more detailed inventory on an annual basis.
Currently, the GHG emissions from the power sector are collected and reported by the Central Electricity Authority so far. Similarly, the government also collects data on emissions based on fuel consumption by different sectors.
“We will have to see how the private sector reports its emissions from the production side,” said the second official.
Reporting from the private sector could come as part of mandatory disclosure either under the existing corporate laws or under the environment-related legislation. Bringing the disclosures under the environment law, though, would create new legal challenges as GHG emissions would also be seen as a ‘pollutant’ — a position the government has so far not been agreeable to.
Labelling the GHG emissions as a pollutant could potentially lead to imposition of climate-based restrictions on individual industrial and infrastructure projects.
A disclosure mechanism through the corporate law framework would limit the data to merely another audit and reporting requirement. At the moment, while carrying out an environmental impact assessment of individual projects the green laws do not consider the GHG emissions from the project as a parameter to evaluate the project.
While the climate budgeting exercise will start with the next financial year, the government has more than two years to put in place the new emissions inventory protocols as the submission of the latter will be mandated only once the Paris Agreement is operationalised.