Im­per­a­tive to bet­ter align financial sys­tem with real econ­omy to tran­sit to a green econ­omy

To tran­sit to a low car­bon econ­omy…

FICCI Business Digest - - In Focus -

Naina Lal Kid­wai, Global Com­mis­sioner of the New Cli­mate Econ­omy and Mem­ber of UNEP In­quiry In­ter­na­tional Ad­vi­sory Coun­cil and Past Pres­i­dent of FICCI, called for im­me­di­ate steps to make the tran­si­tion to a low car­bon econ­omy, stat­ing that apart from in­creas­ing pro­duc­tiv­ity, it will al­low In­dia to en­joy cleaner air, live in more com­pact, con­nected and co­or­di­nated ci­ties and have wider ac­cess to wa­ter and elec­tric­ity.

Speak­ing at a con­fer­ence or­gan­ised by FICCI jointly with ICRIER on 'Strate­gies for Sus­tain­able De­vel­op­ment: Cli­mate Ac­tion, Financial Re­form' in New Delhi on Au­gust 3, 2015, Kid­wai said that financial in­sti­tu­tions have a role to play and can help fi­nance the trans­for­ma­tion to a clean, sus­tain­able fu­ture. A grow­ing num­ber of financial in­sti­tu­tions are in­cor­po­rat­ing cli­mate risk into their op­er­a­tions and chan­nel­ing financial flows to­ward low­car­bon, cli­mate-re­silient op­por­tu­ni­ties. Ma­jor in­vestors with around half of to­tal in­sti­tu­tions as­sets (US$ 45 tril­lion) now sub­scribe to re­spon­si­ble in­vest­ing prin­ci­ples, she added.

Kid­wai said that there is an ur­gent need to ac­cel­er­ate the tran­si­tion to a green econ­omy by bet­ter align­ing the financial sys­tem to the re­silience and the long-term suc­cess of the real econ­omy. The UNEP In­dia In­quiry led by FICCI which is un­der way is in­tended to sup­port such ac­tions by iden­ti­fy­ing best prac­tice, and ex­plor­ing financial mar­ket pol­icy and reg­u­la­tory in­no­va­tions that would sup­port the de­vel­op­ment of a green financial sys­tem. The FICCI-UNEP re­port looks at how to align the financial sec­tor to­wards a green agenda. The re­port would map

cur­rent best prac­tices, draw to­gether prin­ci­ples and frame­works, catal­yse new think­ing, and ul­ti­mately lay out a se­ries of op­tions for ad­vanc­ing a green financial sys­tem.

On the oc­ca­sion, Dr. Isher Judge Ah­luwalia, Chairperson, ICRIER, along with the dig­ni­taries launched the New Cli­mate Econ­omy's (NCE 2014) In­dia Re­port, pre­pared by World Resources In­sti­tute and ICRIER, ti­tled 'In­dia: Path­ways to Sus­tain­ing Rapid De­vel­op­ment in a New Cli­mate Econ­omy'.

Ac­cord­ing to the re­port, the in­vest­ments made over the next 15 years will be de­ci­sive for the fu­ture of our cli­mate sys­tem and econ­omy. Around US$ 90 tril­lion glob­ally will need to be in­vested in ci­ties, land use and en­ergy in­fras­truc­ture be­tween now and 2030 to de­liver de­vel­op­ment and growth.

The NCE re­port lists 11 im­por­tant ar­eas for re­form of en­ergy sys­tems, land use and ci­ties, in or­der to boost de­vel­op­ment and re­duce poverty in a sus­tain­able man­ner. The re­port calls for power sub­sidy and elec­tric­ity sec­tor re­forms, set­ting en­ergy ef­fi­ciency stan­dards, fuel taxes to pro­mote a more ef­fi­cient fuel mix, poli­cies to re­duce, high cost of fi­nance for re­new­able en­ergy, re­struc­tur­ing of pub­lic spend­ing on agri­cul­ture, live­stock sec­tor re­forms, forestry ini­tia­tives, re­form of land reg­u­la­tions, ex­pan­sion and re­newal of ur­ban in­fras­truc­ture and strength­en­ing of ur­ban lo­cal gov­ern­ment.

In a video mes­sage to the del­e­gates, Prakash Javdekar, Min­is­ter for En­vi­ron­ment, For­est and Cli­mate Change, stated that the ac­tions ini­ti­ated by In­dia is a demon­stra­tion to the world on the way for­ward for sus­tain­able de­vel­op­ment. In­dia is com­mit­ted to “use what is needed, not what is pro­duced and use only the re­quired quan­tity” of nat­u­ral resources and com­pletely avoid waste.

The min­is­ter said that the world needs to ac­cept that changes would be re­quired in life­styles so that “we are able to give to our fu­ture gen­er­a­tions a bit more than what we have in­her­ited”. In­dia, he said, was do­ing its bit and added that the de­vel­oped coun­tries were duty-bound to do more so that the COP21 in Paris pro­duces a suc­cess­ful out­come.

Dr. Ra­jat Kathuria, Di­rec­tor and Chief Ex­ec­u­tive, ICRIER, in his ad­dress, pointed out that the Global Com­mis­sion on the Econ­omy and Cli­mate is a ma­jor in­ter­na­tional project to an­a­lyse and com­mu­ni­cate the eco­nomic risks and op­por­tu­ni­ties that arise from cli­mate change. The pur­pose of the New Cli­mate Econ­omy (NCE) is to de­velop ro­bust ev­i­dence across the world to main­stream the eco­nomic ar­gu­ment for cli­mate pol­icy.

He said that like many other de­vel­op­ing coun­tries, In­dia's ci­ties not only face se­vere in­fras­truc­ture bot­tle­necks and ser­vice level deficits that un­der­cut eco­nomic per­for­mance, but poorly man­aged ur­ban growth, di­rectly im­pacts health and qual­ity of life. Wors­en­ing air pol­lu­tion in In­dian ci­ties is es­ti­mated to have caused 620,000 pre­ma­ture deaths per an­num (WHO). It also adds sig­nif­i­cantly to over­all car­bon emis­sions (close to half of In­dia's net green­house gas emis­sion orig­i­nate in ur­ban ar­eas). Th­ese chal­lenges present NCE and its part­ners, ICRIER and WRI, with an op­por­tu­nity to craft a nim­ble pol­icy-driven re­search col­lab­o­ra­tion that can build on their con­tin­ued en­gage­ment in In­dia to sys­tem­at­i­cally pro­vide a sus­tained set of high qual­ity re­search prod­ucts of suf­fi­cient gran­u­lar­ity to mean­ing­fully in­form the on-go­ing ur­ban re­form process, in­clud­ing in­sights on im­ple­men­ta­tion.

In his pre­sen­ta­tion Man­ish Bapna, Ex­ec­u­tive Vice Pres­i­dent and Man­ag­ing Di­rec­tor, World Resources In­sti­tute, said that there are ma­jor op­por­tu­ni­ties in three key sec­tors of the global econ­omy – en­ergy, ci­ties and land use. By im­prov­ing ef­fi­ciency, in­vest­ing in in­fras­truc­ture, and stim­u­lat­ing in­no­va­tion across th­ese sec­tors and the wider econ­omy, In­dia and the world can de­liver strong growth with lower emis­sions.

Bapna said that in mid­dlein­come coun­tries, high in­ter­est rates and low debt avail­abil­ity hin­der low-car­bon en­ergy. In In­dia, the cost and terms of debt alone can add 24-32 per cent to the cost of util­ity-scale wind and so­lar PV projects. The gov­ern­ment should im­ple­ment in­no­va­tive fi­nanc­ing and dis­tri­bu­tion mod­els to un­lock the po­ten­tial of re­new­able en­ergy. De­vel­op­ment fi­nance in­sti­tu­tions can pro­vide the sup­port re­quired through eq­uity, loans, guar­an­tees, and in­sur­ance prod­ucts to ex­pand re­new­able en­ergy and en­ergy ef­fi­ciency in mid­dle- and low­in­come coun­tries.

Dr. A Di­dar Singh, Sec­re­tary Gen­eral, FICCI, said that the de­vel­op­ment of in­fras­truc­ture in de­vel­op­ing coun­tries was tardy with huge gaps in the tar­geted in­fras­truc­ture that will be re­quired by 2050. Hence, sus­tain­able de­vel­op­ment is the need of the hour. This could be achieved if jus­ti­fi­able and fea­si­ble eco­nomic mod­els are cre­ated to en­cour­age the pri­vate sec­tor's par­tic­i­pa­tion.

The pur­pose of the New Cli­mate Econ­omy is to de­velop ro­bust ev­i­dence across the world to main­stream the eco­nomic ar­gu­ment for cli­mate pol­icy.

Dr. Isher Judge Ah­luwalia, Chairperson, ICRIER (2nd from left) and Naina Lal Kid­wai, Global Com­mis­sioner of the New Cli­mate Econ­omy and Mem­ber of UNEP In­quiry In­ter­na­tional Ad­vi­sory Coun­cil and Past Pres­i­dent of FICCI (3rd from left), along with other dig­ni­taries launch­ing the New Cli­mate Econ­omy's (NCE 2014) In­dia Re­port ti­tled 'In­dia: Path­ways to Sus­tain­ing Rapid De­vel­op­ment in a New Cli­mate Econ­omy'.

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