Mint Mumbai

Trump is scaring Republican­s away from saving planet Earth

His popularity has led his party members to deny climate change

- MARY ELLEN KLAS is a politics and policy columnist for Bloomberg Opinion.

Internatio­nal news in India at the beginning of 2024 was dominated by a publicized phase of diplomatic tension between India and the Maldives following Prime Minister Narendra Modi’s visit to the Union territory of Lakshadwee­p. This was followed by an order by the government of Maldives asking Indian troops to leave the archipelag­o nation.

However, this wasn’t the first time the relationsh­ip between the Maldives and India has been disturbed. If we go back a decade, in 2013, Malé had asked Indian infrastruc­ture giant GMR to leave. After protracted arbitratio­n, GMR was awarded $270 million in 2016 against claimed losses of $800 million.

Jindal Steel faced a similar fate in Bolivia when it had to walk out of a multi-billion-dollar project following a scandal over encashment of bank guarantees by the Bolivian government. The Indian company was awarded $22.5 million against claimed losses of over $100 million.

Given such instances, Indian industries wanting to spread their wings beyond Indian shores have been seeking political risk insurance (PRI).

Despite market demand for PRI, the question is whether this should be a significan­t policy matter, given the robust growth of India’s economy and growing set of domestic and internatio­nal investors. There is general euphoria about the India story and the arrival of Amrit Kaal—a propitious phase for turning India into a developed country. The continued buoyancy of Indian markets in the wake of the covid pandemic, slowdown in China and conflicts in Ukraine as well as Palestine has demonstrat­ed the confidence of investors in the India story. Strong domestic markets, of course, are indispensa­ble to a robust economy.

However, to transform India into a global economic power, Indian businesses must expand their footprint beyond domestic markets. Outbound foreign direct investment (FDI) will be instrument­al in accomplish­ing this business expansion. India’s outward FDI imperative may be understood from two perspectiv­es:

One, India and Indian businesses must have a strategy to identify and capture markets abroad through forward integratio­n in largely untapped and underserve­d regions such as Africa and South America. Many of India’s small technology-enabled companies could move quickly into global markets. For these ‘born global’ startups and micro, small and medium enterprise­s (MSMEs), outward FDI may be a critical means of business expansion.

Two, in a globalized world, sourcing of raw material can play a significan­t role in businesses gaining a competitiv­e advantage. Therefore, unsurprisi­ngly, some Indian companies have invested in facilities across the globe in pursuit of such an advantage while expanding operations. The future expansion strategies of Indian businesses must stay cognizant of the emergence of some developing nations as major suppliers in the coming years. The drive for decarboniz­ation across industries has been driving demand for critical minerals that go into clean-tech solutions from such countries. This presents an opportunit­y for backward integratio­n by Indian businesses through outward FDI.

The outward FDI path, however, is not free of hurdles. Some relatively untapped markets are particular­ly prone to high political risk, unfortunat­ely. Given this backdrop, PRI is a tool for businesses to mitigate and manage risks arising from the adverse actions or inactions of government­s. As a risk-mitigation tool, PRI helps provide a more stable environmen­t for investment­s in developing countries. It also eases the access of companies to finance on good terms.

In India, some private insurers and ECGC Ltd, a state-owned insurer, provide PRI. However, there is a major challenge that contribute­s to an observed under-utilizatio­n of PRI by Indian businesses as an effective tool for expansion: the low availabili­ty of US dollar-denominate­d PRI policies.

Rupee-denominate­d PRI policies are not adequately useful for businesses as the Indian rupee has been depreciati­ng in value against the US dollar for years. Thus, the assured sum may not be sufficient to cover losses over extended periods.

Both backward and forward integratio­n are long-term endeavours and necessitat­e insurance policy coverage for longer periods of time. Also, the frequent renewal of short-term rupee-denominate­d policies issued by Indian insurers is cumbersome and perhaps motivates businesses to opt for risk cover from internatio­nal insurers that operate overseas.

Globally, most national PRI providers offer risk coverage in foreign denominate­d currencies. This includes the UK, where insurers offer 60-plus local currency options for PRI. For Turkey, its Exim Bank offers coverage principall­y in dollars and euros, although it also offers many other options, like the Japanese yen and British pound. In Japan, specific policy conditions are laid out for insurers to provide foreign currency denominate­d payouts; these include dates for applicable foreign-exchange conversion rates for such payments.

To facilitate the growth of Indian businesses outside India, India must overcome this problem associated with political risk insurance.

After decades of refusing to acknowledg­e the link between human activity and a warming planet, most conservati­ves [in the US] no longer deny that climate change is real. Republican-led states have advanced proposals for developing renewable energy and are investing in clean fuel tech. Southern-state governors have embraced the green jobs boom created by US President Joe Biden’s Inflation Reduction Act by taking credit for it while cutting ribbons at new electric vehicle (EV) and battery manufactur­ing plants.

But as it becomes clear that Donald Trump will win the Republican presidenti­al nomination, there has been a notable retrenchme­nt in the commitment of many GOP clean-energy advocates. Republican­s across the country are reversing course for fear of triggering Trump, who has repeatedly called climate change a “make-believe problem,” even suggesting that the concept was a “hoax” concocted by China.

In Florida, where Governor Ron DeSantis broke with Tea Party-led climate deniers in 2016 and acknowledg­ed that “humans contribute to what goes on around us,” the Republican-led legislatur­e has sent him a bill that requires all references to “climate change” be deleted from state statutes. DeSantis is likely to sign it.

To DeSantis and Republican legislator­s, climate change may be menacing their state, but it’s someone else’s problem.

Republican House Speaker Paul Renner, who represents the Palm Coast area that was pummeled by Hurricanes Idalia and Ian, defended the retreat from use of the words “climate change,” claiming the bill’s intent is to keep energy cheap and reliable. For him, it’s fine to throw taxpayer money into fortifying homes and businesses against windstorms, floods and rising seas instead of focusing on policies that would help prevent the damage in the first place. “So if the climate’s changing, if that’s going to have negative consequenc­es, [then] we put aside a bunch of money for flooding and resilience,” Renner said.

There is no ‘if.’ Earth’s climate has changed because of decades of greenhouse gas emissions from fossil fuels. Property insurance rates in Florida have risen 57% between 2015 and 2023 and its residents already have wasted, as Renner says, “a bunch of money,” because people keep building and rebuilding in places prone to these natural disasters.

Maybe Renner is hoping to extract campaign contributi­ons from the fossil fuel industry—like Trump and DeSantis. The clean-energy backtracki­ng is costing jobs. Trump has called for the eliminatio­n of the clean-energy tax credits contained in the Inflation Reduction Act and promised to slash incentives for EVs if he is elected. It’s become uncool for anyone who supports Trump to own an EV. So it’s no surprise that EV sales are far below expectatio­ns and that automakers have scaled back or delayed production.

The decline in EV sales led Rivian Automotive to indefinite­ly pause constructi­on of a $5 billion production plant in Georgia. And in South Carolina, Albemarle suspended plans to break ground on a $1.3 billion plant to manufactur­e EV batteries.

This short-sighted thinking is going to hurt more than jobs. Bob Inglis, a former Republican congressma­n from South Carolina who lost his seat in 2010 because he campaigned on fixing the climate crisis, says precious time is being lost in the fight to adopt policies aimed at halting the damaging changes.

“The scientists are ringing in my ears saying, ‘Faster, Inglis faster.’ We don’t have time for to wait,’’ he told me. He founded an advocacy organizati­on, republicEN.org, to work with conservati­ve climate activists. “A majority of Americans, including a majority of Republican­s, and an even larger majority of young Republican­s, believe the science of climate change, and want to see our leaders put forward serious solutions,” George Behrakis, vice president of Young Conservati­ves for Carbon Dividends said.

Despite being out of touch with most Americans, Trump has doubled down on his derision for climate change “because it excites some part of his base,” Inglis said. The result is a Republican Party stuck between advancing an optimistic marketdriv­en solution to the problem and angering the retributio­n-driven Trump.

With the loudest mouth on the planet spewing misinforma­tion with his anticlean-energy narrative, it is no surprise that Trump’s followers are parroting him. Of course, that won’t matter when another hurricane blows through the US south this summer. But never mind talk of policies aimed at preventing the destructio­n these events bring. It’s all just a hoax we should ignore to ‘make America great again,’ as Trump’s slogan goes.

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REUTERS Donald Trump’s climate denial is making Republican­s follow suit
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