October 27, 2020
Climate finance need not be a green wash.

Conflicting policies are ruining response to climate crisis in India

Climate crisis is real and a serious threat to India’s ambition to become a $5 trillion economy. Response to climate crisis is broadly classified into two categories – mitigation and adaptation.

While mitigation looks into reducing greenhouse emissions and increasing carbon sinks like dense biodiversity rich forests, adaptation prepares people to face climate threats by building their resilience through measures like rainwater harvesting structures.

India’s Nationally Determined Contribution targets (NDCs), originating from the landmark Paris agreement on climate change and United Nation’s sustainable development goals, form the basis of the country’s action plan but contradictory decisions continue to derail it. 

Funds meant for climate have been diverted, access to land resources misused and renewable energy achievements are unreliable. There are many other policy responses that question the very commitment of the Indian government to climate concerns.

“Drastic changes proposed in environment impact assessment, 100 percent foreign direct investment in coal mining, opening up of more coal mining blocks to private corporations, changes in land and regulatory mechanisms in the name of ‘ease of doing business’ contradict the very priorities the government has been boasting of,” warns Joe Athialy, executive director of the non-profit Centre for Financial Accountability (CFA). 

Funds meant for climate have been diverted, access to land resources misused and renewable energy achievements are unreliable. There are many other policy responses that question the very commitment of the govt

Funding and Allocation

Indian introduced the National Action Plan on Climate Change (NAPCC) in 2008 and currently has eight core missions covering major fields, including water, solar energy, sustainable habitat, energy efficiency, green cover, Himalayan ecosystem, sustainable agriculture and strategic knowledge for climate change. Such ambitious plans need steady availability of funds.

It has happened on a number of occasions that funds have been inadequate and the missions had to be accommodated within the existing government programmes and schemes with vastly scaled down budgets.

The budget for energy, adaptation and forestry sectors together amounts to around Rs 58.68 lakh crore in 2020 and estimated to be Rs 118.68 lakh crore in 2030, said a report of the Sub-Committee for the Assessment of the Financial Requirements for Implementing NDCs. The total fund availability estimates, however, stand at almost half of the 2020 target at Rs 29.06 lakh crore.

Of this around 70 percent comes from domestic finance while 30 percent from international funds. So, despite being the second largest recipient of funds from the Green Climate Fund of UNFCCC, India’s response to climate change relies heavily on domestic public expenditure routed through annual budgets.

The same domestic funds are, however, diverting the money meant for climate crisis to other sectors, as detailed later in this article.

At the international level, there are multilateral, bilateral funds and private investments too that focus on the climate crisis. The Clean Development Mechanism (CDM) is a controversial process that allows industrial countries to trade off their emissions with carbon credits earned by supposedly lower emission or greener projects in developing countries.

As of December 2019, 21.36 percent of projects registered with the CDM Executive Board were from India (second largest globally). A levy of 2 percent on the sale of emission credits from CDM contribute to the National Adaptation Fund.

Budget for energy, adaptation and forestry sectors together amounts to around Rs 58.68 lakh crore in 2020 but the total fund availability stand at only half of this target

A common criticism against the international funds is that they are mostly in the form of loans and hence a liability. This cannot be a sustainable option to operationalise long term programmes that address climate benefits. “Funding for climate resilience and climate benefits must be generated in house, in a manner in which they pool in local capacities to mobilise opportunities and feed back into communities,” says Jyotsna, Senior Researcher at the Centre for Budget and Governance Accountability (CBGA). “Decentralised planning is the need of the hour to mainstream climate objectives.”

Divergent Policies, Misleading Numbers

NAPCC-focussed approach underlines the lack of a comprehensive policy that is capable of realigning all decisions towards climate issues. Due to this dichotomy, while NAPCC addresses these concerns, other departments keep on executing projects which move in the opposite direction.

Given this scenario, announcement of new schemes only raises doubts about the real intentions and who these would benefit. Big corporates getting easy access to huge tracts of common land which might be a source of livelihood and sustenance for local communities in the name of setting up solar energy parks is a stark example of such a dichotomy.

State climate action plans rely heavily on Centre’s strategy and as a result, sectoral approach becomes the norm by default leading to focus on performance objectives rather than climate issues. “Such a scenario is an impediment to comprehensively plan strategies for climate benefits. States also lack capacity to access international finance. It is the Centre that accesses international funds, approves projects and states’ role begins only after projects come in,” says Jyotsna. “State-centric finances are essential for region specific planning and implementation of programmes with long term climate benefits.”

A closer look at the NDCs reveal that renewable energy has emerged as the major climate change mitigation response. Focus on clean energy by the state action plans as well raises questions about the principle of co-benefits. Co-benefits in the renewable energy sector means reduction in greenhouse gas emissions and increase in energy security. However, the policy may not be aligned with the social realities of India.

“The way these initiatives are being promoted is a ‘green wash’. There are people without access to electricity in power-surplus states. So who is consuming all the clean and renewable energy,” Athialy asks. “Active private participation in this sector only expounds the business sense in these projects as they are commercially viable and promise access to land. Certainly a huge business opportunity. Unless production of renewable energy is complemented by reduced production from non-renewable sources, climate concerns will only aggravate. We have already begun to lose.”

The way these initiatives are being promoted is a ‘green wash’. There are people without access to electricity in power-surplus states. So who is consuming all the clean and renewable energy?

In 2008, 2.63 percent of GDP in 2006-2007 was noted as India’s spend on adaptation to climate variability spread across eight areas. However, a 2010 study reveals that most of this money was spent on anti-poverty development programmes with no additional contribution/investment made on climate resilient components of the programme. 

A subsequent 2014 study for three financial years in four states found that the same development-dominated spending was true for State-level budgets. In other words, India was not differentiating between expenditure on business-as-usual development in a disaster-prone country and the additional expenditure on helping people adapt to climate uncertainties. 

“Merging/reclassifying existing programmes like water harvesting under the NAPCC missions is misleading and underlines the lack of a proper vision that genuinely addresses climate concerns. Fund diversion has been a big problem in all sectors and climate action plan is no exception,” says Soumya Dutta, Co-Convener, South Asian People’s Action on Climate Crisis (SAPACC). “On the other hand, good adaptation schemes like farm pond programme have not been impactful due to bad implementation. There is hardly any country-wide adaptation programme right now.”

Complexities in management and monitoring present a strong case for an accountability framework. More importantly, regional requirements must be mapped for better planning and expenditure instead of pooling resources into programmes in the garb of co-benefits. We need programmes that are designed with the spirit of climate justice in almost every sector.

Climate concerns need to be mainstreamed in all existing programmes. For instance, programme resources under MGNREGA can be used to build climate resilient infrastructure at all levels. Thereafter, this expenditure will also come within the ambit of the climate change action plan.

Funding: Misuse and Tracking

Diversion of domestic funds meant to tackle the climate crisis raises questions on commitment to the cause. The National Clean Energy Fund (NCEF), for instance, is funded by the clean energy cess levied from 2010-2011 financial year. By 2018, the cess collected stood at Rs 86,440 crore but only 34 percent was transferred to the fund.

Compensatory Afforestation Fund, created through an order of the Supreme Court, is meant to fund plantation in lieu of the forest land diverted for non-forest purposes like industrial activities.

From 2006 to 2019, money mobilised by this fund grew from Rs 1,200 crore to Rs 54,685 crore but it was only in June 2019 that the fund could be transferred to states. The fund also lacks community participation and oversight mechanism to remain aligned with forest conservation and rights of forest dwellers.

National Clean Energy Fund is funded by the clean energy cess levied from 2010-2011. By 2018, the cess collected stood at Rs 86,440 crore but only 34 percent was transferred to the fund

The 2013 CAG report shows that compensatory afforestation was done on only 7 percent of the over 1.03 lakh hectare non-forest land that should have been covered and 49 percent of the identified degraded forest land.

The National Adaptation Fund (NAF) was established in 2015 as a central sector scheme to focus on adaptation measures particularly in vulnerable sectors like agriculture. Allocations under this fund were Rs 119.41 crore and Rs 109.78 crore in 2017-2018 and 2018-2019 respectively but it fell to Rs 40 crore in 2019-20. 

So far, 30 projects have been approved by NABARD under this fund at a cost of Rs 847.82 crore but considering the 15 major agro climatic zones in the country and region specific vulnerabilities, the scope of this fund is huge and the falling allocation is a disappointment.

Apart from these, the National Disaster Response Fund is another resource base that has been supporting states’ response to calamity situations and is funded by cess levied on certain items, approved each year through a Finance Bill.

The need is to track expenditure on climate policy across ministries and departments to hold the respective authorities accountable. Making such expenditures open for public scrutiny may not be enough. We can advocate for use of specific budget codes like the ones we have in tribal and scheduled caste sub plans for monitoring. Tribal sub plan expenditures use code ‘796’ and this has allowed budget analysts to see where all the resources for tribal development go and where it does not.

It also allows scrutiny of expenditure against allocation and hence, sector specific impact on tribal development, which can then feed into policy development. It is time we think of something similar for climate policy too.

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