Binit Das
At the second edition of the CII Global Economic Policy Summit that was held in New Delhi on December 8 and 9, 2022, the theme was "Economic Policy for a Future Ready Economy."
In one of the sessions that centred around Financing the Green Transition, some of the key challenges came up for discussion. Issues such as how certain projects could be financed, how the burden could be shared between public finance and private finance and how low-income countries could be supported in their transition to green finance were deliberated upon. It is estimated that achieving the goal of net zero on a global scale by 2050 is likely to cost $3.5 trillion a year.
As a concept, climate finance gained recognition at the Earth Summit in Rio 1992, followed by Kyoto in 1997---in the following years, it ran for a certain period of time before it gathered steam in Paris 2015. Currently, this concept has gained a lot of traction. The globe has a short time frame to bend the curve of CO2 emissions. Now, the issue is that the stock of CO2 which is in the atmosphere, has a certain limit that we cannot cross and if we do, then we are in a trajectory and cannot bend it back.
By and large, countries the world over are trying to control and reduce the CO2 flow and that is exactly where the problem is---that we have the Organisation for Economic Co-operation and Development (OECD) which has contributed to the stock. Since it is a worldwide concern, there has to be a transfer to the emerging countries (who are being pushed) and that flow has to be reduced. Following the COP27 summit, there has been some amount of disagreement on compensation. This is where efforts are on by India towards meeting its NDC---in fact, the revised NDC through panchamrit has been announced, taking into account the target for net-zero by 2070. While this is a problem which is being created and significantly contributed by the West, it has come to become a global problem and therefore India needs to participate in it equally. Furthermore, India is equally committed in addressing the global commons, but for that, finance is the key---it needs to flow from where it is currently invested to where the investment is required.
Therefore, the world needs a mechanism to unlock the capital and technology from OECD countries and flow it into the developing world. For organisations such as the International Solar Alliance for instance, the resources are in the tropics, but the technology and capital lies outside the tropics. Therefore, there is a need to shift equalized technology and socialize the cost of capital across the world. Since there is no mechanism to do without socializing the cost of capital, it will be extremely difficult to prevent a pathway and maintain the 1.5°C level. The global response to warming of 1.5°C comprises transitions in land and ecosystem, energy, urban and infrastructure, and industrial systems, according to the Intergovernmental Panel on Climate Change.
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