MONEY TO FIGHT CLIMATE CHANGE
1. Context
The money currently being channeled for climate action is barely one to 10 percent of the estimated requirements. At the recently concluded climate change meeting in Sharm el-Sheikh, Egypt, countries agreed that a complete transformation of the international financial system was needed to significantly scale up resources for climate action.
2. The estimated amount of money required to tackle Climate Change
- It is estimated that the global transition to a low-carbon economy would likely require about $ 4-6 trillion every year till 2050. To achieve net Zero targets, a $ 4 trillion investment is required in renewable energy till 2030.
- Further, the total requirements of the developing countries for implementing climate actions were about $ 6 trillion between 2022 and 2030.
- Investing such a huge amount means at least five percent of the global GDP would need to be directed into climate action every year. This amount was just 1 and 1.5 percent of Global GDP a few years back.
- Developed countries agreed to mobilize $ 100 billion every year from 2023 but as of now, they can mobilize $ 50-80 billion every year. Therefore, the current requirements are higher than the money being made available.
3. Problems with Climate Finance
- There are two main dimensions to the problem of climate finance-availability and access. The transformation of the financial sector needs to address both of these.
- One straightforward way of ensuring funds is for the developed countries to increase their contributions. But even if this happens, it will likely result in only a marginal increase in the overall pie. The more significant jump would come from businesses and corporations investing money into green projects.
- The current rules and regulations of the global financial system make it extremely difficult for a large number of countries to access international finance, particularly those with political instabilities, or weaker institutional and governance structures. The transformation would, therefore, also involve simplification of practices, changes in the way risks to investments are assessed, and an overhaul of the credit rating system.
- Besides availability and access, there is a third element as well-Transparency. Climate finance flows through a maze of channels-bilateral, regional, and multilateral.
- It is in the form of grants, concessionary loans, debt, equity, carbon credits, and more. There are differences of opinion over whether a particular sum of money is climate-related.
- As a result, there are widely differing assessments of the quantum of climate finance currently being mobilized. This needs to be addressed.
4. Ways to bring more money for Green Projects in India
- Whether we like it or not, the bulk of the additional financial resources to fight climate change would come from the pockets of the common citizen.
- There is already are growing number of voices calling for an early fixing of the carbon price so that the carbon markets can start functioning quickly.
- The use of petrol and diesel, and other fossil fuels is almost surely going to be taxed. The production of coal is already being taxed for several years in India, and it has been generating valuable resources for the government, which has utilized it mainly for investing in clean technologies.
- These funds have also been utilized for works in the Clean Ganga Mission and during the Covid-19 pandemic.
- The government has already imposed taxes on the production of coals which brings money for investments in clean technologies but there is a need to share the burden with citizens, and businesses and come up with different sources of Money.
For Mains
| For Mains:1.Explain the purpose of the Carbon Tax. Critically analyze its effectiveness in helping countries such as India in limiting CO2 emissions and reach net-zero targets. |
Source: The Indian Express
