This business of climate change

Paris 2015 is the buzzword among the global climate change community today, when the countries would negotiate a long-term agreement on climate change.

The road to Paris is also dotted with two events this year — the UN Secretary General’s Climate Summit in New York in September, and the 20th Conference of Parties to the UN climate change conference in December. Both aim to rouse the interest and ambition of the global community to strike a successful long-term deal — a deal that will have ambitious goals beyond 2020.

So, what is the deal for business and industry? Many say the negotiations are about the politics of climate change, less about the economics of it. Whatever the outcome of negotiations, there will be an impact on businesses.

The impact could be an opportunity or a risk.

Indian business and industry, with its proactive attitude to embracing newer opportunities, has not shied away from the opportunity.

The carbon market presented an opportunity for new businesses to emerge that dealt with advising, consulting and verifying the generation of carbon credits. And most importantly, helping industry to build a momentum on climate mitigation projects.

Hence, the business response to the climate change opportunity was not found wanting in the Indian context. More than 2,500 projects in 7 years from 1600 companies under the Clean Development Mechanism (CDM) is not a small number given a small timeframe.

There are projects ranging in thousands that directly or indirectly mitigate climate change; these have arisen under various domestic schemes, legislations and initiatives.

Whether it is the energy efficiency scheme, national solar mission, urban renewal mission, many other projects under renewable energy, green buildings, transportation, forestry, the list is quite a long one.

Six key elements that will provide industry the impetus for climate change mitigation through the international regime, need to be taken up at the global level.

First, access to international climate finance is the most critical element. Let’s be clear. Indian corporates have demonstrated their pro-active approach to mitigation. However, direct investment in climate mitigation on a large economy wide-level is not going to happen easily unless the cost of mitigation is internalised.

It needs to be front loaded with climate finance which will help meet the incremental economic costs of mitigation, enable mainstreaming of climate mitigation and adaptation among the small and medium enterprises, and fund collaborative research and development in low-carbon technology.

Second, new market mechanisms would have to be devised for the whole business of climate mitigation to be market-driven.

Third, there is no point of talking about a carbon tax or a price on carbon. Adding a tax burden will be detrimental to something that can otherwise have a wide-ranging response through positive incentives. Can we instead talk of a price for reducing carbon emissions?

Indian corporates need not pay a price on carbon but a price for carbon. Fourth, a mechanism for technology availability and viability needs to be brought in by the UN Framework Convention on Climate Change (UNFCCC).

Fifth, it is critical that trade flows should not be impacted by any measure in the garb of climate change action that is unilateral in nature.

Any imposition by countries on embodied carbon in goods that cross borders would have a major adverse impact on trade. ‘No border taxes’ should be the outlook. Standards or norms developed by different countries or an international institution should be used for enhancing the competitiveness in the market, not for potential unilateral measures.

Industry should be aware of standards being pushed to achieve a singular goal of discriminatory market access and guard itself against such standards.

Climate action cannot be at the cost of competitiveness, these two should only be mutually reinforcing.

Last, a high level panel under the UNFCCC recommended setting up of a stabilisation fund for carbon credits generated and not sold. This can revive the confidence of companies at a time when there is virtually no carbon market.

There should be a fund with a sunset clause to clear returns on investment made in carbon emissions reduction projects, projects that yielded carbon credits but did not find any takers.

While these elements will be critical to what the global dialogue yields, the government and industry work towards building an enabling environment at home to scale up efforts at the domestic level.

There is a clear set of domestic interventions that can provide the impetus for action to mitigate and adapt to climate change impacts.

Indian business and industry need five key touch points domestically to embark on ambitious mitigation and adaptation initiatives.

One, an access mechanism for the National Clean Energy Fund to provide funding for incremental cost of low carbon technology adoption, by way of a viability gap funding.

Two, create the necessary regulatory environment for long-term funds to step into the climate change mitigation and adaptation space.

We need to create an investment climate that will attract pension and insurance funds to tap this market in India.

Three, mainstream climate change concerns and actions across all spheres of policymaking. Climate change has to be accorded priority at the top level in government and in business.

Four, facilitate the creation of a voluntary domestic market. With the global carbon market outlook being weak, a voluntary carbon market in India could give the much needed fillip for GHG mitigation initiatives to gather a new momentum.

A domestic emissions trading scheme of a voluntary nature should be espoused. Business and industry can work with the government in building the thought process, design, architecture, and operationalisation of such a mechanism for India.

Last, create an enabling environment for renewable energy technologies and renewable power. We need the ecosystem for building a strong domestic supply chain for such technologies, create sustainable demand for such technologies and for renewable power.

The global delivery of what business needs coupled with a domestic ecosystem will act as strong catalysts for a scaled up response from business towards climate change mitigation and adaptation. It is time the voice of Indian business reaches out and exhorts the global community towards a practical outcome.

The writer is the president of Ficci

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