Context: Finance Minister and U.S. Treasury Secretary attended the eighth ministerial meeting of the U.S.-India Economic and Financial partnership. Also in attendance were Federal Reserve Chair Jerome Powell and RBI Governor Shaktikanta Das (who attended virtually).
- The ministerial held a session dedicated to climate finance for the first time, as per a joint statement.
- India has been under pressure, including from the U.S. and U.K., to provide a deadline to reach ‘Net Zero’ emissions.
- India has so far not made commitments beyond its Paris-related goals and has argued that rich countries must move towards ‘net minus’ commitments.
Key highlights of the meeting
- In the run-up to the UN Climate Change Conference (COP26) in Glasgow at the end of the month, India has been pushing for rich countries to meet their Paris Accord climate finance commitment of $100 billion per year.
- The two sides “reaffirmed the collective developed country goal to mobilise $100 billion annually for developing countries from public and private sources, in the context of meaningful mitigation actions and transparency on implementation.
- Holding such a session, reflected the “critical” role climate finance has to play in achieving global climate goals and the two sides’ commitments to drive “urgent progress” in combating climate change.
- Both democracies intend to engage further on addressing climate change between our two ministries, as well as through the Finance Mobilization pillar of the recently launched Climate Action and Finance Mobilization Dialogue under the U.S.-India Climate and Clean Energy Agenda 2030 Partnership.
- About: Climate finance refers to local, national or transnational financing - drawn from public, private and alternative sources of financing.
- The Green Climate Fund (GCF) was established in the Cancun Agreement (2010) and designated it as an operating entity of the financial mechanism.
- Under the Paris Agreement in 2015, developed countries confirmed this goal and agreed that prior to 2025 a new collective quantified goal from a floor of USD 100 billion per year shall be set.
Need for Climate Finance:
Source: UNEP (NbS - Nature based Solution)
Principles of Climate Finance:
- Polluter Pays: The principle is the commonly accepted practice according to which those who produce pollution should bear the costs of managing it to prevent damage to human health or the environment.
- Common but Differentiated Responsibility and Respective Capability (CBDR–RC): It is a principle within the United Nations Framework Convention on Climate Change (UNFCCC). It acknowledges the different capabilities and differing responsibilities of individual countries in addressing climate change.
- Additionality: Climate finance should be additional to existing commitments to avoid the diversion of funding for development needs to climate change actions. This includes use of public climate finance and investments by the private sector.
Global Climate Financing:
- Adaptation Fund (AF): It was established under the Kyoto Protocol in 2001 and has committed US$ 532 million to climate adaptation and resilience activities.
- Clean Development Mechanism (CDM):
- It allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2.
- The CDM is the main source of income for the UNFCCC Adaptation Fund.
- Global Environment Fund (GEF): It is a private equity fund focused on seeking long term financial returns by investments in clean energy under climate change.It has served as an operating entity of the financial mechanism.
- In addition, parties have established two special funds:
- The Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF).
- Both funds are managed by the GEF.
Climate Financing in India:
- India has to reduce GHG emissions under its Intended Nationally Determined Contributions (INDCs), which requires climate financing.
- National Clean Energy Fund: The Fund was created to promote clean energy, funded through an initial carbon tax on use of coal by industries.
- National Adaptation Fund: The fund was established in 2014 with a corpus of Rs. 100 crore with the aim of bridging the gap between the need and the available funds.
Source: Click Here