The green taxonomy needed to attain carbon neutrality

Context: ‘Panchamrit’ five-point action plan showed India’s readiness to assume an influential role in the global calculus of climate change mitigation.

India’s way forward to achieve COP26 targets

• Absolute decoupling: Followed for the economy to hit the net-zero target by 2070, once reach peak carbon emissions. Economically stifling if done before reaching a relatively high level of income and human development.
• Attract private green capital: Patchy progress made at CoP-26 points out requirement of billions of  dollars of investment for relative decoupling.
• The risk perceptions of India as an emerging economy will not attract as much eco-friendly finance as its global abundance can enable. 
• As per Climate Policy Initiative report, in 2016-17 and 2017-18, the share of international private finance was just 5% of tracked domestic green finance.
• Articulating Green taxonomy: A green taxonomy would standardize what qualifies as ‘green’ and establish eligibility criteria for green finance.

Significance of Green taxonomy

• Promote investor confidence: They will assist in the making of green investments.
• Provide visibility to sectors, other than energy: Those in need of investment that remain starved of capital.
• Aid entire green-finance ecosystem: Along with the green financial markets as an appropriate incentive structure is formulated for the purpose.
• Ease for financial institutions and businesses: They can refer to the taxonomy to manage their carbon footprint allowing the centre to monitor and mitigate.

Challenges before Green Taxonomy

• Broadening the focus: It should also focus on other pressing environmental problems, such as air and water pollution, water scarcity and ecosystem and biodiversity losses.
• Predefine a technology-agnostic technical screening criteria: For commercial activities spanning high-impact sectors such as power, manufacturing, transport, and others.
• Including sustainable agricultural and livestock farming practices: As their environmental gains are established by reliable and robust evidence.
• Correcting poor compliance culture of environmental norms: Existing norms may need to be upgraded for compatibility with global standards, even as new ones are established.
• Regulating automobile sector: Financial incentives of vehicle testing agencies must be detached from manufacturers’ compliance with emission norms.
  • The carbon-neutrality of bio-fuels must be established before related upstream and downstream activities are included in the taxonomy.
• Commencing and funding research: To establish evidence in favour of the sustainable agricultural and livestock practices that are likely candidates for the taxonomy.

Conclusion: Green taxonomy can begin the transformation of green finance in India from a trickle to a flow. Countries like China, Bangladesh, Malaysia and Mongolia, even the EU, have already developed their own taxonomies due to its transformative power.

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