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Countless droughts, floods, hurricanes and cyclones, and forest fires have provided a glimpse of devastation that climate change and environmental degradation can cause. Climate change is no longer something in the future. Scientists have through multiple assessments stressed that the window to limit the most catastrophic impacts of warming is small.
Science shows that impacts of unchecked warming will be felt more keenly in countries like India. A recent report by the environmental think tank Germanwatch ranks India as the fifth-most vulnerable country in terms of extreme weather events. Studies show that the current level of efforts to slow down global warming will see average temperatures in India rise by 1-2° C by 2050. Climate change will have deep economic and social impacts. A report by McKinsey estimates that unchecked climate change could cause a reduction of 2.5-4.5% of GDP.
The challenges of climate change and environmental degradation demand a transformation of the economy if countries are to achieve the 2030 Sustainable Development Goals. Shifting away from a fossil fuel-based energy system, the economy will require a transition that helps produce less waste by using resources more efficiently to deliver more, and reusing and recycling them for longer use.
This is the climate-constrained world that finance minister Nirmala Sitharaman will have to keep in mind as she presents Budget 2020 with the aim of putting the country on a high-growth trajectory to make it a $5 trillion economy by 2025.
The precarious balancing act of realising sustained economic growth essential to improving the living standards of all its people without endangering the well-being of the planet even as it is constrained by a rapidly warming world requires bold leadership and massive investments. To this end, the government should signal its intent to transform India into a sustainable, low-carbon, high-growth economy.
The President’s Address today that sets forth the vision of the government provides an opportunity to set out the broad strokes of this transition — the green turn. This transition to an economy that is resource efficient and wastes less cannot be achieved overnight, and will require realignments and changes in the economy.
Therefore, Budget 2020, the first of this critical decade, should signal the first steps towards this transition by aligning fiscal measures and incentives with the requirements of a green transition. In signalling this transition, India will have the opportunity to develop its industrial base, build its infrastructure and grow its economy in a manner that makes it competitive, environmentally sustainable and resource efficient while ensuring the health and well-being of all its people. Growing the economy will require an increased consumption of materials — metals, mineral, fuels and biomass for food, livestock and energy — and this will mean a growth in emissions. But it is possible to manage the rate at which these emissions grow by putting in place incentives that would encourage resource efficiency, reuse and recycling of resources, and improved design of systems that would ensure that more can be achieved by using fewer resources.
The Budget should clear these incentives that would privilege reduction, reuse and recycling of material resources. Public procurement is a good starting point — driving investments to more resource-efficient systems. In signalling the government’s shift towards a production system that wastes less, the finance minister will provide the foundation to addressing critical problems such as air and water pollution.
The power sector is central to India’s transition to low-emissions development — it accounts for 42% of India’s national emissions in 2014. Falling costs of renewable energy make it cheaper than coal, and innovations and reduction in storage costs will make renewables the economically sensible choice too. In addition, fiscal incentives would nudge the nation towards fuel switching, along with energy efficiency, demand management through aggregation and reduction in energy demand through better planning and implementation.
Transport is another sector where the Budget could signal the transition. Mass public transport will play an important role in reducing and aggregating energy demand. This, along with the plan for complete electrification of the Railways by 2024, and achieving net zero emissions by 2030, will alter the country’s mobility landscape. The Budget should provide the fiscal indications that will make this transition possible.
A clear signal from the highest levels of government will unlock financial investments, promote innovations and create jobs critical to achieving the goal of a sustainable, low-carbon $5 trillion economy.
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