Indian biz stands to gain from Paris deal

The Paris Agreement to strengthen global climate effort will be implemented from 2020, where all parties developed and developing will have to undertake mitigation targets. More than 190 nations reached this landmark agreement to strengthen the global climate effort in Paris in December 2015.

The Paris Agreement commits countries to undertake “intended nationally determined contributions” (INDCs) and establishes mechanisms to hold them accountable and strengthen ambition in the years ahead.

However, there still remains a wide gap between what the science demands to keep the world on a 2 °C trajectory and the actions that nations have committed to undertake so far. It been has estimated that the total carbon dioxide emissions expected after the reduction from INDCs amounts to 750 billion tonnes until 2030 and developed countries have disproportionately contributed to this exhaustion in the past, which is over and above what they can rightfully claim.

The principles of equity and common but differentiated responsibilities (CBDR) enshrined in the framework of UNFCCC would then imply a “just and equitable” distribution of the rem-aining global carbon budget. To address this gap, the Paris deal anchors a binding obligation on nations to submit mitigation contributions along with simultaneous financial contributions by developed countries and a built-in transparency framework to achieve long term goals.

The framework of the Paris Agreement marks a clear departure from the Kyoto Protocol, which was a “top-down” but highly differentiated approach, setting binding emissions targets only for developed countries.

It reflects a “hybrid” approach, blending bottom-up flexibility and applicable to all parties under the Convention from 2020, to achieve broad participation with top-down rules, to promote accountability and ambition, and giving businesses and industries worldwide a chance to catch on to the embedded opportunities in the deal to meet their INDCs.

The Paris Agreement contains strengthened provision on technology development and transfer, with a new technology framework being established to strengthen collaborative approaches in Research and Development (R&D) and for facilitating access to technologies, thereby giving businesses the necessary spurt to transform their competitive landscape.

The financial markets, too, stand to gain as it offers investors (domestic and international) the scope to diversify their portfolios to invest in the “green” space. It is worth noting that over 60% of Indian green bonds’ proceeds are allocated to renewable energy. Climate change projects have extras to offer to financiers: financial returns topped up with positive social, economic and environmental returns.

Subsequently, businesses voluntarily reduce carbon emissions and follow energy-saving environmental standards, because doing so is consistent with profit maximisation. Greater energy efficiency saves money, carbon emissions and energy too.

What this means is that businesses and consumers have already begun planning and, in many cases, taking action to prepare for a future in which low-carbon technologies will be mandated or encouraged thro-ugh global and national policy.

In addition, the deal anchors new mechanisms facilitating  the development of carbon markets to meet mitigation commitments. It is likely to generate or certify tradable emission units between industries that could also be traded among countries, promising a profitable revenue stream to the Indian industry.

Private Sector Facility

The financial mechanism of the UNFCCC recognises the role that private sector can play to help economies follow a low-carbon trajectory. This is very well anchored in Private Sector Facility (PSF) of the Green Climate Fund (GCF). The GCF is mandated to provide $100 billion to developing countries, mobilised from both public and private sources by 2020.

The PSF enables this fund to directly and indirectly finance private sector mitigation and adaptation activities at the national, regional and international levels.

There is undoubtedly an enormous scope for private companies to invest and build sustainable business models around solutions such as green buildings, energy efficiency, sustainable transport, second/third generation biofuels, decentralised renewable energy, and sustainable agriculture. The loss and damage provision in the Agreement opens up several areas where technology and service providers can contribute.

Although how the INDCs will percolate down to industry level action still remains to be articulated, the ratification sets a clear direction for a low-carbon trajectory in the future and signals that industry must start taking proactive action towards climate change mitigation. 

All this will happen by enab-ling policy framework domestically, provision of financial flows from global as well as domestic sources, access to cost-effective technology, and mechanisms to ensure accelerated pace of low-carbon technology adoption. The role of carbon markets to generate resources for mitigation must be encouraged through incentives rather than economy-wide or sector-wide approaches that may result in dis-incentivising positive action.

An enabling policy framework to help scale up or replicate innovative business models would enable mass scale transformation such as in areas of off-grid and decentralised renewable energy applications.

(The author is Secretary General, Federation of Indian Chambers of Commerce and Industry – Ficci)