Introductory Remarks
Adrian Haack, Director, KAS India Office
Adrian Haack noted the urgent need to address the climate change agenda during India’s G20 presidency. Dr Haack highlighted Germany’s efforts to reduce carbon emissions—in August 2022, Germany launched the world’s first fleet of 14 hydrogen-powered trains, which aim to save up to 4,000 tonnes of carbon emission in a year. As India’s largest trade partner in Europe, Germany has a shared objective of fostering the green partnership. Recently, India and Germany signed a joint declaration of intent on Indo-German partnership for green and sustainable development. According to the declaration, Germany pledged US$10.52 billion as support to India until 2030 to enable the country to meet its target of raising its non-fossil energy generation capacity to 500 GW. He underlined Germany’s support for India’s green initiatives such as ‘One Sun, One World, One Grid’ and Coalition for Disaster Resilient Infrastructure. Moreover, Dr Haack reiterated the importance of creating a climate club to reinforce the sense of urgency of climate change. He noted that the climate club would be critical in coordinating aspects such as technology transfer, shared regulation, and intellectual property rights.
Jayant Sinha, Member of Parliament, India
Jayant Sinha highlighted that it is crucial to unlock the surplus investment flow from Global North to Global South. He cited a recent Asia Society study, which highlighted the existing capital requirement of US$ 5-10 trillion to drive the net-zero commitment in India by 2050. Currently, for India, the total corporate investment stands at merely US$ 100-150 billion. Thus, Mr Sinha noted that there is an enormous gap that can be bridged to drive the decarbonisation agenda in India. He highlighted that for India, net zero is net positive, wherein decarbonisation and development are closely related. The capital investment infused into cost-effective green technologies will result in increased GDP, increased balance of payments, and improved public health and employment for India. Additionally, capital infusion into commercial sectors such as electric mobility, solar power, green cement, green steel, and green fertiliser can help the Global North earn a return for its investors.
Mr Sinha also highlighted that with India taking up the G20 presidency in December this year, it has an opportunity to go beyond the Paris Agreement and initiate a global climate alliance, which will enable capital flows from the Global North to Global South. Such a climate alliance should acknowledge the principle of Common-But-Differentiated-Responsibilities (CBDR). This will allow G7 countries to set up more ambitious targets, but at the same time, it can provide the Global South with an enabling environment to set legally binding sovereign treaties, which will help drive both—development and decarbonisation.
Naoyuki Yoshino, Professor Emeritus, Keio University, Japan; Former Dean and CEO, Asian Development Bank Institute (ADBI)
Naoyuki Yoshino highlighted that there are two kinds of green projects. The first kind is large-scale projects, such as hydro projects found in Southeast Asia, where private finance can be brought in. He noted that traditionally, electricity derived its revenue from user charges—today, electric power supply has created new businesses in the region, which leads to spill-over tax revenues. He proposes that to enhance the private sector participation, 50 percent of the spill-over tax revenues from new businesses can be returned to power operators.
The second type is community-based projects such as solar power projects found in Cambodia. In such an arrangement, the community contributes to setting up the project, which can sufficiently supply electricity to the entire village. Additionally, Dr Yoshino expressed his scepticism regarding the green credit rating agencies and green bonds. According to him, each credit agency has its own definition of ‘green’. Similarly, each green bond has different yield rates, which distorts the portfolio distribution. According to him, it is necessary to ensure common definitions to avoid distortions.
Remarks
Tapan Sarker, Finance Discipline Lead, School of Business, Faculty of Business, Education, Law, and Arts, University of Southern Queensland, Australia
Tapan Sarker reiterated that it is crucial to incentivise private sector financing in developing countries. According to him, the challenges in developed and developing countries differ. For instance, while the carbon tax could be a good tool for developed countries to reduce emissions, for developing countries, it is likely to add additional costs to companies. Similarly, the political challenges are far more in developing countries. For the Global South, public finance is still the mainstream source of climate finance as the capacity of the private sector is limited. Thus, we need to forge more partnerships between the private and public sectors—with the public sector providing fiscal incentives for greater private sector participation. Dr Sarker also highlighted that developing countries are more likely to face higher institutional challenges. Therefore, for India’s G20 presidency, it must direct focus on reforming its governance and institutions.
Suranjali Tandon, Assistant Professor, The National Institute of Public Finance and Policy, India
Suranjali Tandon highlighted the need to “marry the language” of green finance and design appropriate green financial plumbing needs—including taxonomies, creating asset classes, and addressing counterproductive regulations. She reiterated that fiscal incentives would be useful in attracting foreign private sector investment, however, she also noted that FDI still accounts for a very small percentage of the Indian economy. According to her, designing a carbon tax would require—balancing behavioural change with equity concerns. Moreover, while the G20 has recognised carbon pricing as a potential tool for addressing climate change, the G20 members need to assess and recalibrate how cross-border carbon pricing mechanisms will reshape international trade and taxation. She also noted that it is important for G20 members to collaborate on how the carbon tax revenues could be utilised—whether they would be used to enhance social security or for new investment opportunities.
Sylvia Beyer, Senior Energy Policy Analyst, International Energy Agency
Sylvia Beyer highlighted that the developed economies’ 2009 pledge to provide US$100 billion of climate finance to developing countries every year by 2020 remains unfulfilled. The latest OECD data shows in 2020, US$ 83.3 billion was provided and mobilised for climate, US$ 16.7 billion short of the intended US$ 100-billion level in the initial target year of the goal. While adaptation finance continues to grow, mitigation finance remained the core focus area. According to her, adopting whole-of-government national energy transitions toward net-zero emissions can provide the necessary stability of the regulatory framework across a range of ministries—finance, energy, climate/environment, and industry. This alignment of pathways, policies and tracking would be critical for ensuring investment in the transition. Adopting legal net-zero targets and whole-of-government frameworks will be an important pillar of robust and stable long-term policies, strategies, and predictable investment frameworks for the private sector. She noted that economy-wide transitions can be supported by phasing in policy packages that include stable incentive frameworks for clean energy technologies, regulations and standards, alongside carbon pricing and taxes, and phasing out of fossil fuel subsidies. Moreover, she underlined that India is now designing a national carbon pricing scheme, building on the excellent Perform Achieve Trade energy efficiency scheme. According to her, such a scheme would be helpful in India. For the design of such mechanisms in developing countries, it will be useful for India to learn from other countries that have gone through similar activities. She reiterated that India’s G20 presidency should continue sharing the experiences (both best practices and lessons learned) amongst countries, maybe in the sustainable finance working group, which has now agreed to a transition finance agenda that includes carbon pricing schemes.
RR Rashmi, Distinguished Fellow and Programme Director, TERI, India
RR Rashmi, Distinguished Fellow and Programme Director, TERI, IndiaRR Rashmi highlighted that there are three main challenges for India’s G20 presidency. According to him, the first challenge is enhancing the role of the private sector—the private sector must ensure the availability of more risk capital, which is consistent with the countries’ national ambitions. The second challenge is addressing currency risk—Mr Rashmi proposed creating a global hedge fund that could address such a risk. The third challenge is the implementation of a nationwide carbon market. He noted that carbon pricing is a powerful policy tool to mitigate climate change, however, several challenges can impede its implementation in developing countries. In developing countries such as India, political barriers, fragmentation, and distortion of the energy sector could especially pose difficulties in the adoption of a uniform carbon pricing mechanism.
He also highlighted the importance of scaling up green technology transfers and bridging the knowledge gaps in the Global South. The Global Environment Facility (GEF) is one such initiative that aims at obtaining new technologies and project financing at a low cost. The Paris Agreement also played a key role in elaborating the provisions of technology transfer and financing, however, the implementation of such transfers still suffer a funding shortfall. According to him, the G20 members must aim at developing technology facilitation mechanisms to support the needs of the developing countries in technology development and transfer.
Delfina Lopez Freijido, Co-lead of the Finance for Nature Unit, International Union for Conservation of Nature (IUCN)
Delfina Lopez Freijido noted the importance of policy interventions by the public sector. She highlighted that the climate club could play a crucial role in reducing the distortions, especially fossil fuel subsidies. She reiterated that it is important to address risk investment to ensure sustainable and resilient infrastructure in developing economies. According to her, the international financial institutions and multilateral development banks have a crucial role to play in attracting private sector investment in green infrastructure, as they have a range of de-risking tools and approaches at their disposal.
Galit Palzur, Expert on Corporate Risk Management of Disasters, Climate Change and Extreme Events, Israel
Galit Palzur noted that the G20 must highlight the importance of improving domestic capacities in the form of building a bankable pipeline of shovel-ready projects. It emphasised the need to enhance the “country platform approach” to increase the private capital flows to developing and emerging economies. She highlighted that while many G20 members have taken several steps to align their financial systems with sustainable development and climate change risks, there is a need to create comparable standards for financial assets across nations.
Shruti Sharma, Senior Policy Advisor, IISD, India
Shruti Sharma noted that India and some other emerging economies have performed well towards reforming fossil fuel subsidies, thus, it would be a good agenda point to see in India’s upcoming G20 presidency. Another agenda point could be the climate leadership and target setting by state-owned Enterprises (PSUs/SoEs). Several PSUs in major economies (including India) have announced new clean energy partnerships and targets, however, most have not set out clear strategies for adjusting business models to clean energy transition and net-zero. According to Ms Sharma, G20 leadership on this aspect could be useful and an easy win for consensus building.
Emre Tiflik, Director, Sustainability Research, Institute of International Finance, US
Emre Tiflik highlighted that the private sector has two major concerns. The first concern is the lack of pipeline on projects—for the private sector, there is a lack of clarity on what is investible and available. The second concern is the lack of transparency—there is information asymmetry in the market, especially in ESG-related investment opportunities. Thus, there is an urgent need for a transparent flow of information. According to him, Multilateral Development Banks (MDBs) play a crucial role in addressing the flow of capital. It is important to optimise the MDB balance sheets such that there is greater collaboration between the private sector investors and MDBs.
Neha Kumar, Programme Manager, Climate Bond Initiative, India
Neha Kumar noted that India is a member of the International Platform for Sustainable Finance—the platform is a forum for dialogue between policymakers, with the overall aim of increasing the amount of private capital being invested in environmentally sustainable investments. India’s thinking is not to reinvent the wheel but to work on a regime that not only has a common language but also contributes something new that is important within its own context and that of other developing economies.
According to Ms Kumar, it is crucial to task the Ministry of Finance to develop a green taxonomy, build a sustainable finance architecture, and define the role of central banks. Moreover, she noted that India’s stance is unique because it not only focuses on mitigation and adaptation but also aspects such as just transition and employment creation. It is important to understand how much leeway the Indian presidency will have to set new rules and tweak existing rules, which can be demonstrated by domestic action. A roadmap for India’s G20 presidency can include achieving low-hanging fruits such as the creation of an alliance that has political backing and addresses political economy constraints in the grand bargain. She also reinforced that transition finance and de-risking play a key role in addressing climate change.
