European Union introduced new legislation, Fit for 55, to cut its GHG emissions by 55 per cent by 2030 and to net zero by 2050. This is a welcome step for climate action since it turns the EU’s announcement into law, protecting it from the winds of political change. It opens new markets for Indian industry, for example for electric vehicles. However, it also introduces a potentially adverse policy called the carbon border adjustment mechanism (CBAM).
The EU has had a carbon emission trading system since 2005, with a current market price of 50 euros per tonne of carbon. With Fit for 55, the EU will bring more sectors into this trading scheme and tighten its allocation of permits.
The EU’s carbon price is likely to go up as a result, making its domestic products more expensive than imports from countries that do not have such rules. The new CBAM is meant to level the playing field between domestic and imported products.
CBAM will require foreign producers to pay for the carbon emitted while manufacturing their products. Adding the price of carbon is meant to discourage consumers from buying carbon-intensive products and encourage producers to invest in cleaner technologies.
The adjustment will be applied to energy-intensive products that are widely traded by the EU, such as iron and steel, aluminium, cement, fertiliser, and electricity.
It may also affect downstream industries — for example, automobile manufacturers may buy domestic low-carbon steel rather than imported high-carbon steel.
India is Europe’s third-largest trading partner, and it does not have its own carbon tax or cap. So, CBAM should be a cause for concern for it.
A UNCTAD study released recently predicts that India will lose $1-1.7 billion in exports of energy-intensive products such as steel and aluminium — India’s goods trade with the EU was $74 billion in 2020.
The CBAM will undoubtedly be very complex to administer. The adjustment rate will vary by country and product, depending on the carbon intensity of the production technology and the electricity mix.
It will require verification of data reported by every foreign supplier, including intermediate products from third countries. It may have to rely on country defaults or sectoral benchmarks, at the risk of less than perfect outcomes.
The EU Parliament’s endorsement is expected to take two years, which will be followed by a three-year transition period before the CBAM is imposed in 2026.
What should Indian industry do to prepare in the interim?
First, it should enter clean technology partnerships with European industry. For example, India exports semi-finished and flat-rolled products of iron or non-alloy steel, but such partnerships can help enhance the competitiveness of its high-technology stainless or alloy products.
Second, Indian companies should invest in more renewable electricity and energy efficiency. They can adopt science-based targets for emission reduction and internal carbon pricing to incentivise low-carbon choices.
The government can extend the perform-achieve-trade scheme to more industries and provide finance to MSMEs to upgrade to clean technologies. WRI India’s analysis shows that carbon dioxide emissions from the iron and steel industry can be reduced from 900 million tonnes to 500 million tonnes in 2035 through greater electrification, green hydrogen, energy efficiency, and material efficiency.
Third, India can try to diversify its exports to other markets and products. For instance, it could increase its market share of crude steel compared to more emission-intensive producers like China, Russia and Ukraine.
At present, the CBAM may seem obstructionist. But over the long-term, it can provide regulatory certainty to industry by harmonising carbon prices, and Indian industry can position itself as a strong player in the trade landscape of the future.
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- Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition, a collective of the United States, United Kingdom and Norway governments, came up with a $1 billion fund.
- LEAF is supported by transnational corporations (TNCs) like Unilever plc, Amazon.com, Inc, Nestle, Airbnb, Inc as well as Emergent, a US-based non-profit.
- The world lost more than 10 million hectares of primary tropical forest cover last year, an area roughly the size of Switzerland.
- Ending tropical and subtropical forest loss by 2030 is a crucial part of meeting global climate, biodiversity and sustainable development goals. Protecting tropical forests offers one of the biggest opportunities for climate action in the coming decade.
- Tropical forests are massive carbon sinks and by investing in their protection, public and private players are likely to stock up on their carbon credits.
- The LEAF coalition initiative is a step towards concretising the aims and objectives of the Reducing Emissions from Deforestation and Forest Degradation (REDD+) mechanism.
- REDD+ was created by the United Nations Framework Convention on Climate Change (UNFCCC). It monetised the value of carbon locked up in the tropical forests of most developing countries, thereby propelling these countries to help mitigate climate change.
- It is a unique initiative as it seeks to help developing countries in battling the double-edged sword of development versus ecological commitment.
- The initiative comes at a crucial time. The tropics have lost close to 12.2 million hectares (mha) of tree cover last year according to global estimates released by Global Forest Watch.
- Of this, a loss of 4.2 mha occurred within humid tropical primary forests alone. It should come as no surprise that most of these lost forests were located in the developing countries of Latin America, Africa and South Asia.
- Brazil has fared dismally on the parameter of ‘annual primary forest loss’ among all countries. It has lost 1.7 mha of primary forests that are rich storehouse of carbon. India’s estimated loss in 2020 stands at 20.8 kilo hectares.
- Between 2002-2020, Brazil’s total area of humid primary forest reduced by 7.7 per cent while India’s reduced by 3.4 per cent.
- Although the loss in India is not as drastic as in Brazil, its position is nevertheless precarious. For India, this loss is equivalent to 951 metric tonnes worth carbon dioxide emissions released in the atmosphere.
- It is important to draw comparisons between Brazil and India as both countries have adopted a rather lackadaisical attitude towards deforestation-induced climate change. The Brazilian government hardly did anything to control the massive fires that gutted the Amazon rainforest in 2019.
- It is mostly around May that forest fires peak in India. However, this year India, witnessed massive forest fires in early March in states like Odisha, Uttarakhand, Madhya Pradesh and Mizoram among others.
- The European Union’s Copernicus Atmospheric Monitoring Service claimed that 0.2 metric tonnes of carbon was emitted in the Uttarakhand forest fires.
- Implementation of the LEAF Coalition plan will help pump in fresh rigour among developing countries like India, that are reluctant to recognise the contributions of their forest dwelling populations in mitigating climate change.
- With the deadline for proposal submission fast approaching, India needs to act swiftly on a revised strategy.
- Although India has pledged to carry out its REDD+ commitments, it is impossible to do so without seeking knowledge from its forest dwelling population.
Context:-
At the recently concluded Leaders’ Summit on Climate in April 2021, Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition, a collective of the United States, United Kingdom and Norway governments, came up with a $1 billion fund plan that shall be offered to countries committed to arrest the decline of their tropical forests by 2030.
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]What is LEAF Coalition?
Why LEAF Coalition?
Brazil & India
According to the UN-REDD programme, after the energy sector, deforestation accounts for massive carbon emissions — close to 11 per cent — in the atmosphere. Rapid urbanisation and commercialisation of forest produce are the main causes behind rampant deforestation across tropical forests.
Tribes, Forests and Government
Disregarding climate change as a valid excuse for the fires, Indian government officials were quick to lay the blame for deforestation on activities of forest dwellers and even labelled them “mischievous elements” and “unwanted elements”.
Policy makers around the world have emphasised the role of indigenous tribes and local communities in checking deforestation. These communities depend on forests for their survival as well as livelihood. Hence, they understand the need to protect forests. However, by posing legitimate environmental concerns as obstacles to real development, governments of developing countries swiftly avoid protection of forests and rights of forest dwellers.
For instance, the Government of India has not been forthcoming in recognising the socio-economic, civil, political or even cultural rights of forest dwellers. According to data from the Union Ministry of Tribal Affairs in December, 2020 over 55 per cent of this population has still not been granted either individual or community ownership of their lands.
To make matters worse, the government has undertaken systematic and sustained measures to render the landmark Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 ineffective in its implementation. The Act had sought to legitimise claims of forest dwellers on occupied forest land.
Various government decisions have seriously undermined the position of indigenous people within India. These include proposing amendments to the obsolete Indian Forest Act, 1927 that give forest officials the power to take away forest dwellers’ rights and to even use firearms with impunity.
There is also the Supreme Court’s order of February, 2019 directing state governments to evict illegal encroachers of forest land or millions of forest dwellers inhabiting forests since generations as a measure to conserve wildlife. Finally, there is the lack of data on novel coronavirus disease (COVID-19) deaths among the forest dwelling population;
Tardy administration, insufficient supervision, apathetic attitude and a lack of political intent defeat the cause of forest dwelling populations in India, thereby directly affecting efforts at arresting deforestation.
Way Forward
Tuntiak Katan, a global indigenous leader from Ecuador and general coordinator of the Global Alliance of Territorial Communities, aptly indicated the next steps at the Climate Summit:
“The first step is recognition of land rights. The second step is the recognition of the contributions of local communities and indigenous communities, meaning the contributions of indigenous peoples.We also need recognition of traditional knowledge practices in order to fight climate change”
Perhaps India can begin by taking the first step.