Context

Earlier this week the Intergovernmental Panel on Climate Change (IPCC) reported on climate science, warning against the folly of a business-as-usual development model.

Past assessments have been disregarded as sensationalist. For attention to shift from a day of front-page news to a more strategic conversation, we must understand what the science says, what the politics delivers, and what the economy demands.

IPCC Reports

  • Globally, average surface temperatures have already risen by 1.09°C between 1850-1900 and 2010-2019 thanks to anthropogenic emissions of greenhouse gases. What happens next depends on our development and technological choices.
  • The IPCC document explores several scenarios based on shared socioeconomic pathways and different levels of radiative forcing (or the change in the energy balance in the atmosphere due to natural or human causes).
  • If we followed high fossil fuel development (doubling emissions by 2050), temperatures would rise by 4.4°C (range of 3.3-5.7°C) by 2100.
  • If a more sustainable pathway were pursued (with net-zero emissions by 2060 and negative emissions thereafter), average global temperature rise would be 1.4°C (range of 1.0-1.8°C).

Regardless, it is likely that average rise in temperatures will breach the 1.5°C barrier within the next two decades. If emissions are not mitigated rapidly, we are staring at rising climate risks and catastrophic impacts.

Science has become better at attributing warming to human influence and extreme events to a changing climate. Less than 0.1°C of the warming observed since the pre-industrial era is thanks to natural reasons. Human influence is very likely the main reason behind glacial retreat since the 1990s. Since observations began, glaciers have lost the maximum mass during 2010-19.

India is particularly vulnerable

  • If warming exceeds 4°C, India could see about 40% increase in precipitation annually, leading to extreme rainfall events.
  • Three-quarters of India’s districtsare now hotspots of extreme weather events.
  • Since 1990, more than 300 such events have resulted in damages exceeding INR 5.6 lakh crore.
  • Average rate of sea-level rise was 1.3 mm per year during 1901-71. This rate increased to 3.7 mm annually during 2006-18.
  • Even with warming restricted to 1.5°C, we are still on course for more than 2 metres of sea-level rise beyond this century. We are bequeathing a very different world to future generations.

The world needs transformational change but countries have more myopic outlooks. The IPCC says that in order to stabilise rise in temperatures, two things have to happen: Anthropogenic emissions must become net-zero and in the interim cumulative emissions cannot exceed a global carbon budget.

To stay within the 1.5°C limit, starting in 2020 the remaining global carbon budget is 300-500 gigatonnes of carbon dioxide (GtCO2) (with a likelihood of 50%-83%).

But who will cut their emissions?

Of late, several large emitters have promised net-zero emission targets. But China and the United States have already emitted 129 GtCO2 and 344 GtCO2, respectively, between 1990 and 2010.

Despite their self-laudatory targets, China would consume 87% of the global carbon space (if it reached net-zero in 2060) and the US would eat up 26% (if it reached net-zero in 2050).

Clearly, mere announcements of net-zero targets do little to retard the “carbon grab” of the largest emitters.

In a pathbreaking study, CEEW researchers find that rich countries, as a whole, emitted ~25 gigatonnes of carbon dioxide equivalent (GtCO2eq)more than their estimated emission allowance during 2008-20, thanks to non-participation in pre-2020 climate agreements and misuse of accounting loopholes.

To put it in context, this is more than half the world’s greenhouse gas emissions in 2019, or nine years’ worth of India’s 2016 emissions.  Climate justice demands that developed countries now take steps to free up carbon space for others.

If climate science is stark and climate politics has been unjust, how do we meet our development aspirations?

The claim on a fair share of the carbon budget is not a licence to pollute. India must adopt a more climate-friendly development pathway for its own sake. Its per capita incomes, energy consumption and carbon footprint are well below the global average but it must deliver high rates of economic growth within a shrinking carbon budget.

India has an energy revolution underway. This ranges from household electrification to smart meters, scaling up solar and wind to new ambitions in biofuels and hydrogen, energy efficiency to clean cooking for millions, electrification of railways to electric vehicles, first country with a cooling action plan to skilling thousands in green jobs.

Next, the discourse must shift from energy to the economy.

There are very few sunrise sectors that are not low-carbon. India must tap new technology frontiers (green hydrogen), new business models (distributed and digitalised services, for distributed energy, EV charging, cold chains), new construction materials (low-carbon cement, recycled plastic), new opportunities in the circular economy of minerals, municipal waste and agricultural residue, and new practices for sustainable agriculture and food systems. Many of these technologies and business models are proven but need policy and regulatory support.

Finally, it will become imperative to remove greenhouse gases from the atmosphere and repair the climate in critical regions, such as the poles. If those tipping points are breached, there will be disastrous consequences. This will require new levels of international cooperation.

Climate science is not sensationalism but gets plugged that way because of our short attention spans. The climate crisis is a strategic threat to our development prospects. It deserves sober, continuing analysis, deliberation and action. The headlines look bad; reality will get worse.


 

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  • Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.

    Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.

    The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.

    Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.

    In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.

    Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.

    “Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.

    India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.

    With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.

    They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.

    India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.

    As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices

    The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).

    The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.

    Here is an approximate break-up (in Rs):

    a)Base Price

    39

    b)Freight

    0.34

    c) Price Charged to Dealers = (a+b)

    39.34

    d) Excise Duty

    40.17

    e) Dealer Commission

    4.68

    f) VAT

    25.35

    g) Retail Selling Price

    109.54

     

    Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.

    So the question is why government is not reducing the prices ?

    India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.

    However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.

    That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.

    Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.

    Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.

    But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.