What India needs to do at COP26, Glasgow

Rather than talking endlessly about lost and marginal opportunities, India's climate envoys need to start thinking bigger, says Mihir S Sharma.

We should perhaps not hold out too much hope from this year's climate change conference -- the 26th Conference of the Parties, or COP26 -- to be held at Glasgow.

A few months ago, one could reasonably expect that there would in fact be a significant increase in the global ambition to combat climate change and reduce carbon emissions as a result of this conference. Yet a combination of factors has unfortunately caused this optimism to appear misplaced.

Multiple nations -- 'parties', as they are called in climate change negotiations -- are responsible for this reduction in expectations.

Consider, for one, the United States and the European Union.

The former, emerging from the climate-denying Trump era, has re-entered the Paris Agreement; Joe Biden, in April, announced that the US economy would achieve a 50-52 per cent reduction in greenhouse gas emissions (compared to 2005 levels) by the end of the decade. Yet the eventual legislative product of this sweeping target is, frankly, a disappointment.

Biden has made no attempt to touch the price of carbon in the US economy, and his 'build back better' bills are -- in the words of the Financial Times -- 'packed with the kind of micro-regulation that would have made the Soviet Union's Gosplan proud'.

Worse, they barely add up to one-third of the emissions reductions that Biden promised by 2030 -- and even then face serious objections in the US Senate, where a pivotal senator is from the coal-bearing state of West Virginia.

The EU, meanwhile, has set more credible targets and taken more credible action. Yet its ambition is inward-focused: The 'European Green Deal' would ensure a large amount of capital flows to climate-sensitive projects within the EU, but at the potential cost of funding more efficient carbon mitigation projects elsewhere in the world.

It also proposes to levy a carbon tariff on goods entering its borders from 2026 -- in other words, steel from Indian plants, if it is produced in a more emissions-intensive process, will have to pay an additional price per ton to be sold in Europe.

This has severely increased distrust with its potential partners on climate change, including India.

The most attention, and least actual scrutiny, has surrounded the pledges made by the People's Republic of China: That it would achieve 'net zero', or carbon neutrality, by 2060.

This distance of the target has meant that there are no restrictions in effect on the announcement of new coal-fired thermal power plants, and China has continued to make such announcements even in 2021; in just the year's first six months, the projected new plants would increase the country's emissions by 1.5 per cent.

Part of the problem is the nature of the 'net zero' claim itself, which privileges distant targets based on as-yet-undeveloped targets over taking major steps to reduce emissions in the immediate future.

It is not hard to sympathise with Union Finance Minister Nirmala Sitharaman's point that large emitters with a historic responsibility should come to the table with legally mandated emissions targets on a tighter timeframe.

But India has to bear its share of the responsibility as well. Negotiators and officials may be right to resist a meaningless net zero target -- and in any case, India has a proud recent history of missing policy targets -- but there is less justification for some of their other sticking points.

One is on climate finance. In 2015, at the Paris Agreement, the developed world promised to mobilise $100 billion of climate finance to aid the green transition in emerging economies. Only a fraction of that money has materialised, mainly thanks to the EU living up to its responsibilities.

India insists that any climate action should be predicated on the rest of that grant money being made available.

The point is not whether this demand is justified. The point is that it is not constructive, and not helpful even from India's point of view.

At best, India would get a small amount of incremental grant capital from this $100 billion. And even the total figure of $100 billion is an order of magnitude less than the trillions of dollars actually required by India and the rest of the emerging world over the next decade if greener infrastructure -- from renewable energy to sustainable water systems to zero-emissions mobility -- is to be built.

Bureaucrats and officials in New Delhi are happy to focus solely on a few paltry billions because those sums, if paltry, would go to boost their own budgets. Yet that is a dereliction of duty when there are far greater sums in climate finance that could be mobilised if India sought to put proper, forward-looking proposals on the table.

The fact is that if the trillions that are needed are to flow to India and the rest of the emerging world, they will come not as grant money to government budgets but as private-sector investment in green and frontier sectors.

India's government has isolated some of these sectors in its recent moves towards industrial policy -- batteries, for example. But it needs to understand that global agreement and shared regulation on private financial flows are essential prerequisites for scaling up investment in these sectors.

This agreement on climate finance should cover such areas as risk mitigation, targeted investments, and project preparation assistance.

And COP26 is the right location to move towards such a global agreement.

India's model should be South Africa, a fellow coal-rich developing country that has had an even harder time imagining a development path that is greener than its current trajectory.

Transitioning its debt-ridden State-run electricity company, Eskom, from coal-fired plants to renewables would be prohibitively expensive: Perhaps as much as $28 billion, according to South Africa's finance ministry.

<>That's why the South Africans have put proposals out there which aim to make it easier to swap debt for green financing -- which, if approved, would clear up Eskom's balance sheet on the condition that it begins greater investment in renewables.

Rather than talking endlessly about lost and marginal opportunities, India's climate envoys need to start thinking bigger.

What are the ways in which green financing pathways can be built up and institutionalised for countries like South Africa and India? That's what we should ask for at COP26 in return for greater climate ambition from our own side.

Mihir S Sharma is head of the Economy and Growth Programme at the Observer Research Foundation, New Delhi.