‘India reduced support to the fossil fuel industry by 4%’
India reduced support to the fossil fuel industry by 4% from 2015 to 2019 even as the countries in the G20 forum of the world’s major economies are not walking the talk in addressing the climate crisis, a new report by BloombergNEF, a global research organisation, and Bloomberg Philanthropies released on Tuesday said. The G20 countries provided $636 billion in direct support for fossil fuels in 2019, which is just 10% less than that in 2015, it added.
The report noted India has reduced the support, but it has 66 coal power plants in the pipeline. India is second only to China, which has 247 coal power plants in the making among G20 countries while Indonesia has 33.
Most G20 countries have announced ambitious climate targets to reach the Paris Agreement goal of limiting global temperature rise to 1.5-degree Celsius compared to pre-industrial levels. But the report said they provided $3.3 trillion support for coal, oil, gas, and fossil-fuel power between 2015 and 2019. It added the sum could have funded 4,232GW new solar power plants or over 3.5 times the size of the current US electricity grid.
The G20, as a whole, has cut fossil fuel funding by 10% during 2015–19. But there are significant variations across countries. Eight countries of the forum--Australia, Canada, the US, Brazil, France, Indonesia, Mexico and China--increased their support to the fossil fuel industry.
“This support encourages the (potentially wasteful) use and production of fossil fuels. It can also distort prices and risks carbon ‘lock-in’— whereby assets funded today will be around for decades, locking in high levels of future emissions. All of these factors hinder the climate transition,” the report said.
In a statement, Günther Thallinger, a member of the Board of Management of Allianz SE and chair of the UN convened Net-Zero Asset Owner Alliance, said as of today policy frameworks across most G20 countries are not sufficient to drive a real economy to net zero transition to achieve the 1.5 degree Celsius goal with reasonable likelihood. “The new NDCs (nationally determined contributions) and 2050 net zero targets from some G20 countries are warmly welcome, however pledges and targets alone will not be sufficient to change course. The development and publication of credible 2030 emission reduction plans, which create a rising price on carbon and have clear regulatory standards, including on climate-related financial disclosures are urgently needed.”
India is under pressure to clarify its short- and long-term climate ambitions after other major economies announced carbon-neutrality goals, the report said. It added India has set up a task force to consider potential timelines and pathways for reaching net zero emissions.
India is likely to request financial support from other countries in return for a net zero pledge. It could also opt for a near-zero emission target to balance the need to tackle climate change and to enable economic development.
Over half of electricity generation capacity is owned by the Centre and state governments and it is mostly dependent on fossil fuels. The Centre aims to divest state-owned companies and raise ₹1.75 trillion, Union finance minister Nirmala Sitharaman said in her budget speech in February, the report noted.
India does not yet have any national carbon pricing mechanism or a policy on climate risk reporting.
The Climate Policy Factbook of BloombergNEF has pointed to three areas for which immediate government action is needed to limit global warming to 1.5 degrees Celsius. They include phasing out support for fossil fuels, putting a price on emissions, and encouraging climate risk disclosure. In each of these areas, the report found the policies of G20 countries were off course.
The report said France and Germany have made the most progress in terms of implementing carbon pricing. Russia, Saudi Arabia, Brazil, Indonesia and India have no pricing policies.
Climate-risk policies can also assess the effects of environmental changes and climate policies on the current performance of companies and financial products, the report said. Financial institutions do not have the data needed to assess climate-related risks associated with their investments. This puts the onus on regulators to enforce disclosure regulations focusing on physical assets and environmental data, the report added. A few countries have made policies on such disclosure. They include France, Germany, Italy and the UK.
“G20 is a very diverse group of countries. The wealthy countries in this group are yet to meet the Paris Agreement’s climate finance goal of $100 billion, though they spent an estimated $189 billion last year on fossil fuels. For developing countries in the G20, such as India, the imminent drying up of coal finance and the EU’s new carbon tax on imports are serious signs that our industry needs to prepare to shift to low carbon technologies. This new report gives importance to carbon pricing as a way to incentivise shifts to cleaner fuels and technologies. The government of India’s Apex Committee for Implementation of Paris Agreement, set up in December 2020, is authorised to issue guidelines on carbon pricing,” said Ulka Kelkar, director of the climate programme at the World Resources Institute, India.