India to have a climate change budgetary supplement from next year

Government begins work on detailed annual greenhouse gas emissions inventory as well

From next year, India will start climate budgeting, a practice to account for budgetary measures that support climate change-related actions across the country. Quite along the the lines of gender budgeting, the government will also prepare a supplementary report to go with the main budget documents accounting for how much money India is annually investing on climate change.

The government has also begun groundwork for a detailed and granular greenhouse gas emissions inventory which will be generated annually in order to meet one of India’s climate change commitments towards greater transparency under the Paris Agreement.

The decision to do climate budgeting was taken at the Prime Minister’s executive council last year. The methodology to do this apportioning of different budget heads for their climate change attributes is currently under preparation at the finance ministry. The nodal Union environment forests and climate change ministry, will take a call on the possible design to use in order to classify the FY18-19 budget for its impetus to climate change actions.

Multiple senior officials involved in the climate budgeting initiative confirmed that the government would have the supplementary climate report in the next budget cycle.

“We initially thought of doing it for FY17-18 budget. But, we realised its important to have a robust methodology that can withstand international scrutiny as well. This would take some time so we decided to implement climate budgeting from FY18-19,” said one of the senior officials Business Standard spoke with.
 
“One way is to develop a method to assess if a expenditure head has a climate change attribute and if it does how much of that expenditure can really be said to be funding our climate actions. The other route is to use specific budget heads where the functions being served through that expense are explicitly marked for climate change actions,” said the second official.

“The finance ministry is going to soon finalise a status paper on this which will provide guidance on which method is the best and most robust,” the official said.

Climate change actions are generally classified in to two segments. One set of actions is seen as those reducing the emissions – called mitigation. The other is seen as those helping the country adapt to inevitable climate change – called adaptation. At times the same action can provide both mitigation as well as adaptation benefits. The government’s climate budget is expected to similarly classify the government’s expenditures along these lines.

The government will have to walk a fine balance in preparing this climate budget. A methodology that produces too conservative a figure will lead to pressure from the global community for lack of commitment. And, a methodology that suggests India is already investing a lot in climate action will sit incongruous with the country’s demand at global forums for a pie of the international climate finance.

In parallel to the climate budget the government is working on a template for a national greenhouse gas emissions inventory. This inventory is meant to quantify the annual GHG emissions from each economic sector and industry in order to help measure the impacts of emission reduction actions over time.

So far India has sporadically prepared such an inventory. But, substantial parts of it have so far been based on statistical extrapolations and not primary level data collection. Under the Paris Agreement, starting 2020, India would have to provide a more detailed inventory on an annual basis.

Currently, the GHG emissions from the power sector are collected and reported by the Central Electricity Authority so far. Similarly the government also collects data on emissions based on fuel consumption by different sectors. “We will have to see how the private sector reports its emissions from the production side,” said the second official.

Reporting from the private sector could come as part of mandatory disclosure either under the existing corporate laws or under the environment-related legislation. Bringing the disclosures under the environment law though would create new legal challenges as GHG emissions would also be seen as a ‘pollutant’ – a position the government has so far not been agreeable to. Labelling the GHG emissions as a pollutant could potentially lead to imposition of climate-based restrictions on individual industrial and infrastructure projects. A disclosure mechanism through the corporate law framework would limit the data to merely another audit and reporting requirement.

At the moment, while carrying out an environmental impact assessment of individual projects the green laws do not consider the GHG emissions from the project as a parameter to evaluate the project.

While the climate budgeting exercise will start with the next fiscal, the government has more than two years to put in place the new emissions inventory protocols as the submission of the latter will be mandated only once the Paris Agreement is operationalised – which as of now is slated for 2020.