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‘Net zero is for those countries that should have peaked emissions by now’

In the first of a two-part interview, Rajni Ranjan Rashmi, former principal negotiator for India at the UN climate change negotiations and ex-special secretary in the MoEFCC, speaks to CarbonCopy on the growing schism between the developed and developing world ahead of COP26

Over the past year, the area of climate action has been awash with commitments of carbon neutrality and mid-century ‘net-zero’ targets. A spate of announcements has culminated in palpable pressure on large developing countries, particularly India, to raise their climate ambitions in the lead up to the United Nations’ 26th Conference of Parties on climate change (COP 26), which will take place in Glasgow in November. 

Progress at the COP depends to a large extent on how well and how swiftly the growing disparities between poorer nations and their rich counterparts are resolved. On paper, the COP26’s task is to get the world to enhance their Nationally Determined Contributions (NDCs) pledged to the Paris Agreement. But as the UN’s recently released NDC synthesis report points out, unless climate aid is mobilised–and not just in the form of loans, but also grants–new or updated NDCs, especially for developing countries, cannot be implemented. 

To get a better understanding of where India stands in this tug-of-war ahead of the COP26, CarbonCopy spoke to Rajni Ranjan Rashmi, a former principal negotiator for India at the UN climate change negotiations and ex-special secretary in India’s Ministry of Environment, Forest & Climate Change (MoEFCC).

Mr R R Rashmi | TERI
The former bureaucrat is now a Distinguished Fellow with TERI and is associated with the  Centre for Global Environmental Research (CGER) where he works on areas pertaining to climate change, mitigation and adaptation challenges, carbon markets, and related environmental policies and actions. He also serves on the Climate Finance sub-committee in India’s Ministry of Finance.

Q- India is under a lot of international pressure to announce a net-zero target. So far, the government has staved off this pressure. How do you see such a target with regards to countries like India? 

All nations that have announced net-zero targets have done it for the long term. None of them have announced short-term net-zero goals. Among these, most are a group of countries [developed countries listed under Annexure I of the UNFCC convention] that are mandated under the Climate Change Convention not only to reduce the emissions, but also to peak their emissions and bring it down to minimum. Most of these countries talking about net zero have failed to peak their emissions in time and bring it down as needed. 

So, I think the focus of this net-zero goal should be on those countries that were mandated as per the convention and the Kyoto Protocol to have peaked their emissions by 1990. Despite this, their emissions continued to grow. They have started declining only recently after they secured access to low-carbon energy in the form of natural or shale gas. So in 2021, it is no longer valid to talk about a 2050 net-zero ambition. These countries should talk about net-zero in 2030-2035. For India, the trajectory will naturally be different. 

Q- Do you think this global pressure to announce net zero, especially in parts of the developing world, is a shift away from the principle of Common but Differentiated Responsibility?

I should think so. Although, talking about net-zero by itself does not mean that the principle of Common but Differentiated Responsibility has been discarded. Net zero is a global goal. It is not binding on every country.  But it is certainly worrying that we have started talking about the goal for 2050 even before the world has met its NDC targets for 2030. Of course, because of IPCC scenarios that have been presented to us by scientists, we must think of deeper emission cuts, but that applies to that group of countries [Annexure I countries] that are supposed to have peaked decades ago. The net-zero goal cannot be applied without discrimination. 

So, the principle of Common but Differentiated Responsibilities, also agreed to in the Paris agreement, is very much alive. And I don’t think net-zero goals can or should do away with this.

Q- As countries/regions start devising their decarbonisation strategies, border adjustments and taxes on carbon are likely to become more prevalent. How do you view this as a measure for decarbonisation? The effect of this on countries like India? How can these effects on trade be assimilated into climate action strategies and considerations?

This is a worrying development. Unfortunately, carbon tax affects countries adversely when they have no or low access to alternative sources of energy. Such countries may suffer from higher costs of energy as well as lower growth. Hence, the use of carbon tax as a means of decarbonisation is problematic.

As a matter of principle, the use of border adjustment for carbon taxes is not consistent with the principles of the Convention. Article 15 of the Convention clearly says that no country will take unilateral trade action in the name of climate change.

Such attempts were made in the past. The European Union experimented with this kind of border tax for the aviation sector in 2011-12. They were stopped in their tracks when the multilateral regime for regulating aviation emissions in the form of CORSIA came into force. So, the picture is unclear. The response of the government may depend on the extent to which international trade affects our economy. About 18-19% of India’s GDP consists of exports. A large part of this trade is commodity oriented and is not very carbon intensive in nature. So commodities that are carbon intensive and are traded internationally such as steel, cement and textiles, may be affected. 

However, I do not see this approach being very consistent with the Climate Change Convention. For that, we need global actions that are based not on competitiveness and international trade, but on economic capacity, environmental responsibility and national circumstances, in tune with the Paris Agreement.

Q- In the final decision taken at the 2019 negotiation on the subject of climate finance, countries were only invited to submit “their views on the operational definitions of climate finance”, which would be considered by the Standing Committee on Finance for its 2020 Biennial Assessment. How will the issue play out at the COP26?

It is quite likely that this issue will get a lot of political attention. The primary task of this COP26 is to look at the nature of the NDCs, whether they can be enhanced, and whether the right kind of environment exists for countries to raise their targets and goals, for which financing support is critical. So, a lot of discussion will take place on what kind of financial support is available. The definition of climate finance is a controversial issue, because the developed or donor country always emphasises on treating all kinds of mobilised finance and leveraged finance as climate finance and use this to discharge their obligations. This is opposed by the recipient countries. So, I think this will remain a controversial area where countries will have to find a middle ground. It is quite obvious that all the mitigation and adaptation needs cannot be funded only from public sources of finance. But the role of public finance in reducing the cost of capital and risks is critical. Mobilisation and leveraging will be required with the help of public finance, but the extent to which it should be accounted for in discharging the obligations of the developed world is a matter of discussion.

Q- The discussion papers from India’s finance ministry say that only public grants, unrequited equity and grant-equivalent values of loans should be counted as climate finance. What is your view on this?

I think it is logical to say that only the grant portion or the concessional part of the loans should be treated as climate finance. This doesn’t contradict the overall approach towards climate finance because it says that this part of climate finance [grant and concessional parts] can be used to mobilise and leverage finance globally. So, nobody is saying that leveraging is bad or mobilisation is not good. In fact, that has to happen if we have to create good business models for investment. 

But the point is that the accounting of promised climate finance from developed countries, in terms of $100 billion, cannot be equal to mobilised funds. That must come from public sources. And governments in the developed world should properly account for it. They have got the freedom to use innovative means to achieve that. In fact, Article 11 of the Convention or even the Paris Agreement talk of innovative ways of financing. There are many ways in which they can raise funds to meet the obligations. They can auction their allowances or use public levies to support the global funding. So, it is logical to say that everything is not climate finance. At the same time, climate finance can be used to leverage other sources of finance in meaningful and remunerative ways for the private sector to come in. The present model of Green Climate Fund appears to be inadequate for this purpose.

Q- In 2018, countries agreed to initiate in November 2020 deliberations on setting the new finance goal. Due to the COVID-19 pandemic, the annual climate negotiations could not take place in 2020, and were pushed to November this year in Glasgow. Is this discussion going to move forward? 

The COP presidency has said that the settlement of the issue of climate finance is one of their primary goals. Their effort will be to build consensus and involve parties together on this and arrive at some meaningful solution. I think it is not impossible, as long as we are clear on what we want. There is certainly a difference of opinion here. But I think there are ways of bridging this difference. 

Q- As per your understanding, what are the major issues concerning Article 6, from the developing countries’ perspective? [Read more on Article 6 here]

From developing countries’ point of view, one critical issue is that of legacy credits. Countries such as India, China, Brazil and South Africa had invested a lot in generating emission reductions and credits in the pre-2020 period. Those credits have still not been allowed in the Paris Agreement, under the agreed modalities. This will be one major challenge for developing countries. The transitional arrangements for these credits from the CDM [Clean Development Mechanism] should be recognised and allowed to be traded in the new carbon market arrangements. Getting this done will be a key priority for developing countries. If this doesn’t happen, it will be an act of bad faith and may give a wrong signal to the investors. Those companies that have invested in the pre-2020 period will feel unrewarded and dissatisfied. This is not a good way to deal with commercial investments. 

As for the other issues with Article 6, I get a sense that the developed country partners are only looking at it as an environmental integrity issue. They’re not willing to treat carbon markets as a source of financing low-carbon actions, which is a primary concern of the developing countries. After all, why should developing countries go to the carbon market unless it supports commercial investments in their climate actions. There must be some returns from investment in emission reduction strategies if the new market arrangements are to help in fulfilling the emission reduction targets of the rest of the world. The one big challenge for the Article 6 elements would be to ensure they incentivise investment in emission reduction technologies.

Q- On market-based offset mechanisms, there is a fear of greenwashing and creative accounting. Additionally, traditional offset practices such as afforestation are also vulnerable to climate change impacts. How do you see this evolving in the years to come?

This threat or the apprehension has always been there. The offsets based on afforestation can be temporary or transitional and some people feel that they don’t do much for the environment on a long-term basis. This is why, under Article 6 of the Paris Agreement, countries are trying to tighten the rules to ensure that the environmental impacts of these emission reductions are not transient or temporary in nature. 

Emission reductions in the forestry sector are, by their very technical nature, limited by the life of the tree. They are affected by human activities. But this is a problem specific to those countries that suffer from heavy rates of deforestation. The apprehension is not valid for countries that have maintained their forest cover such as India. Moreover, the fear of greenwashing should not disincentivise efforts to create a good carbon market. After all, the carbon market’s objective is not just to make offsets available, but also to incentivise the investments in carbon-emission-reduction technologies so as to make them sustainable over a period of time. And investment in these technologies will help us make the necessary energy transition. So they may appear to be short term in nature, but the impact is long term and efficient.

This is the first of a two-part interview. The second part will explore how India can fund its own climate action at a time when finance promises from developed nations remain unfulfilled.