The GAIA Perspectives

Sustainable Aviation Fuels for Powering the Aviation Sector

In light of the global drive towards carbon neutrality, countries are increasingly focusing on sectoral contributions to emissions in order to realise their respective emission targets. The spotlight has shifted towards hard to abate sectors such as industries and transport. Within the mobility sector, while significant progress has been made on the road transport front, the potential of the aviation sector has often been overlooked. The sector contributes roughly 3 per cent to the global carbon dioxide (CO₂) emissions and is responsible for 12 per cent of the emissions originating from the overall transport sector. Soaring fuel prices owing to the Russia-Ukraine war highlights the need for securing alternate sustainable sources of fuels that prevent developing economies from being at the mercy of market determined exorbitant fuel prices.

According to estimates by IRENA, emissions from the aviation sector need to fall by 90 per cent by 2050 in order to limit global temperature rise beyond 1.5º Celsius. Moreover, as of October 2021, members of the International Air Transport Association (IATA) jointly agreed to achieve carbon neutrality by 2050, representing the only global sectoral decarbonization target that has been announced till date.

Beyond tapping the low hanging fruits of improving energy efficiency or fleet renewal, the top contenders for decarbonizing the aviation sector include use of electric propulsion systems, hydrogen fuelled aircrafts and Sustainable Aviation Fuels (SAF). However, once commercially available, electric aircrafts will only be suitable for covering shorter distances and carrying fewer passengers. It is important to note here that roughly 80 per cent of the emissions from this sector result from flights covering more than 1500 km. This highlights the limited impact that electric aircrafts will possibly have on overall emissions. Similarly, in addition to adequate supply of green hydrogen, refuelling infrastructure and storage facilities would be required to make use of hydrogen as a technology option. However, hydrogen as an aviation fuel is still in nascent stages and it will be a while before it is ready for use in both short and long-range flights. This effectively only leaves the option of SAF which can be derived from a variety of feedstock (e.g., jatropha, camelina etc.) and waste (e.g., municipal waste, agricultural residue, used cooking oil etc.).

SAF can be produced using one of the three technologies i.e., hydro-processed esters and fatty acids (HEFA), alcohol to jet or power to liquid (PtL). Amongst these, HEFA is the least expensive option which makes use of vegetable oils and fats. PtL on the other hand involves electrolysis of water to produce hydrocarbons that are in turn combined with carbon monoxide produced from captured CO₂. Depending on the feedstock used, SAF can deliver 80 percent reduction in lifecycle emissions in comparison to traditional jet fuels. Moreover, the use of these fuels requires little to no modifications in the current aircraft infrastructure. These can be blended with traditional kerosene with blending rates of up to 50 percent already being certified. However, with SAF accounting for only 0.1 per cent of the jet fuels used globally, it begs the question as to why the shift has not been made.

One obvious barrier is the cost component with some SAF variants costing twice as much as traditional jet fuels when produced from waste products and the costs rising by 6-10 times when produced from synthetic fuels in conjunction with carbon capture . Another issue is with respect to securing adequate supply of feedstock for producing SAF. It is important to note here that not all SAF are of the same quality and they differ in terms of their environmental impacts. The ‘sustainability’ component is determined by well-to-wake emissions that account for lifecycle emissions starting from feedstock extraction to processing and combustion. A case in point is biofuels derived from palm oil that has been unsustainably produced or from crops that result in deforestation and lead to land use changes. In addition, there exists an added issue of competing demand for feedstock catering to different applications in the transport, aviation and maritime sectors, though differing in terms of product quality.

Photo by Andrea Piacquadio on Pexels.com

Emissions from the aviation sector need to be viewed from a dual lens – one focusing on domestic aviation and the other on international aviation. It is pertinent to mention here that while the former is included within the Nationally Determined Contribution (NDC) targets submitted by the Paris Agreement signatories, international aviation falls beyond its purview. Dealing with the latter is a bit tricky given how 65 per cent of aviation CO₂ emissions exist in international space, and no one country can be assigned responsibility over the same. Though fraught with a few glaring limitations, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) (2016) launched by the International Civil Aviation Organization (ICAO) is a good starting point. It calls for carbon neutral growth from the aviation sector post 2020 and also contributes towards the goal of augmenting aviation fuel efficiency by 2 per cent every year till 2050.

While biofuels and bioenergy in the context of energy transitions and decarbonization of the mobility sector has been a part of the G20 discourse, the aviation sector has not found a mention till now. Nevertheless, at the country level, member nations such as, Australia, Brazil, European Union, Indonesia, Japan, United States etc. have shown interest in SAF and have or are in the process of formulating policies and schemes to expand their scale. For instance, EU’s “Fitfor55 package” encompasses a ReFuelEU Aviation Initiative that introduces mandates for fuel suppliers to increase the share of SAF and also proposes obligations on airlines for limiting the use of jet fuel. Similarly, US has launched a Sustainable Aviation Fuel Grand Challenge that aims to produce 3 billion gallons of SAF annually till 2030 and also work towards reducing aviation emissions by 20 per cent during the same period.

Leveraging off of this common interest, and also taking note that some of the busiest domestic airline routes in the world are housed within the G20 countries, decarbonizing the aviation sector may be treated as one of the priority areas in India’s upcoming Presidency. In fact, the country has already taken preliminary steps to express its interest in this theme with India opting to co-lead the Innovation Platform on Sustainable Aviation Fuels under Mission Innovation. Furthermore, the country is well positioned to assume a leadership role as far as SAF is concerned by reaping benefits from its low-cost renewable energy and abundant feedstock supplies. The G20 platform may be leveraged to further this agenda on multiple fronts. For one, it may be used to create markets for supplying feedstock and tackling the supply shortfall. For instance, while EU faces shortages of used cooking oil (UCO), one of the primary feedstock that it uses for SAF production, countries like India with an annual consumption of 22-27 million tons of UCO can emerge as suppliers of the same. This of course would first require working out the logistics of its domestic collection systems. Second, under India’s G20 Presidency, the group may wish to develop common standards for SAF feedstock quality for trade which may echo those designed under CORSIA or differ from the same. As an added advantage, SAF offers opportunities that tie up well with priority areas identified by preceding presidencies such as Carbon Capture Utilization and Storage (CCUS) and green hydrogen, which have a pivotal role to play in producing advanced versions of such fuels. However, the uptake of SAF would necessarily need complementary policies at the domestic level in the form of mandates, blending targets, subsidies etc. akin to those already in place for the mobility sector.

Granted that SAF is not the only panacea for aviation sector emissions, similar to other sectors, there are a host of technology levers that need to be tapped for ensuring emission reductions and carbon neutrality. Taking note of the technology readiness levels and varying timelines of commercialization, SAF appears to be the most realistic option that can deliver results in the short to medium term.

(Views expressed are the author’s own and don’t necessarily reflect those of ICRIER)

Cleaning the Kitchen Fuels: To Steam the Green Growth

The usage of open fires and solid/semi-solid fuels for cooking is one of the world’s most pressing health and ecological problems, directly affecting close to 50% of the world’s population. Ineffective cooking and heating are a root cause of energy poverty, poor health, gender inequality and environmental degradation. It leads to more than 4 million premature deaths each year, making household air pollution the fourth biggest heath risk in the world, as well as a major contributor to ambient air pollution. The dearth of access to safe and clean cooking fuels also increases pressure on forests and habitats and leads to increased release of harmful pollutants that contribute to climate change.

It is well-known that usage of clean cooking-stoves and fuels could dramatically reduce fuel consumption and exposure to toxic emissions. In order to develop a flourishing universal market for clean and efficient cookstoves and fuels, we can transform the way the world cooks, enabling substantial, cross-cutting gains for sustainable development and save hundreds of lives in the process. There is no such thing as inefficient fuels , but rather there are inefficient cooking processes.
The domestic energy access remains a key area of focus for the G20 and that implementation is comprehensive and expeditious. In order to address energy deficiency, reach the Sustainable Development Goals (SDGs), and advance the aims of the Paris Agreement, it is essential to scale clean cooking. As every nation at its capacity is working towards executing the SDGs and addressing environmental change, it is particularly important that we invest in scalable solutions at the household level that generate cross-cutting impacts.
List of recommendations for advancing progress that may be considered:
• Continue to prioritize the implementation of the G20 Energy Access Action Plan and SDG 7, ensuring that clean cooking is incorporated in both discussion and implementation.
• Developing nations can be hand held in establishing beneficial tax and tariff rates necessary to grow the market for clean and efficient cookstoves and fuels.
• Help ensure that financial mechanisms and programming to support energy access, economic development, health, women’s empowerment, and climate change mitigation and environmental protection efforts include provisions to support clean cooking.
The section of population with access to clean cooking fuels and technologies varies across countries, owing to various factors. At the domestic level, availability and affordability are both crucial. At a larger level, access is influenced by government policies, a nation’s economic status, as well as availability of resources.
In view of the complex interplay of forces that influence access to, and adoption of, clean fuels and technologies, no fuel or initiative taken by a particular country can be emphasized as a benchmark model for all others to emulate. The question of affordability must be addressed to sustain and increase the usage of clean cooking fuels and technologies.
The State-funded programmes, such as subsidies on clean cooking fuels and/or tailor-made technologies, have been among the initiatives taken by many countries. Nevertheless, more substantial state-led interventions are needed in countries where the majority of the population still lack access to clean cooking facilities.

In such nations, especially the low-income ones, investments in overall infrastructure associated with import, processing, supply and distribution of clean cooking fuels such as LPG are also required. Improved cook-stoves which meet WHO guidelines is one solution for the immediate future. Subsidies or low-interest loans could be provided to the poorer dwellings to facilitate the uptake of clean fuels.
Domestic cooking behaviour, the financial status of citizens, as well as current infrastructure need to be assessed before framing policies and programmes. The ideal scenario would be to provide clean fuels like LPG, natural gas and electricity for cooking to all, and households should continue to use these fuels through steady refills and payments of tariff. Nevertheless, such a scenario appears ambitious considering there are countries where more than 80% of the populace is yet to receive any form of clean cooking fuel or technology. For some regions mere subsidy on LPG leads to limited transition.
In the rural regions, focus should be given to technological innovation that aids the usage of available biomass to make clean fuel, alongside supplying fuels like LPG, natural gas or electricity. Few nations have combined policies promoting clean cooking fuels and technologies with others discouraging use of non-clean fuels for cooking. Policies and delivery models appropriate to local needs have to be developed.
Clean cooking must be prioritized as a critical cross-sectoral growth issue. Progressing towards the ambitious goal of universal access requires accelerated actions by all stakeholders. To develop a sustainable clean cooking market, we need to improve the overall eco-system by raising awareness, enhancing partnerships, harnessing synergies, and monitoring development with new data and tools. To have a concrete ecosystem requires that our efforts focus on the following, mutually-reinforcing elements that ripple across it:
• Clean cooking for all must be integrated into national policies and planning for energy, climate, and COVID-19 recovery.
• A dramatic scale-up in both public and private investments is needed to implement clean-cooking strategies and action plans to achieve on-the-ground results ensuring supply chains.
• Catalysts are needed to spur market innovations that can deliver affordable clean-cooking solutions at scale.
• Attaining development impacts requires adopting society-centered approaches aligned with both diver user needs and broader development objectives (e.g., climate, health, gender, jobs and sustainable livelihoods).
• The approaches adopted must ensure inclusiveness by addressing the needs of poor, vulnerable, fragile, and displaced populations, as well as engaging and empowering women across the clean-cooking value chains.
(https://www.orfonline.org/research/towards-universal-access-to-clean-cooking-fuels-and-technologies/)
As our world recovers from the crisis, clean cooking will be an important element for a low-carbon development trajectory, as well as the key to achieve climate and energy access goals. The G20 forum can be an arena to prioritize it and use the opportunities in recovery plans to marshal the necessary financing and multi-sectoral partnerships.

(Views expressed are the author’s own and don’t necessarily reflect those of ICRIER)

The Model Tenancy Act 2021: What does it mean for India’s vast Informal Rental Sector?

Amidst escalating urbanization, providing adequate and affordable housing has become India’s pressing urban development challenge. Lack of secure and affordable rental housing severely affects low-income households who are bereft of homeownership in the city that they work in. Rental housing in metropolitan India is primarily provided by private landlords who operate outside the regulatory and judicial framework (Harish, 2021). About 70 per cent of all rental arrangements in India are not backed by written contracts of any form or are informal in nature (NSSO, 2019). A further look at its geographic variation reveals an interesting picture of rental market informality (Figure 1). For instance, more than 80 per cent of the total rental houses are informal in the large states of – Andhra Pradesh (93.99%), Telengana (93.53%), Bihar (92.28%), Haryana (84.85%), and Punjab (83.46%).

**Figure 1: State-wise distribution of Informal rental arrangements, India (2019)**

Nearly 70-80 per cent of the rental arrangements are not backed by written rental agreement in Uttar Pradesh, Rajasthan, which is being followed by Jammu and Kashmir, Himachal Pradesh and NCT of Delhi (Figure 1). Further, among the 20 per cent supported by a written contract, only about one-fourth is registered as leases.

For many low-income migrant households, informal rental housing is an affordable option and provides a foothold in the city, allowing them to access its employment and economic opportunities. In most cases, such housing is of poor quality and plagued by low tenure security, predatory landlordism, overt forms of exploitation and vulnerability for the tenant. The deficiency of tenure security and housing distress faced by impoverished tenants has also been glaringly amplified by the recent exodus of migrants from the major cities due to the Covid-19 induced lockdowns last year. In response to their distress, the Government of India introduced the Affordable Rental Housing Complex (ARHC) scheme in July 2020, with the motive of augmenting the supply of affordable rental housing for low-income and single-headed migrant households by institutional landlords in India’s cities.

Of late, the union government has also passed the Model Tenancy Act, 2021 (MTA) to revive the rental real estate business, address impediments in the current rental ecosystem, and achieve the target of ‘Housing for All’ by 2022. Up till the passing of this Act, tenants’ rights had been safeguarded by archaic and stringent Rent Control Acts (RCA) that created several negative externalities in the local housing market dynamics (e.g., minimal rent increase, the growing burden of property maintenance and ensuing quality deterioration, lengthy and complex eviction process, a disincentive to the landlord to let out property or reinvest in rental businesses, among others). With India’s rapid urban surge, growing market potential, increased inflow of FDI, massive migration, and rise in job-seeking floating population, growth in both demand and supply of rental housing will be colossal. A well-managed rental housing market can be the ‘lifeline’ for millions of home-seeking tenants. Given this context, MTA aims to establish a regulatory framework that facilitates gradual formalization of the current renting ecosystem and create a conducive environment for the supply of affordable rental housing in urban India.

The strengths of MTA

Without a doubt, MTA is a much-needed stepping stone towards reviving urban India’s rental housing potential. With its prime motive to revitalize the rental sector, MTA provides a plethora of progressive provisions:

Transparency in rental arrangements

A mandatory written and online registered rent agreement between landlord and tenant is proposed under this Act. While MTA gives enough leeway to parties involved in the rent agreement to decide rental tenure, monthly rent price and rent revision, it imposes a cap on the security deposit that can be levied from a prospective tenant at a maximum of two months’ rent for residential premises and a maximum of six months for non-residential premises. The rent price can’t be revised between the rental tenure and the landlord has to inform the tenant three months before the revision. The landlord is entitled to charge double house rent for initial two months and four times after that if the tenant fails to vacate the property even after the termination of rental tenure. Subletting of property is allowed only by entering into a supplementary agreement with the landlord’s existing rental agreement.

Litigations and disputes minimisation

To minimize the incidence of litigations and disputes, repair and maintenance obligations have been assigned to both landlords and tenants. The landlord is responsible for fixing structural damages to the tenancy and undertaking whitewashing painting of walls, doors and windows. The tenant is responsible for periodic repairs, including kitchen fixtures, glass panels, maintenance of open spaces; must inform the landlord of any damage to the property urgently. The landlord cannot evict tenants during the contract period and stop providing essential services such as gas, electricity and water supply.

Time-bound conflict management

To ensure speedy conflict resolution, the appointment of a rent authority with prior approval of the state or the union territory is proposed. MTA also envisages the setting up of rent courts and rent tribunals by states to resolve disputes within 60 days of receiving the complaint.

Issue and challenges

While this new tenancy legislation has several well-intentioned provisions that can be a catalyst to transform the rental housing sector, it seeks to address the formal rental space, thereby entirely overlooking the vast grey area in the rental market, which is developed, managed and operated by informal rental providers. MTA falls short in many aspects that could potentially impact informal renting ecosystems. For instance,

Exclusionary and poor blind by design

The current standards of MTA are exclusionary and poor blind by design. As mentioned earlier, the proposed tenancy agreement and online registration systems are unlikely to appeal to the informal rental market, particularly among low-income and impoverished tenants. There is no penalty for failing to register a rent agreement, and all following provisions are only applicable to registered agreements. Consequently, it is expected that under this Act the informal rental space will be bypassed entirely, contributing to solid persistence of informality with its related risks.

Inclusive and equitable access to the rental market remains a distant dream.

The MTA provisions are unlikely to address the challenges of inclusive and equitable access to the rental housing market for tenants. For instance, MTA proposed a mandatory “digital platform in the local vernacular language” to facilitate hassle-free tenancy registration systems. However, addressing gaps in digital literacy and information access among informal sector tenants is a matter of concern. Aside from this, unnecessary documentation such as mandatory Aadhaar (despite no subsidy being offered) and PAN (regardless of monthly rent prices), the form for registering rental agreements increase the burden of paperwork and procedural complexity manifold. The requirement of vernacular language also seems to increase the dependency on intermediaries (rental brokers), which in turn will create a financial burden on the potential tenant.

Silent on rental market discrimination

The informal rental sector significantly transforms the social dynamics of renting ecosystems. Any person who has undertaken a housing search in India’s urban rental market would attest that only a few landlords, real estate agents, and brokers would provide or show homes to tenants that are not aligned with their caste, religion, and culture persuasions. Such prejudices of landlords/agents against particular sections of society act as significant constraints in their access to vacancy information and rental housing having the preferred characteristics. Caste, religion, marital status, ideational differences and associated food choices are the prime levers of rental market discrimination- often leading to a pretty troubling housing search process that is time-consuming and costly (Thorat et al., 2015; Dutta & Pathania, 2016). It also triggers involuntary housing segregation on caste and religious lines, thereby creating hindrances in social cohesion and peace and perpetuating social inequality. Unfortunately, MTA is silent on rental market discrimination and fails to safeguard tenants’ right to housing adequately.

In addition, the vast majority of houses are acquired through intermediaries/brokers or informal referral services in the casual rental market. The property agents and brokers, presumably from sheer greed for commission fees, are often reported to take advantage of prospective tenants by providing partial/false information about the housing vacancy to be rented. This makes those tenants who have less access to social networks or housing market information and have little knowledge about tenant-landlord rights, more vulnerable in this regard. This eventually creates negative externalities in the tenants’ housing search intensity and outcomes. MTA does not provide any defined guideline to curtail such malpractices in informal rental spaces.

Force majeure clause

MTA considers only war, flood, drought, fire, cyclone, earthquake or any calamity caused by nature as force majeure situations which allow the tenant to continue in possession for one month from the date of cessation of the force majeure event on the same terms as set out in the rental agreement. However, riots, civil unrest, or even a Covid-19 pandemic have not been included in the force majeure clause, resulting in a lot of ambiguity and cause for dispute in the informal renting ecosystem.

Conclusion and way forward

Housing is a state subject. Therefore, efficient and effective implementation of MTA and its success rate is mainly contingent on the very nature of the state-centre political relationship. For instance, while Tamil Nadu, Uttar Pradesh and Assam have already adopted the MTA; for states/UTs where archaic Rent Control Act has to be repealed or amended, timely implementation of MTA remains a challenge. Aside from this, there may be some states (e.g., West Bengal) that may not implement this Act at all. Nonetheless, as the informal rental sector is transforming from a small-scale private matter into a much larger one, it deserves urgent policy interventions in the interest of more just and sustainable outcomes. In this regard, MTA must address the above-mentioned issues of the informal rental markets to effectively convert its negative externalities into positive dynamics. The following measures can be helpful in this regard:

Firstly, MTA must expand its scope and coverage to address all types of rental housing sub-markets, including informal rentals. Because, policy indifference towards this ‘sunrise sector’ may have serious implications for the sustainable urban development pace in India. Without adequate attention, negative externalities (e.g., unfair landlord-tenant relations, arbitrary rent settings, poor housing outcomes and lack of adequate basic services including health and safety risk, among others) would continue to prevail. The government will also miss an opportunity to improve the quantity and quality of affordable rental housing.

Secondly, incorporation of anti-discrimination clause in amended MTA will be critical to solve rental market discrimination. A socially inclusive housing market is the key to ensuring that everyone has appropriate access to rental homes.

Finally, in order to create an effective rental marketplace for augmenting adequate supply of affordable and quality rental housing, as envisaged in MTA, a well-managed rental housing market backed by supportive ecosystems is needed. This will not only be instrumental for catalyzing urban India’s rental housing potential but would also help achieve ‘Housing for All’ target.

References

Datta, S., & Pathania, V. (2016). For whom does the phone (not) ring? Discrimination in the rental housing market in Delhi, India, WIDER Working Paper 2016/55. Available at: https://www.wider.unu.edu/sites/default/files/wp2016-55.pdf

Harish, S. (2021). Affordable Rental Housing Complexes Scheme and Private Rental Housing in Indian Cities. Economic & Political Weekly, 56(16), 15-19.

National Sample Survey Organization (2019). Drinking Water, Sanitation, Hygiene and Housing Condition, 76^th Round. Ministry of Statistics and Programme Implementation, Government of India, New Delhi. Retrieved December 2, 2019 from http://microdata.gov.in/nada43/index.php/catalog/central/about

Thorat, S., & et al. (2015). Urban Rental Housing Market: Caste and Religion Matters in Access. Economic and Political Weekly, 50 (26 & 27): 47–53.

Why does COP26 remain indecisive on ‘Nature-Based Solutions?’

The buzzword for this year’s climate negotiations was ‘nature-based solutions’ or NbS. Several negotiations throughout the year discussed the importance of harnessing the benefit of nature utilising nature-based solutions. While the concept is still evolving and being pushed at COP26, its inclusion in the draft proved to be controversial.

The draft initially published by the presidency emphasised “the critical importance of nature-based solutions and ecosystem-based approaches, including protecting and restoring forests, reducing emissions, enhancing removals and protecting biodiversity”. However, in the recently published updated draft, the word “nature-based solutions” was replaced by “protecting, conserving and restoring nature”.

It is widely acknowledged that Nature-based solutions can play a crucial role in climate action, i.e., mitigation and adaptation. In fact, to back the argument, The Nature Conservancy and 15 other institutes highlighted that nature-based solution can reduce emissions up to 37 per cent by 2030 to keep the global temperature on track for a 2° Celsius trajectory. Adding further to the Nature Conservancy Report, research by the OECD highlighted that nature-based solutions could have a significant positive impact on the economy and provide benefits like job creation.

What went wrong with ‘Nature-based Solutions?’

Over the last few years, numerous governments and businesses have expressed their interest in pursuing projects involving NbS. In fact, more than 66 per cent of the countries globally have included Nbs in their nationally determined contributions. Most of these solutions identify forests as the sanguine options for climate actions. This joint interest was also backed at Glasgow, where more than 130 leaders pledged to end deforestation and forest protection by 2030. The pledge is also supported by 95 high profile companies from various sectors and is backed by a USD 20 billion investment.

While the public and private sector recognised this as a welcoming move, the indigenous people and several global south countries have expressed their disagreement over the pledge and the inclusion of NbS. Since the very beginning, the evolution of the concept of nature-based solutions has been ambiguous. Despite the clarifications and descriptive background research by the International Union of Conservation of Nature, the term has attracted much criticism. The reason for this criticism was because of the following:

Firstly, the business connotation of nature-based solutions is often taken to be planting more trees, irrespective of understanding of plant species indigenous to the region. The latter is, unfortunately, not respected enough while thinking of NbS strategies! It is critical to understand here that the natural system is not the same everywhere. A million years of evolution have endowed every ecosystem with a unique identity and characteristics.

Secondly, in a rush to fix the planet, we have done all sorts of harm that could have been easily avoided. The lack of cognisance of the fact that native species play a crucial role in any ecosystem functioning leads to a huge flux of non-native, fast-growing species plantation, which severely hampered ecosystems.

Thirdly, the mere recognition of nature as a commodity meant to serve humanity. Nature is definitely more than that; across the globe, nature is worshipped in several forms. Kim Tam argues that the connection between nature and humans is the key to solving the environmental crisis. While this relationship is often misunderstood, and in several cases, we as humans feel our superiority over the natural systems, the failed recognition of this interaction has resulted in criticism of the NbS concept.

Fourthly, the implementation of projects based on NbS must be done in consent with the local communities. This is a considerable concern for regions where land tenure rights are less stringent and can be infringed.

Natural systems are critical for the planet; however, their benefit is not limited to being a carbon sink. Instead, it provides multiple ecosystem services, is home to biodiversity, and innumerable other benefits. Additionally, nature-based solutions will provide businesses and governments with an easy opportunity to offset, which they are already pondering. Thus, rather than promoting this nascent idea, the presidency must push the leaders and businesses towards adopting low carbon development pathways and limiting the emissions for a systemic change.

The need for concrete solutions

Despite our high hopes, The COP26 discussions so far are disappointing given what they have been able to achieve thus far. This year’s presidency has presented nothing concrete on the table, and the discussion seems nothing apart from a ‘reverie’. The negligence and lack of seriousness at Glasgow raise serious questions on the vision and will of global leaders towards climate action. What we call for is concentre actions, not mere greenwashing. The action must be radical and must be pillared on climate equity.

(The author is a researcher at ICRIER. Views expressed are the author’s own and don’t necessarily reflect those of ICRIER )

Corporate climate reporting framework in India and the world

Source:https://elearning-adbi.org/courses/governing-sustainable-finance/

Both, the recent Intergovernmental Panel on Climate Change (IPCC) report, and the COP at Glasgow amplify the concerns of voices in favor of curbing emissions. This is in line with the Paris agreement as well where almost the entire globe pledged to limit temperature rise to well below 2°C. These ambitious targets of limiting the temperature rise are however difficult to achieve if companies do not comply with recording their greenhouse gases (GHG) emissions and managing it. In order to facilitate the proper accounting of GHG emissions, frameworks like GHG protocol and ISO 14001 audits provide the guidelines for responsible recording, accounting and verification of the six Kyoto Gases emitted during operations and processing at a particular industrial entity. In order to make net-zero commitments successful, companies’ adherence to the green accounting principles will play an important role.

The GHG protocol also serves as the basis for two important principles namely, Science Based Target Initiative (SBTi) and The Climate Related Financial Disclosures (TCFD). These two frameworks play a critical role in defining the flow of capital, as the companies complying with these standards have to adhere to net-zero strategies and trajectories, which defines sustainable and green finance in a portfolio. SBTi decides whether the emission reduction targets are science based or not, while the TCFD makes sure that the climate change concerns of companies are not addressed in silos but holistically. This is done by making the company apprising its board members and investors about the risks and opportunities for the firm due to climate change on a periodic basis. The company is also expected to prepare at least two transition pathways incorporating climate change induced issues, with at least one transition pathway including 2°C or higher temperature rise.

Similarly, the framework governing the investments and finance companies on sustainable finance is European Union (EU) Taxonomy which lays down principles of green finance based on categories defined under the framework. Recognition of the framework by asset managers and investment bankers can be observed by their stress on companies to reveal information on climate change and related parameters. This helps financial institutions to reduce their risks associated with climate change and also manage their portfolio in a better way. Most investors are making green investments and tracking it based on the EU taxonomy. EU is in process of mandating the listed companies operating in the region to disclose information on the EU Taxonomy and TCFD parameters. All these frameworks make sure that firms are aligned to the Paris Agreement and net-zero strategies. It further promotes companies to reduce emissions in order to attract even more funds from investors.

In fact, countries like the US, UK, Japan, Canada, France, and Australia have made it mandatory for companies to report their GHG emissions. For making it mandatory, initially governments identified companies by their revenues. However, over time many developed countries modified their identification process with the number of people employed in the company being the deciding factor, not the revenues.

In India these developments started very late. In March 2012, World Resource Institute (WRI), the Confederation of Indian Industry (CII) and The Energy and Resources Institute (TERI) launched the India GHG Program which aligned with the voluntarily disclosed Nationally Determined Contributions (NDC) for India. The objective was of helping Indian companies to monitor their progress on low carbon pathways in an acceptable and consistent manner. Further, in May 2021 the Security Exchange Board of India (SEBI) released their guidelines on business responsibility and sustainability reporting (BRSR) for the top 1000 listed companies in the financial year. These guidelines are based on the nine principles of National Guidelines on Responsible Business Conduct (NGBRCs) and reporting under each principle is divided into essential and leadership indicators. The essential indicators are mandatory by the government for the companies to report, while the reporting based on the leadership indicators is optional. Again, this framework is expected to attract investment as the principles captured under the BRSR are considered to be more meaningful based on their environmental and social impacts, and thus expected to attract more investor capital. Various international frameworks and protocols like Global Reporting Initiative (GRI), TCFD, Sustainability Accounting Standards Board (SASB) and integrated reports can be replaced by this framework and companies can disclose information under this protocol.

The 2008 economic crisis and the COVID-19 pandemic have made us realise the importance of planning and preparedness. The TCFD makes sure companies look into both acute and chronic risks induced by climate change, and be ready with plans to cope with climate induced financial disruptions and opportunities. Similar guidelines by SEBI are mandatory for top 1000 listed companies in India, irrespective of the economic sector they are involved in. It is to be understood that different kinds of risks are associated with different economic sectors, thus guidelines should differ, considering the relevance of the sector and be made mandatory for companies in some specific sectors prone to risks associated with climate change. Developed countries have already made these guidelines mandatory for a wide range of companies despite their financial performance, hence providing the government with the data to plan and strategies in order to cope up with the economic setbacks due to climate change. A survey was conducted by EY in 2021 to look into the climate risks and preparedness for listed companies globally. The two parameters that define the results in the report include the coverage by companies where organisations were assigned a score on the number of parameters reported based on TCFD recommendation and the quality of disclosures defined as the data points available in public domain, a score of 5 means all the features of aspect were addressed, 3 means aspects discussed in detail, 1 meaning limited disclosures and 0 not publicly available by them.

The graph clearly shows that companies are performing better in the developed countries as compared to the developing. The scores are good for those companies located in areas where the climate regulations are strict by the government and the government itself is leading the steps for emissions reductions. Hence it would not be wrong to say that mandating the framework will help in tracking and then reducing the emissions in a long run. Countries like UK, US, and Canada have a good score both in quality and coverage parameters, while India received a quality score of 28% with 49% disclosures, which is lower than Africa.

Source: https://www.ey.com/en_in/climate-change-sustainability-services/risk-barometer-survey-2021

The experience of developed countries has shown us that it takes time to mandate companies and increase the coverage on parameters and asset level. In order to make the emissions reduction models work, companies need data to make decarbonization pathways and analyze the cost associated with it. Developing countries like India always have the argument that developmental needs take priority, but a question to be asked is given the critical status of air quality due to pollutants in Indian cities can we really afford to ignore emissions reduction? The listed companies in India should take a step forward and reveal information related to emissions, their strategy to reduce emissions and their preparedness for climate change induced risks to their portfolio. This will not only help the government in planning better as well as attract foreign investments to the Indian market.