People walk in front of the venue of the United Nations climate change conference COP29, in Baku, Azerbaijan
Credit: Reuters Photo
The annual jamboree on climate change is underway with the world’s most influential leaders congregating in Baku, Azerbaijan, for the conference of parties (COP29).
Interestingly, even as experts and policy-makers make a huddle to capture the attention of the world on the risks emerging from climate change, the carbon footprint accumulated as a result of air miles collected cumulatively and investment for setting up the infrastructure for hosting an event of this scale is likely to leave the most vulnerable population to climate change unimpressed. On the eve of COP29, Oxfam estimates that the carbon emissions by billionaires in 90 minutes was more than what an average person does in a lifetime.
Still, one of the initial wins secured by the United Nations Framework Convention On Climate Change (UNFCCC) is laudable. Largely credited to the initiative by India, the landmark consensus securing the formalisation of carbon credit market underscores the crucial role in pivoting the debate away from growth versus green to sustainable finance as a bridge between the two.
Despite the customary pledges by the wealthiest countries and corporations, there is no escaping the fact that the world is no less farther from meeting $500 billion annually to achieve sustainable transition. The Global South, in particular, is placed on a cliffhanger constrained by fiscal resources on one hand and lack of accessibility to technology on the other.
Carbon credit entails efficient transfer of monetary resources from carbon intensive firms to carbon neutral firms. For instance, a petroleum company reducing its carbon footprint via carbon credits leads to generating financial resources necessary to develop an ecosystem built on green energy. By developing a sustainable and efficient carbon market, a great part of the Global South can potentially tap into sustainable finance otherwise available at exorbitant terms at the expense of economic sovereignty.
A recent remark by the former governor of the Reserve Bank of India (RBI) Raghuram Rajan on the growing irrelevance of multilateral financial institutions like the International Monetary Fund (IMF), unless they change their parochial ways of approaching lending, is illustrative of the intellectual quandary gripping the Global South in accessing transition finance.
As one of the most influential countries in the Global South backed by its economic weight, India is rightly positioned to lead the world in spearheading the carbon credit market. Despite its burgeoning economic growth, India accounts for one of the lowest carbon-emission per capita. Also, as a founding member of the International Solar Alliance (ISA), India can leverage its natural abundance in renewable energy to develop an efficient primary market for carbon credits.
India also boasts of a vibrant and well-developed financial market making it an ideal place to develop an innovative secondary market for trading carbon credits. International financial jurisdictions, like the GIFT City, is well poised to develop financial instruments tracing their value to the underlying carbon credit market developed through internationally validated ETS.
The Global North can ill-afford to suffocate their southern counterparts on coercive terms like tariffs to elicit compliance. Having had the opportunity to develop a robust economic infrastructure well over a century while protecting technology on green energy in the garb of intellectual property rights (IPR), it is only rationale for the Global South to develop an indigenous technology without scraping for financial resources.
At the end of the climate conference, world leaders must brace for a new politico-economic order dominated by a US leadership that neither cares about clean energy nor climate change. If anything, tariffs and tough talk will be the new norm. But as King Charles III admonished in his opening remarks at COP28: “Earth doesn’t belong to us; we belong to it.”
Ullas Rao is associate professor at JAGSoM, Vijaybhoomi University, Mumbai. X: @Ullasrao7.
(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH).