The net zero challenge

Context:

• In a scenario where India seeks to achieve dual objectives of net zero by 2070 and advanced economy status, RBI report provides a framework to discuss trade-offs during the transition.

Highlights of the Report:

• India’s Net-zero targets: India is committed to achieving net zero status by 2070 at CoP26. The road to net zero will not be smooth, as is reflected in the report.
• Trade-offs and growth: The RBI provides a framework of thinking about the trade-offs between growth, inflation and efforts to transition to a net zero economy.
• Link between economy and emissions: An annual GDP growth rate of 6 per cent would raise net GHG emissions by 10.5 times of levels in 2021-22.

Suggestions:

• Increase green energy demands: India should increase the share of green energy in primary energy consumption to 82 per cent by 2070 and reduce emission intensity by 5.4 per cent annually.
• High ambitious growth projections: We should plan to achieve net zero by 2050 would limit the losses from extreme weather events and decarbonisation to 3 per cent by 2049.
• Addressing inflationary impact: The productive life of existing fossil fuel-based assets will be shortened thus exposing the banking sector (through loans) to these assets.

Conclusions drawn:

• Role of fiscal policy: It makes a case for fiscal intervention in the form of a carbon tax or an emission trading system.
• Less energy intensive sectoral growth: The role of shifts in production to less energy intensive sectors — fisheries, textiles, land transport and services are required.
• Imposing regulatory measures: Agencies associated must focus on regulatory implementation and following guidelines.