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To combat climate challenges, the Finance Commission needs to step up

  • Published
    13th Jan, 2024

Context:

The Commission must evolve from a traditional fiscal arbitrator to a leader in shaping India's climate readiness.

Evolution of Fiscal Federalism for Forest Conservation

  • Global Initiatives and India's Role: India actively participates in global efforts to enhance forest cover, mitigating climate change and bolstering community resilience.
  • Fiscal Federalism and Forest Resources: The Finance Commission incentivizes states for forest conservation, recognizing the direct impact on state revenues and expenditure needs.
  • Role of 15th Finance Commission: The 15th Finance Commission allocates significant funds, becoming the world's largest payment for ecosystem services, addressing both forest cover and density.

The 16th Finance Commission's Crucial Role

  • Paris Agreement Commitments: The 16th Finance Commission can align tax devolution with climate goals, making climate vulnerability and emission intensity key parameters.
  • Performance-Based Grants: Consideration of sector-specific grants is vital for achieving India's NDCs and SDG goals, emphasizing clean energy, emissions reduction, and innovative solutions.
  • Science-Driven Approach: Leveraging scientific data on climate vulnerability, pollution inventories, and remote sensing, the 16th FC can design a performance-based fund allocation system.

Transforming the Commission for Climate Readiness

  • Metamorphosis to Climate Orchestrator: The 16th Finance Commission must transition from a traditional fiscal arbitrator to a leader aligning India's fiscal blueprint with environmental imperatives.
  • Incorporating Climate Solutions: The Commission should actively address ecological challenges, including crop burning, mangrove restoration, and forest fires, integrating climate solutions into its framework.
  • Harmonizing Economic Growth and Environmental Imperatives: India needs a fiscal plan harmonizing economic growth with environmental priorities; the 16th FC is uniquely positioned to fulfill this critical role.
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