The net zero challenge

  • 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.
  • 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.
Question: Discuss the need and effectiveness of a carbon tax is in tackling global warming. Do you think measures like carbon tax are regressive in nature?
Syllabus mapping:
  • Subject: Economy (GS-III)
    • Sub-topic: Economic sectors and Open economy
  • Introduce with defining carbon tax and its significance
  • Mention how India’s growth projections and net-zero targets are conflicting in nature.
  • Suggest steps to be adopted for a coordinated approach.
  • Conclude with mentioning challenges in present taxation in environmental terms.

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