To combat climate challenges, the Finance Commission needs to step up
- In recent years, India has been a leading participant in global efforts to improve forest cover and combat climate change.
- These initiatives have contributed to building resilience of communities and ecosystems.
Role of Fiscal Federalism and Finance Commission (FC)
- Fiscal federalism, managed by the Finance Commission (FC), is crucial in balancing conservation costs with state revenue and expenditure needs.
- Past FCs allocated funds for forest conservation, with the 15th FC allocating 10% of the central tax pool to ecology and forests, making it a significant Payment for Ecosystem Services (PES) system globally.
- The Commission also gave grants to combat air pollution.
Importance of the 16th Finance Commission
- The 16th FC, appointed recently, comes at a critical juncture as India commits to reduce greenhouse gas emissions and build additional carbon sinks by 2030.
- The commission can play a pivotal role in shaping the National Carbon Market and Green Credit Market, aligning with the Paris Agreement.
Proposed Actions for the 16th FC
- Include climate vulnerability and emission intensity in the tax devolution formula to align with India's Nationally Determined Contributions (NDCs) under the Paris Pact.
- Consider performance-based grants for sectors crucial to achieving NDCs and Sustainable Development Goals (SDGs), with a focus on clean energy.
Addressing Specific Climate Challenges
- Allocate funds for innovative solutions to combat crop burning, mangrove restoration and forest fires exacerbated by climate change.
- Leverage scientific data on climate vulnerability and pollution inventories to design a performance-based fund allocation system.
Transforming the FC's Role
- The 16th FC should evolve from a conventional fiscal arbitrator to an orchestrator of India's climate readiness.
- A fiscal blueprint is crucial aligning economic growth with environmental imperatives, positioning the 16th FC as the ideal mechanism for this transformation.