April 2022

The latest IPCC report on Mitigation of Climate Change provides an exhaustive list of solutions across the energy, buildings, transport, land and industrial sectors which show that it is possible to cut emissions quickly and cheaply. It is clear that the next few years are very critical for countries that are accelerating mitigation measures. Unless we accelerate mitigation across all sectors and regions, 1.5 will remain beyond reach.

Carbon Markets and Economic Instruments

Economic instruments include carbon pricing instruments, subsidies, etc. These pricing instruments now cover about 20% of global emissions, much of that is through emissions trading mechanisms, which are dominated by Europe and China. The new Chinese English is really making something very substantial, as well as carbon taxes. These have definitely been shown to be effective but they also work in complementary ways with regulations. The report talks about how you have carbon pricing instruments, but you also have regulations. These regulations are very widespread and actively used in sectoral policies such as building codes, energy efficiency standards including both performance standards as well as things like India’s bad performance trade scheme, which is a tradable regulatory mechanism with flexible instruments. There are hybrid things and these flexibility mechanisms definitely help the cost-effectiveness of those regulatory instruments. Coming back to the pricing instruments, an interesting finding of the report is that these carbon pricing instruments have incentivized low-cost emissions reductions, which is what they are designed for, in a sense, the lowest cost reductions but on their own without complementary instruments and at current carbon prices have not really been able to incentivize higher cost mitigation options. So for the scale of transition that you either need a much higher carbon price or you need complementary mechanisms to induce innovation such as we’ve seen in renewable energy feed-in tariffs and subsidies for certain technologies and so on. So again, it comes back to the point that there is no single silver bullet. We have to design these packages carefully and design them given a particular context. There’s been a lot of learning about how you design these market instruments better. Subsidies have also been used quite effectively, particularly for innovation.

Climate finance is critical but finance alone won’t shift things

IPCC’s Working Group III report sends out a clear message that the global average investment is required to achieve 1.5°C or 2°C by 2030, the current projections show that the flow of finance is 3 to 6 times less than required on a global average basis at present. The finance shortage is across the globe but the gap is relatively higher in developing regions like Asia, Africa and Latin America. It is a substantial problem to mobilise necessary finance. However, we should read this issue in conjunction with enabling conditions that include finance, technology and innovation, institutions and policy, all have to work together. We cannot mobilise finance individually as it would not work and vice-versa. This needs to include a transition that is just. Hence, the language of development pathways is important because it talks about shifting the whole approach to lining up all these things in ways that enable transitions that are both low carbon, sustainable and just.

When we look at finance, we have to make a choice on what we are investing in it. This report provides evidence of what those investments can be. For eg: When building a city or settlement, you will plan your roads, infrastructure and service access. That will determine the nature of the investment. SPM Fig 6 shows that different sectors can have granular technology applications and infrastructure design to provide access to people so that their increasing demand for well-being doesn’t conflict with reducing emissions but in fact creates more jobs and opportunities. We need to look at the economy-wide impact of financial investment. Finance mobilisation will depend on how you are making a choice on where you want to invest. Chapter 5 gives examples of how public transit systems can be more secure, and comfortable and also reduce the carbon footprint for every individual. We talk of finance as a constraint, but it would really be useful if we look into how we shift our developmental choices, how we involve people in the whole process and then how we can make the financial arrangements. It is not always that we need a lot of finance. We have shown that there are many options where the cost of mitigation is very low as compared to the damages the impact could have had.

Net Zero

You cannot talk about Net Zero alone; you have to look at what is happening in the short run and to the extent that Net Zero is a useful way of mobilising sub-national actors. There have been lots of initiatives at the city level, lots of transnational initiatives and all of these things contribute to the formulation of Net Zero targets. It’s important that they be credible and don’t have leakage effects where reducing emissions in one place displaces emissions to another place. The key message is that to stabilize the climate, you need to reach Net Zero but the immediate short-term issue is what are we going to do in 2030. One has to have both conversations, particularly for countries like India who are on the upslope of emissions which translates to a question not of reducing emissions, but of avoiding emissions.

Carbon Dioxide Removal Technology

One thing is very clear that for Net Zero, the Carbon Dioxide Removal (CDR) technology will have a very important role to play. On the other side, we must see what we can do to reduce the burden on the supply and look into the demand so that more known, less-risky and off the shelf options can be implemented. Chapter five is about off the shelf and development oriented solutions, which will advance development, create employment, increase investment, but in a cleaner way. CDR is also talking about a cleaner way, but it is for the first time IPCC has come up with so much scientific information on CDR. So there can be biological methods, which include reforestation, afforestation, which we say very clearly. But then there are also others and all these have different layers of cost implication. If we are talking about the solutions, which reduce the cost burden and increase the benefit, then we need to really compare among the different options available and countries have to make a choice. Countries also must decide how much they want to scale up CDR. If you think you can be oblivious to emissions and capture all by planting trees, then you may not have a human settlement and land full of trees. So there are several challenges in large scale deployment of CDR methods. Or what we can do is reduce the emissions to begin with, so we do not have to remove it from the atmosphere and that’s why Chapter Five is very important because it is about how you can reduce emissions by involving people. So it is for countries to decide if we need a cleaner city with less air pollution, electrification, active mobility, a walkable city or do we go for carbon dioxide removal and fossil fuel use. The report has made a very comprehensive assessment of all the different CDR methods, and so how to combine, monitor, evaluate and govern them has become a major scientific evidence from this report, which can be very useful for decision makers.