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CFI Newsletter #13: The IPCC Edition
What are the key takeaways for India from the IPCC Report + what does the report mean for climate finance?
The Climate Finance Initiative Newsletter offers quick digests and insights around what is happening in climate finance. While the Climate Finance Initiative’s current focus of work is India-centric, we will capture a global perspective of climate finance in this newsletter on a fortnightly basis.
From deep-dives on the meanings of terminology used, to blaring doomsday predictions, the IPCC 6th Assessment Report may only be a week old, but it has been dissected more finely than a Michelin-star chef cutting vegetables.
The report does make for some grim reading, but theres is some solace when IPCC says that all is not lost, but the time for stringent action needs to happen today. If this is not a wake-up call for policymakers and businesses to get their act together, we are not sure what will be.
This edition of the CFI Newsletter is a special edition focused around the implications of the 6th IPCC Assessment Report, where we pick highlights from report on implications to India, and throw a light on something that has been little spoken about: “What does the report mean for Climate Finance?”
Takeaways for India from the IPCC Report
1. More heatwaves
Like every other part of the world, India will face an increase in temperature and witness more extreme weather events. The IPCC has been cautious not to specify targeted increases for specific regions, but the report predicts that global warming will cause an increase in temperature in every part of the world. While the extent of temperature rise may vary, it is almost certain that temperatures will rise across the world, causing heatwaves in many parts.
Heatwaves and humid heat stress will be more intense and frequent during the 21st century. For India, these heatwaves - being called "extreme heatwaves" due to how much hotter they will be compared to heatwaves in the past - are the first challenge.
Heatwaves cause damage to agriculture and also affect human health through heat-related illnesses - a study published in the Lancet indicated that already 84,000 deaths a year in India are related to high temperatures; a staggering 640,000 deaths are related to exposure to cold conditions.
2. Sea levels rise
Sea level rise and the impact on India’s coastal cities is probably the biggest existential crisis facing the country. It said that Mumbai and Chennai have had 0.58 and 0.57 meters of sea level rise, the highest among the metros. This was followed by Kolkata with 0.15 meter rise.
From the IPCC data, NASA has postulated that cities like Mumbai and Chennai (incidentally the two cities where Simmi and Shravan live) are likely to face water level increases of around 2 feet by the end of the century.
For every $1 spent on flood mitigation, it has also been estimated that India could avoid the equivalent of $248 in damages.
3. More extreme weather
The Indian Ocean is warming at a higher rate compared to the global average which will lead to tropical cyclones intensifying more rapidly, with higher storm surges, strong winds, and extreme rainfall. Extreme rainfall events are rising at the rate of 7% with every 1 degree C of warming.
Increasing air pollution has reduced the intensity as well as frequency of monsoon rains in India and the rest of south Asia between 1950 and 2000, but climate models for the future reflect that monsoon rainfall will increase due to warming temperatures leading to more extreme weather events, such as cyclones.
Floods caused by extreme rainfall, pluvial floods, are set to increase, straining Indian cities that already suffer from flooding due to faulty water management and poor drainage / sewage infrastructure.
Urbanisation has pushed up intense rainfall in cities across South Asia, as cities generate more low-level moisture that increases ‘heavy rainfall’ instances over the area.
The snowcaps of the Himalayas will start to thaw, but little research has been conducted on how melting glaciers will affect the India’s river systems and cases around flooding.
The authors of the IPCC Report acknowledge that this may sound alarmist to some, but we cannot afford excessive dispassion and caution — a tendency that has been called ‘scientific reticence’— in communicating the very plausible threats due to the human-induced warming.
THE BIG READ
What does the IPCC Report mean for Climate Finance?
Predicting the world of policy changes and adaptation finance post the IPCC report
Hundreds of news reports and articles have already been written on the IPCC report and its implications. So you are probably wondering why we need yet another analysis in this newsletter. We started with the same thought but as we read article after article, we felt there was a missing piece. While there is ample print and internet space devoted to distilling all the different ways humanity will have to evolve to survive the impact of climate change, there isn’t much telling us how this will all be funded.
So we felt it was worthwhile spending some time on how climate finance needs to evolve to respond to the threats and challenges that the IPCC report outlines, particularly as it pertains to India. These are our key takeaways:
Policy direction needs to become clearer
The Indian government response to the IPCC has largely been the one to blame developed nations for the current stage of emissions. However, past sins aside, climate change is no longer a national problem. Given that the IPCC report deals with how cities and most of India’s population will be adversely affected, there is a clear need to deal with flooding, droughts, crop losses, and increased number of climate refugees that are predicated in the next 10-15 years.
Professor Subimal Ghosh, one of the authors of the IPCC report, highlights the following main areas that India now needs to now work on in terms of its climate policy:
Adaptation to extreme weather events caused by climate change.
A resilience plan, especially for urban areas.
Increase climate services.
A plan for areas facing "compound climate extremes".
India’s climate response - through the national solar mission and the newly announced green hydrogen policy - has largely focused on reducing fossil fuel usage. What the IPCC report tells us with near certainty is that extreme weather events will happen in the next two decades and policymakers need to shift their focus to build infrastructure to adapt: water, flood management, sanitation and food security.
We at CFI are proponents of private investments and market based returns but we will admit that these are components to the climate response that can only be classified as public goods that need to be funded through government budgets.
Clear policy direction, however, plays another critical role in finance: private investors who finance long payback projects, e.g. water infrastructure, will need assurance that adverse policy changes will not impact their revenues and profits years in the future. If Indian government were to put thought and finance behind the concern areas highlighted in the IPCC report, it will have a multiplier effect of bringing additional private investment in infrastructure and its supply chain.
Adaptation financing could finally take off
Climate change mitigation efforts have been easier to fund since the investments in renewables and electric vehicles have a clear economic case of either a lower cost or higher lifetime savings compared to their fossil fuel driven counterparts. Even where economic benefits are not clearly visible for more innovative solutions, there are still impact benefits that show emission reduction and benefit from the growing demand for instruments like carbon offset credits.
Adaptation is far more difficult. Unlike the MWs of renewable elecricity capacity and number of electric vehicles, investments in sustainable cities, water, waste and food supply chains are difficult to quantify and measure. There are also interventions being built to protect against a probable future use case so immediate economic benefits are hard to see.
This could change when the IPCC report confirms that it is no longer a case of ‘your city might flood’ but rather a certainty that ‘sea levels will rise and there will be flooding’. This could just be the prompt that governments and corporations need to invest in adaptation infrastructure. We are also starting to see instance of insurance companies build in climate change scenarios and costs. So it might actually become more costly to insure cities and buildings and infrastructure as it stands today, creating a push for investors in climate resilient assets and supply chains.
CFI’s State of Climate Finance Report, published in November 2020, estimated the need for private finance for climate adaptation in cities and agriculture alone at USD 610 billion by 2030. If this sounds like a lot, India’s own declared cost for climate action (public and private financing for mitigation and adaptation activities) by 2030 as part of its 2015 Nationally Determined Contributions was USD 2.5 trillion. This is your regular reminder that we are still yet to submit the 2020 update to the NDCs that allows us to understand how India looks to scale its priorities, 5 years on from first setting them out.
Leveraging Progress in other sectors
India has a thriving financial inclusion and fintech (financial technology) ecosystem. Microfinance companies and small banks reach remote populations, and fintechs are building lending and payment solutions that have scaled to cater to millions of underserved individuals. India has three pillars that are being used by financial services and consumer goods sellers alike: the Aadhar digital identify system, a widespread adoption of bank accounts, and widespread and affordable mobile phone/data networks.
This provides a strong basis to build climate solutions around climate migration and disaster relief for the masses.
Similarly, education and information will be key components to help farmers, fishermen and small businesses avoid losses from climate events. India has spent decades building a public-private skilling network through National Skill Development Corporation. This is a network that is waiting to be leveraged for disseminating climate adaption skills.
They key lesson here is that every sector and every business will be impacted by climate events and we need to re-tool the infrastructure and information networks to make them effective in a world moving to more hostile climates.
Is there more that needs to be done? Of course! Beyond the areas we lay out, there is a need to:
build a concrete plan to shift away from coal;
support innovations that draw carbon back from the atmosphere;
build forest cover to absorb emissions;
save lives and livelihoods as cyclones and floods and heatwaves continue to increase - a more near-term priority perhaps
create a clear policy direction on infrastructure across cities and states on India that deploy tax money effectively and also catalyses private investment where it is most needed.
It will also help if India can commit to a deadline to the international community on when it will revise its emission targets and achieve the global promise of zero net carbon.
If there is one takeaway that the scientists writing the IPCC report need us to remember, it’s the need for speedy action. What India needs is an immediate, comprehensive action plan for both emission reduction and adaptation, and a clear policy direction. With that in place, the funding will follow.
Engaging with CFI
As always, if you are keen to engage or talk to us on our work plans (check out the deck here) or if you have something of your own to collaborate on, reach out to us below!
That’s it for Edition #13 of our newsletter.
As always, send all feedback, compliments and brickbats our way. And of course, we do appreciate you spreading the word about this newsletter.
We’re growing to build something collaborative with you and the more the merrier!
Simmi Sareen and Shravan Shankar