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CFI Newsletter #4: A Climate Farm Bill
+ Green jobs, Investors taking action against carbon-intensive companies, climate refugees in India
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.
We like our feel-good stories, and whales do make us feel good. And now we know that the world's largest animals help to take carbon dioxide out of the atmosphere, by storing carbon in their bodies acting as moving sequesters which remain in the deep sea after they die. An IMF study put a dollar value on the carbon sequestered by a whale during its lifetime, which with other benefits like better fisheries and ecotourism, the average great whale is worth more than USD2 million, with the entire global stock amounting to over USD1 trillion.
A word of warning: the feel-good nature of this newsletter edition is downhill from here. PS. personal reasons and an upcoming wedding mean this edition is a few days late.
Climate Finance by the Numbers
The global energy sector in 2018 was estimated to support 58 million jobs, with around half in the fossil fuels sector. In a marked shift by 2050, renewable energy and energy efficiency sectors are expected to add 63 million jobs. Fossil fuel industry will lose 6 million jobs over the same period as we move to a cleantech friendly world.
India has the 4th largest renewable energy workforce and will be a big driver of this increase. Around 824,000 people, as estimated in 2017-18, are directly or indirectly employed in renewable energy activities in India, with hydropower (around 44% of employment), solar (25%), and biomass (10%) leading the way. Decentralized renewable energy companies employ as many workers - 95,000 - as the traditional utility-scale power sector; and this proportion is expected to more than double by 2022-23. The ILO estimates that based on current commitments, renewable energy in India alone could support 3 million jobs in India by 2030.
This promise is moot unless India gets these 3 million and more people to sufficient levels of skills for these green jobs. Education and skill development systems need to be designed for a new trained workforce; workers in sectors facing a “climate writing on the wall” need to be reskilled.
Green jobs in India has been present as a policy plank for a while, but its execution faces the usual weaknesses of inadequate funding, ineffective private sector linkages, and local-level policy disconnects - areas that need addressing sooner rather than later.
Shareholders voting against board members at a company’s lack of action on climate change risks is not new, but when the largest asset manager in the world does it, it is worth noticing and projecting how it is likely to become more mainstream.
In 2020, BlackRock identified 440 companies from its portfolio that were deemed carbon-intensive and voted 55 times against directors from 49 companies, while also putting 191 directors under review for potential down-votes in 2021 unless they had demonstrated enough progress in managing and reporting climate-related risks. In 2021, they look to scrutinize around 1,000 companies under the same carbon intensity lens.
It feels poetic that Milton Friedman’s adage that a “company’s responsibility is to its shareholders” will likely be one of the most influential ways for companies to shift away from a profit-only focused towards one that accounts for environmental positivity.
BlackRock’s stance - which includes more progressive actions of stopping the funding of coal power plants and increasing the ESG lens in investment decision making - and initiatives like the Net-Zero Asset Owner Alliance, indicates a shift that climate-positive investments will become the expectation in time. This hopefully is the beginning of the end for greenwashing. But the pace, scale, and actual impact of such stances still need to be seen.
BlackRock has a significant presence in India and it will be interesting to keep an eye on. The asset manager has already voiced criticisms over the State Bank of India’s intention to fund the Adani Group’s Carmichael Mine which has pretty much been rejected by most banks. It will be useful to see how BlackRock flexes its muscle in the country and on how Indian companies shift.
In a year of eye-opening, shocking statistics, this was one of the most shocking. 14 million people in India migrated in 2020 due to the impacts of climate change: sea-level rise, water stress, crop yield reductions, ecosystem loss, and drought.
Events like this make us stop thinking about climate change as a future occurrence and to look at it as something happening now.
The majority of the 14 million are people in poorer sections of society, with the brunt faced by women whose lack of land ownership, productive assets, and access to credit and information, increase their struggles from the impact of climate change. Further, the migrations are happening into already overcrowded urban areas.
Even with efforts around emission reduction, urgent action and investment is needed towards climate adaptation measures around water, agriculture, and rural and urban infrastructure. India’s cities will become more crowded than they are today, and the infrastructure required to provide adequate living conditions to climate refugees simply doesn’t exist.
The number of these climate refugees in India is expected to increase to between 26 to 42 million by 2050, depending on the effectiveness of our climate change mitigation efforts. Adaptation infrastructure will need to be captured not just in policy targets, but also in how we build financing solutions for startups that we hope will emerge in water, waste management and sustainable food segments.
THE BIG READ
A Climate Farm Bill
Climate change’s impact on agriculture will require a more concerted effort from the Government of India incorporate climate mitigation, adaptation, and resilience measures in the sector.
We at CFI HQ have been reading and following the protests and debates around the Farm Bills in India, which in brief faces a clash from one side claiming that reforms will increase rural development, investment, and increase autonomy for farmers, while the other side, which includes the farmer groups that are supposed to benefit, claim it will instead weaken their control in the face of big food corporations who purchase their crops.
The climate change impact on agriculture in India crops up quite quickly when reading about the Farm Bills. The impact of climate change is already being felt (see the climate refugees piece above) and agriculture in India, with its dependence on the monsoon and natural weather patterns for growing, is falling prey to it today. Climate resilience or climate action do not feature in these Farm Bills, so we thought we would do a bit of thinking on what a future Climate Farm Bill for India could cover.
We do not lack for solutions
As we covered in our report on The State of Climate Finance: A Roadmap to 2030 for Private Action:
Agriculture and food production have two critical implications from a climate action perspective. One, methane emissions occurring due to livestock rearing (enteric fermentation and manure management) and rice cultivation account for a significant proportion of our GHG emissions. Second, creating sustainable food supply and the accompanying infrastructure is a critical element of climate adaptation.
A study found that in 2012, India’s annual GHG emissions from agriculture and livestock stood at 481 megatonnes of CO2 equivalent, of which 42% came from crop production and 58% was emitted from livestock.
The issue does not lie in a lack of knowledge of solutions.
Organic farming and less drastically, biofertilizers or more efficient fertilizer use, tackles nitrogen inputs. Water use in rice paddies can be curtailed by avoiding continuous flooding which reduces methane emissions without affecting yield. Solar pumps and dehydrators are validated to reduce diesel and grid energy use. Tackling methane emissions in cows is a bit more future-focused, but solutions that advocate seaweed and insects as an alternative for soy feed have shown promising potential.
Even in the adaptation strategies for food and agriculture, we are not lacking for solutions: climate-resilient resistant crops, managing soil nutrients and erosion, controlling the spread of pests and disease, and investing in value chain activities like logistics will make for robust supply chains of sustainable food.
We lack effective adoption of solutions
The issue lies in solutions not being effectively adopted.
There are gaps in distilling knowledge and access to grassroots, behaviour biases to prevent shifting, missing or ineffective incentives to shift adoption - including addressing the politically sensitive ones around fertilizer subsidies and free electricity use for water - and of course ineffective financing support for adoption.
Even the zero to low-cost nature of solutions like efficient use of nitrogen fertiliser, adoption of zero-tillage practice in farmlands, and managing water use in rice fields - solutions that have the potential to reduce emissions by 43 megatonnes of CO2 emissions per year, equivalent to 30 million cars removed from roads every year - which, we repeat, involve little to no cost, are dependent on behaviour change and basic infrastructure interventions. Try having a conversation with farmers that to grow more and save costs they have to do less and be more efficient that goes against what they have been doing for years. With that bias, you can be expected to be received with scepticism.
A Roadmap to Climate-Positive Agriculture
There is a tendency for policy directions to be prescriptive with specific solutions to be implemented, e.g. the commitment to implement one hundred thousand solar pumps for farmers as part of India’s Intended Nationally Determined Contributions towards the Paris Agreement, which does not seem to have much other concrete planks towards climate mitigation in agriculture.
A Climate Farm Bill should prioritise reduction targets in key areas around climate mitigation and adaptation areas, with ample research available on climate change and agriculture in India from which intervention areas and investments - we estimate India will need USD 340 billion by 2030 - can be backcasted to address solutions.
More importantly, a Climate Farm Bill should also be prescriptive on the adoption of solutions to be easier and more accessible to farmers. This largely should focus on three areas:
better knowledge and market linkages for farmers to access products and technologies;
better incentive structures around agriculture, such as subsidies for adopting more sustainable practices, and;
a better environment for financing access for agriculture, from innovation support, growth capital, scale, to platforms for better access to loans and insurance.
We don’t have to wait for policy changes
While the Climate Farm Bill is something we dream of, there are luckily hundreds of startups who have chosen not to wait. In the last five years, the agritech ecosystem has evolved to include platforms that help farmers get access to better inputs and provide them with knowledge and guidance on how to grow more resilient, more relevant crops. There are others providing technology to process produce better - on-farm dehydrators and cold storages come to mind, and several others connecting farmers to new markets and buyers.
Though it takes a long time to build relationships and earn farmer trust, these young startups are building and growing their communities. Our only hope is that policy changes support and enhance these efforts. We need all hands on deck to grow our food supply, while continuing to reduce agricultural emissions over the next thirty years. Technologies exist; the devil now lies in implementing them at scale.
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Engaging with CFI
If you are interested to work with CFI, here’s a roadmap of CFI activities from Jan - Jun 2021. We are inviting you or anyone who you think might be interested to work with us on these activities.
Research and Thought Leadership:
Actionable research to provide thought leadership and improve the conversation around climate finance in India:
Research Series on Improving Climate Financing Structures in India
The CFI Newsletter
New Climate Finance Structures Pilots:
Pilot 3 models of financing and innovation structures to improve climate finance access in India.
Innovation Scale-up Fund
Climate Asset Financing Facility
Finishing School for Climate Data Analytics
For a more detailed look at these, check out the deck here.
That’s it for us this week. As always, send all feedback, compliments and brickbats our way. And of course, we do appreciate you spreading the word about this newsletter.
Simmi Sareen and Shravan Shankar