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Mitigation Instruments for Achieving India’s Climate and Development GoalsA White Paper by the Working Group on Mitigation Instruments

WGMI members, Vaibhav Chaturvedi
October 2019 | Low-Carbon Pathways

Suggested citation: WGMI. 2019. Mitigation Instruments for Achieving India’s Climate and Development Goals: A White Paper by the Working Group on Mitigation Instruments. New Delhi: Council on Energy, Environment and Water and Environmental Defense Fund.

Overview

In this paper, the Working Group on Mitigation Instruments (WGMI) provides a framework to choose the appropriate mitigation instruments for India’s transition to a low-carbon economy. The white paper, developed in collaboration with the Environmental Defense Fund (EDF) and supported by Shakti Sustainable Energy Foundation, builds on the literature available to compare specific instruments in the Indian context and move towards a balanced and informed narrative. The framework has been developed with a view to align the objectives of sustainable development with greenhouse gas (GHG) mitigation.

India, with competing priorities around limited resources, has to ensure it chooses appropriate and cost-effective options for low-carbon development as per the Paris Agreement. The Working Group on Mitigation Instruments (WGMI) was constituted to deliberate on the potential mitigation instruments for India. Four WGMI deliberations focused on different mitigation instruments for identifying the strengths and weaknesses of each with a special focus on Indian conditions.

Framework for the choice of mitigation instrument.

Source: WGMI’s deliberations, 2019

Key Highlights

  • The framework presented by the WGMI has six dimensions – distributional impacts, alignment with Indian economic structure, co-benefits and co-costs, impact on government budget and administrative burden, linkages with global developments, and feasibility of implementation.
  • The framework facilitates an approach through which experts can score the various dimensions of the framework for alternative mitigation instruments within the context of a specific policy objective
  • Development will be the guiding framework for a low-carbon transition in India.
  • Mitigation policies need to be developed and deployed to give clear and long-term policy signals to investors and stakeholders
  • The key mitigation instruments that are being implemented in India are: (i) Perform, Achieve and Trade (PAT), (ii) Renewable Energy Certificate (REC) trading scheme, (iii) coal cess, and (iv) sectoral incentives like feed-in tariffs (FiT), generation-based incentives (GBI), accelerated depreciation (AD) for solar and wind electricity.
  • Any mitigation intervention and associated instrument should make business sense.
  • Sectoral incentives do not put a direct price on carbon, they have been instrumental in reducing emissions in the Indian economy indirectly.
  • While evaluating the performance of an emissions trading scheme (ETS) system, the ultimate measure of performance should be emissions cap, not the price.
  • India will need to think how to address emissions from its small and medium industries, either through inclusion in the ETS or through other mechanisms that leverage the ETS, if it decides to go ahead with such a system
  • Understanding the potential economic, environmental and social co-benefits that could arise as a result of explicit design and implementation of an ETS could be useful for India.
  • Revenue management and distribution is arguably one of the most critical aspects of administering a carbon tax system.
  • Using Article 6 to reduce emissions within the scope of India’s Nationally Determined Contribution (NDC) will mean having to make accounting adjustments so that the mitigation is not counted towards India’s NDC targets.
  • Understanding a company’s baseline emissions is an essential building block for developing a company level mitigation strategy.
  • Mitigation by using revenue from an internally feasible level of carbon price along with complementary mitigation choices, not driven only by a carbon price, might be more effective.

Key Recommendations

  • List the stakeholders who could be impacted, assess the winners and losers, and explore ways to address the trade-offs through complementary policies while assessing mitigation instruments.
  • Mitigation instruments have to align well with the economic structure and policies of the government for it to succeed in the objective of mitigation.
  • Understand the co-benefits and co-costs while evaluating mitigation instruments.
  • Understand linkages with global developments to devise a domestic mitigation strategy.
  • Create a simple yet powerful index for quantitatively evaluating the mitigation instruments.
  • Engage with the broad stakeholder community to arrive at a representative score for alternative instruments.
A collective framework-based assessment, either through an online survey or in-person stakeholder roundtable discussion, would be instrumental in a structured comparison of alternative mitigation instruments and their perceived strengths and weaknesses.

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