The Union Budget 2023-24 is expected to be a barometer for the Central Government’s policy commitments towards the conservation of environment and sustainable development. The public policy challenge for the government is how to strike a balance between economic growth and sustainable development, which are at variance due to the onslaught of climate change and its increasing economic costs. On the one hand, the government wants to achieve a $5-trillion economy by 2025 and $26 trillion by 2047; on the other, it has set a target of net-zero emissions by 2070. A balanced Budget which intertwines economic growth with inclusive and sustainable development for restoring the ecosystems is needed.
The policy on LiFE is paradoxical as the govt has imposed market economy, yet it expects people to limit consumption for the sake of the environment.
Major expectations from the Union Budget include policy measures for fulfilling commitments to the United Nations Framework Convention on Climate Change (UNFCC) in its first Nationally Determined Contribution under the Paris Agreement (2021-30). The climate commitments include a mass movement for ‘LiFE’ (Lifestyle for Environment), a reduction in the emission intensity of its GDP by 45% by 2030 from the 2005 level, and the creation of an additional carbon sink of 2.5-3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030.
The policy on LiFE is a paradoxical notion as the government has imposed market economy (mass production and consumption), yet it expects people to limit consumption and change their lifestyle for the sake of the environment. Lifestyle changes can gradually happen with changes in the foundations of neo-classical economic policies which need to be reoriented towards a green and sustainable development model of economic development.
India’s 40% poor, particularly the vulnerable communities, continue to suffer in silence the impact of climate change with their limited economic resilience. The Sustainable Development Goals have failed to improve society at large due to lack of budgetary commitments and most of them cannot be achieved by the target year of 2030, including the goals of ending poverty and ensuring zero hunger.
Creating an additional carbon sink is another ambitious climate policy commitment. Currently, India’s forest and tree cover is 80.9 million hectares, which is 24.62% of the country’s area. The increase in the forest cover has been mainly due to a change in the methodology of assessing the forest along with tree cover. The government aims to bring 33% of the area under forest and tree covers by restorating 26 million hectares of wasteland. This effort requires a huge budget support to increase the area under forest to 106.9 million hectares. The innovative financing approach, including economic incentive schemes, can help bring an additional 10 per cent of the area under forest land.
India being a land-scarce country and the cost of afforestation being very high on degraded land, the government may incentivise the farmers to cultivate trees on their private lands and it can be compensated either by making a payment for the ecosystem services (regulated market) or a provision to earn carbon credits from the voluntary carbon market. The government can pay the farmers and, in turn, earn carbon credits at the aggregate level from developed countries. For example, if a farmer grows 500 trees on an acre of his land, the payment for the ecosystem services can be worked out at Rs 120 per tree, which is Rs 60,000 per annum; or, it can be worked out based on the carbon offset by the trees or forests. An annual expenditure of Rs 741 crore is required to target 500 sq km or 1,23,553 acres of forests on private land per annum.
Further, India intends to reduce the emission intensity of its GDP by 45% by 2030. But, in reality, the environment sector is the worst affected in recent years. The Environmental Performance Index of 2022 placed India at the last position among the 180 nations, with a score of 18.9 out of 100. The major cities of India are highly polluted and beyond the carrying capacity to make them livable.
The National Clean Air Programme (NCAP) has been implemented in major cities with the target of 20-30% reduction in suspended particulate matter (SPM) by 2024. However, there has been a considerable rise in the SPM and RSPM (respiratory suspended particulate matter) levels in many cities. Vehicular emissions have choked metropolitan cities and traffic jams are common, raising health and economic costs due to fuel combustion and productive hours lost, apart from the rising temperature.
The Indian economy has already moved on to the high growth rate or high-carbon economy, with a high per capita energy consumption followed by high ecological footprints in terms of per capita emission of CO2. This is reflected in serious environmental degradation and negative externalities which are on the rise and imposing a social cost, such as health costs.
Despite various reports, including the sixth Assessment Report of the Intergovernmental Panel on Climate Change, warning of serious economic disruptions in the subcontinent, the government seems to have not taken climate change very seriously in the policy domain. There is no expert panel to study the economic implications of climate change for the Indian economy, whereas the UK Government has seriously considered the recommendations of the Sir Nicholas Stern report on the Economics of Climate Change. India needs to de-learn a lesson from the western country as our economic security largely relies on environmental sustainability and the budget allocation for this sector reflects the genuineness of the policy commitments.
Thus, environmental and sustainable development programmes such as SDGs and programmes on climate change, afforestation, clean energy and national clean air should receive a fair share of 2 per cent of the Budget, amounting to Rs 80,000 crore.