Guest Blog : Unlocking India’s Green Recovery

LEAD at Krea University, July 1, 2021

Unlocking India’s Green Recovery : Bridging Global Approaches with Local Priorities

With the second wave of the pandemic devastating the Indian economy further, policymakers need to revisit stimulus packages and draw lessons from emerging green recovery  practices from across the globe. Green recovery strategies are short-term stimulus that can aid economic recovery post a crisis in an environmentally beneficial manner helping to channel public/private funds into green opportunities that augment outcomes like job creation, climate adaptation and build resilience to economic downturns. While there is renewed focus on green recovery in light of COVID-19 and the associated economic downturn, almost 97% of post COVID spending on green recovery is concentrated in developed countries.

Limited public finance and lack of motivation from private players are the biggest bottlenecks to the adoption of green recovery pathways in developing countries. Nonetheless, recent developments and new funding opportunities in the green economy landscape are promising for countries like India. There is growing acknowledgment amongst the private sector  and commercial banks on the potential of green investments in the country. This may be because of studies estimating higher returns on investment and improved impact from green initiatives in developing countries viz-a-viz developed nations. Newer financial tools like Green Bonds and Environmental, Social and Governance (ESG) based investments are being looked at to promote green recovery interventions. In addition, multilateral institutions such as the World Bank and IMF have pledged funds for developing countries to advance green recovery plans—but this has come with a caveat. Countries are required to produce context-specific, financially viable and outcome-driven strategies that align with green recovery objectives.

COVID recovery packages have so far focused on immediate solutions such as promoting enterprise-based credit and  mining and coal subsidies without taking environment or climate considerations into account. Such measures are welcome, but they can also potentially contribute to negative spillovers on national green commitments in the short term and even the long term. This article makes the point that tweaking green recovery strategies according to stakeholder priorities can provide promising green recovery avenues.

Priority areas across global Green Recovery frameworks

The term “Green Recovery” is certainly not new. It has been increasingly used for stimulus packages post the 2008 financial crisis to create a recovery that is both green and sustainable. Table 1 illustrates the priorities of key green recovery frameworks announced post the pandemic.

Most frameworks have prioritized multiple attributes, and their overall aim is to identify a ‘sweet spot’ that seeks to balance short-term gains with long-term priorities:

• Not surprising, with over 114 million job losses in 2020, job creation has been the primary focus of most green recovery strategies. Broadly, the emphasis has been on the ability of green projects to be more labour intensive than ‘brown’ (environmentally degrading) projects, and hence employ more people.
• Environmental benefits are second in priority and range from ecological restoration in degraded spaces (most preferred across frameworks) to improving current infrastructure through green buildings (least preferred). The main reason for this is that the former priority provides more jobs than the latter. The strategies also seek to combat climate risk, through climate adaptation mitigation and strategies and are also expected to directly and indirectly provide jobs.
• Although the strategies discuss building economic resilience to disasters and future pandemics, limited interventions have been identified. Similarly, the economic viability of interventions and the need to channel limited funds into effective outcomes has received limited importance, until recently.

Stakeholder Priorities for Green Strategies in India

Green strategies are referred to as the overarching set of green interventions initiated prior to the pandemic. Previously, the adoption of India’s green strategy  was achieved by matching the vision of  key stakeholders including the government, private investors and commercial banks with critical climate action required in the country. In a similar vein, now, it is time to look at green strategies and identify those that align with local stakeholder priorities for pre-pandemic and green recovery frameworks.

Additionally, we also illustrate the current trend of COVID spending across strategies. The trend is estimated as the difference between green and brown spending for each strategy. For instance, both mining and land restoration are expected to impact sustainable land use. Currently, the spending on mining (brown) is greater than spending for restoration (green), which is reflected by  the brown shade for post COVID stimulus trends under sustainable land use strategies. Similarly, estimates for other strategies are derived from the Vivid Economics study on ‘Greenness of Stimulus Index 2021’. Strategies that have higher stakeholder priority and reflect brown trends in the current stimulus packages can be immediate green recovery avenues.

Table 2(A) illustrates the pre-pandemic investments of stakeholders across key green strategies in India. Table 2(B) compares the overall stakeholder priority (sum of individual priorities) across strategies with the current trends of India’s stimulus packages.

Juxtaposing the priorities of the global GR frameworks (Table 1) with the findings from Table (2A) and (2B) suggests that:

• Clean energy generation like solar, wind and other renewable technologies are (were) prominent across stakeholders in India having received the most attention in the last decade. Stakeholders can have a strong motivation to scale up or create surrounding ecosystems (like solar irrigation pumps) as a part of GR strategies. That being said, clean energy generationmay not provide as many jobs and (or) augment economic resilience like sustainable land use strategies. The latter is constrained by the lower priority among stakeholders. Notwithstanding the differences, these two strategies are the closest match for green recovery in India.
• Green buildings and transport rank second according to pre-pandemic stakeholder priorities, but they may not align with the green recovery priorities like job creation and economic resilience. In contrast, climate adaptation strategies that have been the least priority among stakeholders align most with the job creation and building resilience. Such synergies and tradeoffs have been discussed and verified with few stakeholders but a detailed perception survey is out of the scope of this article.
• Based on the share of financial outlays, it is evident that not all stakeholders are equal. Both commercial banksand the government combine for ~70% of green strategies; aligning with their vision and motivation may be more ‘valuable’ than other stakeholders. Although international investors may consist of only ~15% of the funding, they are expected to play a significant role in promoting GR in developing countries.
• India’s current stimulus outlays have been dominated by the promotion of brown strategies like coal subsidies and mining to boost economic recovery. Aligning them with the aggregate stakeholder priority indicates added potential forclean energy generation and sustainable land use activities for India’s green recovery.

The Road Ahead to India’s Green Recovery

The adoption of post pandemic recovery strategies in India has been low owing to several challenges, the most critical being the lack of availability of (green) finance. Recent developments in GR literature are promising but come with the caveat that developing countries must produce feasible, financially viable and outcome driven action plans to attract GR funds.

A review of green recovery frameworks indicated that most organizations prioritize job creation with a focus on increasing employment levels via green projects. In decreasing order of priority, environmental degradation, climate risk and economic resilience are other focus areas.

Juxtaposing GR priorities with stakeholder priorities in India (prior to the pandemic) indicate clean energy generation and ecological restoration as matching ‘broad’ strategies. Based on the share of financial outlays, both commercial banks and the government combine for 70%; international organizations only account for 15% of the current green funding in India. That being said, as per World Bank and IMF, aligning green recovery strategies with these three stakeholder priorities can play a significant role in promoting green recovery in developing countries like India. Based on the current stimulus outlays in India and aggregate stakeholder priority, there is potential for clean energy generation and sustainable land use practices for India’s green recovery.

Endnotes:

i) During a crisis, the common consensus among nations with limited availability of finances is to boost the economy, notwithstanding the impact on the environment. This has paved the way for polluting and environmentally degrading policies and interventions or brown recovery strategies. There is competition among developing countries to adopt the least stringent environmental laws and policies to attract these highly polluting industries to their country. This is infamously called the race to the bottom strategy

ii) The strategies have been clubbed into five broad categories and they cover the main themes of the  latest India’s green taxonomy published by the Climate Policy Initiative (2020).

This blog has been authored by:

Akshay M, Senior Research Associate, LEAD at Krea University
Divyanshi Vohra, Research Assistant, LEAD at Krea University
Rahul Muralidharan, Research Fellow, LEAD at Krea University
in collaboration with Vivek Venkata Ramani, Climate Resilience and Finance Expert