Roadmap for Answer Writing
1. Introduction
- Define Climate Budgeting: Briefly explain the concept of climate budgeting, which involves identifying, classifying, and categorizing climate-related expenditures within the government budget.
- Context: Mention India’s lack of a formal framework for climate budgeting and the need to address climate change concerns within its development agenda.
2. Why Climate Budgeting is Necessary
- International Reporting Requirements:
- Explain how climate budgeting helps meet international reporting requirements like the Enhanced Transparency Framework (ETF) and Biennial Transparency Reports (BTR) under the UNFCCC.
- Fact: ETF encourages countries to report financial contributions towards national climate targets, thus making climate budgeting critical for India’s global commitments.
- Strengthening Climate Finance Instruments:
- Discuss how integrating climate finance into the budget strengthens frameworks for financial instruments such as green bonds and provides data to support climate investments.
- Fact: By identifying eligible projects, the government can track climate investments more effectively.
- Estimating the Climate Finance Gap:
- Explain how climate budgeting aids in estimating the finance gap for climate projects, providing data to improve the effectiveness of climate financing.
- Fact: Indonesia used climate budgeting to analyze its climate finance gap and promote innovative financial models.
- Robust Policy-Making:
- Show how quantifying investments needed to reduce sector-wide emissions helps prioritize climate actions and guide policymaking.
- Fact: Climate budgeting supports effective State Action Plans on Climate Change, which help manage climate finance and policy prioritization.
- Preventing Underreporting:
- Discuss the underreporting of climate-related expenditures and the importance of climate budgeting in addressing this issue.
- Fact: Programs like PMKSY (Pradhan Mantri Krishi Sinchayee Yojana) aimed at water conservation are not always classified as climate adaptation or mitigation initiatives, despite their significant co-benefits.
3. Examples of Existing Practices
- Mention states like Maharashtra, Assam, Chhattisgarh, Bihar, Odisha, and Kerala, which have already conducted budget coding exercises to track climate-relevant expenditures in development projects.
- Fact: These states track the climate relevance of their projects, highlighting the practical utility of climate budgeting at the state level.
4. Conclusion
- Summarize the importance of introducing a national climate budgeting framework for India to ensure transparency, accountability, and better management of climate finance, ultimately improving the integration of climate action into the country’s development process.
Relevant Facts for Answer
- Enhanced Transparency Framework (ETF): The ETF under the UNFCCC requires countries to report financial contributions towards their climate goals. Climate budgeting helps India meet these reporting obligations.
- Climate Finance Instruments: Climate budgeting supports frameworks like green bonds, ensuring that eligible projects are identified and tracked, enhancing climate investments.
- Climate Finance Gap: Countries like Indonesia have used climate budgeting to identify and address gaps in climate finance, promoting innovative financial models.
- State Action Plans on Climate Change: Climate budgeting helps prioritize actions in state-level plans, making the management of climate finance more robust.
- Underreporting of Climate Projects: Programs such as PMKSY (Pradhan Mantri Krishi Sinchayee Yojana), which focus on water conservation and climate adaptation, are often not reported as climate-related projects.
- State-Level Initiatives: Several Indian states, including Maharashtra, Assam, Chhattisgarh, Bihar, Odisha, and Kerala, have conducted budget coding exercises to track climate-relevant expenditures.
Model Answer
Introduction
Climate budgeting is essential for integrating climate concerns into India’s development agenda, as it helps identify, classify, and categorize climate-related expenditures within the government’s budgetary structure. This enables accurate estimation, diligent monitoring, and systematic tracking of climate-related finances. However, India currently lacks a specific framework or guidelines to allocate a budget for climate change interventions.
Reasons for Climate Budgeting
1. International Reporting Requirements
Climate budgeting can help India meet its international reporting obligations, such as the Enhanced Transparency Framework (ETF) under the UNFCCC. By tracking climate finance expenditures, India can efficiently report its contributions towards national climate targets in Biennial Transparency Reports (BTR), fulfilling global commitments.
2. Strengthening Climate Finance Frameworks
Integrating climate finance into the budget allows for better identification of eligible projects, enhancing frameworks like green bonds. This, in turn, facilitates investments in climate-friendly initiatives, ensuring that financial instruments align with climate goals.
3. Estimating the Climate Finance Gap
Climate budgeting enables the estimation of the finance gap, providing evidence of existing climate expenditures. For example, Indonesia used climate budgeting to analyze this gap, helping create innovative financial models to address the shortfall.
4. Robust Policy-Making
By quantifying investments required to reduce emissions, climate budgeting aids in prioritizing climate actions. This process supports the State Action Plans on Climate Change, allowing for better management of climate finance and more robust policy decisions.
5. Preventing Underreporting
Climate budgeting helps prevent the underreporting of development projects with significant climate co-benefits. For example, PMKSY (Pradhan Mantri Krishi Sinchayee Yojana), which focuses on water conservation, is not typically reported as a climate adaptation or mitigation initiative.
Conclusion
Several Indian states, such as Maharashtra, Assam, Chhattisgarh, Bihar, Odisha, and Kerala, have already initiated budget coding exercises to track the climate relevance of development projects. This emphasizes the need for a national framework for climate budgeting to improve transparency, accountability, and the effectiveness of climate finance management.