VIZAG: India has a common framework for climate vulnerability assessments but hasn’t yet established one on climate risk. It also lacks a systematic methodology for evaluating the extent to which development programmes address climate risk and vulnerability. Besides, there are funding gaps in climate adaptation measures at the national and sub-national levels.
A recent report titled “Financing Adaptation in India,” by the Climate Policy Initiative, suggests various actions to mitigate the impacts of climate change and ensure sustained economic growth. It recommends that the 16th Finance Commission include adaptation-related interventions as a variable when setting the criteria and formula for devolution of funds to state governments.
Besides, time-bound climate-incentivised borrowing ceilings that account for state-specific climate risk and vulnerabilities could be introduced, it suggests. It also advocates developing robust green finance data infrastructure to enhance transparency and informed decision-making. The report highlights the importance of refining investment needs and prioritising sector-specific adaptation actions through State Action Plans on Climate Change updates. However, challenges such as inconsistencies in budget estimates and the absence of clear differentiation between adaptation and mitigation interventions hinder accurate assessment of funding gaps at the state level.
It identifies substantial investment needs for adaptation measures at the state level, with six states alone requiring $5.5 billion annually until 2030. The estimated annual adaptation investment needs for these six states from 2021 to 2030 are: Odisha Rs 198.9 billion, Tamil Nadu Rs 176.6 billion, Kerala Rs 48 billion, Haryana Rs 10.2 billion, Himachal Pradesh Rs 9.5 billion, and Goa Rs 1.5 billion, bringing the total needed investment across these states to Rs 444.7 billion. However, challenges such as the 2019-20 economic slowdown and the Covid pandemic have strained state finances, impeding their ability to invest in adaptation measures. Furthermore, borrowing constraints and pressure to reduce debt burdens exacerbate the funding gap further.
Uma Pal, co-author of the report, noted, “India’s common framework for vulnerability assessments has paved the way for adaptation planning at the sub-national and local levels. The need of the hour is to establish a framework for physical risk assessment and introduce methodologies for categorising adaptation action to enable risk-informed decision-making and increase adaptation finance flows.”
India has made significant strides in integrating adaptation into broader development goals. The country has formulated initiatives such as the National Action Plan on Climate Change (NAPCC) and frameworks for sovereign green bonds to mainstream adaptation into development planning. However, harmonising methodologies, improving data availability, and enhancing institutional capacities are essential for effective adaptation planning and implementation, it states.
The report delves into the financial landscape of climate change adaptation in states, discussing sources of adaptation finance, including domestic and international funds, central and state government budgets, and various climate-dedicated funds. It emphasises the significance of state budgets for adaptation, given the substantial contribution of states to public expenditure in this regard.
Out-of-the-box ideas
16th Finance Commission could include adaptation-related interventions as a variable when setting the criteria for devolution of funds to state govts
Introduction of time-bound climate-incentivised borrowing ceilings that account for state-specific climate risk and vulnerabilities
Building comprehensive green finance data
Deploying mechanisms such as PPPs and blended financing, and offer assurance of minimum investment return, or assured revenues, to spur private capital in climate adaptation