“Mitigating Carbon Emissions in India: The Case for Green Financial Instruments”

New Delhi, 18th of February 2013
Please find here the link to download the report.

Executive Summary
With the sun gradually setting on the Kyoto Protocol (Phase One), it has become quite apparent that the global response to resource scarcity and climate change is going to be variable and disaggregated. Increasingly, countries and businesses across the globe are adopting various financial mechanisms and policies in order to manage such challenges. However, many such responses are restricted to advanced, developed countries, whereas the effects of climate change and the increasing cost of resources such as fossil fuels are likely to be more severe for developing countries. This dichotomy in response measures needs to be urgently addressed, and this report is an attempt to highlight the benefits of an inclusive growth oriented financial response mechanism with particular focus on India.

In its first chapter the report briefly outlines the relevance of GHG emissions mitigation through in- clusive market based mechanisms in India. With shifting patterns of economic growth and increased global demand volatility companies and investors in emerging economies, such as India, need to rec- ognise the value created through the supply chain of business deliverables by mitigating emissions. Mechanisms which exclude companies that do not meet global benchmarks, whether by way of share- holder advocacy and investment exclusion, or regulatory policies, will have a significant impact on the way that these companies choose to grow.

Low carbon strategies can only be implemented if the emissions landscape and its effects on sustainable growth are clearly defined and understood. The second chapter outlines emissions trends in India in order to map the carbon landscape and set the context for the rest of the discourse. Chapter 3 examines the trends of energy consumption and emissions at a sector specific and firm specific level (within the assessed sector). It is found that firms in the assessed sector (cement) are operating in sub optimal con- ditions, along with a lack of policy frameworks and market based emissions reduction incentives – there are no indigenous market based mechanisms to incentivise and stimulate change.
A firm level case study of one of the bigger private players in the Indian cement sector has revealed that the firm’s financial performance could have been better. At the same time, capacity additions and increased output have caused the total emissions of the company to increase, which is not sufficiently offset by the revenue gains. As a result, the firm’s emissions intensity has been rising consistently for clinker production. However, enhanced use of additives has kept the overall GHG intensity of cement based revenue lower. The average emissions intensity of the company was higher for three years than the sector average for the same period. The high correlation between the firm’s environmental perfor- mance and its financial performance has been highlighted.
The results of chapter 3 are aligned with the philosophy that environmental performance must not be excluded from the range of parameters that are used by investors while choosing a stock, especially a long term investment. This is true since the two concepts are inherently interlinked under the overall aegis of sustainable growth. It highlights the need for developing market based mechanisms to signal investment opportunities based upon carbon efficiency and financial performance, as both tend to complement each other in the medium to long term.

Chapter four concludes that; companies preparing for risk are not risk averse, but rather are risk prepared. The difference is subtle but important. Market based mechanisms which incentivise good performance by channelling investments to firms that respond to risk better than their competitors in a given environment, help investors realise this distinction clearly. For “green” market mechanisms and investment vehicles to be viable and effective, they must efficiently ensure that the transmission mecha- nism works and only performance based, credible signals are relayed to the open markets. This becomes even more important in the context of a developing country due to the nascent capital markets, and urgent need for scaling up sustainability initiatives – both at the firm and policy levels.

Capital generation should not be looked at as the problem. Rather, redirecting existing and planned capital flows from traditional high-carbon to low-emission; resilient investment is the key challenge of financing transition to a low-emission economy. In order to facilitate such transitions, a universally replicable model will be used – a multipronged approach to achieve the above objectives. This would involve creation of innovative financial products based on purely quantitative data, create and publish sector wise and cross sectoral market reports, and facilitate progressive policy advocacy in order to en- able market realisation for its products. It will further seek to replicate the model in other developing countries through a hub and spoke approach to expansion.

BRICS, Columns/Op-Eds

BRICS, Steel, Mortar….and Money – Analysis of the 4th BRICS Summit in New Delhi

by Samir Saran and Vivan Sharan
4th of April 2012
Please find here the original link to the article.

With the Delhi Declaration, BRICS nations, which met recently in the Indian capital, have shown that they have the steel to stand up to traditional power structures, a cohesive vision to jointly respond to development challenges through institutionalisation of concrete mechanisms, and the determination to channel monetary power to strengthen markets, businesses and trade. The Declaration indeed gives insight into the gradual transformation of BRICS, from essentially a response mechanism crafted to address the various development challenges posed by the global financial crisis, to a forward looking entity seeking to enact and enable real global transformation.

The Delhi Declaration extends over 50 paragraphs which are all encompassing in some sense and address many relevant themes for BRICS countries and the developing world at large. The Declaration is significantly more impressive and comprehensive than the 16 paragraph Joint Statement of the BRICS Leaders at the first summit held at Yekaterinburg in 2009 and the sketchy and macro statement of purpose at Sanya last year. The Action Plan within the Delhi Declaration consists of 17 steps which will deepen intra-BRICS engagements. There are three prominent narratives that define the Delhi Declaration – reaffirmation of the UN framework for global governance, disappointment with financial regimes shaped in the mid 20th century and a confidence to tap into economic opportunities that exist within BRICS.

The Delhi Declaration has stamped the intent of BRICS nations to coordinate and collectively respond to global security challenges within appropriate frameworks that give precedence to fundamental principles such as international law, transparency and sovereignty. BRICS members have recognised and re-emphasised the centrality of the UN in dealing with regional tensions and they have explicitly outlined this for specific cases including the Arab-Israeli conflict, the Syrian imbroglio and the contentious Iranian nuclear programme.

The Declaration unambiguously states that “plurilateral initiatives” that go against the fundamental principles outlined earlier, will not be supported by BRICS. The Declaration is clearly against actions such as asymmetric trade protectionism, unilaterally imposed sanctions and taxes imposed on businesses. The EU’s Aviation Tax is one such example from contemporary policymaking. In terms of trade, there is strong emphasis on operating within legal instruments such as the WTO and institutions such as the UNCTAD for furthering the inclusive development efforts through consensus and technical cooperation.

The aftershocks from the financial crisis are still a cause of concern to the BRICS nations. The pre-occupation with Europe has distracted attention from the social transformation programmes and poverty alleviation efforts among BRICS members. The Delhi Declaration has spelt out the “immediate priority” of restoring market confidence and getting global growth back on track. The steps to address such concerns will include attempts to rebalance global savings and consumption, furthering of regulatory and supervisory oversight in the financial markets, increasing the voice of developing and emerging nations in global financial governance and the institutionalisation of financial mechanisms to redirect existing capital to tackle development imperatives.

The BRICS members have therefore announced a working group led by the Finance Ministers of the individual nations, in order to examine the “feasibility and viability” of a BRICS Development Bank. When formed, such an institution will likely be able to shift and contextualise the development discourse within and outside BRICS and therefore is one of the most significant actionable outcomes. It is evident that such a multilateral institution is not meant to compete with existing ones, but rather, to enhance lending and investment to create sustainable development trajectories. Contrary to expectations several high ranking Chinese policymakers, including the Assistant Foreign Minister, Ma Zhaoxu, have supported the idea.

The BRICS members have clearly outlined that the purpose and nature of Bretton Woods Institutions such as the World Bank, must shift from being essentially a mediation instrument to enable North-South cooperation, to one which can actually prioritise “development issues” and overcome the “donor-recipient dichotomy”. They have also called upon the World Bank to mobilize greater directed resources and enable development financing at reduced costs through financial innovations and improved lending practices. Indeed for BRICS, the focus on World Bank and IMF reforms has remained constant through the years, yet the Delhi Declaration articulates these concerns more lucidly than ever before.

Given that intra-BRICS trade has been consistently on the rise over the past decade, BRICS Leaders have endorsed the conclusion of the Master Agreement on Extending Credit Facility in Local Currency under the BRICS Interbank Cooperation Mechanism and the Multilateral Letter of Credit Confirmation Facility Agreement between their respective EXIM/Development Banks. Such steps to mitigate market risks and enable local currency transactions will only add to the existing momentum and build resilience in BRICS economies to global business cycle fluctuations and exchange rate volatilities. Notably, BRICS have also endorsed the market led efforts to set up a BRICS Exchange Alliance between the major stock exchanges of BRICS, which will enable investors to efficiently allocate capital across BRICS economies and invest in the BRICS growth story.

The unity and purpose of BRICS has been the target of speculation and scepticism from various quarters. With the Delhi Declaration, BRICS members have been able to assuage such doubts as they have begun to create a credible hedge against traditional global narratives of security and development. They have simultaneously been able to project that there is resolution within the group to deal with issues that are not only of immediate concern but even those that will need attention in the future. The Delhi Declaration paves the way for the institutionalisation of BRICS cooperation, making BRICS a significant transcontinental and politically united force. In Sanya BRICS spread wide to include South Africa; in Delhi they went deep to include substance.

Samir Saran is Vice-President and Vivan Sharan an Associate Fellow at Observer Research Foundation. The Foundation hosted the BRICS Academic Forum in March this year.

Non-Traditional Security, Politics / Globalisation

Samir chaired the ORF event ‘How should India meet the Maoist challenge?’, 2010

May 15, 2010
New Delhi

There is an urgent need to re-examine the current strategies of the government towards the Maoist challenge. This was noted during a roundtable discussion on “Meeting the Maoist Challenge: A Re-look at Current Strategy” on Friday, 14 May, 2010 organized by ORF. Focusing the discussion on how to tackle the Maoist challenge, it was noted that bad governance, misplaced development models, incorrect security measures, and perceptions of justice have all played a significant role in the growth of Maoism in India’s heartland.

Two issues came out prominently during the discussion. First, the current discourse on the Maoist challenge has been dominated by one view – the “paranoid view.” A consequence of this has been the complete absence of alternative views in the current strategies of the government. Second, contrary to the popular understanding and strategies, the discussion noted that the issue was not development but the sense of being denied justice and/or access to justice. Again, in contrast to the popular notion that the Maoist-Naxal problem was a law and order problem, it was noted that the issue is rather a problem of the obliteration of the politico-social structures of the tribal people.

Assessing the current strategies adopted by the Centre and various affected State Governments to counter the spread of the left wing extremist in more than 200 districts of India, a participant pointed out that the Salva Judum strategy of the government has been one of the main causes of the growth of Naxalism. It was pointed out that no rehabilitation and compensation has been made by the government of Chattisgarh to the people who had lost everything.

A participant pointed out that there is a general contempt among people towards the tribals which also was one of the reasons for the current state of affairs in the tribal areas. Another participant noted that there is a difference between cause and phenomenon. Commenting on the role of media, a participant noted that both print and electronic media have become indifferent to the Maoist issue. Further, the media has been fed by only one side – the police view – and reports often lacked balance.

The discussion questioned the “elitist development model” in tribal areas. It was noted that the current development model measured only by GDP growth and encourages corporate interests has destroyed the livelihood of the tribal people as most of their land were taken away for mining and other industrial projects. Both government and corporate had gone and uproot the tribals in their own land without showing any respect for the tribal people, their culture, their traditional knowledge, their civilisational strengths and their land.

The discussion suggested a multi-pronged strategy for the government. An admixture social, judicial, economic, political and security approaches have been suggested. Though the discussion also got trapped in the debate on what come first – security or development, it brought in other elements that go beyond the mere debate on security vs development.

It was noted that there was a need to broaden the medium of discussion on the Maoist challenge. It was felt that to develop a proper approach to tackle the issue, alternative voices need to be included while formulating strategies and policies. It was also noted that IB or police view alone is not enough but also one sided and that there was a need to include rights-based perspectives in government’s policies. It was noted that the issue was not pure economics but one of delivering rights.

On the political front, it was suggested that there was a need to re-look at the current governmental structures at the district and block levels. A participant suggested that the first priority of the government has to be to restore civil administration in the affected states and districts. A participant noted that change in government structures at the block level could be an effective way to ensure better representation of local people who are better placed to understand local issues and problems. Also, such as gesture could also give a sense of justice to the people. It was also suggested some autonomous areas could be created for the tribal people through that a sense of local control over its own people and resources could be ensured.

It was noted that there an urgent need for the government agencies to address the basic needs of the people. Education has been stressed in the tribal areas. It was suggested that the “elitist development model” in tribal areas need to be re-assessed. This mode of development has not created wealth but transferred wealth an there was a need for an alternative model of development where the local benefit.

The discussion has urged the government to deliver rights to the people. A participant has suggested that a judicial commission needs to be set up to address the issue of injustice that has been meted out on the people.

A participant noted that there was a need to re-look at the Salva Judum policy. Another participant pointed out that the traditional police force cannot deal with the Maoist challenge and there was a need for special training. A participant felt that there was a need for appropriate security force to deal with the Maoist problem to minimize collateral damage. Most of the participants felt the army should not be used also against the Maoists.

The discussion, presided by former Special Secretary Ministry of Home Affairs Mahendra Kumawat, ended with the note that development and security approaches need to include right-based approach in dealing with the Maoist challenge.

Participants included Mr. D.M. Mitra, Mr. Mohan Guruswamy, Dr. Nandini Sundar, Mr. Dilip Kumar, Mr. Arvind Kaul, Mr. Ashol Rastogi, Mr. K Subramaniam, Mr. Rajiv Sharma, Mr Saibal Dutta, Dr. Satish Misra, Mr. Samir Saran, Dr. Niranjan Sahoo and others.

BRICS

Summary of BRICS Think Tanks Symposium, March 2011

March 2011
Link to original website

Scholars and experts from BRICS (Brazil, Russia, India, China and South Africa) countries have said that the current crisis in the Middle East and North Africa (MENA) regions should be resolved expeditiously in the interest of regional stability and in conformity with the aspirations of the peoples of MENA and said that the current crisis demonstrated that the global governance system needed to be more responsive.

This formed part of a recommendation document prepared for the Third Leaders Summit to be held at Sanya, China in April this year. At a meeting of 60 scholars of think tanks from the five BRICS countries, held in Beijing on March 24 and 25, 2011. A seven-member delegation of Indian experts, led by Observer Research Foundation, took part in the meeting of the BRICS Think Tank Symposium, hosted by the China Centre for Contemporary World Studies (CCCWS) and the China Foundation for Peace and Development (CFPD). It comprised of former Indian ambassadors Mr. HHS Viswanathan (Distinguished Fellow, ORF) and Mr. T.C.A. Rangachary, Mr. Samir Saran, Vice President and Senior Fellow, ORF, Dr. Ravni Thakur Banan, Associate Professor, Delhi University, Dr. Saroj Kumar Mohanty, Professor and Senior Fellow, Research and Information Systems for Developing Countries, Dr. Jyotirmoy Bhattacharya, Fellow, Indian council for Research on International Economic Relations and Sriparna Pathak, Junior Fellow, ORF.

In the recommendations proposed for the consideration of the Third BRICS Leaders Meeting to be held in April in China, the scholars said that the leaders should give attention to the changing international context, sluggish economic recovery, governance issues, reform of the international economic and financial architecture, Sustainable Development and Climate Change.

In the opening speech, Mr. Sun Jiazheng, Vice Chairman of the National Committee of the Chinese People’s Political Consultative Conference and President of CFPD, made three suggestions regarding cooperation among BRICS: (1) Undertaking intensive studies, and recommendations on issues that concern BRICS. (2) Focusing on major areas of international finance, international order, world peace and stability (3) Strengthening exchanges between think tanks of BRICS.

At the opening session, delegates from the five countries spoke on the need for reforming the global financial institutions, democratising global governance system, avoiding unilateralism, increasing discussions within the grouping on issues of wages, poverty, energy, health and education, defining a BRICS identity and mission and widening the BRICS’ agenda.

The first session discussed “Challenges and Opportunities- Environment and Background for the Development of BRICS Countries”. The presentations focused on the opportunities and challenges for BRICS post the financial crisis and the way ahead on issues of development and global governance Delegates from BRICS countries also spoke on issues of technological innovations, moving away from reliance on OECD countries, and greater engagement with other developing countries to enable sustainable growth.

On the topic of ‘Changes and Responsibilities: Agenda and Items for BRICS Countries in Advancing Global Economic Governance’, participants elaborated the need to realise inclusive growth and emphasised on stability, peace, shared prosperity, and development, South- South cooperation, open markets and mutual trade and investment among BRICS.

The theme of the third session was ‘Unity and Cooperation- Practical Cooperation and Institutional Building of BRICS Countries’. This panel discussed how BRICS can be a bridge for North- South cooperation, and the need within the BRICS grouping to resolve differences and seek common goals. Presenters also spoke on strengthening trade among BRICS, strengthening framework for polycentric world, promoting cooperation and engaging private sector actors in agriculture and other sectors among BRICS.

‘Exchanges and Mutual Trust- Cooperation Among Think Tanks of BRICS Countries’ was the final theme of the symposium. The discussions delved into ways to deepen BRICS interactions and the need to convene international seminars on areas of bilateral and multilateral areas interests. There was a strong emphasis on the need to establish a BRICS institutional framework at the governmental and non governmental level and to create working groups on select projects. It was also agreed to create a BRICS Think Tanks website for scholars to contribute to.

The interactions were free and friendly and there were no contentious issues. It was obvious that the delegates were trying to find the relevance, mandate and evolution of the Group.

One high level political interaction was organised for the delegates to meet Mr. Dai Bingguo, a State Councillor, where he praised the work of the delegates in coming up with new ideas. He also cautioned that the leaders may not have the same ideas. He spoke of “broadening” the Organisation, a concept not liked by the Russians.

Some divergences on issues like trade and currencies notwithstanding, there was a general feeling that BRICS is here to stay and contribute to a change in global governance. How this will be achieved is the question to which nobody seemed to have a clear answer. There were references to the need for an alternative model of development in which BRICS countries do not repeat the same mistakes committed by the developed world. There were also statements that BRICS should act as a bridge between the developing and the developed countries. But would the other developing countries (particularly potential aspirants to the Group like Indonesia, Turkey and Mexico) like BRICS to play this role?

One theme that came up constantly was the lack of intra-BRICS cooperation in comparison to the potential that exists. For example, BRICS contributes to about 20% of global GDP. Further, 60% of the global Foreign Exchange Reserves today are held by BRICS. But these are parked mainly in Western countries when BRICS themselves desperately need capital for development.

Apart from some general references to the need for reforms of global financial institutions and replacement of dollar by SDR as the global currency, no in-depth discussions took place on these issues. However, the increase in the voting shares of China, Brazil and India was referred to as a beginning of a change in the mind-set of the developed world. One theme that was very evident was the need to coordinate BRICS positions in G-20 so as to have a greater voice.

BRICS, In the News

Chinese Crienglish.com reports on BRICS Think Tank meeting, 2011

March 26, 2o11
Link to original website

BRICS think-tanks call for closer economic ties

Think-tanks from five major developing economies are now calling for closer economic ties among the BRICS countries, just ahead of the group’s summit in Hainan, China next month. BRICS countries include China, Brazil, India, Russia and South Africa.
International relations expert Jin Canrong from China’s Renming University says, despite booming economies, the five countries still do not have enough say in global economic dialogues.

“The top agenda of the next summit is still the economy, and especially the top ten topics talked about at this year’s G20 summit in France. For instance, the fluctuating raw material prices, and the possibility of giving an index for economic imbalance – those are all important.” Samir Saran, senior researcher with India’s Observer Foundation, says the BRICS countries could find more shared interests economy-wise. “For the BRICS countries, there is still enough room to enhance their cooperation in energy, electricity, food security, agriculture and technology. Also, the five countries could learn from each other regarding eliminating poverty, improving healthcare and education.”

BRICS, In the News

Institute for Applied Economic Research, Brazil reports on BRIC Summit of Think Tanks

April 14-15, 2010
Link to original website
Link to IPEA

Consumption dream based on the American way is unsustainable
Participants in the BRIC Summit of Think Tanks demand radical change in the productive sector and new global governance

The researchers who participated in the BRIC Summit of Think Tanks agreed unanimously that the citizens of their countries have consumption dreams based on the American way of life. For many, this is a dream that the planet will not stand. The debates led to the conclusion that the way out entails new global governance and a radical change in the productive sector, with lower production of private automotive vehicles and more investments in public transportation. Who will volunteer to try to lead a new world order?

The Indian researcher Samir Saran, from the Observer Research Foundation, noted that U.S. president Barack Obama has demonstrated political will to lead the transition to clean energy in the world. He quoted part of a speech delivered by the U.S. president: “We know that the leaders in the new energy matrix may lead the 21st century economy”.

According to Chinese researcher Zhang Yuyan, from the Institute of World Economics & Politics, Chinese Academy of Social Sciences, BRIC nations must unite to take the lead and “avoid that tariffs on carbon emissions be used as protectionist measures by developed countries”. The researcher believes that relations between the BRIC countries and other emerging nations should safeguard the right to quality of life to all citizens.