“Climate change is now affecting every country on every continent. It is disrupting national economies and affecting lives, costing people, commodities, and countries dearly today & even more tomorrow. People are experiencing the significant impacts of climate change, including changing water patterns,
rising sea levels, and more extreme weather events”.
“The poorest and most vulnerable people are being affected the most.”
-GOAL (UN Sustainable Development Goals) accessed
18th Nov.2016
Climate change is no more an environmental concern. It has emerged as the most significant development challenge for the economies as a whole. Its economic impacts, particularly on the developing nation, make it a governance issue.
Industrialized countries have managed to delink sulphur dioxide (SO2) emissions from economic growth but cannot do the same with CO2 (carbon dioxide) emissions. Per capita, CO2 emissions remain closely related to a country’s economic development level and, thus, standard of living. It is evident that till the time we reduce our dependence on CO2 (i.e., coal, oil, and natural gas), growth cannot be delinked substantially from CO2 emissions.
Understanding the usage of CO2, there is an urgent need to curb the use of fossil fuels (which are being used by every individual in one way or the other) by changing our lifestyle and shifting our focus towards a sustainable form of lifestyle. As the call for action is becoming urgent with each passing day, the world is looking for answers (with bated breath) from all the global economies collectively. Though the onus is on the developing economies to cut down on the CO2 emissions (due to the high industrialization), it is equally essential that the developed economies contribute equally and become more energy-efficient and reduce their energy emissions.
As they say:
“It is a collaborative effort.”
After years of brainstorming and discussions amongst the veterans of climate change analysts, the renewable energy (that is being considered the substitute for usage of fossil fuels) constitutes just 2% of the world’s primary energy in the world (data is since 2010). This is worrisome as renewable sources are being considered as the most significant substitute.
THE WORLD is yet to delink growth from carbon emissions, and we (INDIA) as an emerging world can leapfrog to make the transition to a cleaner technological regime.
INDIA: we all are aware that it is at the brink where it can make or break a path in terms of climate change (since it is developing economy and we are still building our infrastructure and cities). But, it is necessary to know how INDIA is getting affected by climate change economically???
Let me try and answer the same according to my understanding of the INDIAN economy:
IMPACT ON INDIAN ECONOMY
INDIA, one of the fastest-growing economies of the world, faces the challenge of lowering its carbon emissions, making itself reliant on renewable sources of energy (or sustainable sources of life) and yet driving impressive economic growth. More than 80% of India’s population still live less than $10 per day. According to the World Human Development Index: India stands at 129th position, ensuring an immense scope for improvement in the Indian economy. It is because of this reason, India has been crowned as the flag bearer of developing a green or sustainable economy.
According to Mc. Kinsey Global Institute, nearly 75% of India’s labour workforce, is exposed to heat-related stress, thus putting the country’s economic growth at risk. It also mentions that by 2030 the average loss in daylight working hours could put 2%-4% of GDP at risk, reducing efficiency to a great extent. Furthermore, the absence of any prudent legal framework (legislation that is in place to combat the effects of climate change) by the INDIAN government makes the task of achieving a sustainable environment more cumbersome to perform.
To achieve the ultimate goal of a sustainable environment, the closest laws in place are the Air (prevention and control of air pollution) act, 1981 and the water (prevention and control of water pollution) act, 1974. These have been amongst the earliest actions to combat climate change, though the two haven’t been implemented in the same manner as intended. In addition to the above two, there was the Environment (Protection) Act, 1986 that was brought in to fulfil the gap of the laws mentioned above (that were already existing). However, the above also have not been implemented correctly both by the central and the state governments.
This ensures that the Indian system lacks a legal framework that binds the government and the individuals, both simultaneously to work collectively to achieve the mammoth target of climate sustainability. With these grim facts about India’s response to curbing carbon emissions, there has been a silver lining in the form of initiatives that have been undertaken in the recent past. These initiatives also lay importance to the fact that INDIA is indeed trying and is committed to achieving its part in the global response to climate sustainability. Seen from the global perspective, India’s per capita carbon emissions are marginal @ 4% of the global emissions (Singh 2019). In absolute terms, too, India’s emissions and energy intensity are favourably low compared to international countries. Over the years, the energy growth has been significantly lower (less than 4% p.a.) than the economic growth (over 9% p.a.) (Growth 2011).
This reduced energy intensity at the relatively low level of India’s GDP has been the result of a range of factors, including sustainable patterns of consumption, proactiveness (though at a somewhat lower level) to enhance the efficiency of the resources, and more recently, the use of Clean Development Mechanism (CDM) to accelerate the adoption of clean energy technologies (Purohit 2019). Furthermore, the globally computed indices, namely Climate Change Performance Index (CCPI) and Climate Risk Index (CRI) indicate that INDIA has been fairing pretty well in taking up proactive actions for the adaptation and mitigation techniques to solve the issue of climate change.
According to the Climate Change Performance Index (CCPI) (the index indicates the efforts made by a country to tackle climate change effectively); amongst the 58 states that were ranked in 2017, India stands at 20th position, which is a positive sign and ensures that India is on track ahead. Still, a lot needs to be achieved. According to Climate Risk Index (CRI), India stands at the 14th position, which means that India is highly vulnerable to climate change. It is adversely dangerous.
The Indian economy has benefitted immensely by investing in CDM projects. The total number of projects registered was 1452 compared to 8044 projects globally by the end of 2015. On the other hand, CDM projects in India facilitated an estimated investment of Rs. 1.6 trillion by the end of 2014, investing in CDM projects fruitful for the economy and the environment of India.
With all the above initiatives by the governments at the various fronts, India still lacks a legal framework and the will on the part of governments to work on a war footing basis to achieve the competitive target of climate sustainability. This, in turn, is impacting sectors significantly…. Let’s have a clear understanding of how sectors are getting affected by climate change:
A. TOURISM SECTOR
Tourism is the largest single sector in the world economy that accounts for 9% of global expenditure. Over 2 million people are dependent on the industry for employment.
According to the Intergovernmental Panel on Climate Change (IPCC), “India will lose its tourism revenues if the temperature keeps rising.” With the climate change, there would be a threat to major tourist destinations in terms of extinction of species, decreasing freshwaters, increasing heat waves, inability to conduct/ play snow-based games as the people will not be able to visit these places.
Mumbai is the financial capital of INDIA, is expected to witness considerable losses in the number of tourists visiting the city by the year 2050. A rough estimate of about 19, 63,500 crores of rupees would be lost alone by the financial capital from its tourism sector by the year 2050. This figure could give a rough estimate of the magnitude of loss INDIA as a country would be facing due to lack of tourism.
The above is a petite figure to understand the losses; there are no significant facts and figures that can estimate the failure in the tourism sector in the decades to come. The only silver lining is to adopt a holistic approach in tackling the climate change problem in the industry and bring it back on the road to recovery.
B. MANUFACTURING SECTOR
It is incredibly discouraging to know that there is no concrete data available that can make us understand how the manufacturing sector will get impacted by climate change. The industry as a whole too is facing the heat of rising temperature and growth in environmental situations. More than 90% of manufacturing pollution comes from consumer used products such as electronics and vehicles. This contributes to the contribution of the sector to the global pollution of GHG (Green House Gases) for 19% and another 11% of the power used to produce these consumer goods. Furthermore, the temperature rise could add to the manufacturing sector’s fury, and in the year 2050, the global loss can be estimated to be around $47 billion.
Again, about INDIA’s financial capital, Mumbai could witness losses of around 15,08,138 crores rupees in the manufacturing sector by the year 2050. This is just an estimation that too, for only one city in the country. It is tough to imagine how devastating the figures can be when the entire country’s estimates are taken into consideration.
These figures are terrifying, but only a collaborative approach and the zeal to take dramatic steps will help curb the climate changes, thus, enabling the sector to flourish as it is desired.
C. INSURANCE SECTOR
Climate change is no longer a projection for emerging risks but is a reality for insurance companies worldwide.
Insurers have been researching what climate change effects mean to their businesses, and pricing of the insurances will be premium. However, the property, health, and life could still be left uninsured. According to estimates, the losses from global natural disasters in 2018 were approx. $160 billion, with half of the value, still left uninsured. Furthermore, the annual losses for more than 136 of the world’s largest coastal cities could rise from $6 billion in 2005 to over $1 trillion by 2050. This can be reduced if these cities invest about $50 billion annually in climate change adaptation without delay. The Bank of England warns that “Climate change could threaten economic resilience and financial stability severely.” According to Climate Wise: The insurance sector needs to use more of its $30 trillion of investments in funding society’s resilience to climate change effects.
Insurance is going to play a pivotal role in a country like INDIA, which is dominated by rain-fed agriculture. There is a vast scope for insurance to improve upon for INDIA and other developing countries and be the flag bearer for innovation. Lack of innovation and initiative by industry giants could prove a gargantuan challenge.
D. AUTOMOBILE SECTOR
Of the total global CO2 emissions, the transportation sector contributes to about 24%. The industry responsible for nearly a quarter of global emissions; road transport (which consists of cars, trucks, buses), accounts for a whopping 74% of international transport CO2 emissions.
In the year 2018, more than 86 million new cars were produced, and of these, there was a soaring demand for heavier vehicles (like SUVs) that are responsible for a notch higher emissions into the atmosphere.
INDIAN automobile industry is one of the largest globally, and by 2026, it is expected to be the third-largest automobile market (in terms of volumes) in the world.
The industry currently manufacturers 26 million vehicles, including passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles in March-April 2020. Of this, 4.7 million vehicles were exported. INDIA holds a strong position in the international market for heavy vehicles as it is the largest tractor manufacturer, second-largest bus manufacturer, and third largest heavy truck manufacturer in the world. This automobile sector is expected to reach $300 billion by 2026 (currently, it stands @ $118 billion).
With such promising figures, the automobile sector is flourishing rapidly (which is a positive sign). Having said so, if there is a time to take stock and recalibrate its sustainable strategy, it is NOW.
Stricter emission norms, higher taxes, lack of infrastructure (such as charging stations and cleaner fuels), and the uncertainty of mainstream consumer demand for electric and hybrid vehicles… creates innumerable challenges for the industry as a whole in terms of maintaining economic profitability and achieving environmental sustainability at the same time.
To achieve both of the parameters mentioned above at the same time, it is extremely important to innovate. Innovation is the key driver that can lead the way towards making INDIA a pioneer in eco-friendly technologies for cars. Adding to innovation, there is a requirement to influx fresh talent (that can add and create new ideas) and create an infrastructure base along with research and development (R&D) for promoting and achieving innovation.
This would be possible if both the government and industry stalwarts sit together and brainstorm with an ambition to achieve a cleaner and greener environment for the present and the future generations to live in.
E. OIL AND GAS SECTOR
Oil & gas firms have had far and more adverse climate impacts than thought off. According to a study, human emissions of fossil methane have been underestimated by up to 40%.
According to the UN Environment Program: Methane has a greenhouse effect that is about 80 times more potent than CO2 over 20 years, which is responsible for at least 25% of global heating.
Investments in oil and gas production over the next five years will lock in more than 1.5°C of global warming. 85% of global and gas expansion plans are in North America alone. The world today cannot afford and does not need more oil and gas development. In addition to catastrophic climate, change-expansion puts countries, communities, workers, and investors currently dependent on oil and gas financially at risk.
Indian oil and gas industry is amongst the eight core industries and plays a significant role in influencing decision-making for all other essential sections of the economy. The oil and gas sector is exposed to the range of climatic events and their potential impacts such as storm surges, floods, water scarcity, heat waves, etc.….. yet there is very little preparedness and planning for assessing how it may vary the future due to change in the climate. Indian oil and gas sector needs to be more concerned from the resilience point of view than mitigation of GHG (Green House Gases) emissions. To combat the impact of climate change, the sector needs to brainstorm over the following categories:
· Concerned companies take immediate actions about existing infrastructure and should within the next five years. The four most essential steps relate to conducting location-specific flood modelling exercises, exploring plant-specific water efficiency improvement options, and building a database to properly establish the impact of temperature rise on energy consumption and efficiency of operations.
· Maintaining long-term actions that pertain to existing and planned infrastructure and relate to building institutional capabilities at the national level in terms of building strategic knowledge and regulatory framework to understand climate change.
F. TEXTILE SECTOR
The textile industry is considered the most ecologically harmful industry in the world. The industry is enormous, and the environmental impacts occur at every stage of the fibres’ life cycle, yarn fabrication, fabric manufacture, wet processing, and manufacturing of the garment. The distribution and transportation to the stores, usage of the product, and the final stage of disposing of the product involve a massive amount of pollution.
The textile industry uses nearly 2000 different chemicals to transfer everything from dyes to agents. These chemicals pollute water significantly, causing water crises affecting the long-term environment ultimately. This contaminated water, pigments, de-fumer, bleach, and other powerful chemicals pollute the environment and increase heat, causing global warming.
Indian textile industry contributes 14% to industrial production, 3% to the GDP, 8% to the total excise revenue collection, and 17% to the country’s export earnings and employs nearly 40 million people. With these figures, the textile sector’s growth is enabled and facilitated by the use of material, leading to a manifold impact on the environment. The effects of the initiatives have been drastic both on human beings and the environment. This has given rise to the use of sustainable forms of fabrics that are ecofriendly in their usage and, at the same time, economically significant.
To maintain this kind of sustainability, the sector has developed considerably. However, this development has made the textile industry competitive in the global market but hurts human life and the environment as a whole. Automation and modernization increased the production speed, but the result has been extremely negative on water, air, and lead to severe health hazards.
It is now on the government and the industry together to sit and brainstorm to make their industry more environmentally sustainable and economically significant, together at the same time.
G. PHARMA SECTOR
For the healthcare and pharmaceutical industry, the impact of climate change is two-folds, responding to the increased risk of certain diseases and conditions and decarbonizing their processes and products to prevent the worsening effect.
The sector is far from green. A study by environment engineers at the University of Ontario: found that the industry is significantly more emission-intensive (13% or more) than the automotive industry despite being 28% smaller.
According to an analysis, combined CO2 emissions from hospitals, health services, and medical supply chains across the OCED group (37 countries across the globe including US, UK, Canada, Japan, Australia, etc.) plus China and India comprise 4% of total global emissions footprint…. more significant than either aviation or shipping.
The NHS (National Health Services) in the UK has been found to produce 5.4% of England’s total carbon emissions. The pharmaceutical company must retain a focus on driving decarbonization and best practice sustainability in the house as in product design. In 2015, the Global Pharmaceutical Industry produced 55% more CO2 than the automotive industry.
Understanding the above, the shift to a far more rapid decarbonization rate across the pharma industry, and the broader healthcare sector will require significant action. Focused efforts can deliver decarbonization results and can be delivered alongside economic growth and expansion service.
According to IDC: FutureScape, Worldwide Datacenter 2019, global pharmaceutical performance demonstrated that the company’s leading on emissions (Amegen, Johnson & Johnson, and Roche Holding) were also most profitable in the sector. This is clear proof that there are economic opportunities in innovating for the future.
H. AGRICULTURE SECTOR
Climate change and agriculture are interrelated processes, both of which take place at the international level, i.e., global scale. Climate change affects farming in several ways, including through growth in the average temperatures, rainfall, and climate extremes (heat waves, etc.), changes in pests and diseases, changes in atmospheric carbon dioxide and ground-level ozone concentrations, changes in the nutritional quality of some foods, etc. to name a few.
Changes in the climate are already affecting agriculture, the impacts of which have been unevenly distributed across the world. The climate changes will probably increase the risk of food insecurity for some vulnerable groups; for example, South America may lose 1%-21% of its arable land area, Africa 1%-18%, Europe 11%-17%, and India 20%-40% approx. The accelerating pace of climate change, combined with global population and income growth, threatens food security everywhere. Agriculture is extremely vulnerable to climate change. Higher temperatures eventually reduce the yields of desirable crops while encouraging weed and pest proliferation. Pests management becomes less effective, meaning that higher rates of pesticides will be necessary to achieve the same control levels. Heatwaves can cause extreme heat stress in crops, limiting yields if they occur during certain times of the plants’ life-cycle (pollination, pod, or fruit set). Also, heat waves can result in wilted plants (due to elevated transpiration rates), which can cause yield loss if not counteracted by irrigation. Heavy rains that often result in flooding can also be detrimental to crops and soil structure. The overall impacts of climate change on farming are expected to be negative, threatening global food security.
Indian agriculture remains vulnerable to the vagaries of weather, and the looming climate change threat can make it vulnerable further. It is estimated that farm incomes could reduce by 15-18% and 20-25% in unirrigated areas since agriculture accounts for a large share of GDP (16%) and an even greater employment share (around 49%).
The Economic Survey in 2017-18 has warned that “climate change could reduce annual agricultural incomes in the range of 15% to 18% on an average, and up to 20% to 25% for unirrigated areas”.
With all the above figures, sustainable development within climate change is the need of the hour. It is necessary for the government and the industry along with farmers at the grass root levels to effectively and swiftly achieve the desired sustainability.
After understanding all the sectors and their contribution towards INDIA’s economy, it is clear that the road towards a sustainable environment is a long way. There is an immense scope of improvement, and a sea of opportunities are in front of the CEOs that they can adopt to achieve climate sustainability. There are lots of opportunities, but the obvious question to be raised is….
Whether the CEOs are taking enough steps in the right direction, or do they view the problem of climate change as the corporate problem or no????
The answer to this is that CEOs do acknowledge climate change as the corporate problem but are clueless about the road ahead. Awareness levels about climate change are at the highest levels than ever; however, the shape of future corporate strategies is to be formulated at a large scale.
The issue of climate change needs immediate attention by the corporates and the governments, and to counter the effects of climate change, nearly 3% of the GDP could be spent. With such a vast population, inadequate infrastructure and lack of policies, climate change is a defining subject that must be addressed to maintain the economy’s pace. With the resilient economy and ecology that is fragile, INDIA is looking for ways to achieve sustainable development – economically sound, socially relevant, and environmentally friendly. Economic growth at the cost of degradation of the environment will aggravate poverty, unemployment, and disease. Thus, the integration of development with that of the environment has been at the forefront of India’s policymaking. The question is:
“Are we ready?”