A new delineation of green transition through green finance

The notion of a “green transition” has so far been delineated, in large parts of the world, through energy transition only. This implies fuel-mix change by shifting towards renewables from traditional fossil fuel use. Somehow, the underlying fact that energy transition alone will not resolve the problems of climate change lurks somewhere in the background of this dominant reductionist paradigm of green transition.

Humanity’s unbridled development ambitions and the inherent penchant for economic growth and urbanisation have been driving land-use change from the natural ecosystem (e.g. forests, grasslands, and coastal ecosystem) for creating physical infrastructure. This not only impedes the capacity of such natural ecosystems for additional carbon sequestration but also dents its capacity of stocking the carbon. Rather, with land-use change, the historically stocked carbon gets released, thereby, hampering a critical regulating service of the ecosystem. Policymaking machinery (mostly of the Global South) seems oblivious to the fact that such losses cannot be substituted merely through an energy transition. Rather, unrestrained land-use change that replaces natural capital with physical capital negates the positive impacts that would otherwise be obtained through movement to renewables.

Therefore, mitigation projects should not be looked at only through energy mix change. As such, one of the perennial problems of the global climate negotiations is the missing dimension of ecosystem services (i.e., services provided by nature free of cost to the human society). This has two connotations. Firstly, at the negotiation table, there is an ignorance of nature’s capacity to regulate the climate. Secondly, none of the negotiations acknowledge the important role that the ecosystem plays in human life. The importance of ecosystem services was highlighted by Pawan Sukhdev in 2009by interpreting the same as “GDP of the poor”.

The paper revealed that 57 percent of the poor’s incomes in India is sourced from nature. Recent estimates of the ecosystem dependency ratio (ratio of monetary value of ecosystem services and the income of the community) revealed that in certain parts of South Asia, the ratio is greater than unity. This implies that the ecosystem-dependent poor community obtain more benefits from the natural ecosystem than from the economy. Therefore, the extensive land-use change causes losses to the ecosystem services, thereby, hampering the well-being of the poor. On the other hand, forces of global warming and climate change also impede these ecosystem services (e.g., saline water intrusion in coastal areas due to sea-level rise destroys the natural soil fertility).

In this context, there is another concern needs to be highlighted. In many parts of the Global South, mitigation activities will not help. They will need to adapt. However, while there is ample scope for funding mitigation projects, the opportunity for adaptation financing is limited. This has created an inherent funding bias in favour of mitigation activities. Therefore, the term ‘green financing’ has become closely associated with ‘green transition’, and is largely focused towards funding renewable energy projects. Adaptation, then, seems to be an activity that is a need for the Global South but is hardly acknowledged by the Global North.

Eurasia Review