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Source– The post is based on the article “Greenwashing, ESG backlash and transitions” published in the “Business Standard” on 5th May 2023.
Syllabus: GS3- Environment
Relevance– Climate change related issues
News– The article explains the increasing focus on green transition and phasing out of fossil fuels across the world and India.
How is there increasing focus on phasing out of fossil fuels across the world?
In New York, Governor Kathy Hochul announced the first state-wide ban on the use of natural gas in new buildings for heating or cooking this week.
The financial industry is also gradually moving away from fossil fuel financing. Analysis by BloombergNEF shows that the ratio of financing between low carbon energy and fossil fuels should be at least 4:1 by 2030 to meet the 1.5°C climate goal.
Bank financing for energy supply totalled $1.9 trillion in 2021. Of that, $842 billion went to low-carbon energy projects and companies, and $1.038 trillion went to fossil fuels.
The ratio is likely to improve. A host of banks publicly announcing their climate transition plans. Banks that have unveiled plans in 2023 include Citigroup, Spain’s Banco Bilbao Vizcaya Argentaria and NatWest Group in the UK. HSBC intends to do so later this year.
How are the measures to phase fossil fuels facing backlash in the US?
There is backlash against as many as 11 large financial institutions that boycott the oil and gas industry in some states of the USA. As per a recent bill, Florida’s public or state-controlled funds can no longer invest their money based on environmental, social and governance factors.
The law broadly directs all Florida pension funds to prioritise returns without considering factors in investment decisions.
Over a dozen states in the US have enacted anti-ESG-related bills or policies, while many have similar proposals in discussion.
What is the way forward for green energy transition in India?
India’s CO2 emission level may rise from 2.7 gigatonnes to 3.9 gigatonnes by 2030.
India’s green transition would require a multi-pronged action plan, the Reserve Bank of India said in its report on currency and finance released earlier this week.
A number of policy actions are required. It comprises a carbon tax of rupee equivalent to $25 per tonne, increasing the share of non-fossil fuel in the energy mix.
There is a need for more production and use of EVs, electric vehicles and green hydrogen, and regulatory measures to incentivise resource allocation for green projects.
What are some regulatory actions taken in India for green transition?
Securities and Exchange Board of India mandates ESG disclosures for the top 1,000 companies.
It has raised concerns about making false, misleading, unsubstantiated, or incomplete claims about the sustainability of a product, service, or business operation.
It asked issuers of green debt to ensure that funds mobilised are used for the stated purpose, and the negative externalities associated with usage of the funds are quantified.
A consultation paper on ESG disclosures, ratings and investing has subsequently been issued.