Early domestic climate action could help India reduce the economic risks associated with carbon border pricing measures introduced by major trading partners, as well as strengthen its long-term competitiveness, the UNFCCC has said in a new case study.
According to the study, The impacts and incentives inherent in destination-based carbon pricing, which was published by the UNFCCC’s Katowice Committee of Experts on the Impacts of the Implementation of Response Measures (KCI), destination-based carbon pricing measures adopted by major trading powers could have a significant effect on India’s economy.
Hypothetical scenario
It examines a hypothetical scenario in which India’s major export destinations – Canada, the European Union, Japan, Oceania, the United Kingdom and the United States – simultaneously introduce border carbon adjustments (BCAs), noting that such a measure would negatively affect India’s economy across production, trade, employment and economic development.
The steel sector, which is particularly emissions-intensive, would face the most significant impacts.
‘However, the study also shows that the impacts can differ substantially depending on the timing of India’s own climate action,’ the UNFCCC said, adding that India fares ‘significantly better’ when it takes ‘early domestic mitigation measures, including investing in renewable energy and shifting towards lower-emission steel production, than when action is delayed.
‘The impacts also depend on how other affected economies respond, with the greatest losses occurring when India is the last to act.’
Proactive mitigation
It suggests that ‘proactive mitigation efforts’ could play an important role in reducing the advisor impacts of carbon border measures while strengthening long-term resilience and international competitiveness.
The case study was presented at the June UN Climate Meetings (SB64) in Bonn, Germany, in June, and forms part of a series of regional case studies that explore how developing countries can assess and respond to the impacts of climate policies by ‘sharing practical methodologies, modelling approaches and lessons that can be adapted to national contexts.’ Read more here. [Photo: UN Climate Change]
