CBAM Can’t Be Premium For Measures Towards Climate Action, Says CEA Nageswaran

The premium paid to developing countries for their action against climate change cannot be Carbon Border Adjustment Mechanism, said India's Chief Economic Advisor, V Anantha Nageswaran.

"By taking actions against climate change, developing countries are also ensuring the lives and property of people and businesses in developed countries… The kind of premium that the developed world is contemplating paying to the developing world cannot be the carbon border adjustment mechanism. It has to be something more positive than that," Nageswaran said while speaking at a regional workshop on climate finance, organised by the Department of Economic Affairs and Asian Development Bank on Thursday.

CBAM is the EU's tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU and to encourage cleaner industrial production in non-EU countries.

He also weighed whether sovereign nations, private insurers or multilateral organisations are best placed to insure against climate risks.

Climate change involves more complicated geopolitical risks as the supply of critical minerals and rare earths, which are necessary for renewable energy sources, is concentrated in a few geographical locations, as Nageswaran pointed out.

“There is a concentration of production, and there is an even starker concentration of processing of these materials and rare earths... Countries that are progressing towards renewable energy become more vulnerable than before in the world when they were consuming fossil fuels in terms of their dependence on a few sources of supply. That is also a risk that needs to be insured,” he said.

A fear of emissions should not affect the employment and output of developing nations, which is another risk that needs to be hedged against, Nageswaran said.

Climate finance, particularly from developed nations, to bear the cost of climate action is a priority that India raised at the recently concluded G20 Summit.

“…Even if we stopped all emissions, as of today in the world, there are going to be consequences arising out of the historical emissions, and they will be with us for several decades. And therefore, developing countries will need to take action against them, and until they're able to do so, there will be a loss of output and employment,“ he said.