Context: Recently, China, the largest carbon dioxide emitter, has announced that it would balance out its carbon emissions with measures to offset them before 2060.

• With this development, the spotlight is on the U.S. and India, ranking second and third in emissions. Also, India ranks fifth in the Global Climate Risk Index 2020.

Key Facts

• According to a United Nations report, between 1998 and 2017, disaster-hit countries reported $2.9 trillion in direct economic losses, with 77% resulting from climate change.
• The U.S. faced the highest losses, followed by China, Japan, and India.

Concerns

• While air pollution levels have decreased worldwide after the COVID-19 outbreak, with the resumption of polluting activities, emissions in India are set to rise sharply unless strong action is taken.
• Carbon dioxide, a major culprit in global warming, was 414 parts per million in August 2020 because of past accumulation.
• As one half comes from the three top carbon emitters, they need to drive de-carbonisation.

What are India’s commitments to tackle Climate Change?

• India has committed to 40% of electricity capacity being from non-fossil fuels by 2030
• India has also committed lowering the ratio of emissions to GDP by one-third from 2005 levels
• It has agreed to enhance its forest cover which will absorb 2.5 to 3 billion tonnes of carbon dioxide (CO2, the main gas responsible for global warming) by 2030.

Solutions to emerging Challenges
It is in India’s interest to take stronger action before 2030, leading to no net carbon increase by 2050.  A smart approach is pricing carbon which can be done in following ways:
Emission Trading

• One way to price carbon is through emission trading, i.e., setting a maximum amount of allowable effluents from industries, and permitting those with low emissions to sell their extra space. 
• It is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants.
• This is in contrast to command-and-control environmental regulations imposed by governments

Carbon Tax

• Another way is to put a carbon tax on economic activities — for example, on the use of fossil fuels like coal, as done in Canada and Sweden. 
• A carbon tax is a fee on the carbon content of fossil fuels
• It is a powerful monetary disincentive that motivates transition to clean energy across the economy, simply by making it more economically rewarding to move to non-carbon fuels and energy efficiency.
• Example: Canada imposed a carbon tax at $20 per tonne of CO2 emissions in 2019, eventually rising to $50 per tonne. This is estimated to reduce greenhouse gas pollution by between 80 and 90 million tonnes by 2022.
• The fiscal gains from pricing carbon can be sizeable. A carbon tax at $35 per tonne of CO2 emissions in India is estimated to be capable of generating some 2% of GDP through 2030. 

Carbon Tariff on Imports

• Big economies like India should also use their global monopsony, or the power of a large buyer in international trade, to impose a carbon tariff as envisaged by the EU
• Focusing on trade is vital because reducing the domestic carbon content of production alone would not avert the harm if imports remain carbon-intensive

Conclusion

• By reducing carbon emission through carbon pricing there are immense health benefits. A significant part of more than 3 % percent of India’s GDP currently spent on pollution-induced diseases will inevitably come down.
• India is among the nations that are hardest hit by climate impacts. While there is growing public support for climate action, the solutions must be in the country’s interests. For this, India must focus on carbon-taxing as a key policy instrument for its carbon mitigation strategy and meeting the committed climate goals.