Should businesses worry?

Should businesses worry?
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First Published: Fri, Jan 04 2008. 01 15 AM IST
Updated: Sun, Jan 06 2008. 11 20 PM IST
The trillion-dollar Indian economy may be on a bull run, but the bull is unaware of the risk of unseasonal downpour.
Decisions on financing climate change risk reduction—adaptation and mitigations included— are based on a paucity of data. Should businesses worry? The answer is a resounding yes. The thousands of small businesses and microenterprise, who are investing their hard-earned savings in the local economy should worry a lot. The main reason to worry is not so much the climate risk itself—floods, droughts, cyclones or salinity ingress—but the lack of basic financial projections on which public and private financing decisions can be taken.
Neither the company CEO on Dalal Street nor the auto repairman at a street corner of a coastal town in India is informed of the costs of climate risks. The economic illiteracy of climate risk mitigation measures is pervasive.
There is hardly any national effort, in the public domain, to put a figure on adaptation costs by estimating the proportion of current investments in India’s development that would be sensitive to climate change. This is even more true for the small businesses who are transforming Indian cities into engines of accelerated economic growth. Businesses just do not know if their investments in engineering, construction, telecommunications, automobiles and construction materials such as cement and steel are exposed to the risk of climate change and to what degree. Neither do these businesses, small or large, know the related costs of protecting existing assets such as buildings and basic services; the need for new investment in infrastructure as a result of climate change such as bypasses or storm drains; or the costs faced by communities and households. Is there a big black hole in India’s business decision-making process? These estimates are not difficult to make. The World Bank has, for example, evolved methods to estimate global costs of adaptation and has come up with a figure of $9 billion to $41 billion per year. There is no corresponding figure for Indian investments.
India has the most innovative range of climate risk mitigation and adaptation measures taken at a community level. The adaptation work undertaken by the M.S. Swaminathan Research Foundation, the Tata Energy Research Institute and Development Alternatives is pioneering. But estimates of the scaling-up costs of such initiatives are lacking. When such estimates are made they remain inaccessible to business. The United Nations Development Programme-Global Environment Facility-funded small grants (managed by the Centre for Environment Education) have facilitated many small-scale adaptation projects (such as developing flood-resistant paddy varieties) on the ground, which can help make estimates. Making such estimates is not difficult. Oxfam has made estimates based on local adaptation projects at a global level, adding up to a cost of $50 billion per year. No projection is available for implementing such projects across India.
Further, Indian businesses do not have sectoral estimates of climate risk impacts for agriculture, forestry, fishery, water supply. These are vulnerable to floods, droughts, extreme heat or cold. Nor do businesses have cost estimates for new infrastructure investments in roads, electricity, transport and port and coastal settlement protection measures. As a result, business decisions in these high-growth sectors are based on inadequate information. And small businesses,?which can’t diversify much to lower their risks unlike the large ones, will suffer the most. For instance, they have no estimates of the shift in commodity output patterns such as in the case of paddy from coastal areas or brackish aquaculture, which is of growing investment interest, due to variations in temperature, sea levels or flooding.
Mihir R. Bhatt is director, All India Disaster Mitigation Institute, Ahemdabad. He was a member of a panel on Cities and Adaptation at Bali. Comment at otherviews@livemint.com
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First Published: Fri, Jan 04 2008. 01 15 AM IST
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