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Business News/ Opinion / Online Views/  Towards a cleaner and greener India

Towards a cleaner and greener India

Higher carbon taxes and community centred forest management are key

Illustration: Jayachandran/Mint (Jayachandran/Mint)Premium
Illustration: Jayachandran/Mint

Green concerns seem to be getting more importance in economic policy now. Consider two recent developments. First, the 14th Finance Commission has given a 7.5% weight to forest cover in the formula to determine how much different states will get from tax devolution. Second, the latest Economic Survey had a significant discussion on how the higher charges on fuel consumption should be seen as carbon tax.

The first move is about a fair deal to states with high forest cover. These states act as national carbon sinks (by absorbing carbon dioxide), and they will help India meet its international climate change commitments in the future. It is only fair that the more industrial states, in effect, pay forested states for this.

The second move is about inter-generation equity. There is a heated debate in environmental economics about the extent to which the present generation should pass on the costs of pollution to future generations. This is an especially complicated debate in the case of a country such as India that has mass poverty: should it focus on economic growth and leave the cost of environmental clean-up to future generations that will have higher incomes? Or should the costs be paid right away. Also, this newspaper has argued on earlier occasions that carbon taxes are a better policy tool than subsidies to specific renewable energy technologies, even though both have the same effect of altering relative prices.

The struggle for a cleaner environment requires a two-pronged approach. One pertains to the supply management of India’s forest resources. The other relates to the demand management of fossil fuel consumption. On both fronts, historically, Indian policy has been counterproductive.

For the longest time, India has been subsidizing the very same fuels which exacerbate emissions. The current government has, however, managed to buck the populist trend. It has used the sharp fall in global oil prices to not only deregulate domestic market prices but also charge a higher excise duty. This has acted as carbon tax. Add to that the doubling of the cess amount on coal from 100 per metric tonne to 200 in this budget, and it would appear that India now has an appropriate level of carbon tax.

However, that is not the case. The latest Economic Survey, shows that much more needs to be done before taxation starts credibly altering consumption behaviour and, as a result, reduces emissions. The Survey states, “…there is still a long way to go with potential large gains still to be reaped from reform of coal pricing and further reform of petroleum pricing policies."

It is also clear that any increase in taxes will become politically more costly once oil prices recover their previous highs. To that extent, the government would do well to seize the moment fully.

On the issue of improving forest cover per se, the irony about forests in India is that they are rarely thought of as assets in themselves. Much of the debate is around either the valuable land on which they stand or the rights and rehabilitation of the poor that depend on them. Traditional attempts at improving forest cover, mainly through government departments, do not inspire confidence either.

For instance, a 2013 report by the Comptroller and Auditor General of India found gross anomalies in the way funds of Compensatory Afforestation and Fund Management and Planning Authority were utilized with crores being spent on unauthorized activities such as renovating buildings, buying vehicles, cell phone charges and honorariums. The guilty states, such as Arunachal Pradesh and Chhattisgarh among others, are now likely to benefit from greater devolution of funds. Clearly, mere provisioning of extra cash is not going to solve the problem. The Mission for Green India, part of the National Action Plan on Climate Change, aims to improve the quality and quantity of forest cover but it is still in the nascent stage.

State governments would do well to look at some global success stories in forest management, such as Mexico, before committing expenditure. The two key lessons from the turnaround of Mexico, a country which went from having rampant deforestation to being one with 33% forest cover, are the stress on community ownership of forests as well as the government’s efforts to link forests to markets for eco-tourism, protection of river streams, seeds and other biodiversity.

This is a difficult subject. While the Mexcian experience appears worth emulating, it should be studied carefully before being implemented in a complex country such as India. Poor citizens have a high marginal propensity to consume. Putting the burden of preservation on them is unfair. These issues need careful study before preservation policies and strategies are put in place.

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Published: 05 Mar 2015, 06:15 PM IST
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