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NEW DELHI : The fossil fuel revenues for India can fall around 65% of the 2019 levels by 2050, said a new report by the International Institute for Sustainable Development (IISD).

The study suggests that in terms of coal production, India’s revenues can fall around 15%.

Titled Boom and Bust: The Fiscal Implications of Fossil Fuel Phase-Out in Six Large Emerging Economies, the report spotlights heavy dependence on fossil fuel revenues in Brazil, Russia, India, Indonesia, China, and South Africa (BRIICS).

The economic reliance on fossil fuels puts BRIICS countries at risk of experiencing a substantial revenue gap over the next few decades, as the world transitions from fossil fuel-based energy systems to cleaner energies to limit global warming to 1.5°C.

The six emerging economies need to start adjusting their fiscal policies now to account for declining fossil fuel use to avoid a USD 278 billion gap in revenues by 2030.

The study finds that by 2050, overall fossil fuel revenues in BRIICS countries could be as much as $570 billion lower than a business-as-usual scenario where governments fail to phase down fossil fuels enough to avoid the worst climate impacts. The widest gaps are expected to occur in India ($178 billion), China ($140 billion), and Russia ($134 billion).

The report finds that public revenues from fossil fuel production and consumption currently account for a staggering 34% of general government revenue in Russia, 18% in India, and 16% in Indonesia. The share stands at 8% in Brazil, 6% in South Africa, and 5% in China.

“To prevent devastating climate change, the world has to phase out the production and consumption of fossil fuels, which will inevitably erode related revenues. Emerging economies have an enormous opportunity to build more resilient and economically sustainable energy systems as they decarbonize—but they must plan ahead to avoid shortfalls in public revenues that could reverse progress on poverty eradication and economic development," says Tara Laan, Senior Associate at IISD and lead author of the report.

The economic planning can be done in climate-positive and socially progressive ways, by removing subsidies from—and increasing taxes on—fossil fuels in ways that don’t hurt the poor—like export duties and windfall profits taxes, as imposed by India last week.

The IISD experts suggest that the eventual fall in global energy prices will be an opportune time to impose carbon pricing. Diversifying income streams, such as new targeted taxes in the energy and transport sectors will ensure that addiction to fossil fuel revenues does not become a barrier to the reform.

ABOUT THE AUTHOR

Swati Luthra

Swati Luthra writes on climate change, water, environment and forest issues for Mint. A graduate in Psychology, Swati has been mapping India’s policy initiatives to help meet the pledges made at CoP-26 including achieving net-zero carbon emissions by 2070.
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