{"id":122592,"date":"2024-07-24T20:05:05","date_gmt":"2024-07-24T14:35:05","guid":{"rendered":"https:\/\/pwonlyias.com\/stage\/?post_type=current-affairs&#038;p=122592"},"modified":"2024-07-25T09:46:09","modified_gmt":"2024-07-25T04:16:09","slug":"climate-finance-taxonomy","status":"publish","type":"current-affairs","link":"https:\/\/pwonlyias.com\/stage\/current-affairs\/climate-finance-taxonomy","title":{"rendered":"Climate Finance Taxonomy"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">In the <a href=\"https:\/\/pwonlyias.com\/stage\/editorial-analysis\/union-budget-2024-25\/\">Union Budget 2024-25<\/a>, it was announced that the government would develop a &#8216;Climate Finance Taxonomy&#8217; to boost capital availability for climate adaptation and mitigation, aiding India&#8217;s green transition and climate commitments.<\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Climate Finance Taxonomy\/ Green taxonomies<\/b><\/span><\/h2>\n<ul>\n<li><b>About: <\/b><span style=\"font-weight: 400;\">A climate finance taxonomy is a <\/span><b>system that classifies which parts of the economy may be marketed as sustainable investments.\u00a0<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">It refers to a <\/span><b>set of standardised regulations and guidelines to inform companies and investors on making impactful investments towards environmental conservation and combating the climate crisis.<\/b><\/li>\n<li><span style=\"font-weight: 400;\">This initiative of Climate Finance Taxonomy <\/span><b>will support achievement of the country\u2019s climate commitments and green transition.<\/b><\/li>\n<\/ul>\n<\/li>\n<li><b>Derived from:<\/b><span style=\"font-weight: 400;\"> The term <\/span><b>&#8216;taxonomy<\/b><span style=\"font-weight: 400;\">&#8216; originally comes from the <\/span><b>field of biology.<\/b><span style=\"font-weight: 400;\">\u00a0<\/span>\n<ul>\n<li aria-level=\"2\"><span style=\"font-weight: 400;\">It is the scientific method of naming and classifying organisms, including plants, animals, and microorganisms.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Countries that have established Taxonomies:<\/b><span style=\"font-weight: 400;\"> Countries that have developed taxonomies to facilitate climate-sensitive investments include <\/span><b>South Africa, Colombia, South Korea, Thailand, Singapore, Canada, Mexico, and the European Union.<\/b><span style=\"font-weight: 400;\"> Additionally, <\/span><b>China, Malaysia, and Sri Lanka<\/b><span style=\"font-weight: 400;\"> have also issued green taxonomies for this purpose.<\/span><\/li>\n<li><b>Impact of adopting green taxonomies on India:<\/b>\n<ul>\n<li aria-level=\"2\"><b>Attract International Climate Funds:<\/b><span style=\"font-weight: 400;\"> A taxonomy could help increase foreign climate investments, addressing the current shortfall in green finance.<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Currently,<\/span><b> green finance flows in India only account for around 3% of total FDI inflows to India, according to the Landscape of Green Finance in India 2022 report, published by Climate Policy Initiative.<\/b><\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"2\"><b>Clarify Sustainable Activities: <\/b><span style=\"font-weight: 400;\">Provide <\/span><b>clear definitions and criteria<\/b><span style=\"font-weight: 400;\">, overcoming the existing ambiguity in what constitutes sustainable activity.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Course<\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Role of Taxonomies in Climate Finance<\/b><\/span><\/h2>\n<ul>\n<li><b>Standards for Financial Instruments: <\/b><span style=\"font-weight: 400;\">Establish criteria for classifying climate-related investments such as <\/span><b>green bonds.\u00a0\u00a0<\/b><\/li>\n<li><b>Climate Risk Management: <\/b><span style=\"font-weight: 400;\">Aid in <\/span><b>assessing and managing risks associated with climate change.<\/b><\/li>\n<li><b>Net-Zero Transition Planning: Support planning and implementation strategies<\/b><span style=\"font-weight: 400;\"> for achieving net-zero emissions.<\/span><\/li>\n<li><b>Climate Disclosure: <\/b><span style=\"font-weight: 400;\">Facilitate <\/span><b>transparent reporting and disclosure<\/b><span style=\"font-weight: 400;\"> of climate-related financial information.<\/span><\/li>\n<li><b>Alignment with Science-Based Pathways: Ensure that economic activities meet credible, science-based transition pathways.<\/b><\/li>\n<li><b>Boost Deployment of Climate Capital: <\/b><span style=\"font-weight: 400;\">Encourage investment in climate-related projects and initiatives.<\/span><\/li>\n<li><b>Reduce Greenwashing Risks: Minimise the chances of misleading claims about environmental benefits.<\/b><\/li>\n<\/ul>\n<table style=\"width: 100.199%;\">\n<tbody>\n<tr>\n<th style=\"border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle; width: 100%;\">\n<h3><span style=\"font-size: 16pt; color: #000000;\"><b>Potential for Green Investments in India<\/b><\/span><\/h3>\n<ul>\n<li aria-level=\"1\"><span style=\"color: #000000;\"><b>Total Climate-Smart Investment Potential: <\/b><span style=\"font-weight: 400;\">India has a climate-smart investment potential of <\/span><b>$ 3.1 trillion from 2018 to 2030, according to a report by the International Finance Corporation (IFC).<\/b><\/span><\/li>\n<li aria-level=\"1\"><span style=\"color: #000000;\"><b>Electric Vehicle Sector: <\/b><span style=\"font-weight: 400;\">The <\/span><b>largest space for investment is in the electric-vehicle segment<\/b><span style=\"font-weight: 400;\">, at $ 667 billion as India aims to electrify all of its new vehicles by 2030.<\/span><\/span><\/li>\n<li aria-level=\"1\"><span style=\"color: #000000;\"><b>Renewable Energy Sector: <\/b><span style=\"font-weight: 400;\">Significant investment avenue,<\/span><b> with potential valued at $403.7 billion.<\/b><\/span><\/li>\n<\/ul>\n<h3><span style=\"font-size: 16pt; color: #000000;\"><b>India\u2019s Climate Commitments\u00a0<\/b><\/span><\/h3>\n<ul>\n<li aria-level=\"1\"><span style=\"color: #000000;\"><b>Net Zero Economy: <\/b><span style=\"font-weight: 400;\">India aims to achieve a <\/span><b>net-zero economy by 2070.\u00a0<\/b><\/span>\n<ul>\n<li aria-level=\"2\"><span style=\"color: #000000;\"><b>According to the IFC, India needs an estimated $10.1 trillion to achieve net-zero by 2070. Public investments alone can\u2019t match this goal, which calls for standardisation in investments.<\/b><\/span><\/li>\n<\/ul>\n<\/li>\n<li aria-level=\"1\"><span style=\"color: #000000;\"><b>Reduce Emissions Intensity:<\/b><span style=\"font-weight: 400;\"> It has also pledged to <\/span><b>reduce the emissions intensity of its GDP by 45% by 2030, from the 2005 level.\u00a0<\/b><\/span>\n<ul>\n<li aria-level=\"2\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">India has committed to <\/span><b>achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030 as well.<\/b><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span style=\"font-size: 18pt;\"><b>Measures Taken by India to Set Up a Green Taxonomy<\/b><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Task Force on Sustainable Finance: It was <\/b><span style=\"font-weight: 400;\">established in January 2021 under the Department of Economic Affairs, Ministry of Finance.\u00a0<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Its objectives include creating a framework for sustainable finance, establishing pillars for a sustainable finance roadmap, drafting a taxonomy of sustainable activities, and developing a risk assessment framework for the financial sector.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b><a href=\"https:\/\/pwonlyias.com\/stage\/reserve-bank-of-india-rbi\/\">Reserve Bank of India (RBI)<\/a> Initiatives:<\/b>\n<ul>\n<li><b>RBI Joined the Central Banks and Supervisors Network for Greening the Financial System (NGFS) as a member.<\/b><\/li>\n<li><b>RBI Participates in the Basel Committee on Banking Supervision\u2019s task force on climate-related financial risks.<\/b><\/li>\n<li aria-level=\"2\"><b>It also engages with the International Platform on Sustainable Finance.<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+CSE+Books\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Check Out UPSC CSE Books From PW Store<\/span><\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Conclusion<\/b><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">While the budget announcement on the green taxonomy is a step forward, it lacks specific timelines for implementation and details on carbon pricing mechanisms.<\/span><\/p>\n<table style=\"width: 100.029%;\">\n<tbody>\n<tr>\n<td style=\"width: 137.915%; 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to boost capital availability for climate adaptation and mitigation, aiding India&#8217;s green transition and climate commitments.<\/p>\n","protected":false},"author":11,"featured_media":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"tags":[],"paper-wise":[2089],"subject":[4642],"acf":[],"_links":{"self":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/122592"}],"collection":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs"}],"about":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/types\/current-affairs"}],"author":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/comments?post=122592"}],"version-history":[{"count":5,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/122592\/revisions"}],"predecessor-version":[{"id":122632,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/current-affairs\/122592\/revisions\/122632"}],"wp:attachment":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/media?parent=122592"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/tags?post=122592"},{"taxonomy":"paper-wise","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/paper-wise?post=122592"},{"taxonomy":"subject","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/subject?post=122592"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}