TAXONOMY FOR THE NATION

The draft framework for climate taxonomy is a significant step but the devil lies in the details. The urgency with which this will be updated on an ongoing basis remains to be seen

- MEYYAPPAN NAGAPPAN

THE MINISTRY OF FINANCE recently released a draft framework for climate taxonomy, which has significant implications for foreign and domestic investors, companies (in power, mobility, construction, iron, steel and cement sectors), MSMEs and stakeholders in the agriculture sector.

The climate financing needed to achieve net-zero goals is estimated at $250 billion annually till 2047. Further, this capital is required broadly in two areas, financing the energy transition and climate mitigation/adaptation investments, with more capital required earlier for financing the capex for the energy transition and investments into climate technologies. Commercial and concessional capital, therefore, has a huge role to play in filling this gap.

A robust taxonomy could accelerate the flow of capital to activities it covers. India has currently proposed only a framework and not a full taxonomy. The sectors proposed to be covered initially are power, mobility, buildings, agriculture, food, water, iron, steel and cement. It proposes to start with qualitative standards and then later introduce quantitative metrics. There is also a special focus on MSMEs and agriculture.

In designing and assessing a taxonomy suited to India, we have the benefit of learning from other countries. Some aspects of India’s framework that stand out and those that need further improvement are mentioned below.