EDITORIALS & ARTICLES
2nd June 2021
State of Finance for Nature Report 2020
Recently, the United Nations has released the State of Finance for Nature Report 2020.
State of Finance for Nature Report
- It was jointly produced by the United Nations Environment Programme, the World Economic Forum and the Economics of Land Degradation.
- Its purpose is to provide up-to-date information about public and private sector finance that is channelled to activities and assets that can be considered NbS and to present estimates of the future needs.
- It complements the vast array of existing literature and processes that monitor specific flows of environment or development finance.
Key Highlights
- The annual investments in nature-based solutions (NbS) will have to be tripled by 2030 and increase four-fold by 2050 from the current level of investments.
- The Nature-based solutions refer to sustainable management and use of nature to tackle socio-environmental challenges.
- It found that approximately $133 billion currently flows into nature-based solutions annually (using 2020 as base year).
- The public funds make up 86 per cent and private finance 14 per cent of these investments.
- It estimated existing public and private investment directed to NbS.
- The investments of $133 billion comprise about 0.10 per cent of global gross domestic product, most of which come from public sources.
- The largest proportion of this investment is carried out by public financial services providers, including the governments, development finance institutions (DFIs), environmental / climate funds.
- It represents 86 per cent of total investment flows to protect biodiversity and landscapes, mixed with activities such as sustainable forestry.
- The public sector spending for the same is dominated by the United States and China, followed by Japan, Germany and Australia.
- The US tops the list with approximately $36 billion a year in NbS spending, and is closely followed by China with $31 billion.
- The countries such as Brazil, India and Saudi Arabia are likely spending large amounts of money too, but they do not report internationally comparable data.
- The following contribute to 14 per cent of total NbS financing equal to $18 billion a year, mostly through investments in sustainable supply chains and biodiversity offsets:
- Commercial financial institutions
- Investors including insurance companies, asset management firms
- Philanthropies including foundations and endowments
Future commitments under State of Finance for Nature Report
- The public and private actors will need to scale up their annual investments by at least four times to meet future climate, biodiversity and land degradation targets.
- By 2050, total investment of nature needs will amount to $8.1 trillion, while annual investment should reach $536 billion annually by 2050.
- It called for a comprehensive system and framework for labelling, tracking, reporting and verifying the state of finance for NbS.
- It recommended reforming taxes, repurposed agricultural policies and trade-related tariffs and harnessing the potential of carbon markets.
Protected Planet Report 2020
Recently, the United Nations Environment Programme (UNEP) and the International Union for the Conservation of Nature (IUCN) have released Protected Planet Report 2020.
- It is the first in the series to include data on OECMs in addition to protected areas.
- It was issued by UNEP World Conservation Monitoring Centre (UNEP-WCMC) and the International Union for Conservation of Nature (IUCN), with support from the National Geographic Society
- It underlined the progress the world has made toward the ambitious goals agreed by countries in 2010 at the United Nations Convention on Biological Diversity.
- It called for existing protected and conserved areas to be identified and recognised by accounting for the efforts of indigenous peoples, local communities and private entities.
- It added that a global network of effective and equitable protected and conserved areas will play a vital role in safeguarding the health of people and planet for generations to come.
- It provided a strong starting point from which to begin working towards this ambitious goal.
Key Highlights
- It highlighted that 82 per cent of countries and territories increased their share of protected area and coverage of other effective area-based conservation measures (OECM) since 2010.
- The OECM are a conservation designation for areas that are achieving the effective in-situ conservation of biodiversity outside of protected areas.
- It says that over 21 million square kilometres has been placed within protected and conserved areas.
- It implies that 42 per cent of the area now within protected and conserved areas has been added in the last decade.
- It resulted in at least 22.5 million square kilometres (16.64 per cent) of land and inland water ecosystems and 28.1 million square kilometers (7.74 per cent) of coastal waters and the ocean are within protected areas and OECMs.
- It highlighted that on an average, 62.6 per cent of key biodiversity areas (KBA) either fully or partially overlaps with protected areas and OECMs.
- The KBAs are sites that contribute significantly to the global persistence of biodiversity, in terrestrial, freshwater and marine ecosystems.
- The average percentage of each KBA within protected areas and OECMs is 43.2 per cent for terrestrial, 42.2 per cent for inland water and 44.2 per cent for marine (within national waters).
United Nations Convention on Biological Diversity
- It was opened for signature on 5 June 1992 at the United Nations Conference on Environment and Development (the Rio Earth Summit).
- It entered into force on 29 December 1993.
- It has 3 main objectives:
- The conservation of biological diversity;
- The sustainable use of the components of biological diversity; and
- The fair and equitable sharing of the benefits arising out of the utilization of genetic resources
- It was conceived as a practical tool for translating the principles of Agenda 21 into reality.
IEA Roadmap to Net-Zero by 2050
Recently, the International Energy Agency (IEA) released one of the most consequential reports which give a comprehensive pathway to net-zero carbon dioxide (CO2) emissions by 2050.
Need for Roadmap to Net-Zero by 2050
- The number of countries announcing pledges to achieve net-zero emissions over the coming decades continues to grow.
- The pledges by governments to date fall well short of what is required to bring global energy-related carbon dioxide emissions to net zero by 2050.
- The viable pathway to net-zero emission is narrow and requires an unprecedented transformation of how energy is produced, transported and used globally.
Roadmap to Net-Zero by 2050
- It is the world’s first comprehensive study of how to transition to a net zero energy system by 2050 while ensuring stable and affordable energy supplies.
- It sets out a cost-effective and economically productive pathway, resulting in a clean, dynamic and resilient energy economy dominated by renewables like solar and wind instead of fossil fuels.
- It examines key uncertainties, such as the roles of bioenergy, carbon capture and behavioural changes in reaching net zero.
- It sets out more than 400 milestones to guide the global journey to net zero by 2050.
Features of Roadmap to Net-Zero by 2050
- It calls for no investment in new fossil fuel supply projects, and no further final investment decisions for new unabated coal plants.
- By 2035, there are no sales of new internal combustion engine passenger cars, and by 2040, the global electricity sector has already reached net-zero emissions.
- The pathway calls for annual additions of solar PV to reach 630 gigawatts by 2030, and those of wind power to reach 390 gigawatts.
- It aims to increase energy efficiency resulting in the global rate of energy efficiency improvements averaging 4% a year through 2030.
- The pathway calls for annual additions of solar PV to reach 630 gigawatts by 2030, and those of wind power to reach 390 gigawatts.
- The report suggests most of the global reductions in CO2 emissions between now and 2030 will come from currently-available technologies.
- The IEA’s report recommends that governments increase and reprioritize research and development spending and put them at the core of energy and climate policy.
- The rate of installation of solar PV and wind power needs to triple by 2030 and increase nearly 900% by 2050 to meet future demand.
- The IEA’s net-zero scenario envisions the world thriving in 2050, with the global economy doubling in size and nearly 2 billion more people.
Significance of Roadmap to Net-Zero by 2050
- It brings a historic surge in clean energy investment that creates millions of new jobs and lifts global economic growth.
- It describes a net zero pathway that requires the immediate and massive deployment of all available clean and efficient energy technologies, combined with a major global push to accelerate innovation.
- The report has three main aims:
- To examine the impacts of announced net-zero emissions pledges and what they might mean for the energy sector.
- To develop a new energy-sector pathway towards achieving net-zero emissions globally by 2050.
- The report will provide a detailed sector-by-sector analysis of the changes that would be needed over the next 30 years, including specific technology and policy milestones, and the wider implications for economies and society.
- To set out key policy recommendations for governments to act upon in the near-term, and a long-term agenda for change to achieve net-zero goals, including with a view to reaching other Sustainable Development Goals.
International Energy Agency (IEA)
- The IEA was founded in 1974 by industrialised countries within the framework of the Organisation for Economic Co-operation and Development (OECD) in response to the oil embargo.
- The countries seeking to become members of the IEA must also be members of the OECD.
- In addition, the country must demonstrate several requirements such as:
- Crude oil and/or product reserves equivalent to 90 days of the previous year’s net imports, to which the government has immediate access;
- A demand restraint programme to reduce national oil consumption by up to 10%;
- Legislation and organisation to operate the Co-ordinated Emergency Response Measures (CERM) on a national basis;
- Legislation and measures to ensure that all oil companies under its jurisdiction report information upon request;
- Measures in place to ensure the capability of contributing its share of an IEA collective action.
- It was established as the main international forum for energy co-operation on a variety of issues such as security of supply, long-term policy, information transparency and international energy relations.
- The IEA’s founding members were Austria, Belgium, Canada, Denmark, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, Norway, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States.
- They were followed by Greece, New Zealand, Australia, Portugal, Finland, France, Hungary, Czech Republic, Republic of Korea, Slovak Republic, Poland, Estonia and Mexico.
- The eight associate members of IEA are Brazil, China, India, Indonesia, Morocco, Singapore, South Africa and Thailand.
Sinovac vaccine gets WHO emergency approval
Recently, the World Health Organization (WHO) has approved China's Sinovac Covid vaccine for emergency use.
Sinovac Vaccine
- It is an inactivated vaccine.
- It works by using killed viral particles to expose the body's immune system to the virus without risking a serious disease response.
- The Beijing-based biopharmaceutical company Sinovac is behind the CoronaVac.
- It is the second Chinese vaccine to receive the green light from the WHO, after Sinopharm.
- It is a more traditional method of vaccine that is successfully used in many well-known vaccines like rabies.
- One of Sinovac's main advantages is that it can be stored in a standard refrigerator at 2-8 degrees Celsius.
- It implies that Sinovac is a lot more useful to developing countries which might not be able to store large amounts of vaccine at low temperatures.
- The Strategic Advisory Group of Experts on Immunization recommends the vaccine for use in adults 18 years and older, in a two-dose schedule with a spacing of two to four weeks.
Significance of Sinovac Vaccine Approval
- It prevented symptomatic disease in 51% of those vaccinated and prevented severe symptoms and hospitalisation in 100% of samples.
- The approval opens the door for the jab to be used in the Covax programme, which aims to ensure fair access to vaccines.
- The emergency approval means the vaccine meets international standards for safety, efficacy and manufacturing.
- The low- and middle-income countries will be the main benefactors of China's vaccine production as rich nations scooped up most of the more expensive candidates produced by the likes of Pfizer-BioNtech and Moderna.
Surge in FDI Inflows
Recently, the Ministry of Commerce & Industry has announced that in a pandemic-ravaged year, India managed to rake in the highest ever foreign direct investment during financial year 2020-21 at $81.72 billion.
Reasons for surge in FDI inflows
- The measures taken by the government on the fronts of Foreign Direct Investment (FDI) policy reforms have resulted in increase in 10 per cent higher FDI inflows.
- The investment facilitation and ease of doing business have resulted in increased FDI inflows into the country.
- An increase of 47% in “repatriation/disinvestment” entirely accounts for the rise in the gross inflows.
- It is entirely on account of net foreign portfolio investment because foreign institutional investment (FIIs) has boomed by an astounding 6,800% to $38 billion in 2020-21.
- The surge in total FDI inflow during the pandemic year is entirely explained by booming short-term FIIs in the capital market.
- The government has showcased the rise in gross FDI inflows as a badge of the success of its economic policies to counter the widespread criticisms of output and investment slowdown and rising unemployment rates.
- Singapore was the biggest investor in India last fiscal, accounting for 29 per cent FDI, followed by the United States at 23 per cent and Mauritius at 9 per cent.
- The US and UK reported 227 per cent and 44 per cent year-on-year increase in FDI in India during FY21.
- Out of top 10 countries, Saudi Arabia was the top investor in terms of percentage increase during FY21.
- It invested $2,816.08 million in comparison to $89.93 million reported in the previous financial year.
- Among states, Gujarat received the highest FDI at 37 per cent of the total equity inflows.
- Maharashtra and Karnataka had the second and third highest flow at 27 per cent and 13 per cent, respectively.
- The computer software and hardware segment received the most FDI in FY21, accounting for 44 per cent of total FDI equity inflow.
- Under computer software and hardware segment, the major recipient states during the fiscal under review were Gujarat at 78 per cent, Karnataka at 9 per cent and Delhi at 5 per cent.
- The construction (infrastructure) activities and services sector followed with 13 per cent and 8 per cent share, respectively.
Significance of increase in FDI inflows
- It reflects the confidence of international investors in India’s market as FDI inflows play an important role as India faces huge infrastructure funding requirements to boost growth.
- Increased Employment and Economic Growth: The increased FDI boosts the manufacturing as well as the services sector which in turn creates jobs, and helps reduce unemployment among the educated youth.
- Human Resource Development: The skills gained and enhanced through training and experience boost the education and human capital quotient of the country.
- Development of Backward Areas: The FDI enables the transformation of backward areas in a country into industrial centres which in turn provides a boost to the social economy of the area.
- Provision of Finance & Technology: The introduction of newer, enhanced technologies and processes results in their diffusion into the local economy, resulting in enhanced efficiency and effectiveness of the industry.
- Increase in Exports: The creation of 100% Export Oriented Units and Economic Zones have further assisted FDI investors in boosting their exports from other countries.
- Exchange Rate Stability: The constant flow of FDI into a country translates into a continuous flow of foreign exchange which helps the country’s Central Bank maintain a comfortable reserve of foreign exchange.
Sustainable Alternative Towards Affordable Transportation (SATAT) Scheme
Recently, the Union Minister of Petroleum and Natural Gas & Steel presided over a virtual ceremony in which a number of initiatives were launched to provide major fillip to the SATAT initiative.
- A Cooperation Agreement was signed by Oil and Gas majors including IndianOil, HPCL, BPCL, GAIL and IGL, for the promotion and development of the SATAT.
- The Cooperation agreement provides for establishing a strong network for marketing the entire produced quantity of CBG Plants through various channels.
- The agreement also has provision for associate implementers to join the SATAT movement.
- The IndianOil shall act as coordinator under the SATAT scheme and liaison with the Government and other agencies on behalf of Industry members.
- GAIL shall serve as the coordinator for the implementation of the CBG-CGD synchronization scheme.
- The Ministry also signed MoUs with Essar Capital Limited, XEMX Projects, Knowledge Integration Services, and Global Green Growth Institute, Seoul to set up new CBG Plants across the country.
- The Ministry laid the foundation stones of 5 upcoming CBG Plants at Gujarat (2), Uttar Pradesh (2)and Punjab (1).
- It will be set up by CNM Energy Solution Pvt Ltd, CarboneuPvt Ltd, Cities Innovative Biofuels Private Limited and CEF Budhana Energy Private Ltd.
- A website to provide a digital boost to the SATAT programme was also unveiled by the Ministry.
- It shall be a resource centre for new and existing CBG Plants providing details on CBG & SATAT, enablers under the SATAT scheme and FAQs.
SATAT Scheme
- It was launched in 2018 by the Ministry of Petroleum & Natural Gas in association with Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd.
- It envisages targeting production of 15 MMT of CBG from 5000 plants by 2023.
- It aims to set up Compressed Bio-Gas production plants and make CBG available in the market for use as a green fuel.
Significance of SATAT Scheme
- It will provide an investment of 1.75 lakh crore, an additional revenue source to farmers, and 75,000 direct job opportunities and lakhs of indirect jobs.
- It would benefit vehicle-users as well as farmers and entrepreneurs.
- It holds great promise for efficient municipal solid waste management and in tackling the problem of polluted urban air due to farm stubble-burning and carbon emissions.
- It will help bring down dependency on crude oil imports and in realising the Prime Minister’s vision of enhancing farmers’ income, rural employment and entrepreneurship.
Compressed Bio-Gas (CBG)
- Bio-gas is produced naturally (through a process of anaerobic decomposition) from waste / bio-mass sources like agriculture residue, cattle dung, sugarcane press mud, municipal solid waste, sewage treatment plant waste, etc.
- After purification, it is compressed and called CBG, which has high methane content.
- It is exactly similar to the commercially available natural gas in its composition and energy potential.
- It can be used as an alternative, renewable automotive fuel with similar calorific value and other properties similar to CNG.
Benefits of Compressed Bio-Gas (CBG)
- Responsible waste management, reduction in carbon emissions and pollution;
- Additional revenue source for farmers;
- Boost to entrepreneurship, rural economy and employment;
- Support to national commitments in achieving climate change goals;
- Reduction in import of natural gas and crude oil; and
- Buffer against crude oil/gas price fluctuations
Committee on Variable Capital Company (VCC)
Recently, the expert committee on Variable Capital Company (VCC) submits its report to the International Financial Services Centres Authority (IFSCA).
- The Committee of Experts to examine the feasibility of the Variable Capital Company (VCC) was constituted by International Financial Services Centres Authority (IFSCA).
- It aims to examine the suitability of the Variable Capital Company as a vehicle for fund management in the International Financial Services Centre in India.
- It was set up to explore the potential for allowing another legal structure i.e. variable capital company (VCC) as an additional option through which asset managers could pool the investors’ funds.
- It examined the relevance and adaptability of the VCC for the IFSC in India or alternative structures to attract fund business in the IFSC.
- The pooling of funds in India is undertaken through three types of entities, namely:
- Limited liability companies governed under the Companies Act, 2013;
- Limited liability partnerships under the Limited Liability Partnership Act; and
- Trusts governed under the Indian Trusts Act, 1882.
Variable Capital Company (VCC)
- It is a new corporate structure for investment funds.
- It has a variable capital structure that provides flexibility in the issuance and redemption of its shares.
- It can be set up as a single standalone fund or an umbrella fund with two or more sub-funds, each holding a portfolio of segregated assets and liabilities.
- It is basically an alternative form of corporate vehicle that dispenses with some of the key limitations of companies and LLPs.
- It can be used for both open-ended and closed ended alternative and traditional fund strategies.
International Financial Services Centres Authority (IFSCA)
- It has been established in 2020 under the International Financial Services Centres Authority Act, 2019.
- It is headquartered at GIFT City, Gandhinagar in Gujarat.
- It is a unified authority for the development and regulation of financial products, financial services and financial institutions.
- The GIFT IFSC is the maiden international financial services centre in India.
- Its objective is to develop a strong global connect and focus on the needs of the Indian economy as well as to serve as an international financial platform for the entire region and the global economy as a whole.
One Nation One Standard Mission
Recently, the Research Design & Standards Organization (RDSO) of Indian Railways has become the first institution to be declared SDO (Standard Developing Organization) under “One Nation One Standard" mission.
- It is a scheme which provides for “Recognition of SDO”.
- It is an initiative of Bureau of Indian Standards (BIS).
- It is envisioned on the line of ‘one nation one ration card’ in order to ensure quality products in India.
Significance of One Nation One Standard Mission
- It aims at aggregating and integrating the existing capabilities and dedicated domain specific expertise available with various organizations in the country engaged in standards development.
- It will enable convergence of all standard development activities in the country resulting in “One National Standard for One Subject”.
- It aims to usher in more faster transition from development of technology & innovation stage to actual use on ground.
- It aims to make India the leader in setting global benchmarks in setting standards.
Bureau of Indian Standards (BIS)
- It is the National Standard Body of India established under the BIS Act 2016.
- It came into existence, through an act of parliament in 1987.
- It is established for the harmonious development of the activities of standardization and marking and quality certification of goods.
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