THE ENVIRONMENT AND CLIMATE CHANGE

The Problems

1. India is very vulnerable to climate change, with its agricultural and other productivity, health and water supply particularly at risk.

2. Existing environmental regulators are short of funding, capacity and power.

3. Regulation that is either too lax or too harsh means that courts often intervene in environmental issues – sometimes levying excessive punishments or making excessive demands.

4. India’s forest resources are inefficiently managed, with local communities having little say in how they are run. Stern rules about tree-cutting mean that too few new forests are created. There is little incentive to protect biodiversity and wildlife.

Environment

E. Somanathan

Pollution regulation

Air pollution has captured media attention recently, but it is a problem that has been building for many years. It is clear that our existing regulatory system failed to monitor the problem and intervene at a sufficiently early stage. But this is only one of many such looming problems. Water pollution in many places is equally serious. Not long ago, there were news reports that ammonia levels in the Yamuna river had become too high for purification plants to cope with. The fact is that our regulatory system is unable to perform the task of monitoring the environment and heading off threats before they become crises.

The problems with the existing legislation and regulatory system are:

· The central and state pollution control boards are under-funded and dependent on the political executive for their budget. They do not have autonomy in hiring and are understaffed – especially with regard to qualified scientific personnel. The Central Pollution Control Board (CPCB) has a few hundred employees compared to 14,000 at the US Environmental Protection Agency, and the number of scientists is even fewer.

· Only all-or-nothing penalties are available, so the choices facing the boards are effectively to either do nothing or shut down an industry. This has resulted in nothing being done until matters reach a crisis, when the courts intervene (sometimes in a draconian manner). The stop–go nature of regulation results in regulatory uncertainty, so that firms do not have appropriate incentives to invest in clean technology.

It is not possible to address major environmental problems in a cost-effective manner without making use of pollution fees or charges levied at the appropriate level (where the production chain is most concentrated), for example, a fee on plastic production at refineries (refunded if plastic is recovered, i.e., a fee on unrecycled plastic), since it is prohibitively costly to monitor small producers and retailers of plastic bags; a fee on fly ash or sulphur dioxide emitted by coal power plants; a fee on coal use (to cover small coal users whom it is not cost-effective to monitor individually); a fee on diesel at refineries (since it is not practical to monitor pollutants from individual vehicles); a fee on nitrogenous fertilizer use, since it is costly to monitor use on farms; and so on.

Recommendations for pollution regulation

Regulation should be delegated to an independent regulator at both the central and state levels, with the central regulator having overriding authority for all pollutants whose effects cross state boundaries. The existing regulatory structure should be enhanced in the following ways:

· The regulator should have the power to set and levy pollution fees on pollutants and on inputs that are closely related to pollutants. It should also have the power to levy fines for non-compliance with regulations or non-payment of fees.

· The regulator should be appointed for a five-year term, and not removable except by impeachment.

· The regulatory agency must be funded automatically through a charge on industry revenue, so that it is not dependent on annual budgetary appropriation.

· The regulator must be required to use the best available scientific and economic evidence to set pollution fees for pollutants (or inputs closely linked to pollutants) equal to the estimated monetary value of the harm that they cause, and to levy fines for non-compliance. Rules/fees and their justification must include a period for public comment before they are issued. All pollution monitoring data must be published without delay.

· The regulator must have the power to conduct and commission outside entities to conduct scientific (including economic) studies that may be used to determine appropriate regulations and fees.

· The regulator may recommend the use to which revenues from fees and fines may be put but the ultimate decision in this regard must rest with the government (state or Central as the case may be). Such revenues should not form part of the agency’s budget.

Delegating the power to decide the appropriate level of regulation or fee to an independent scientific body is appropriate since the political system does not generate sufficient incentive to deal with problems that mature gradually and are difficult to understand. Giving the government the authority to determine the use of revenues generated from pollution charges is essential for appropriately compensating those adversely affected by regulation in a democratic manner. The scientific body is an inappropriate venue for final decisions involving distributional issues.

The regulator should have the power to issue quantitative limits on pollutants, or outright bans, in addition to being able to levy pollution fees.

Pollution fees have two great advantages. First, they induce an economically efficient reduction in pollution, because they offer inducements to all parties in production and consumption chains to change their behaviour to reduce pollution.

Second, they have a political advantage that is perhaps even more important. The present focus of industry lobbying is to stop regulations or water them down. With the existence of government revenue from pollution fees and a politically independent regulator, industry may conclude that lobbying the government to get a piece of the revenue from pollution fees in order to install pollution equipment or invest in clean alternatives will be more likely to yield fruit than lobbying to stop or delay regulations.

Not all pollution issues are amenable to remedy by such a regulator – for example, the household air pollution (HAP) problem. It is a common misunderstanding that HAP stays indoors. In fact, it is the single largest contributor to national air pollution. The cost-effective solution to HAP is to refund electricity bills for low-income households up to a limit like 100 kWh per month (higher in winter to allow for electric heat) and to charge them the same rate as other customers. This would greatly increase the existing market for induction stoves and take away most of the incentive to use solid fuels. It would also remove the existing incentive that distribution companies have to black out poor households that pay lower rates. Revenues could come from pollution fees levied by the regulator. This would be more cost-effective than subsidizing LPG, although it is likely that LPG will continue to be used in part until electricity supply reliability and quality improve.

Climate change

India is extremely vulnerable to climate change, and we have already suffered losses in terms of heat wave deaths (Mazdiyasni, et al.

To a large degree, an effective pollution regulation system as outlined above will also reduce the emissions of greenhouse gases. The most important pollutant for global warming is carbon dioxide, produced by burning fossil fuels – coal, oil and gas. When fossil fuels are burnt, they produce other pollutants. Therefore, when pollution fees are levied on those pollutants, fossil fuel combustion and carbon dioxide emissions will also be discouraged.

Several complementary policies will be needed in addition – for example, the promotion of walking, cycling and public transport by providing appropriate urban infrastructure, and the electrification of transport by providing charging infrastructure. India also needs to adapt to that part of climate change that is now inevitable – by expanding research and development (R&D) of drought- and heat-sensitive crops, better flood planning and many other measures.

To hold the rise in global temperature to a safe level, the world will have to stop adding to the quantity of carbon dioxide and greenhouse gases in the atmosphere, and eventually even move some from the air. However, India’s share in global emissions of greenhouse gases is only about 7 per cent, fourth after China (26 per cent), the United States (15 per cent) and the EU (10 per cent). Getting these emissions down to zero in the next few decades – followed by negative emissions thereafter – will require a massive replacement of fossil fuels with renewables and other yet-to-be developed technologies.

Ecosystem protection

Forests and other natural ecosystems such as grasslands and wetlands outside the national park system are inefficiently managed by state forest departments (Somanathan, et al. 2009). Legislation is needed to hand over such lands, when they border villages, to local bodies such as gram sabhas to manage. This would result in more efficient management with higher production of timber and other forest products, and more afforestation (as suggested by the experience of Chinese forest reforms, Xu 2010). Gram sabhas would be efficient about timber production but may not do enough to protect wildlife and plant species diversity. Payments for ecosystem services financed by timber taxes would be more cost-effective and politically acceptable, when it comes to incentives for maintaining biodiversity and protecting wildlife, than existing regulations. An important aspect of such a reform would be the removal of existing laws and regulations that prohibit timber cutting and sales, even on private lands, so that farmers and local bodies have the incentive to plant trees.

The national park system should also be reformed to share revenues and management responsibility with local communities.

Legislation is needed to make the use of underpasses and overpasses mandatory for roads and railways. This will allow projects to go ahead without cutting off wildlife migration that is essential to prevent species from going extinct.

References

M. Auffhammer, V. Ramanathan, and J.R. Vincent, 2006, ‘From the Cover: Integrated Model Shows That Atmospheric Brown Clouds and Greenhouse Gases Have Reduced Rice Harvests in India.’ Proceedings of the National Academy of Sciences, 103(52): 19668–72.

Ridhima Gupta, E. Somanathan, and Sagnik Dey, 2017, ‘Global Warming and Local Air Pollution Have Reduced Wheat Yields in India’, Climatic Change, 140(3–4): 593–604.

O. Mazdiyasni, A. AghaKouchak, S.J. Davis, S. Madadgar, A. Mehran, E. Ragno, M. Sadegh, A. Sengupta, S. Ghosh, C.T. Dhanya, and M. Niknejad, 2017, ‘Increasing Probability of Mortality during Indian Heat Waves’, Science Advances, 3(6):e1700066.

E. Somanathan, R. Prabhakar, and B.S. Mehta, 2009, ‘Decentralization for Cost-Effective Conservation’, Proceedings of the National Academy of Sciences, 106(11): 4143–47.

E. Somanathan, Rohini Somanathan, Anant Sudarshan, and Meenu Tewari, 2015, The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing. Discussion Paper No. 15-03. Indian Statistical Institute, New Delhi, India.

P. Wester, A. Mishra, A. Mukherji, A.B. Shrestha, 2019, The Hindu Kush Himalaya Assessment: Mountains, Climate Change, Sustainability and People. Springer.

J.T. Xu, 2010, ‘Collective Forest Tenure Reform in China: What Has Been Achieved So Far’, In World Bank Conference on Land Governance. World Bank, Washington, DC, http://policydialogue.org/files/events/XuJintao_collective_forest_tenure_reform_china.pdf.

The Solutions

1. An independent regulator in every state and at the Centre should be created that is funded directly through a charge on industry. This regulator should be able to use scientific evidence to set pollution fees and fines, so that incentives change through the entire supply chain of a polluting industry.

2. Households should be encouraged to switch to electricity for activities like cooking – in particular, through a refund of the power bill of low-income households. People should be given the incentive to switch to electric vehicles by rolling out charging infrastructure nationwide.

3. India’s global strategy on climate change should focus on an acceptance of the idea of a higher price on carbon, which will induce greater research into substitutes for fossil fuels.

4. Local communities should be given greater control over forest resources, alongside payments for maintaining the ecosystem of forested areas.