Adapting to survive the coronavirus crisis and Food Processing Industries

The rampant spread of COVID-19 pandemic, across borders and geographies, has put global economy in recession with global economy projected to shrink by 3.2% (UN DESA). The disruptions caused by the outbreak and containment measures have left deep impacts on supply chains of manufacturing sector.  Companies across the globe have been scrambling to streamline their supply chains to secure immediate operations.  The economy of India is not an exception and the Indian industries including the food processing industries and MSME are severely affected. MSMEs are an important part of larger supply chains and their health has a bearing on the supply chains overall and indeed ability to supply major consumer product categories. Therefore, substantive support measures are required to see MSMEs through this crisis.

It is important to note that the food processing sector is recognised as a sunrise sector in India. The $600 billion industry currently employs close to 70 lakh workers, including around 15 lakh women. Furthermore, it has a massive potential to unlock the economic value of agricultural produce, thus facilitating the national agenda of doubling farmers’ income by 2022.

The ministry of food processing Industries recently announced the setting up of a task force to address some of the pressing concerns faced by the units. A closer look at some of these challenges highlights the need to understand the structural nature of the issues affecting the sector. It is evident that COVID-19 Crisis offers an urgent and much needed reset point for India’s Food Processing Industry.

The current Government is appeared to be committed to support the food processing industries and MSME in general for reviving their businesses and it is pertinent to highlight here the recently announced Financial and regulatory supports by Honourable Prime Minister and Finance Minister as part of the clarion call on ‘Atmanirbhar Bharat”. It is expected that industries will tide over the huge blow caused by the lockdown and able to provide more and creating more employment in coming years.

COVID-19 has revealed the weaknesses of a globalized manufacturing system and in order to respond, companies need to fundamentally rethink supply chains. In a post-lockdown world, supply chain stress tests will become a new norm.

It has moved from playing a “behind the scenes” organizational role to being a prime driver of the company business. Companies must have now appropriate ‘re-calibration’ strategies for modifying their supply chains as a key business driver and putting back the human asset as the most important factor for an agile business to succeed.

There are huge opportunities for Indian companies and would encourage them to attract international capitals and investment for creating a new manufacturing hub in India. This is possible, as many international manufacturers now looking into India considering its pro-business and FDI environment.   It is believed that our Industries need to strengthen on three fronts: cost (cheaper labour), quality (high skilled workforce), and supply chain (robust infrastructure), India can call itself the next global factory in future. We shall promote a ‘culture of manufacturing’ in India which is prevalent in a few countries such as Germany and South Korea, and closer home in South East Asia. We need to attract our best brains and encourage them to join the manufacturing sector. We need to establish manufacturing linkages. The lack of infrastructure pushes up the logistics cost, which at 14 per cent of GDP is one of the highest globally.  Our industries shall be able to present to the world the enormous opportunities that India offers as a base for manufacturing, innovation, design, research and development.

Keshav C Das

New Delhi, 31st May, 2020

Strategies and challenges towards USD1 Trillion Indian Manufacturing Sector

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In the journey towards achieving sustainable high growth trajectory and inclusive development, India needs to reinvigorate its manufacturing sector. “Since the industrial revolution, no country has become a major economy without becoming an industrial power.” A revival in the manufacturing sector is thus imperative for India to achieve an inclusive and sustainable growth.

As a country with a population projected to increase to more than 1.3 bn by 2021, India has tremendous human potential. The demographic dividend which will present India with a large pool of young and working age population has to be harnessed well and productive employment must be generated. The 183 million additional income seekers (according to the Planning Commission/Niti Aayog) that are expected to join the workforce in the next 14 years cannot be absorbed by the services sector alone. To take full advantage of its demographic dividend and to unlock the human potential of its entire people, India needs to strengthen its manufacturing sector.

To achieve a manufacturing-led transformation, my Government has launched the ‘Make in India’ programme to promote the manufacturing sector of India and make India a global manufacturing hub. The initiative seeks to raise the share of manufacturing to 25% of GDP and create 100 million manufacturing jobs by 2022.

In order to bring about the structural change in the economy, India will also have to move from low value-added to high value added and from low productivity to high productivity sectors or activities.

India has ranked number 1 in Asia on seven out of 10 indicators – political stability, currency stability, high-quality products, anti-corruption, low cost of production, strategic location and respect for IPR. These positive signs for manufacturing sector. The desires of industries and vision of our government match perfectly; our technology and talent can change the world; our scale and skills can speed up global economic growth.

These are all positive signals and we shall take up the agenda of ‘Manufacturing India’ as a collective responsibility.

Keshav C Das

Make In India needs to work

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India has followed a peculiar growth story over the years. India has seen high growth in the services sector. The government has been focusing on right from creating a single window facility for addressing investor concerns, identifying key manufacturing sectors, to creating a common platform to unite state governments, bureaucracy and corporate leaders.

India is blessed with a large labour pool and admirable levels of judicial transparency. We can leverage our territorial position to play a critical role in the global supply chains. Doubling up as a potential high consumption market can keep demand fluctuations in check as well as save up on the logistics costs.

I trust that our Industries need to strengthen on three fronts: cost (cheaper labour), quality (high skilled workforce), and supply chain (robust infrastructure), India can call itself the next global factory in future.

We shall emulate a ‘culture of manufacturing’ in India which is prevalent in a few countries such as Germany and South Korea. We need to attract our best brains and encourage them to join the manufacturing sector. We need to establish manufacturing linkages. The lack of infrastructure pushes up the logistics cost, which at 14 per cent of GDP is one of the highest globally.

The idea of promoting manufacturing is to ensure our demographic dividend finds meaningful employment. We launched the Make in India campaign to create employment and self-employment opportunities for our youth.  We are working aggressively towards making India a Global Manufacturing Hub.  We want the share of manufacturing in our GDP to go up to 25 per cent in the near future.

We are also aware that under the pressure of this campaign, the government machinery will be required to make a number of corrections on the policy front.  There is an increasing need to stress on zero defect and zero effect manufacturing.  We shall place high emphasis on energy efficiency, water re-cycling, waste to energy, clean India and river cleaning.  These initiatives are directed at improving quality of life in cities and villages.  These initiatives provide you additional avenues for investment in technologies, services and human resources.

Keshav C Das

Sectoral Strategies for Transforming the Food Processing Industries in India

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In the context of India’s vision of becoming the ‘Global Manufacturing Hub’; food processing is the ‘SUNRISE SECTOR’. The Food & Grocery market in India is the sixth largest in the world. Food & Grocery retail market in India further constitutes almost 65% of the total retail market in India. The Government of India through the Ministry of Food Processing Industries (MoFPI) is taking all necessary steps to boost investments in the food processing industry. The government has sanctioned 42 Mega Food Parks (MFPs) to be set up in the country under the Mega Food Park Scheme. Currently, 17 Mega Food Parks have become functional. Our food and retail markets are all set to touch $ 828.92 billion investment by 2020. The Processed food market is expected to grow to $ 543 bn by 2020 from $ 322 bn in 2016.

By 2024, the Food Processing industry will potentially attract $ 33 bn investments and generate employment for 9 million people. These are all remarkable targets and asipiration for us. The Government has been working to linking Indian farmers to consumers in the domestic and international markets. The Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments across the value chain.

The potentiality of the food processing sector is huge. We shall acknowledge that India offers the largest diversified production base and has a growing food industry. We are the largest milk producing nation. We are the largest producer, consumer and exporter of spices. We are world’s second largest producer of food grains, fruits, and vegetables. Hence, we have a glorious legacy, excellent track records and necessary skills-technologies and know-how to become a ‘manufacturing Hub in the food processing sector.

To make this aspiration we need only three things: firstly promoting profitable farm production with appropriate agronomical practices, secondly, linking farmers with market and thirdly attracting investment for transforming this important sector.

The government has been already working to secure these ‘development triangle’. For instance, under the Nivesh Bandhu program, which is an investor facilitation portal to assist investors on the investment decisions. A special fund of $285 Mn has been set up in National Bank for Agriculture and Rural Development (NABARD) for affordable credit.

The government has also 100% FDI in the food processing sector. Sector-specific Skill Development Initiatives are also being taken up, with National Institute of Food Technology, Entrepreneurship and Management (NIFTEM) and Indian Institute of Food Processing Technology (IIFPT) being recognized as Centres of Excellence.

Apart from growing population and burgeoning purchasing power, rising urbanization, rising retail trade due to initiatives such as Digital India, together with the presence of global players of the industry can be considered as the major growth drivers for the segment.  We have a population base of 1.3 bn offering a large demand-driven market, with the retail sector expected to treble by 2020. Hence, this is our time now to make India Better! This is our time to make India a leader in the food processing Industry’.

Addressing Water-Energy-Food Nexus

Although, India has made impressive progress in economic development and social transformation; it is continuing to struggle with challenges such as access to clean energy, food, water and ensuring an adequate standard of living for its vast population.  High population growth, rapid urbanization, fast economic progress, and industrialization, have increased demand for resources, including food, water, and energy, and intensified their use, with serious implications for the environment and long-term security of these sectors. South Asia remains home to more than 40% of the world’s poor (living on less than USD 1.25 a day) and India has managed to reduce the poverty level into 369 million (27.9 per cent of total population) in 2015-16[1]. The MDGs remain an unfinished agenda and its transition into Sustainable Development Goals (SDGs) accelerate the ambition of government in ensuring water-energy-food securities without degrading the natural resource base. This ambition remains as a fundamental development challenge.

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Freshwater, once abundant, is under over-exploitation due to increased demand for competing uses and anthropogenic negative impacts of climate change. About 14% of the Indian population (163 Million) lacks access to safe drinking water. Indian agriculture is dominated by small and marginal farmers, the ratio of agricultural land to agricultural population is about less than a hectare (0.3) per person, compared to more than 11 ha/person in developed countries. Over 90% of total water withdrawals are used for agriculture and about 60% of the population in India depend on groundwater for irrigation. Irrigation efficiency is low, water productivity is less than one-fifth of that in the world’s large food producing countries. There is a serious shortage of the energy required to make water available for crop production, for example through groundwater pumping. Per capita energy consumption in India is among the lowest in the world, which is about one-third of the global average (0.6 tonnes of oil equivalent (toe) as compared to the global per capita average of 1.8 toe). With growing populations, climate variability, declining agricultural land, increasing stress on water and energy resources, India faces the challenge of how to produce more food with the same or a reduced land area, less water, and increased energy prices, while conserving resources and maintaining environmental sustainability.

We need to focus on promoting sustainable use of energy with an integrated approach for water-Energy-Food (WEF) and do no harm to the environment. It is important to promote energy efficient irrigation pumps along with precession irrigation, which aims to replace the currently practiced business as usual irrigation facilities such as flood irrigation, powered with either diesel or electricity from gird. These efficiency measures along the entire agrifood chain can help save water and energy, such as precision irrigation based on information supplied by water providers, which can motivate farmers to invest in their systems to ensure the best returns from their water investment. It is expected this technological innovation around ‘energy efficient irrigation’ and water resources management strategy would create an enabling ecosystem in the country, which could trigger expansion of efficient irrigation to promote food grain production.

It is pertinent to underscore that the water-energy-food nexus is becoming an explicit focus issue among public-sector and private-sector businesses, which see an opportunity to help enable economic development and business growth in addressing nexus issues. At a global level, the United Nations’ 2015 Sustainable Development Goals include three that focus specifically on food, water, and energy. Organizations including the United Nations, World Bank, and the World Economic Forum have called for action to address the nexus stress. The voice of the private sector is also being heard through organizations such as WBCSD.

The private sector is emerging as a force in establishing and activating the water, energy, and food nexus ecosystems. Scaling these water, energy, and food nexus ecosystems can involve bringing in other stakeholders such as multinationals, NGOs, foundations, and regional or global banks to promote leading practices in water, agriculture, and energy management tied with the promotion of innovative technologies. This ‘increasing level of interests’ of various stakeholders are building up an impressive ‘startup and innovation’ culture for the Indian entrepreneurs and innovators, who could be benefited from the available knowledge, technologies and readily available financing. Cleantech is a rapidly growing market that shows great potential for Indian innovators. 84 innovators participated in a cleantech accelerator of UNIDO with their innovations covering energy efficiency, renewable energy, water and waste water and post-harvest management. A total of 26 already succeeded to create start-ups and collectively raised USD7 million for scaling up and commercialization.

There is also a need of ‘policy-push’ for strengthening the WEF nexus. Policies and instruments can be developed with an adequate consideration for the cross-sectoral consequences. The cross-sectoral efforts that have been made have remained linear, such as taking into account water for food or energy for food. This could create an imbalance between the sectors in terms of demand and supply. The connections between macro-economic and sectoral policies and cross-sectoral impacts should also be internalized into national policies. The common challenge facing India is how to decouple food production from water and energy use intensity and environmental degradation to make it sustainable. The planned Sustainable Development Goals (SDGs) are closely interlinked and success in achieving them will depend heavily on ensuring the sustainable use and management of water, energy, land (food), and other natural resources. These factors are not only interdependent, they also both reinforce and impose constraints on one another. It is within our power to combat scarcity by taking action at the nexus. Working together, and taking advantage of technological advances, the public sector, private sector, and NGOs can develop approaches that offer the hope of a sustainable and prosperous future.

[1] (source: 2019 global Multidimensional Poverty Index, UNDP and Oxford Poverty and Human Development Initiative)

India with Clean Air: will it be a reality?

State of Global Air 2019, published by Health Effects Institute (HEI), said exposure to outdoor and indoor air pollution contributed to over 1.2 million deaths in India in 2017. The report added that worldwide, air pollution was responsible for more deaths than many better-known risk factors such as malnutrition, alcohol abuse and physical inactivity. In India, air pollution is the third-highest cause of death among all health risks; each year, more people globally die from air pollution-related disease than from road traffic injuries or malaria.745228-airpollution-delhi-pti-101918

With a current population of almost 20 million, the National Capital Territory (NCT) of Delhi experiences periods of extremely high air pollution levels. According to WHO survey of 1600 world cities, the air quality in Delhi is the worst of any major city in the world. In Delhi, poor quality air damages irreversibly the lungs of 2.2 million or 50 percent of all children. In November 2017, in an event known as the ‘Great Smog of Delhi’, the air pollution spiked far beyond acceptable levels. Levels of PM2.5 and PM10 particulate matter hit 999 micrograms per cubic meter, while the safe limits for those pollutants are 60 and 100 respectively.

This worst scenario of air pollution is also vividly experienced in other Indian cities. According to the WHO, India has14 out of the 15 most polluted cities in the world in terms of PM 2.5 concentrations. Other Indian cities that registered very high levels of PM2.5 pollutants are Patna, Agra, Muzzaffarpur, Srinagar, Gurgaon, Jaipur, Patiala and Jodhpur, followed by Ali Subah Al-Salem in Kuwait and a few cities in China and Mongolia.

Although there are multiple reasons, including broad effects of meteorology, vehicular emissions contribute significantly to the problem. According to some reports, 80 per cent of PM2.5 air pollution is caused by vehicular traffic. Other causes include wood-burning fires, fires on agricultural land, exhaust from diesel generators, dust from construction sites, and burning garbage and illegal industrial activities.

India has initiated major steps to address pollution sources: the Pradhan Mantri Ujjwala Yojana Household LPG programme, accelerated Bharat Stage 6/VI clean vehicle standards, and the new National Clean Air Programme (NCAP) are a few key initiatives of government. NCAP is the first ever effort in the country to frame a national framework for air quality management with a time-bound reduction target. It proposes a framework to achieve a national-level target of 20-30 per cent reduction of PM2.5 and PM10 concentration by between 2017 and 2024. This is a right step forward and kindles a great deal of optimism and expectations. These and future initiatives have the potential, if fully implemented as part of a sustained commitment to air quality. Perhaps, government shall also focus on building the necessary ecosystem for implementing these initiatives.

There is an urgent need to start structured advocacy for managing the air pollution and develop an ‘’integrated ecosystem’’ which would contribute to the aspiration of sustainable and inclusive growth of India. The key components of this ‘’integrated ecosystem’’ could be robust research and development (R&D) for clean air promotion and deployment of appropriate solutions for ensuring ‘’clean air’’. Besides, implementation of stringent air pollution regulations and empowering states to take up take local action at cities level to improve air quality are also crucial.

Key stakeholders should have called on a voluntary response to air pollution and, within this context, taken up investment for promoting cleaner technologies. We must also promote innovation of low-emission and less polluting technologies and its deployment in industrial and other related sectors of Indian economy.

It is expected that similar initiatives shall be taken up by other development partners, aiming to integrate sustainability strategies into urban planning and management, which could eventually create a favourable environment for investment in infrastructure and service delivery for transforming our polluted cities to ‘’clean and sustainable cities.

Good air quality can go hand in hand with economic development, as indicated by some major cities in Latin America which meet, or approach, the WHO Air Quality Guidelines. Despite the upswing in air quality monitoring, many cities in India still lack capacity to do so. There is a particular shortage of data on air quality and its management. Hence, the government shall also focus on real time air quality monitoring and creating awareness at different level (household-industries and community level). India’s air pollution problem needs to be tackled systematically, taking an all-of-government approach, to reduce the huge burden of associated ill-health and livability in cities. This is a bigger responsibility to the newly formed government and its leadership!

 Keshav C Das

Establishing an Energy Fund for NDC Implementation

As part of the NDCs, India has committed to generate 40% of its electricity needs from renewable sources by 2030. However currently, the share of renewable in electricity generation as of 2017 is only 15%. The biggest bottleneck to achieve the targets is adequate financing of the RE assets by both government as well as private firms. There is an estimated need of $ 100 billion in next six years to achieve the targets set by the country. With the current flow of approximately $785 million in the last year, it seems highly impossible to achieve the targets without having a clear road map of financing and investments in RE sector in India. Financial innovation must happen at both investments as well as at the consumer level.

Goal: To Mobilize Domestic and New & additional funds from developed countries to implement the above mitigation and adaptation actions in view of the resource required and the resource gap. USD 2.5 trillion (at 2014-15 prices) required for meeting India’s climate change actions between now and 2030 as per preliminary estimates. Ashden India, along with its 30+ winners of the prestigious Ashden Award aim to work the government of India, industry groups and national financial agencies of India to design a financial framework for renewable energy financing. This framework will enable the implementing agencies (public or private) to select suitable and applicable financial models while designing and implementing renewable energy projects, ranging from solar to biomass; and on grid project to off-grid project.

It is expected that the proposed financial framework will recommend six innovative financing mechanisms – and likely finance providers – for mobilising investment and looks at the benefits and challenges of each approach. These mechanisms include emission trading schemes; green bonds; international financial institutions; international and regional climate funds; government-backed funds; and equity capital.

Keshav C Das

New Delhi

(I)NDCs as a pathway to realize national and global low-carbon, climate resilient – development strategies

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What is INDC and NDC?

Countries across the globe adopted an historic international climate agreement at the U.N. Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP21) in Paris in December 2015. In anticipation of this moment, countries publicly outlined what post-2020 climate actions they intended to take under the new international agreement, known as their Intended Nationally Determined Contributions (INDCs). The INDCs will largely determine whether the world achieves an ambitious 2015 agreement and is put on a path toward a low-carbon, climate-resilient future.

The word “intended” was used because countries were communicating proposed climate actions ahead of the Paris Agreement being finalized. However, as countries formally join the Paris Agreement and look forward to implementation of these climate actions – the “intended” is dropped and an INDC is converted into a Nationally Determined Contribution (NDC). This conversion happens when a country submits its respective instrument of ratification, accession, or approval to join the Paris Agreement. A detailed update on the (I)NDC can be found in the NDC registry site of UNFCCC[1]. In addition, the NDC platform of the World Bank[2] is also resourceful to get analysis on the (I)NDCs.

 

Why is it important for SNV?

 

(I)NDCs are important for SNV as it fits strategically into the corporate strategy of SNV with respect to poverty alleviation, energy for all, sustainable health and sanitation, reduced deforestation and sustainable landscape development. Besides, (I)NDCs are important for SNV as because they reflect national climate actions of governments. SNV wants to align with these to have more impact and increase opportunities to access climate finance.

INDCs contribute to the Sustainable Development Goals (SDGs). As such, INDCs will have implications for framing country’s low carbon and climate resilient development strategy, By participating in their implementation  SNV  can   contribute to the  Sustainable Development Goals (SDGs) 1 (to end poverty), 7, to “Ensure access to affordable, reliable, sustainable, and modern energy for all”, SDG 9 to “build resilient infrastructure, promote inclusive and sustainable energy and foster innovation”, SDG 6, to “Ensure availability and sustainable management of water and sanitation for all,  Increasing water productivity and adopting sustainable production and consumption patterns to meet the world’s projected future demands” and SDG 12 to “Ensure sustainable consumption and production patterns”.

At the level of country strategy; (I)NDCs are instrumental for identifying long-term and immediate low-carbon and climate resilient development priorities of countries. (I)NDCs implementation needs to be tailored to each country’s circumstances, building on existing strategies, plans and capacities, and clearly setting out how action on the ground will be delivered and turned into achievements. SNV can use this scope by contributing to the development of frameworks for NDC implementation, setting out the coordinated action required across five distinct (but intrinsically linked) pillars: governance, climate change mitigation, – adaptation, finance and measurement, reporting and verification (MRV).

There is increasing interest of donors to fund (I)NDCs activities, which could entice SNV to engage in these initiatives. In 2014-15, the NAMA Facility funded by BMU, UKAID, EU and Denmark committed 60 Million EUR for financing mitigation actions in line with the (I)NDCs. The Green Climate Fund received pledges of 11 Billion USD, which will fund 1:1 climate change adaptation and mitigation activities in accordance to (I)NDCs.  Bilateral donors like Norway, Denmark, UK and Germany are providing small funding to countries for preparing INDCs frameworks. T Currently available funding for developing INDCs are less than 10 Million USD. The climate finance update -2015 depicts[3] that developed countries pledged to deliver finance approaching $30 billion between 2010 and 2014, and committed to mobilize $100 billion per year from public and private sources by 2020 for investing in climate change mitigation activities (adaptation is still less than 15% of total funding available).

 

Objective and the targeted audience

 

Currently, countries have been developing detailed implementation plans for INDCs, which includes prioritization of activities to be taken up from 2021 and securing funding from international and domestic sources for implementation. Countries are expected to complete this preparation of implementation plans by mid of 2017 as UNFCCC has set this target. These plans will provide the blueprint for future climate financing.

SNV country teams have the opportunity to closer align with these plans and identify priority areas from INDCs in the agriculture, forestry and energy sectors, to develop low carbon and climate resilience programs with national actors, achieve poverty reduction- and environmental impact and access climate finance.   SNV country offices need to establish effective partnerships with the national governments to implement these NDCs projects and programmes.

To prepare these activities, SNV has undertaken an analysis of INDCs with the following objectives:

  1. To provide an overview of how agriculture, energy, forest and climate sectors have been included in the Intended Nationally Determined Contributions (INDCs) in SNV countries; and
  2. To provide recommendation on SNV interventions in 5 countries.

 

Structure of the report

 

The report includes 4 key sections, viz., (A). brief background on the definition of (I)NDC and its importance for SNV; (B). General overview on (I)NDCs according to sector focus, level of ambitions of countries; (C). Detailed analysis of (I)NDCs from countries, where SNV has presence and (D). Summary recommendation for SNV to realize its (I)NDC support ambitions through the establishment of partnerships with country governments.

Overview of (I)NDCs:

 

162 INDCs have been submitted to the UNFCCC as of July 29, 2016 by 190 countries (EU has submitted a regional INDC), accounting for over 90 percent of global emissions[4].

 

Most of the INDCs are national in scope; they address all major national GHG emissions or at least the most significant sources such as Co2, and CH4. The GHG reduction ambition of INDCs are different in scale (ranging from 1.5 to 89.0 per cent in comparison to BAU).  Approximately, 80 INDCs include relative targets for reducing emissions below the ‘business as usual’ (BAU) level, either for the whole economy or for specific sectors.

129 countries included in their INDCs sectoral or sub-sectoral quantified targets. These Parties included targets for energy and land use, land-use change and forestry (LULUCF) sectors together with their economy-wide targets.

 

78 countries identified targets for renewable energy. Renewable energy targets were expressed using different indicators, such as share in the energy matrix, installed capacity, generation and penetration, and ranged between 3.5 and 100.0 per cent for these indicators.

 

Renewable energy was highlighted in many INDCs. Related actions aim at increasing the share of and improving access to clean energy, such as feed-in tariffs, investment programmes for renewable energy generation, and improvement of the grid infrastructure. A few Parties communicated quantified renewable energy targets, with some aiming at achieving 100 per cent renewable energy supply for the electricity sector.

 

Actions on energy efficiency, also highlighted in many INDCs, include the modernization of energy generation and transmission infrastructure, the promotion of smart grids, efficiency improvements in industrial processes, and energy conservation standards. Sustainable transport is highlighted in several INDCs through measures such as improving public transport, limiting the import of inefficient vehicles and using fuel efficiency standards. A few Parties also communicated quantitative energy efficiency targets.

 

In several INDCs countries provided information on plans to implement policies and measures to reduce CH4 and other non-CO gases by improving crop and livestock production, promoting low-carbon agriculture and establishing waste management and recycling programmes as well as waste-to-energy facilities. Furthermore, several INDCs highlight measures to promote the conservation and sustainable management of forests. Some countries particularly highlighted the importance of REDD-plus activities in this context. A few countries communicated targets for increasing forest cover.

 

156 countries included emissions and removals from land use, land use change and forestry (LULUCF). A few countries indicated that a common framework for LULUCF accounting may be desirable, which could be based on existing guidance and experience under the Convention and its Kyoto Protocol. However, many of the INDCs do not provide comprehensive information on the assumptions and methods applied in relation to LULUCF, which presents a major challenge for the quantitative evaluation of the aggregated effect of the INDCs.

 

82 countries, most in sub-Saharan Africa, included sectoral mitigation targets for the agriculture sector, or quantified the potential reductions from their mitigation actions. These contributions ranged from 5 GgCO2e /year (Côte d’Ivoire) to 90 000 GgCO2e/year (Ethiopia), or 6.8% to nearly 50% of emissions, generally calculated against business-as-usual emissions in 2030.

 

As the reference point (baseline), some countries chose 1990, a few chose 2005 and others referred in their contributions to 2000, 2010, 2013, 2014 or 2015. Some countries specified their level of emissions for a base year or provided information on Business as usual BAU reference scenarios for the mitigation objectives expressed relative to BAU. Most Parties indicated either a 5- or 10-year implementation period for their INDCs. Many of the INDCs refer to an implementation timeline up to 2030, while a few refer to an implementation timeline up to 2025. A few of the INDCs communicated targets for both 2025 and 2030, one of which is indicative or interim. A few Parties indicated a timeline of up to 2035, 2040 or 2050, mostly in conjunction with another target year. Furthermore, a few countries communicated an implementation period starting before 2020.

 

134 countries provided information relating to planning processes, including specific aspects such as: the national process of the development and approval of the INDC; institutional arrangements; stakeholder engagement; policy and legislative issues; and priority areas for implementation. These Parties have already taken a number of steps to develop a strong domestic basis for planning and implementing their INDCs and expect to build on those efforts in the future. Many INDCs are directly backed by already existing national legislation or policies. And several INDCs provide information on processes towards new legislation and policies, triggered by the preparation of the INDCs. While the level of ambition and the degree of advancement in national climate policies vary, all Parties mentioned that their INDCs are based on, among others, existing policies or ongoing national processes, as well as on experiences with implementing the Convention and its Kyoto Protocol.

 

A few countries referred to the need to respect human rights and gender equality. The consideration of gender issues is seen by 87 countries as imperative in establishing an enabling environment for adaptation. For example, one country (Ghana) has established a climate change gender action plan. Other countries mentioned the need to address human rights.

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Many countries provided information emphasizing that their INDCs have undergone national stakeholder consultation processes with a view to raising awareness and securing buy-in with respect to their INDCs and related long-term development plans. Parties highlighted that support from actors such as the private sector, academia and civil society, as well as from relevant sectoral ministries and regional and local governments, is critical for the identification of realistic targets. Examples of processes to engage stakeholders included the establishment of expert task forces and working groups, parliamentary hearings, large-scale public consultations, including workshops, targeted meetings and an invitation for written submissions, as well as awareness-raising campaigns. A few Parties noted that they still plan to hold consultations on the overall national climate policy underlying their INDCs.

 

Over half of the communicated INDCs include the plan or intention to use market-based instruments from international, regional or domestic market instruments, including the clean development mechanism (CDM). Most of those countries indicated that they would use market instruments to meet only part of their targets. Several countries stressed that the use of market-based mechanisms is important for the cost efficiency of the mitigation effort and for enhancing the level of ambition. The assessment of the aggregate effect of the INDCs presented in this report assumes that no double counting of outcomes from actions to reduce emissions will occur.

 

Support needs for the implementation of INDCs were highlighted by several countries Those countries identified in their INDCs needs for targeted foreign/international investment and finance, capacity-building and technology, with some providing quantitative estimates of the support required for the implementation of their INDCs and for achieving the upper level of their mitigation contributions. Some countries identified domestic/national measures to support the implementation of their INDCs, including the use of market-based mechanisms, increased budgetary support, public–private partnerships, green procurement programmes, reforms of pricing and taxation regimes, the improvement of green credit mechanisms and the establishment of specialized national funds. A few Parties noted the importance of engaging the private sector. .

 

158 countries noted the importance of enhanced international support in the context of the new global agreement, including its scaling-up, and the strengthening of the role of and linkages between the existing operating entities of the Financial Mechanism, including the Green Climate Fund (GCF) and the Global Environment Facility (GEF), and the Technology Mechanism (CTCN) under the Convention.

 

Information contained in the INDCs shows a clear and increasing trend towards introducing national policies and related instruments for low-emission and climate-resilient development. Many INDCs are already backed by existing national legislation or policies and several have triggered national processes to establish relevant policy frameworks. Furthermore, many INDCs involved public consultation and the engagement of a wide range of stakeholders to demonstrate the developmental benefits of action to combat climate change and to secure the buy-in for such action.

 

Information provided by countries highlights the trend towards an increasing prominence of climate change on national political agendas, driven in many cases by inter-ministerial coordination arrangements as well as by an increasing trend towards the mainstreaming of climate change in national and sectoral development priorities. At the same time, many countries have made efforts to ensure that the private sector, civil society and other nongovernmental actors recognize the importance of, and provide support for, national action to combat climate change.

 

The INDCs show an increasing interest of countries in enhanced cooperation to achieve climate change goals collectively through a multilateral response and to raise ambition in the future. In particular, countries stressed the need for strengthening finance, technology transfer and capacity-building support for climate action in general as a means of creating an enabling environment and scaling up action.

 

Narratives provided by countries in their INDCs convey the vision that each country implements its own strategy and reveal the need for a process to reconcile efforts made in the context of different national circumstances with the efforts needed to keep the global temperature rise below 2 °C. This target of global temperature rise, should be addressed as Parties consider current and future efforts in relation to any agreed goal under the Convention.

 

Inclusion of adaptation in INDC: One hundred countries included an adaptation component in their INDCs. The secretariat received adaptation components from 46 African States, 26 Asia-Pacific States, 19 Latin American and Caribbean States, 7 Eastern European States and 2 Western European and other States.

 

Countries highlighted their common determination to strengthen national adaptation efforts in the context of the 2015 agreement. Some stressed that adaptation is their main priority for addressing climate change, in particular as they see it to be strongly linked to national development, sustainability and security.

 

All adaptation components of INDCs included information on key impacts and vulnerabilities. Countries reported in particular on observed changes or projections of future changes, the most vulnerable sectors or geographical zones, high-risk impacts and incurred costs resulting from the impacts of extreme events. In terms of climate hazards, the main sources of concern identified by most countries are flooding, sea level rise and drought/desertification.

 

The information provided clearly demonstrates that countries are moving to full-scale planning and implementation of climate change adaptation and strengthening and scaling up existing efforts (mitigation?). Most Parties referred to developing nationwide adaptation plans and strategies; several countries indicated that they are conducting the process to formulate and implement national adaptation plans (NAPs) and most of them foresee having developed their NAP by 2020. Such national efforts are often accompanied by specific policies, measures and initiatives in practically all key economic sectors and areas, with water, agriculture, health, ecosystems, forestry and infrastructure being reported as the priority ones. A few countries intend to undertake actions with regional or global impacts as they will address transboundary issues.

 

The recognition of the need to involve relevant stakeholders in the planning and implementation of adaption, including vulnerable communities, was high on the agenda of several countries. In addition, many emphasized the need to consider gender issues when undertaking adaptation.

 

Loss and damage associated with past and projected impacts of climate variability and change were reported by several countries, some of which have quantified projected loss and damage, for example in the form of absolute costs, annual loss of GDP, or percentage of land or agricultural production lost by a certain year or a particular threshold, for example a specific rise in sea level. A few countries provided details on projected costs of climate change impacts and how intended adaptation measures are expected to reduce them while leaving some residual damage, clearly making an economic case for investing in adaptation and disaster risk reduction.

 

Most countries provided information on the means of implementation (e.g. finance, technology and capacity-building) needed to support the implementation of their planned adaptation actions, including related to support needs and envisaged domestic and international support. Financial needs for adaptation were quantified by some countries, with individual needs ranging from USD 100 million to over 200 billion for the whole INDC period to around USD 10 million to 3 billion per year. A few Parties provided projected adaptation costs for different mitigation scenarios, thus clearly indicating that the need for adaptation depends on mitigation ambition.

 

Regarding the monitoring and evaluation (M&E) of adaptation action, countries highlighted that they have established or will establish quantitative and qualitative indicators for adaptation and vulnerability to measure progress. In terms of the M&E of domestic and international support provided and received, in particular finance, a few countries are putting in place climate finance systems for determining, disbursing and monitoring climate expenditure and for enhancing the visibility of adaptation measures within the allocation of national budgets.

 

159 Countries referred in their INDCs to the importance of extensive national consultation and interdisciplinary coordination to ensure strong alignment with development objectives and buy-in from all relevant stakeholders.  Parties specifically highlighted that all levels of government share responsibility for action and the existence of inter-agency coordinating mechanisms on climate change in the countries. A few of the INDCs have been approved at the highest political level, for example by the national Parliament, the Cabinet of Ministers or by the President. Furthermore, the importance of national, subnational and regional cooperative action both by government and non-State actors was noted by several Parties. A few of the INDCs specifically note that initiatives undertaken by cities and subnational governments will be an important driver for their implementation.

 

Conclusion

 

In sum, the (I)NDCs, submitted to the UNFCCC clearly depicts the level of commitments of countries for reducing GHGs emission. 74 developing countries have included information on the level of political support adopted in their INDCs. In 8 developing countries the Head of State have formally backed the INDC; in 33 developing countries INDCs were adopted through an inter-ministerial process; 29 developing countries have developed their INDC through a sole line ministry; 8 developing countries had their INDC validated in parliament before submission. 109 developing countries have developed their INDCs based upon existing national policies and plans. As discussed in the previous section, the (I)NDCs have included mainly 7 key areas under the mitigation sector and another 7 key areas under adaptation sector.

[1] http://www4.unfccc.int/ndcregistry/Pages/Home.aspx

[2] http://spappssecext.worldbank.org/sites/indc/Pages/INDCHome.aspx

[3] http://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/9358.pdf

[4] http://www.c2es.org/international/2015-agreement/indcs

 

Keshav C Das

Ashden India, New Delhi

 

Focus on Manufacturing for Economic Development

manufacturingIntroduction:

Developing countries have been experiencing rapid economic growth over the last decade that is mostly fueled by the strong performance of the agriculture sector, which in turn was mainly due to the higher yield and area expansion of smallholder farmers. However, there is a limit as to how much this strong performance of the economy can continue if the country continues to rely on the agriculture sector. To be able to sustain the strong economic performance of the last decade and achieve economic growth, countries need a structural change towards manufacturing. This raises a couple of questions: why manufacturing and what kind of manufacturing?

Why Manufacturing?

Much recent literature has demonstrated that economic development requires structural change from low productivity activities to high productivity activities. It also suggests that the industrial sector in general and the manufacturing sector in particular is the engine of economic growth. In fact, virtually all cases of high, rapid, and sustained economic growth in modern economic development have been associated with industrialisation, particularly growth in manufacturing production[1].

But these assertions require grounding in empirical regularities and theoretical justifications. Policy makers need to provide stylized facts regarding the correlation between the manufacturing sector and economic growth.

Empirical reasons (stylized facts)

There is an empirical correlation between the degree of industrialization and per capita income in developing countries.

One of the most prominent empirical regularities is that countries with a higher manufacturing share in GDP grow faster.  Of course one may object that, this evidence, based on a cross section data, may be a result of the fact that some countries have conducive economic policies and endowments that enable establishment of manufacturing and high growth. i.e., it may not be the case that manufacturing contributes to the faster growth, rather it may be the case that there is something else the countries have got that encourages manufacturing. This takes us to the second empirical regularity. The data shows that the experience of sustained fast growth in developing countries are associated with an increase in the share of manufacturing exports in the total exports and an increase in employment in the manufacturing sector.

A combination of the above two empirical observations suggests that manufacturing is a key sector for countries to experience sustained high growth. The next question then is whether manufacturing can be brought about by policy or countries are doomed to specialize in their comparative advantage. In other words, do the countries with higher share of manufacturing in their economy achieve that because they have a conducive endowment structure (e.g. abundance of labour) or do they achieve that because they have made conscious policy decisions that are conducive for the development of manufacturing?

A look at the data suggests that the latter is closer to the reality. Specifically, empirical regularities show that countries that grow fast are those that produce (especially export) goods more sophisticated than what their comparative advantage shows. In other words, a conscious policy to promote technological upgrading dictates whether a country engages in the production of a manufacturing good that facilitates its growth rate. Part of the reason why countries that produce goods more sophisticated than their comparative advantage grow faster is because that entails catching up to a higher level technology (i.e., getting closer to the technological frontier).

These empirical regularities suggest that a transition to manufacturing is likely to provide a boost to the economic fortunes of the country. One might wonder about the channels through which manufacturing provides such a growth boost. The following is a brief discussion regarding the theoretical rationale for it.

Theoretical reasons[2]

First, there is substantial data that shows that in developing countries the productivity of labor in the industrial (manufacturing) sector is much higher than the agriculture and service sectors. As a result, shifting labor away from agriculture/service towards the industrial sector provides a positive static shift effect. i.e., the country’s GDP will be much higher for a given amount of labor and hours worked. This static shift effect is known in the literature as a structural change bonus.

Second, the data also shows that in developing countries the productivity of labour tends to grow much faster in the manufacturing sector than in the agriculture and service sectors. In other words, a country where more workers are engaged in the manufacturing sector will grow faster due to the dynamism of the sector.

Third, the manufacturing sector tends to have stronger Linkage and spillover effects. There are evidences in the literature that the industrial sector provides a stronger demand for the products of other sectors (backward linkage) and supplies more inputs to other sectors (forward linkage). In addition, the manufacturing sector has traditionally been the sector where most new products and processes get developed. In other words, most sectors adopt new technologies and processes that originate from the manufacturing sector. To put it in an economic jargon, the manufacturing sector has stronger spillover effects (knowledge externalities).

Fourth, the manufacturing sector usually requires lumpy investments. This characteristic of the industry has two implications. The first implication is that production in the sector offers economies of scale, i.e. increased productivity as more is produced. The large-scale production that results from the effect of economies of scale will further provide opportunities for learning by doing. In other words, production in the industrial (manufacturing) sector provides both static gain (economies of scale) and dynamic gain (growth of productivity through learning by doing). The second implication of lumpy investment in the sector is that the sector provides more opportunities for capital accumulation.

Finally, there is the effect of Engel’s Law: as per capita incomes rise, the share of agricultural expenditures (as a share of total expenditures) declines and the share on manufactured goods increases. One consequence of this observation is that the expanding world market that results from economic growth provides a much larger market for manufacturing goods than agricultural commodities. As a result, countries that produce manufacturing goods are better positioned to benefit from this growth in the global economy.

What Kind of Manufacturing?

The above discussion has illustrated the benefit of transitioning to the manufacturing sector as a source of high and sustained growth. In addition, it shows that policy plays a role on whether a country achieves the suggested structural transformation or not. If policy is going to play such a role, then we have to identify what kind of manufacturing is likely to succeed in the country and therefore needs the support of the government.

When deciding which manufacturing sub sectors a country wants to trasit to it needs to take in to account two factors: Comparative advantage and linkages.

Comparative advantage is dictated by the type of productive asstes that are abundant in the country. In the case of developing countries cheap labor and land are the basis for our comparative advantage. The manufacturing goods that rely on these inputs are agro related food and non-food processing as well as as other light manufacturing such as textile and leather.

Whether producing a specific manufacturing commodity, that relies on cheap labor and agricultural commodities, will lead to rapid transformation compared to encouraging other relatively similar manufacturing goods depends on the degree of sectoral linkages it produces. If the production of the specific manufacturing good encourages stronger backward and forward linkages with the other sectors of the economy, then encouraging its production will lead to faster and sustainable growth.

Comparative advantage is one of the main criteria for encouraging the production of a specific manufacturing good. Ethiopia has an abundance of land, with potential to produce agricultural products as an input to agro processing manufacturing subsector. Comparative advantage, however, is not automatically translated into competitive advantage. Whether a country successfully industrializes or not depends on the availability of the right type and quantity of raw materials on long term and sustainable basis. In other words, the performance of the agricultural sector in terms of providing quality inputs at a competitive price and in suffient quantity is a fundamental issue for the success of the manufacturing sector.

[1] Szirmai(2009)

[2] Most of the discussion regarding theoretical justifications provided below relies on Szirmai(2009)

Keshav C Das

New Delhi, October, 31, 2016

 

Is the Paris Agreement entering into ‘Actual Force’?

indc-bright-tree-words

The news from Indian Prime Minister came today evening as a surprise- that India will ratify the Paris Agreement on October 2 and submit its NDC. This submission of India will push the Paris Agreement nearer to ‘’force into implementation’’. India accounts for 4.5 percent of the global emission.  However, the big question is: Will the Paris Agreement and its supporting NDCs are having sufficient clarity on its ambition and resources necessity (financing, technical and institutional) to implement the NDCs? The answer of this question is again very confusing (yes and no).

In an analysis based on the synthesis report of UNFCCC and other analysis, it is found that most of the INDCs are national in scope; they address all major national GHG emissions or at least the most significant sources such as Co2, and CH4. Approximately, 129 Parties included in their INDCs sectoral or sub-sectoral quantified targets. These Parties included targets for the energy and land use, land-use change and forestry (LULUCF) sectors together with their economy-wide targets. 78 Parties identified targets for renewable energy as part of the information to facilitate the clarity, transparency and understanding of their INDCs.

A few Parties referred to the need to respect human rights and gender equality. Over half of the communicated INDCs indicate that Parties plan to use or are considering the use of market-based instruments from international, regional or domestic schemes, including the clean development mechanism (CDM). Support needs for the implementation of INDCs were highlighted by several Parties. Those Parties identified in their INDCs needs for targeted investment and finance, capacity-building and technology, with some providing quantitative estimates of the support required for the implementation of their INDCs and for achieving the upper level of their mitigation contributions.  158 Parties noted the importance of enhanced international support in the context of the new global agreement, including its scaling-up, and the strengthening of the role of and linkages between the existing operating entities of the Financial Mechanism, including the Green Climate Fund (GCF) and the Global Environment Facility (GEF), and the Technology Mechanism under the Convention.

Information contained in the INDCs shows a clear and increasing trend towards introducing national policies and related instruments for low-emission and climate-resilient development. Information provided by Parties highlights the trend towards an increasing prominence of climate change on national political agendas, driven in many cases by inter-ministerial coordination arrangements as well as by an increasing trend towards the mainstreaming of climate change in national and sectoral development priorities. The INDCs show an increasing interest of Parties in enhanced cooperation to achieve climate change goals collectively through a multilateral response and to raise ambition in the future. In particular, Parties stressed the need for strengthening finance, technology transfer and capacity-building support for climate action in general as a means of creating an enabling environment and scaling up action.

Inclusion of adaptation in INDC: One hundred Parties included an adaptation component in their INDCs. The secretariat received adaptation components from 46 African States, 26 Asia-Pacific States, 19 Latin American and Caribbean States, 7 Eastern European States and 2 Western European and other States.

Parties highlighted their common determination to strengthen national adaptation efforts in the context of the 2015 agreement. Loss and damage associated with past and projected impacts of climate variability and change were reported by several Parties, some of which have quantified projected loss and damage. Regarding the monitoring and evaluation (M&E) of adaptation action, Parties highlighted that they have established or will establish quantitative and qualitative indicators for adaptation and vulnerability to measure progress.

The above mentioned facts are very much encouraging. However, there are critical concerns about majority of INDCs and even in case of submitted NDCs, mainly related to their BAU and the reference level. Defining the baseline level of emissions against which country’s reductions will be achieved (i.e., emissions associated with the BAU scenario) is imperative for transparency and accountability. Absent this information, tracking progress towards INDC goals is impossible for countries. This applicable for majority of the INDCs. Similarly, INDCs are not yet clear on financial allocation and resource mobilization strategies. INDCs are not yet owned by sectoral ministries in countries, rather, it has been considered as an initiative only of Ministry of Environment and Climate Change. In some case, INDCs are merely developed as ‘’wish list’’. The actual prioritization has not yet been conceived by national government. Institutional arrangement for implementing NDCs is yet to be done. Securing financing for implementation of NDC is a key challenge. Lack of quantitative indicators/tools to measure the adequacy and effectiveness of planning and implementation. Hence, still there are a ‘wishy-washy’ picture of global commitments on NDCs.  Perhaps, this can be overcome with strategic supports of international development agencies as well as strong commitments of national government. In addition, public participation is also key to make a transformational change in the INDC context.

Keshav C Das

Berlin, September 26, 2016