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Better Global Financial Stability, Adoption of Climate Stress Tests & Green Investments needed to counter the threat of Climate Change
-Devjit Roy Chowdhury,,Economic Advisor, Ministry of Economy, Fiji
An Exclusive Interview of The Economic Advisor on Climate Change to the Fiji Government

Intro: This week on Indiastat brings you an exclusive interview of Devjit Roy Chowdhury, Economic Advisor to the Climate Change and International Cooperation Division (CCICD) of the Ministry of Economy, Fiji. In a thought-raising interaction with senior journalist Mahima Sharma, Mr Chowdhury shares his deep insight and study into the ongoing drastic climate change and discusses how without a proper roadmap and green energy transition, the hope from Electric Vehicles is a far-lived dream. He also highlights the fact that to achieve Net Zero GHG emissions by 2050, it is critical for developed countries to honour their commitment of mobilizing USD 100 billion per year to help developing countries cut their emissions. He also shares how Fiji made history by becoming the first emerging economy to offer a sovereign green bond. And how this award-winning initiative has encouraged developing economies to help achieve resilient development objectives. For this and more, let's take a full read of this deep-thoughts-raising interaction.

MS: Global warming presents a grave threat to macroeconomic and financial stability. Climate change will pose a huge disruption. Is the global financial system ready? If not, what kind of economic policies would be needed to bear the jolt?

DRC: Climate change is a reality which is a threat to the stability of the financial system. Warmer temperatures, sea level rise and extreme weather will damage property and critical infrastructure, impact human health and productivity, and negatively affect sectors such as agriculture, forestry, fisheries and tourism. The global financial system is susceptible to physical risks from climate events as well as the transition risks through the policy and technological changes necessary to achieve a greener economy. To be able to deal with these risks, the banking sector requires a new toolkit. First, the banking system must develop the capacity to understand and assess the possible impacts of climate change on monetary and financial stability. Second, adoption of climate stress tests to evaluate climate risks and how the system will manage these risks. Third, by promoting green investments and actively decarbonizing their own portfolios.

MS: Going in for electric vehicles (EVs) without changing the source of the energy (without green transition) which is mostly fossil fuel based in developing nations. Your take on the same and how must nations stride ahead on a logical path rather than following a rat-race?

DRC: The full benefits of EVs can only be realized after the energy sources become renewable, and this could take some decades. Meanwhile, it is imperative for countries to develop national policies and roadmap for transition from Internal Combustion Engine Vehicles (ICEVs) to EVs. Policies to support this adoption could include: develop standards and regulations around charging infrastructure; provide incentives to support infrastructure and technology development; pilot of EVs in public transport fleet to ensure the safety and reliability of the technology; enable business models for deployment; and create financial mechanisms targeting electric mobility.

MS: Post the concerns raised and commitments made at COP26 Summit 2021, it is clear that the commitments made don't match the policies as well as the global consumer behaviour. Thus, what kind of global public policies and joint ventures are needed to address the Climate Change? (Reference: The IMF has recently called for urgent action to address gaps in climate mitigation ambitions and policies. IMF MD said: Unchanged global policies will leave 2030 carbon emissions far higher than needed)

DRC: Climate policies conceived and implemented at the national or local level are unlikely to be effective at tackling climate change. Keeping this in mind, in 2015, governments adopted the Paris Agreement, agreeing to hold global average temperature rise “well below 2°C” and, if possible, 1.5°C. The agreements and deals made during the COP26 Summit, won’t be enough to limit a planetary temperature rise to 1.5°C. Based on the announcements made, experts estimate that we are now on a path to between 1.8°C and 2.4°C of warming. The countries agreed on revisiting their climate pledges in the next round of talks in 2022 to put the world on track for 1.5°C. The process in reaching decisions following the COP process is time-consuming, so alternatives are suggested to slow global warming over the next decade.

First, the IMF has proposed setting up an international carbon price floor based on a country’s income level. A report from WEF and PwC analyses this proposal. The report concludes that if the proposal is widely adopted, an international carbon price floor could cut global emissions by between 9.5 and 12.3 per cent this decade. If only high-income countries took part, it would be 1.9 per cent, rising to 8 per cent if middle-income countries took part. Second, it is important to ensure countries implementing stimulus packages in response to COVID-19 crisis contribute to the goals of the Paris agreement. A green recovery will make a country more resilient to future crises as well as address environmental challenges. Third, given the limited availability of public resources, private-sector finance has been widely seen as a step to scale up access to resources for ambitious climate action. During the COP26 conference, a coalition of private financial institutions announced $130 trillion of private capital to decarbonise the economy. Though the announcement has generated a lot of initial excitement, details of how the sector intends to divest from the fossil fuel industry and develop credible plans for the transition is awaited.

MS: Climate change and the need of more policy experts, especially the ones who have add-on expertise in data science and latest AI-based digital technology. What's your take on the same?

DRC: There is a need for expertise across various sectors to address climate change issues. Skills in data science is a valuable tool to combat climate change via a wide array of applications and techniques. Several studies have explored the interrelationship between data science and climate studies to understand the complexities of climate change . Prior to analysis, it is important for professionals in this field to identify pathways from existing models to climate impact that would be of interest to policy makers. Furthermore, its vital that communication of key findings has to be simplified for the understanding of a wider audience who may be unaware of statistical tools or technical jargon.

MS: The world plans to reach net zero GHG emissions by 2050. Don't you think without ample energy transition modes, this will be a far lived dream? Please throw light on such missing aspects as well as the needed measures in the direction?

DRC: During the COP26 summit in Glasgow, the United Nations launched a report on a roadmap to net zero emissions by 2050. Based on the roadmap, by the end of 2030 coal power plants will need to be phased out completely for OECD members and phased out globally by 2040. Additionally, by 2030, global annual investment into renewable energy, energy efficiency and renewable energy capacity also needs to triple. Global net zero requires eliminating all GHG emissions from every end-use sector. As of 2019, fossil fuels – coal, natural gas and oil – make up nearly 80 percent of the world energy supply in 2020 and renewables like solar and wind accounted for 11.4 per cent. Restructuring the global energy system by 2050 is a mammoth undertaking. The annual cost for transition is intimidating and for developed countries such as the USA the investment is possible. But it is unreasonable to expect that emerging economies in the developing world that have historically low emissions to be able to allocate resources for achieving net zero 2050 goal. Moreover, it is critical for developed countries to honour their commitment of mobilizing USD 100 billion per year to help developing countries cut their emissions. Achieving this commitment will rebuild trust and pave the way for more ambitious goals.

MS: Combating climate change is an economic opportunity as well. Please share your detailed view on the same. (Example: E-waste safe disposal is a huge market)

DRC: As the world is recovering from the impacts of the pandemic situation, priority should be placed on a green and sustainable recovery that can deliver social, economic and environmental benefits to the country. Green recovery does not solely focus on the use of renewable energy, but encompasses any economic intervention that supports sustainable jobs and development while preserving and protecting natural resources. Evidence from a number of studies shows that green recovery plans outperform alternative ‘return to normal’ plans for both GDP as well as employment. Investing in clean energy infrastructure and green R&D can also yield long term economic benefits by ensuring that countries are competitive in fast-developing new markets. Crucially, investment in adaptation activities reduces climate risks which could adversely impact the economy if extreme weather events become more frequent.

MS: Climate change is skewing economic data — and the stakes are high for economists to get it right. What's your viewpoint and advice on the same?

DRC: The volatility brought about by climate change has an impact on the accuracy of data that economists use for modelling purposes. To ensure veracity of data, economists should collaborate with climate change scientists to understand the manner by which data is being skewed, so that the bias can be addressed. Additionally, the uncertainty around climate change events can be resolved by undertaking scenario analysis.

MS: Time and again it has been said that economists must step in urgently for a GREEN CHANGE. What role are you playing abroad as an Economist - Public Policy & Climate Change - amid the researchers, advisors to reach a policy/intervention decision? (Kindly share via one or two quick policy decisions made with your help at any government level, so that our student audience can easily relate to the same)

DRC: The NDC Partnership, through its Economic Advisory Initiative, is responding to the urgent needs of countries to prepare green recovery plans and packages in response to COVID-19. The Partnership is embedding economic advisors in the planning and finance ministries of developing country members. As the economic advisor for the Ministry of Economy, Fiji I have been supporting the ministry in its green recovery initiatives. I have developed financial models to support the business case for selected climate-related projects such as EVs in Fiji; formulating feasibility studies on renewable energy projects, and providing inputs to the Ministry on greening and fine-tuning the country’s economic recovery packages to ensure alignment with the country’s sustainable development and climate change goals.

MS: A main goal of the COP26 conference was to mobilise climate finance for developing countries? In this regard, could you please give a background of how Fiji has accessed innovative climate finance instruments and the obstacles faced by the country?

DRC: In 2017, Fiji made history by becoming the first emerging economy to offer a sovereign green bond. This award-winning initiative has been successful to tap into unprecedented levels of international private climate finance to help support domestic climate action and has also encouraged the private sector to better consider the potential for bond investments to help achieve resilient development objectives. Challenges still remain in financing the climate commitments as highlighted by a recent report, Fiji Climate Finance Snapshot, which identifies the investments needed to fund Fiji’s climate finance needs are lagging. The financial landscape of Fiji, though one of the most sophisticated in the Pacific, faces significant barriers in accessing climate funds because of accreditation challenges, complexity of project approval criteria, limited capacity to develop bankable projects, and macroeconomic fiscal constraints. Streamlining and simplifying access procedures across funding instruments could support a more efficient allocation of climate finance resources for Fiji. Finally, financing and support from the international community can be better adapted to the Fiji context by allowing more scope for risk-taking, innovation and a diverse range of financial instruments.

MS: Last but not the least, a question for our student readers: What are the job opportunities for the youth once they enroll in Economics with specialization in Climate Change?

DRC: Graduates in Economics with a specialization in Climate Change have a specific skill set which is in demand from the public sector, private sector, and international organizations. The industry is on the lookout for economists with knowledge in cost benefit analysis, macroeconomic modelling, environmental impact assessments, and data analysis. Employment of economists in this field is projected to grow as more countries and companies start implementing their commitments to reach Net Zero.

About Devjit Roy Chowdhury

Devjit Roy Chowdhury is the economic advisor to the Climate Change and International Cooperation Division (CCICD) of the Ministry of Economy, Fiji. He has been hired by the NDC Partnership Economic Advisory Initiative to identify low-carbon and climate resilient shovel ready projects for investment based on Fiji’s Nationally Determined Contributions investment plan. Devjit has significant knowledge in climate change issues, financial services, infrastructure advisory, agricultural sustainability, and trade policy. His educational background include: a Master in Public Administration from LKY School of Public Policy, National University of Singapore; Master in Economics from Louisiana State University, USA; and a Masters in Quantitative Economics from Indian Statistical Institute.

About the Interviewer

Mahima Sharma is an Independent Journalist based in Delhi NCR. She has been in the field of TV, Print & Online Journalism since 2005 and previously an additional three years in allied media. In her span of work she has been associated with CNN-News18, ANI - Asian News International (A collaboration with Reuters), Voice of India, Hindustan Times and various other top media brands of their times. In recent times, she has diversified her work as a Digital Media Marketing Consultant & Content Strategist as well. Mahima can be reached at media@indiastat.com

Disclaimer : The opinions expressed within this interview are the personal opinions of the interviewee. The facts and opinions appearing in the answers do not reflect the views of Indiastat or the interviewer. Indiastat does not hold any responsibility or liability for the same.

indiastat.comDecember, 2021
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