Incentivise states to generate local resources to fight climate challenges: NITI Aayog VC Suman Bery

NEW DELHI: There is a case to incentivise states to mobilise domestic resources for mitigation of climate-related challenges, NITI Aayog vice-chairman Suman Bery said, suggesting that the Finance Commission take this up.

"I don't think there's enough pressure on how the cities or states regenerate non-tax revenue...So how do we construct an incentive structure through the Finance Commission otherwise, so that, as it were, there's more incentive for states to mobilise resources at the local level," he said at the CII's Annual Business Summit 2024. Talking about the fiscal resources that will be needed for climate financing, Bery said domestic resource mobilisation will be more for mitigation while adaptation will require private finance. "There is a large demand that's going to be made on fiscal resources at a time when tax revenues are themselves going to be affected by decarbonisation, as a large part of our revenues at both the state and the central level comes from fossil fuel taxes," Bery said. NK Singh, chairman of the 15th Finance Commission, said unlocking private capital is key to meet the requirements of climate finance, while also emphasising on the need to increase public-private partnerships, enlarging the fiscal space of states and the Centre and the role of multilateral development bank in reforming international finance architecture. "It is important to recognise what makes private capital reticent, what can be done to minimise and mitigate the risks, including regulatory risks, so that they can contribute to climate finance," Singh said.

"Multilateral development banks have a long way to go to improve the processes and procedures to be able to address the daunting challenge of seeking to meet financing needs of an orderly transition to be able to address the challenges of climate financing," he said.