New Delhi, Feb 16 (KNN) Chief Economic Advisor V Anantha Nageswaran expressed grave reservations regarding the imposition of tariffs by certain advanced economies on high-carbon goods from other sources.

He argued against penalising developing countries, emphasising their significant contribution to global economic activities.

Nageswaran underscored the vulnerability of developing countries transitioning towards renewable energy, especially amidst geopolitical tensions.

The CEA highlighted the vital role developing nations play in sustaining lives and businesses in developed countries, questioning the fairness of their treatment in return.

“If so, what is the premium they are getting in return for taking action on their part to ensure economic activity in the developed world? So, that is also something we need to think about and obviously, the kind of premium that the developed world is contemplating paying to the developing world cannot be the carbon border adjustment mechanism,” Nageswaran said.

Speaking at a regional workshop on climate finance and insurance organised by the Department of Economic Affairs and the Asian Development Bank, Nageswaran also emphasised the geopolitical risks associated with climate change, particularly concerning critical minerals and rare earths.

As developing nations, India included, transition to renewable energy, there's a noticeable accumulation of these materials in specific regions, along with a heightened concentration of processing capacity for these minerals and rare earths.

“And therefore, countries which are progressing towards renewable energy become more vulnerable than before in a world when they were consuming fossil fuels, in terms of dependence on a few sources of supply. That is also a risk that needs to be insured,” he said.

“Is the insurance industry better placed to finance that kind of risk? Or is it something that can be insured only through an international collaborative arrangement?” he asked.

With the EU's plan to implement tariffs through the Carbon Border Adjustment Mechanism (CBAM) and the UK's consideration of a carbon border tax, Nageswaran warned against the adverse impacts on developing countries.

He stressed the need for financial institutions to safeguard against stranded assets resulting from the energy transition.

(KNN Bureau)