RBI suggests carbon pricing system to drive green finance in India

Mumbai, May 4 (KNN) India needs to put broad-based carbon pricing system in-line with emerging global best practices and introduce a carbon tax, said the Reserve Bank of India (RBI) on Wednesday.

According to the central bank’s ‘Report on Currency and Finance 2022-23’ a carbon pricing system is necessary to speed up and drive green finance in the country and meet climate goals.

Due to its regressive nature, the carbon tax may need to be accompanied by complementary redistributive policies, in view of the inability of the weaker sections to move to eco-friendly modes of production and patterns of consumption, said RBI.

The report, themed ‘Towards a Greener Cleaner India’, does not represent the views of the RBI, and is based on the findings and conclusions of the contributors from the Department of Economic and Policy Research.

It also recommended introducing an Emissions Trading System (ETS) linked to green taxonomy, covering all sectors of the economy, which can partly balance subsidy (less polluting industries getting carbon credits for trading) and tax (more polluting industries that should have to buy carbon certificates).

“While a carbon tax may be more effective, an ETS may be less politically contentious,” said the report.  (KNN Bureau)