To boost flow to the farmers adopting climate smart agriculture (CSA), a paper has suggested several steps including creation of a dedicated credit guarantee scheme, refinancing of intermediaries and creation of a professional pool for classification of farm assets.
Apart from the current limited climate finance flows, disproportionate sectoral flows of current climate finance also present another problem, according to a paper on increasing climate smart agriculture financing in the country.
At present energy and transport, the two largest emitting sectors, have attracted 44% of the total climate finance from private financing while sectors like agriculture and industry, the next two largest emitters, have obtained less than 4% of the total climate financing.
In terms of long term recommendation for boosting private investment in climate smart agriculture and addressing the financing gaps in climate mitigation and adaptation technologies, the study has stated raising green bond finance over overseas markets and pilot blended finance structures for early and high potential technology adoption.
A priority sector fund by the NABARD to refinance CSA farmer portfolios of banks and NBFCs can be established, the paper stated. For the short term, the paper has suggested creation of dedicated credit guarantee schemes for financing farmers and MSMEs who adopt such farm practices.
“NABARD and SIDBI can partner with development finance institutions and government departments to create grant-plus-loan and interest subvention schemes,” the paper has suggested.
Concessional capital – refinancing schemes, dedicated low-cost term loans, and credit guarantee schemes are likely to provide the necessary supply side push to Financial intermediaries to undertake CSA financing, the paper by Samunnati, a NBFC associated with agri-value chain financing, has stated.
It recommended creation of a dedicated fund for refinancing financial intermediaries on such portfolios and creation of a pool of professionals for verification and certification of those assets which adopt such farm practices.
In terms of barriers in increasing financing for climate smart agriculture the study has identified factors such as limited incentives for the farmers to adopt the technologies, increased risk perception amongst financial institutions towards financing and lack of established taxonomy and ensuing risk of greenwashing.
According to the Central Research Institute of Dryland Agriculture estimates that climate changes could reduce agricultural yields by 4.5% to 9%. As per India’s third biennial update report, agriculture is the second largest contributor (14.5%) to India’s total greenhouse gas (GHG) emissions. Agriculture consumes 20-25% of total electricity in the country.
Climate Policy Initiative (CPI) has estimated that, to achieve the stated climate targets and to reduce the adverse impact of climate change events, annual global climate financing needs shall reach $ 9 trillion by 2030.
From: financialexpress
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