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Global Risk Insights

Global Risk Insights

GlobalRiskInsights.com provides the web’s best political risk analysis for businesses and investors. Our contributors are some of the brightest minds in economics, politics, finance, and…

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Why Is India Holding Out On The Paris Climate Agreement?

Power plant

In setting out the framework for greenhouse gas emissions reduction worldwide beyond 2020, the agreement reached by the United Nations Framework Convention on Climate Change (UNFCCC) in Paris last year is certain to have a transformative effect on all industries. But entry into force of the Paris Agreement still requires the ratification of at least 55 states, representing 55 percent of global emissions. The ratifications of the United States and China during the recent G20 Summit have given new momentum to the deal. In doing so, they have raised the question of if, and when, other states will follow suit.

Of the remaining signatories to the Paris Agreement, the potential ratification of India is considered by many to be the most significant. Notwithstanding the recent declarations of China and the U.S., those states that have ratified the Paris Agreement currently make up only 39 percent of global emissions. As the world’s fourth largest absolute contributor (responsible for around 6 percent, according to the World Resources Institute), India’s ratification could move the Agreement considerably closer to the required threshold. This quantitative aspect aside, the ratification of India – which has been a powerful representative of the ‘developing world’ at UNFCCC – could also represent the ‘green-light’ other developing states are waiting for before expediting their own ratifications.

Where does India stand?

The Government of India has demonstrated its support for the Paris Agreement through its willingness to become a signatory. During earlier rounds of UNFCCC negotiations, India had not been shy in its opposition to prescriptive, binding targets for emissions which it felt would undermine its economic growth. However, the more flexible approach enshrined within the Paris Agreement – based on the requirement to set out non-legally binding national ‘contributions’ – was sufficient to gain India’s support, and signature, in December.

Since signing, India has also declared its intention to take the next step. A joint statement made by India and the United States in June said it would seek to ratify ‘as soon as possible this year’. During an international meeting of ministers in July, India’s Environment Minister, Prakash Javedkar, stated that the country had initiated the domestic processes for ratification.

But more recent events, centered on the discussions during the G20 Summit in Hangzhou, have cast doubt over the Modi regime’s commitment to early ratification. While the United States and China used the summit as a platform to hand their signed documentation to UN Secretary-General Ban Ki-moon, India actively discouraged a commitment by G20 governments to ratify before the end of 2016. Dr. Arvind Panagariya, Vice-Chairman of India’s new planning body, told journalists that India had encouraged ‘flexible’ language regarding the timescale for ratification set out in a G20 communique. Related: The Shakeout Continues: 100 Oil And Gas Bankruptcies Yet To Come

The politics of delay

Given the political (and moral) pressure, both nationally and internationally, it is highly unlikely that India has, or will, ‘u-turn’ on its policy. Why, then, does it now appear to be delaying its ratification? On one level, the hesitancy of recent statements could reflect the fact that ratification of such an all-encompassing deal is a significant legal exercise, one which officials know will take time. India is, after all, notorious for its slow bureaucratic machinery.

But there may be other factors at work. India has repeatedly stressed the need for assistance from developed countries when it comes to climate finance and technology transfer if it is to meet its commitments. Considerable significance has therefore been attached to the failure to secure such assistance in the context of a nuclear energy project currently being developed with the United States. Engineering and site development work has already begun for the construction of six nuclear reactors by U.S. firm Westinghouse Electric. But there has been no agreement on issues of cost and financing. It is conceivable that India sees the benefits of using its ratification of the Paris Agreement – something which the U.S. is known to covet – as leverage to secure the terms it desires in what will be a benchmark for future energy cooperation.

The potential utility of delaying ratification has another dimension. In recent months, India has ramped-up its long-term bid to become a member of the Nuclear Suppliers Group (NSG), a grouping of countries aimed at controlling the movement of nuclear materials and technology. India’s entry into the NSG would have important geopolitical implications and its attempts to join have been repeatedly blocked by China. Related: 9/11 Bill Crashes Saudi Stock Exchange, Bond Market Ambitions

Recent reports suggest that India has been seeking to leverage its ratification of the Paris Agreement in this cause. Specifically, the Modi Government has claimed it will only be able to meet its emissions reduction targets if it rapidly expands its capacity to produce nuclear energy, something that would be difficult to achieve without NSG membership (NSG members only being permitted to transport nuclear materials between themselves). Membership of the NSG, the argument goes, represents a quid pro quo which India should expect if it is to ratify. The legitimacy of the argument has been questioned, but it appears to be one that India’s Ministry of External Affairs is willing to deploy in the hope of accessing the NSG.

If the Indian Government – or at least forces within it – wants to make use of the ratification question in these ways, its window of opportunity could be small. Mid-November will see the next annual UNFCCC Summit in Morocco, with several states expected to ratify in the lead up. If the Agreement were to enter into force before India itself ratifies, the political capital of its ratification would be undermined. The Modi Administration will be trying to balance any attempt to deploy its ratification against the potential embarrassment of being ‘late on parade’. The extent to which ratifications gather pace within the next two months will therefore be key in determining India’s next move.

By Global Risk Insights

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