Karnataka's eco budget - 100cr (2022 - 2023)

3 min read

Eco budget

  • no formal definition of eco-budget.
  • may be defined as
    • an estimate of the value of forest loss and degradation, and
    • the compensation of the same through financial allocation for ecological restoration,
    • in order to achieve better environmental outcomes and
    • mitigating the impact of negative environmental externalities –
    • with the ultimate goal of enhancing human well-being.

Green budget

ORGANISATION FOR ECONOMIC CO OPERATION AND DEVELOPMENT (OECD):

  • using the tools of budgetary policymaking to help achieve environmental goals
  • includes “evaluating environmental impacts of budgetary and fiscal policies and assessing their coherence towards the delivery of national and international commitments
  • aims to “design new, innovative tools to assess and drive improvements in the alignment of state expenditure and revenue processes with climate and other environmental goal

Karnataka

  • In a 2019 report, the Ministry of Environment, Forest, and Climate Change (MoEFCC) has identified Karnataka as having the second-highest potential of creating more carbon sink through additional forest and tree cover by 2030.
  • the state government initiated, for the first time, a discussion on the economic value of degradation of forest ecosystem services in the budget.
  • Loss and degradation of forest ecosystem services is a major socioeconomic and ecological challenge in the state

Different estimation methods:

1. Revealed preference method:
  • observation of individual choices in existing markets that are related to ecosystem service that is subject to valuation
2. Stated preference method:
  • simulating a market and demand for ecosystem services by means of survey on hypothetical, policy induced changes in the provision of these services
3. Market price method:
  • price of commodities such as vegetables, which are produced by ecosystem and sold in market
4. Damaged cost method
  • cost associated with the hypothetical damage avoided due to existence of ecosystem services
5. Benefit transfer method - used by Karnataka govt
  • adapting value estimates from past research to assess the value of similar but seperate change in different resource
6. Alternate cost method:
  • community's willingness to pay for ecosystem services, as a basis for regulation

Ecological fiscal transfer (ETF)

  • "The transfer of public revenue between governments within a country based on ecological indicators"
  • countries such as France, China, Brazil, Portugal, Poland and Indonesia, have proposed this economic tool for the conservation of nature
  • In India, the 12th and 13th Finance Commissions recognised made allocations of Rs. 1,000 and 5,000 crore, respectively, for the states
  • 15th FC considered 2 mechanisms - compensation and incentive

In India, 11,467.83 hectares of forest land have been converted to non-forestry purposes such as drinking water provision, irrigation, mining, road and railway, transmission line and other economic growth and development-oriented projects MOEFCC, 2020

Way forward

  • "environmentally harmful subsidies for fossil fuels at US$500 billion every year globally" - OECD, 2019 Ideas for India
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