Climate Finance at the Sub-National Level – The Case of Odisha

Climate Finance at the Sub-National Level – The Case of Odisha

Paper examining financing options and strategies for State Action Plans on Climate Change in India.

In efforts aligned with the National Action Plan on Climate Change in India, all Indian states are individually developing State Action Plans on Climate Change (SAPCC). To date, 25 states have prepared SAPCC documents, with five recommended for funding by the Ministry of Environment and Forests. Just over half of the SAPCCs have included cost estimates, the enormous size of which represents a potential stumbling block to achieving national climate goals. The purpose of this study, produced by the Centre for Development Finance, is to develop financing strategies to assist the central and state governments in implementing SAPCC in an effective and efficient manner. This is achieved through a comparative analysis of six SAPCCs, as well as an in-depth case study concerning the state of Odisha, with recommendations made that may also be applied elsewhere.

The report is structured in five parts. Chapter One introduces the project, providing context and explanation of the choice of Odisha for the case study. Chapter Two explains the methodology of the study, while Chapter Three forms the core of the report: a detailed analysis of the climate relevance of Odisha’s current public expenditure, a comparison of Odisha’s proposed spending versus current spending, and recommendations. Also provided is a preliminary analysis of fiscal instruments and fund-raising strategies available to states. Chapter Four then provides in-depth analysis of each of the adaptation relevant sectors, with sector-specific recommendations, before Chapter Five presents the study’s conclusions.

Findings and recommendations are extensive, and cover adaptation, mitigation, and sector-specific aspects of Odisha’s climate-related public financing, and additional sources of finance. Some key insights are also drawn that the authors belief might be useful to a wide range of stakeholders, including other states and international donors. These include that:

  • Most international funds focus on large-scale deployment of clean technology; concerted effort from government toward assessment, feasibility, and demonstration projects are therefore required.
  • Innovative public finance mechanisms are needed in order to reduce risk perception and financing gaps associated with energy efficiency projects.
  • Grants should be used with caution, so as to not limit market size. It is recommended grants be used for market creation, awareness raising, etc.
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