The Green Billions

National Adaptation Fund for Climate Change (NAFCC)

The National Adaptation Fund for Climate Change (NAFCC) is a Central Sector Scheme established in the 2015-16 fiscal year to assist in the adoption of tangible adaptation mechanisms that lessen climate change’s negative effects in India. Initiatives in areas like agriculture, animal husbandry, water, forestry, tourism, and others are eligible for funding under the NAFCC. The fund functions under its National Implementing Entity (NIE) which is the National Bank for Agriculture and Rural Development (NABARD). In the latest information released by the Finance Ministry, it was noticed that NAFCC grants dropped from Rs 115.36 crore in 2017-18 to Rs 27.76 crore in the 2021-22 fiscal year. A steady drop in the grants appears inversely proportional to the rising urgency of accelerating adaptation efforts. What was the need for the establishment of the fund? In recent years, there has been a growing demand to mitigate sustainable infrastructure with adequate financing to ratchet the climate goals of each country. Especially since India has established a set of more aggressive emission reduction objectives and has joined the global bandwagon by committing to a net-zero goal by 2070, it becomes critical to sustaining climate funding in the context of subnational climate action and regional interests. Climate finance remained one of the core themes and a long-pending request by developing countries from their wealthier counterparts among the range of key choices agreed upon, which are now part of the Glasgow Climate Pact. Climate finance allows for the exchange and the transfer of technology and knowledge from industrialized to developing countries, who require the ability and resources to combat climate change at the rate that the world requires today. In India particularly, the fund focuses on green technologies and initiatives that are homegrown thereby supporting the government’s ‘Made in India’ campaign. How does the fund function: The programme was initiated in August 2015 to cover the cost of climate change adaptation for states and union territories that are particularly vulnerable to the effects of climate change. The fund functions in a way that project proposal are prepared in consultation with NIE, i.e. NABARD, by the state/ UT government bodies. To be eligible for consideration under NAFCC, these project proposals are then authorized by the State Steering Committee on Climate Change. The State Government has the authority to employ any company to assist in project preparation at their discretion. Twelve projects with funding ranging from Rs 150 crore to Rs 250 crore were approved in 2015-16, nine in 2016-17, six in 2017-18, and three in 2018-19. The fund till now has brought to life significant alterations in the way climate development infrastructure functioned in India. In Orissa, around 400 farmers have switched from paddy farming to horticulture as a means of crop diversification. According to Indian express, funds from NAFCC are being deployed to teach farmers how to diversify their crops and sell their products. In Himachal Pradesh, the fund supports a project to uplift the livelihoods of agriculture-dependent rural communities in drought prone districts through climate smart solutions. However, due to a lack of publicly available information, its scalability and achievements become difficult to map out. While dedicated funding for climate adaptation promotes competitive federalism among states, MoEFCC officials demand for scaling these efforts to achieve transformative outcomes and prioritize projects leading to larger national level impact. Long Road Ahead for India: In the Union Budget 2022-23, major emphasis for climate sustainability was on sovereign green bonds and thematic funds for blended finance. Green bonds, which will be issued by the Reserve Bank of India, will be part of the government’s overall borrowing programme and will be used to fund initiatives that will reduce carbon emissions. However, the NAFCC fund’s allocations and future were largely missed from the conversation. In Orissa and Himachal Pradesh, NAFCC’s performance has been encouraging to say the least. In the future, it will be necessary to analyze A FCC’s role, contributions, and uptake in order to determine whether it should be continued in its current form. At the same time, India cannot realize its carbon emission and climate sustainability goals with the current funding, or even the funding at which the fund began its operations. The role of soliciting private sector investment in adaptation initiatives has proven to be a solid way forwards in many countries. Although hard to acquire, the government may find an adequate way through CSR and green investing to generate funding from big MNCs in India. It would be fascinating to investigate the possibilities of private organizations, particularly small businesses and start-ups, supporting adaptation projects..