In his column in this newspaper earlier this week, Himachal Pradesh Chief Minister P.K. Dhumal rued the fact that his state was not being adequately compensated for preserving and conserving vast natural resources. He is right. While the practice of compensating for the use of green technology or preserving forests exists internationally, India is yet to warm to the concept.

A small step towards this has been made though. After arguments by the Central Empowered Committee (CEC) in the Supreme Court, the 11th Finance Commission recommended that Rs 1,000 crore be put aside to compensate states whose forest cover was more than the national average. It was the first acknowledgement of what forests do to preserve soil and water for the entire country. To calculate this, a fairly simple method has been adopted — if the Forest Survey reports show that a state has more forest cover than the national average, it will be given a part of this fund in addition to its regular corpus from the Central government.

What Dhumal is asking for is a step ahead of this one — involving a bit more complexity and monitoring. It is similar to the concept used by the world to deal with the problem of carbon dioxide under the Kyoto protocol — using financial mechanisms to spur clean tech. Forests are part of this mechanism as they are invaluable carbon sinks. Forests preserved, translate into carbon saved.

Trading in emissions was demonstrated by the highly successful US Environmental Protection Agency’s sulphur dioxide (SO2) emissions trading programme. To reduce acid rain, an overall cap on SO2 emissions was imposed on electric power plants. Power generators that found it expensive to cut sulphur emissions could buy allowances from those that made cuts at low cost. The SO2 programme showed that emissions were reduced faster and at much lower costs. This broad acceptance of emissions trading was followed by the Kyoto Protocol, which established several emissions trading mechanisms for reducing greenhouse gases.

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