Tamil Nadu: Green bonds, tax benefits to promote nature-based solutions

CHENNAI: A framework for ‘Nature-based solutions for enhancing urban resilience in tier-2 cities in TN’ released by the State Planning Commission (SPC) suggests implementation of green bonds, tax benefits and integrated water resource management to ensure water security among others to fight climate hazards by addressing systemic barriers.

Pointing out that the expansion of cities intensifies climate risks and there is a growing recognition that urban infrastructure must evolve beyond purely engineered systems, the report acknowledges that the conventional grey infrastructure is increasingly insufficient to address the complex and interconnected challenges arising from rapid urbanization and climate change.

But in contrast, the report also says, the nature-based solutions (NbS) offer adaptive, cost-effective, and multifunctional alternatives by integrating natural ecosystems into urban systems. “Despite these benefits, mainstreaming NbS faces barriers such as limited technical capacity, financial challenges, policy gaps, and a bias towards conventional technological approaches. The proposed framework addresses these barriers in a structured pathway for integration,” the report added.

The framework is based on five guiding principles such as strengthening urban resilience, mainstreaming NbS into urban planning, community engagement and inclusivity, economic viability and leaving no one behind.

Moreover, the framework categorises 30 tier-2 cities into 4 types such as emerging, expanding, thriving and transformative. Type-1 (emerging) cities include Nagapattinam, Neyveli, Tiruvannamalai, Hosur and others. Type-2 (expanding) cities include Erode, Kancheepuram, Vellore, Tambaram, Alandur and others. Type-3 (thriving) cities include Dindigul, Thanjavur, Pallavaram, Avadi, Tirupur, Ambattur among others. Salem, Trichy and Madurai are transformative (Type-4) cities.

It also identifies limited awareness and technical capacities, cultural and behavioural factors, technological bias, financial barriers, policy and regulatory gaps, lack of evidence of efficacy, and complexity and interdisciplinary as challenges to NbS. But, the SPC believes that health benefits, food security, urban liveability and livelihoods, social inclusion and equity, education and awareness, and cultural and aesthetic value as co-benefits of the NbS.

To effectively raise finances to implement NbS, the framework recommends the government to facilitate issuance of green bonds and climate bonds by local bodies to fund projects such as afforestation, wetland restoration, sustainable drainage systems, and urban biodiversity corridors. NbS projects funded through bonds are recommended to undergo rigorous environmental and social screening, and include measurable performance indicators to track climate mitigation, adaptation, and co-benefits.

“Targeted tax incentives are proposed to be established to stimulate private and institutional investment in NbS as part of broader green urban development strategies,” the framework suggests. “This can include tax deductions, exemptions, or rebates for investments in eligible NbS activities. Incentivised areas may span across individual property owners, developers, and corporate entities integrating NbS into their operations or infrastructure.”

Apart from leveraging Corporate Social Responsibility (CSR), access to multilateral financing should be systematically facilitated to enable the design and implementation of large-scale NbS projects, particularly in rapidly urbanising and climate-vulnerable regions. “Embedding NbS within economic planning ensures co-benefits for both people and nature. Thus, NbS can serve as catalytic tools for inclusive and sustainable economic transformation in rapidly growing urban areas,” the document added.

Framework addresses barriers based on:

· Strengthening urban resilience

· Mainstreaming nature-based solutions into urban planning,

· Community engagement and inclusivity

· Economic viability

· Leave no one behind

Four types of Tier-2 cities

Emerging, expanding, thriving and transformative

· Type-1 (emerging): Nagapattinam, Neyveli, Tiruvannamalai, Hosur, etc

· Type-2 (expanding): Erode, Kancheepuram, Vellore, Tambaram, Alandur, etc

· Type-3 (thriving): Dindigul, Thanjavur, Pallavaram, Avadi, Tirupur, Ambattur etc

· Type-4 (transformative): Salem, Trichy, Madurai etc