What are the policy changes that need to be adopted by India to ensure that it fully utilises the opportunities arising from green transition?
Introduction
Climate change represents a significant threat to the Indian economy due to already evident heat stress, reductions in freshwater supply, soil drying, more intensive tropical cyclones, monsoons, and sea-level rise, amongst other impacts. At the same time, global warming creates economic opportunities for India as new technologies and industries required to decarbonise must be developed, manufactured, and deployed at scale. This article identifies specific and concrete policy pathways for deep decarbonisation in India. It emphasises the country’s economic opportunities, including job creation, in the transition—as the country becomes competitive in its transition towards a net-zero economy beyond the mid-century.
India’s Climate and Development Challenges
Without urgent global action, temperatures are likely to reach 4.9 degrees Celsius by the end of this century, even with current policies in place.[1] Achieving the Paris Agreement’s desired goal of 1.5 degrees Celsius warming requires deep and rapid reductions in carbon emissions. Industrialised countries must reach net-zero GHG emissions rapidly. Emerging economies like India need to decouple economic growth from GHG emissions to put their economies on a low-carbon pathway. These economies, however, face enormous developmental challenges as they attempt to grow in a climate-constrained world. India’s climate policy challenge is situated in the context of its urgent need to create millions of new jobs, increase incomes, and improve public health in the next few decades. India’s youth constitute about one-third of its 1.38-billion population, and one-third of them remain unemployed at any given time (the prevailing youth unemployment rate is 32 percent). Moreover, four-fifths of its existing workforce of 500 million people are employed in the informal sector. Therefore, any low-carbon transition effort must generate job opportunities while also finding alternative livelihoods for the jobs lost in the fossil-fuel-dependent industries that are expected to decline.
To be sure, India’s energy system has changed significantly in the past two decades. The government’s efforts to promote renewable energy technologies reflect a high level of policy support. Policy targets are ambitious, aiming to deploy 450 GW of renewables in the electricity system by 2030. In 2017, India added more renewables than coal for the first time in history. The proportion of thermal power capacity decreased from 64.8 percent in 1990 to 57.3 percent in 2018, while renewables increased to 21 percent in the same period. Yet, India’s current market share in critical clean energy technologies remains well under its potential. India accounts for 10 percent of the global market for solar, 5 percent of wind, and 1 percent of battery storage. In a deeply decarbonised/net-zero world, India should account for some 30 percent of global solar, 15 percent of global wind, and 12 percent of the battery market. A policy gap exists between current policies and those that would be needed to reach this market potential.
A particular challenge confronting Indian policymakers today is the question of whether or not Indian goods and services can compete in the emerging global landscape of trade-modifying decarbonisation policies. These include the EU’s proposed Carbon Border Adjustment Mechanism (CBAM), which threatens US $41 billion worth of Indian steel exports, and an unfortunate developing trend of trade disputes over policy support to domestic renewable energy manufacturers. A related question is whether India can become a global leader in the innovation and manufacturing of deep decarbonisation technologies. Emerging technologies such as carbon capture and storage (CCS) and green hydrogen will require high price signals and R&D investments today for their economic benefits to materialise closer to mid-century.
Policy Pathways for Deep Decarbonisation
India’s path to a prosperous low-carbon economy rests on three types of strategies: job creation in low-carbon industries; robust low-carbon economic growth; and peaking, and subsequently reducing, its GHG emissions in a way that does not disrupt development aspirations.
Green job creation has indeed been robust, although it still remains subpar when compared to other countries with large domestic markets. India also has yet to put in place a policy for a just transition of workers from the coal mining and other energy industries, to lighter industry or green jobs. While India’s policy efforts have achieved significantly competitive electricity prices from renewables, it has fared relatively poorly in its participation across the global renewable energy value chain.
India’s solar PV deployment, for example, depends primarily on imported components from China, whose policy approaches have created big employment gains across both manufacturing and deployment of renewables domestically. As of 2019, India created less than half the number of jobs per MW (full-time jobs per MW cumulative capacity installed) created in China (3.61 jobs per MW vs. 6.57 jobs per MW). Owing to the singleminded focus by state discoms on the cost-effectiveness of renewables deployment, as well as the central government’s proclivity for cost-effectiveness over other objectives,[2] industrial development and job creation objectives have taken a back seat.
Economic growth remains modest, especially as India struggles to recover from the COVID-19 pandemic. While growth projections for the coming years are more optimistic, there are continuing concerns about inflation and unemployment-despite-growth which partially predate the pandemic.[3] The Indian government has also yet to articulate a green recovery strategy. Historically, India’s “all-of-the-above” energy policy – encouraging fossil fuels and renewables simultaneously – was justified by the clear need to drastically improve energy access. However, the benefits of this approach are being overwhelmed by the costs of different energy sub-sectors working at cross-purposes, as well as the increasingly clear costs of climate change.
The clearest example is propping up certain coal power plants despite billions of dollars of potential savings (starting today) from their well-managed retirement. Clarifying India’s energy future, on the other hand, will have huge potential to deliver employment, income and public health gains. The ongoing research of the authors of this article quantifies and contextualises this potential.
That research, as well as those of other analysts, indicate that India’s current emissions trajectory is one of continued slow but steady growth due to its existing limited package of policies that directly and indirectly influence emissions. There are approximately 150 individual policies at the national level that influence India’s greenhouse gas emissions in every sector—land use, agriculture, power, transportation, residential, commercial, and industrial. Some of those policies, such as capital subsidies for renewable energy deployment, the National Solar Mission, Perform Achieve and Trade (PAT) pilot energy efficiency trading scheme, and the LED lighting programme, have directly limited India’s emissions.[4] Many other policies, due to their voluntary or general nature, are less likely to have a significant influence on reducing emissions. India’s emissions, while the third highest in the world on a national basis, continue to be one of the lowest of the bigger economies on a per capita basis. Many policy gaps exist, primary amongst them the absence of comprehensive climate legislation.
Policy Implications
India’s efforts to meet its NDC commitments are commendable in many ways. After all, India is one of the few countries whose NDC targets and policies are commensurate with the Copenhagen 2°C goal. Yet, its emissions trajectory shows no signs of peaking under existing policies, and its policies are highly insufficient to meet the 1.5°C goal set under the Paris Agreement. India would need to implement a comprehensive sequence of climate policies to put its economy on track to achieve, simultaneously—robust economic growth, job creation, and emissions reductions. Research by these authors indicates that India could create tens of millions of new jobs, fuel economic growth substantially above business-as-usual (BAU), and reduce the country’s GHG emissions by more than two-thirds the BAU by mid-century if appropriate policies are put in place. The following paragraphs provide specific recommendations for how India could embark on this low-carbon growth trajectory through to mid-century.Read More…
Source : orfonline
