Month: November 2015

India — Re-Energized

Samir Saran Argues that India Must Hold Fast Against Western Climate Change Demands

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India has come in for harsh criticism in recent weeks for refusing to agree to limit its carbon emissions as part of climate negotiations set for next month in Paris. Then, last week, the Indian government revoked Greenpeace’s license to operate in India, claiming the environmental NGO had covered up the extent of its foreign funding. Seeking to understand the situation better Breakthrough’s Michael Shellenberger interviewed Samir Saran, an energy and environmental expert at the Observer Research Foundation, a Delhi-based think tank.

November 12, 2015 | Michael Shellenberger

Original line is here


What motivated you to write your recent essay about the double standard the West is trying to hold India to on climate change?

Earlier this year I was speaking at a premier Washington DC think tank around the time India announced it wouldn’t commit to overall emissions reductions at the climate negotiations. Someone in the audience said to me, “Why can’t India play by the same rules everyone else is agreeing to?” My response was “Why can’t India develop like everyone else did?”

Where are Indians when it comes to energy for development?

Today Indians with grid connectivity spend at least 20 – 25 percent of their income on energy. This only allows them a fraction of energy that the developed world consumes. Indians on an average consume one-fifth of the average coal consumption of an American and one-third of a European. The Chinese, Americans and Japanese all spend less on procuring renewable energy relative to their incomes than do Indians.

Do Indians view climate as the biggest environmental concern?

It is often said that India does not care about the millions who are dying of lung diseases due to pollution. Such a statement diminishes the moral agency of Indians and overlooks the fact that the biggest killer and cause of respiratory deaths is lack of energy. People die because they use informal fuels and inexpensive stoves. To begin any conversation on an issue as complex as Climate with truisms such as “clean air”, “blue skies” etc is to not have any conversation at all.

Beyond being annoying, does what the West says really matter?

Of course it matters! Discourse is still controlled in the Atlantic countries. And these conversations shape choices and imaginations and ultimately preferences — which in turn decide how nations approach issues around financing, lending and making grants.

The Atlantic debates ignore the West’s own “coal-fueled reality,” and seem determined to control others’ carbon choices. All of this is leading to a very constricted development debate for the countries that are beginning to urbanize and industrialize.

Climate debates within the OECD are impacting life choices in the developing world. For India these could be significant dampeners for its vital national projects in the coming years.

Why do you say the next few years are the most critical?

It is estimated that over the next two decades India will need to invest over $2.5 trillion in infrastructure and energy. A large part of this investment may be local and publicly financed. But a significant amount of commercial loans and equity will be needed from global investors. Our national capacities are not commensurate with our ramp-up requirements. During this take-off stage it would be fatal if availability and cost of money become an impediment.

Can’t India find the capital it needs somewhere else?

At a debt-to-equity ratio of, say, 2.33, over the next 20 years or so Indian projects in these sectors would need to borrow roughly $1.8 – 1.9 trillion.

The universe of sources may be restricted. The U.S. EXIM Bank says it will not lend to coal projects; soon the World Bank may follow suit. Other investors like insurance and pension funds in EU don’t want to invest in emerging economies generally due to their fiduciary requirements.

In short, the West is directing finance away from development and infrastructure and towards what resonates with its evolving climate sensibilities. There is a distinct green color to development finance these days. Such twenty-first century morals contest with twentieth century development imperatives.

Can’t the Indian government finance the infrastructure itself?

The Indian Finance Minister’s annual budget is roughly $260 billion a year. But most of it is already committed to military, government salaries and social schemes. That leaves the government with under $50 billion for discretionary spending.

And there is pressure from Europe and the US to direct that spending in a certain way. There is also pressure from within India. Various lobbies are at work and do contest for a sizable share of this pie. The social sector, supporting private sector investments in renewables, incentives for small and medium-sized enterprises are all competing.

Global agreements can have decisive impact. There is some additional room also available with the government-controlled enterprises. And many of these are in the forefront of investing in the bricks and mortar industries.

What about private investors?

The large corporates are linked to global financial regimes and their investments follow sectors for which funds are available. Even as far back as 10 years ago, the revenues of the top five Indian companies made up 16% of India’s GDP. The 2015 budget on the other hand makes up less than 15% of our GDP today. Clearly we have a case of the tail trying to wag the dog. The biggest resources are in domains that are outside global governmental processes and treaties. Due to these being linked to the global political economy, the Indian private sector is increasingly invested in renewables (over-invested, by the way: solar could be a huge bubble as technology and price change).

Can’t India borrow from China?

If you want capital to invest in non-solar energy you have to go to sources in East Asia: Japan, China, and Korea. You basically have three options. The result is we end up borrowing money at 7-9 percent as opposed to the 1-2 percent you can borrow money at in Europe.

High cost of debt is a big problem here even with renewable energy investments and when the costs are passed on to the consumer, renewables are not competitive with fossil fuels. A CPI study couple of years ago arrived at a conclusion that unfavourable debt terms are adding 24-32% to the cost of renewable energy in India, compared to similar projects in the US.

What should India do?

We need to secure finance from larger development and financial institutions and find ways to attract foreign direct investment for infrastructure. That’s what we have to fight for. We also need to ensure that global regimes that are being shaped as we move to COP21 at Paris and beyond are not going to stop 20th Century financing of roads, bridges, power plants, social infrastructure — for India and for the developing world.

At the same time we need to change the discourse in western capitals about India’s efforts on combatting climate change. We need to communicate clearly and boldly that we are committing to ambitious renewable energy targets and that we are punching above our weight and responsibility on climate mitigation.

Do you believe the accusations made by the Indian Intelligence Bureau that Western environmental funding is thwarting development projects?

Not just anecdotally but also based on an exercise we did a few years ago it became apparent that the same set of actors have been opposing India’s development agenda over a few decades. First they were against our large irrigation projects. Then they opposed hydro projects. Then thermal plants. More recently they are opposing our nuclear plants and now there is a general pushback against the entire infrastructure investment agenda of India.

Is there something sinister and conspiratorial behind these attempts by the same sets of actors? I do not know. Should we resort to banning them? Not at all. It is time to create the counter narrative and a counter discourse. Ideas and images must be countered by logic and reality. Are we good at that? No, but we should up our game and therefore I believe scholars and practitioners from India must contribute more frequently to western platforms. Which goes back to your first question on my motivation for writing generally and that particular column specifically.

The Bureau claims that opposition to development slows India’s growth by 1 – 3 percent per year. Is that a real number or just something they made up?

I don’t know how they got to that number but I assume they would compute on the basis of some relationship between investment in infrastructure projects and GDP growth. You have to remember that China’s big investments in infrastructure, bridges, steel, etc, put its growth on steroids.

We can’t do that because we undertook land reforms before we implemented economic reforms whereas China implemented bold economic policies and is still to reform its land laws. Result being that the Indian government can’t announce special economic zones and take over large tracks of land and create industrial areas. Here one man in a village can hold up a whole development initiative through legal recourse and in a sense that is also the strength of India’s development process.

So to answer your question – the number is not important. What is important is that there is a fundamental relationship between infrastructure spending and GDP growth.

So even without Western funding wouldn’t there be resistance to those projects anyway?

Of course! The “activism industry” relies on the politics of agitation. The problem is that not all of it is unfounded. And it is very difficult to agree to what is good agitation and what is damaging. The growing democratic ethos and more open institutional structures allow plenty of space to correct much of what is wrong but may allow also many to do a lot of harm (delays).

Can’t you do more natural gas?

Natural gas is great. We have good access to it by sea and it’s a pity that India isn’t being more aggressive to deploy this fuel. We have great scope to grow it in the coming decades. That is an exciting opportunity because it will help us replace coal and provide the bridge to a future with renewables. And recently this government has appreciated this potential as well.

What about nuclear?

The problem is we don’t have access to large quantities of uranium. That is changing but slowly. The nuclear deal was supposed to be a game changer but not even 1 KW has come out of that so far. The legacy of the Bhopal Gas tragedy means we will rightly insist on nuclear liability and that is holding up investment from Western companies.

Nuclear technology is also interlinked. For example, even though America and France are ready to build plants here, Japan is not yet ready to sign a civil nuclear agreement with us. Unfortunately, American and French plant designs use Japanese components. We are trying to find alternatives. Negotiations with South Korea have also been opened.

And then there is the looming presence of China as a supplier with whom India did open a line on cooperating in this sector. Unlikely to happen, but then stranger things have come about. But irrespective, If we were to do everything right on this front now, long lead times, approvals and safety considerations and availability of reactors imply that it will be a couple of decades before nuclear energy pulls its weight in the fuel mix and only in 2050 can it become a dominant option.


The false debate on India’s energy consumption

Economy & Society

Samir Saran & Vivan Sharan

Original link is here


Despite having among the largest coal reserves in the world, India lags far behind in consumption, at less than a fifth of China’s levels.[1]  The average Indian’s coal consumption is around 20 percent that of the average US citizen, and 34 percent that of the average OECD citizen. And yet, in international negotiations, India finds itself caught in a shrill and binary debate pitching growth against climate. This is a false debate, which stems from the inability of the current mercantilist system to grant all actors a fair share of the “carbon space” – the amount of carbon dioxide-equivalent emissions that can be released into the Earth’s atmosphere without triggering dangerous climate change.

In international negotiations, India finds itself caught in a shrill and binary debate pitching growth against climate

India’s position in climate negotiations is based on the importance of access to energy for human development. This is supported by data, including the positive correlation between energy access and the Human Development Index (HDI).[2]  Estimates vary on how much energy is needed to meet basic human needs (hereafter referred to as “lifeline energy”). The methodologies vary depending on whether these basic needs are considered through the prism of GDP growth targets, HDI levels, or calculations of the energy needed to meet a predetermined set of development goals.[3]

This essay will argue that, if the climate debates have allowed even a nominally equitable level of coal consumption towards meeting lifeline energy needs, India currently has immense room for manoeuvre. The analysis relies on a benchmark metric: that 2,000 watts (W) per capita is a basic level of lifeline energy, covering housing, transport, food, consumption (of manufactured goods), and infrastructure. This is based on a study by Novatlantis, which demonstrates that this level of consumption could power daily life in Western Europe.[4]  Therefore, lifeline energy is defined liberally in this study, as being high enough to cover the minimum lifestyle needs of citizens in developed countries.

Consumption after the financial crisis

While developed countries such as OECD and EU member states have reduced per capita coal consumption since the financial crisis, developing countries such as India have increased consumption over the same period. This reduction by developed countries does not necessarily reflect a greater degree of climate “responsibility”, and, conversely, the increase in consumption by India does not reflect “irresponsibility”, as this analysis will demonstrate. Table 1 shows the total per capita consumption of key regions and countries that are shaping the climate change discourse.

TABLE 1: TOTAL PER CAPITA COAL CONSUMPTION (W)

Countries/Regions 2005 2009 2014
US 2,580.8 2,147.5 1,887.6
China 1,324.4 1,674.4 1,909.6
Germany 1,308.9 1,162.7 1,269.7
Japan 1,260.2 1,127.9 1,321.5
India 217.2 279.3 377.3
World 640.9 675.7 717.3
of which:   OECD 1,316.0 1,143.0 1,100.6
                  Non-OECD 484.7 571.9 635.1
                  EU 846.8 705.6 704.8

Source: BP Statistical Review of World Energy, 2015; The World Bank; author’s calculations

Taking a closer look at coal consumption before and after the financial crisis, it is apparent that the trends are nuanced. Two key sub-trends are visible in Table 2, which tracks coal consumption against total primary energy consumption. The first is that, while developed countries have been cutting total energy consumption, developing countries have been increasing it, albeit at a gradually declining pace since the crisis. Second, while developed countries have cut coal consumption faster than total primary energy consumption, developing countries have increased coal consumption faster than total primary energy consumption. Clearly, then, coal consumption is very much part of the lifeline consumption matrix for developing countries since they require base load generation for industrial-driven economic growth (which is a prerequisite in countries such as India for improving the HDI and generating employment).

TABLE 2: CHANGE IN COAL CONSUMPTION VS. TOTAL PRIMARY ENERGY CONSUMPTION

Regions Category 2006 2009 2010 2011 2012 2013 2014
OECD TOTAL 0% -5% 3% -2% -1% 0% -2%
COAL 0% -11% 6% -2% -5% 0% -2%
Non-OECD TOTAL 4% 0% 4% 4% 2% 1% 1%
COAL 6% 2% 2% 6% 1% 1% 0%
EU TOTAL 0% -6% 4% -4% 0% -1% -4%
COAL 3% -12% 5% 2% 3% -3% -7%

Source: BP Statistical Review of World Energy, 2015; The World Bank; author’s calculations

Finally, Table 3 shows that the average citizen of the US and of China both consume nearly the entire 2,000W lifeline energy benchmark in the form of coal. Conversely, in India’s case, only about 19 percent of the 2,000W benchmark is consumed in the form of coal. In fact, citizens of OECD countries get a much larger proportion of their energy needs from coal than citizens of non-OECD countries. This is also a function of the disparity in per capita energy consumption as a whole between developed and developing countries – while coal consumption as a percentage of lifeline energy in developed countries is decreasing, the gap between the per capita coal consumption of developing and developed countries remains vast.

TABLE 3: PERCENTAGE OF LIFELINE ENERGY DELIVERED BY COAL, WITH A PER CAPITA NEED OF 2,000W

Countries/Regions 2005 2009 2014
US 129% 107% 94%
China 67% 84% 95%
Germany 65% 58% 63%
Japan 63% 56% 66%
India 11% 14% 19%
World 32% 34% 36%
of which:   OECD 66% 57% 55%
                  Non-OECD 24% 29% 32%
                  EU 42% 35% 35%

Source: BP Statistical Review of World Energy, 2015; The World Bank; author’s calculations

India’s twin imperatives

The World Bank’s Special Envoy on Climate Change recently stated that “clean energy is the solution to poverty, not coal”.[5]  This is a view that resonates within a number of development-financing institutions based in OECD countries. For instance, the US Export-Import Bank stopped funding greenfield coal power generation projects worldwide in 2013. The World Bank also seems to be moving in this direction, even though coal consumption has been increasing in developing countries and coal-based energy remains the most practical option at a large scale.[6]  This narrative isolates economic growth from lifeline energy and skirts over the role of growth in development.

The preceding analysis attempts to address some myths related to coal consumption. First, in per capita terms, developed countries in fact consume much more coal than developing countries: The average OECD citizen consumes about double the coal of the average non-OECD citizen. China is a notable exception. And if Chinese per capita coal consumption is a benchmark, the debate on India’s consumption is clearly redundant.

The average Indian already spends much more on renewable energy (as a proportion of income) than counterparts in China and the US

The per capita trends show that India will supply a larger proportion of its 2,000W benchmark through clean(er) fuels than developed countries. There is enough room for India to increase its coal consumption while continuing to accelerate its renewable-energy thrust. India has set a target renewable-energy capacity of 175 gigawatts by 2022. This means that it will be among a handful of countries to source a large proportion of its lifeline energy needs from non-conventional sources. The average Indian already spends much more on renewable energy (as a proportion of income) than counterparts in China and the US.[7]  To spend even more, purchasing power will need to grow, and so, in turn, will lifeline consumption.

This has clear implications for India, and for other similarly placed developing countries. Unlike developed countries, which have already seen peaks in their energy consumption, India must respond to two imperatives. First, to increase its lifeline energy as well as clean energy. This means that the country will have to ensure financial flows towards lifeline energy, make coal consumption more efficient, and engage with the international financial system to ensure that regulations do not make clean energy investments more costly than they already are. Second, and at the same time, lifestyle emissions need to start adhering to or approximating the Swiss model, which shows that “daily life in Western Europe could be powered by less than one-third of the energy consumed today&rd[8]  The estimated 20 million people at the top of India’s socio-economic pyramid, and large companies that consume as much energy as counterparts in developed countries, must be included within the paradigm of “climate responsibility”.


[1]   In 2014, China accounted for more than half the world’s coal energy consumption, at around 3.9 billion tonnes of oil equivalent, while Organisation for Economic Cooperation and Development (OECD) countries consumed just over half this figure. China’s target of capping coal consumption at 4.2 billion tonnes by 2020 was welcomed by OECD countries. See data from the BP Statistical Review of World Energy, June 2015, available athttp://www.bp.com/content/dam/bp-country/de_de/PDFs/brochures/bp-statistical-review-of-world-energy-2015-full-report.pdf; “China seeks to cap coal use at 4.2 billion tonnes by 2020”, Agence France-Presse, 19 November 2014, available athttp://economictimes.indiatimes.com/news/international/business/china-seeks-to-cap-coal-use-at-4-2-billion-tonnes-by-2020/articleshow/45205271.cms.

[2]   UNDP, 2013; The World Bank, n.d.

[3]   Shripad Dharmadhikary and Rutuja Bhalerao, “How Much Energy Do We Need?”, Prayas Energy Group, May 2015, available athttp://www.prayaspune.org/peg/publications/item/298-how-much-energy-do-we-need-towards-end-use-based-estimation-for-decent-living.html(hereafter, Dharmadhikary and Bhalerao, “How Much Energy Do We Need?”)

[4]   Novatlantis, “The 2,000-Watt Society”, 2007.

[5]   Rachel Kyte, “World Bank: clean energy is the solution to poverty, not coal”, theGuardian, 10 August 2015, available at http://www.theguardian.com/sustainable-business/2015/aug/07/world-bank-clean-energy-is-the-solution-to-poverty-not-coal.

[6]   Sunjoy Joshi and Vivan Sharan (eds), “The Future of Energy”, Observer Research Foundation, 2015, available at https://www.economic-policy-forum.org/wp-content/uploads/2015/02/ORF-EPF-Final-Report-The-Future-of-Energy.pdf.

[7]   Samir Saran and Vivan Sharan, “Indian leadership on climate change: Punching above its weight”, Planet Policy blog, The Brookings Institution, 6 May 2015, available athttp://www.brookings.edu/blogs/planetpolicy/posts/2015/05/05-indian-leadership-climate-change-saran-sharan.

[8]   Dharmadhikary, Shripad and Bhalerao, Rutuja, “How Much Energy Do We Need?”, Prayas (Energy Group), May 2015.