Energy, Research, Writing

Financing the end of coal: The market case for decarbonising India’s energy sector

This article was co-authored with Vivan Sharan.

This piece is part of the essay series, Shaping our green future: Pathways and Policies for a Net-Zero Transformation.

Progress, as the world has designed and defined it, requires material production which, in turn, requires energy. Historically, therefore, fossil fuels like coal were key in economic growth across geographies. Today, the developed economies stand on the edifice of fossil fuels, carbon-intensive industries, and lifestyles that have resulted in global warming. The same growth path is now being questioned, and the poor and developing countries are being asked to build, find, and fund newer low- and no-carbon models to lift their people out of poverty and achieve their development goals.

As global climate finance has both under-performed and been subject to clever redesignation, countries such as India remain in dire need of green financing.

Consequently, there are growing calls for India to declare a net-zero year: To offset its carbon emissions by various processes of GHG absorption and removal. India is aware that such calls are irrational, and despite international pressure, has avoided making pledges or setting hard targets, beyond its commitments at the Paris Climate Conference in 2015. Indeed, “net zero” is not possible with India’s current levels of reliance on coal. Its shift away from this fuel will depend largely on the quantum of additional money and resources that can be invested into alternative energy. However, as global climate finance has both under-performed and been subject to clever redesignation, countries such as India remain in dire need of green financing.

In August 2020, UN Secretary-General António Guterres urged India to give up coal immediately. He asked that the country refrain from making any new thermal power investments after 2020, and criticised its decision to hold auctions for 41 coal blocks earlier that year. Similarly, in March this year, in a message to the Powering Past Coal Alliance  Summit, the Secretary-General urged all governments to “end the deadly addiction to coal” by cancelling all global coal projects in the pipeline. Pre-pandemic, India had the second largest pipeline of new coal projects in the world. He also called the phasing out of coal from the electricity sector “the single most important step to get in line with the 1.5-degree goal of the Paris Agreement.”

For much of human history, photosynthesis was the primary source of mechanical energy. Human and animal muscles powered by food and fodder, made the world go around. Photosynthesis was also at the root of heat energy derived from burning wood. Eventually, coal replaced wood as the dominant source of heat energy, but still represented the energy of photosynthesis stockpiled over hundreds of years. The advent of the steam engine in the 17th century helped humans change the heat energy released from coal, to mechanical energy.

This development also upended the paradigm of material production. According to a recent estimate, coal was accounting for well over 90 percent of energy consumption in England by the mid-19th century, owing in large part to the steam engine. For long, researchers had been divided over the question of whether coal was pivotal to the industrial revolution. Scholars such as Wrigley (2010) regarded the switch to coal as a “necessary condition for the industrial revolution,” while others like Mokyr (2009) held that the “Industrial Revolution did not absolutely ‘need’ steam…nor was steam power absolutely dependent on coal.”

A November 2020 paper by Fernihough and O’Rourke might just settle the question: Using a database of European cities spanning the centuries from 1300 to 1900, the authors found that those located closer to coal fields were more likely to grow faster. Those cities, the researchers wrote, “located 49 km from the nearest coalfield grew 21.1 percent faster after 1750 than cities located 85 km further away.”

It is no wonder then, that in March this year, International Energy Agency (IEA) chief Fatih Birol said it will not be fair to ask developing nations like India to stop using coal without giving international financial assistance to address the economic challenges that will result from such a move. He noted that “many countries, so-called advanced economies, came to this industrialised levels and income levels by using a lot of coal,” and named the United States, Europe, and Japan.

This article explores this line of enquiry by examining the consumption of coal across developed and developing countries, and mapping it against key metrics of energy transition. It finds that countries such as India—with their high dependence on coal and a simultaneous growth spurt in renewables—can be the most effective location for climate finance. This is plausible given that per capita coal consumption in India is still far below that of the developed world, and economic transitions are both inevitable and required to be ‘green’.

To be sure, India is struggling with a coal shortage, which has the potential to derail its post-COVID-19 recovery; the same is true for China. Consequently, there is growing scepticism in developed countries, that both India and China will double down on coal and increase production to overcome supply challenges in the future. While such concerns are not unwarranted, they are not unique to the developing world.

To be sure, India is struggling with a coal shortage, which has the potential to derail its post-COVID-19 recovery; the same is true for China.

Germany, for instance, in the first six months of 2021 ramped up its coal-based generation, which contributed 27 percent of the country’s electricity demand. Three factors contributed to this rise: Increase in energy demand amidst the successive waves of the COVID-19 pandemic, increased prices of natural gas, and reduction in electricity generation from renewable energy (particularly wind). Coal is often the bedrock of energy generation, and its use is impacted by complex market processes that cannot be reduced to normative choices.

Energy Use and Coal 

Countries of the Organisation for Economic Cooperation and Development (OECD) are using progressively less energy to power their societies. Multiple factors can contribute to this trend, at least in theory. First is the technical improvements in energy efficiency—i.e., the use of less energy to perform the same tasks. Second is the “activity effect”, or the changes in energy use because of changes in economic activity. This would also encompass a “structure effect” which relates to changes in the mix of human activities that are prompted by changes in sectoral activity, such as transportation. And finally, there could be weather-related changes in energy use—for instance, more temperate weather can reduce the need for heating or cooling.

The IEA quantifies these effects, and consistently finds that the reduction in energy consumption in the OECD countries is largely a result of technical improvements in energy efficiency. This means that the reduced use of energy in advanced countries is not on account of any significant changes in consumer behaviour—otherwise, the activity effect would be the primary determinant of the fall in energy use. While energy efficiency improvements have driven this fall, the IEA finds that the current rate of improvement is not enough to achieve global climate and sustainability goals. Consequently, the Agency has advocated for “urgent action” to counteract the slowing rate of improvement observed since 2015.

While energy efficiency improvements have driven this fall, the IEA finds that the current rate of improvement is not enough to achieve global climate and sustainability goals.

Conversely, developing countries have seen a rapid rise in energy use owing to the activity effect (see Table 1). The increase in economic activity in the developing world is also directly correlated to improvements in life spans and socio-economic progress. While energy use has approximately doubled in countries like India and China from 2005, a large share of global energy efficiency savings is also driven by technical improvements in these countries.  However, in the aftermath of the 2008-09 global financial crisis, China implemented a stimulus package that “shifted its manufacturing sector to more energy intensive manufacturing.” A similar trend may emerge in China’s recovery from the pandemic, that may reduce efficiency gains in the future.

Table 1: Total Energy Consumption (Exajoules)

Country2005200920142020
US96.4289.8892.9987.79
China75.6097.53124.82145.46
Germany14.1713.1513.1612.11
Japan22.4019.8119.2217.03
India16.5021.4527.7931.98
World456.62481.97539.56556.63
OECD238.34225.93229.65217.11
Non-OECD218.28256.04309.91339.52
EU67.3762.7059.5955.74

Source: BP Statistical Review of World Energy, 2021

Equity in Coal 

It would appear that OECD countries have managed to cut their dependence on coal over the last 15 years quite precipitously. In particular, this seems true of countries like the US and EU members. Japan, meanwhile, is an outlier, having turned to coal to provide base-load power to substitute nuclear energy. In most years between 2005 and 2020, the fall in coal consumption in OECD countries has outpaced the decline in total energy consumption. In 2020, for instance, coal consumption dropped by around 18 percent whereas total energy consumption fell by around 8 percent. 

While China has begun to reduce its dependence on coal, it still accounts for the largest share of coal consumption amongst all nations. China is also home to over half of the world’s thermal power plant pipelines—with around 163 GW in pre-construction stage, even discounting the 484GW worth of cancellations since the Conference of Parties at Paris in 2015. China is also one of the last of the biggest providers of public finance for overseas power plants with over 40GW of projects in the pre-construction pipeline. 

Simultaneously, coal consumption has remained relatively stable at just under 40 percent of primary energy consumption amongst non-OECD nations (see Table 2). In these countries, coal consumption tends to mirror total energy consumption. For instance, in 2018 and 2019, total energy consumption increased by three and two percentage points, respectively. India’s dependence on coal has also remained unvarying. These trends suggest that non-OECD countries such as India require to do much more to contribute to a global reduction in coal consumption and therefore towards net-zero GHG emissions. However, there is more to the OECD’s reduced coal consumption than meets the eye. 

Table 2: Share of Coal in Primary Energy Consumption (%)

Country2005200920142020
US24221910
China73726657
Germany24232515
Japan21222627
India54555855
World29303027
OECD20191913
Non-OECD38403937
EU17161711

Source: BP Statistical Review of World Energy, 2021 and author’s own calculations

Since the Earth Summit in 1992, India and other developing nations have argued for an equity-based approach to GHG reduction, commensurate with domestic capabilities and historical emissions. This approach has often been subject to cross-examination by OECD experts. For instance, in a 2019 report by the Universal Ecological Fund, high-profile experts including a former White House Adviser and a Harvard professor, ranked national climate commitments based on absolute emission curtailment targets. The report clubbed developed and developing countries together in its assessment of the general insufficiency of climate pledges to meet the Paris Agreement’s goal to keep global warming below 1.5 degrees Celsius above pre-industrialisation levels.[1] This should not be a surprise, however, as it is only in consonance with the overall trend of Western academic discourse seeking to dilute the equity principle. 

India and other developing nations have argued for an equity-based approach to GHG reduction, commensurate with domestic capabilities and historical emissions.

It is a principle that should not be set aside just yet, given the persistent differences in per capita fossil fuel consumption between the developed and developing worlds. Despite near doubling over 2005–2020, India’s per capita coal consumption is still below the global average (see Table 3). The global average, in turn, has remained static around this period because the decrease in the per capita consumption of coal in OECD countries has been partially offset by an increase in the per capita consumption in non-OECD countries. However, the per capita consumption of coal in OECD countries still exceeds that of non-OECD countries, despite much higher levels of wealth and, therefore, capability to transition to renewables and other fuels.

Table 3: Total per capita Coal Consumption (KWh)

Country2005200920142020
US22599.3418812.9215740.357756.85
China10872.4413601.4216797.0616300.13
Germany11578.8310182.1011423.136140.66
Japan11041.719882.6610891.4610088.89
India1868.882393.573480.003530.87
World5381.485621.296222.875425.69
OECD11013.629509.459009.385564.68
Non-OECD4049.024722.975600.735395.83
EU10960.709013.818207.714787.28

Source: BP Statistical Review of World Energy, 2021; World Bank and authors’ own calculations

Indeed, a large share of the decrease in per capita coal consumption in OECD countries is driven by transition to fuels such as natural gas, that are used to generate electricity, particularly in countries like the US. It accounts for around a 34-percent share of primary energy consumption in the US, and 25 percent in the EU, compared to seven percent in India (and a similar share in China). In contrast, the share of gas in India’s energy mix is amongst the lowest in the world. Even as Prime Minister Narendra Modi wants to more than double the contribution of natural gas to 15 percent of India’s energy mix by 2030, the Petroleum Secretary has said that the country cannot rely on natural gas. There are several reasons, including high landed costs relative to coal, complex domestic pricing mechanisms, a lack of pipeline infrastructure and stable supply/ import linkages, and the inability of financially stressed electricity distributors to enter into “take or pay” contracts.

India, therefore, requires relatively greater and more aggressive investments in alternative sources of energy than its developed country counterparts that have had decades to transition to fuels like natural gas. Such financial flows to India can prove to be much more effective vehicles for a net-zero trajectory, compared to similar investments in other parts of the world with higher per capita exposure to coal and relatively slower transition pathways to renewables.

Around 72 percent of India’s GHG emissions are linked to its energy sector. It is clear, that if OECD countries are aiming to accelerate a global reduction in GHG emissions, they will need to help India finance its energy transition and overcome the many resource-linked barriers to the wide-scale adoption of renewables. The high costs associated with renewable energy storage and grid upgrade requirements, are related resource challenges. Since developed countries are unlikely to be satisfied with per capita equity, they would do well to help India hurdle some of its obstacles.

Financing Energy Transition 

According to India’s Central Electricity Authority’s (CEA) Optimal Generation Capacity Mix, the country’s installed capacity will increase to 817 GW with an additional 27GW of battery storage, by 2029–30 (see Table 4). Of this, firm capacity will contribute approximately 395 GW while renewable sources, around 445 GW.  Additionally, a July 2021 study has concluded that more efficient use of existing thermal resources could lead to 50 GW of excess coal capacity with respect to current needs of the system. With limited expectations from nuclear and gas resources and deteriorating coal economics, investments in renewable energy storage options are crucial for managing India’s base load requirements. This requires unlocking of financial and technological flows from the OECD, particularly since there are several uncertainties associated with the cost of battery storage technology. These include risks linked to supply chains and exchange rates. 

Table 4: Optimal Electricity Generation Mix (2029-30)

Fuel TypeCapacity (MW)%
Hydro (large and imports)60,9777%
PSP (Pumped storage)10,1511%
Small hydro5,0001%
Coal + Lignite2,66,91133%
Gas25,0803%
Nuclear18,9802%
Solar2,80,15534%
Wind1,40,00017%
Biomass10,0001%
Total8,17,254
Total Non-Fossil Fuel5,25,26364%
Total Renewables (Solar, Wind, Biomass, Small hydro, PSP)4,45,301553%
Battery Storage27000MW/1,08,0000 MWh

Source: Central Electricity Authority; The cost trajectory for battery energy storage system is assumed to be reducing uniformly from 7 Cr in 2021-22 to 4.3 Cr (with basic battery cost of US $75/kWh) in 2029-30 for a four-hour battery system

Experts point out that the more renewable energy is introduced into the grid, “the harder and more expensive it will be to use” because of inherent factors such as intermittency. This will need to be offset by investments in a grid that is able to accommodate variable and increased flows of electricity across different regions. The IEA estimates that annual investments in electricity grids will need to “more than double” by 2030 in a conservative scenario where developed countries achieve net zero by 2050, China around 2060, and other emerging and developing economies, by 2070, at the latest. India will also need to explore much wider scale of privatisation of state distribution companies, which now owe generators around US $20 billion.

The capacity utilisation of India’s coal assets has also witnessed a significant decline over the past decade, with power plants running at 53.37 percent plant load factor (PLF) in FY 2020-21 compared to 77.5 percent in FY 2009-10. Several factors have contributed to this, including the rapidly expanding share of renewable energy generation. India’s coal story is beset with additional challenges including planned decommissioning of older coal plants (approximately 54 GW of coal plants by 2030). Research indicates that the cost of retirement ranges between US $0.41–0.59 million per MW, with older thermal units relatively cheaper to decommission. Consequently, maintaining India’s coal fleet also requires around US $106 million in investments, to retrofit existing thermal power plants with Flue Gas Desulphurisation units. The deadline for doing so has been extended several times in the past decade and has finally been fixed for 2022 for plants located in populous areas. The combination of underutilised coal plants, increasing costs of plant maintenance and reduction in costs of renewables, provides a unique opportunity to galvanise investments and strategic attention towards a low-coal pathway.

The technologies that will pave the way to such low-coal path are developing rapidly, with significant progress in renewables, battery storage, and green hydrogen, amongst others. They each require, however, large financial outlays. Moreover, India is still highly dependent on expensive bank lending, which is now hitting sectoral exposure limits, whereas long-term capital is required to finance energy infrastructure. As of April 2020, the exposure of banks and non-bank financial institutions to India’s power sector was already around US$ 160 billion, roughly the lending necessary to finance the country’s renewable energy targets for 2030.

According to the Government of India’s ‘Energy Compact’ submitted to the UN in September 2021, the country required a total investment of US $221 billion to set up 450 GW renewable generation capacity, including associated transmission and storage systems. However, other research has pegged this investment much higher at US $661 billion, to build both renewable energy systems and transmission and distribution systems. The IEA also estimates that India requires a total investment of US $1.4 trillion for clean technologies to help achieve a sustainable development path till 2040. In comparison, developed countries managed a transition away from coal over a longer period of time and with different costs. Investments for clean energy in the Global South needs to be consistently and significantly higher to help achieve the simultaneous goals of SDG 7 (Affordable and Clean Energy) and other development targets.

Advanced countries would do well to recognise that long-term institutional capital is urgently required to help India transition from coal to renewables at scale. What is needed is far more than lip service; nor will change happen only through negotiations at Glasgow at the COP26. Overall, mainstream sources of international climate finance such as the Green Climate Fund and the Global Environment Facility have managed to provide just over a billion dollars in finance for national projects. While there is enthusiasm around green bond financing, the absolute value of issuances towards relevant segments such as renewable energy, is still relatively low at around US $11.2 billion since 2014. To put it in context, the global issuance of green bonds totalled over US $305 billion in 2020 alone, specifically for climate-related and sustainability projects.

India, for its part, must bite the bullet on large-scale power sector reforms, to improve distributional efficiencies and facilitate inward financial and technological flows. 

A high sensitivity to the cost of capital means that other sources of institutional capital are needed to fill the gap, even as the Indian private sector learns to raise green bonds and co-develops green taxonomies with relevant parties.  Most OECD financing towards renewables in developing countries is conducted through debt instruments. According to the International Renewable Energy Agency, cumulative transactions and financial flows from the OECD countries towards renewables development in the rest of the world reached US $253 billion between 2009–2019, of which around US $228 billion was in the form of debt. India accounted for just under US $11 billion of the amount, which is less than 5 percent of the cumulative debt finance by OECD countries. 

Table: Cumulative Transactions by OECD Countries into Renewables (2009-2019, %)

Debt90
Grants5
Equity and Shares in Collectives4
Guarantees and Others1

Source: International Renewable Energy Agency

OECD members must aim to redirect institutional investments towards India. For instance, their sovereign funds and pension funds must adjust to new business models around energy storage and distribution. There are also many possible designs of new financial instruments that could be explored. These could recognise the different capacities and capabilities in developing countries at the outset. For instance, grants and debt funding could be combined in multiple ways to subsidise loans. The scale of grant involvement could be directly proportionate to relevant environmental, social and governance factors, and therefore could incentivise more aggressive low-carbon paths. Similarly, new kinds of investment management and rating modalities could be employed to scale up investments where they are most required to offset planetary risks. The availability of innovative long-term finance for India is critical to any meaningful realisation of global net-zero ambitions. India, for its part, must bite the bullet on large-scale power sector reforms, to improve distributional efficiencies and facilitate inward financial and technological flows. 

Conclusion 

India’s current per capita coal consumption is three-fifths that of the OECD average, and one-fifth that of China’s. This low per-capita coal consumption in a coal-rich country can and must remain the key feature of India’s growth, going forward. This article demonstrates, that for India to keep its coal in the ground, more and better financing is needed.

A market case for a green transition in India already exists. The last few years have demonstrated India’s appetite, amongst the public and the political class, for a move towards cleaner growth. What it requires now is what this essay calls for: A higher flow of capital towards crucial green sectors—in particular, a higher level of foreign capital inflows towards these sectors, and a better texture of such capital, moving towards a more patient and equitable finance.

Download the PDF of the report here


[1] This goal requires a 50-percent reduction in global GHG emissions by 2030.

Standard
Energy, Research, Writing

India’s Coal Transition: A Market Case for Decarbonisation

This report was co-authored with Vivan Sharan.

Progress as the world has designed and defined it requires material production which, in turn, requires energy. Historically, therefore, fossil fuels like coal were key in economic growth across geographies. Today the developed economies stand on the edifice of fossil fuels, carbon-intensive industries and lifestyles that have resulted in global warming. The same growth path is now being questioned, and the poor and developing countries are being asked to build, find and fund newer low- and no-carbon models to lift their people out of poverty and achieve their development goals.

Consequently, there are growing calls for India to declare a net-zero year: to offset its carbon emissions by various processes of GHG absorption and removal. India is aware that such calls are irrational, and despite international pressure, has avoided making pledges or setting hard targets, beyond its commitments at the Paris climate conference in 2015. Indeed, “net zero” is not possible with India’s current levels of reliance on coal. Its shift away from this fuel will depend largely on the quantum of additional money and resources that can be invested into alternative energy. However, as global climate finance has both under-performed and been subject to clever redesignation, countries such as India remain in dire need of green financing.

In August 2020, UN Secretary-General António Guterres urged India to give up coal immediately. He asked that the country refrain from making any new thermal power investments after 2020, and criticised its decision to hold auctions for 41 coal blocks earlier that year. Similarly, in March this year, in a message to the Powering Past Coal Alliance  Summit, the Secretary-General urged all governments to “end the deadly addiction to coal” by cancelling all global coal projects in the pipeline.[1] Pre-pandemic, India had the second largest pipeline of new coal projects in the world. He also called the phasing out of coal from the electricity sector “the single most important step to get in line with the 1.5-degree goal of the Paris Agreement.”[2]

For much of human history, photosynthesis was the primary source of mechanical energy.[3] Human and animal muscles powered by food and fodder, made the world go around. Photosynthesis was also at the root of heat energy derived from burning wood. Eventually, coal replaced wood as the dominant source of heat energy, but still represented the energy of photosynthesis stockpiled over hundreds of years. The advent of the steam engine in the 17th century helped humans change the heat energy released from coal, to mechanical energy.

This development also upended the paradigm of material production. According to a recent estimate, coal was accounting for well over 90 percent of energy consumption in England by the mid-19th century, owing in large part to the steam engine.[4] For long, researchers had been divided over the question of whether coal was pivotal to the industrial revolution. Scholars such as Wrigley (2010) regarded the switch to coal as a “necessary condition for the industrial revolution,” while others like Mokyr (2009) held that the “Industrial Revolution did not absolutely ‘need’ steam…nor was steam power absolutely dependent on coal.”

A November 2020 paper by Fernihough and O’Rourke might just have settled the question: Using a database of European cities spanning the centuries from 1300 to 1900, the authors found that those located closer to coal fields were more likely to grow faster.[5] Those cities, the researchers wrote, “located 49 km from the nearest coalfield grew 21.1 percent faster after 1750 than cities located 85 km further away.”

It is no wonder then, that in March this year, International Energy Agency (IEA) chief Fatih Birol said it will not be fair to ask developing nations like India to stop using coal without giving international financial assistance to address the economic challenges that will result from such a move.[6] He noted that “many countries, so-called advanced economies, came to this industrialised levels and income levels by using a lot of coal,” and named the United States, Europe, and Japan.

This article explores this line of enquiry by examining the consumption of coal across developed and developing countries, and mapping it against key metrics of energy transition. It finds that countries such as India—with their high dependence on coal and a simultaneous growth spurt in renewables—can be the most effective location for climate finance. This is plausible given that per capita coal consumption in India is still far below that of the developed world, and economic transitions are both inevitable and required to be ‘green’.

To be sure, India is struggling with a coal shortage, which has the potential to derail its post-Covid-19 recovery; the same is true for China.[7] Consequently, there is growing scepticism in developed countries, that both India and China will double down on coal and increase production to overcome supply challenges in the future. While such concerns are not unwarranted, they are not unique to the developing world.

Germany, for instance, in the first six months of 2021 ramped up its coal-based generation, which contributed 27 percent of the country’s electricity demand.[8] Three factors contributed to this rise: increase in energy demand amidst the successive waves of the Covid-19 pandemic, increased prices of natural gas, and reduction in electricity generation from renewable energy (particularly wind.)  Coal is often the bedrock of energy generation, and its use is impacted by complex market processes that cannot be reduced to normative choices.

Energy Use and Coal 

Countries of the Organisation for Economic Cooperation and Development (OECD) are using progressively less energy to power their societies. Multiple factors can contribute to this trend, at least in theory. First is the technical improvements in energy efficiency – i.e., the use of less energy to perform the same tasks. Second is the “activity effect”, or the changes in energy use because of changes in economic activity. This would also encompass a “structure effect” which relates to changes in the mix of human activities that are prompted by changes in sectoral activity, such as transportation. And finally, there could be weather-related changes in energy use – for instance, more temperate weather can reduce the need for heating or cooling.

The IEA quantifies these effects, and consistently finds that the reduction in energy consumption in the OECD countries is largely a result of technical improvements in energy efficiency. This means that the reduced use of energy in advanced countries is not on account of any significant changes in consumer behaviour—otherwise, the activity effect would be the primary determinant of the fall in energy use. While energy efficiency improvements have driven this fall, the IEA finds that the current rate of improvement is not enough to achieve global climate and sustainability goals. Consequently, the Agency has advocated for “urgent action” to counteract the slowing rate of improvement observed since 2015.[9]

Conversely, developing countries have seen a rapid rise in energy use owing to the activity effect (see Table 1). The increase in economic activity in the developing world is also directly correlated to improvements in life spans and socio-economic progress. While energy use has approximately doubled in countries like India and China from 2005, a large share of global energy efficiency savings is also driven by technical improvements in these countries.  However, in the aftermath of the 2008-09 global financial crisis, China implemented a stimulus package that “shifted its manufacturing sector to more energy intensive manufacturing.”[10] A similar trend may emerge in China’s recovery from the pandemic, that may reduce efficiency gains in the future.

Table 1: Total Energy Consumption (Exajoules)

Source: BP Statistical Review of World Energy, 2021[11]

Equity in Coal 

It would appear that OECD countries have managed to cut their dependence on coal over the last 15 years quite precipitously. In particular, this seems true of countries like the US and EU members. Japan, meanwhile, is an outlier, having turned to coal to provide base-load power to substitute nuclear energy. In most years between 2005 and 2020, the fall in coal consumption in OECD countries has outpaced the decline in total energy consumption. In 2020, for instance, coal consumption dropped by around 18 percent whereas total energy consumption fell by around eight percent. 

While China has begun to reduce its dependence on coal, it still accounts for the largest share of coal consumption among all nations. China is also home to over half of the world’s thermal power plant pipelines – with around 163 GW in pre-construction stage, even discounting the 484GW worth of cancellations since the Conference of Parties at Paris in 2015.[12] China is also one of the last of the biggest providers of public finance for overseas power plants with over 40GW of projects in the pre-construction pipeline. 

Simultaneously, coal consumption has remained relatively stable at just under 40 percent of primary energy consumption among non-OECD nations (see Table 2). In these countries, coal consumption tends to mirror total energy consumption. India’s dependence on coal has also remained unvarying. These trends suggest that non-OECD countries such as India require to do much more to contribute to a global reduction in coal consumption and therefore towards net-zero GHG emissions. However, there is more to the OECD’s reduced coal consumption than meets the eye. 

Table 2: Share of Coal in Primary Energy Consumption (%)

Source: BP Statistical Review of World Energy, 2021 and authors’ own calculations

Since the Earth Summit in 1992, India and other developing nations have argued for an equity-based approach to GHG reduction, commensurate with domestic capabilities and historical emissions. This approach has often been subject to cross-examination by OECD experts. For instance, in a 2019 report by the Universal Ecological Fund, high-profile experts including a former White House Adviser and a Harvard professor, ranked national climate commitments based on absolute emission curtailment targets.[13] The report clubbed developed and developing countries together in its assessment of the general insufficiency of climate pledges to meet the Paris Agreement’s goal to keep global warming below 1.5 degrees Celsius above pre-industrialisation levels.[14] This should not be a surprise, however, as it is only in consonance with the overall trend of Western academic discourse seeking to dilute the equity principle. 

It is a principle that should not be set aside just yet, given the persistent differences in per capita fossil fuel consumption between the developed and developing worlds. Despite near doubling over 2005-2020, India’s per capita coal consumption is still below the global average (see Table 3). The global average, in turn, has remained static around this period because the decrease in the per capita consumption of coal in OECD countries has been partially offset by an increase in the per capita consumption in non-OECD countries. However, the per capita consumption of coal in OECD countries still exceeds that of non-OECD countries, despite much higher levels of wealth and, therefore, greater capability to transition to renewables and other fuels.

Table 3: Total per capita Coal Consumption (KWh)

Source: BP Statistical Review of World Energy, 2021; World Bank and authors’ own calculations

Indeed, a large share of the decrease in per capita coal consumption in OECD countries is driven by transition to fuels such as natural gas, that are used to generate electricity, particularly in countries like the US. It accounts for around a 34-percent share of primary energy consumption in the US, and 25 percent in the EU, compared to seven percent in India (and a similar share in China). In contrast, the share of gas in India’s energy mix is among the lowest in the world. Even as Prime Minister Narendra Modi wants to more than double the contribution of natural gas to 15 percent of India’s energy mix by 2030, the Petroleum Secretary has said that the country cannot rely on natural gas.[15] There are several reasons, including high landed costs relative to coal, complex domestic pricing mechanisms, a lack of pipeline infrastructure and stable supply/ import linkages, and the inability of financially stressed electricity distributors to enter into “take or pay” contracts.[16]

India, therefore, requires relatively greater and more aggressive investments in alternative sources of energy than its developed country counterparts that have had decades to transition to fuels like natural gas. Such financial flows to India can prove to be much more effective vehicles for a net-zero trajectory, compared to similar investments in other parts of the world with higher per capita exposure to coal and relatively slower transition pathways to renewables.

Around 72 percent of India’s GHG emissions are linked to its energy sector.[17] It is clear, that if OECD countries are aiming to accelerate a global reduction in GHG emissions, they will need to help India finance its energy transition and overcome the many resource-linked barriers to the wide-scale adoption of renewables. The high costs associated with renewable energy storage and grid upgrade requirements, are related resource challenges. Since developed countries are unlikely to be satisfied with per capita equity, they would do well to help India hurdle some of its obstacles.

Financing Energy Transition 

According to India’s Central Electricity Authority’s (CEA) Optimal Generation Capacity Mix, the country’s installed capacity will increase to 817 GW with an additional 27GW of battery storage, by 2029-30 (see Table 4). Of this, firm capacity will contribute approximately 395 GW while renewable sources, around 445 GW.  Additionally, a July 2021 study has concluded that more efficient use of existing thermal resources could lead to 50 GW of excess coal capacity with respect to current needs of the system.[18] With limited expectations from nuclear and gas resources and deteriorating coal economics, investments in renewable energy storage options are crucial for managing India’s base load requirements. This requires unlocking of financial and technological flows from the OECD, particularly since there are several uncertainties associated with the cost of battery storage technology. These include risks linked to supply chains and exchange rates.

Table 4: Optimal Electricity Generation Mix (2029-30)

Source: Central Electricity Authority; The cost trajectory for battery energy storage system is assumed to be reducing uniformly from 7 Cr in 2021-22 to 4.3 Cr (with basic battery cost of $75/kWh) in 2029-30 for a 4-hour battery system

Experts point out that the more renewable energy is introduced into the grid, “the harder and more expensive it will be to use” because of inherent factors such as intermittency.[19] This will need to be offset by investments in a grid that is able to accommodate variable and increased flows of electricity across different regions. The IEA estimates that annual investments in electricity grids will need to “more than double” by 2030 in a conservative scenario where developed countries achieve net zero by 2050, China around 2060, and other emerging and developing economies, by 2070, at the latest.[20] India will also need to explore much wider scale of privatisation of state distribution companies, which now owe generators around USD 20 billion.[21]

The capacity utilisation of India’s coal assets has also witnessed a significant decline over the past decade, with power plants running at 53.37 percent plant load factor (PLF) in FY 2020-21 compared to 77.5 percent in FY 2009-10.[22] Several factors have contributed to this, including the rapidly expanding share of renewable energy generation. India’s coal story is beset with additional challenges including planned decommissioning of older coal plants (approximately 54 GW of coal plants by 2030).[23] Research indicates that the cost of retirement ranges between[24] USD 0.41 – 0.59 million per MW, with older thermal units relatively cheaper to decommission. Consequently, maintaining India’s coal fleet also requires around USD 106 million in investments, to retrofit existing thermal power plants with Flue Gas Desulphurization units. The deadline for doing so has been extended several times in the past decade and has finally been fixed for 2022 for plants located in populous areas.[25] The combination of underutilised coal plants, increasing costs of plant maintenance and reduction in costs of renewables, provides a unique opportunity to galvanise investments and strategic attention towards a low-coal pathway.

The technologies that will pave the way to such low-coal path are developing rapidly, with significant progress in renewables, battery storage, and green hydrogen, among others. They each require, however, large financial outlays. Moreover, India is still highly dependent on expensive bank lending, which is now hitting sectoral exposure limits, whereas long-term capital is required to finance energy infrastructure. As of April 2020, the exposure of banks and non-bank financial institutions to India’s power sector was already around USD 160 billion, roughly the lending necessary to finance the country’s renewable energy targets for 2030. [26]

According to the Government of India’s ‘Energy Compact’ submitted to the UN in September 2021, the country required a total investment of USD 221 billion to set up 450 GW renewable generation capacity, including associated transmission and storage systems.[27] However, other research has pegged this investment much higher at USD 661 billion, to build both renewable energy systems and transmission and distribution systems.[28] The IEA also estimates that India requires a total investment of USD 1.4 trillion for clean technologies to help achieve a sustainable development path till 2040.[29] In comparison, developed countries managed a transition away from coal over a longer period of time and with different costs. Investments for clean energy in the Global South need to be consistently and significantly higher to help achieve the simultaneous goals of SDG 7 (Affordable and Clean Energy) and other development targets.

Advanced countries would do well to recognise that long-term institutional capital is urgently required to help India transition from coal to renewables at scale. What is needed is far more than lip service; nor will change happen only through negotiations at Glasgow at the COP26. Overall, mainstream sources of international climate finance such as the Green Climate Fund and the Global Environment Facility have managed to provide just over a billion dollars in finance for national projects.[30] While there is enthusiasm around green bond financing, the absolute value of issuances towards relevant segments such as renewable energy, is still relatively low at around USD 11.2 billion since 2014.[31] To put it in context, the global issuance of green bonds totalled over USD 305 billion in 2020 alone, specifically for climate-related and sustainability projects.[32] 

A high sensitivity to the cost of capital means that other sources of institutional capital are needed to fill the gap, even as the Indian private sector learns to raise green bonds and co-develops green taxonomies with relevant parties.  Most OECD financing towards renewables in developing countries is conducted through debt instruments. According to the International Renewable Energy Agency, cumulative transactions and financial flows from the OECD countries towards renewables development in the rest of the world reached USD 253 billion between 2009-2019, of which around USD 228 billion was in the form of debt. India accounted for just under USD 11 billion of the amount, which is less than five percent of the cumulative debt finance by OECD countries. 

Table 5: Cumulative Transactions by OECD Countries into Renewables (2009-2019, %)

Source: International Renewable Energy Agency

OECD members must aim to redirect institutional investments towards India. For instance, their sovereign funds and pension funds must adjust to new business models around energy storage and distribution. There are also many possible designs of new financial instruments that could be explored. These could recognise the different capacities and capabilities in developing countries at the outset. For instance, grants and debt funding could be combined in multiple ways to subsidise loans. The scale of grant involvement could be directly proportionate to relevant environmental, social and governance factors, and therefore could incentivise more aggressive low-carbon paths. Similarly, new kinds of investment management and rating modalities could be employed to scale up investments where they are most required to offset planetary risks. The availability of innovative long-term finance for India is critical to any meaningful realisation of global net-zero ambitions. India, for its part, must bite the bullet on large-scale power sector reforms, to improve distributional efficiencies and facilitate inward financial and technological flows. 

Conclusion 

India’s current per capita coal consumption is three-fifths that of the OECD average, and one-fifth that of China’s. This low per-capita coal consumption in a coal-rich country can and must remain the key feature of India’s growth, going forward. This article demonstrates, that for India to keep its coal in the ground, more and better financing is needed.

A market case for a green transition in India already exists. The last few years have demonstrated India’s appetite, among the public and the political class, for a move towards cleaner growth. What it requires now is what this essay calls for: a higher flow of capital towards crucial green sectors—in particular, a higher level of foreign capital inflows towards these sectors, and a better texture of such capital, moving towards a more patient and equitable finance.

This brief was first published in ORF’s monograph, Shaping Our Green Future: Pathways and Policies for a Net-Zero Transformation, November 2021.


Vivan Sharan is a Visiting Fellow at ORF.

Samir Saran is the President of ORF.


Endnotes

[1] “UN Chief Calls for Immediate Global Action to Phase Out Coal”. Unfccc.int. UN, March 2, 2021.

[2] T. Jayaraman, and Tejal Kanitkar. “Reject This Inequitable Climate Proposal.” The Hindu. The Hindu, September 18, 2020.

[3] Tony Wrigley. “The Industrial Revolution as an Energy Revolution.” VOX, CEPR Policy Portal, July 22, 2011.

[4] Wrigley, “The Industrial Revolution as an Energy Revolution”, 2011

[5] Alan Fernihough and Kevin Hjortshøj O’Rourke. “Coal and the European Industrial Revolution,” The Economic Journal, November 4, 2020.

[6] “IEA Chief Backs India on Coal, Says No Exit without Financial Support,” The Economic Times, March 3, 2021.

[7] Laura He and Manveena Suri. “China and India Face a Deepening Energy Crunch,” CNN, October 12, 2021.

[8] Deutsche Welle. “Germany: Coal Tops Wind as Primary Electricity Source,” DW.COM, September 13, 2021.

[9] “Energy Efficiency 2020,” IEA, 2020.

[10] “Energy Efficiency 2020”, 2020

[11] “Statistical Review of World Energy 2021,” BP, 2021.

[12] “China: Home to over Half the World’s Coal Pipeline,” E3G, September 14, 2021.

[13] “The Truth behind the Climate Pledges,” FEUUS, n.d.,

[14] This goal requires a 50-percent reduction in global GHG emissions by 2030.

[15] “High Prices Could Slow India’s Transition to Gas,” The Economic Times, October 20, 2021.

[16] M. Ramesh, “Why Gas Is Not Just Hot Air,” The Hindu BusinessLine, May 30, 2021.

[17] Angela Picciariello, Sarah Colenbrander, Amir Bazaz, and Rathin Roy, “The Costs of Climate Change in India – Cdn.odi.org.” ODI, June 2021.

[18] Karthik Ganesan and Danwant Narayanaswamy, “Coal Power’s Trilemma,” CEEW, July 2021.

[19] Jonathan Kay, “Tangled Wires: Preparing India’s Power Sector for the Clean Energy Transition,” Carnegie Endowment for International Peace, August 4, 2021.

[20] “Financing Clean Energy Transitions in Emerging and …” IEA. IEA, 2020.

[21] IEA, “Financing Clean Energy Transitions in Emerging and …”, 2021

[22] “Power Sector at a Glance ALL INDIA.” Ministry of Power, October 21, 2021.

[23] Aditya Lolla, “India – Peaking Coal?” Ember, February 16, 2021.

[24] Vaibhav Pratap Singh and Nikhil Sharma, “Mapping Costs for Early Coal Decommissioning in India …” CEEW, July 2021.

[25] “Flue Gas Desulphurisation: A Rs 80,000 Crore Investment Opportunity,” The Financial Express, June 11, 2020.

[26] Alan Yu, Kanika Chawla, and Rita Cliffton, “Renewed U.s.-India Climate Cooperation,” Centre for American Progress, February 18, 2021.

[27] “SDG7 Energy Compact of the Government of India … – Un.org.” UN, September 22, 2021.

[28] Rohit Gadre, Atin Jain, Shantanu Jaiswal, Vandana Gombar, and Dario Traum, “India’s Clean Power Revolution.” Bloomberg, June 26, 2021.

[29] “India Energy Outlook 2021,” IEA. IEA, 2021.

[30] “GCF Data- Interactive Map on Programme and Project-Level Data by Country,” Unfccc.int. UNFCCC, n.d.; “India at a Glance,” Global Environment Facility, August 24, 2016.

[31] Shreyas Garg, Rishabh Jain, and Gagan Sidhu, “Financing India’s Energy Transition through International …” CEEW. CEEW, August 2021.

[32] Mark D. Holmes and Elena Millerma, “Energy Transition: How to Finance the Race to Net-Zero,” White & Case LLP, August 5, 2021.

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China, economy, Research, Writing

Undermining institutions, underwriting OBOR: Beijing and the crisis of global governance

This article was co-authored with Mihir Swarup Sharma.

This article is part of the series The Beijing Heist: Making Global Institutions Serve the CPC Agenda


All good things must come to an end, and so must illusions of the promised common future. A fundamental assumption long held by many in the West is that the multilateral institutions instated over the six post-War decades would serve to constrain and direct the “peaceful rise” of the People’s Republic of China (PRC). It was believed that a Beijing that was given the position it thought justified within the multilateral architecture would end up being a responsible steward of these institutions and of the global commons more broadly. The scandal at the World Bank that led to the end of the Doing Business report and index is the third time that this assumption has been proved as naïve, and, indeed, delusional.

The World Bank scandal is directly linked to the Xi Jinping regime’s growing sense of entitlement. An independent report commissioned by the Bank has revealed that its leadership— including a former senior official, Kristalina Georgieva, who is now head of the International Monetary Fund (IMF)—apparently manipulated the supposedly independent report to placate PRC officials worried about their ranking. The immediate context? Ownership shares at the Bank were going to be “re-calculated”; in other words, the PRC was going to see a big boost in its control of the institution. (Eventually, 52 countries had to reduce their voting share in the Bank to increase China’s.) It was the anticipation of Beijing’s increased power over the institution that led to this episode; it appears a careerist international bureaucracy was all too eager to please the new ownership. Many will now want to more closely examine Beijing’s position on the acrimonious selection in 2019 of a new IMF Chief from within the European bloc.

The World Bank scandal is directly linked to the Xi Jinping regime’s growing sense of entitlement. An independent report commissioned by the Bank has revealed that its leadership apparently manipulated the supposedly independent report to placate PRC officials worried about their ranking

Two other institutional pillars of global governance have already been left powerless and have faced global ridicule as a consequence of Beijing’s actions. The World Trade Organisation (WTO) has lost the trust of the world in the two decades since the PRC’s accession; many of its members, developed and developing alike, feel that the PRC has not conducted the reforms that it had promised in order to join. As a result, it has retained an advantage in global trade that the WTO has been unable to rectify, leading to the institution itself being considered worthless. And then there is the World Health Organisation (WHO), which has been seen during this pandemic as prioritising Beijing’s sensitivities over warning the world about a deadly contagion—or even properly investigating its origins. The tight control of information by the Communist Party of China (CPC) means that questions remain unanswered about the virus’ origin, yet what is certain is that the pandemic’s initial spread is in no small part due to the CPC’s machinations and missteps, and the WHO leadership’s complicity with Beijing.

It is time to accept that ceding Beijing the control of the levers of global power leads to disastrous consequences. Liberal democracies such as India and those that designed the post-War multilateral structure understand the need for independent institutions. They may chafe at the pressure such independence brings to bear on their own domestic and geopolitical actions, but appreciation of the importance of institutional strength and independence is in their DNA. This is, of course, not true for the Communist Party of China. Why should anyone expect that a system that permits no independence domestically will not consider it necessary to seize control of global institutions as well? For them, those institutions are useful that perpetuate and further the party line.

Liberal democracies such as India and those that designed the post-War multilateral structure understand the need for independent institutions.

The Ease of Doing Business report and it’s deserved demise should not worry us. Concern about what will follow next should be more widespread. That Georgieva’s name has appeared in this investigation is worrying given that the IMF, in particular, is under siege. Its previous head, Christine Lagarde, explicitly made the point that Beijing’s “One Belt, One Road” initiative risked leading to a debt explosion in the developing world that would become the IMF’s problem. Under Georgieva, the pandemic did, in fact, cause an emerging-economy debt crisis in 2020. Other state-run lenders wanted to grant some measure of relief to those countries most under pressure. The PRC’s financial institutions refused to play along, demanding that they be treated like private-sector bond-holders instead. Georgieva seemed to excuse this behaviour, saying in October 2020, “What we are also hearing from China is a recognition that they are a relatively new creditor, but they are very large creditor, and they need to mature domestically in terms of how they handle their own lenders, the coordination among them.” The problem with the PRC’s external lending is not a lack of maturity or of co-ordination. If anything, the problem is the opposite: Too much co-ordination and political control. Will future bailouts spend IMF money to save Beijing’s bad Belt-and-Road loans? In a closed-door meeting in New Delhi some summers back, an American diplomat who had just finished meeting his counterparts in Colombo explained to Indian analysts that its Chinese debt that has ravaged Sri Lanka’s balance sheet and that a IMF bailout was inevitable—as, indeed, it turned out to be.

Unless all of us recognise the danger Beijing poses to global institutions, we will wind up paying for the expansion of Chinese ownership and political control over vast geographies.

An IMF that fears Beijing’s wrath is one that will not protect its shareholders or global private capital. Lending related to the Belt and Road initiative will cause more and more crises going forward, perhaps sooner rather than later, given the effect the pandemic has had on emerging economies’ balance sheets. An IMF intimidated by one activist minority shareholder might well direct the world’s savings into bailing out the PRC’s lending.

Unless all of us recognise the danger Beijing poses to global institutions, we will wind up paying for the expansion of Chinese ownership and political control over vast geographies. This is the global equivalent of the privatisation of profits and socialisation of loss—badly designed projects will create profits, power and growth for the benefit of the CPC, and their adverse economic outcomes will be left to the world to underwrite. The US has mishandled the World Bank already; does the European Union have it in them to save the IMF?

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China, COVID-19, Research, security, Writing

India’s security choices during the COVID-19 pandemic

At the start of the 2020s, India has been confronted with a massive viral spread and a relentless People’s Liberation Army (PLA) on its borders. Last year, even as India was responding to the pandemic that originated in Wuhan, it had to mobilise its forces to counter Beijing’s invasion on the Himalayan heights. Both resulted in loss of lives and both show no signs of going away. While the virus is threatening to rise again in a ‘third wave,’ China has literally dug in at high altitudes in its quest to secure real estate and territory that it believes is crucial for its Belt and Road Initiative (BRI), that provides access to a warm water port in the Arabian Sea, and that is critical to a larger project that seeks to reshape the geopolitical map of Asia. While the two nations have taken modest steps to disengage, military and diplomatic negotiations have not yielded substantive results.

In June 2021, reports emerged that China had been ramping up infrastructure along the Tibetan border. Following this, around 200,000 Indian soldiers have been deployed on the frontier, an increase of over 40 percent from 2020. For India, China poses a clear and present danger. To respond to an expansive and belligerent northern neighbour, it has to reorient its conception of its security as well as deployment of its political and diplomatic resources. This was not the case until very recently.

For India, China poses a clear and present danger. To respond to an expansive and belligerent northern neighbour, it has to reorient its conception of its security as well as deployment of its political and diplomatic resources.

Pakistan had been the major preoccupation since Independence in 1947. Its occupation of parts of the Indian state of Jammu and Kashmir, its export of terror to India as a means of waging an asymmetric war, and its nuclear proliferation had positioned it as the main threat to India’s national security. For long, China had escaped critical scrutiny despite provocative actions. The Indian security establishment was not very vocal when China tested an atomic device during President R. Venkataraman’s state visit in May 1992 — clearly intended to send a message to India. Indian Defence Minister George Fernandes’ prophetic assertion at the turn of the century that China, not Pakistan, was India’s “potential threat No. 1” was not universally shared in the strategic community in New Delhi.

In their public speeches, Chinese leaders declared their preoccupation with the welfare of their people. They took great pains to position China as a responsible power that avoided international confrontation. In hindsight, they clearly succeeded. From the ‘returns seeking’ investors in the United States to the political leaders in Europe and Asia who wanted a piece of the Chinese economic pie, all bought into this masterly conduct of statecraft. For India, the urge to keep China in good humour was also implicated by the border conflict of 1962. Relations had thawed only a quarter-century later. Prime Minister Rajiv Gandhi’s visit to Beijing in 1988 paved the way for the Sino-Indian Bilateral Peace and Tranquility Accords inked in 1993 and 1996 to stabilise the Line of Actual Control (LAC).

From the ‘returns seeking’ investors in the United States to the political leaders in Europe and Asia who wanted a piece of the Chinese economic pie, all bought into this masterly conduct of statecraft.

With stability along the boundary, trade and cultural ties between the two nations began to flourish. The boundary pacts mandated that large numbers of troops would not be amassed along the border, and that there would be no attempts to alter the status quo unilaterally. The Indian establishment believed that the border accords would be “peace for our time.” This search for fool’s gold would lead to India curtailing its multilateral naval exercises and slowing down infrastructure development in critical sectors of the India-China border. Influential voices in the Manmohan Singh government (2004-2014) believed India’s security interests would be served if it did not upset China.

Pushback came only in 2013, when transgressions by Chinese forces in Depsang were diplomatically and militarily countered. Yet, here too there was much discussion and debate in the upper echelons of government. Greater clarity was to emerge in 2014 when India, under the newly elected Prime Minister Narendra Modi, was at the receiving end of Chinese incursions in Ladakh even as a summit was under way with the visiting Xi Jinping. With two episodes in close succession, it would be fair to say that a change in India’s approach to its northern neighbour was thrust upon it.

The Indian establishment believed that the border accords would be “peace for our time.” This search for fool’s gold would lead to India curtailing its multilateral naval exercises and slowing down infrastructure development in critical sectors of the India-China border.

In recent years, India has been able to recalibrate its approach towards the Middle Kingdom even as the world order is changing. The US-India partnership has evolved rapidly. Washington has helped thwart moves by China to internationalise the issue of Jammu and Kashmir, enabled India’s entry into the international nuclear order and brought pressure on Pakistan to crack down on terrorism. The Quad grouping, where Japan and Australia join the duo to keep the Indo-Pacific region inclusive and open to all, is working on providing alternatives to the BRI and is seeking a number of resilient arrangements, including on technology supply chains. A Quad vaccine for all is on the anvil and other countries are looking to partner with the Quad on important global issues.

The ‘La Pérouse’ maritime exercises in the Bay of Bengal, with France joining the Quad members, and the Australia-France-India ministerial dialogue demonstrate that the idea and the ideals of ‘Quad Plus’ are gathering steam. The UK has floated the ‘Democracy 10,’ which includes the Quad countries, to tackle issues related to 5G and emerging technologies that may have a bearing on collective security. Whitehall’s recent assessment of its economic, security and diplomatic interests may see it engage more deeply with India in the Indo-Pacific. Old Europe is certainly finding a place at the core of India’s security calculations.

A testament to India’s recalibration is NATO Secretary General Jens Stoltenberg’s pitch, at the Raisina Dialogue 2021, to broaden cooperation. NATO views the rise of China as having huge security implications and assesses India as its partner. PM Modi’s historic Porto Summit with leaders of the EU and 27 EU member-states helped boost cooperation on terrorism and maritime security. The ‘connectivity partnership’ between the EU and India seeks to finance projects in other nations, offering an alternative to China’s BRI.

NATO views the rise of China as having huge security implications and assesses India as its partner.

Even as India strengthens and redirects its relationship with the old world, Russia remains the X factor. New Delhi’s strategic ties with Washington have become a sore point for the Kremlin. If two new poles emerge — the US and its partners and allies, and the Beijing-Moscow ‘axis ’ — India’s room for manoeuvre may be affected. India is alive to this possibility and is redoubling its efforts to work with Russia, its largest weapons supplier over the past decades. India has to convince President Putin that the bilateral relationship allows him greater latitude while dealing with his southern neighbour. Through back channels, India also has to work towards a reset between the US and Russia and to convince the EU that pushing Putin into Xi’s corner is dangerous and counterproductive. The recent Biden-Putin summit may have gone some way in making this a possibility.

A resurgent China, with its plan to establish regional hegemony in Asia even as it tries to split and dominate Europe, is Delhi’s biggest security challenge. The Indo-Pacific will define the future of the Asian Century. India has been astute in ensuring that its partners and fellow stakeholders from the Atlantic order work closely with it to navigate the choppy waters of the Indo-Pacific.


An abridged version of the above was published for the Lennart Meri Conference.

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Research, Writing

‘Global Britain’: G7, COP26, Indo-Pacific and the Commonwealth

This commentary originally appeared in Journal of Governance Security & Development.

The rise of the European Union (EU) witnessed continental Europe’s gradual disengagement from the non-Atlantic world. A post-colonial ‘Little England’ struggled to maintain its relevance even while retreating from lands across oceans and seas. Pax Britannica, once global, ceded place to a trans-Atlantic compact in which Britain was one of many voices, often drowned out by the voices of others.

The Maastricht Treaty ensured Britain was just another member-state of the EU whose sovereignty, to some extent, rested not in London but Brussels. Brexit was aimed at reclaiming that bartered sovereignty and regaining the power—within and beyond Europe—Britain had surrendered between 1946 and 2016; it took four years to formalise the separation, and for Prime Minister Boris Johnson to re-hoist the banner of ‘Global Britain’. This coincides with the ongoing post-pandemic rearrangement of the international order, Britain’s stewardship of the G7 and the COP26, and its enduring role as the premier financial centre of the world through all the trials and tribulations.

Admittedly, Mr Johnson’s ‘Global Britain’ faces challenges because Prime Minister Narendra Modi’s ‘Atmanirbhar Bharat’ too faces challenges. If the former’s ‘Global Britain’—leaving the “safe harbour of the EU … at a time of heightened global risk”—is set to sail into previously avoided turbulent seas, so is Mr Modi’s ‘Atmanirbhar Bharat’ negotiating a new passage.

For both Britain and India, it is not about changing partners and allies but stating new purpose and intent in a profoundly changed world where pre-pandemic truisms and certitudes have been rendered meaningless. It is about rationalising international engagement. Furthermore, it is about seizing the moment to emerge as a major player in crafting the new order necessitated, in large measure, by a declining America and a rising China. Britain and India must define their role in refashioning the global landscape in which a new continent, Eurasia, and a new water body, the Indo-Pacific, dominate. India has made its move; Britain, too, must.

The Strategic Rise of the Indo-Pacific  

The possible blueprint for a future whose geo-political, geo-economic and geo-strategic landscape is not dominated by the Middle Kingdom is obvious to all, even to those in Europe discomfited by Beijing’s seemingly inexorable continued rise and yet who are unwilling to stand up and be counted. The prospects for a future unburdened by one overwhelming power would appear brighter if nations were to forge partnerships—bilateral, minilateral, plurilateral—within and across geographies. This is already happening: The Indo-Pacific theatre offers the best and, perhaps, most dramatic example.

The political churn in the Indo-Pacific region began even before the pandemic. It gathered speed and gained purpose after the virus disrupted what were perceived to be settled global arrangements and brought to the fore the unfillable cracks that had, till then, been papered over. This churn has thrown up an indisputable fact: India is pivotal to the Indo-Pacific geography and, along with partners, will be defining the future Quad-centric ecosystem. This need not mean adding more members to the Quad comprising the US, Australia, India and Japan. As in the case of building resilient supply chains, it may only amount to specific conversations and initiatives with specific outreach partners. On issues such as climate finance, the UK is a natural Quad cousin.

Having set sail from the ‘safe harbour’ of the EU, Britain must now navigate its way to this geography where it is neither a stranger nor an intruder. Historically, the UK has been present in the Indo-Pacific region, and Britain has a sense of the nations there. Colonialism waned, but Britain’s partnerships waxed—some of its most important partnerships are in these waters; most notably, Britain has strong partnerships with individual members of the Quad, including India.

Historically, the UK has been present in the Indo-Pacific region, and Britain has a sense of the nations there. Colonialism waned, but Britain’s partnerships waxed—some of its most important partnerships are in these waters; most notably, Britain has strong partnerships with individual members of the Quad, including India

Now is the time for the UK to leverage those partnerships and demonstrate that it did not meander its way out of the EU maze directionless, but did so with firm purpose. The forces that shaped Brexit are a powerful wind in Britain’s sails, no longer constrained by either Brussels or Berlin. Johnson’s ‘Global Britain’ can and must disprove those who believe it has set itself adrift with neither shore in sight nor destination in mind, by navigating towards the Indo-Pacific region, which accounts for 50 percent of global economic growth—a share that can only increase in the coming times.

Refashioning and Reviving Existing Partnerships 

Besides the Quad, Britain and others have a useful and dynamic collective that could be refashioned—the Commonwealth. It is time to reimagine this grouping and give it purpose and new energy. One possibility would be to create a group of eight within the Commonwealth comprising Britain, India, Bangladesh, Kenya, South Africa, Australia, Canada and Singapore. These eight countries have an influence on and are implicated by the developments in the Indo-Pacific. These countries are crucial for the SDG and Climate agenda, and all of these nations are regional trade hubs and technology centers. These eight can put together a vision for growth, sustainability, technology, and global norms and rules for our future and give teeth to a grouping that has been adrift and make it contemporaneous. Global Britain needs new clubs, but, first, it must explore the opportunities that reside in old partnerships.

Indeed, this provides the perfect fit for the central core strengths of ‘Global Britain’ and the legacies of Great Britain: From finance to the green economy, from technology to knowledge, from education to creative urban design—London leads the race by miles. The British economy is structured in such a manner that other economies stand to benefit from it; there is a mutuality of commercial interest and commonality of political purpose. Unlike the EU, ‘Global Britain’ does not need to offshore its economy.

The strategic importance of ‘Global Britain’—for the UK and the world—cannot be overstressed. That importance will gain traction and draw attention as Glasgow prepares to host COP26, perhaps, the most important event on the global calendar in the post-pandemic year. Britain has the capability to finance a rising nation’s transition to a green future; India and South Asia have the capacity to absorb green investments by Britain as it prepares to transit from the old to the new. Climate partnerships will prove to be the most resilient partnerships of the future, and Britain must know this and act accordingly. The City of London is a natural fit for this endeavour, but it is by no means the only candidate. An enlightened approach, including technology and access to it, can work to mutual and planetary benefit. It is for Britain to demonstrate that its approach is strategic rather than tactical. Released earlier this year, the ‘UK Integrated Review of Security, Defence, Development and Foreign Policy’ is an excellent document. It needs to be put into action quickly.

The strategic importance of ‘Global Britain’—for the UK and the world—cannot be overstressed. That importance will gain traction and draw attention as Glasgow prepares to host COP26, perhaps, the most important event on the global calendar in the post-pandemic year

‘Global Britain’ should not mean Britain’s World. It should rather signify Britain with the world. Through effective engagement, backed by its very own Indo-Pacific strategy based on the twin principles of prosperity and security, it can help reinforce a “sustainable rules-based order in the region that is resilient but adaptable to the great power realities of the 21stcentury”. In all this, the centrality of India is beyond debate or doubt, which only serves to underscore that Britain should naturally invest in and with India. Yet, Britain comes into the contemporary Indo-Pacific as a latecomer, its historical role notwithstanding. It has to add value to the Quad template and India’s own evangelising of the Indo-Pacific; it cannot presume to be a leader by default or based on the past.

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Research, Writing

Big Tech and the State: The necessity of regulating tech giants

The scramble for gold on the Internet has transferred control of vast swathes of cyberspace to a very small and select group: Big Tech. This has made ‘significant social media intermediaries’ highly profitable ad businesses that have grown amid non-existent privacy and weak intermediary liability laws. They make the market, grow the market, and shape market rules. No ad business, or any business in history—not even Big Oil or Big Tobacco—has held so much power over consumers and the economy. This perverse power is, perhaps, the single biggest challenge that nations and peoples will have to grapple with. Accountable Tech must be India’s leitmotif in 2023 as it presides over the G-20, and a robust digital republic its sovereign mission as its turns 75 next year. This will need sensible politics, sophisticated policies, and a return to first principles.

Concentration of wealth is a competition issue and an economic policy question. Left unregulated, it brings about inequality in income and opportunity. But concentration of power when it comes to discourse—what is promoted, shared or suppressed—should be more worrying. Safe-harbour provisions in the United States along with self-regulation principles have allowed Big Tech to cherry pick what is to be acted on and what is to be ignored, effectively making it the arbiter of permissible speech. For example, anti-vaccine Twitter users have thrived during the pandemic, while, sometimes, less dangerous actors have had their posts labelled. In January, Angela Merkel, Chancellor of Germany, denounced the de-platforming of then US President Donald Trump by Twitter. “The right to freedom of opinion is of fundamental importance,” Merkel’s Chief Spokesperson, Steffen Seibert said, “Given that, the Chancellor considers it problematic that the President’s accounts have been permanently suspended.”

The issue here is not whether Merkel agreed or disagreed with Trump’s tweets. The question is—who censors him, how, and with what process and level of transparency? For the Chancellor and for many, Twitter cannot choose for itself when it seeks to be a provider of public goods, and when it is a private messenger eligible for intermediary protections. When governments around the world describe digital connectivity as a ‘utility’, information lines cannot be disrupted by religious, cultural or ideological filters. Like water, electricity and roads, significant social media will have to serve all, even those its management and owners disapprove of.

[Platforms] cannot choose for [themselves] when they seek to be a provider of public goods, and when they are a private messenger eligible for intermediary protections.

The instances when utilities (say electricity and water) are denied or disconnected are specific, rare and regulated. Even in the information age, only the state and its three pillars have this right. Global Big Tech is not part of this constitutional arrangement. There are checks and balances in place, with legal recourse available for all within the state and for external actors as well. Any alternative to this constitutional setup would be akin to legitimising foreign influence operations in domestic affairs. In an extreme, for a country that is almost perpetually in election mode, it would be tantamount to election interference. This may seem like hyperbole, but it is closer to the truth than we suspect. For instance, if an electoral candidate makes an incendiary speech on a physical stage, the Election Commission, law enforcement agencies and the judiciary act against him—not the private company that has set up the stage or the power utility that has provided an electricity connection to the mike. Is the online equivalent being honoured by Big Tech?

Regulation of Big Tech across democratic setups

Australia gets this. In February, it passed the News Media Bargaining Code. The code encourages intermediary tech firms to negotiate deals with media outlets, effectively mandating that Facebook and Google pay news firms for content. The law was passed after a protracted battle between the Australian government and social media firms. It escalated when Facebook removed content of certain Australian news agencies, several official government handles, emergency services, and civil society organisations from its platform. Prime Minister Scott Morrison held firm: “These actions will only confirm the concerns … about the behaviour of Big Tech companies who think they are bigger than governments and that the rules should not apply to them.”

Canada, too, is making moves to curtail the wealth and discourse monopoly currently enjoyed by Big Tech. Just this week, Canadian lawmakers passed Bill C-10, which seeks to regulate the kind of content media streaming services prioritise on their platforms. The Bill, which is yet to be passed by the Senate, aims to make digital streaming platforms at par with traditional broadcasting services; the latter are obligated to increase the visibility and “discoverability” of Canadian content, and to set aside part of their profits to support a fund that promotes original Canadian productions.

Across the pond from the Americas, the European Union is also actively working towards mitigating the risks posed by the monopoly of Big Tech. Margrethe Vestager, Vice President of the European Commission for A Europe Fit for the Digital Age, has stated that tech giants, “have the power to guide our political debates, and to protect—or undermine—our democracy.” In December 2020, Vestager and her office tabled the Digital Services Act (DSA), which seeks a systemic assessment of the varied social, economic and constitutional risks posed by the services provided by Big Tech.

The most decisive move yet has come from Poland, which has proposed a law to ‘limit’ the censorship tendencies of the tech giants. Soon after the deplatforming of Donald Trump by Twitter, Prime Minister Mateusz Morawiecki wrote on Facebook: “Algorithms or the owners of corporate giants should not decide which views are right and which are not. There can be no consent to censorship.” The new proposed law provides for a special mechanism for those whose content or profiles have been blocked/deleted by social media platforms, where they can complain directly to the platform, which is obligated to respond within 24 hours. After a review by a specially constituted “Freedom of Speech Council”, deleted content can be restored by order. If platforms do not comply, they can face a heavy fine of up to 50 million zloty (US $ 13.4 million).

Regulatory Frameworks in India

India, too, must take some tough calls. The vision of Digital India has advanced—from only four unicorn companies in 2014, India had 12 in just 2020 alone. Regulation must keep pace with this economic and social reality. It is absolutely critical that the Privacy and Data Protection (PDP) Bill, currently being examined by a Parliamentary Joint Committee be brought forth and enacted as law. Without the umbrella framework of the PDP bill, India’s regulation of Big Tech will be ad hoc, and may be misconstrued as a political instrument.

The vision of Digital India has advanced—from only four unicorn companies in 2014, India had 12 in just 2020 alone. Regulation must keep pace with this economic and social reality.

With respect to regulating intermediaries, the Indian government initiated a public consultation process in December 2018 and invited submissions from the public to the Ministry of Electronics and Information Technology. A spectrum of civic, industry and academic actors participated. The rules were notified in February 2021, specifying clear compliance requirements within three months. Yet, the reaction of Big Tech platforms has been to delay, stall and obfuscate compliance.

It is high time that the actions of these companies were subject to systematic and rigorous Parliamentary oversight; but for that to happen, legislation is needed. Indian law and policy are rooted in our Constitutional principles. Indian policies on digital governance are no different, but they now need the imprimatur of Parliament to truly be effective. And should there be questions and grievances regarding the scope and constitutionality of the law, the courts of India will be the ultimate judge.

The objective of regulatory frameworks is to safeguard public interest, even (or perhaps especially) if it involves eroding the bottomlines of powerful vested interests. To once again quote the EU Commission’s Magrethe Vestager (in an intervention at a technology policy panel at the Raisina Dialogue earlier this year), regulating Big Tech, “Is a job, not a popularity contest”.

Perhaps, the real limitation is one of our imagination. In our minds, Silicon Valley is forever a happy, sunshine place, led by geeky, long-haired wunderkinds in t-shirts and flip-flops. The reality is Big Tech’s instincts today are driven by a single-minded sense of territoriality and collective impatience for different governance systems. For them, their ‘code is law’ and it is universal. That is at the crux of it.

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Research, Writing

Modern Geopolitics: A Race Through Chaos to Stability

Originally published in The Valdai Club. Co-authored with Aarshi Tirkey.

The third decade of the twenty-first century has compelled the world to face its most intractable challenge yet—offering a coherent, collective and equitable response to the COVID-19 pandemic. This has tested the faith of the most ardent internationalists, and is part of a deeper churn in the global order that was underway even before the first COVID-19 case was reported in Wuhan in 2019.

US hegemony has all but come to an end and the rise of a multipolar world has effected a redistribution of power at the global stage. American leadership, that would have been essential to catalysing collective action against the pandemic, bordered on wanting to island itself from the rest of the world much before former US President Trump launched the “America First” campaign. The utopian vision of interdependence and global cooperation had already taken a beating in Europe when Brexit demolished the ideological and institutional underpinnings of the European Union. And China, the other great power, was engaged in its project ‘Pax Sinica’, determined to make globalisation beneficial for its Communist party.

Global institutions had weakened, and the benefits of investing political will into their mechanisms had greatly receded. The coronavirus further exacerbated this: While nations scrambled to respond to this fast-spreading disease, their immediate reaction was to look inwards, go at it alone or with trusted partners, and engage with the international community only for self-serving purposes. At the end of the day, all were ‘Darwinian’ and privileged their own survival without consideration and care for others. This is typified by the perverse ‘Vaccine Access’ world map.

Global institutions had weakened, and the benefits of investing political will into their mechanisms had greatly receded. The coronavirus further exacerbated this: While nations scrambled to respond to this fast-spreading disease, their immediate reaction was to look inwards, go at it alone or with trusted partners, and engage with the international community only for self-serving purposes. At the end of the day, all were ‘Darwinian’ and privileged their own survival without consideration and care for others. This is typified by the perverse ‘Vaccine Access’ world map.

As such, the postwar liberal international order—underwritten by the West under US leadership—had been facing an existential crisis since the turn of the century, with wars in South and West Asia and the Financial Crisis all challenging the old arrangements and aiding the rise of `China as a new revisionist power. And then the Virus from Wuhan exploded on the world stage, accelerating the processes that were already influencing modern geopolitics, a few of which are discussed here.

The 3 R’s of Modern Geopolitics

The first is readjustment, as countries are grappling with the impact of the rise of new regional and global actors. The American century has waned, and the rise of the Asian century—home to the growing economies in the world—is well on its way. The biggest challenge to the global balance of power comes from China, which is set to be the first major economy to rebound after the pandemic With the launch of the Belt and Road Initiative (BRI), China’s close integration with global supply chains, and its advancements in civilian and military technologies—Beijing’s rise appears to be an inevitable reality, howsoever much its international behaviour instills distrust among many, particularly the US and some of its allies.

A contest is, therefore, inevitable. In President Biden’s interim National Security Strategy Guidance, the rise of both China and Russia is treated as a challenge to a stable and open international system. President Xi Jinping—for his part—recently declared that Beijing will never allow any foreign forces to bully, oppress or enslave China and the focus of the party would be “the great rejuvenation of the Chinese nation”. Will the two global powers head for a confrontation or choose to opt for a peaceful coexistence with limited and contained disagreements? The outcome of the US-China rivalry remains to be seen, and countries caught at the intersection of this evolving dynamic must take into account how they readjust their approach to this new age of geopolitics. Russia too will be asked some tough questions and will have to make some difficult choices. Can a positive Biden-Putin engagement play a stabilising role in the 21st Century? Or is a China-Russia nexus inevitable?

The outcome of the US-China rivalry remains to be seen, and countries caught at the intersection of this evolving dynamic must take into account how they readjust their approach to this new age of geopolitics. Russia too will be asked some tough questions and will have to make some difficult choices

Second, the hard-won consensus on the frameworks underpinning multilateralism and globalisation is undergoing a dramatic restructuring. The 2008 global financial crisis, followed by the COVID-19 pandemic, have exposed the fragility of global economic interdependence. The growth of hyper-nationalism and populist politics assess globalisation and multilateralism as arrangements that impinge on the sovereign choices of a state. As such, there is potential for the creation of a ‘gated globalisation’—a globalisation that is less free and less open than before. Economic policies are no longer solely dictated by economic principles; they are now guided by strategic considerations, political trust, climate, health and technological threats. Countries, such as the UK, US and India have introduced trade restrictions, investment screening mechanisms, sanctions and monetary policies to reflect these new considerations. China had already perfected their own model of perverse global integration.

The disillusionment with multilateralism can be directly attributed to institutional inertia, lack of reforms and capture by vested interests, which continue to hamper decision making before these organisations. Countries are, therefore, leaning towards smaller groupings to forge fluid, issue-specific partnerships, which can expedite cooperation between like-minded countries. While this can be one way to overcome the malaise of multilaterals, they may hamper the development of broader and cohesive international strategies for ‘global bads’—from COVID-19 to climate change—which require the participation and commitment of all. The pandemic is not over till all are vaccinated and secured and the threat of climate change is not going to recede by unilateral actions of any single state. The ongoing restructuring calls for the need for new arrangements that can redress the inefficiencies of multilateralism and globalisation, without diminishing their larger benefits. Can a ‘consortium of plurilaterals groupings’ agree to a common minimum framework to address the challenges that confront us all even as they engage within their own clubs to maximise their economy and security?

In the midst of this churn, geopolitics has been reoriented to accommodate new actors, and emerging factors and considerations. Modern geopolitics is increasingly influenced by geoeconomics and geo-technology. Important works, such as War by Other Means, talk of the systemic use of economic instruments to achieve geopolitical objectives—a form of statecraft that was present during the Marshall plan, and is present today as well through China’s ‘chequebook diplomacy’ and more generally the BRI.

Modern geopolitics is increasingly influenced by geoeconomics and geo-technology. Important works, such as War by Other Means, talk of the systemic use of economic instruments to achieve geopolitical objectives—a form of statecraft that was present during the Marshall plan, and is present today as well through China’s ‘chequebook diplomacy’ and more generally the BRI

If the medium is the message, then technology is the future of our politics. The advent of the Fourth Industrial Revolution (4IR) has resulted in the development of technologies that can be both a boon and a bane for humankind. While America was at the forefront of technological leadership in the recent past, this is being challenged by China as it invests heavily in emerging and dual-use technologies such as Artificial Intelligence, Quantum Computing, and biotechnology. First movers may not only take the mantle of technological leadership, but will also become the providers for other countries, creating asymmetric dependencies. ‘GeoTech’ opens a new realm of interstate competition, where concerns of national security and strategic autonomy implicate technology choices and arrangements. In an increasingly digital world, the capture of data—and not territory—and the compromise of critical information infrastructure—and not state borders—are the new security challenges for nations. As an individual’s attention, eyeballs and personal data become the coveted political prize, will the next domain of conflict be the human form and how we will protect it?

New Actors, New Geographies

While the above factors remain at the heart of this churn, new actors and geographies are influencing the conduct of geopolitics. Though the coronavirus hearkened the return of the ‘nation-state’, communities across borders represent a robust challenge to this primary unit of Westphalian sovereignty. The concentration of economic resources and power in global technology companies, from Twitter to Tencent, has driven home the fact that states are no longer the primary actors in the world. Hate, tribalism and irrational ideologies have returned with new vigour, riding on the reach and amplification of digital technologies. Technology giants are now the arbiters of economic and political choices and are challenging the writ of the older political systems.

The emergence of new geographies, such as the Indo-Pacific, Eurasia and the Arctic—in which all regional and global powers have stakes—demand the genesis of new norms, institutions and partnerships. In a universally parochial world, there is limited appetite or leadership to shape and create these. In sum, the pandemic confirmed the decline of the US as a superpower and sharpened questions on Beijing’s moral and political capability to step into the void. Even with its attendant equity and efficiency losses, the importance of‘multi-polarity’—first ideated by Primakov through the Russia, India and China trilateral mechanism—received a resolute confirmation. It has urged that we appreciate this shifting nature of global and domestic affairs to be able to adapt to an increasingly complex world, that is no longer tethered to a conventional understanding of geopolitics.

While the ability to project power globally resides with the US, the world is steadily moving towards political, economic, technological and normative multipolarity. The evolving contours of modern geopolitics is still in a state of flux, and there is wisdom in accepting the notion that the end result is perhaps indeterminable. The age of disruption is here, countries that thrive on disorder may do well in the short term, while nations who invest in stability may well define the future of globalisation and, indeed, the new world order.

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China, Research, security, Writing

Communist Inc: The Pandemic and China’s World

Co-authored with Akhil Deo

The Communist Party of China will celebrate the 100th anniversary of its founding this July. This marks the first significant milestone in Chairman Xi’s “China Dream”, a project that will ostensibly culminate in 2049, the 100th anniversary of the founding of the People’s Republic, with associated aspirations of China cementing its position as a global power. In our book, Pax Sinica, we had detailed three instruments that are crucial to these ambitions: Leadership over global institutions and processes, a conducive environment for achieving “discourse power”, and the construction of new international coalitions. China seeks to control global institutions and rule-making processes, grease and dominate the media and public sphere into a favourable disposition, and enter into perverse partnerships with other nations, described as a “loan for sovereignty” arrangement in one of its avatars.

The onset of the pandemic has made many of these strategies more visible, even as it highlighted the opportunities and challenges that lie ahead for China.

China’s global dominance strategies

For the past decade or more, China has pursued a dual strategy of co-opting post-war institutions while simultaneously pursuing its own brand of multilateralism through the Belt and Road Initiative (BRI) and an assortment of formal and informal fora, such as the Shanghai Cooperation Organisation. Three approaches guide China’s strategy: Building global influence and prestige; shaping and/or altering key norms, standards, and processes; and creating the capacity to withstand pressure for selectively disregarding international rules.

The fruits of these efforts were visible amid the pandemic, most controversially at the WHO, which struggled to balance its commitment towards transparency and accountability, and its operational reliance on and systematic infiltration by China. Under cover of the pandemic, China has made more significant inroads as well. In April 2020, China was appointed to the influential United Nations Human Rights Council (HNRC) consultative group, which plays a crucial role in selecting global monitors for free speech, arbitrary detention and forced disappearances—the very rights that Beijing crushed in Hong Kong and Xinjiang.

One aspect of this ploy of the Communist Party of China (that effectively and absolutely owns the country) that often goes unnoticed in India is China’s leadership in technology standard-setting organisations. Over the past decade, Beijing has improved its representation in, and submissions to, the technical committees and sub-committees of organisations like the International Organisation for Standardisation and the International Electrotechnical Commission. In March 2020, China’s Standardisation Administration published an innocuous document outlining the elements of a more ambitious strategy known as China Standards 2035. The 15-year blueprint will chart a pathway for China to dominate standards in emerging industries, giving it the ability to set the terms of international trade and even define the relationship between technology and society globally.

Augmenting China’s influence in international organisations and standard-setting bodies is its global media and narrative management strategy—an essential facet of “discourse power”

Augmenting China’s influence in international organisations and standard-setting bodies is its global media and narrative management strategy—an essential facet of “discourse power”. Chairman Xi alluded to this in a recent speech, calling for China’s media to develop an “international voice”. The research in our book highlighted what scholars called China’s policy of “borrowing a boat to go out into the ocean”. In other words, China’s use of paid inserts and large advertisements in newspapers allows it to propagate its narratives. Two recent reports provide insight into how significantly these efforts have evolved and intensified.

The first, by the Associated Press and the Oxford Internet Institute, describes China’s use of bots and fake social media accounts to amplify its “wolf warrior” diplomats and their proxies online. While China has previously used these tactics in Taiwan and Hong Kong, such operations have taken on a global scope amid the pandemic. Beijing’s appetite for misinformation, exemplified famously by Zhao Lijian’s claim that the coronavirus originated outside China, only exacerbated the challenge. The second, from the International Federation of Journalists, posits that Beijing’s strategy of syndication appears to be paying off. Over the year, its inserts into local media, increasingly in vernacular, along with a more engaged diplomatic community, have bolstered its visibility in the developing world.

Beyond its media strategy, China continues to fund educational institutions through opaque means, sometimes with attached costs to academic freedom. The Communist Party also increasingly hosts foreign diplomats and security officials for training programmes on “information management” and sponsors ruling party politicians around the world to attend training sessions on party building and governance. In 2020, under pressure from Western scrutiny, Beijing rebranded its infamous Confucius Institutes and handed over operations to a ‘non government organisation’ defined by the party. However, the US and Europe aren’t necessarily the targets of its educational and cultural investments. A report from Aid Data in 2018 revealed that countries that are more aligned with China’s foreign policy receive the bulk of its largesse. While it is unclear yet what gains have accrued to Beijing from such initiatives, they represent a formidable institutionalised apparatus to export its ideology and political practices.

The Communist Party also increasingly hosts foreign diplomats and security officials for training programmes on “information management” and sponsors ruling party politicians around the world to attend training sessions on party building and governance

Backdoor entry into the EU

Finally, we had highlighted China’s strategy of building new coalitions and undermining existing ones. Nowhere was this more apparent than Europe, where Beijing’s 17 + 1 platform for engaging with Central and East European (CEE) nations had triggered concern about its “divide and rule” tactics. To some extent, China’s investments in the region have paid off— with countries like Greece and Hungary scuttling the EU’s efforts to criticise China’s violations of international law in the South China Sea and the passing of the national security law abuses in Hong Kong.

2020 dampened this momentum for China—and demonstrated that large powers can still secure their peripheries. Several East and Central European leaders expressed dissatisfaction with the pace of investments and many were no-shows at the China-led forum. Many have also signed onto the US’s Clean Network Initiative, intended to prevent the entry of China’s 5G companies into key markets. The Baltic states, meanwhile, were more apprehensive about Russia than they were keen on Chinese investments.

Nevertheless, the 17 + 1 platform is but one instrument in China’s more global “perverse diplomacy” toolkit, and writing it off is premature. It marks a permanent presence that China now enjoys at the EU’s doorstep, one that the CEE can always leverage for better terms from Brussels. At the very least, China is now a voice in domestic EU debates.

China also hosts a web of high-level forums and summits in nearly every part of the world, including the Arab states, Africa, Latin America, and the ASEAN. Beijing’s vaccine diplomacy has won it praise in most of these geographies—especially in the face of Western absence and selfish acts of the past year. These forums augment and bolster various initiatives, ranging from China’s infrastructure investments to promoting its technology propositions. And its economic presence and investments are buying it diplomatic support as well. For instance, the support of African states has been crucial for China when its record in Xinjiang and Hong Kong was questioned in the UN in 2020 and 2019.

When looking at the pandemic in retrospect, Chinese leaders will likely see parallels to the 2008 financial crisis—one more milestone in the long decline of the West, and China’s rise. Beijing robustly managed the pandemic at home and stepped up to provide global public goods. To be sure, it faces new headwinds: Public opinion of China has plummeted in the West, the Biden administration is gearing up for great power competition, the EU has ‘frozen’ its latest investment deal with China, and institutions like the G7 are stepping up to offer alternatives to the BRI.

Public opinion of China has plummeted in the West, the Biden administration is gearing up for great power competition, the EU has ‘frozen’ its latest investment deal with China, and institutions like the G7 are stepping up to offer alternatives to the BRI

Elsewhere, the message from China over the past year is resilience and continuity. It remains committed to an alternative form of globalisation via the BRI. Its influence over international institutions will only grow, proportional to its wealth and power. Beijing’s media is increasingly savvy in projecting and protecting its core interests. Further, contrary to the perception that China is “friendless”, it can call upon nations to support it when it matters. And even when there is pushback, it is often haphazard. The recently announced “Build Back Better World”, while grand in intent, struggles with the contradictions within the group on their assessment of the Middle Kingdom. Key countries have chosen trade over security and valuations over values in their engagement with China.

The future of the Indo-China relationship 

Where does this leave India? Our book warned that Doklam was unlikely to be the last border confrontation between the two Asian powers. We argued that it opened a new tense period between India and China—an Asian Cold War. The Galwan Valley Clash confirmed the advent of a new era of high altitude faceoffs with possible ramifications in the oceans as well. This rift has only grown wider amid the pandemic. China’s belligerence in the Himalayas, and India’s restriction on Chinese technology platforms as well as its alignment with coalitions competing with China have all but cemented contestation. This will drive engagement in the years ahead.

New Delhi will confront a more fundamental dilemma: On the one hand, political tensions with China will remain high. But on the other, it is dependent on trade with China for its economic objectives—a dependence that will likely remain given the adverse economic consequences of the pandemic. Indeed, data published by Chinese customs officials revealed that trade with India boomed in 2021, even as Beijing appears to be consolidating its position in the Himalayas. How India resolves this contradiction and builds a security posture that accounts for this will indeed define the relationship.

New Delhi needs clarity of thought and a national consensus on China. In the coming days, it will have to take a leaf out of the Chinese playbook and engage in trade with the one that seeks to do it harm. Its economic engagement must be alive to this and its security considerations immune from these entanglements. It must realise that it cannot trade or talk its way into a better relationship with Beijing. These are important but essentially sideshows to the principal theatre of engagement. Deceit and political muscularity is the new grammar of the bilateral that China has proffered. With limited recourse available, the time for India’s legendary ambiguity is long past.


PAX SINICA: Implications for the Indian Dawn, by Samir Saran and Akhil Deo, is available here.

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Research, Writing

Just deserts? Western reportage of the second wave in India exposes deep schisms in relations with the East

Co-authored with Mr. Jaibal Naduvath

This article is a continuation of a previous article written by the authors, Revisiting Orientalism: Pandemic, politics, and the perceptions industry

In Lord Byron’s poemChilde Harold’s Pilgrimage (1812), the protagonist Harold, contemplating the grandness of the Colosseum, imagines the condemned gladiator, dignified yet forlorn, butchered for the entertainment of a boisterous, blood lusty Roman crowd out on a holiday.

Public spectacles of suffering are integral to the discourse of power. The perverse imagery and messaging surrounding the suffering seeks to intimidate and suppress the subaltern’s agency to perpetuate ethnic dominance and social control. It pivots around an elevated moral sense of the ‘self’. In his seminal work, When Bad Things Happen to Other People, John Portmann argues that it is not unusual to derive gratification over the suffering of the ‘other’, particularly when the native feels that the suffering or humiliation of the ‘other’ is deserved. The suffering then becomes fair recompense for transgressions real and imagined, and the accompanying sense of justice and closure brings forth feelings of gratification.

India is reeling in the aftermath of the second wave of COVID-19. As death reaps rich dividends cutting across class and covenant, the country is engaged in a determined fightback. The developments have made global headlines, and, in equal measure, triggered global concern. Apocalyptic images of mass pyres and victims in their death throes, replete with tales of ineptitudeprofiteering and callous attitudes, have made front page news and have become television primetime in much of the trans-Atlantic press, conforming to reductive stereotypes that have informed three centuries of relations with the Orient. The ‘self-inflicted’ suffering is then ‘fair recompense’.

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Research, Writing

Diplomacy and Resilience: Betting on India is a Good Wager

Co-authored with Prof. Harsh V Pant

At the India-EU summit in early May, French President Emmanuel Macron declared, “India does not need to listen to lectures from anyone about vaccine supplies. India has exported a lot for humanity to many countries.” The sentiment was shared by most of the European leaders who took part in the extraordinary summit that saw Prime Minister Narendra Modi interacting with all 27 EU national leaders as well as presidents of the European Council and the European Commission. The EU leaders expressed their full solidarity with India at a time when the country is battling a treacherous second wave of the COVID-19 pandemic. Ahead of the summit, EU member states had mobilised more than €100 million worth of emergency medical equipment in support of India’s battle.

It may be difficult to comprehend at this moment of distress, but if not for India’s earnest global engagement over the past few years—and, its proactive assistance to many nations  during the first wave of COVID-19—it would not have been possible to swiftly mobilise such remarkable amounts of global resources for India’s battle with the pandemic. From western nations to India’s partners in the Middle East and the Indo-Pacific, so many nations have rallied behind India.

If not for India’s earnest global engagement over the past few years—and, its proactive assistance to many nations  during the first wave of COVID-19—it would not have been possible to swiftly mobilise such remarkable amounts of global resources for India’s battle with the pandemic

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