COP21: Can India reconcile growth and environment?

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India is among the countries most vulnerable to climate change. But as a developing nation, it also faces a balancing act between reducing CO2 emissions and boosting economic growth. DW examines India’s role in COP21.

A factory chimney in a residential area emits smoke as haze casts a blanket over Bangalore on December 11, 2009 (Photo: DIBYANGSHU SARKAR/AFP/Getty Images)

Already one of the most disaster-prone nations in the world, India is also likely to be hit hard by the effects of global warming. The South Asian country has very dense coastal populations vulnerable to rising sea levels.

And the freak weather patterns which already taking place – such as extreme heat, drought, and the record-breaking floods in Chennai – will not only affect agricultural and food security, but also cause water shortages and disease outbreaks.

The Indian government has reacted to the growing threat by rolling out an ambitious clean energy plan. New Delhi has pledged to invest $100 billion in clean energy investments over the next five years as well as to source 40 percent of its electricity from renewable and other low-carbon sources by 2030.

India is already the world’s fourth-largest emitter of carbon dioxide after China, the US and the EU

Although it hasn’t specified a cap on its emissions, the South Asian giant wants to reach 175 gigawatts (GW) of renewable energy capacity by 2022 – up from currently 38 GW – of which 100 GW will be from solar energy. In fact, at the outset of the UN climate summit taking place in Paris from November 30 to December 11 (COP21), Indian PM Narendra Modi and French President Francois Hollande launched an alliance of 121 countries to dramatically boost the use of solar power.

‘We still need conventional energy’

But will this be enough? Analysts point out that while New Delhi is well aware of the dangers posed by global warming, it also wants to make sure that any deal in Paris doesn’t restrict the country’s ability to expand its economy, with PM Modi saying that rich countries should not force the developing world to abandon fossil fuels completely.

“We still need conventional energy. We need to make it clean, not impose an end to its use,” said Modi at the start of the Paris talks, calling on developed nations to meet their commitment to muster $100 billion a year from 2020 to help poor countries cope with climate change.

Moreover, India sees itself as one of the most vocal proponents of “climate justice” – the notion that historical responsibilities as well as present-day capabilities matter greatly in shaping the climate governance regime.

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“From the perspective of New Delhi, it bears little responsibility for the exponential increase in greenhouse gas emissions since the industrial revolution, and also has very little capacity to address the problem when much of the country still lives in abject poverty and hundreds of millions of Indians still lack access to electricity,” David Livingston, an associate at the Energy and Climate Program at the Carnegie Endowment for International Peace, told DW.

It is precisely this balancing act between boosting economic growth and reaching environmental goals that poses the greatest political challenge to leaders of developing nations such as India – which is already the world’s fourth-largest emitter of carbon dioxide after China, the US and the EU, according to the International Energy Agency (IEA).

Hard to abandon coal

India is home to one-sixth of the world’s population, and its third-largest economy in purchasing power parity (PPP) terms, but accounts for only six percent of global energy use, with one in five Indians – 240 million people – still lacking access to electricity, according to the IEA.

But the government’s plans to lift millions out of poverty will likely to change this, as efforts to modernize and industrialize India will trigger dramatic increase in energy demand. In fact, the IEA estimates that the country’s energy demand will account for roughly a quarter of the global increase in consumption by 2040.

The problem is that coal – the key source of power in the country, accounting for around 60 percent of total electricity generation – is also a key source of carbon emissions. And due to the relatively low cost and large reserves of domestic thermal coal, it remains the key fuel source in India’s long-term energy strategy, as Rajiv Biswas, Asia-Pacific Chief Economist at the analytics firm IHS, told DW.

The IEA estimates the expansion of coal supply will make India – which has some of the most polluted cities in the world – not only the second-largest coal producer in the world, but also the largest coal importer, overtaking Japan, the EU and China in the coming years.

Watch video01:39

India moves to tackle air pollution

“India is a coal-focused country, and it plans to double its consumption in the next 15 years. This is the crux of the problem, given that it’s hard to imagine India substantially bringing down its emissions if it plans to scale up one of the most emissions-intensive energy resources out there,” Michael Kugelman, South Asia expert at the Washington-based Woodrow Wilson Center told DW.

But while this may seem like a dire prospect, Livingston explains that from India’s perspective, New Delhi’s long-term climate strategy makes sense as it not only puts the country on a growth path, but also keeps per-capita emissions far below those of other industrialized countries such as the US. Today, India’s per-capita emissions are only one-third of the global average.

“The paradox here is that while India’s implied emissions growth rate to 2030 is the largest in absolute terms of all large economies, the country still ends up with the smallest per-capita emissions of all these economies in 2030,” Livingston told DW.

Around $2.5 trillion needed

That’s why the key to the climate talks in Paris will be the level of support developing countries such as India can get from the international community to lower their dependency on fossil fuels, says climate policy expert Samir Saran.

There are two ways this can happen, the analyst at the New Delhi-based Observer Research Foundation told DW: “Either the West can provide the necessary scale of finance and clean technology that will enable India to rapidly deploy renewable energy to power its development, or, the West needs to drastically cut its emissions to allow for rising Indian emissions in the coming years.”

Indian representatives at COP21 have said the country would cut back on coal if the Paris agreement ensures it receives international support that brings down the cost of expanding renewable energy.

“Solar and wind is our first commitment. Hydro, nuclear, all of these non-carbon sources are what we will develop to the largest extent we can,” Ajay Mathur, the director of India’s Bureau of Energy Efficiency, was quoted by the Associated Press as saying. “What cannot be met by these would be met by coal,” he added.

A preliminary estimate by Indian authorities suggests that at least $2.5 trillion will be required for meeting India’s climate change actions in the next 15 years. They are to be met from domestic sources and leveraging of financial commitments made by developed countries, said Indian Environment Minister Prakash Javadekar in early December. Three-quarters of that investment is expected to go into the power sector.

‘We still need conventional energy,” says PM Modi

Bill Hare, a lead author for the Intergovernmental Panel on Climate Change and founder of climate research group Climate Analytics, believes the financial effort would be worth it. The expert warns that India would be making a very risky investment for its sustainable development by going too much further into coal when the alternatives are not only cheaper and more cost effective but also place a much lower environmental, health and damage burden on the country.

“So from the development point of view, I think India has some stark choices ahead of it. If it goes into coal it will not contain its air pollution problems; if it goes into renewables, it will have a much better chance of a sustainable future,” said Hare.

There’s currently a lot of talk about liquefied natural gas (LNG) opportunities in India. LNG is not as polluting as coal and oil, and India has explored possible cooperative opportunities with Australia and other countries to allow for import arrangements, said analyst Kugelman. But this is all preliminary. “For now, coal will remain king in India. And that’s a troubling prospect for the delegates in Paris,” said the India expert.

Pivotal role in COP21

India’s role in the ongoing COP21 talks is seen as pivotal – not least by virtue of its size, stature and emissions record. “India enters this climate summit with such looming development challenges, such capacity for innovation, and on such a growth trajectory that it is an indispensable nation in any meaningful global approach to climate change”, said analyst Livingston.

An agreement without India’s participation would not only be “practically impossible” under the legal structures of the United Nations Framework Convention on Climate Change (UNFCCC) but would also lack credibility, the climate expert added, “The country on pace to becoming the world’s largest emitter in a few decades time simply cannot be left behind,” he said.

India’s role in the Paris climate talks is seen as pivotal

Analyst Saran has a similar view. “India’s role at COP21 is critical. Unless a global agreement takes into account the concerns of one-sixth of humanity, it is destined to end in failure,” he said. Without financial support and technology flows from developed nations it is likely that developing nations such as India will continue to turn to cheap, highly-polluting coal to meet their development needs.

A change in economics?

But experts say that over time, the relative economics of conventional energy and new, clean technologies will change dramatically. A recent study from MIT has shown that we can expect the cost of wind energy to fall by around 25 percent, and solar by around 50 percent, based on anticipated investment, past trends and technology cost floors.

“The implications of this are tremendous – it means that by 2030, both technologies would represent a negative cost of carbon abatement relative to coal in many areas. The logic of climate action would finally be articulated in the crude but compelling logic of economics, and this is a development that India, nor any other nation, could afford to ignore,” said Carnegie expert Livingston.

‘India needs its own share of carbon space to grow’

CLIMATE

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With climate talks underway in Paris, DW talks to expert Samir Saran about the role New Delhi can play in the success of a global deal. Saran says that India’s concerns need to be addressed to yield positive results.

An Indian bystander watches as smoke rises from a cast iron factory at Howrah on the outskirts of Kolkata on July 9, 2008 (Photo: DESHAKALYAN CHOWDHURY/AFP/Getty Images)

DW: What role can India play in the ongoing UN climate summit in Paris (COP21)?

Samir Saran: India is the world’s third largest emitter and those emissions are only likely to grow over the coming decades. India’s population size means that unless a global agreement takes into account India’s concerns, it is destined to end in failure. The success of a global agreement is contingent on Indian participation and engagement.

India is also in the unique position of relating to both the developed and developing world and acting as a bridge between the two. Its arguments of common but differentiated responsibility strike a chord with poor countries vulnerable to climate change and its own poor, who comprise one-third of the global poverty stricken populace.

Saran: ‘The success of a global agreement is contingent on Indian participation and engagement’

On the other hand, its entrepreneurial and industrial classes are throwing their weight behind ambitious action and leadership on climate change, which is increasingly matching that of developed nations, and in some cases even outstripping them.

For example, India spends more of its GDP on renewable power than US, China or Japan. India’s role at the COP21 is critical for these reasons.

How can India ensure that its economic development does not have a negative impact on the environment?

This is a false debate. The dichotomy of development and environmental impact is an orientalist concept. India needs its own fair share of carbon space to grow. There are two ways that can happen: either the west can provide the necessary scale of finance and clean technology that will enable India to rapidly deploy renewable energy to power its development, or, the West needs to drastically cut its emissions to allow for rising Indian emissions in the coming years.

As for what is at stake, we live climate change realities every day in India, whether it is rising air pollution levels in Delhi or floods in Chennai. We are acutely aware of human impact on the environment and its consequences. You won’t find any climate change deniers in India.

Climate impacts are inequitable and India’s poor are the most vulnerable to extreme weather events and natural disasters that are linked to climate change. In India there are three types of victims, those who are victims of poverty, those who are victims of climate change, and those who are victims of both. Developmental plans and economic prosperity has to be safeguarded through adequate adaptation measures and ambitious climate action in the country.

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On a global level, if India’s renewable energy industry takes off and we are able to scale up our clean energy capacity in line with the ambitious targets outlined by the government, it will be an example to the world.

We would be the first country in the world to transition to a middle income economy without having burnt its fair share of coal. That is an example that we can then export to other countries in Africa and Asia and help them along that same path, the benefits of which will be global. So the success of climate action in India is something the world has a stake in, not just Indian citizens. Which is why, receiving adequate support is crucial.

What is New Delhi’s position in the summit? What can government offer, and what does it demand from richer nations?

New Delhi’s position at COP21 is progressive, ambitious and forward looking. For its part, India is undertaking a massive, ambitious program of clean energy expansion, with a target of 175 GW of renewable energy by 2022. To put that number in perspective, India is basically planning to add more renewable energy capacity in the next seven years than Germany has added energy capacity in the previous 200 years of industrialization.

It has launched the Solar Coalition along with France to further push the solar agenda among countries receiving abundant sunshine. India has also committed to reducing the carbon intensity of its economy and to support its adaptation needs through domestic finance. These are significant commitments and arguably we have been more ambitious than is required by the principles of historical responsibility and national capability.

Indian joggers exercise on a smoggy morning near the India Gate monument in New Delhi (Photo: ROBERTO SCHMIDT/AFP/Getty Images)

For a climate agreement to be truly effective however, developed nations need to support finance and technology flows to developing countries such as India. We need support for our clean energy targets and we need support for nuclear power.

Over the next 20 years, India also needs to borrow roughly $1.8 – 1.9 trillion for infrastructure projects. But global financial institutions increasingly don’t want to invest in India’s infrastructure. The West is directing finance away from development to climate. That’s what we have to fight for. We need the West to not stop the 20th Century financing – roads, bridges, power plants – that are badly needed here.

Samir Saran is Senior Research Fellow and also Vice President responsible for Development and Outreach at the New Delhi-based Observer Research Foundation. He specializes in climate policy.

The interview was conducted by Gabriel Domínguez.

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New Room to Manoeuvre: An Indian Approach to Climate Change

Columns/Op-Eds, Energy, Water / Climate

Unbundling the coal-climate equation

October 7, 2015 03:47 IST | Samir Saran and Vivan Sharan, The Hindu

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There is still enough room for India to grow its coal consumption while continuing to accelerate its thrust on the expansion of renewable energy.

Ahead of the Paris climate summit, India announced on October 2 its Intended Nationally Determined Contributions (INDCs) for climate change mitigation and adaptation. India intends to reduce its carbon emissions intensity by 33-35 per cent by 2030, from its 2005 levels. While this commitment has drawn fulsome praise from many, the green ayatollahs have predictably ignored its herculean clean energy ambitions and focussed on Indian dependence on coal. It is time to lay bare the ‘coal hypocrisy’ of these privileged ‘western greens’.

India’s total energy consumption is a fraction of that of China, the U.S., the European Union and the OECD. Its position at the climate change negotiations has continued to reflect the centrality of access to energy for human development. And India’s normative position is supported by data, such as the positive correlation between energy access and the Human Development Index (HDI).

Lifeline energy

While a number of estimates exist on how much energy is needed to meet development objectives (we call it ‘lifeline energy’), an interesting benchmark is that of the 2000-Watt society, based on a Swiss research group’s findings. The research states that 2000-W per capita is a basic level of energy which accounts for housing, mobility, food, consumption (manufactured goods) and infrastructure. In a forthcoming paper for the European Council on Foreign Relations, we argue that if the ‘space’ allocated to India for coal consumption towards fulfilling lifeline energy needs is even nominally equitable, India does not have to compromise on its development and growth aspirations.

On an average, U.S. citizens consume nearly the full extent of this lifeline energy benchmark using coal, the ‘dirty fuel’. India consumes only 19 per cent of the benchmark through coal. In fact, citizens of OECD countries get a much larger proportion of their energy needs relative to the 2000-W benchmark from coal than non-OECD countries.

It is important to note that in 2014, the average Indian accounted for around 20 per cent of the average American’s coal consumption and around 34 per cent of those from the OECD. What has caused concern in the developed world is that while they have reduced per capita coal consumption relative to pre-financial crisis levels, India has increased consumption over the same period. In our analysis, we point out that just as reduced coal consumption of developed countries following the crisis does not necessarily reflect a greater degree of ‘responsibility’ towards the climate, the increase in consumption by India does not reflect ‘irresponsibility’.

This is better explained by two key trends, visible after the crisis. One, while developed countries have been cutting down energy consumption as a whole, developing countries have been increasing consumption, albeit at a gradually declining pace. Two, while developed countries have been cutting coal consumption faster than primary energy consumption, developing countries have increased coal consumption faster than primary energy consumption. Clearly then, industrial consumption (manufacturing and jobs) is very much part of the lifeline consumption matrix for developing countries.

Growth-development link

Many financial institutions such as the U.S. Exim Bank have stopped funding coal-based power generation projects. The World Bank also seems to be following in this direction even though coal consumption has been increasing in developing countries and coal-based energy remains the most practical option of scale. This tendency isolates economic growth from lifeline energy and skirts the central goal of development within growth.

India is neither in the same basket of per capita coal consumption as developed countries nor comparable to China. In fact, we have shown that India will meet a larger proportion of the 2000-W benchmark through ‘clean’ fuels than developed countries. Therefore, there is enough room for India to grow its coal consumption while continuing to accelerate its renewable energy thrust. And this is precisely what the Indian INDCs reflect.

India has set a target of renewable energy capacity of 175 gigawatts by 2022; and has promised to achieve 63 GW of nuclear energy if “supply of fuels is ensured”. It will be among a handful of countries to source a large proportion of its lifeline energy needs from non-conventional sources, across the developing and developed worlds.

It is worth emphasising that unlike developed countries that have already peaked their energy consumption, India must first strive to provide the 2000-W per capita lifeline energy to all, even as it seeks to clean this energy mix. India will continue to consume coal to grow its industrial base, improve HDI and develop its economy. This in turn will allow it the financial capacity to invest heavily in non-conventional sources. The Indian INDCs reflect this enduring paradox; India will need to grow its coal capacity if it is to successfully go green.

Developed countries such as those within the EU want to reduce their emissions to two tonnes per capita by 2050; which will in turn reflect the total carbon ‘space’ available per capita if the world is to limit global warming to manageable levels. While the road to Paris is paved with such good intentions, it is essential that each person on this planet begins to move towards an equitable carbon profile. This has two clear implications.

First, large developing countries such as India must invest in renewable energy benchmarks that match developed countries. Second, developed countries must pare down per capita coal consumptions to levels which would match India’s lifeline consumption through coal in the future.

Simply put, every time a new coal plant comes up in India, one should be shut down in the OECD. If coal use can be substituted by clean sources, then millions of tonnes of coal capacity in EU and the U.S. are low hanging fruits. India uses coal to satisfy less than a fifth of its potential lifeline energy needs, while OECD countries use this ‘nasty’ fuel to satisfy two-thirds of theirs. It is time to meet in the middle. No, we are not suggesting historic responsibility; only the one we jointly shoulder for tomorrow.

(Samir Saran is vice-president and Vivan Sharan is visiting fellow at the Observer Research Foundation, India)

Columns/Op-Eds, Uncategorized, Water / Climate

As communications infrastructure collapses, social media is saving lives in J&K

Published: 20:32 GMT, 9 September 2014, Mail Online India

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Tragedy has struck Kashmir once again.

That it is perhaps the severest since Independence is undeniable.

The human despair, spirit and resolve are all on display, and the entire country (real and virtual) seems affected by nature’s cruel intervention.

The efforts to rescue those stranded are feeble as the institutions, infrastructure and administrative resilience have been found wanting – yet precisely because of this, the courage and heroic efforts of individuals and some organisations stand out in stark contrast.

Floods: The entire country (real and virtual) seems affected by nature’s cruel intervention.

Even as the embankments built in the times of the Maharaja have been breached by ravaging waters, the unfolding tragedy and response is also about the ‘angels or demons’, depending on your take on it – Social Media and the Armed Forces.

A recent report in a leading daily had one of the most powerful men in India, its Home Secretary, observe, “I simply cannot speak to anyone in J&K.”

The last 72 hours have seen the near total collapse of the phone network, and power lines have collapsed. This has complicated coordination and rescue, because stranded people have no way of telling rescue centres of their plight.

Worse still, Delhi is cut off from the Government of J&K, while the Government of J&K is cut off from the army, which is coordinating rescue efforts.

The army is the only body there that has managed to maintain some semblance of intra-organisational communications due to satellite phones. However, it has no way of knowing the location where people are stranded, or how many and how critical their situation is, since the normal method – air reconnaissance – is difficult at best given the cloud cover and weather.

And the much-vilified social media is coming to the rescue. Even as large parts of the mobile communication infrastructure have collapsed, some wireless communication and the traditional wire line communication networks have allowed people access to social media and various messenger services, websites, and some agencies.

To the rescue: Social media has helped save the stranded

It has also allowed a degree of dissemination of situational reports, videos and distress messages, many of which have reached the army.

Whatsapp, FB messenger, Twitter and others are the most potent tools for the rescue teams in the valley today.

As a result what we have is the army using satellite phones to communicate, but basing its rescue efforts significantly on guidance from Whatsapp, Facebook and Twitter.

In that sense these have effectively replaced the search helicopter, the emergency beacon and the communications network of the valley.

For the governments at the Centre and in the state of J&K, which have frequently demonised social media, this must be a moment of revelation.

In February this year, the then Home Minister, Sushil Kumar Shinde, had vowed to “crush social media” to great applause from within his party and some others.

Yet today the home secretary cut a sorry figure, claiming “there is no means to communicate with anybody” till the 15 wireless systems he has sent to be set up in the valley come online.

Social Media, angel or demon? Let the debate begin.

The second story is that of the ‘men in green, blue and white’. Among the nation’s armed forces, they are reviled by a few liberals and a section of those in Kashmir, at the receiving end of Pakistani venom and terror, and frequently derided by the political class in the state and centre.

Yet had it not been for the army’s rescue teams and its “infrastructure of occupation,” as secessionists would call it, how many more lives would have been lost?

At a time when the democratically-elected government of J&K has failed in its civic duties in buttressing the embankments (which they should have known about anyway) and a home ministry that is fumbling in the dark, it is this supposed villain that has come out as the knight in shining armour.

It is this same “infrastructure of occupation” – helipads built on apple orchards, hospitals built on peach orchards and supply dumps built on farm land – that are now being used so effectively to rescue the stranded, treat the wounded, and provide relief supplies to the displaced.

It is this same infrastructure with its bulldozers that is being used to clear roads, and the army trucks that sustain the “occupation” that are being used to ferry in essential supplies for the “occupied”.

Given the police, local government and central government networks failed within the first few hours of the flood and the Doordarshan system which could be used as an emergency communications system also collapsed in this period, it has been the army’s communication systems that have provided the only link between J&K and the rest of the country.

It is the maligned Armed Forces Special Powers Act used to “suppress” Kashmiris, that the army is using to deliver critical supplies to the “occupied”.

And yet vultures who some in Kashmir refer to as “freedom fighters”, would rather support infiltration even at this time, then help their brethren. The IAF, let this debate end.

This is not to say that social media and the deployment of the Armed Forces are always virtuous. The use of social media for malicious purposes is proven. The use of the medium to incite and radicalise is also rampant.

Yet it is a force for good as we saw this past week.

Challenge and vilify the user, do not condemn the tool.

Similarly, the deployment of armed forces has resulted in actions that are highly avoidable. Some of their heavy-handed interventions have resulted in justifiable anger and resentment.

Here again, challenge the political mandate and policy direction from the government, not the army, which remains a force for good.

The writer is vice president at the Observer Research Foundation. His twitter handle is @samirsaran

Columns/Op-Eds, Water / Climate

Calibrating India’s Climate-Change Response

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A street in New Delhi, India with crisscrossing power lines shows one of the dilemmas facing the Indian government in its struggle to provide reliable electricity.
(Stanley Foundation/Amy Bakke)

India and other developing countries have consistently emphasized the notion of equity in the climate-change debate, advocating a “common but differentiated responsibility”—the principle that all states are obligated to address global environmental degradation, but not equally so.

This approach, however, is fast reaching its structural limitation since a number of countries, including some in the G-77 and the Alliance of Small Island States, are indulging Western lobbies that seek to dilute it and have already hinted at accepting a compromise.

Without the full support of developing countries including China, which is clearly distancing itself from the G-77 narrative, India will shortly find itself isolated without enough political weight to continue pushing for the common-but-differentiated approach. It has to rethink its equity-centric narrative without risking being politically outmaneuvered in multilateral discussions.

The narrative will need to be both progressive and inclusive, with a focus on accommodating fundamental realities in the implementation framework of the United Nations Framework Convention on Climate Change (UNFCCC), such as the fast rates of urbanization in the developing world, which will inevitably lead to changes in consumption and production patterns.

India should adopt a fresh approach to better align its domestic and multilateral commitments before 2015, when a large part of the world negotiates a global response to climate change under the auspices of the UNFCCC. Careful calibration by India’s new government, which was elected in May 2014, requires a series of actions: the articulation of a viable normative framework within which to place its climate-change response, the provision of modern commercial energy, enabling efficiency gains in large companies through market mechanisms, and investment in adaptation.

LOW-HANGING FRUIT
Despite a sustained thrust for energy access by previous Indian governments, elaborate planning has unraveled through poor implementation. Around 300 million Indians still do not have access to electricity, and millions more merely have notional access. While the electrification of a number of new areas has proceeded, the quality of electricity—essentially the number of hours in a day that grid power is available—remains highly variable. Moreover, the new government has to enable an energy transition not just to cater to the nominal needs of so-called light-bulb electrification, but also to enhance industrial competitiveness. For this, it will need to relentlessly pursue all viable energy options.

Although India’s energy basket is coal dominated, India does not produce enough of the material to sustain domestic consumption, and even if its development can be accelerated, domestic coal consumption will peak in a couple of decades. In the years ahead, coal imports will add a new degree of fragility to India’s fiscal stability. Even as the government renews attempts to overhaul the coal sector, development of natural gas supply chains—new port infrastructure for liquefied gas as well as pipelines connected to massive gas fields in nearby regions such as West and Central Asia—offers an unparalleled opportunity to scale up power generation. Additionally, unlocking domestic gas potential will also need some bold political leadership as it involves creating market-based pricing mechanisms to attract domestic and foreign investment. Indeed, gas has the potential to become India’s bridge fuel until other alternative energy sources can be mainstreamed.

While gas presents an opportunity for the medium term, reaping the low-hanging fruit must be an immediate priority of the new government. Creating the right market conditions can enable efficiency gains in large companies. Simply through demand-side management, energy consumption in the industrial sector can see efficiency improvements of up to 25 percent. Moreover, greater operational efficiency has virtually unlimited potential. Substantial energy savings are possible if financial-incentive mechanisms that employ market forces and reward such efficiency gains are promoted. Templates for such financial instruments already exist, such as the Bombay Stock Exchange’s GREENEX index, which tracks energy-efficiency performance of listed stocks. There is great equity in ensuring that the big corporations in India achieve energy and resource efficiency levels consistent with global best practices. It will also bolster India’s global position as it seeks equity while engaging with the richer and more-developed countries.

Perhaps the most critical area for India’s response to climate change must be adaptation. It needs to invest in actions against the imminent threats posed by climate change irrespective of how the global discourse progresses. Investments must be made through innovative channels, using a mixture of capacity-building programs, awareness campaigns, traditional solutions, and new technologies. A good example of an appropriate adaptation response would be to look at areas such as the financial engineering of insurance products to protect farmers from erratic weather patterns.

TOWARD 2015
It is already clear that the new government is likely to rely on sustained economic growth as the primary instrument for responding and adapting to climate change. This, of course, has its own set of implications for India’s emissions, which are likely to increase before stabilizing in the long term. The twin objective for the government in New Delhi must be to peak India’s emissions as quickly as possible and to keep the peaking emissions as low as possible.

Therefore, at home, India will largely need to focus on rapidly building up generation capacity, using efficient coal-mining and combustion processes, exploiting opportunities that natural gas offers, and investing in green technologies and efficiency gains. At the global level, India must ensure that the 2015 negotiations do not impede its ability to offer a better life to its people or make the cost of the provision of lifeline services too steep. Both agendas must be pursued simultaneously.

Samir Saran is a senior fellow and vice president at the Observer Research Foundation. He has diverse experience in the Indian private sector and was actively engaged with regulators and policymakers during the 1990s as India undertook economic reforms. Saran held various senior positions at Reliance Industries, India’s largest business conglomerate. An electrical engineer by training, he has a master’s degree from the London School of Economics and Political Science and has been a fellow at the University of Cambridge.

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“Mitigating Carbon Emissions in India: The Case for Green Financial Instruments”

New Delhi, 18th of February 2013
Please find here the link to download the report.

Executive Summary
With the sun gradually setting on the Kyoto Protocol (Phase One), it has become quite apparent that the global response to resource scarcity and climate change is going to be variable and disaggregated. Increasingly, countries and businesses across the globe are adopting various financial mechanisms and policies in order to manage such challenges. However, many such responses are restricted to advanced, developed countries, whereas the effects of climate change and the increasing cost of resources such as fossil fuels are likely to be more severe for developing countries. This dichotomy in response measures needs to be urgently addressed, and this report is an attempt to highlight the benefits of an inclusive growth oriented financial response mechanism with particular focus on India.

In its first chapter the report briefly outlines the relevance of GHG emissions mitigation through in- clusive market based mechanisms in India. With shifting patterns of economic growth and increased global demand volatility companies and investors in emerging economies, such as India, need to rec- ognise the value created through the supply chain of business deliverables by mitigating emissions. Mechanisms which exclude companies that do not meet global benchmarks, whether by way of share- holder advocacy and investment exclusion, or regulatory policies, will have a significant impact on the way that these companies choose to grow.

Low carbon strategies can only be implemented if the emissions landscape and its effects on sustainable growth are clearly defined and understood. The second chapter outlines emissions trends in India in order to map the carbon landscape and set the context for the rest of the discourse. Chapter 3 examines the trends of energy consumption and emissions at a sector specific and firm specific level (within the assessed sector). It is found that firms in the assessed sector (cement) are operating in sub optimal con- ditions, along with a lack of policy frameworks and market based emissions reduction incentives – there are no indigenous market based mechanisms to incentivise and stimulate change.
A firm level case study of one of the bigger private players in the Indian cement sector has revealed that the firm’s financial performance could have been better. At the same time, capacity additions and increased output have caused the total emissions of the company to increase, which is not sufficiently offset by the revenue gains. As a result, the firm’s emissions intensity has been rising consistently for clinker production. However, enhanced use of additives has kept the overall GHG intensity of cement based revenue lower. The average emissions intensity of the company was higher for three years than the sector average for the same period. The high correlation between the firm’s environmental perfor- mance and its financial performance has been highlighted.
The results of chapter 3 are aligned with the philosophy that environmental performance must not be excluded from the range of parameters that are used by investors while choosing a stock, especially a long term investment. This is true since the two concepts are inherently interlinked under the overall aegis of sustainable growth. It highlights the need for developing market based mechanisms to signal investment opportunities based upon carbon efficiency and financial performance, as both tend to complement each other in the medium to long term.

Chapter four concludes that; companies preparing for risk are not risk averse, but rather are risk prepared. The difference is subtle but important. Market based mechanisms which incentivise good performance by channelling investments to firms that respond to risk better than their competitors in a given environment, help investors realise this distinction clearly. For “green” market mechanisms and investment vehicles to be viable and effective, they must efficiently ensure that the transmission mecha- nism works and only performance based, credible signals are relayed to the open markets. This becomes even more important in the context of a developing country due to the nascent capital markets, and urgent need for scaling up sustainability initiatives – both at the firm and policy levels.

Capital generation should not be looked at as the problem. Rather, redirecting existing and planned capital flows from traditional high-carbon to low-emission; resilient investment is the key challenge of financing transition to a low-emission economy. In order to facilitate such transitions, a universally replicable model will be used – a multipronged approach to achieve the above objectives. This would involve creation of innovative financial products based on purely quantitative data, create and publish sector wise and cross sectoral market reports, and facilitate progressive policy advocacy in order to en- able market realisation for its products. It will further seek to replicate the model in other developing countries through a hub and spoke approach to expansion.

Books / Papers, Water / Climate

Samir co-authored “Re-Imagining the Indus”

October 2o11

Observer Research Foundation, New Delhi

Please download the entire report here.

In the News, Water / Climate

Samir Saran in MINT discussion on “Making sense of sustainability”

Mint conclave on the ways to promote sustainability in business

New Delhi, 16th of July 2012

Please find here the original link to the article

New Delhi: Ravi Narain, managing director and chief executive of National Stock Exchange of India Ltd; Rajat Kathuria, economist and in-coming director, Icrier; Sivasubramanian Ramann, executive director of Securities and Exchange Board of India (Sebi); Seema Arora, executive director at CII-ITC Centre of Excellence for Sustainable Development; and Samir Saran, vice-president at Observer Research Foundation, were the panellists who took part in a Mint debate on sustainable development. The panellists discussed the ways to promote sustainability in business. Mint’s deputy managing editor Anil Padmanabhan moderated the discussion. Edited excerpts:

Padmanabhan: Sustainability is not possible without inclusion. Environment has to be seen holistically. Is there a business case for sustainability?

(Left) Ravi Narain, Managing director and CEO, NSE and Seema Arora, Executive director, CIIITC Centre of Excellence. Photos: Pradeep Gaur/Mint

Arora: There is certainly a case for sustainability. As the minister (M. Veerappa Moily) said, it is not that business has to do it for anyone else. Business has to do it for its own survival. And that’s how we advocate it. That’s why mainstreaming sustainability into corporate decision-making. Sustainability here includes social and governance issues. Corporates need to look at it from this lens as well as from long-term perspective. Typically businesses look at it from short-term lens because they are driven by certain rewards they get. For this movement to actually succeed, that reward mechanism has to have a long-term lens. This is what we are trying to do with different stakeholders. Coming back to your question, there is certainly a business case, that is why we see many corporates already doing it. They are creating value for themselves and their stakeholders.

Saran: I am not sure about there being a business case for sustainability because there is no agreement on how we define sustainability. You saw Rio +20, there was no agreement among various nations on what sustainability is. But governance is something that can be measured. We have tried to create a method where we measure energy and emissions. We see these two as a proxy for governance. Any company with good governance will be efficient with its fuel consumption.

Padmanabhan: If we look at the guidelines laid by the (ministry of corporate affairs) ministry, they are more holistic.

Saran: Here again, we have to separate sustainability from social enterprise. If you were to tag your social ventures as corporate social responsibility, CSR, then I think you are confusing the cost of employee with CSR and that’s not right. That’s what most of the companies do. They try to project workforce infrastructure development as giving back to larger society. I think, these two have to be segregated. Up to the 90s, companies were hiding that they were making profit. Because the companies were projecting themselves as not profitable, they didn’t have to do much for others. Post 90s, profit became the mantra and then inclusion didn’t matter. And until 2007-08, it was the mantra. Only in 2009, social inclusion was introduced in the budget by UPA (United Progressive Alliance). The issue is, social transformation and growth are not linked.

From Left to Right: Samir Saran, VP, Observer Research Foundation; Rajat Kathuria, Economist, Icrier and Sivasubramanian Ramann, Executive director, Sebi

Narain: There is a very clear business case, but it is not explicit enough. The so called enlightened businesses see it as a business case, but it is not out there in all our faces. We need to help bring out the cases of successful businesses who managed to see it as a business case and that has the ability to move it forward. There is empirical and anecdotal evidence that companies can get a premium if they are able to demonstrate good governance. It gets fuzzier when you come to non-governance part of sustainability. That’s about markets and investors. The other half is funders. I think the banks need to do a lot more to align their interests with corporates in making a business case.

Padmanabhan: As a regulator, how do you see it?

Ramann: I agree there is a business case in this whole move towards sustainability. If inputs are costed correctly, that is where a company is going to go forward, and make the best of whatever inputs are available and discard the expensive one and take on what is cheaper. We should bring that out more clearly.

Padmanabhan: You mean include the environment and social cost in the price?

Ramann: We are talking about moving ahead, looking clearly ahead at cost, which is real. One good thing that happened was the BSE green index. So, why not put out a simple number on which companies could be graded. That would certainly be good step forward.

Kathuria: One of the classic reasons for market failure has been that the externalities. It is not the inability but the complete dissociation from firms’ point of view to include those costs, those externalities into cost of production, which gives rise to market failure issue. The question is how to get firms to do that. There are two ways, one is voluntarily, or force companies to include those costs and therefore get the desirable results. The world is experimenting with carbon credits and standard for environmental sustainability and jury is still out there. But the problem is market failure and addressing that market failure, culture is also important. Do we have the culture of compliance in our country or not. So getting the firms to do it is a long road ahead. One of the ways in which compliance happens is through a strong institutional structure. Nor are we that sanguine about market any more, that the market is going to lead to the outcomes that are desirable, neither is the world. The way, to get the market to achieve the desirable outcome, is the institution structure that has sound enforcement and the right market incentives.

Padmanabhan: Samir you said growth and social inclusion are delinked at this point of time. Do you think these incentives can be a bridge?

Saran: I am not a believer in carrots. I think sometimes sticks are needed too. Now, I am not saying that should be done. The Greenex is a good way of doing it, you are listing good performers. Then, like Ravi (Narain) mentioned, hopefully we can ensure that funds flow to these performers. What is not happening today is that you are creating institutions and standards, but funds are not necessarily being driven to those performers in that framework. I completely agree with Ravi, unless bankers start backing good performers, good governance and social practices, you are not going to see companies either hurt enough or incentivize enough to change.

Padmanabhan: It is clear that we need incentive structure. Now the big debate is whether you follow stick approach or a carrot approach.

Arora: In our country pressures and dilemmas are completely different at the moment. I don’t think we can say that this is the only route by which we will get the results we really want. Also, culture has to play a major role here in a way we change the behaviour and the way industry responds to certain things. There is certainly a case in providing some kind of incentives for good performances. They could be different types of incentives, market-based incentives, financial incentives or recognitional incentives, we can start and experiment with. The important point is the entire ecosystem at this moment is rewarding corporate performance on quarterly performance. If that is going to be the main metrics, then obviously the ecosystem is not rewarding anything else the corporates do in terms of value creation on sustainability. So, the system has to work together to make that happen. We need to bring consumers on to the table. We need to have mix of incentives and gradually move to disincentives. But we are not mature enough to start immediately with it.

Ravi: Can we ask every institutional investors to put out in public domain what their assessment is for each corporate they have invested in, on their ESG (Environment, Social and Corporate) view, ESG action and sustainability.

Padmanabhan: Raman, as a regulator, can the disclosure be expanded to include these?

Raman: Most certainly. The facts is the initiative of ministry of corporate affairs has given the way forward for regulators like us. And it is something that is probably going to come out soon on how to get companies to make better disclosures. It is active work in progress, be it a listing agreement or any other form, the companies will be bound legally to bring out disclosure with regards to ESG.

Padmanabhan: What can be the collaborative mechanism that can be put in place, which will incentivise whether through carrot or stick, or its combination.

Rajat: It can’t be either carrot or stick approach. It has to be both. What works better is a carrot approach. A stick approach would work well in trying to establish culture of compliance if you have credible enforcement. Unless you are going to be able to enforce standards on whether environment or carbon, the stick approach is going to be difficult. But it can’t be either-or approach. Some good case studies show that carrot approach is a good approach, but a stick, enforcement and penalizing the non compliers is going to create compliance culture in the future.

moulishree.s@livemint.com

Columns/Op-Eds, Water / Climate

Column in DNA INDIA: “Climate change meets global hypocrisy”

by Samir Saran and Vivan Sharan
Mumbai, 2nd of July 2012
Please find here the link to the original article

And so the saga concludes. A tired, weather-beaten group of States have retreated from Rio de Janeiro after a half-hearted attempt to rescue the world from a host of unsolved problems including climate change and unsustainable development. What unfolded was largely predictable. The Rio+20 declaration, ‘The Future We Want,’ is punctuated with old rhetoric around action and responsibility, laden with sweet murmurings on change, some affectionate recognition of imminent apocalypse and defined by absence of commitment.

The highly contested Kyoto Protocol remains the last substantial effort at the global level on environment. With developed countries lacking resolve to agree and/or act to achieve the set of common goals at the recent Durban Summit, and now, at Rio+20, it is becoming clear that global action is illusory, utopian and certainly less efficient.

It is ironic that at the same time as we dither on committing finance and technology to save the Earth, nations have, with great alacrity and commitment, pumped in trillions of dollars in concert to save wanton banks and financial entities that have failed to meet even basic regulatory and supervisory norms. The US alone has doled out $1.5 trillion to save its financial institutions following the financial crisis created by the same entities, while the developed world collectively put forth around $3 trillion for the same.

In stark contrast, the mightiest leaders of the world gathered at Copenhagen nearly three years ago and pledged, very proudly, a meagre $100 billion a year from 2020 as a collective financial response to climate change. A commitment to provide ‘new and additional’ resources approaching $30 billion for 2010-2012 was also made as part of a ‘fast start’ process. As of now, the fund has still not been capitalised and even the physical location where the fund will be hosted remains uncertain.

The message for Joe the plumber and the aam admi is unambiguous. Saving the banks is a multi-trillion dollar effort requiring action today. Saving the planet will cost only a fraction and can wait for 10 years. So it is hardly surprising when surveys reveal significant decline in interest on matters climate.

And the hypocrisy continues. Most recently, at the G20 Summit at Mexico, BRICS nations, including India, collectively pledged $75 billion through the IMF, to save the failing Eurozone economy from imminent collapse. That developing nations’ policymakers and economists rely on the unsustainable consumption of the western economies for their own obsession with perverse growth makes us willing accomplices. India, Russia, Brazil, South Africa, China are no victims, they just seem eager to sustain the lifestyles of the rich. Lifestyle emissions today account for nearly two thirds of total emissions.

According to the seminal Stern Review on ‘The Economics of Climate Change,’ global atmospheric levels of carbon dioxide equivalent gases must stabilise in the range 450-550 parts per million (ppm) by 2050. Anything higher would ‘substantially increase risks of very harmful impacts.’ Arctic monitoring stations reported this year that the concentration of these gases has already reached 400 ppm and the global average is predicted to reach this level in a few years (2016).

Developed countries currently occupy approximately 80% of the greenhouse gas (carbon) stocks. Developing countries like India need room to grow and per capita energy consumption will have to rise to enable this economic growth and development. Even to rise above the energy poverty level prescribed by the UN, India and Africa will need to increase their energy production by at least three times.

Carbon space will be a natural requirement. This space is now being denied. Hypocrisy becomes malafide now.
The alchemists of capitalism have turned the sparse carbon into ‘carbon real estate,’ available for sale to the highest bidder. The weak and poor have been priced out. And at the G20, we have just offered to subsidise the rich to buy more.
The core issue of equity still eludes all debates and was missing at Rio+20 as well. Mitigation commitments being discussed are just not enough; they are deceitful as they undermine the sovereign rights of other nations. Developed countries will need to vacate their holding of carbon stocks.

One sixth of humanity cannot continue to hold 80% of the total carbon space that is available if western science is to be believed. This is what needs to be negotiated. The time lines and specific action by which these countries have carbon negative footprints must be sought.

It is unfortunate at the very least, if not downright conspiratorial, that countries like China and India have not been able to see through the haze created by the multilateral discourse and identify the real priority: to evict the developed countries who are squatting on carbon real estate that does not belong to them rather than negotiating the partaking of what is left.

Samir Saran is a vice president and Vivan Sharan an associate fellow at the Observer Research Foundation, New Delhi.