Energy, Environment, Writing

The Geopolitics of Energy Transition: A Guide for Policymakers, Executives, and Investors

This report was co-authored with Dr. Alexis Crow

As the price of natural gas reached record highs in the UK and Europe—trading at the equivalent of $200 per barrel of oil,[1] and as economic activity in China has been curtailed by the country’s power supply crunch, central bankers and policymakers from across the globe are forced to confront significant challenges to price stability, with a focus on shielding households and businesses from an increase to the cost of transport and basic goods, while monitoring the potential for price pressure and supply chain bottlenecks to upend the global economic recovery. This is important at this time, for the ripple effects of disruptions to energy markets could amplify social and political fissures that are visible across the global landscape, and which might portend complex domestic politics as many countries head into elections in 2022.

Surging demand for natural gas—and shortages and bottlenecks to supply—have resulted in a corollary demand for oil products (referred to as gas-to-oil switching), thus driving up the price of WTI crude to seven-year highs.[2] The skyrocketing commodity price environment has led one observer to point to the “revenge of the old economy”, according to which the collective noble efforts to move toward a cleaner, greener future fuelled by renewable energy have been stymied by a recent past of inadequate investment into the capacity and infrastructure of the hydrocarbons that power our economies.[3]

Thus, even as COP26 has drawn to a close, and as policymakers, business leaders, and investors have left Glasgow with firm commitments to ostensibly advance the decarbonisation agenda, we are reminded of the extent to which our entire energy infrastructure still hinges upon the use of fossil fuels. This includes oil used for transport or power generation, or natural gas (or coal) for power generation, as well as natural gas deployed as “bridge fuel” to support the growth of renewable energy, including wind, solar, and hydrogen. This is effectively captured by what transpired in Germany earlier this year. In the first six months of 2021, the country increased its coal-based generation, which contributed 27 percent of the country’s electricity demand.[4] The need to resort to coal-fired power generation is not unique to the case of Germany: the US has also posted the first annual increase in coal use for power generation since 2014.[1] The combination of an asynchronous economic recovery, attendant shocks to demand, curtailments of supply, and surging prices in natural gas are contributing factors to rich income countries’ pivoting toward the use of coal. This illustrates one stark reality: hydrocarbons continue to underpin our  global energy infrastructure.[5] For all the talk of “stranded assets” and potential “dinosaurs of investment”,[6] hydrocarbons still compose the lion’s share of energy consumption on a global basis.[7]

What are the lessons to be learned from the recent power crunches? And what are the potential macro, socio-economic, and geopolitical implications as we navigate the energy transition? Amidst so much uncertainty and volatility, where are the opportunities for accord, as well as bright spots for investment?

Humility is also requisite as governments confront their energy interdependence with one another: again, despite record growth in renewable energy capacity,[8] and surging climate financing, countries within the European Union are poignantly aware of their dependence upon natural gas imports—whether from Russia, Norway, or the US. And even despite its own domestic shale and conventional oil and gas production, the US continues to import hydrocarbons from countries such as Canada, Colombia, and Saudi Arabia. Similarly, even despite trade tensions, resource ties still bind China with Australia, with the latter having exported a record volume of natural gas to China in 2020.[9] Thus, geopolitics remains at the very heart of the changing energy landscape. The inverse is also entirely true.

In the past, resource ties have been a source of tension; but, as we shall see, such bonds also have the potential to become a geopolitical salve, provided that the relationship is designed to be mutually beneficial to both parties. As we navigate the path toward net zero, and by seeking balance and diversification, our continued energy interdependence can actually spur opportunities for cooperation amongst policymakers, and for long-term investment and profit generation for enterprises and economies around the world.

Geopolitics and fossil fuels: tension and salve

The quest for resources to fuel industrial growth, military campaigns, and transport and urbanisation lies at the very heart of geopolitics. In considering the relationship between energy and geopolitics, the existence of resources is often associated with tension, be it in the form of border disputes, armed conflict, trade disputes resulting in embargoes, or interstate conflict or war. Access to strategic reserves of coal in Romania was a pivotal part of the campaign on the Western front during the Second World War. During the 1970s, energy-importing countries experienced the oil shocks related to the OPEC crises in the wake of the Arab-Israeli War, the Yom Kippur War, and the Iranian Revolution.[10] Indeed, research shows that if a resource-rich country has an endowment of oil along its border with an “oil-less” country, then the probability of conflict between these two countries is higher than if there were no oil at all.[11] Recent data also indicates that the presence of onshore oil might even portend a higher rate of conflict than the presence of offshore oil, as the potential for production and output to be seized by rebel groups is far higher on land than it is in deep-sea projects.[12]

And yet, while asymmetric access to resources might spur tensions between countries, it can also be a geopolitical salve, by underpinning ties of trade, development, and civic diplomacy and even employment. Japan’s quest for resources to fuel its extraordinary manufacturing era from the 1960s onwards resulted in a mutual export of ODA (overseas development assistance) to southeast Asian countries such as Vietnam. One might also argue that Israel’s relatively recent discoveries of natural gas—and successive exports to Egypt—have also underpinned a normalisation of relations with Cairo, — a diplomatic rebalancing which has also been a key facet of improving relations between Israel and the UAE. 

A crude awakening: our enduring energy interdependence, and continued reliance upon fossil fuels

Such positive examples of resource ties are swiftly forgotten in times of crises. The underlying conditions that led to positive benefits to the political relationship in these two instances are also ignored. And so it is with the present power crunches ricocheting across the globe. With the asynchronous reopenings of economies in the wake of the COVID-19 pandemic—and amidst ongoing disruptions to supply (be it from underinvestment in hydrocarbons, weather-related events such as flooding, pandemic-induced stoppages to production, or port congestion)— we are reminded not only the extent to which our economies depend upon fossil fuels for power generation and for transport, but also, of the extent to which many countries remain deeply interlinked in patterns of energy interdependence.

The European dilemma regarding natural gas supply from the Russian Federation is instructive, but it must also be recognised that energy interdependence cuts both ways. As long as Russian gas is a competitive source for energy, then energy-hungry European manufacturing powers will need to engage with the leadership in Moscow; equally, as long as Europe has access to alternative sources of fossil fuels – even if not as cheap – Russia will need to retain an understanding of European red lines. This is what interdependence means. This insight is equally applicable to the energy interconnections of the future: China can be a useful partner in the energy transition, even if it is not the only one.

Indeed, for some policymakers, part of the allure of developing domestic renewable energy capacity was that it ostensibly would lead toward more enhanced energy independence. Ostensibly, extraordinary efforts in diplomacy might not be needed in such a green future, as countries would, in theory, no longer be reliant upon conflict-ridden territories to secure energy supply. Even in a net-zero future, this is perhaps to view the world through rose-coloured glasses: for the development of wind, solar, and hydrogen energy—or indeed techniques of greater energy efficiency—at an affordable cost is intrinsically related with garnering supplies, inputs, R&D, and human capital from different jurisdictions. Overly halcyon scenario-planning for domestic renewable energy capacity development often fails to incorporate these facts.

The shift from fossil fuel-based to renewable energy capacity does not end interdependence; it merely pushes interdependence to a different part of the energy mix. The dependence now shifts from hydrocarbons to metals and from ores to rare earths. Countries in Africa, Asia, Americas and Australia are likely to emerge as global mineral hubs, and the routes to ship these new commodities might pave new geostrategic highways.

In recent years, control over the production of rare earths has become a familiar site for geopolitical tension. In 2021, the Biden administration in the United States ordered a review of the country’s critical mineral supply chain; the recommendations included prioritising development financing for “international investments in projects that will increase production capacity for critical products, including critical minerals”.[13] The administration’s concern is readily understandable, as shown in Table 1.

Table 1: China’s share in the rare earths supply chain

Source:World Mining Data,

*Disaggregated data for neodymium was not available; the data for Rare Earth Concentrates (REO) has been used since neodymium is a rare earth metal.

Yet it is not just production of rare earths that will be relevant, but also the locations of their processing and other forms of value addition. These might emerge as the equivalent of present-day refineries and petroleum complexes, and their distribution potential linked to key consumption centres might lead to the birth of new geostrategic lynchpins such as the Straits of Malacca and of Hormuz. The notion that domestic renewable energy production would free countries from the intricacies of dependence is misguided – and a seminal mistake if it was to be the basis of new energy order.

Sunset on Malthus?

Part of the reason why the aspiration of energy independence retains its sheen is that our energy economics and policymaking continues to be suffused with a Malthusian legacy.[14] Said another way, the spectre of scarcity continues to inform the way we think about energy and resources. The fear that “there will never be enough” renders misgivings about dependence—or else outright denial. A sense of energy insecurity –no matter how much it is brushed under the rug might also prompt a premature and imprudent vaunt into a disorderly energy transition, with a disproportionate focus on bolstering capacity at home. Such a policy would have little regard for the fact that climate change has been branded as humanity’s largest negative externality: in order to mitigate the situation, global actions ought to be in concert. Humility is thus needed not only in recognising the endurance of hydrocarbons within the energy mix, but also, but it is also implicit in our interconnectedness as we navigate the green transition. For the rich income countries, part of this humility also requires understanding the various ways in which the energy transition has the potential to deepen the chasm between the ‘haves’ and the ‘have nots’.

The haves and the have-nots: is the energy transition deepening the chasm?

The energy transition has the potential to create a deeper chasm between the standings of the ‘haves’ and the ‘have nots’ in the global macroeconomic environment. First, if we consider the traditional trajectory of industrial growth—that is, from agrarian activity to textile production, and then from heavy industry to light manufacturing, eventually segueing to services-oriented economies—the case can be made that for developing countries earlier on the maturity curve (such as Vietnam and India), stringent measures toward decarbonisation might actually thwart what would otherwise unfold as a full evolution of robust domestic industry. For the ‘price takers’ and for commodity-hungry countries, this might take the shape of premature restrictions on access to or use of resources to fuel domestic manufacturing activity.

And for the ‘price makers’—that is, commodity-rich exporting countries—the case can also be made that swift or unrealistic moves toward decarbonisation might rob oil and gas exporters from a significant base of output as well as a source of gross national income. In a country in which resource wealth underpins GDP, export activity, employment (both directly related to exploration, extraction and production of natural resources, as well as indirectly, via civil service salaries), national income, and sovereign and pension funds, the potential for social fissures to either manifest or to be exacerbated is clear.

It should be noted that history indicates that access or proximity to natural resources is not perfectly correlated with a trajectory of sustainable economic growth—hence the “Dutch resource curse”. Research from Brazil also indicates that oil endowments within a province or a municipality do not necessarily result in improved livelihoods for members of that community.[15] Indeed, even in a lofty commodity price environment, such as at present, windfalls potentially reaped from higher export prices of oil and gas do not always translate into higher incomes for households within the exporting country.[16]

This tension between environmental and the development agendas within emerging markets and developed economies (EMDEs) is also evident in the debate surrounding the potential carbon border adjustment tax (CBAT), as well as recent agreements on deforestation in COP26. 

Home game: mitigating the domestic bias of climate finance

An effective, secure energy transition is currently undermined by the “domestic preference” evident within the realm of climate finance. In recent years of tracking climate finance flows, data from one leading industry body evidences that 76 percent of capital is invested in the same country in which it is sourced.[17] Thus, despite various commitments and guarantees from bodies such as the G7 or the G20, a significant challenge remains regarding the ability for much-needed climate finance to cross borders.[18] Certainly, a long-running trend of a domestic bias for investment is not limited to climate and infrastructure investments. Rather, it extends across sectors and asset classes, including real estate, energy, private equity, and venture capital. Whilst managing ‘sticky capital’ and the prospect of generating long-term returns, and building up enterprise and asset values, investors might harbor an inclination to place their money close to home—in other words, “where home-country risks are well-understood.”[19]

As these authors have highlighted previously, playing close to home in infrastructure investing may not always be the least risky option.[20] And yet, we have already motioned that the dawning age of renewables is not one of energy independence, but of a new kind of interdependence. Policymakers operating under the illusion of energy sovereignty are otherwise missing out on the opportunity to cultivate positive structures of interdependence which could potentially support their own geo-strategic aims – such links, might, in turn, spur opportunities for private investment.

Thus, we might witness a shift in incentivisation for private finance and the climate problem: such that sticky capital not only supplies the domestic market, but that it is directed outwards as well, perhaps even towards the geographies where host countries of finance might find mutually beneficial resource ties – such as the model of Japan and ODA in Southeast Asia, discussed earlier. As argued above, interdependence can be a salve for geopolitics as long as both sides gain in the energy or in the development equation. Such a value exchange – or what Michael Oakeshott refers to as an “enterprise association” – rests upon an understanding of interdependence – again, something that has been jettisoned in the lack of humility in the energy transition (something which is mirrored in the “domestic bias” of climate capital).

Such misconceptions have the potential to divert policymakers from a future of true sustainability, which involves the creation of resilience through diversification. Redirecting long-term flows of investment—including private capital—towards emerging market/developing economies will not necessarily be easy. Large sources of private capital in the global north – whether institutional capital or banks – will need a fresh set of incentives to invest in the energy supply chains of the future.[21]

Moreover, recognising that these investments will likely be in new minerals, new processes, and new geographies, it is clear that old regulatory risk models may no longer be suitable. New market mechanisms to help enable a level playing field of investment in new energy materials are needed—which might take inspiration from the industry bodies which have developed over time in support of oil markets around the globe.

Conclusion: The Green Marshall Plan

The scale of the rebalancing required – of investment, attention, and financial flows – is vast. If anything, it should be compared to the Marshall Plan. That enormous effort, after all, had both pragmatic and idealistic motivations. On the one hand, it was necessary to assist a Europe devastated by war; on the other, it was essential that a liberal community be built that was strong and resilient in the face of the Soviet challenge. There are similar overlaps today between the realist search for security and the idealist requirements of climate action. A Green Marshall Plan has the potential to both stabilise international relations and create the diversification and resilience necessary to allow for durable interdependence during the energy transition. 

For the energy transition to act as a geopolitical salve rather than as a source of discord, a Green Marshall Plan must have four characteristics.

First, it should be genuinely global in character. A global net-zero approach would understand that some regions might take longer on the fossil fuel transition because of the specifics of their development or their energy landscape. Nor should geographical factors be ignored: An archipelago like Indonesia will take longer to transition to solar energy and away from natural gas than a continental country.

Second, legacy energy infrastructure will need attention to help enable the success of the Green Marshall Plan, to make it implementable, and to scale it. As is evident in energy consumption patterns across the globe, fossil fuels remain a part of the energy mix, and a way of working toward a balanced and global green transition. Nor can sectors like mining be ignored: the Green Marshall Plan will likely have to go into a “dirty” sector, invest in new ways of mining and new materials to mine.

Third, the Green Marshall Plan is not just about blue-sky research into the possibilities of the future. It is about increasing investment in nuts-and-bolts manufacturing in underserved geographies as well – whether energy efficiency in the Asian steel producers of the future or new cobalt mining technologies in sub-Saharan Africa today. It is about enabling development of critical frontier technologies, as well as swiftly and sustainably spreading a green ‘know-how’ which is globally benchmarked.

And fourth, the Green Marshall Plan should embed energy resilience at its heart. Areas which have sped up their energy transition are those where it is seen as assisting in energy security. As these authors argued, dependence on a single source or vendor is antithetical to achieving long-term and sustainable energy security. As such, the strategic mapping of a secure energy future cannot exclude a China, with its strong presence in the rare earths supply chain, or a Russia with reserves of natural gas, or the countries of the Gulf, abundant in oil and gas reserves. Again, humility as well as diversification might render each actor a more responsible and empathetic participant in the global energy transition.

What we are recommending is an all-inclusive future. That will require the leaders of key nations to invest political capital in a new institutional framework that supports the energy landscape of the future. The International Energy Agency, OPEC, commodity exchanges and others defined and shaped the hydrocarbon world. The global energy transition requires new frameworks, organisations and political arrangements to underwrite our common journey ahead, which reflect the needs of multiple stakeholders, in both the private and public spheres. The G7’s B3W, the European Union’s Global Gateway, and the Indo-French International Solar Alliance all point to one imperative: of green arrangements underwriting green transitions. The world needs a new institutional structure: one that keeps the lights on in the 21st century.

Endnotes

[1] Today in Energy; Annual U.S. coal-fired electricity generation will increase for the first time since 2014.

[1] David Sheppard and Tommy Stubbington, “Record gas prices hit bonds as investors fear wider damage,” Financial Times, October 6, 2021.

[2] Stephanie Kelly, “Oil prices reach multi-year highs on tight supply,” Reuters, October 26, 2021.

[3] Jeff Currie, “The revenge of the old economy,” Financial Times, October 21, 2021.

[4] “Germany: Coal tops wind as primary electricity source,” DW, October 13, 2021.

[5] See also, Vivan Sharan and Samir Saran, “India’s Coal Transition: A Market Case for Decarbonisation,” ORF Issue Brief No. 505, November 2021, Observer Research Foundation.

[6] Steve Fuller, “Are fossil fuel companies a dinosaur of an investment?” Ellsworth American, February 14, 2015.

[7] “Statistical Review of World Energy,” 70th Edition, 2021, p. 12.

[8] Elizabeth Ingram, “World adds record new renewable energy capacity in 2020,” Renewable Energy World, June 4, 2021.

[9] Damon Evans, “Australian LNG exports to China hit record,” Energy Voice, August 8, 2021.

[10] Daniel Yergin, The Prize: The Epic Quest for Oil, Money & Power (US: Simon & Schuster, 1990).

[11] Francesco Caselli, Massimo Morelli and Dominic Rohner, “Asymmetric oil: Fuel for conflict,” VOX EU, July 19, 2013.

[12] Andrea Tesei, Jørgen Juel Andersen and Frode Martin Nordvik, “Oil price shocks and conflict escalation: Location matters,” VOX EU, October 26, 2021.

[13] “FACT SHEET: Biden-⁠Harris Administration Announces Supply Chain Disruptions Task Force to Address Short-Term Supply Chain Discontinuities,” The White House Statements and Releases, June 8, 2021.

[14] For an excellent discussion of how Malthus continues to cast a long shadow on economics in advanced economies, see J.K. Galbraith, The Affluent Society (US: Houghton Mifflin, 1958).

[15] Francesco Caselli and Guy Michaels, “Oil windfalls and living standards: New evidence from Brazil,” VOX EU, January 20, 2010.

[16] Bryan Harris, “Brazil’s GDP surges back to pre-pandemic levels,” Financial Times, June 1, 2021.

[17] CPI 2019, 2020, 2021.

[18] Sophie Yeo, “Where climate cash is flowing and why it’s not enough,” Nature, September 17, 2019.

[19] Barbara Buchner, Alex Clark, Angela Falconer et al., “Global Landscape of Climate Finance 2019,” Climate Policy Initiative, November 2019.

[20] Alexis Crow and Samir Saran, “Geopolitics and investment in emerging markets after COVID-19,” World Economic Forum, September 25, 2020.

[21] IANS, “Modi’s supply chain mantra: trusted source, transparency and time frame,” Business Standard, November 1, 2021.

Standard
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.

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Research, Uncategorized, Writing

Enough Sermons on Climate, It’s Time for ‘Just’ Action

As Britain readies to host the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in November this year, there is a concerted effort to push countries towards publicly endorsing and adopting ‘Net Zero’—a carbon neutral emission norm—as policy. This is a demand for an inflexible, near-impossible, time-bound agenda to achieve what is no doubt a noble goal. And, as is often the case with climate-related issues, the nobility of intent is at risk of being overwhelmed by sanctimonious hectoring that raises hackles instead of ensuring meaningful participation.

On 3rd March, UN Secretary-General Antonio Guterres took to Twitter to call on governments, private companies and local authorities to immediately initiate three measures to mitigate climate change: Cancel all coal projects in the pipeline; end coal plant financing and invest only in renewable energy; and, jumpstart a global effort to a ‘just transition’ from carbon to non-carbon energy sources.

On the face of it, this was an unexceptionable call from the high priest of the UN to the global laity to rise in support of an important cause. But if we were to scratch the surface of the Secretary-General’s words, we would see that his call was little more than virtue-signalling.

For, there is nothing ‘just’ about the transition that he has sought without delay. Implicit in his call is the immoral proposition to disregard poverty, despair and the yawning development deficit between nations as he places them all on the same plane. Inherent in this approach is the unedifying complicity of global institutions in foisting an arrangement founded in the belief that the poor in the developing world should underwrite the climate mitigation strategy of the developed world. The climate high priests need to realise that depriving the world’s poorest of their aspirations can never be ‘just’ climate action. It can be convenient and, hence, it has much appeal in many quarters.

The climate high priests need to realise that depriving the world’s poorest of their aspirations can never be ‘just’ climate action. It can be convenient and, hence, it has much appeal in many quarters

An Alternative Script

A waffle-free alternative script for those given to sermonising to the world would focus on three other aspects that may actually lead to faster transitions and more justice. First, an impassioned call to those who control capital—managers of pension, insurance and other funds—to ensure larger amounts of money leave the country of origin and flow to countries of deficit for building sustainable, climate resilient infrastructure of the future. The Climate Policy Initiative has calculated that less than a quarter of climate finance flows across national boundaries; in other words, the overwhelming majority of climate finance is raised for domestic projects. The states expected to disproportionately do more to battle climate change are located in Asia, Africa and Latin America. Yet, they are inadequately funded and financed and cost of capital in these places dampens the scope of action. It would be stressing the obvious to say that the frontline states cannot be expected to engage in this battle without adequate inflow of climate capital at the right price for climate action.

Second, the assessors of risk—the intractable credit rating agencies, the cash-rich central banks and the big boys of New York, London and Paris—who decide how much capital should flow in which direction, should be called upon to recalibrate their risk assessment mechanism. Let it be said, and said bluntly, that objective ‘climate risk’ outweighs subjective ‘political risk’ which prevents the flow of capital to key climate action geographies. Risk must be reassessed objectively. Till then, the highfalutin sermons of the Pontiffs of Climate would be mere lip service, which none among the Climate Laity would bother to take seriously.

Third, and, perhaps, the most ‘just’ proposition the Secretary-General could make, would be a moral directive to all Western nations to shut down coal plants and fossil fuel- based enterprises immediately and entirely abandon carbon-fuelled energy for any purpose. After all, green energy sources need room to grow and space to mature and the OECD nations must allow this at warp speed. It is farcical to deny coal plants to countries that are still struggling to claw their way up the development ladder and demand that they turn carbon neutral while thousands of units and homes belch and blow climate emissions every day in rich economies. What is good for the rich cannot be bad for the poor.

Rich countries have failed to reduce their share of fossil fuel emissions. CSEP’s Rahul Tongia has calculated that the top emitting countries in terms of per capita emissions (nations above the global average emissions) still account for about 80 per cent of global Fossil CO2.  He further explains that the absolute emissions of these countries are rising even when measured in 2019. The rich took more than their fair share historically, and are still doing so. Any ‘Just Transition’ must involve evicting the squatters occupying carbon space to the detriment of others. Buying this space from the poorer is not ‘just’; it is another perverse business model based on extraction and mercantilism of centuries past.

Any ‘Just Transition’ must involve evicting the squatters occupying carbon space to the detriment of others. Buying this space from the poorer is not ‘just’; it is another perverse business model based on extraction and mercantilism of centuries past

In the run-up to COP26 at Glasgow, we are witnessing a new passion play of countries making a dramatic show of embracing the idea of Net Zero economies in the coming decades. The script of this passion play draws on starkly evocative narratives that seek to catalyse action through theatrical terms such as ‘climate emergency’. From appropriating the voice of the powerless to acquire legitimacy and crafting compelling narratives through a new cohort of well-funded ambassadors to push the envelope on climate change policy approaches, we are seeing varied actors engaging with climate issues in different ways. These different efforts have a common design, the economic objective of socialising the cost of climate action and making the poor carry the can for the rich.

That said, some facts are irrefutable. The last decade has been the warmest in recorded human history and its effects are visible to all. In February this year, an iceberg larger than New York City broke off the frozen Antarctic  and my just be a prelude to what lies ahead. Indeed, the possibility of the Arctic turning into a benign waterway in the near future can no longer be ruled out. It would require extraordinary un-intelligence to argue that global warming and its fallout can be mitigated by business-as-usual decision-making. But even as there is trans-world consensus on climate change and its impact, many would and must disagree on the proposed burden-sharing and distribution of responsibilities as we respond as a collective.

The India Imperative

India will be significantly affected by climate change in the coming decades. It is already feeling the heat and is combatting challenges from its mountains to its coasts due to shifting weather cycles and changing climate. It needs clearheaded policies, backed by political will, on this single most important issue that will impact its growth, its stability and the very integrity of its geography comprising a multitude of topographies.

This is happening at a moment when India is poised to exit the low-income orbit and take off on a trajectory towards becoming a middle-income country. Its journey from a US $3 trillion economy to a US $10 trillion economy coincides with ongoing climate action, polarising climate debate and climate-impacted economics. India can neither isolate itself from this reality, nor can it be reticent or timid in making its choices known to the world. India cannot be a receiver of decisions made elsewhere; it has to be on the high table, co-authoring decisions implicating its future.

For India, the moment offers three opportunities in these challenging times. First, India has to prepare itself through its policies, politics and internal rearrangements to seize and realise the single biggest global opportunity of leading a global effort to mitigate emissions of the future. The IEA, in its India Energy Outlook 2021 Report, estimates that India’s emissions could rise as much as 50 percent by 2040—the largest of any country, in which case India would trail behind only China in terms carbon dioxide emissions. This need not happen and is an opportunity for India and the World.

India must grab this chance to lower its future emissions through the right investments, technologies and global partnerships. The developed world, too, must make a matching response: Just like the Marshall Plan invested billions to rebuild post-War Europe with Germany at its heart, a new age Climate Marshall Plan must see India at its core. India must prepare and offer itself as the single biggest climate mitigation opportunity for the world and the most important green investment destination.

The developed world, too, must make a matching response: Just like the Marshall Plan invested billions to rebuild post-War Europe with Germany at its heart, a new age Climate Marshall Plan must see India at its core

Second, neither the world nor India should forget the dictum that on climate, India solves for the world. The solutions that India experiments with and implements successfully will be fit to be repurposed for other developing countries with similar geo-topographical conditions and economic sensitivities. Many of them are frontline countries in the climate battle.

India can and must become the hub of climate action for this decade and beyond, offering services, technology and infrastructure through climate supply chains that span the developing world. The International Solar Alliance is just a modest beginning. The future holds multiple opportunities. The country must lead the charge through building financial institutions that will support and sustain green transitions and helping create green workforces fit for purpose for the coming decades, amongst others.

Third, as India celebrates 75 years of its independence in 2022 and leads the G20 in 2023, it has the chance to make its most significant identity shift. India moved from being a British colonial state to a free nation in 1947, and then moved from being perceived as a land of snake-charmers to becoming an internationally acknowledged technology hub at the turn of the century. This decade offers the chance for it to emerge first as aUS $5 trillion and then as aUS $10 trillion economy that will be green and low carbon in its evolution – the first large green economy of the fourth industrial revolution.

India’s expectations from Glasgow COP26 should be uncluttered—its single purpose must be to catalyse global flows and investments to India and other emerging economies. If India fails to attract investments, the markets will clearly have not signed on to the climate agenda. In this effort, India needs a leg-up from the Climate Pontiffs.

Perpetuation of global poverty and low incomes cannot be the rich world’s climate mitigation strategy. ‘Net Zero’ should not seek this end state. On the contrary, investing in the emerging world’s green transition is the only way to build a ‘just’ world. The UN Secretary-General could help ensure that the largest pool of new money flows to where the climate battle will be fought—in India and in the emerging world. That would be a just transition and an efficient one.

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Uncategorized

India — Re-Energized

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

{photo_credit}

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

November 12, 2015 | Michael Shellenberger

Original line is here


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

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

Where are Indians when it comes to energy for development?

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

Do Indians view climate as the biggest environmental concern?

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

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

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

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

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

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

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

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

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

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

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

Can’t the Indian government finance the infrastructure itself?

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

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

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

What about private investors?

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

Can’t India borrow from China?

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

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

What should India do?

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

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

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

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

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

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

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

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

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

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

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

Can’t you do more natural gas?

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

What about nuclear?

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

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

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


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Uncategorized

Indian exceptionalism and realistic responses to climate change

10 September 2015 12:00PM, the interpreter

Original link is here

Climate Change  Pic

At a discussion in Washington DC this spring, I was quizzed with a degree of annoyance on the multiple messages coming out of New Delhi with respect to India’s position on a global agreement to combat climate change. In the same discussion there was also an exasperated inquisition on why Indian needs and priorities must hold the world to ransom (as if there were a consensus) and why India imagines that it merits a special space, attention or exception in the climate arena.

The response to these two central propositions on India and climate change must of course come from the officialdom at Raisina Hills, home to Delhi’s executive offices. However, as we move down the road to COP 21 in Paris, it is crucial that any response, if formulated and then communicated (a bigger ‘if’), would need to engage with the most important climate proposition put before India by the world, and its interplay with the country’s development/growth imperatives.

Viewed from New Delhi, and after sifting through the chaff, the proposition for India’s climate change response posed by a large section of OECD countries, and certainly from the influential capitals in Europe, is fairly straightforward:

  1. India must be the first country in the world (of size and significance) to successfully transition from a low-income, agrarian existence to a middle income, industrialised society without burning even a fraction of the fossil fuels consumed by other developed countries. China was the last country to enjoy this privilege. India will be the first that will have to cede this option and of course this may well be the new template for other developing countries to emulate.
  2. The scale of this transition and the current economic situation in some parts of the world, alongside the complex and privately controlled innovation landscape, means that there is limited ability for the Annex 1 countries (the developed world) to offer any meaningful support in terms of financing or technology transfer. Official Development Assistance (ODA) is a small fraction of what is necessary today, and India will therefore need to mobilise domestic resources to power the non-fossil-fuel-fired Indian story.
  3. Even as India adopts this ‘exceptional’ approach to industrialisation, and creates the necessary financial and commercial arrangements to achieve it, mostly through its own endeavors, the developed world and others want to retain the right to judge Indian performance. India will be monitored with an increasingly extensive system of compliance verification, and will be criticised for its missteps on the journey despite the novelty and scale of its undertaking.

My response to the thesis of ‘Indian exceptionalism’ therefore is that India does not seek to be an exception, but the demands imposed upon it that will require it to be exceptional. This is a truth for others to accept, and the climate reality for which India must discover creative policy. Three distinct narratives among various actors in India have so far shaped its response.

The first set of responses is from a group of people I like to call India’s ‘cold war warriors’. This group believes that no matter the contemporary political, economic and environmental reality, an alternate universe can be constructed through the mandate of the UNFCCC. These persons are the architects of the global intergovernmental processes and have faith in them. They believe that an agreement in Paris this December at COP 21, that is sensitive to Indian needs, will somehow assist in the transition required by India and will ensure that India only needs to make incremental changes to its ‘business as usual’ approach to economic growth and development. This group has ignored the changing economic system, which is increasingly disinvesting from fossil fuels politically, and in terms of financial flows and promoting green energy markets. The ‘green’ economic and market realities that will shape India’s future are seen as something that can be circumvented by creatively crafted text and clauses in a legal (read weak legal agreement) agreement in Paris. Despite 20 years of failure to achieve this ‘world of equity’ with ‘differentiated responsibility’ they continue to believe that a global agreement is the end in itself.

The second set of strategies to the proposition facing India are advanced by a group I refer to as the climate evangelists. They believe that 2050 is already upon us. Commercially viable clean energy solutions are available, and these hold the answer to both our immediate and future energy woes. The opportunities that exist in the creation of a new green economy must be grabbed with both hands. This group wants subsidies and incentives for clean energy technology, and taxes and regulation of fossil fuels. These green pioneers are sanguine that sufficient ‘push’ and ‘pull’ will deliver technology innovation and development on the requisite scale. They reject that fossil fuels are necessary as baseline sources of energy and instead insist that the technological revolution is already here, and that India must get on board or be left behind. Their argument is often a moral one: we have a moral obligation to save the earth for its own sake and for future generations – ignoring the fact that at this level of income disparity, inequality and differential access to the right to life, the planet is in fact being saved for the rich to flourish.

The third set of responses is from the group I call the climate realists. The realists understand that the global climate proposition is inherently unfair, and that India could and probably should push back against such an imposition by the developed world. However, they also recognise that no matter how hard they try to construct a ‘fairer’ agreement in Paris, the combined forces of the market, society and technology are all pointing towards a ‘greener’ transition. The political economy of climate change necessitates a transformation, and it is not necessarily in India’s interests to fight against it. Instead, the realists understand that there is an opportunity to lead in constructing a green economy. They believe that this moment can be used to reshape the tax, financial and global governance systems. They also see no contradiction in also ensuring continued flow of investments and emphasis on lifeline sources of energy for India’s poor.

Analysis shows that India does better then Germany, the United States, China and others on per capita coal dependence, with about a third of the consumption levels of the greenest among these three. It also already commits, as a proportion of its GDP, more towards renewable energy off-take than most (except Germany). It therefore does not need to defend its coal consumption. On the other hand, it must certainly be the champion to encourage ‘greener’ performance from others. The equity that it seeks lies in this. The rich must continue to invest more in renewables. This must be demanded and enforced.

Prime Minister Modi’s recent statements suggest that he may be such a realist as well. He is promoting an aggressive renewable energy thrust, while being uncompromising on the point that lifeline energy will continue to rely on coal for the foreseeable future. When he takes coal off the discursive table, he is not foreclosing the right to use coal; instead he is sharpening the focus on India’s impressive credentials around green growth. He invokes religious texts, civilisational ethos and clever political word-play as he seeks a leadership role for India in global climate policy, and sets the agenda with ambitious plans for transitioning to a new energy paradigm. The ‘house always wins’ is a golden Las Vegas adage with a lesson for global politics too: unless we see strong political leadership of the kind being displayed by Prime Minister Modi and President Obama, the house – in this case national officialdom(s) and global bureaucrats – will prevail again. They will construct a new world order with words, commas and full stops, where nothing, not even the climate, can ever change.

(Photo by Flickr user DFID – UK Department for International Development, used under a Creative Commons licence.)

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Indian leadership on climate change: Punching above its weight

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Original link is here 

Indian Prime Minister Narendra Modi and others at the highest political level have outlined in recent statements India’s commitment to constructive engagement with the global effort to combat climate change. Taken at face value, these statements indicate that India wants to take a leadership role in addressing climate change. However, in the global discourse on climate change, India often gets singled out for resisting mitigation action and for its reliance on fossil fuels such as coal. In this paper we argue that in addition to the efforts directed toward coping with and adapting to climate impacts (e.g., recent floods in Kashmir and monsoon failure in 2014), India is also “punching above its weight” on mitigation.

India ratified the United Nations Framework Convention on Climate Change (UNFCCC) in November, 1993 and is a Non Annex 1 Party to the Convention. As a Non Annex 1 Party, India is not bound to mandatory commitments under the Convention. This is a central to the notion of “Common but Differentiated Responsibilities and Respective Capabilities” as enshrined in Article 3 of the Convention. [i]

Overall development of any nation is directly linked to its energy use and access: energy poverty is a good indicator of low levels of overall development. The United Nations Development Program’s Human Development Reports have established that energy access and development are interlinked. Energy poverty is defined as a lack of adequate access to “modern energy services.” Modern energy services include the access of households to electricity and clean cooking facilities­—fuels and stoves that do not cause indoor air pollution. The poor in India are spending more than the rich in the developed countries on energy generally and clean energy specifically. Around 306.2 million people in India lack access to electricity (Table 1), perhaps the largest energy access challenge anywhere in the world. At around 705 million, India also has the highest number of people without access to non-solid fuels.[ii]

Table 1: Access to Energy (Electricity and Non Solid Fuels)

ACCESS TO ELECTRICITY (% OF POPULATION) ACCESS TO NON-SOLID FUEL (% OF POPULATION)
COUNTRY Total Rural Urban Total Rural Urban
1990 2000 2010 2010 2010 1990 2000 2010 2010 2010
BRAZIL 92 97 99 94 100 81 89 94 64 > 95
CHINA 94 98 100 98 100 36 47 54 19 70
GERMANY 100 100 100 100 100 > 95 > 95 > 95 > 95 > 95
INDIA 51 62 75 67 93 13 29 42 14 77
JAPAN 100 100 100 100 100 > 95 > 95 > 95 > 95 > 95
U.S.A. 100 100 100 100 100 > 95 > 95 > 95 > 95 > 95

Source: Global Tracking Framework, IEA

Carbon dioxide (CO2) emissions from energy use account for the majority of greenhouse gas emissions. According to the International Energy Agency (IEA), “meeting the emission goals pledged by countries under the United Nations Framework Convention on Climate Change (UNFCCC) would still leave the world 13.7 billion tons of CO2—or 60%—above the level needed to remain on track for just 2ºC warming by 2035.”[iii] There are at least two ways to tackle this problem. The first is to scale up clean energy efforts, whether in the form of fuel switching from coal to gas or installation of renewable energy capacities. The second option is perhaps harder: lowering energy consumption dramatically by altering lifestyles in developed countries.

For India, the viable solution to address the global climate change challenge is clear. Given its low base, India’s demand for energy will increase manifold in the decades ahead (energy consumption will increase by 128 percent by 2035 according to BP[iv]). India will have to scale up efforts on the clean energy front: an enabling global agreement and domestic investment environment are critical for this.

Renewable Energy Framework

Development of renewable energy has been one of the pillars of the Indian Government’s strategy to improve energy access to tackle energy poverty. India’s Integrated Energy Policy, formulated in 2006, lays down a roadmap for harnessing renewable energy sources. [v] The extant policy framework for promoting renewable energy follows from this, with a target of adding 30 gigawatts (GW) by 2017 as per the 12th Five Year Plan. The sector specific developments are:

  1. Solar Energy: The National Solar Mission, being implemented by the Ministry of New and Renewable Energy, increases utilization of solar energy for power generation and direct thermal energy applications. The long-term goal is to generate 20 gigawatts (GW) of grid connected solar power by 2022. The government has recently announced its intentions to increase the target for installed solar capacity to 100 GW.
  2. Wind Energy: Wind energy is the largest source of renewable energy in the country.. According to the meso-scale Wind Atlas (yet to be validated through field measurements), India has a potential of generating around 102 GW of wind power at 80 meters above sea level. Around 22 GW of wind power capacity had been installed by November 2014. Fiscal incentives in the form of a Generation Based Incentives (GBIs) on a per unit generated basis and Accelerated Depreciation (AD) that allow greater tax deductions early on in the project cycle have been reinstated recently. In the latest Union Budget, the Government has specified a 2022 target of 60,000 MW on wind energy capacity.
  3. Biomass: The government has been supporting grid-interactive biomass power and bagasse co- generation in sugar mills in India, with a target of 400 megawatts (MW) between 2012 and 2017. Central financial assistance is provided for this. A 2022 target of 10,000 MW of installed biomass capacity has been announced recently.
  4. Waste to Energy: The Indian government, through the “Swachh Bharat Mission,” under the Ministry of Urban Development, has provided support for up to 20 percent of project costs linked ‘Viability Gap Funding[vi]’ for waste processing technologies.
  5. Small Hydropower: Hydropower units of less than 25 MW are classified as “Small Hydropower” projects by the government. As of December 2014, a total capacity of around 3,946 MW was available from such projects in India. Section 7 of the Electricity Act of 2003 stipulates that “any generating company may establish, operate and maintain a generating station without obtaining a license/permission if it complies with the technical standards relating to connectivity with the grid.”[vii] The government is targeting an installed capacity of 5000 MW by 2022.

At the end of the fiscal year in March 2014, the total cumulative installed capacity for renewable energy in India was around 13 percent of the total electricity share at 31,707 MW. The average per capita electricity consumption in India for the year 2013-14 was 957 kWh[viii]: around seven per cent of the per capita consumption of the United States between 2010 and 2014 (13,246 KWh).[ix]  This is a stark reflection of India’s energy poverty challenge. Despite a very low base of per capita electricity consumption, the scope and ambition of India’s renewable energy initiatives is remarkable.

Assuming a solar energy capacity addition of 100 GW by 2022 as per the government’s plan, India’s per capita renewable energy installed capacity, not accounting for any capacity growth in wind, biomass, and waste to energy, will be around 92.6 watts per person, well over today’s global average of around 80 watts per person.[x] This is a conservative estimate since currently wind power accounts for the largest share of renewable energy, at around 67 percent of total installed capacity, whereas solar accounts for only around 8 percent.

We should also note here that the large hydro (25 MW and above) potential and installed capacity is also significant and is not counted in the renewable energy estimates above. Large hydro potential in the country is around 145,320 MW of which 36,080 MW has been commissioned as of December 2014. [xi] This is more than the entire renewable energy installed capacity in the country. Power from large hydro can also provide base load power to mitigate intermittency challenges of renewable energy.

Per Capita Spend on Renewable Energy

At the Conference of Parties (COP) to the UNFCCC in Paris (COP-21) in 2015, global leaders will decide if an international renewable energy and energy efficiency bond facility will be established.[xii]  Securing financing for mitigation and adaptation efforts is key to any meaningful attempts to address climate change. Promoting renewable energy offers a clear pathway for reducing greenhouse gas emission from the energy sector.

The key constraint to the development of renewable energy has been the historically higher costs associated with it. There are wide divergences in the Levelised Cost of Electricity (LCOE), as defined by the International Renewable Energy Agency (IRENA), depending on location. The cost of generation in non-OECD countries for both wind and solar power tends to be lower than for OECD countries owing to various structural factors such as cheap labor rates that lower project costs. For illustration purposes, the range of LCOE as assessed by IRENA in 2012 has been used.[xiii] In the case of Solar Photovoltaic systems without batteries the estimated LCOE is between 0.25 to 0.65 KWh. For onshore wind energy (projects larger than 5 MW), the costs are between 0.08 and 0.12 KWh.[xiv]

Assuming a weightage of 94 percent wind power and 6 percent solar power generation in India, the costs per KWh of electricity generated through renewable energy is between 0.09 and 0.135 (Table 2). Costs in USA, Germany, China, and Japan have also been estimated and summarized in the Table 2.

Table 2: Cost of Renewable Energy (USD) per KWh, 2012

  INDIA USA GERMANY CHINA JAPAN
Lower End 0.09 0.09 0.11 0.09 0.08
Upper End 0.1356 0.1356 0.185 0.1356 0.224
Weightage in Renewables Mix 94% (W), 6%(S) 94% (W). 6% (S) 75% (W), 25% (S) 94% (W), 6% (S) 60% W, 40% (S)

*Rough estimations (assuming that renewable energy is largely a combination of wind and solar, particularly given the relatively negligible growth in other sources over 2012-2040) following from electricity generation shares specified in the World Energy Outlook 2014, for countries (EU figures used as a proxy for Germany) in 2012

100 GW of installed solar energy capacity by 2022, run at a plant load factor of 13 percent,[xv]will produce around 113,880 GWh or 113,880,000,000 KWh of electricity annually. Under this scenario India would be spending between USD 28.4 billion and USD 74billion on its LCOE for solar power based generation (using solar photovoltaics). The Indian government estimates that the additional overall investments required to facilitate this would be to the tune of USD 100 billion.[xvi] To further put this into perspective, 100 billion USD is around a third of the total budgeted expenditure of India’s Union Government in 2015-16 (INR 17.77 lakh crores). Based on the lower end estimates in Table 2, the LCOE will be over a tenth of the total amount of 100 billion USD that the Green Climate Fund is to make available by 2020.

Given the fiscal challenges, India punches well above its weight in terms of its expenditure on renewable energy (Solar Photovoltaic and Wind Energy). Using verifiable approximations for 2012, the average Indian spent about one and a half times what the average Chinese spent, between 2.2 and 4.3 times what the average Japanese spent, and around 2 times what the average American spent. Indians spent between two thirds and half of what average Germans spent.

Table 3: Per Capita Income Spent on Renewable Energy (in % of Daily Income) in 2012*

INDIA USA GERMANY CHINA JAPAN
Per Capita Renewable Energy Consumed (KWh per day) 0.1080 1.95 4.146 0.3007 0.776
Lower End (% of daily income spent) 0.26 0.12 0.40 0.17 0.06
Upper End (% of daily income spent) 0.44 0.21 0.82 0.29 0.20

*Calculated on the basis of per capita incomes and country populations in 2012 as specified by the World Bank; renewable energy consumption as available in the BP Statistical Review of World Energy 2014 for the category ‘other renewables’ (2012) which is based on gross generation from renewable sources including, wind, geothermal, solar, biomass and waste, and not accounting for cross-border electricity supply and converted on the basis of thermal equivalence assuming 38 per cent conversion efficiency in a modern thermal power station; and the estimates in Table 2

Over the next 7 years until 2022, India has a target of renewable energy capacity of 175 GW and most of this capacity addition is to come from solar and wind energy. [xvii]As India ramps up its solar capacity to 100 GW and wind to 60 GW, which is close to the total wind and solar installed capacity in the EU in 2012,[xviii] the average Indian per capita spending on renewable energy as a percentage of daily income should positively compare with average EU levels.

Energy in the Paris Agreement

The future of global energy and the climate change challenge is contingent on a number of political and economic factors. This last year has been proof that even well-formed trends, such as in the case of the global price of oil, can change drastically. Current estimates suggest that coal, oil, and gas will contribute around 81 percent of primary energy consumption until 2035.[xix]However, these estimates are based on benchmark prices of commodities and current technologies.

Changes in both prices and technologies associated with oil, coal, and gas are essentially unpredictable. However, the cost of renewable energy will certainly continue to decrease consistently in the coming years. The cost competitiveness of renewable energy in the form of onshore wind is already at par with fossil fuel based systems for generating electricity, and the LCOE for solar has halved between 2010 and 2014.[xx]The costs of utility scale solar energy are likely to become competitive with fossil fuels in the future. Indeed this competitiveness narrative of renewable energy remains highly nuanced, and depends on a variety of factors such as existing grid infrastructure and labor costs. For instance, since the penetration of renewable energy in India is high, a substantial grid infrastructure cost will be involved in scaling up electricity generation through renewable energy.

As part of the domestic financing framework, recent measures have helped transition Indian policies from a carbon subsidization regime to a carbon taxation regime.  From October 2014, a de facto carbon tax equivalent of USD 60 per ton of carbon dioxide equivalent in the case of unbranded petrol and around USD 42 per ton in the case of unbranded diesel has been introduced. In addition the clean energy cess[xxi] on coal has been doubled and is now equivalent to a carbon tax of around USD 1 per ton.[xxii]

However the fiscal space to maneuver is limited given that the proportionate per capita spend on renewable energy in India is already much higher than developed and developing countries and does divert resources from necessary social and infrastructure spending.

The main barrier for increasing renewable energy penetration will be a lack of financial and technological flows; India’s achievements in renewable energy have occurred in spite of such flows. For instance, Clean Development Mechanism-linked flows, which could potentially subsidize renewable energy development dried up a few years ago owing to the oversupply of Carbon Emission Reduction certificates which are now trading at near zero levels.[xxiii]Similarly, transfer of cutting edge clean energy technologies has been limited by international trade law and protectionist policies of innovating countries. Capital flows can be unlocked by a new global agreement and robust bilateral cooperation on clean energy could potentially prove to be the most effective medium for government—government technology transfer.

In an important 1991 report on global warming, Anil Agarwal and Sunita Narain made a compelling case that “those who talk about global warming should concentrate on what ought to be done at home.”[xxiv] It seems that the conversation at the UNFCCC has inevitably evolved to reflect this discouraging reality. The centrality of the Intended Nationally Determined Contributions in the draft negotiating text of the Lima Call for Climate Action is indicative of the renewed focus on domestic action.[xxv]

Gauging by the renewable energy thrust alone, India’s response at home has been more than commensurate with its economic weight. It must, at the very least, demand similar levels of per capita renewable energy spending by way of commitments from OECD countries. India is already among the countries leading the clean energy transition and must demand that much of the developed world catch up when the Conference of Parties meets at Paris.


[ii] Common solid fuels used in India include dung cakes and firewood

[vi] Viability Gap Funding is a grant to support infrastructure projects become financially viable

[viii] As per the provisional figures of the Central Electricity Authority: http://164.100.47.132/lssnew/psearch/QResult16.aspx?qref=8212

[x] Population in 2022 = 1.42 billion assuming a 17.64 per cent growth rate as seen in the decade 2001-2011 as per the Census of India

[xii] As per the draft negotiating text for COP 21: http://unfccc.int/resource/docs/2014/cop20/eng/10a01.pdf#page=2

[xiv] Concentrated solar power systems generate solar power by using mirrors or lenses to concentrate a large area of sunlight, or solar thermal energy, onto a small area;

[xvi] Economic Survey of India, 2014-15, Available at: http://indiabudget.nic.in/es2014-15/echapter-vol1.pdf

[xix] BP Energy Outlook

[xxi] A cess is a form of an indirect tax

  • Samir Saran

    Senior Fellow and Vice President, Observer Research Foundation

  • Vivan Sharan

    Consultant, Observer Research Foundation

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