Energy, Environment, Writing

Building Back Better together—Potential for an India-UK partnership for a Green Transition

This article was co-authored by Terri Chapman

While many have pinned their hopes on technology to solve the looming challenges posed by climate change, it is clear that this alone may not be the silver bullet, and other processes will have to be invested into. For example, one of the most ambitious technological efforts to date is the Climeworks Orca plant that was launched in Iceland last month. The plant is illustrative of the inadequacy of the hunt for the technology elixir. The plant can remove 4,000 tons of CO2 a year, which is equivalent to the annual emission from just 800 cars. To scale this up and make it accessible to different geographies is the hurdle for such innovation. The timelines to do this are incompatible with the urgency of responding to global warming.

It is time to do what we have known needs to be done for decades—which is to reduce greenhouse gas emissions. These reductions are complicated by the fact that industrialisation is still underway in much of the world. Countries in the global South rightly seek space to grow. However, the template for that development—backed and funded by international financial institutions—is heavily reliant on high-emitting activities with only limited finance being deployed towards cleaner and greener options. At the same time, countries of the global North are dragging their feet and, in some cases, still peddling the idea that climate change can be responded to without dramatic changes in consumption patterns or significant financial reconfiguration. The “blah, blah, blah,” approach to climate change described by Greta Thunberg, is as she says, not working. Instead, countries around the world, especially high-income countries, must realise that they cannot negotiate or talk their way out of the climate mess created by them. Instead, it is time to get their political approach right and to deploy the largest quantum of financial resources ever mobilised to enable equitable green transitions. And there is another complication; this climate war chest will have to be invested into developing countries, which challenges the credit risks and cost of capital logic that have defined the post-War financial flows.

Countries of the global North are dragging their feet and, in some cases, still peddling the idea that climate change can be responded to without dramatic changes in consumption patterns or significant financial reconfiguration.

The COVID-19 pandemic has created renewed opportunities and invigorated the demand to make our cities healthier, make our social protection systems more robust, make our societies more equitable, and to respond to climate change meaningfully. More people now get what “systemic risk” means and the devastation caused by the pandemic should make governments more eager to address such risks.

The United Kingdom (UK) and India are well placed to respond to these new opportunities as partners and to craft a road map together for Glasgow and beyond. This is a partnership with much merit. The leadership for green transitions is coming from countries like India (the only G-20 country living up to its ‘2 degree’ commitments made at Paris) even as control over capital and technology resides in developed countries like the UK. Leveraging their specific roles and strengths, the UK and India can work together as partners in three areas in particular. These include human capital development, climate finance and funding of clean energy and infrastructure, and green and smart manufacturing.

Partnership in higher education

The UK is a global leader in education, knowledge, innovation, and research, while India is one of the largest consumers of higher education and is a market for research and innovation. Higher education enrollment, for example, has tripled over the last 20 years in India but remains at just 28 percent. The opportunity is defined by a simple fact—nearly half of India’s population is below the age of 25 and that demand for higher education is likely to increase. As a result, there is significant demand for UK education opportunities in India. In 2019, more than 37,500 Tier 4 student visas were given to Indian students studying in the UK. While this is a large number of students, in the larger context, it is insignificant and amounts to very little beyond building and nourishing an Oxbridge community in India.

Efforts under the new policy could create greater access to high-quality higher education in India, deepen UK–India academic and scientific collaborations, and create new research initiatives and more significant innovation.

India’s New Education Policy 2020 makes it easier and more attractive for foreign universities to establish branch campuses in India. Efforts under the new policy could create greater access to high-quality higher education in India, deepen UK–India academic and scientific collaborations, and create new research initiatives and more significant innovation. All of these can support broader efforts to foster human capital, skills, and knowledge in India, which are needed to transition towards a more sustainable, knowledge-based economy. UK institutions must re-calibrate their global role by investing in overseas markets and partnering to build the campuses of the future in the geographies that matter. Human capital and research efforts in India will enable innovation and work forces, which will be deployed at the frontlines of global climate and development efforts.

Partnership in finance

The second area of potential for the UK–India partnership is finance. Mitigating climate change will require enormous financial investments. This is much larger than the US $100 billion annual commitment made by the Annex II countries. For example, just for meeting its renewable energy targets by 2030, India will require around US $2.5 trillion dollars. The common but differentiated responsibility for financing green transitions posits that industrialised countries must contribute to (small amounts) and help catalyse large financial flows towards this ambition of New Delhi. However, many are falling behind even on their abysmally small commitments. Unless these trillions of dollars can flow to India and other developing countries, we will lose the climate battle and what unfolds will be unpredictable and consequential.

There are significant and unrealised opportunities for investment in ‘green transitions’ more broadly and at retail scale. Unfortunately, financial institutions are only modest actors in the green spaces in India. Transformative interventions at scale will require new thinking, innovative financial products and more favourable borrowing terms. It will be a crime against humanity if the country with the largest potential to curtail future emissions borrows money from the developed world at exorbitant rates. If Climate Risk is seen as a clear and present danger, cost of funding for climate mitigation projects must remain the same across continents.

Transformative interventions at scale will require new thinking, innovative financial products and more favourable borrowing terms.

The Indian Railway Finance Corporation (IRFC) issuance of climate bonds in 2017 is illustrative of the potential. The bond raised US $500 million from investors around the world. Municipal bodies in India, including the Indore Municipal Corporation (IMC), are also considering raising ‘green masala bonds’ to fund climate responsive projects. Green bonds offer an opportunity for countries like India to access new pools of international funding for green projects, for which there appears to be demand in the UK. In September, the UK issued its first sovereign green bond, raising 10 billion GBP, with demand of nearly 90 billion GBP, indicating the magnitude of appetite for such investments.

Additionally, regulations and perverse laws will have to make way and allow pension and insurance funds to invest into emerging economies that are the ground zero of the climate battle. These funds hold the largest global savings, mostly derived from fossil fuel age businesses and there is justice in their being the patient capital that is deployed in building clean and green infrastructure in emerging and developing economies. Retail finance needs innovation too. Buying a solar facility for rooftops in any market must be at a discount (financial costs) to the credit available for purchase of cars and air-conditioners. Bulk finance and retail finance have not yet signed the Paris Agreement; can London and New Delhi partner to change this?

Partnership in green manufacturing and value chains

The third opportunity is around supporting green and smart manufacturing and green value chains. Again, the pandemic has revealed the risks of over-dependence on any single country to supply critical goods. China, for example, owns the largest solar and wind manufacturing companies. India offers an alternative and an opportunity to diversify supply chains and make them more resilient. This is a chance to invest in and build up India’s smart and green manufacturing capabilities and create more robust supply chains for renewables and other green technologies. The R&D and innovation out of the UK has recently served only Beijing. It is time to rethink this monochromatic value chain. An India and UK innovation and smart manufacturing bridge is needed. The potential of such collaboration is illustrated by the AstraZeneca vaccine, for which R&D took place in the UK, with mass manufacturing in India at the Serum Institute of India – the world’s largest vaccine producer. India is also ramping up its green production and manufacturing capabilities in areas such as hydrogen production and the manufacturing of next generation battery technologies to support green transitions. Indian companies are scouting for partnerships; and it is time to put some political weight behind it. The Build Back Better World and the Quad and the EU and India partnership all support this.

India is also ramping up its green production and manufacturing capabilities in areas such as hydrogen production and the manufacturing of next generation battery technologies to support green transitions.

We must act to save lives, improve health, protect livelihoods, and safeguard resources for current and future generations. But the single most important motivation has to be the collective will to improve the lives of billions who have been excluded from the economic mainstream and, indeed, from any access to dignity and livelihoods. These constitute the largest cohort on the planet and their continued misery must not underwrite the green-tinted splurges of the rich world. The UK and India are in a position not just to act but to act as partners to change this.

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Columns/Op-Eds, Politics / Globalisation

Samir writes on NetIndian: G-20 was promising, but short on substance

India, 2009
Link to original website 

US President Barack Obama came to London with a mission. His primary goal was to ensure the participation of other countries in the US effort to pump money into the globaleconomy. His intentions were announced beforehand during his frequent media interactions. There had also been protests from the EU, led by France and Germany, who had rightly asserted that the institution of robust regulations in the global financial system must precede any further efforts to sustain the old world financial order by injecting funds through bailouts and stimuli. However, in the end Obama had his way, aided to a large extent by the emerging economies led by the Asian giants. While India eagerly supported the Americanline, the Chinese clearly lacked original voice, enmeshed as they are in the ‘Made in America’ mire.

The pre-summit dinner witnessed ‘Obamaspeak’ that was followed by the complementary and supportive remarks of the Indian Prime Minister, a noted economist and a credible voice of the Third World. These initial views seemed omnipresent in the final communiqué that was circulated at the conclusion of the summit. While Dr Manmohan Singh’s suggestions on protectionism, regulation and surveillance, IMF reforms and credit flows were a part of the final G-20 declaration, even he would be the first to admit (as he did at a press conference later), these key aspects formed part of the Rhetoric or future promise, even as the US endeavour to ensure global participation in the bail out efforts and recapitalization of institutions formed the substance of the agreement.

The Committee of 20 has agreed to infuse capital into the IMF without any immediate reform in its constitution and operations. The current $250 billion at the disposal of IMF would be increased by $500 billion. Japan and EU have agreed to provide $100 billion of additional funds while China will contribute $40 billion. The IMF will also increase the amount available to each country by way of Special Drawing Rights (SDR) by $250 billion. This allows distressed economies to literally print additional currency and convert it to tradable notes in extreme circumstances. There is also a suggestion that IMF would deploy more effective surveillance; hopefully implying it will watch the West as closely as it does the developing world. However, in the absence of regulations and regulatory authority it remains to be seen if this surveillance would amount to much. The world was expecting a reform of the IMF to be initiated and an urgent change in its governance; these measures have been relegated to the list of future efforts and promises.

The other major disappointment was the lack of progress in instituting a global financial regulator. As a consolation the G-20 agreed to strengthen the Financial Stability Forum and enlarge its membership to include India, China and Brazil (and have rechristened it as the Financial Stability Board). Though it aspires to serve as a watchdog and advise national regulators on activities of individual companies/organizations, the lack of defined powers will clearly undermine its ability to serve the role of a global regulator that is so urgently needed.

President Obama had unequivocally sought the participation of EU, India and China (read funding from) on the rescue efforts through government bailouts. His intention to get commitments from these countries was thwarted by the French and German governments. British Premier, Gordon Brown, though stitched together a compromise that restated the $ 5 trillion stimulus already announced by countries along with the possibility of further bail-outs in future if needed. Though this aspect was meant to be at the core of any G-20 resolution, it remains unresolved primarily due to the ‘Regulation Versus Stimulus’ divide between the US and continental Europe.

The Indian position has also supported the need for regulation though the conviction of its position will be tested in the days ahead. India needs to integrate with the global financial systems in order to access capital that it urgently needs. It is important that India argue for the early establishment of a supra-regulator so that the global risks to its banks and institutions are minimized.

India and other countries have also agreed to participate in recapitalizing financial institutions on the belief and with the stated intention of reviving global credit flows and have also agreed to jointly agree to the treatment of ‘toxic assets’. In fact  treatment of ‘toxic asset’ in the declaration does not cut any new ground and the responsibility for the same still rests with local governments though a commonality in the mechanics is proposed. One of the great impediments for bank credit is the presence of these bad loans. Unless these bad loans are purged from the balance sheets it remains to be seen if banks could resume regular lending again and this important challenge still remains unaddressed.

President Obama made it clear at a post-summit press conference that his primary mandate is to servethe American citizens and this was evident in the discussion on protectionism and its articulation in the summit agreement. While the wordings have asked countries to desist from protectionist tendencies (trade barriers) till 2010 (12 months), there is skepticism as 17 nations have already breached trade practices since November last, when a similar agreement had been endorsed. The suggestion of this 12 month time-frame itself is suspect. Why should any time-frame be mentioned and why should not all trade at all time respect the WTO arrangements? Wouldn’t this special emphasis on a time period actually encourage countries such as the US to operate outside of the WTO claiming special circumstances? This summit will also strengthen Obama’s hand as he defends his position on the issue of executive salaries and bonuses at home. New rules and best practices agreed to by the G-20 crack down on the multi-million dollar cash bonuses doled out as reward for risky investment and trading calls.

In conclusion it would seem that the while the current crisis may see the end of the ‘Washington Consensus’, the overwhelming dominance of President Obama at the summit underscores that Washington would firmly remain the architect and the driver of the new world order through, and on the other side of, this crisis. The outcome of this summit can be summed up as ‘No Stimulus and No Regulation’ declaration, though with plenty of promises on both fronts.

The author is Vice-President-Development and Outreach at the Observer Research Foundation (ORF) in New Delhi. His area of expertise is Regulation/Policy, Corporate Communications and Media Studies. An electrical engineer by training, Mr Saran is a Masters in Media Studies from the London School of Economics. Frpm 1994 onwards he has had a rich and diverse experience in the Indian private sector and was actively engaged with regulators and policy-makers during the 1990s as India undertook economic reforms. Since October 2008, Mr Saran is developing and implementing the outreach and development programmes at ORF. His current projects are in the domain of “globalisation” and include studies on Islam, Radicalisation, Climate Change and the Global Financial Crisis. He continues to contribute in various fora on regulatory aspects and on the political economy. The views expressed in this article are his own.


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