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Synopsis: India should equally weigh its stand on Climate justice with the cost of carbon-heavy future.
Introduction
The world is facing a difficult situation with cutting back on CO2 pollution. Global emissions of CO2 today are at about 55 gigatons a year. To avoid catastrophic events with a reasonable probability, emissions have to go to zero by about 2055. Under business as usual, emissions are projected to grow to about 80 gigaton per year in 2055.
While many countries have announced their Zero transition targets, India stands firmly with the principle of ‘Climate justice’. The corollary of this fact is that India need not worry about carbon emissions until we become a developed country. But in the view of the author, India needs to reconsider this decision.
How India is faring in controlling carbon emissions?
Indian emissions through history make up 3.1 per cent of the CO2 in the air. However, India went up from about 4 per cent of global emissions in 2000 to about 7 per cent today and India is the fourth-largest source of emissions.
On a flow basis, India’s annual emissions rose from about 1 gigaton per year in 2001 to 2.6 gigatons per year today, with a compound growth rate of about 5 per cent per year.
While there is ample sunlight in India, the carbon intensity of energy production has actually grown in recent decades.
Why India’s aim for a carbon-heavy future needs to be reconsidered?
The first is the cost of capital: The global financial system has changed in ways that interfere with carbon-heavy growth paths for India. Real sector investment projects in India are now planned in an international asset pricing environment.
Vast resources of asset managers worldwide have been reshaped into the ESG world. As a consequence, the cost of capital is high for a carbon-intensive electricity project and low for a renewable energy project. (ESG stands for Environment, Social and Governance. ESG is becoming a crucial factor in the assessment and evaluation of potential investments in the context of sustainability).
If Indian firms try to use fossil fuels, they will face a high cost of capital in doing so. ESG investment also demands that big companies emit less carbon in their upstream suppliers. For instance, a firm like Google does not buy thermal electricity.
The new world of ESG-inflected investment pushes energy firms and energy customers in India to not emit CO2 (directly or indirectly).
The second is the social movement in developed countries against carbon emission will reshape international relations:
A Pew Research Centre survey in 17 advanced economies, published last month, found that 72 per cent felt global climate change would personally harm the respondent, and 80 per cent were willing to make changes in life and work in response.
These strong majorities have reshaped the views of First World politicians who face democratic accountability and have to follow the shifting views of the median voter. It could lead to an intensification of the rules shaping ESG investment. Climate questions will become a part of the overall give and take of foreign policy.
What is the way forward?
As the world organises itself to remove emissions by 2055, the reshaped international relations environment implies there are gains for India from de-carbonising. Hence, India should prioritise decarbonisation.
Source: This post is based on the article “Climate justice and India’s choice” published in Business Standard on 18th October 2021.
