Managing Climate Change: A Strategy for India – Explained, pointwise

Introduction

Climate Change is a clear and present danger. The latest IPCC Assessment Report has warned that if nothing is done, global warming is likely to reach at least +2.8°C by the end of the century. Developing countries will be most seriously impacted by the impending disasters. Globally, there is a concerted effort to address the challenge under the aegis of the UN Framework Convention on Climate Change (UNFCCC). At the latest Conference of the Parties (COP) in Glasgow (COP26), many countries including India accepted a long term commitment to reduce carbon emissions to Net Zero. This is a departure from the position in 2015 (Paris, COP21) when most countries had committed only to reducing the emissions intensity of their GDP. India has set a target to achieve Net Zero by 2070, while most developed countries intend to achieve the target by 2050. There are several challenges in achieving these targets. A research paper titled ‘Managing Climate Change: A Strategy for India’ authored by a noted economist has suggested several measures to achieve these targets.

About India’s Climate Targets

India had submitted its first pledge in 2015 that had three primary targets. The revised climate targets (or INDCs, Intended Nationally Determined Contributions) were officially submitted in August 2022. The new targets are: (a) Reduction in emissions intensity of the GDP by 45% by 2030 (compared to 2005 level); (b) Total non-fossil fuel electricity generation capacity to be raised to 500 gigawatts (GW) by 2030.

The long term target is to achieve Net Zero emissions by 2070.

The targets are contingent on transfer of technology and low-cost international finance including Green Climate Fund (GCF).

What suggestions have been provided by the Working Paper?

The longer-term objective of getting to Net Zero can be achieved by a combination of both demand side and supply side actions.

Demand Side actions include: (a) Increased energy efficiency through adoption of energy-efficient technologies, combined with lifestyle changes; (b) Shifting from direct use of fossil fuels to electricity as the final energy source wherever possible.

Supply side actions include: (a) Shifting away from electricity generation using fossil fuels (coal, diesel and gas) to Renewable Energy (RE, mainly solar and wind); (b) Development of green hydrogen as a substitute for fossil fuels in key areas; (c) Expanding forest area to increase natural carbon sinks; (d) Developing CCUS techniques (Carbon Capture Utiltization and Storage) to make them commercially viable to offset CO2 emissions from residual use of fossil fuel that may remain.

The Report has provided sector-wise action points for promoting decarbonization.

Decarbonising Power Sector

Need: This is a top-priority sector because it accounts for roughly half of total CO2 emissions in the economy. Also decarbonising other sectors of economy will entail shifting from direct use of fossil fuels to use of electricity as the final source of energy (e.g., shift form oil based vehicles to electric vehicles in transportation), increasing the share of electricity as the major energy carrier.

To meet the 2030 target, annual capacity addition must increase to 38 GW over the next 8 years, up from an average of about 11 GW in the previous 4 years.

Suggestions

Intermittency: It can be handled by (a) Pairing RE generation with gas-based power plants or with pumped-hydro storage; (b) Use of grid-scale battery storage. Each of these methods entails additional costs, and will make RE costlier.

Risk cover to RE Producers: Improving the financial status of DISCOMs should be a top priority but will take time. In the mean-time, special risk-mitigation measures can be undertaken to encourage private investments in RE. The Union Ministry of Power, State Governments and the RBI can sign a tripartite agreement. Under the agreement, RE power generators will be reimbursed by the RBI in case they are not paid on time by the DISCOMs. RBI will debit the account of State Government and recover the amount from them. There is evidence that private sector generators prefer to invest if they are offered such protection.

Expanding Transmission Infrastructure: Power Grid Corporation (under Central Government) has to step-in as it better equipped to handle environment clearances etc. Government can provide initial investment. As these transmission lines become operational and start earning revenues, they could be privatised to raise capital for further investments.

Phasing-out Coal: A recent study had recommended that ~50 GW of coal capacity in India can be considered for early retirement provided supportive finance is available. The Ministry of Power has recently announced phasing down of 81 units of coal power plants to 40–55% of their capacity, to replace with approximately 30 GW of solar power by 2025–26. The Governments of Gujarat, Maharashtra, Karnataka and Chhattisgarh have announced that they will not fund any new coal power plants in their States. Shift away from coal will have economy wide impacts like loss of livelihoods in the coal mining sector, loss of income to coal producing State Governments, loss of transportation revenue to Indian Railways among others. Hence, retirement of functioning coal plants should ideally be incentivised by provision of international concessional financing. Here, India must keep on pressing for financial support from the developed countries to fulfil their commitments.

Carbon Tax: At present, the Government levies a cess of INR 400/tonne of coal. This translates to a carbon tax of US$ 3.5/tonne of CO2. IMF has recommend a carbon tax of US$ 25/tonne of CO2 for India, (US$ 75/tonne for the US/EU). Increasing carbon tax on coal to the recommended level will increase costs of coal-based electricity by ~40% leading to early phase out. Oil products are already heavily taxed by the Governments. The introduction of carbon taxation can accelerate the transition to RE, as well as generate revenues to help finance other elements of the climate management plan.

Production Base for RE: According to an estimate, achieving Net Zero will require the RE capacity to reach 7400 –8400 GW by 2070. India must meet its demand for Solar cells/modules, wind turbines etc. domestically as well as export for global demand. The Union Government has already launched PLI Schemes for manufacturing Solar PV Cells, batteries etc. The Government should avoid high import tariffs and instead foster innovation by domestic industry to make them competitive. The Government has rightly encouraged partnerships with leading international companies. The trade policy required for this objective has to be carefully designed, recognising the importance of openness to innovation. Domestic R&D efforts by the industry should also be encouraged.

Land Acquisition: State governments would need to be proactive. They can acquire the land with appropriate compensation to landowners, and passing it on to private solar power developers on a fixed/long-term lease basis. The process must be transparent. Focus should also be on utilizing wasteland for solar power generation to minimize impact on agriculture. In addition, agriculture productivity can be enhanced by sustainable practices to negate any impact of diversion. There is a need to actively pursue reduction in methane emissions from agriculture sector.

Decarbonising Industries

Need: The Industrial sector accounts for ~33% of India’s CO2 emissions. Almost 50% of the emissions from the industrial sector are contributed by Steel, oil-refining and cement production. The rest are emitted by mining and quarrying, brick manufacturing, pulp and paper, fertilisers, textiles and petrochemicals, and other non-specific industries. Decarbonizing industrial sector will be crucial to achieve the climate change targets.

Suggestions

Shift to Electricity: Many industries use fossil fuels to generate heat required in their operations. They can be shifted to use electricity for this purpose.

Shift to Green Hydrogen: Industries like steel, fertilizers, cement, petrochemicals etc. use fossil fuels as feedstock in chemical processes (shift to electricity not possible). They can be decarbonized through use of Green Hydrogen (H2). India’s H2 demand is expected double over the next 10 years. Green Hydrogen Policy is geared towards increasing adoption. Government should provide appropriate incentives to increase R&D and adoption of Green Hydrogen.

CCUS Measures for Cement Sector: India is the second-largest producer and consumer of cement in the world. Cement manufacturing is very carbon-intensive. According to the IPCC, CCUS, through the reverse-calcination process, could be a feasible solution to decarbonise this industry as the costs become favourable

Decarbonising Transport

Need: The transport sector contributes 13% of India’s emissions. The sector is heavily dependent upon petroleum and natural gas. This sector includes railways, road transport, inland shipping, and airlines.

Suggestions

Electrification of Railways: Indian Railways has the 4th largest rail network in the world. 80% of the broad-gauge track network is now electrified. However, > 33% of trains (both passenger and freight) are currently run by diesel locomotives. The railways should put in place a plan for an accelerated shift to full electric traction over this decade and phase out diesel locomotives.

Modal Mix of Freight Transport: Focus should be on faster completion of Dedicated Freight Corridors (DFCs). Modal mix of India’s freight should be shifted to Railways (from Roads) as Railways are more energy efficient.

Electrifying Road Transport: Electric Vehicles (EVs) are gaining popularity but at present account for less than 2% of the total automobile sales in the country (15% in China). Adoption can be improved through Government interventions to: (a) Reduce price of EVs; (b) Promotion of EVs for public transport; (c) Establishing a sustainable EV-Charging network; (d) Establishing a robust battery-swapping ecosystem.

Restructuring Manufacturing Capacity in Automotive Sector: To achieve Net Zero by 2070, entire fleet of vehicles have to be EVs by 2050. So sale of fuel based vehicles has to be phased out by 2035. Automotive Manufacturing ecosystem has to shift to production of EVs. Auto component production is dominated by MSMEs, they will need to be assisted to restructure themselves to produce the new types of parts, including components for batteries. Government has to come-up with appropriate policy framework to aid this transition.

Safety of EVs: Statutory regulation for this sector needs special attention. The EVs need to be safe to build public faith and enhance adoption. Establishing standards for battery design suited to Indian conditions, standards for charging/recycling and their enforcement will be crucial. A close coordination between industry and the government will be necessary.

Promoting Public Transport: Increased capacity of Metro networks and use of EVs in public transport (electric buses) are initial steps. A large-scale shift towards public transport requires a ‘system reform’ of the urban passenger transport system.

Source: Managing Climate Change: A Strategy for India, Centre for Social and Economic Progress

Emissions from Expanded Urbanization

Need: India’s urban population is projected to increase from about 377 million (or about 31% of the population) in 2011, to over 875 million (53%) by 2050. With rising urbanization and higher incomes, demand for electricity will rise. This will contribute to increased emissions (till electricity mix has share of fossil fuels).

Suggestions

Energy Efficient Appliances: Commendable progress has been made in some aspects e.g., UJALA helped in bringing down the retail price of LED bulbs by 80% and has succeeded in distributing 370 million LED bulbs since 2015. This has effectively saved 48 billion units of electricity per annum, or avoided 386 mt of CO2 emissions from electricity generation. Adoption of energy efficient appliances (like ACs, fans etc.) should be expanded through similar Government interventions.

Energy Efficient Buildings: Energy usage in buildings can be significantly reduced through better building design and construction materials. Regulatory mechanisms could enforce LEED/GRIHA standards for building design and construction, limit the use of glass facades for commercial building designs, promote rainwater harvesting, rooftop solar panels and construction materials suited to the Indian climate.

Managing Intra-city Transportation: Spatial planning has been ignored in Indian urbanisation, but it can help to minimise transportation in private vehicles, and maximise usage of public transport within cities. The IPCC estimates that demand-side measures of infrastructure use; based on compact cities, rational spatial planning and high public transport usage, can potentially mitigate 30% CO2 emissions by 2050. Developing a 10-year action plan for the 20 biggest metros in the country would be a good first step in elaborating a strategy for decarbonisation.

Managing Urban Waste: Rising amount of solid waste and sewerage generated in cities is a major source of non-CO2 GHGs. Adopting sustainable measures for urban waste management can help cut down these emissions.

Afforestation and CCUS

Need: The IPCC has recognised that fossil fuels cannot be completely eliminated in hard-to-abate sectors (like air transportation). The resulting emissions will have to be dealt with by increasing the stock of forests providing a natural carbon sink, and through CCUS technology to mitigate climate change.

Suggestions

Afforestation: The Forest Survey of India (FSI, 2019) estimates that to create a 2.5 Gt-CO2e equivalent carbon sink, India would require the area under forest and tree cover to increase by 18.7 million hectares (~3.4% of the country’s geographic area). Nearly 66% of this can be achieved through restoration of impaired and open forests. The FSI (2019) estimates the total cost of this to be 1.5% of the GDP. This will not only help in sequestering CO2, it will also have substantial co-benefits including ecological restoration and water management.

Carbon Capture, Utilisation and Storage (CCUS): CCUS refers to techniques of artificially capturing CO2 from the atmosphere/large point-sources such as industries and sequestering it chemically into geological formations for long-term storage. The IPCC considers CCUS to be critical to achieving the +1.5°C target. The Ministry of Petroleum and Natural gas has recently published a draft policy document for CCUS in India, wherein geological sites with 393 Gt-CO2 sequestration potential have been identified.

The technology for CCUS is still maturing and it cannot be currently deployed cost-effectively at industrial scale. However, advanced countries have a vital interest in this area and are heavily involved in developing the technology.

Investment Requirement for the Transition

Implementing the mitigation strategy will require massive investments. These must be supplemented by investments aimed at adaptation to combat extreme weather events such as prolonged droughts and heavy floods. Several studies have attempted to quantify the additional investment India must plan for in future to mitigate climate change.

Source: Managing Climate Change: A Strategy for India, Centre for Social and Economic Progress. Estimates of additional investments required by India to combat Climate Change.

The additional investment needed has to come from the public and private sectors in some combination. Some of the investments e.g. in transmission infrastructure, agricultural R&D, water management in rural and urban areas will have to come dominantly from the public sector. This will impose a strain on already constrained government finances and efforts will have to be made to create fiscal space to accommodate these investments. For the rest, private sector should carry the burden.

The UNFCCC explicitly envisaged that developing countries would receive international financial assistance to help meet the demands of both mitigation and adaptation. The Paris Agreement of 2015 had promised additional international financial assistance of $100 billion per year, to be achieved by 2020. This has not been achieved. The Glasgow Pact noted that it would now be achieved only by 2023. The Pact also called for a substantial increase in the amount of assistance thereafter. The new target for international financial assistance will have to be agreed in subsequent COP meetings.

Climate change negotiators have not emphasised flows from multilateral development banks (MDBs), such as the World Bank, the International Finance Corporation, the Asian Development Bank, the European Investment Bank and others, as important channels for international finance for climate change. They have instead favoured the UN Green Climate Fund as the preferred channel for this purpose. However, given the scale of financing needed, it is unlikely that the requisite amounts can be achieved without active involvement of the MDBs.

Conclusion

IPCC has observed that actions announced by all nations in COP26 to fight climate change are insufficient to contain global warming to the desired level. The Glasgow Pact therefore called on all Parties to consider taking stronger action, to be announced by COP27. Since the consequences of exceeding +1.5°C are alarming, with India likely to be one of the worst sufferers, Government  should take an active role in pushing all countries to do more. Domestically, the Government has done a commendable job in pushing for RE energy and EV adoption. The effort must be continued with same vigour for ensuring green transition of the economy as early as possible.

Syllabus: GS III, Conservation, Environment pollution and degradation

Source: Mint, Centre for Social and Economic Progress