Mapping the climate transition by identifying policy interventions

Source: The post is based on the article “Mapping the climate transition by identifying policy interventions” published in Mint on 1^st June 2023.

Syllabus: GS 3 – Environment, Growth & Development

Relevance: measures needed by India to align its growth rate with its net zero emission goals

News: In the Report on Currency and Finance, the RBI has highlighted various concerns associated with achieving desired growth rate while controlling the emission targets.

As per the report, if India wants to become a developed country by 2047-48, its GDP growth rate should be 9.6% per annum up to 2047-48.

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What are the commitments made by the countries towards achieving net zero target?

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How can India align its growth with its net zero emission target?

As per the RBI report, India can – a) increase the level of energy efficiency i.e., reduce the energy used per unit of GDP and b) increase the greenness of energy i.e., reduce emissions per unit of energy.

At present, India’s energy efficiency has been improving at 2.3% per annum over the last 10 years. However, it needs to be accelerated to 5%.

Similarly, the share of green energy in primary energy has to be increased to 70% – 82% of the total by 2070.

How can India achieve these targets?

Prioritizing Areas: As per the RBI report, India needs to intervene in some major areas which needs to be implemented over the next 10 years.

Shifting power generation away from coal-based thermal power towards solar, wind and other green sources is the one of the priority areas because this will lead to almost half of the reduction in emissions.

Phasing down coal-based power plants:  As per the RBI report, the govt. should ensure that no new coal-based thermal power plants will be set up after a certain period.

Phasing down coal-based power plants may also lead to phasing out coal mines, which can have implications on employment and state finances. India needs to prepare itself for such challenges.

Investments: Raising the share of green energy to 70% or 82% of total energy by 2070 will involve massive investments in building electricity generation, storage and transmission capacity and also in developing infrastructure for green hydrogen.

Since a large part of investments will be taken by the private sector, there is a need for a policy environment that will encourage such investment.

Carbon tax or cap-and-trade system: The RBI report highlights the issue of imposing such a system. The Electricity Amendment Act makes provision for introducing a cap-and-trade system. However, whether an explicit carbon tax would be better needs to be carefully examined.

Moreover, either option would raise the cost of coal to users and this would be reflected in the price of coal-based electricity.

Such mechanisms might enhance the competitiveness of green electricity without implementing mandatory renewable purchase obligations on discoms.

However, despite such concerns, a big advantage of carbon taxation is that it raises revenue. 

Since both the central and state governments do not have enough fiscal space for the transitions, carbon taxation will provide required resources.

What can be the way ahead?

Improvements in energy efficiency are critical to reduce emissions. Therefore, there is a need to switch to more energy-efficient systems and implement more energy-efficient building designs.