The year 2023 brings a new set of challenges for India in climate change policy and actions. Last year, India updated its Nationally Determined Contributions (NDCs) under the Paris Agreement and also released a Long-Term Low Emission Development Strategy (LT-LEDS) in the context of a net zero emissions goal by 2070. Work on the road map for the transition of economic sectors included in the Strategy is to begin. But more urgent is resolving the issues in implementing the updated NDCs that will be achieved by 2030.
The background of the emerging challenge is the Global Stocktake (GST) that will take place this year (2023) at the climate conference in Dubai. GST is a process aimed at taking stock of progress on climate change commitments under the Paris Agreement, particularly in mitigation, adaptation, finance, technology, capacity building, etc. GST will determine the adequacy of current global efforts and the nature and scale of efforts needed for the next round of Nationally Determined Contributions.
Will India be adversely affected by this process? It may well be so if the Global Stocktake remains focused on the mitigation of emissions and ignores the questions of impacts of climate change, the adaptive capacity of countries, and the mobilisation of resources and technologies necessary for the transition. How should India build a narrative that helps her negotiate the Global Stocktake? Four steps could be taken.
First is by showing that her targets are not just ambitious but are backed by a coherent technology and financing plan for transition. The plan should remove the roadblocks to transition in terms of policy, finance and institutional structure.
For this to happen, the Centre and states need to look at energy transition from a common perspective and not in adversarial terms. Currently, there is a certain degree of distrust between the two. Even though the non-fossil fuel sources (including large hydro and nuclear) as a share of the total electricity capacity of the country have risen to 42%, integration of renewable energy into the grid is a question mark. Moreover, the rate of capacity creation needs to be doubled from less than 20 GW to over 40 GW per year to reach the 500 GW mark by 2030.
Estimated additional investments for this purpose are at least US $380 billion by 2030. Investments at this scale cannot materialise unless reforms in the current regime of energy pricing and distribution take place with the consent of the states. Centre-state coordination is key to avoiding the pile-up of stranded assets and attracting private capital in the long term.
The question of coal phase-down comes up in all conversations on the clean energy transition. States are bound to be affected by the phase-down if and when it happens. Planning for the coal phase-down also implies scaling up the already enhanced target announced under the updated NDCs and securing additional investments to create capacity.
The G7 group of countries have offered public, private and multilateral finance to India through ‘Just Energy Transition Partnership’ to facilitate this process. The partnership can be gainful only if it looks at coal not in isolation but as part of the overall energy system and secures capital at costs that are superior to those available in the international markets. The pace and composition of sectors chosen for reform must also be consistent with the priority of states and the nation.
Second, states must be assured that their climate vulnerability is recognised and that the Centre is willing to help them in every possible way to build climate-resilient infrastructure and protect the economic sectors from loss of productivity. This needs funds for adaptation and economic transition at a scale grander than has been attempted so far through National Adaptation Fund and the Finance Commission grants. A platform for sustainable finance for states can be created where all stakeholders, including the Centre, states, multilateral financial institutions, corporates and philanthropies, get together to strengthen the hands of states. This will help states become equal and interested partners in the movement for Lifestyle for Environment (LiFE).
The third step involves framing a policy for the creation of demand and production facilities for alternative fuels. The government has reiterated in the LT-LEDS that it is keen to encourage investments in green hydrogen and biofuels. However, this entails a clear assessment of the demand from various sectors and investments within a timeframe.
The Indian civil aviation industry will be subjected to the 2020 emissions freeze line from 2026 under the ICAO regulations. The shipping industry may soon have to follow the IMO mandate. Green ammonia can help bring down the carbon footprint of the agriculture sector. Together, we need to assess the targeted scale of production of alternative fuels like ethanol, methanol and hydrogen by 2030 and devise the regulatory support or incentives needed to meet the demand from domestic sources.
Fourth, the markets can help moderate the transition cost by harnessing the scale and efficiency of technologies. The government has rightly initiated steps for creating an effective domestic carbon market. Indian players have a large and vibrant presence in the international voluntary carbon market. But they are daunted by the prospect of possible restrictions on their participation. It will help the market grow fast if the government segregates the economic sectors for domestic and non-domestic authorisation and dispels doubts about the availability of carbon credits for domestic and international use.
Managing the transition in all sectors affected by climate change is a complex process. Taking the proper steps early will make it easier. It will also help establish India’s leadership by demonstrating that her NDCs represent more than her fair share of global responsibility and capacity.
R R Rashmi
Distinguished Fellow at The Energy and Resources Institute, New Delhi and former civil servant