Author: Ankur Malyan
Energy Review, Vol 4. Issue 4. 2022
The Intergovernmental Panel on Climate Change’s (IPCC) latest WG-III AR6 report has re-established the necessity of reaching net-zero by 2050. In the race to net-zero, India has announced its commitment to 2070 net-zero while mainstreaming equity in the climate debate. A developing fossil-dependent nation, India is expected to undergo complete transformation leading to a new climate paradigm.
A New Climate Paradigm
India’s commitment to 2070 net-zero means phasing out coal from the power system and industry by 2060, the much greater extent of electrification across sectors and technological advancement around hydrogen and carbon removal technologies reaching commercial feasibility within the coming decades. However, the new climate paradigm is beyond the energy system transformations. It means redundancy of fossil businesses but creating opportunities for green enterprises, for instance, the advent of Solar/Hydrogen India Ltd. It means job losses in fossil industries but a multi-fold increase in green jobs. It also means going away from the current political-economy structure toward market-driven and competitive mechanisms. Also, it would mean a more cohesive alignment among and between states and national commitments.
Other components will be citizens weighing their carbon footprint while making decisions, institutions mainstreaming green skills in their curriculums, building an equipped workforce, and raising citizens’ earnings to afford greener commodities. A new paradigm could also expect the emergence of a global carbon economy, trading carbon as any other commodity. There would also be geopolitical transformations, such as lithium and hydrogen becoming the ‘new oil’ and emerging new trade centres. Nonetheless, many other social and economic transformations could be expected under these new standards.
Pathways for an Emerging Leader
Being cognizant of its responsibilities and willing to become a climate leader, India has already started investing in the big bets. Some primary initiatives include achieving self-reliance via indigenising manufacturing (Atmanirbhar Bharat), making a green hydrogen hub in India (National Hydrogen Mission), expanding the renewable energy portfolio, promoting electric vehicles, etc. To ace the transitions to net-zero, India must focus on the five primary elements – ‘Panchtatva’. The five elements of India’s net-zero pathway include investment, infrastructure, just transition, research & development and political economy. To be a leader in the new climate paradigm, India must be blissful for green energy businesses, emerge as a green manufacturing hub, be a climate justice torchbearer, become a technology (co-)innovator, and develop sustainable and competitive markets.
Firstly, India must diversify its investment portfolio towards green energy while intentionally discouraging fossil fuel businesses and investments. Public and private investments must directly support green businesses with appropriate financial and regulatory incentives. Since there has been a significant focus on hydrogen, India must move the needle faster, changing visions to reality and developing confidence among private investors via demonstration projects. However, there must be a risk mitigation mechanism and the availability of low-cost financing for promoting these projects.
Secondly, since India envisions becoming a manufacturing hub, it is apparent that the transition must be green for a net-zero pathway. There must be incentives to support green manufacturing. At the same time, there must be a robust carbon pricing mechanism to make green products competitive. Supporting the indigenous green manufacturing value chains need reliable infrastructure and logistics. For the lifecycle of each product, from cradle to grave, processes must be clean, requiring a reliable supply of clean fuel (such as green hydrogen), green movements of goods via zero-emissions trucks or trains, and resource-efficient recycling to achieve circularity.
It is undeniable that net-zero has to be a citizen-centric transition in all possibilities. The just transition is often discussed in climate conversations, but it is necessary to acknowledge that the concept is beyond coal and must be viewed across other sectors. Thus, thirdly, it must be a torchbearer for climate justice. Jobs must be secured across industries such as fossils, conventional vehicle supply chains, etc. Additionally, the just transition is nearly impossible without the capacity building of the current and new workforce that needs advanced skill development programmes. Also, India being an agricultural economy, expected to cut greenhouse gas emissions, the just transition of farmers towards modern methods is equally essential. Thus, a ‘just transition beyond coal’ should be an emerging social principle that needs attention while agrarian economies like India undergo economic and low carbon transition.
Multiple scenario analysis for net-zero has highlighted the role of carbon removals, including capture, utilisation and storage (CCUS) and hydrogen, in decarbonising the Indian economy. However, it is crucial to note that India’s net-zero transition is unsustainable, with the country being a technology borrower. Hence, fourthly, India’s vision must emerge as a technology innovator/co-innovator. The utilisation of carbon across processes has already started gaining attention. However, support in building an ecosystem and market for carbon products could accelerate CCUS. Ecosystem support is also needed for the cost-competitive production of hydrogen. Also, the technological challenges associated with hydrogen need to be overcome with dedicated investments in research and development.
The fifth element of net-zero transition is developing a sustainable and competitive market by eliminating the current political economy structure. The Indian economy has many economic and regulatory safety nets, such as cross-subsidy for electricity and fertilisers, gas allocation policy, etc. With rising income, this political-economy structure must be phased out gradually. Instead, more sustainable, open, and competitive markets must be established, leading to resource and economic efficiency. For the vulnerable groups, the focus should be on mainstreaming them into the development wave to raise their income and affording capacity. These reforms will be the toughest yet needed to build the future economy.
Overall, being a leader in this new climate paradigm might not be easy and would involve many unconventional reforms in the economy. However, the discussed elements must be tied together to make this happen. India has all potential to hold this place considering the size of the economy, human resources, available resources and vision of the future. Thus, with a greater focus on ‘panchtatva’ and aligned pillars of the economy, India would be a leader in the new climate paradigm.
(Ankur Malyan is a policy researcher working at the Council on Energy, Environment and Water (CEEW), New Delhi, India, in the Low-Carbon Pathways team. He has been working in the energy and climate change domain for more than three years, exploring the near- and long-term aspects of energy transitions and mitigation pathways.)■□■