Elephants In The Climate Room

Context: An analysis on the cost factor and other concerns shaping India’s climate action.

Major concerns before India’s climate action

• Supply-side complexities: This goes beyond reducing the commercial cost of renewable energy while expanding its coverage, E.g. Need to build infrastructure for storage and distribution.
• Demand-side concerns: Need for radical change in technologies and processes to efficiently absorb or use renewable energy on commercially viable terms.
  • E.g. Lack of infrastructure and commercial viability limiting the scope of electric cars.
• Need for coal-based development: While the GoI’s in 2020 has decided to liberalise the coal sector for commercial mining, it cannot outrightly phase out the use of coal.
  • China, which has a much higher income and energy consumption, has a 62% share of coal (India 50%), and it added 17 new coal plants in 2020.
• Conservative approach: Under the 13 Production-Linked Incentive (PLI), only two are linked to green technologies - advanced chemistry cell battery and high-efficiency solar photovoltaic (PV) modules.
• Structural disadvantages in India’s manufacturing sector: High-cost land, inflexible labour laws and high cost of capital and added risks from policies such as carbon tax.
  • Inadequate spending on R&D (0.7% of GDP), poor private sector participation in R&D etc., limits the scope for the emergence of breakthrough technologies.
  • The startup ecosystem, a potential breeding ground for innovation, is still focused on services and ‘reverse engineering’ more than breakthrough technologies.
  • Thus, the innovation in cleantech to happen in advanced economies and India had to rely on buying cleantech on commercial terms.

Conclusion: Considering the burden of the cost factor and other challenges, India would do well to adopt a conservative stance on climate negotiations and not commit to net-zero either by 2050 (like advanced economies) or 2060 (like China).