The tight-rope walk: How should India balance emissions & economic growth

India needs an economic growth model that keeps the environment at its heart, while delivering prosperity for nearly 1.5 billion people
The tight-rope walk: How should India balance emissions & economic growth
The tight-rope walk: How should India balance emissions & economic growthEnergy Watch
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Economic growth has long been the key driver of prosperity, reducing poverty and improving living standards worldwide. According to the World Bank’s Global Economic Prospects Report, India is expected to be the fastest growing major economy in the next two years at a growth rate of 6.7 percent [1]. Most medium to long-term studies of energy demand and supply, also expect (or desire) India’s annual growth rate to be between 5.5 percent and 6 percent over the decade [2]. However, traditional economic growth in countries across the world has largely relied on carbon-intensive industries and production, mobility that disproportionately relies on motorised private transport, better living standards at home and outside led by increasing energy use, more energy and material intensive agricultural practices, thereby leading to rising greenhouse gas (GHG) emissions. A decoupling of the two has rarely been observed, barring some geographies which are endowed with alternative energy sources or those that have consciously adopted a different growth paradigm (Costa Rica or Bhutan, for instance).

Even as the country grows, she has to contend with crippling climate events, driven largely by emissions from the developed world, that are ever more frequent. Research from the Council on Energy, Environment and Water (CEEW) indicates that 8 out of 10 Indians live in districts that are vulnerable to extreme climate events and a third of the districts of the country are exhibiting a swapping trend, here flood-prone areas are now drought-prone and vice-versa [3]. A world that fails to address rising emissions, resulting from our collective choices, will also have to contend with the increasing uncertainties that climate change brings with it. India, despite its status as a developing country and with millions whose standard of living has to be raised, will have to bear some share of the burden.

There is increasing recognition that a narrow definition of economic growth that is limited to GDP per capita or incomes alone, does not do justice to the wider goal of shared prosperity for all

This essay proposes plausible considerations in redefining economic growth and outlines some priority areas for action to maintain an economy-environment balance over the next decade and beyond. We envision four plausible pillars that can support such a different economic world view - domestic policy interventions, embracing technological advancements and innovation, leveraging market-linked instruments, and the role of international cooperation and climate finance. If these do deliver, the India will have accomplished what has possibly not been done so far on this globe — an economic growth model that keeps the environment at its heart, while delivering prosperity for nearly 1.5 billion people.  

The challenge: Redefining prosperity for the masses

There is increasing recognition that a narrow definition of economic growth that is limited to GDP per capita or incomes alone, does not do justice to the wider goal of shared prosperity for all. India’s economic growth over the last three decades has been driven by the services sector which has resulted in inequitable distribution of income and set in place a growth paradigm that has not prioritised technology-led and employment intensive industrial development. However, the largest share of our working population (46 percent) is still engaged in agriculture [4], which is vulnerable to the vagaries of climate — erratic monsoons and hydro-met events, that can significantly impact yields and incomes. Equally, the quality of life experienced by our citizens in our rapidly urbanising landscape is also on the decline. In the year 2001, more than half the population of the country was breathing air that was within the permissible limits of the National Ambient Air Quality Standards. In 2020, that figure came down to 29 percent [5]. Summer heatwaves are projected to occur three to four times more frequently, with average duration expected to double [6]. This leaves a significant population at risk for heat-stress-induced health outcomes and even mortality. The cooling solutions required to combat the increased heat still includes only technological solutions such as air conditioners, whose penetration is less than 10 percent of Indian households [7] . The broader solutions on the urban form and designing for more liveable cities, which economises on energy use have not yet been internalised by our policymakers.

The green economy is decentralised by design, but will need to be nurtured through explicit public support and patronage from corporate houses

While an all-encompassing definition of prosperity for all is likely to take us into a labyrinth of priorities and trade-offs, and indeed some ‘Wordsmith-y,’ it is important to recognise that our choices today are not necessarily in the interest (economic or otherwise) of a majority of our population and often ignores the trade-offs — winners and losers and between competing demands for resources, especially our natural resources. As our colleagues from CEEW argued, in their joint publication with researchers from NIPFP, in the immediate aftermath of the first-wave of COVID-19, “the pandemic gives us an opportunity to shape the economic recovery in a manner that would deliver a new social contract between the state, citizens, and enterprise. This new social contract would rest on two pillars: commitment to jobs, growth, and sustainability; and a razor-sharp focus on tail-end risks” [8].

Policy that frames our economic priorities

1. Green Industrial and Green Economy Policy

With increasing protectionism globally to make domestic green industries competitive, there is a palpable resurgence of industrial (albeit green) policy across the world. India has espoused the trend and has even been a trend-setter, through schemes such as the Production Linked Incentive (PLI) scheme. However, given the much deeper pockets of developed countries (eg the US Inflation Reduction Act) or even the aggressive investments by China in developing a world-dominating industrial base for all green technology, India must be more strategic in identifying opportunities that will serve her interests well. Policies promoting the adoption of renewable energy, energy storage, and electric mobility can drive job creation and economic diversification. However, when it comes to manufacturing, recent studies reveal that select clean energy-related product families concerning solar, wind, and battery products that score high on product complexity index, can be produced competitively in India. This targeted approach would optimise resource allocation while reducing risk exposures in full value chain integration [9]. In effect, India can offset the risk of going from a fossil-fuel importing country to becoming a green-technology importing country through this strategy.

In addition to manufacturing (in the industrial sense), it is imperative for countries to cater to the emerging opportunities in the ‘green economy.’ As a recent study for the state of Odisha has identified, these could be by way of jobs that promote circular economy — recycling of batteries, construction and demolition waste, plastics and electronic waste streams, bio-economy and nature-based solutions like, bio-fibres, bio-inputs, sustainable tourism, mangrove restoration and many more, and, finally, in decentralising the deployment and use of renewable energy for livelihood activities — solar drying, chiller services for perishable products, food processing, etc [10]. The green economy is decentralised by design, but will need to be nurtured through explicit public support and patronage from corporate houses, so that they can become integrated with the larger economy. These sectors have the potential to generate an additional 10 lakh jobs just in the state of Odisha.

The lack of enforcement of emissions standards in thermal power plants is a telling case of bad science derailing an important regulation in addressing India’s air pollution woes

2. Regulatory standards, compliance and incentives

Policy must give a clear call to action by facilitating the creation of standards that drive down emissions — both greenhouse gases and pollutants, across the economy. This direction must then facilitate the implementation of a stringent regime that caps emissions intensity, and eventually emissions, for industrial production, and fuel-efficiency and emissions standards for vehicles. While India was a leader in the implementation of the PAT scheme, it is now clear that the targets set were not ambitious. The Indian Carbon Market, implements an emissions intensity equivalent of PAT and also risks setting low targets. A robust benchmarking process and assessment of the cost-benefit trade-offs beyond corporate bottom lines is necessary to have a successful regime that delivers meaningful reduction in emissions. Successful implementation of standards also hinges on developing scientific temperament on the issue of pollutant emissions and their impacts. The lack of enforcement of emissions standards in thermal power plants is a telling case of bad science derailing an important regulation in addressing India’s air pollution woes. With the increasing penetration of smart meters and IoT (Internet of Things), the opportunity to drive demand side management practices (including through traditional energy efficiency) have grown manifold. The right incentives, through pricing signals for electricity, would unleash a world of possibilities.

Enslaving technology

1. Everything, Everywhere and (maybe) all at once

Technology is the ubiquitous go-to option for all things green. Battery technology for better integration of RE into the grid, remote monitoring and telemetry for assessing generation and state of assets in the transmission and distribution sector, passenger information and ticketing systems to enable seamless information flow and convenient payments for those using public transit, electrolyser technology for producing green hydrogen, early-warning systems against impending natural disasters, efficient cooling solutions to reduce heat-stress and customised inputs at a farm level for managing sowing, irrigation, and pest control to improve agricultural productivity, are all examples of ways in which technology plays a key role in averting economic loss, improving productivity and on-boarding green energy. While there is a case for staggering the deployment of new technologies, the opportunities abound across economic activities and we are far behind on implementing many of them, to serve us well.

The tight-rope walk: How should India balance emissions & economic growth
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2. Research and Innovation – a cultural shift

While the suite of technologies identified earlier are available commercially, India needs to inculcate the research and innovation into the DNA of its private sector. For a country the size of India, R&D budgets of the private sector pale in comparison to public budgets. A few areas shine bright (space and biotechnology, for instance) on account of visionary leaders, enterprising risk takers and consistent funding. There is a need to expand R&I budgets at a rapid pace to nurture the S&T capabilities in students across universities and early career youth in the workforce. The next decade and beyond will be India’s decade — when much of the world would have aged further and there will likely be a shortfall in skilled human resource for various roles across the energy sector.

Conclusion

Balancing emissions reduction with climate resilient economic growth is a complex but achievable goal. It has to start with defining growth that will be equitable and improves the quality of life for the largest number. While there exist multiple levers for driving change, government policy is the most potent way to drive change, and, technology is perhaps the greatest tool to help implement and monitor the progress of that policy. Most importantly, investing in technological innovation will be key to retaining competitive advantage as the role for technology increases and to help find newer avenues for greening our economy.

Disclaimer: Views expressed are personal

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