With the incoming Biden administration promising to bring climate change back on the US agenda, the Modi government, which had fallen silent on this subject in keeping with Donald Trump’s distaste for the subject, has suddenly shifted gears. The Centre has set up an apex inter-ministerial committee for implementation of the Paris Agreement, the path-breaking pact brokered by former President Barack Obama.
The purpose of the apex committee, known as AIPA, is to generate a co-ordinated response on climate change matters, which ensures that India is on track to meet its Nationally Determined Contributions (NDCs) obligations under the Paris Agreement. The AIPA will have members from 14 ministries and will be chaired by the secretary, ministry of environment, forests & climate change. It will operate as a national authority to regulate carbon markets in India, formulate guidelines for consideration of projects or activities, issue guidelines on carbon pricing, market mechanism and other similar instruments that have a bearing on climate change and NDCs.
India has made eight commitments under the NDCs, which has three quantitative goals – reduction in the emissions intensity of gross domestic product (GDP) by 33-35 per cent over 2005 levels by 2030; achieving about 40 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030; and creating an additional carbon sink of 2.5-3 billion tonnes of carbon dioxide equivalent through additional forest and tree cover by 2030.
While the Democratic Party’s victory marks a return to an erstwhile policy position for the US, including a rejoining of the Paris Accord, India is a remarkably different country than it was four years ago, particularly as it relates to its energy mix. India is already halfway towards meeting its 175 GW by 2022 goal and renewables make up 23.5 per cent of total electricity generation capacity in the country. India’s solar tariffs are now among the lowest in the world for large utility-scale projects and the government has allocated $1.4 billion towards the electrification of transportation infrastructure.
Large market for fossil fuels
On the flip side, however, despite the strides in renewables, India’s current and planned energy mixes reflect a strategy, which includes coal, oil and natural gas, rather than a predominantly renewable energy focus. Coal India Limited, owned by the government, has been instructed to nearly double its annual coal production by 2024 and the process of auctioning 41 coal blocks for commercial coal mining by both public and private entities has begun. Since 2017, a large number of international oil & gas companies have invested in oil & gas projects in India, with the view that the country is one of the last remaining large markets for fossil fuels. Even as India builds renewable energy capacity, it remains the second-largest importer of coal, the third-largest importer of oil and the fourth-largest importer of liquefied natural gas (LNG) in the world.
Despite the strides in renewables, India’s current and planned energy mixes reflect a strategy, which includes coal, oil and natural gas, rather than a predominantly renewable energy focus
On the other hand, the US, emboldened by a fracking boom, has pivoted to being a net exporter of oil and gas and has driven American shale producers to ink supply contracts with Indian public sector firms. Will Biden rein in the fracking boom at a time of job loss in his country?
But, if climate change takes centrestage in the US-India relationship, the nature of the Strategic Energy Partnership between the two countries will come into focus increasingly. It is expected that the new US administration will push for faster decarbonisation and a more renewables-focussed energy transition for India. India, on its part, needs to take advantage of America’s toolkits – financial and knowledge transfers.
Besides, the US has a mature and rapidly evolving power market, which has experience with everything from interstate power flows, utility-scale battery storage and large corporate procurement to asset-based securitisations of residential solar loans, power price hedges and net metering. The exchange of this wealth of information across policymakers and financial engineers will be crucial if the US would like to work with India to move towards the more ambitious 1.5 target for global temperature increase.
For India now, the major challenge is to reduce reliance on coal while continuing to meet its growing energy needs in a manner that is affordable to the broadest section of population. A projection by McKinsey indicates that renewable hybrid systems could be competitive with coal fired plants over the next 8-10 years. However, such a transition will have to be accompanied by programmes for providing skilling and employment opportunities for the 1.5-million-strong workforce, which is currently employed in the coal value chain.