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Introduction to Indian Energy Quadfecta | Why India Matters for Climate Change and Why Climate Change Should Matter to India
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Introduction
Hello readers! Welcome to Indian Energy Quadfecta, where I will be sharing thoughts, ruminations, and semi-organized streams of consciousness related to decarbonization and climate change in India. Climate change, as many will know, is one of the world's most widely recognized 'wicked problems' - one that is naturally multi-faceted, contradictory, economically and socially complex, and very difficult to form consensus around.1 In light of this, it may appear puzzling to be writing a newsletter about climate change, a problem that is inherently global and interconnected, but just focused on one country. It's a fair point too: the earth and its troposphere could care less about whether carbon emissions originate from India, Italy, or Iceland, and concepts like 'per capita emissions' and 'nationally defined contributions (NDCs)' matter only to a limited extent in humanity's mission to limit catastrophic warming. That said, I believe our individual decisions, and the decisions of individual countries, matter. In that context, while the fight against climate change is undoubtedly a global one, this broader war may well be won or lost in a few particularly significant battles. India - with 18% of the world's population and electricity demand that is projected to triple by 20502 - is poised to be one such battleground. For India, like for any other country, climate change mitigation and decarbonization can never exist in a vacuum. Rather, a sustainable energy solution for a steadily developing country like India must necessarily strive to achieve the energy 'quadfecta': affordable, accessible, reliable, and clean. To achieve its climate ambitions while accounting for this quadfecta, India's path to climate change mitigation at scale will need much more than solar panels and windmills. It will involve every aspect of our lives: how we eat, how we ride to work, how we generate electricity, how we grow food, how we manufacture goods, how we travel, how we build buildings, and the list goes on.
Before we go further, let me share a little bit about me: I am originally from India (born in Mumbai, and grew up across India / China / the US) and have been fascinated with topics related to energy and sustainable infrastructure for many years in both academic and professional settings. Most recently, I have been focused on helping to evaluate, build, and scale energy and infrastructure businesses in private investing roles. For me, exploring India’s path to a sustainable economy strikes a personal note and I’m excited to share my thoughts, observations, and insights on a regular basis. Each edition of the Indian Energy Quadfecta will explore a specific topic related to decarbonization in India, including the good, the bad, the okay-for-now, and the really-not-okay! For today's edition, we'll start at the highest level and look to answer two simple questions: "Why does India matter for climate change?" and "Why should climate change matter to India?" Let's get started.
Why Does India matter for Climate Change?
People, People, People
India is on track to become the world's most populous nation by 2027, already representing more than 1 in every 6 humans. While India's current per capita CO2 emissions remain relatively low at ~40% of the global average, the country will nevertheless continue to be a major contributor to global emissions (currently the 3rd largest after China and the United States). India's rapidly urbanizing population will continue to drive towards improved (and more energy intensive) lifestyles. In its India Energy Outlook 2021, the IEA projects that even if India successfully implements its ambitious stated energy policies (what is commonly referred to as the Stated Policies Scenario, or STEPS), it will see a 69% increase in primary energy demand, 180% increase in electricity demand, and a 52% increase in CO2 emissions between 2019 and 2040.3 The path India chooses on climate change will have a meaningful impact on the planet - this is not just speculation but rather mathematical certainty.
See footnote here4 for definitions of the IEA cases modeled in the chart above.
Nature's Bounty
Despite achieving some highly impressive milestones for renewable energy capacity deployments over the past few years, India nevertheless finds itself reliant on coal for over 75% of its electricity generation mix. While much more progress needs to be made to close this coal-to-renewable gap in the coming decades, India's renewable resource potential presents a source of optimism. With tropical conditions, high solar radiation levels, and meaningful rural land with significant wind availability, India's current renewable capacity of 90 giga-watts (GW) as of December 2020 is only a fraction of its estimated resource potential.
A Seat at the Table
In many respects, India has already assumed an active climate leadership role at the global stage. As one of the nations instrumental in the 2015 Paris Agreement, India is now also one of the few countries in the world on track to exceed its nationally determined contributions (NDCs) under the agreement. These commitments included a pledge to cut the greenhouse gas emissions intensity of its GDP 33-35% by 2030, increase non-fossil fuel based power capacity to 40% from 28% and substantially boost forest cover to reduce CO2. Moreover, India is already the second largest solar power market in the world, and is widely recognized to have the potential for becoming a leader in the solar and energy storage value chain.
Why should climate change matter to India?
The narrative around global climate change mitigation has often delved into a zero-sum tussle between developed and developing countries. Developed countries argue that developing countries should shoulder their "fair share" of decarbonization efforts going forward; developing countries counter that this is an unfair standard because the now developed countries had polluted without abandon for decades while industrializing. From an Indian perspective, I believe we’re approaching the point where this debate may not just be unproductive but also irrelevant. In fact, it is entirely within India's own self interest to pursue an aggressive decarbonization strategy because: (1) India is likely to bear a disproportionate share of the negative impacts of climate change, (2) India has has potential to realize transformative economic growth while pursuing climate change mitigation, and (3) India can help reduce its dependence on both foreign imports and foreign capital in the process.
Disproportionate Impact
While the problem of greenhouse gas emissions is certainly a collective one, the resulting impacts of climate change are not distributed evenly; India is at risk of being among countries worst affected. India’s risk exposure is further compounded when one considers India's concentration of economically disadvantaged persons, who are likely to be the most vulnerable to climate risk. Specifically, climate change is likely to drive extreme weather events including excessive and irregular rainfall, frequent drought conditions, intensive heat waves, cyclones, and coastal degradation driven by rising sea levels. The cumulative impact of these events will have ripple effects throughout the country's water, food, and energy systems while displacing millions. These events are also not in the distant future, but very much in the here and now. According to the Global Climate Risk Index 2021 published by environmental think tank Germanwatch, India was the 7th most affected country by extreme weather events in 2019 including an elongated and irregular monsoon season with 11.8 million people affected and $10bn+ of economic damage.5 The other countries in the top 10 make for an interesting comparison: Mozambique, Zimbabwe, Malawi, Afghanistan, South Sudan, The Bahamas, Japan, Niger, and Bolivia. Thus, India has a natural vested interest in driving decarbonization and mitigating the effects of climate change - it is as much a matter of economics and national security as anything else.
Economic Potential
One of the other major problems with the historical narrative around climate change is that it pits environmentalism against economic growth, where progress on the former comes at the expense of the latter. This introduces a false duality and also represents an outdated view. In reality, fixing the environment is no longer a 'trade off' with economic growth, it is a catalyst for economic growth. Decarbonization is now widely recognized as one of the world's largest investment 'megatrends' that is expected to unleash $100+ trillion dollars in capital deployment over the next several decades.6 It is entirely within India's interest (and potential) to capture a meaningful chunk of this economic pie - and actively help to grow it. As one example, in the IEA's STEPS scenario, India's market share of key clean energy technologies such as solar PV, wind turbines, and Lithium-ion battery equipment grows to over $40bn+ per year, with 1 in every 7 dollars spent worldwide being invested in India by 2040, compared to 1 in 20 today. Investments at this scale - whether sourced from foreign direct investments or domestically - are also expected to catalyze growth and job creation, with 1.6 million jobs expected to be added in the clean tech sector through 2040 in a Sustainable Development Scenario.7 In a local context, solar now represents the cheapest form of electricity in India for the last several years, and is now even considered cheaper than operating existing coal plants in several areas. The economic case for continued decarbonization has never been clearer.
'Atmanirbhar-ness'
Much has been said about the Indian government's pursuit of the Atmanirbhar Bharat ("Self-Reliant India") ideal, particularly in the wake of COVID-19 recovery efforts. Meanwhile, the emphasis on clean energy as a key component of 'self-reliance' in the energy sector is also gaining steam. India currently relies on foreign imports for over 75% of its oil demand. Similarly, despite having the world's fifth largest coal reserves, India's reliance on coal imports has also been growing steadily. The implication here is that a truck driver in Haryana looking to refuel their vehicle is entirely at the mercy of price movements in Cushing, Oklahoma, the Brent oilfield in Norway's North Sea, and oil tankers off the coast of Iran - this is hardly a recipe for self-reliance. Low carbon energy sources and their enabling technologies have the potential to paint a completely different picture for India's quest to be Atmanirbhar: domestic infrastructure and domestic manufacturing fueling domestic job creation, perhaps even backed by domestic capital.
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“Climate change as a ‘wicked problem’”, by Gerald Stang and Balazs Ujvari; European Union Institute for Security Studies;
https://www.iss.europa.eu/sites/default/files/EUISSFiles/Alert_52_Climate_change.pdf
India 2020, Energy Policy Review, https://iea.blob.core.windows.net/assets/2571ae38-c895-430e-8b62-bc19019c6807/India_2020_Energy_Policy_Review.pdf
India Energy Outlook 2021, International Energy Agency, World Energy Outlook Special Report
For reference, the scenarios modeled in the IEA India Energy Outlook 2021 report is paraphrased below:
Stated Policies Scenario (STEPS): based on today’s policy settings; assuming spread of COVID-19 largely brought under control in 2021
India Vision Case (IVC): based on rapid resolution of public health crisis and more complete realization of India’s state policies; faster economic growth
Delayed Recovery Scenario (DRS): downside scenario for India’s energy and economic development in the event that pandemic is more prolonged
Sustainable Development Scenario (SDS): India mobilizes additional surge in clean energy investment, rapid decline in emissions, consistent with longer drive to net-zero emissions, while accelerating progress towards other sustainable development goals
Global Climate Risk Index 2021, by David Eckstein, Vera Kunzel, Laura Schafer
World Energy Transitions Outlook, IRENA, March 2021, https://www.irena.org/publications/2021/March/World-Energy-Transitions-Outlook
India Energy Outlook 2021, International Energy Agency, World Energy Outlook Special Report