LONDON, April 10 (Reuters Breakingviews) - Helping India grow in a green way is one of the best things that could happen for its people and the planet.
Emissions from the world’s most populous country are only 7% of greenhouse gases but are growing fast while those produced by rich countries have largely peaked. If India avoids the dirty path to development that others including China have taken, everyone will have a better chance of avoiding climate hell.
India would have a lot to gain too. A step-up of investment in low-carbon development could provide good jobs, cut air pollution and increase energy security, says Navroz Dubash from the Centre for Policy Research, an Indian think tank. It would also position the oil importer well as global trade restructures along green lines and in favour of goods produced with a low carbon footprint.
This would be a massive undertaking. Prime Minister Narendra Modi’s government has committed to decarbonise the economy by 2070. Many experts think India needs to go even faster. The consultancy group McKinsey, for example, calls for a $11 trillion investment to fund an “accelerated scenario” that completes most of the work by 2050.
India will need to attract the lion’s share of the funding for the required electricity storage, green hydrogen and other clean technologies, as well as to ramp up renewable energy, from private sources. To do so, it will need policies that incentivise green investment, including accelerating its plans for carbon pricing.
Rich countries can also help, even at a time when their budgets are stretched. They can provide guarantees, so cutting the cost of capital for private investors. They can also get the World Bank to step up its climate investment - an idea which India is pushing for and which is likely to figure prominently at the World Bank and International Monetary Fund’s spring meetings this week.
KNOTTY ISSUES
The Group of Seven (G7) rich industrial nations has sought to interest India in a Just Energy Transition Partnership (JETP), following similar deals struck with Indonesia, Vietnam and South Africa. These pledged financing, partly to help retire coal power plants early.
But the Modi government would prefer to work through the Group of 20 (G20) large economies, which it is chairing this year, says Vaibhav Chaturvedi of CEEW, an Indian climate think tank. It would like to present a broad framework on how to promote green development for emerging economies rather than focussing on running down coal.
Modi’s government doesn’t want to single out the black stuff, which accounted for 73% of electricity generation in the last financial year and is the only fossil fuel it mines in significant amounts. India worries its electricity grid would become unreliable if solar and wind power, which is cheaper to produce but not generated around the clock, plays too big a role in the energy mix - though this could be fixed if it ramped up storage. It is also concerned because millions of people work in or are dependent on the coal industry.
HOLISTIC PLAN
Even if a deal comes under the G20, it will still be the G7 plus others such as the Gulf states that provide help through finance, technology and trade opportunities. If the G7 doesn’t single out coal and takes a broader view of the overall path of India’s greenhouse gas emissions, a grand bargain may be possible.
India could then be much more ambitious in its transition plan and the G7 and other rich countries could mobilise funds, focussing on key bottlenecks.
There’s an opportunity too to fix India’s bust electricity distribution companies, which are mostly owned by the country’s states and represent a major blockage in the energy transition. These “discoms” fail to pay their bills on time to power generators because politicians want them to subsidise power to retail consumers and farmers. They made a collective loss of over 2.3 trillion rupees ($28 billion) in 2019-2020 before subsidies and other support - equivalent to 1.2% of gross domestic product.
This is a tricky political problem. But if the central government comes up with a solution, rich countries could help fund it. Investors would then stop worrying whether the discoms would pay them - and more money would flow to where it is needed for India to curb its emissions faster.
Green growth would also help Indian exporters such as JSW Steel(JSTL.NS) avoid the carbon tariffs the European Union and probably Britain are planning to introduce on dirty imports. That provides another incentive to do a deal for a country with big ambitions to establish itself as a global manufacturing hub and as a supply chain alternative to China.
For much of this to work, the United States would need to dial down the protectionism in its Inflation Reduction Act, which subsidises clean technology made in America. India, along with European countries and Canada, has criticised the legislation for sucking green investment away from the rest of the world and called for America to “find a way out for its trusted partners.”
There are undoubtedly many obstacles to a climate deal between rich countries and India. But the prize is so great that both sides should bust a gut to overcome them.
Follow @Hugodixon on Twitter
