Analyse cost-benefit carefully: World Bank

Analyse cost-benefit carefully: World Bank

New Delhi: India will be able to reduce its carbon intensity considerably if it stays the course on its plans to slash its energy deficit and move to more environmentally friendly power alternatives by 2031, but any further cuts will come at a high cost, according to a yet-to-be-released World Bank report.

The report, India: Options for Low Carbon Development, is a synopsis of a study by the World Bank for the Indian government and was due to be unveiled at the climate change talks in the Danish capital of Copenhagen on Wednesday, but its release was cancelled. A copy of the report was reviewed by Mint.

“The World Bank had forwarded a synopsis of the draft study to the government of India as it was considering presenting the initial findings for discussion at Copenhagen," said Charles Cormier, country sector coordinator for the World Bank’s social, environment and water resources management unit.

“However, the Bank decided against making the presentation at Copenhagen as the findings of the study are still to take final shape and we did not wish to join the debate at this stage," added Cormier, a co-author of the report. The study, requested by India in 2005, is still undergoing internal reviews at the World Bank and will not be finalized until early 2010, he said.

The report analyses three basic scenarios, which project fuel use in energy-intensive sectors and associated carbon dioxide (CO2) emissions beginning in 2007 through the 15th five-year Plan.

Also See Crystal Ball (Graphics)

“This report counters the Planning Commission’s perception that India wasn’t doing enough and it says that additional action will not be in its own (India’s) interest," said a government official, who did not want to be identified.

Last week the government announced a 20-25% cut in India’s emissions intensity by 2020 and a 37% cut by 2030. Carbon intensity is a measure of the amount of greenhouse gas emissions relative to a country’s economic output, such as manufacturing and services.

The World Bank report takes into account electricity generation, energy-intensive industries, non-residential buildings, residential electricity use and road transport, which make up three-fourths of CO2 emissions in India from energy use.

The study finds that the CO2 intensity in the five sectors studied would decline 28% (between 2007-2031) if India implements its plans to completion, making ambitious investments in lower carbon energy capacity, reducing losses from electricity transmission and distribution and retiring old thermal energy capacities.

The scenario also assumes that hydropower will increase fivefold, which is the technical limit of what is possible. Onshore wind capacity is also taken to the technical limit of what is achievable, nuclear capacity more than quadruples and the share of so-called supercritical coal plants in electricity generation increases from 20% in the 11th Plan (2007-2012) to as much as 90% in later years.

The second scenario in the report, which takes into account delayed implementation of supply measures vis-a-vis plans, projects a 25% cut in carbon intensity between 2007 and 2031.

The most ambitious scenario includes reduction in CO2 emissions per tonne of products such as steel and cement by almost 20% on average by 2020, mandatory minimum efficiency standards for appliances, evolving over time to international standards, more stringent fuel economy standards matching European Union emission norms and increased generation of environment-friendly energy such as solar power. This scenario indicates a CO2 emissions intensity reduction of 41% by 2031 from the five sectors— closest to the one India announced recently.

“Given the large amounts of carbon-neutral investment needed in the scenario and even more so for emission stabilization, unless the carbon-neutral technologies were fairly cost-competitive, the carbon finance costs would be staggering", warns the report.

The study, however, does not specify the costs despite indications of cost figures in earlier drafts. The government has said that it will undertake action to reduce emissions intensity without international financial or technological help.

“There is a lack of data on costs of various technologies that makes it difficult to make absolute statements on the cost implications of the various scenarios modelled. However, we hope to have some element of robustness to the analysis we will be presenting in the final report, which is expected to be ready early next year," said Cormier.

Analysts say that the cost calculations are critical to deciding on cuts in emissions intensity.

“No one knows the cost. What the government has said is that the while the emissions intensity has been dropping, we will raise the pace by 50%. But how will they do it? Why do you need to take more action and who has calculated the cost," said Surya Sethi, former senior adviser, energy, at the Planning Commission.

Some experts also call for a measured, policy-driven approach towards reducing emissions. Such an approach wouldn’t “artificially constrain us" to a set target, said Navroz Dubash, senior fellow at the Centre for Policy Research, a New Delhi-based think tank.

The World Bank study recommends a monitoring and evaluation system to detect any slippages during programme implementation and to ensure early corrective measures.

“Unless India improves the allocation of financial, technical, institutional and skills-based resources, achievement rates may continue the roughly 50% success rate experienced for the addition of new generation capacity" in the past three five-year Plans, it says.

In conclusion, the report warns that Indian decision makers should carefully consider costs and benefits from cleaner energy options. Measures such as energy price adjustments to reflect carbon content and local environmental impact and policies to reduce traffic congestion haven’t worked in any country, whether developed or developing, it says.

Graphics by Ahmed Raza Khan / Mint