Climate action: India Inc needs a clear road map for our green transition
- A sectoral approach is needed that lays out what’s expected of energy-consuming businesses so that they can align their decarbonization paths with national goals and invest quickly.
On the positive side, India’s aggressive push for renewable power has resulted in renewable electricity costs becoming competitive with grid power, although India still has to make round-the-clock (RTC) power competitive. A differential market approach—with high paying customers such as industry and the commercial sector being targeted as beneficiaries of RTC power—can help move the needle quicker, giving a further boost to renewable power. The residential and agricultural sectors can possibly help deal with the intermittency of renewable power better through well-designed demand-response programmes, leading to more efficient consumption and a possible push for stand-alone renewable power. In addition to preparing the manufacturing/supply sectors for a low-carbon future, aggressive targets adopted by the government are also helping electricity markets mature and the country build capacities in related institutions, such as regulatory commissions. A case in point is the evolution of green tariffs, with the Joint Electricity Regulatory Commission recently proposing an incremental tariff for Chandigarh. Green tariffs have been in India for nearly 15 years, but with limited uptake.
India’s early action on green hydrogen and electric vehicles (EVs) also holds promise in helping these sectors evolve in line with strategic national interests. The EV programme, albeit with substantial subsidies, has resulted in about 5% of total vehicles sales between October 2022 and September 2023 being electric. This is expected to increase eight-fold to 40% by 2030 as a number of identified barriers are addressed. We need better charging infrastructure, wider choice of charging models (and EVs), safety, etc. Learnings from this programme are helping build our ecosystem to support EVs and also being integrated into future incentive schemes, with FAME 3 proposing to extend support to hydrogen vehicles. However, the green hydrogen initiative is in its infancy in India, and we should take note of international developments and critiques of both the economics and scale of its impact, beyond its application in the vehicles industry. Green hydrogen applications and infrastructure set-ups for meeting dispersed demands pose a huge risk of stranded assets, and India may be well served by investing in the development of sustainable business models simultaneously. Cross-sectoral learning from city gas distribution models may prove useful in avoiding pitfalls.
To address gaps in preparing Indian industry for a soft landing in response to climate concerns, India needs to urgently provide clarity on its evolving economic structure and the obligations that energy-consuming sectors would face while playing their part in the transformation needed.
India’s pioneering LiFE programme could potentially have an impact on demand—more in the form of shifts than reduction. A not-so-tiny example emanates from a design-challenge competition to develop edible cutlery, among other initiatives of the ministry of tourism. As evident from the much-reported travel chaos over the New Year, and every other holiday, tourism in India is growing by leaps, with devastating effects. Responsible tourism can, if designed well, have a material impact on climate mitigation and adaptation. Another striking example of enabling responsible tourism is to shift from the construction of ecosystem-destroying roadways to popular destinations towards mass transit systems (with number control). Again, climate realities may result in today’s popular destinations losing their sheen over time due to the impact of either climate threats or policy changes driven by the same. Indian industry needs to recognize the risks and become an active stakeholder in long-term investment decisions.
An approach similar to what has been adopted for energy-producing sectors is required for energy-consuming sectors as well. The sooner each industrial sector (a sectoral approach is important for a level playing field in India) gets a line-of-sight on its path to decarbonization, the sooner it would be able to align its operational and growth choices with a climate-focused strategy based on projected energy options. Clarity on the glide paths available to consuming industries would also provide comfort to low- or zero-carbon-energy-producing sectors in making relevant investment decisions, thus improving the investment environment. A virtuous cycle between low-carbon energy demand and supply would provide a further impetus to renewable energy. From an international perspective, clear evidence of following a country-appropriate carbon pathway could possibly provide an argument against externally-imposed ‘carbon taxes’ such as the EU’s Carbon Border Adjustment Mechanism. Indian industry should adopt an aggressive approach to demanding an early comprehensive climate action plan.
Lastly, long-term goal clarity at the sectoral and sub-sectoral levels would empower Indian industry to factor in vulnerabilities associated with supply chains—in particular international—and prepare for skilled manpower adjustments. The latter too is a long-gestation adjustment that will involve partnerships with knowledge sectors. In the age of climate change, industry needs to recognize that we are all in this together and must act in a concerted manner to mitigate responsibly and adapt inclusively.
