A low-carbon future?
With the next round of talks on the Kyoto Protocol beginning this week, climate change is back on the agenda. Can India balance its thirst for higher growth with lower carbon emissions? Abhijit Patnaik writes.delhi Updated: Nov 28, 2010 23:34 IST
Greenspaces, a proposed Information Technology Park in the National Capital Region, is a 'Green' special economic zone (SEZ): designed, developed and operated in a low carbon, sustainable way. It will have a 1.75 million square feet building which includes features such as rainwater harvesting, solar hot water systems etc and 1 megawatt solar power generation — enough to meet electricity usage of over 500 homes — from rooftop cells. And yes, Reva enthusiasts, even charging points for electric cars.
With developed nations clamouring for countries such as India and China to accept binding reductions in emissions, this kind of project is but a drop in the vast ocean of low-carbon investments that can attract billions of dollars of wealth into the country and put India on an environmentally sustainable growth trajectory. The World Investment Report 2010 estimates that worldwide low-carbon foreign direct investment (FDI) flows in 2009 in merely three sectors — renewables, recycling and low-carbon technology manufacture — alone amounted to $90billion (around R4.11 lakh crore). The potential for low carbon investment is enormous — but is India ready to reap the benefits?
Though India's current per capita CO2 emissions are 1.2 metric ton (MT) against a world average of 4 (the US is 19), this cannot be used as an excuse for complacency in investing in green projects. Global warming is a real threat, and by facilitating additional investments and transfer of technology, low carbon investment can reinforce India's growth while controlling the carbon intensity of its development path. After all, India is both a large potential market for products borne out of low-carbon investments (like energy efficient household appliances) as well as an emerging player in the low-carbon industry — developing photovoltaic cells, wind power, waste management, reforestation efforts etc. "We have the option to get locked into a high-carbon growth trajectory since we have abundant reserves of coal. We find ourselves at a critical juncture if we want to stay on a low-carbon growth trajectory," says Shreekant Gupta, adjunct professor of Economics at the Lee-Kwan Yu School of Public Policy in Singapore.
Pull factors for low carbon investment, such as natural resources and potential markets, are not problems in India. What may be a hurdle is the lack of supporting policies from the government to ensure businesses make a more positive contribution.
The Clean Development Mechanism (CDM) developed by the United Nations Forum for Combating Climate Change (UNFCCC) has allowed developed country investors to comply with emission norms by investing in climate mitigation projects in developing countries such as India and acquiring carbon-credits in return. As of now, India accounts for 22.5% of all registered CDM projects at the UNFCCC. However, the carbon-credit volumes transacted in India in 2008 were small — only 4%, dwarfed by China's 84%. It seems India is taking baby steps in this direction.
"In pure carbon investments, which are high-risk, like the Bachat Lamp Yojana (which promotes replacement of inefficient bulbs with energy-saving CFL bulbs), waste management etc.," said Nitu Goel, vice president at Managing Emissions, a carbon-finance firm. "The appetite is low due to long gestation periods of carbon-credits. But in energy investments, which are profitable, we have seen a large number of projects."
Progress is being made. "At a policy level, India has the National Action Plan on Climate Change. In the energy sector, policies have been formulated to encourage 3rd party sales, feed-in-tariffs, allowing 100% FDI and other benefits," said Ashutosh Pandey, of Emergent Ventures India, a climate change consulting company.
In fact, nearly half of the 806 reported investments from 2003-09 in environmental technology products like windmills and solar panels were in developing countries including India, Brazil, China and Indonesia, according to the WIR.
"Indian firms have shown interest, but to go to the next step, they need to show more pizzazz," said Gupta.
"Demand for cars is on the cusp of a great expansion. This will have a huge impact on our energy needs and carbon emissions," he said. "A massive investment in hybrid cars could be the next big opportunity for Indian car manufacturers. Differential road tax to create a market for eco-friendly cars is one example of policy we don't have."
(Last week, the government announced an incentive package that gives up to R1 lakh to buyers of electric cars).
The developmental benefits that India can capture with a well-designed low carbon strategy include energy security, cleaner air in cities and better waste management. After all, Gupta said, "almost 300 million people in India don't have access to electricity. For them, every hour is earth hour."