India must incentivize investments in carbon removal

Globally, the transition to a lower-carbon economy requires fundamental changes in the ways that energy is produced, transported, and used. And developing nation such as India is no exception. The country has made commendable progress in the last decade towards setting up a low-carbon energy system, by promoting energy efficiency and utilising renewable energy sources. 

In a report jointly published by The Energy and Resources Institute (TERI) along with the Shell Group of Companies India, strategic actions are required for India to meet its goal of net-zero emissions by 2030. This includes increasing electrification in various sectors, meeting electricity demand through non-fossil sources, promoting low-carbon alternatives like hydrogen and biofuels and deploying digital solutions to enable low-carbon options. The report also emphasizes the importance of adopting circular economy business models to drive resource efficiency.

Photo Source: Shutterstock

India’s industrial and manufacturing activities have increased manifolds, owing to a rise in demand for quality goods and services in the global market. But in the midst of soaring economic aspiration, India must also revise its agenda on achieving its net zero carbon emission without derailing the efforts on industrial developments.

The nation is facing an energy dilemma, ensuring energy security and environmental sustainability while working towards decarbonization, all at the same time. Environmental experts, however, are confident that India has begun its efforts to amplify the production of power through renewable methods.

On August 1st, the Energy and Resources Institute (TERI) along with the Shell Group of Companies India launched a report namely ‘India transforming to a net-zero emissions energy system: A Call to Action to 2030’ at the T20 Summit in Mysuru, Karnataka. The report highlights the actions required for India to meet its goal of net-zero emissions by 2030. Some of the key strategies include increasing electrification in various sectors and meeting electricity demand through non-fossil sources. The other means mentioned in the report include promotion of developing low-carbon alternatives like hydrogen and biofuels and deploying digital solutions to enable low-carbon options.

The report also emphasizes the importance of adopting circular economy business models to drive resource efficiency. As of 2023, India holds the G20 presidency, putting it in a unique position to lead deliberations on key global challenges including climate change. The nation has taken steps its efforts in line with its goal to achieve net-zero emissions by 2070. However, like many developing countries, India also faces the challenge of balancing environmental sustainability with ensuring energy security and energy equity for its people.

India’s economy at par with developed nations

In recent years, India has accomplished some important economic milestones. The nation’s economy grew to be the 5th largest in the world in 2022, as it surpassed China in terms of population in 2023. India stands in an advantageous position as it has a comparatively young population, with an average age of about 28 compared to the average Chinese population of 39. In contrast, ageing populations in advanced nations will probably result in slower economic and labour force growth as well as increased budgetary strain.

India’s GDP growth in 2022 stood at 6.8% growth and in 2021 it was recorded at 9.0% in 2021, and for 2023, it is is predicted to increase by 5.9%. At the same time, the rate of increase in consumer prices has slowed significantly, with the headline inflation rate decreasing to 4.7% in April 2023.

But the challenges are far from away. Core inflation is still persistently high, hovering around 5%, and there is still a risk that increasing fuel and food costs would have unintended consequences on wages and general price levels.

The government continues to realise that climate change is crucial to India’s growth and development objectives, in spite of the recent economic and global geopolitical unrest. Addressing climate change, including lowering emissions and boosting resistance to its effects, is essential for India to provide its people with economic prosperity. As the developed economies move to low-carbon energy, India is already on the path to increasing energy efficiency and installing renewable energy, which spurs domestic demand for these goods. Additionally, it is funding research and development for environmentally friendly manufacturing.

Key findings of the report

The report identifies 10 key areas for India to fully realise its ambition and potential to be a climate change-maker:

1. Utilising the co-benefits of energy transition for broader sustainable development goals.
2. Developing a thriving low-carbon manufacturing industry.
3. Expanding electricity transmission and distribution networks.
4. Increasing investments in energy storage and renewables integration.
5. Scaling up the use of hydrogen and bioenergy to decarbonise difficult-to-abate sectors.
6. Establishing a robust policy framework for investing in natural carbon sinks.
7. Implementing a strategic roadmap for carbon capture and storage (CCS) and incentivising investments in carbon removal.
8. Introducing carbon pricing measures to promote low-carbon businesses and consumer choices.
9. Encouraging sectoral collaborations and coalitions to accelerate action.
10. Ensuring a just transition by equitably sharing costs and benefits.

Decarbonization: Chalking out the blueprint

Different sectors exporting goods to Europe are getting ready to comply with the Carbon Border Adjustment Mechanism (CBAM) of the European Union, which is set to take effect in October 2023. India has already begun to take action to reduce the mechanism’s negative effects, and the country is also developing an electrification plan for the sector to help it operate carbon-free.

The report states that carbon removals, whether through technology (such as carbon capture and storage or direct air capture) or natural carbon sinks, will be an important part of India’s long-term decarbonisation journey.

The joint report suggests the following pointers for carbon removals/reduction:

• Transition to net-zero emissions: to offset emissions from high-growth and high energy demand sectors like aviation and heavy industry, and keep the stock of greenhouse gas emissions as close to the 1.5°C budget as possible; and
• Net-zero emissions world: to reduce temperature overshoot and bring down the stock of greenhouse gas emissions so that the global average temperature rise returns to 1.5°C or below by the end of the century.

“The creation of carbon markets, with international links, will become an increasingly important policy lever to attract investment, promote innovation and drive deployment of low-carbon technologies,” the report states.

A greener future of India

According to the International Energy Agency, between now and 2030, India will need to invest $160 billion annually in its energy transition. In another estimate, between 2023 and 2050, green investments will amount to almost $12 trillion, which would put the world on a course to achieve net-zero emissions by 2070.

India has undertaken a more strategic approach, for example, through the Just Transition Worker Support Facility (with the Asian Development Bank) in a few districts and states. This facility aims to integrate existing resources across skilling and reskilling, entrepreneurship, livelihood development and relevant social protection initiatives to provide bespoke assistance in making the transition away from coal.

Delivering an efficient energy transition also involves addressing climate resilience and adaptation. India is still vulnerable to the effects of climate change. Rising sea levels and unpredictable rainfall patterns will both have an impact on the lives and economies of coastal fishing communities as well as the viability of smaller landowners and rural farming communities.

“Investing in climate resilience, alongside investments to reduce emissions, will be an important pillar of delivering a just and equitable transition. The Reserve Bank of India estimates that the cumulative total expenditure in 2030 for adapting to climate change is around $1.05 trillion,” the report states.

India’s sustainable development will depend on how financial and technological resources are allocated in order to strengthen the economy, communities, and means of subsistence, as well as the natural ecosystem and environment.

The opportunities to make the transition to low-carbon energy transition are highlighted by the synergies between the energy transition and sustainable development. To take advantage of the potential, integrated policies and long-term planning must be implemented within this decade.