The global warming fight has a challenge for India
Developed countries have accepted 2050, China 2060, and India 2070 as the deadline for energy transition to net zero emissions by 2070.
There are two developments that will cut short the transition time. The European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM), which will be effective from 2026, will result in penal customs duties on imports unless the carbon tax in exporting countries is hiked to the EU level. The second is increasing pressure to accept the ‘peaking’ of emissions. The
G-7 Summit in Hiroshima last year, and Apulia in June 2024, called on the ‘major economies’ to accept the peaking of emissions by 2025. This was a reference to China and India as the EU and the United States have already accepted ‘peaking’.
What is Carbon Border Adjustment Mechanism (CBAM)?
The Carbon Border Adjustment Mechanism (CBAM) is a European Union (EU) policy that aims to:
Decarbonize energy-intensive sectors
The CBAM is a carbon tariff on products that are imported into the EU and are carbon intensive, such as steel, cement, and some electricity.
Ensure a fair price for carbon
The CBAM ensures that the carbon price of imported goods is equal to the carbon price of domestic production.
Encourage cleaner production
The CBAM aims to encourage cleaner industrial production in non-EU countries.
Prevent carbon leakage
The CBAM aims to prevent carbon leakage, which is when production is moved to third countries with less ambitious environmental standards.
Level the playing field
The CBAM aims to level the playing field between EU producers and foreign producers. The CBAM is part of the European Green Deal and will take effect in 2026. There is a transitional phase from 2023 to 2025.
Now coming to Problems related to India Energy Requirements and Green Energy?
But we cannot ignore India’s development imperative. We need more electricity to replace fossil fuels. India’s electricity consumption is a third of the global average. While developed countries and China have to diversify to clean energy sources, India has to grow and diversify.These twin challenges entail much higher costs and require a longer transition time. However, we do not have the luxury of waiting till 2070 as pressure mounts for the ‘peaking’ of emissions. The ‘peaking’ year is an intermediate stage where emissions plateau before declining to the net zero stage. China has accepted the goal of peaking by 2030. India cannot remain an outlier indefinitely. At the most, we may have a decade when our emissions will be capped. A more compressed transition schedule means that we have to depend upon existing technologies. Small modular reactors and hydrogen will take more than a decade to become commercially viable.
Can we escape pressure for early ‘peaking’?
While targets in climate negotiations may be voluntary, they will be enforced through bilateral tariff measures and international financing conditions. The peaking level will determine the quantum of energy available for future growth. We need to rapidly ramp up electricity generation to establish our claim to an energy level that is sufficient to sustain future growth before we are constrained to accept the peaking of emissions. China has 200 GW of new coal-based power plants sanctioned or under construction.While targets in climate negotiations may be voluntary, they will be enforced through bilateral tariff measures and international financing conditions. The peaking level will determine the quantum of energy available for future growth. We need to rapidly ramp up electricity generation to establish our claim to an energy level that is sufficient to sustain future growth before we are constrained to accept the peaking of emissions. China has 200 GW of new coal-based power plants sanctioned or under construction.
It estimated the minimum quantum of demand for electricity as 21,000 Terawatt hours (TWh) by 2070. An International Energy Agency report has pegged India’s energy demand at 3,400 TWh by 2040. Different timelines make a comparison difficult. But it is worth keeping in mind that India’s energy consumption in 2020 according to NITI Aayog data was 6,200 TWh. Is it realistic to peg its energy demand two decades later at half the level of 2020, the pandemic year, when the economic activities were slow? This is a prescription for energy deficit and slow growth.The Economist has suggested decoupling growth with energy. The West has not followed this paradigm. Will India’s service economy minimise the need for energy? Server banks needed to power the digital economy require a huge amount of energy. Generative AI will increase energy demand exponentially. This is why Microsoft and other tech giants are turning to nuclear power, which is the only source of clean, firm power at scale.
Which Energy Could lead the way for Us Nuclear or Solar A look into it ?
For energy transition, the choice lies between renewables and nuclear, the two forms of energy that are emission-free. But which of the two entails lower cost and land? The current renewables tariff does not fully take into account storage and transmission costs. A paper by the Central Electricity Authority last year acknowledged that the cost of renewables round the clock ranges from ₹4.95 per unit to ₹7.5 a unit (on the assumption of only six hours of storage). This is higher than the tariff for nuclear power at ₹3.80 a unit. The VIF-IIT Bombay study has also brought out that the renewable high option will cost the most ($15.5 trillion), while the nuclear high option will cost the least ($11.2 trillion) by 2070.
The VIF report has shown that the renewable high approach will require 4,12,033 square kilometres — double the total surplus land of 2,00,000 sq.km available in India. The nuclear high approach will require 1,83,565 sq.km. The renewable route for the production of green hydrogen will increase the demand for electricity for electrolysis and make land constraints worse. On the margins of COP28 in the United Arab Emirates, a group of over 20 countries, including the U.S., France, and Japan have pledged to triple nuclear power by 2050. Nuclear power already provides 20% of electricity generation in the U.S. and 70% in France. Japan joined this group despite the legacy of the Hiroshima and Nagasaki bombings, and the Fukushima accident. In India’s case, there is a need for a sharper increase, as the share of nuclear power in generation is as low as 3%.
Ramping up nuclear power requires government support, as resources on this scale cannot be internally generated by the Nuclear Power Corporation of India Limited (NPCIL). Nuclear power also needs to be given the status of green energy as it is emission-free. Besides operationalising existing joint ventures between the NPCIL and public sector units, public-private partnerships with industries in hard-to-abate sectors should be encouraged given the looming EU deadline for enforcing the CBAM. The bulk of the additional demand for generation will have to be met by larger 700 MW-1,000 MW reactors.
Problems related to Finance ?
- At COP29, developed countries committed a paltry $300 billion per year from diverse sources by 2035 against the demand by developing countries for $1.3 trillion. Will this distant goal survive the Trump presidency? Most of this will be non-concessional finance. Many developing countries cannot absorb loans. Multilateral development banks have their statutes, which will require amendment.
- Green finance from private sources will come only if the tariff is raised, and the health of DISCOMs is restored. The government cannot bear the fiscal burden of energy transition. The public has to be sensitised to steep hikes in tariffs given the investment in creating new-generation assets. This requires political consensus.
- COP29 has finalised the rules for carbon trading. This amounts to rich countries buying the carbon entitlement of the poorer countries to cushion their lifestyle changes. If we cannot diversify to clean sources by the peaking year, we will need carbon for our growth rather than a trade-off.
- The energy transition is a fight for limited carbon space. No major economy is likely to diversify to clean energy before the global carbon budget runs out in the next 10 years. An equitable share in the remaining carbon space is crucial for future growth. We must establish our claim by establishing highgeneration capacity. The EU and the U.S. have already claimed entitlement to remaining carbon space by unilaterally establishing their peaking levels. China will keep expanding its claim till 2030.
