India has set itself an ambitious long-term goal of reaching net zero emissions by 2070. In August 2022, India updated its Nationally Determined Contributions (INDC) under the Paris Agreement to reflect its aim of achieving 50% cumulative electric power installed capacity from non-fossil fuel based energy sources by 2030. The route towards achieving this is through transfer of technology and low-cost international finance.
Despite India's renewable energy push, dependence on coal is intertwined with the growth of the economy. Coal fired thermal power plants currently account for nearly 70% of power generation capacity in India. India is also the second largest producer, consumer and importer of coal. More importantly, production of coal is also deeply entrenched with the local economies of the districts in which it is mined.
Explaining India's dependence on coal, Coal Minister Pralhad Joshi had stated that coal is going to stay as a major source of energy in the foreseeable future. The Minister clarified that despite the push for renewables, India will require a base load capacity of coal based generation for stability and also for energy security. Notably, while India has committed to clean energy- the pace of transition to cleaner energy sources in India is to be viewed in light of the principle of common but differentiated responsibilities and respective capabilities, the transfer of climate finance and low cost climate technologies.
At COP 27, India made a pitch for the phase down of all fossil fuels. This was rejected and the parties to the Sharm el-Sheikh Implementation Plan agreed only to accelerate efforts towards the phase down of unabated coal power. Unabated coal power refers to the consumption of fossil fuels in facilities without Carbon Capture Utilisation and Storage (CCUS). The International Energy Agency states that CCUS is a suite of technologies that capture CO2 from sources such as fossil fuel based power plants and other industries. The CO2 is then compressed and transported via pipelines, ships or roads to be utilised in different applications or stored permanently in geological formations.
India in its Long Term Low Carbon Development Strategy (Strategy) unveiled at COP 27 reasoned that the singling out of coal was unjustified as global oil and gas emissions were 25% higher than coal emissions. The Strategy at the same time noted that oil and gas based electricity generation – which India lacks – provides greater flexibility in dealing with the intermittent nature of renewable energy. India would thus have to continue to rely on coal based power plants, the Strategy reasoned. With regard to CCUS, the Strategy stated that the economic, technical and political feasibility of CCUS is highly uncertain. Despite this note of caution, there are two government documents that make a case for CCUS in India.
In July 2022, Ministry of Petroleum and Natural Gas in July 2022 had released the Draft 2030 Roadmap for CCUS for Upstream Exploration and Production Companies (Roadmap). The objective of this Roadmap was to provide a framework to make develop India as a sustainable and viable CO2 storage hub considering India's huge spread of sedimentary basins.
The Roadmap recommends the development of carbon markets, which will not only reduce emissions but also provide the required market support mechanism for the adoption of new mitigation methods and technologies. Additionally, it also stresses on the setting up rules and a standard mechanism to report, monitor and verify the reduction of CO2 and green-house gas emissions.
In a similar vein the Niti Aayog study titled 'Carbon Capture, Utilisation and Storage Policy Framework and its Deployment Mechanism in India' released on November 30, 2022 recommends a tax and cash credits policy to promote CCUS in the near term and a transition to carbon taxes in the long term.
To reduce the emissions intensity of its GDP by 45% from the 2005 level by 2030, the government has taken steps to increase the adoption of green hydrogen and enable the development of carbon markets. In August 2022, the Lok Sabha passed the Energy Conservation Amendment Bill, 2022 which aims to mandate the use of non-fossil fuel sources including green hydrogen, green ammonia, biomass and ethanol for energy and feedstock in industries. The Bill also gives the power to the Central Government to establish carbon markets.
In May 2022 the Ministry of Power had unveiled a plan for the replacement of thermal power with renewable energy. As per this plan, over the next 2-3 years, thermal power plants will be required to operate up to a technical minimum of 40% instead of 55% to accommodate cheaper renewable energy. To implement the same, in August 2022, the Central Electricity Authority released the draft Central Electricity Authority (Flexible operation of thermal power plants) Regulations, 2022.The visit of German Foreign Minister Annalena Baerbock to India on December 5 and 6 was expected to lead to progress over the proposed Just Energy Transition Partnership (JETP) between the G-7 countries and India. The JETP is a partnership through which finance is provided to the developing country party to transition away from coal. India, however needs to carefully mull over the impact that such a transition would have on the existing coal infrastructure which would affect millions of livelihoods. Shutting down existing thermal power plants would have significant legal ramifications and also carry demobilisation costs.
While there was no mention of the JETP during the visit, it was highlighted that under the Indo-German bilateral partnership on Green and Sustainable Development, Germany has proposed a goal of providing at least 10 billion Euros by 2030 as new and additional commitments in renewable energy finance to India.
At the joint press conference held on December 5, the German Foreign Minister, when asked on the finance that Germany was making available to India for a just transition away from coal, forthrightly admitted that when it comes to phasing out of coal, every country needs to decide for itself.
The JETP and any climate finance flow needs to be seen in the context of historical responsibility and the commitment of developed countries to mobilise USD 100 billion a year by 2020 as climate finance. At COP 27, an agreement was reached to set up the Loss and Damage Fund. The Fund aims to provided adequate and predictable financial resources to assist developing countries that are particularly vulnerable to climate change in meeting the economic and non-economic losses and damages suffered on account of climate change.
As India develops the legal and regulatory environment to ensure that the energy transition is just, equitable and smooth, there is also an opportunity to shape a fair and transparent architecture around the disbursal of money out of the Loss and Damage Fund and other funding mechanisms. Striking the right chord between the need of the hour versus the need of the future, simultaneously being cognizant of financing needs, will be key.
- The article has been published in Times of India
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.