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2 | 2011
Energy and Development
Dossier | Energie et développement - Revue | Évolutions des politiques de développement

Indian Energy Policy and Strategy: Pre- and Post-Copenhagen 2009

Megha Shenoy, Grishma Jain and Tara Parthasarathy
Translation(s):
Politique et stratégie énergétiques de l’Inde avant et après Copenhague 2009

Abstract

Published by Palgrave Macmillan

India is an extraordinarily diverse democratic country with one of the fastest growing economies in the world. It is the world’s sixth largest consumer of energy. Interest in its energy policies and strategies is escalating due to their huge impact on geopolitical relations, global energy prices and climate change. Its current per capita energy consumption and GHG emission values are low; however, these are bound to increase if it continues on the path of development that the West has followed. If India is to ‘leapfrog’ the already well-trodden path to one that ensures sustainable development, it is imperative for the country to redefine its development paradigm in order to ensure inclusive growth. Unsustainable subsidies, poor reform implementation, distorted energy prices and inadequate investment in renewables are some of the major constraints that the Indian government needs to re-examine so as to increase energy security and provide a framework for transition to a low-carbon economy. In addition to innovative energy policies such as the National Solar Mission, the National Mission on Enhanced Energy Efficiency and the National Mission on Sustainable Habitat, India needs to adopt a framework for decoupled growth, which we consider as an increase in the quality of life for its citizens without an increase in environmental damage. Since 2008 India has demonstrated that it is serious about changing its growth pattern and moving towards clean energy alternatives. However, this vision will not be fully realised unless the global North provides technical and financial assistance to collectively mitigate the adverse impact of global warming and subsequent climate change.

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The ROI management and research team were extremely supportive during the preparation and writing of this piece. We thank Professor Suren Erkman, Purnima Ramaswamy, Manjunath Prasad, Lokanath S. Rashmi Kumari, Shilpa I. Pattanshetti, Arsha Branson, Sandipan Sarangi, Laure Müller and Loïc Leray.

Our people have a right to economic and social development and to discard the ignominy of widespread poverty. For this we need rapid economic growth. But I also believe that ecologically sustainable development need not be in contradiction to achieving our growth objectives. In fact, we must have a broader perspective on development. It must include the quality of life, not merely the quantitative accretion of goods and services. Our people want higher standards of living, but they also want clean water to drink, fresh air to breathe and a green Earth to walk on.

Dr Manmohan Singh, Prime Minister of India, 2009

1. Introduction

1With the largest population and the 12th largest economy in the world, India is currently the world’s sixth largest energy consumer. Interest in the energy policies of the central and individual state governments and the related strategies is increasing due to their huge impact on global energy prices, geopolitical relations and climate change. For a comprehensive understanding of Indian energy policy and strategy options we need to examine the sources of primary energy, the purposes for which this energy is being consumed and the trends of relevant indicators over the recent past.

2This chapter provides an overview of India’s energy policies in the context of climate change and the recent international negotiations. Rather than give details of the policy and strategy options, we outline some of the innovative changes in policies as well as the challenges and constraints that India is to overcome if it is to make the transition to sustainable development. After a brief discussion of India’s energy needs we highlight the nation’s energy policies with respect to development needs, energy demand and supply-side dynamics. We then outline the challenges and constraints of Indian energy policies in general and those specific to a transition to a low-carbon economy. The Indian government needs to overcome barriers that have constrained its previous attempts at improving quality of life for its citizens by providing them with a framework that ensures energy security as well as optimal material and energy utilisation. A holistic vision that questions consumer patterns associated with development and strives to improve human development with decoupled growth (growth based on reduced consumption of resources) is the need of the hour.

2. Shifts in Indian energy trends: implications for policy

  • 1  In this chapter we refer to different orders of magnitude ranging from the kilojoule to the terajo (...)

3India’s primary energy consumption in 2007 was 19,885,302 terajoules (TJ),1 of which 30 per cent was imported (EIA, 2009, 2010a). Most of this energy was from fossil fuels, while only 1.8 per cent was from hydroelectric, 0.7 per cent from nuclear and 0.2 per cent from other renewable sources that included wind and solar energy (see Figure 6.1). Almost 70 per cent of India’s population lives in rural areas that have limited access to electricity and automobile ownership. The nation consumes a large quantity of biomass (firewood, agricultural residues and animal waste) for household and cottage-scale industry energy needs in rural areas. Of the total energy consumed in 2007 by India, 27.2 per cent could be considered combustible renewables such as firewood, agricultural residues and animal waste. Supply-side estimates of this biomass consumption are highly uncertain because it is not subject to market transaction; there may be between 201 and 352 million tonnes of biomass use per year (Ravindranath and Hall, 1995; Rai and Chakrabarti, 1996; Shukla, 1997). Variation in moisture and calorific content of wood adds further uncertainty to the energy content of this biomass.

4

Figure 6.1 – India’s energy consumption, by source of energy

Figure 6.1 – India’s energy consumption, by source of energy

Source: EIA (2002, 2009, 2010a).

5India’s primary energy consumption in 2006 (18,636,242 TJ) was five times less than that of the United States (US), four times less than that of China, 14 times more than that of Switzerland and 17 times more than that of Nigeria (see Figure 6.2).

6India’s political development objectives have centred on the establishment of a social democracy that aims to ensure equal opportunity (but not necessarily equal outcomes) in political and economic institutions. Over the past 63 years of independence India has maintained parliamentary democracy and civil liberties to an extent that is exceptional for an extraordinarily diverse country colonised for more than 200 years. However, equal rights, social justice and reduced poverty still remain distant ideals. The government needs to deal with an extremely large population, severe poverty and limited resources. Moreover, the current state of affairs is a consequence of an evident failure in governance.

7Improving human development could lead to considerably increased consumption of electricity if India follows the development path chosen by most other countries that have made the transition from low to moderate levels of development. The Ministry of Power and the Ministry of Environment and Forests estimate that over 600 million Indians, that is 53 per cent of India’s population, had no access to electricity in 2007 (Government of India, 2007).

8Demographic trends may also directly affect energy consumption. The Indian population began to spiral in the 1920s. Birth control policies were undertaken from the 1950s on. Thanks to family planning initiatives, the growth rate has edged down to the current level of 1.5 per cent (see Figure 6.3). India now represents 17.3 per cent of the world population.

Figure 6.2 – Growth of primary energy consumption in India, US, China, Switzerland and Nigeria

Figure 6.2 – Growth of primary energy consumption in India, US, China, Switzerland and Nigeria

Source: EIA (2006)

9Between 1980 and 2007 India’s Human Development Index (HDI) rose by 1.33 per cent annually from 0.427 to 0.612. In 2007 India’s HDI rank was 134 among 182 countries, with China’s rank being 92.

10A wide disparity in energy accessibility exists across India’s urban and rural divide. Indeed, 54.9 per cent of rural households, in comparison to 92 per cent of urban households, had access to electricity in 2005; 9 per cent of rural households, in comparison to 57 per cent of urban households, had access to liquefied petroleum gas for cooking (Balachandra, Ravindranath and Ravindranath, 2009). Approximately two-thirds of rural households still depend on biomass such as firewood, crop residues, and dung cakes. The lack of cleaner fuels and energy-efficient cooking devices results in indoor pollution. This reduces life expectancy and increases associated medication expenses which further reduce incomes. Additionally, these devices emit larger quantities of greenhouse gas (GHG) per unit of energy and result in a need for more time to gather fuel, which also hinders education (UNDP, 2010).

11

Figure 6.3 – Annual populatino growth in India, China and the world

Figure 6.3 – Annual populatino growth in India, China and the world

Source: World Bank (2010)

12India’s energy policies targeting the 28.6 per cent of the population living below the poverty line aim to raise the HDI. Measures such as the National Biogas Programme (1981–82) and subsidies for liquefied petroleum gas and kerosene, through smart cards for families living below the poverty line, are aimed at enhancing access to cleaner fuels. However, both the National Biogas Programme and the subsidies on liquefied petroleum gas and kerosene have failed to enhance access. The main reasons for failure of the National Biogas Programme are: lack of sense of ownership by the community, inappropriate match between the design of the biogas plant and its environment due to inadequate understanding of biomass flow, difficulty in establishing price for input and output, lack of coordination between organisations involved in the programme and lack of follow-up (Lichtman, 1987). Subsidies for liquefied petroleum gas and kerosene have ended up favouring the rise of a black market for these fuels, which forces poorer families to pay higher costs (Bhatia, 1988). The Rajiv Gandhi Grameen Vidyutikaran Yojana Programme (begun in 2005) and the Remote Village Electrification Programme (begun in 2001) aim to provide basic electricity to rural and remote areas by extending free connections to households living below the poverty line and subsidising capital costs by 90 per cent through Indian government grants (Government of India, 2009a).

13Although there is no precise Millennium Development Goal regarding energy, the United Nations (UN) Millennium Project highlights the role of energy services as a prerequisite for development and for achieving the Millennium Development Goals. India accounts for about a third of the world’s population without access to electricity, that is 40 per cent of India’s population in 2005 (Bhattacharyya, 2010). India spends around 30 per cent of its export earnings on importing energy (UNDP, 2010). This dependence depletes scarce foreign exchange and increases exposure to the balance of payments impact of oil price shocks. India’s Integrated Energy Policy, in combination with more specific programmes like the National Biogas Programme, the Integrated Rural Energy Programme and the Remote Village Electrification Programme, and targeted subsidies for liquefied petroleum gas and renewable technology, are all steps towards promoting rural access to energy services through increased use of improved technology. However, these programmes have had limited success in achieving their goals, mainly because of an extensive decentralisation of policy implementation at the level of individual states and difficulties in spreading proper understanding of new energy technologies in rural areas.

3. Energy use: demand, intensity and efficiency

14Although the first industrial revolution began in England in the late eighteenth century, the British actively discouraged Indians from taking up modern technology with access to fossil fuel and electricity. At the time of independence India’s population was around 350 million and most depended primarily on biomass for energy (Gadgil and Guha, 1992). Since independence in 1947 the demand for energy, particularly electricity and fossil fuels, has grown exponentially, primarily due to the rapid increase in urbanisation, industrialisation and population. The average growth rate in energy consumption from 1980 to 2006 was 5.4 per cent. In 2006 India accounted for about 3.7 per cent of the world’s commercial energy demand. However, this is still 7–11 per cent short of the demand for energy in India.

15Despite this increase in overall energy consumption, the average per capita energy consumption in India is only 16.8 GJ, in comparison to the world average of 76 GJ in 2006 (see Figure 6.4). In 2007 India was ranked 61st out of 207 countries classified from lowest to highest energy consumption. This low per capita consumption could be partially due to the large amount of biomass that is consumed without being recorded.

16In 1991 India imported just 17.8 per cent of its commercial energy; in 2008 it imported more than 30 per cent. This growth in import is due to a growth in demand, scarcity of fossil fuels and the inefficiency of state-run enterprises in energy exploration, production and distribution, as illustrated by the huge transmission and distribution losses in electricity (see Figure 6.5). In 2004 India, with losses amounting to 26.29 per cent, was ranked 13th out of 131 countries listed from highest to lowest transmission and distribution losses. Despite these inefficiencies and the inability of energy corporations to keep up with demand, India has achieved moderate levels of increased energy efficiency (Government of India, 2007). From 2002 to 2007 some INR 140 billion (USD 3.1 billion) of taxpayers’ money went towards reducing transmission and distribution losses, which decreased by 9.62 per cent over those five years. Yet, the investment did not include programmes to improve collection and reporting of data by the individual state electricity boards so as to continually monitor improvements in reducing such losses (Chandramouli, 2010a).

Figure 6.4 – Per capita energy consumption in India and the world

Figure 6.4 – Per capita energy consumption in India and the world

Source: EIA (2008)

17Energy intensity (the amount of energy consumed per unit of gross domestic product (GDP)) has decreased in India ever since the early 1970s. However, compared to other countries, energy intensity in India is still extremely high, that is 1.5 times the world average, 1.47 times the average of all Asian countries and 1.55 times that of the US. To some extent, subsidised prices of certain forms of energy (fossil fuels) and the continuing inability of the government to pass on the true cost of oil to consumers have led to end-use inefficiencies (Carl, Rai and Victor, 2008; Mirani, 2010). For example, the price paid by consumers for electricity, liquefied petroleum gas and kerosene was respectively 48 per cent, 61 per cent and 69 per cent of the true production and supply costs in 1992 (The Energy and Resources Institute, 1992). Although this pricing has gradually changed and today these prices are approaching the true production and supply costs, end-use inefficiencies due to subsidisation of electricity for specific sectors of the economy (agriculture, for example) are acting as key barriers to improving the energy intensity of the Indian economy.

18Despite these inefficiencies, the rate of energy growth from 1997 to 2007 (4–5 per cent per annum) has been much lower than India’s economic growth (9 per cent per annum). While India’s energy intensity has always been lower than that of China, the decrease in energy intensity has not been as remarkable (see Figure 6.6).

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Figure 6.5 – India’s consumption of electricity, by various sectors of the economy

Figure 6.5 – India’s consumption of electricity, by various sectors of the economy

Source: IEA (2008)

20

Figure 6.6 – India’s energy intensity compared to that of China, Switzerland and the world

Figure 6.6 – India’s energy intensity compared to that of China, Switzerland and the world

Source: EIA (2008)

21When only commercial sources of energy are accounted for in India the industrial sector consumes the largest percentage. Major energy-consuming sectors such as cement, steel, aluminium and fertilisers have reduced their energy intensity over the years; thermal-specific energy consumption in the Indian cement and iron/steel sectors has decreased by 7.5 per cent and 3.5 per cent per annum respectively (Government of India, 2007). This decline in India’s energy intensity is due to various policies:

  1. Energy Conservation Act (2001) that has identified nine major energy-consuming sectors for observance of mandatory energy efficiency standards;

  2. linking of tariffs to energy efficiency by the Electricity Regulatory Commissions, thereby providing an incentive for efficiency improvement;

  3. high ratio of recycling and consequently decreased demand for virgin raw material for the steel, aluminium and copper sectors;

  4. Energy Labelling Programme (launched in 2006) for electrical appliances, distribution transformers, fluorescent tube lights, air conditioners and so on;

  5. Energy Conservation Building Code (launched in 2007) that has been incorporated into the compulsory Environmental Impact Assessment requirements for new large commercial buildings;

  6. mandatory execution of energy audits in large-scale units in nine high-energy-consuming sectors that are also required to report energy conservation and consumption data annually;

  7. implementation of 538 clean development mechanism (CDM) projects (registered by India’s CDM Executive Board) accounting for a reduction of 43.5 million tonnes of carbon dioxide (CO2) annually and associated efficiency improvements; 1,023 more projects have been approved by the CDM National Designated Authority and are currently being implemented.

22As with most policies in India the level of enforcement and implementation is variable. Each act is implemented by appropriate government agencies that are controlled by the individual states. Each of India’s 28 states has a different level of enforcement depending on the efficiency of the ruling party of each state government. Therefore, the government has to make extra efforts for efficient implementation and enforcement of policies in general.

23When non-commercial sources of energy (biomass not subject to market transaction) are included the residential sector in India is the largest consumer of energy. Within the residential sector almost 85 per cent of total energy consumed between 1999 and 2000 was non-commercial; therefore, this sector is very important but is often neglected in policies aimed at energy conservation. Some 35–40 per cent of the energy consumed by the residential sector is for cooking (Pachauri, 2007). High energy intensity in this sector is due to use of cheap and inefficient cooking stoves. The Ministry of Non-Conventional Energy Sources (now the Ministry of New and Renewable Energy) funded a large-scale National Programme on Improved Chulha (chulha means stove in Hindi) from 1984 to 2002. The main objective of the programme was to reduce demand for firewood by providing subsidised (up to 90 per cent of cost) energy-efficient stoves to rural households (Moghe, 1993). In 2001 the programme had distributed such stoves to 32.77 million households (27 per cent of existing rural households) (Hanbar and Karve, 2002); however, this number may not represent the number of operational stoves. Despite such programmes, there has been an increase in the per capita consumption of firewood in rural areas (Alam, Sathaye and Barnes, 1998; Pachauri and Jiang, 2008) from 16.2 kg in 1988 to 17.3 kg in 1994 (National Sample Survey Office, 1997). This increase is partially due to the failure of the National Programme of Improved Chulha because of poor coordination between the Ministry for Non-Conventional Energy Sources and the individual state-level implanting agencies, subsidies granted to the builders of the stoves that cause their motivation to be directed more towards the government than the consumers and lead to hasty production of faulty stoves, lack of after-sales servicing and maintenance (Eregeneman, 2003) and greater focus on merely achieving targets without building capacity to maintain and service these stoves for years to come (Moghe, 1993). This problem of continued usage remains a challenge to the myriad companies and organisations that are still distributing these stoves in rural and semi-urban India. In urban areas the shift from biomass to commercial fuels is significant. Government policies that subsidise the prices of liquefied petroleum gas and kerosene and control their distribution have played a key role in this transition.

4. Dynamics of energy supply in India in the Kyoto-Copenhagen context

24The total primary energy demand in 1960–61 in India was only approximately 2,400 TJ. In a single decade this increased to 2,940 TJ, with over 20 per cent of supply in coal/peat and over 60 per cent in biomass (IEA, 2010b). Over three decades the demand due to Indian population and economic growth resulted in a three-fold increase in the country’s total primary energy supply (IEA, 2010b). In 1999 coal provided 32 per cent of total primary energy supply, while the share of biomass had dropped to 42 per cent (WRI EarthTrends, 2003). This was at the time when the Kyoto Protocol had just come into existence.

25This was also the same period when India had just finished enacting a series of policies to liberalise the economy. Srivastava (1997) predicted that India would need 19,147,000 TJ from coal and 6,560,000 TJ from oil by 2011–12 to sustain a 6 per cent GDP growth per annum. While these projections did not include biomass, Sudha and Ravindranath (1999) projected that about 457 million tonnes of biomass would be needed for use as firewood and industrial energy in 2010. Since then India has grown at a rate higher than 7 per cent per annum and has exceeded the original growth target set in the 9th Five-Year Plan (Planning Commission, 1997). Total primary energy use, including biomass, shot up from 19.6 million TJ in 1999 to 25.4 million TJ in 2008, a 29 per cent increase in less than a decade. Coal provided around 40 per cent of primary energy. Oil became the second largest source with 25 per cent, whereas biomass slipped to 24 per cent.

26India has taken large and innovative steps to reduce GHG emissions and thereby address climate change through its National Action Plan on Climate Change (2008), announcing a reduction in emissions intensity of the economy (CO2 per unit of GDP) by 20–25 per cent by 2020 (Dasgupta and Sethi, 2009). However, in all climate change negotiations India has been persistent about two points, namely taking per capita GHG emissions into consideration when constructing a global strategy to reduce emissions, on the one hand, and supporting strategies that are only based on equitable burden-sharing, on the other; the latter strategies take the impact of accumulated GHG into consideration as well as the economic capability of a country to reduce its emissions (Government of India, 2009a).

27Despite this commitment to reduce emissions, India’s development path is characterised by a large allocation of funds to create and maintain expensive fossil-fuel-dependent infrastructure. Such allocation has reduced the budgets available to improve critical sectors such as health, education, energy-efficient infrastructure that includes non-motorised transportation, renewable energy and further energy efficiency initiatives. India has a rare opportunity to adopt a different development paradigm; the Indian government should focus more on integrating energy efficiency and renewable energy technologies and strategies in all development policies (Shenoy, 2010).

28At the UN Climate Change Conference in Copenhagen in December 2009 Indian Prime Minister Manmohan Singh indicated that, irrespective of the outcome of Copenhagen, India would go ahead and meet its intensity reduction targets. In the most recent Five-Year Plan (Planning Commission, 2007) the Indian government has targeted an additional 30 gigawatts (GW) of capacity from renewables. Through the National Solar Mission the target is an additional 22 GW by 2022. Moreover, the recently approved National Mission on Enhanced Energy Efficiency aims to save 943,000 TJ by 2015. However, India’s Integrated Energy Policy (Planning Commission, 2006a) still depends on coal and oil as the main sources of primary energy in the near future and this is unlikely to change without radical action.

5. Reality or myth of the transition to a lower-carbon economy

5.1. Technical constraints and opportunities

29In 2007 India’s 1.9 billion tonnes of CO2 emissions were less than a third of those in the US. But they are growing fast with an increase in use of fossil fuels. India’s power sector is one of the most CO2-intensive in the world and contributes 60 per cent of its total CO2 emissions. The power grid emission factor of 0.82t CO2/MWh in 2008–09 (Central Electricity Authority, 2009) was more than 50 per cent higher than the world average (OECD and IEA, 2007). Yet, this is predicted to decrease because of increases in the shares of renewables, nuclear power and the newly developed ultra-supercritical technology for coal-based power plants; a prototype plant is planned to be commissioned by 2017 (Bhaskar and Koshy, 2010). Nearly 70 per cent of India’s electricity supply comes from coal due to large indigenous reserves. With modernisation of these coal-fired plants India could be looking at emissions cuts of between 10 and 13 million tonnes of CO2 equivalent each year (World Bank, 2009). Additionally, switching to a cleaner fuel such as natural gas for power generation would reduce CO2 emissions by about 50 per cent. However, shortage of domestic resources along with constraints in regulation, pricing, supply and infrastructure have led to gas demands going unmet in recent years. Although gas use in India amounted to 59 billion cubic metres in 2009–10, up from 43 billion cubic metres in 2008–09, total demand for 2008–09 was estimated at 30 billion cubic metres higher than actual consumption (OECD and IEA, 2010). Wind power capacities of 12,009.28 megawatts (MW) as well as with other renewables provide over 10.6 per cent of India’s grid capacity (Ministry of New and Renewable Energy, 2010). The New and Renewable Energy Policy promotes utilisation and development of renewables through indigenous design, but its potential is hindered by fiscal and technological constraints. India has approved a National Solar Mission ‘Solar India’ (Government of India, 2009b), at an estimated cost of INR 43.37 billion (USD 963.7 million), with the aim of installing 20,000 MW of solar energy capacity by 2022 and achieving an estimated cut of 42 million tonnes of CO2 emissions. India is endowed with vast solar energy potential, with most areas receiving 4–7 kWh per square metre incident energy per day. India is looking to use a mix of thermal as well as photovoltaic solar energy to achieve its mission. The mission has been termed realistic by experts, but great stress is put on critical environmental and certain economic aspects of this very expensive technology. Currently solar generation costs in India are INR 15–20 (USD 0.33–0.44) per kWh (Ministry of New and Renewable Energy, 2010) and, while plans for subsidies have been made for the initial years, grid parity is anticipated by 2022, contingent on factors such as the scale of global deployment, the pace of advancements and research and development (R&D).

30There is great scope for improvement in energy efficiency across all sectors in India. As mentioned above, the target set by India for reductions in emissions intensity of economy (CO2 per unit of GDP) is 20–25 per cent by 2020 (Dasgupta and Sethi, 2009). McNeil et al. (2008) showed that total electricity consumption could be reduced by about 4.7 per cent by 2020 by improving the efficiency of household appliances. In addition, new vehicles abiding by mandatory pollution limits could cut 10–15 per cent of GHG emissions by 2015. Promoting non-motorised mobility by improving cycling and pedestrian paths would also aid in reducing emissions.

31India has a technical advantage in that it is in the process of building its energy, transport and industrial infrastructure. Therefore, it should invest in energy-efficient technologies helping it to ‘leapfrog’ carbon-intensive phases of development and move towards an advanced low-carbon economy (Saran, 2009).

5.2. Economic constraints and opportunities

32India’s economy has accelerated with GDP growth averaging close to 7 per cent per year since 2000; up until 2030 it is projected to average between 5.8 and 6.5 per cent, reflecting improving economic efficiency through liberalisation, foreign direct investment (FDI) and industrialisation. In order to meet its energy demands, India should invest about USD 1.25 trillion in energy infrastructure from 2006 to 2030 (OECD and IEA, 2007), bringing a need for an explicit financing mechanism and thus substantial investment opportunities. Shifting to a low-carbon economy would require a major reorientation of India’s energy strategy. It would call for a shift from coal, its most abundant resource, to renewable energy-based and biofuel-based energy systems. A shift to oil and gas would increase India’s dependence on imports due to low domestic reserves. According to Prasanna (2009), current subsidies for fossil fuels are acting as a primary barrier to enabling economic viability of these renewable energies.

33Energy prices in India are indeed heavily subsidised. Policies should ensure that energy costs reflect the real economic as well as environmental costs of providing them to the consumer. Targeted subsidies should only be provided to help improve the living conditions of the poor.

34Renewable energy options often require high initial investments. The Indian government offers investment support through various schemes and tax benefits. Estimates indicate that more than USD 600 million could be yielded per year through the National Clean Energy Fund (Mehra, 2010). The fund, financed by levying a tax of INR 50 (USD 1.1) per tonne of coal, has been created to support the development of renewable energy. India is also host to CDM projects which promote technology transfer from industrialised nations and offset emissions through carbon credits. While Indian companies see CDM projects as very relevant, the extent of CDM implementation may remain low unless the host country is given the right to replicate and innovate in technology gained through transfer, thereby removing the monopoly of investing countries on its price. CDM projects as well as the Electricity Act (2003), which encourages independent private electricity production, have facilitated the setting up of several renewable energy-based electricity plants (CDM India, 2010). Currently renewable resources represent a generating capacity of 14,538 MW (Chandramouli, 2010b).

5.3. Institutional constraints and opportunities

35The presence of a robust institutional mechanism is critical in India’s transition to a low-carbon economy. Although India has undertaken initiatives to anticipate climate change impacts, it typically has difficulty executing its plans promptly and effectively due to pervasive corruption, inefficiency and the lack of accountability in its bureaucracy (National Intelligence Council, 2009).

36The energy sector in India is split between five different ministries and several government agencies. This often leads to administrative bottlenecks in the implementation of planned and proposed policies. In 2008 the Indian cabinet agreed to bring together the various ministries and agencies involved. The National Development Council is the umbrella organisation in charge of reviewing and approving the Integrated Energy Policy set forth in the Five-Year Plan by the Planning Commission (Pachauri and Bhandary, 2004).

37India’s energy sector has been dominated largely by state-owned companies. This results in controlled and subsidised energy prices. Recent reforms are slowly removing barriers to private participation and are ensuring competitive energy prices that reflect true resource costs in the energy sector. In 1997 the government announced a New Exploration Licensing Policy to provide a more attractive framework for private domestic investment and FDI in oil exploration. This became a success story with the discovery of 424 billion cubic metres of natural gas by Reliance Industries in the Krishna Godavari Basin in 2002, the largest gas discovery in the world that year. The find has relieved shortage of gas in some individual states. Although the government officially abolished the administered pricing mechanism in 2002 for all petroleum products, customers have been paying the true cost of petrol, diesel and kerosene only since 2010 (BBC, 2010). Most states in India provide electricity to farmers for free or near-free rates. On a countrywide basis 28 per cent of electricity is consumed by this segment which has no incentive to improve efficiency or reduce wastage (Chandramouli, 2010a).

38India has given host-country approval to numerous CDM projects, many of which are being developed by Indian companies. Their expected emissions reductions by 2012 amount to about 260 megatonnes of CO2 equivalent (CDM India, 2010). Increased cooperation between the government, financial institutions and industry would be very valuable in defining optimal mechanisms for reducing energy consumption and emission levels and in continually evaluating them.

5.4. Social constraints and opportunities

39Home to around 1.1 billion people and with about 27 per cent of the population living below the poverty line and 400 million people without access to electricity, India needs to sustain high economic growth and ensure proper allocation of funds if it is to eradicate poverty and meet its human development goals (Planning Commission, 2006a). With close economic ties to natural resources and climate-sensitive sectors such as agriculture, water and forestry, India seems to be in a tight situation because it needs to continue to develop at a rapid rate in order to serve rural energy needs while striving to make the transition to a lower-carbon economy.

40In reality the poor contribute very little towards global carbon emissions as they live lives below subsistence level and essentially use biomass for cooking, thereby saving energy at the cost of human welfare. An increase in energy use to improve the living conditions of the poor is seen as their due right, therefore, even if it increases India’s GHG emissions. Introduction of biomass technology for improved burning of rural fuels is already helping lower their carbon footprint further.

41It is estimated that land-use change in developing countries could contribute towards global emissions to the extent of 1.6 billion tonnes of carbon. A rapidly growing population and the consequent increase in requirement of land and biomass resources are a cause for concern regarding forests and their ability to ensure carbon sequestration. The Indian Prime Minister has announced a Green India Mission campaign for the afforestation of 6 million hectares, thus covering a total land area of 33 per cent (compared with 23 per cent currently). An initial amount of INR 60 billion (USD 1.3 billion) has been earmarked by the Compensatory Afforestation Management and Planning Authority to commence work (Ghosh, 2009). Compared to many other developing countries, India has been commendable in maintaining a relatively high percentage of forests on its territory; for example, over 2.5 million hectares of forests are lost in Brazil every year. However, India lags behind China’s achievement of gaining 4 million hectares of forests annually. From 1999 to 2009 the forest cover in India grew by 3.31 million hectares, with an average 0.46 per cent annual increase (Forest Survey of India, 2009).

6. Energy hopes and fears

6.1. Loopholes and barriers

42India has pledged to reduce the carbon intensity of its economy, but without absolute limits, arguing that they would unfairly curb its development (Dasgupta and Sethi, 2009). It insists that the developed world should take the lead in cutting global carbon emissions. Although overall development and improving the living conditions of the poor are most important, there is a concern that these priorities might become an excuse for a relaxed attitude towards carbon mitigation.

43The lack of a comprehensive framework to cover policy formulation, compliance and verification provides numerous loopholes for industry to conduct ‘business as usual’ in India. For example, in 1988 the Forest Conservation Act of 1980 was amended to stop wood-based industries sourcing raw material from forestlands, leaving them for the needs of the forest-dependent communities. However, the amendment did not prohibit forestry departments from undertaking plantations. Using this loophole, politicians tried to allow industrial firms access to government forestlands (Agarwal, 2000).

44Market barriers, ranging from inadequate access to capital, energy subsidies and information asymmetry, inhibit energy efficiency in India. The government needs to remove these by facilitating access to capital through low-interest loans for energy efficiency such as the 5 per cent interest loan available for renewable energy projects from the Indian Renewable Energy Development Agency. It also needs to improve access to information via workshops, courses and help lines aiming to enhance industrial energy efficiency. Assessing a project’s contribution towards sustainable development is difficult due to varying emission sources, unreliable data and estimates that can be interpreted in a range of ways, leaving room for manipulation. Thus, determining the baseline for calculating ‘additionality’ of CDM projects is very difficult. Much literature has suggested that CDM effects on non-Annex I countries are not positive in sustainable development (Schneider, 2007). Two case studies of Indian CDM project proposals show that ‘packaging’ of information plays a decisive role in ‘additionality’ assessment by the CDM Executive Board. Despite both above-mentioned projects being clearly non-additional, only one was rejected as the project developer himself praised the project’s attractiveness in the absence of the CDM (Michaelowa and Purohit, 2007).

6.2. Poverty alleviation in a lower-carbon economy

45The impact of carbon emission policies on economic growth and poverty alleviation is crucial for a low-income country like India because the most pressing need is to reduce poverty rather than control carbon emissions. While emissions growth to provide minimum energy requirements to India’s poor is inevitable, it is still modest relative to developed countries’ emission levels. The additional electrical energy required to provide electricity to India’s 450 million poor is less than 8 per cent of the US electricity supply (Prayas Energy Group, 2009). However, the redistribution of energy from over-consumers to the poor must also play a role. As Haavelmo (1990) puts it: ‘Only raising the bottom without lowering the top will not permit sustainability.’

46India’s poor population is stuck in a vicious circle. Energy and firewood deficits lead to deforestation, and crop residues and dung being diverted from agriculture, which further intensifies land degradation, hunger and poverty. In order to emerge from this vicious circle, innovative strategies such as bio-agricultural production that can be used for carbon sequestration and poverty alleviation are needed (Ong’wen and Wright, 2007). Such synergies between land-use change and poverty alleviation must be found so that participation in carbon sequestration may benefit the poor (Lipper and Cavatassi, 2004). Various options such as cleaner fuels, more efficient technology and localised renewable energy projects have begun making a small but positive contribution towards poverty alleviation along with a low-carbon economy.

47While CDM projects claim the potential of poverty alleviation thanks to supplementation of agricultural income through non-farm employment and improved availability of energy and other infrastructural facilities via investment and technology, nearly all such projects have a business orientation and do not contribute towards rural poverty alleviation to any notable extent (Sirohi, 2007).

6.3. Indian policy responses

48Lowering energy intensity through higher efficiency is equivalent to creating a virtual source of untapped domestic energy in India (Planning Commission, 2006a). The National Mission on Enhanced Energy Efficiency is developing polices that include establishing benchmarks of energy consumption for all energy-intensive industries, allowing trade of energy-savings certificates, energy incentives and reduced taxes on energy-efficient appliances. It also calls for energy policies to put greater emphasis on urban waste management and recycling, including power production from waste, to strengthen enforcement of automotive fuel economy standards, to use pricing measures to encourage the purchase of efficient vehicles and to offer incentives for the use of public transportation (National Action Plan on Climate Change, 2008). These policies will be implemented by the Bureau of Energy Efficiency.

49The Indian government has also begun moving towards a rational energy pricing policy by removing a variety of energy subsidies, thus permitting energy prices to reflect their economic as well as environmental costs, and only allowing subsidies targeting poverty alleviation (Reddy and Balachandra, 2003). Such a policy, if properly respected, would influence the choice of technology, fuel and energy and result in fair allocation of costs among consumers according to the burden they impose on the system.

50While the Integrated Energy Policy covers all sources of energy, the Indian government is considering further means to re-enforce it so as to achieve more rapid and more inclusive growth. Several policy considerations have been highlighted in the National Action Plan on Climate Change. Exploiting non-conventional energy, especially solar power, and developing the thorium cycle for nuclear power offer possibilities for India’s energy independence beyond 2050 (Planning Commission, 2006b). In order to enhance the National Solar Mission, policies supporting the establishment of a solar research centre, increased international collaboration on technology development, the strengthening of domestic manufacturing capacity as well as increased government funding and international support are being considered (National Action Plan on Climate Change, 2008).

7. Conclusion

51An estimated 300 million people were living below the poverty line in India in 2005 and 410 million people are still without access to electricity today. This is the reason why inclusive development has to be India’s first priority. India has demonstrated ably since 2008 that it is committed to providing clean energy to its people and that it is ready to focus on renewable energy, sustainable development and energy efficiency in order to reduce its emissions. It has also made the commitment to meet a carbon intensity reduction target of 20–25 per cent by 2020. However, India cannot compromise on its developmental agenda.

52At Copenhagen in December 2009 India positioned itself as ‘a deal-maker and not a deal-breaker’. Prime Minister Manmohan Singh indicated that, whatever the result of Copenhagen, India would resolve to attain its intensity reduction goals. Following Copenhagen India announced four of its eight missions under the National Action Plan on Climate Change, namely the National Solar Mission, Green India Mission, Mission on Sustainable Habitat and Mission on Energy Efficiency.

53These actions indicate that India is serious about changing its growth pattern and moving to clean energy alternatives. Yet, two major constraints might hamper such a move. The Indian government will have to cope with the huge gap between policy formulation, on the one hand, and actual policy implementation, on the other hand, as the recent history of the country amply illustrates. Moreover, India does not have sufficient capabilities to switch to clean energy all alone. In order to fulfil its promise, India needs technical and financial assistance from the global North. India wants a legally binding agreement that follows the principle of common but differentiated responsibilities and provides long-term cooperative action. The fast-start funding of USD 30 billion mentioned in the Copenhagen Accord needs to be made available. The reduced emissions from the deforestation and degradation (REDD) mechanism needs to be implemented. The implementation framework for technology development and transfer needs to be developed. India needs additional financing to help deploy clean energy over and above the changes that will ensue as a result of policy amendments already made. Capacity building in policy and business circles alike is an imperative.

54In the absence of adequate international agreements, India will not be able to commit to anything more than what it has already planned. India will resort to bilateral overtures, but the outcomes will not be as robust or as far-reaching as under a truly global binding agreement. Indian energy trends will continue to show a decline in carbon intensity, a decoupling of GDP and total primary energy supply as well as an increase in productivity, but at too slow a pace. In order to accelerate India needs additional strategic financing and technical assistance within the framework of a global agreement. India is hopeful that industrialised countries will agree to follow the principle of common but differentiated responsibilities so as to collectively mitigate adverse impacts of climate change.

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Notes

1  In this chapter we refer to different orders of magnitude ranging from the kilojoule to the terajoule. For clarity, we provide here a short reminder of the equivalence among the orders used: 1 terajoule (TJ) = 1012 J; 1 gigajoule (GJ) = 109 J; 1 megajoule (MJ) = 106 J; 1 kilojoule (KJ) = 103 J.

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List of illustrations

Title Figure 6.1 – India’s energy consumption, by source of energy
Credits Source: EIA (2002, 2009, 2010a).
URL http://poldev.revues.org/docannexe/image/764/img-1.png
File image/png, 37k
Title Figure 6.2 – Growth of primary energy consumption in India, US, China, Switzerland and Nigeria
Credits Source: EIA (2006)
URL http://poldev.revues.org/docannexe/image/764/img-2.png
File image/png, 59k
Title Figure 6.3 – Annual populatino growth in India, China and the world
Credits Source: World Bank (2010)
URL http://poldev.revues.org/docannexe/image/764/img-3.png
File image/png, 70k
Title Figure 6.4 – Per capita energy consumption in India and the world
Credits Source: EIA (2008)
URL http://poldev.revues.org/docannexe/image/764/img-4.png
File image/png, 41k
Title Figure 6.5 – India’s consumption of electricity, by various sectors of the economy
Credits Source: IEA (2008)
URL http://poldev.revues.org/docannexe/image/764/img-5.png
File image/png, 42k
Title Figure 6.6 – India’s energy intensity compared to that of China, Switzerland and the world
Credits Source: EIA (2008)
URL http://poldev.revues.org/docannexe/image/764/img-6.png
File image/png, 58k
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Cite this article

Electronic reference

Megha Shenoy, Grishma Jain and Tara Parthasarathy, « Indian Energy Policy and Strategy: Pre- and Post-Copenhagen 2009 », International Development Policy | Revue internationale de politique de développement [Online], 2 | 2011, Online since 14 February 2013, connection on 19 November 2017. URL : http://poldev.revues.org/764 ; DOI : 10.4000/poldev.764

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About the authors

Megha Shenoy

Research Director, Resource Optimization Initiative (ROI), Bangalore; Visiting Fellow, Center for Industrial Ecology, Yale University. She completed her Masters and PhD at the Indian Institute of Science, Bangalore, and a post-doctoral fellowship at the Center for Industrial Ecology, Yale University.

Grishma Jain

Researcher, Resource Optimization Initiative (ROI), Bangalore. She  completed her Masters in green chemistry and sustainable industrial technology at the University of York.

Tara Parthasarathy

Consultant, Climate Works Foundation, New Delhi. She completed her Masters in environmental management at the School of Forestry and Environmental Studies, Yale University.

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International Development Policy is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

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