India’s Net Zero strategy: India can be a role model for developing countries

The recent Sixth Assessment Report of the Intergovernmental Panel on Climate Change made it clear that the world faces catastrophic consequences of rising temperatures unless nations make significant new efforts to alter this course, by reducing greenhouse gas emissions. ‘Net Zero’ refers to offsetting new greenhouse gas emissions with other actions, to (supposedly) make net emissions zero. This concept has become the focal point for action to deal with global warming and climate change induced by human activities.

At the 2021 COP26—the 26th Conference of Parties that signed the United Nations Framework Convention on Climate Change in 1994—many countries agreed to goals of achieving Net Zero by 2050. While these goals may still be too timid to completely remove the risk of catastrophe, they do represent major progress over previous agreements. However, countries like India, which are still relatively poor (China is four times as rich as India, for example), have been reluctant to commit to goals that could keep large segments of their populations from improving their material well-being to the point that they can enjoy decent lives. The case here is that advanced countries, which created the current situation with their past emissions, should rightfully do more to fix the problem. At COP26, India did agree to a goal of Net Zero by 2070.

India has a little over one sixth of the world’s population, but contributes just over 7% of global CO2 emissions. Its cumulative emissions are proportionately even lower compared to its population. This situation reflects the fact that it is still in the early stages of its development trajectory. Given this situation, India’s adoption of a Net Zero target of 2070 is quite reasonable. The country has a feasible strategy for India to achieve this goal. A centerpiece of such a strategy has to be rapid adoption of renewable energy, especially solar power. India needs rapid electrification for development, and focusing on green electrification can make it possible to achieve Net Zero goals without sacrificing economic growth. In particular, India’s strategy will require large new investment in solar power.

Currently, electricity accounts for just over a quarter of total final consumption of energy, and solar and wind power capacity is about 20% of that. To achieve Net Zero by 2070, electricity generation capacity will have to increase by about 6% a year. This is not out of line with recent growth rates of about 8%, but will have to be sustained for a much longer period. Solar power capacity will have to grow faster, at about 10% a year. Transmission, distribution and storage will all have to be improved commensurately with a strategy of green electrification.

This is all quite feasible, though it does not mean that the task is an easy one. But many of the challenges that will need to be overcome are broadly similar to those that arise in any effort for sustained, long-run development. These challenges include managing adjustment costs associated with structural change, overcoming vested interests, catalyzing innovation, and coordinating different aspects of change across sectors. Incorporating green objectives into development adds one more constraint to policymaking, but arguably also changes the objective function in a direction that better measures welfare. As in any situation of externalities and public goods, the government has a role to play in setting standards and making sure that market prices more accurately signal social costs and benefits.

In the case of climate change, the global nature of the problem means that a country like India should be receiving financial support from countries that have historically been much greater cumulative contributors to the current dire situation. Some estimates suggest that India will need additional annual investment in the energy sector of 2.7% to 4.5% of its current GDP. This is beyond the government’s own resource capacity, but is certainly feasible with a mix of bilateral and multilateral contributions, made in ways that also incentivise private investment. National policies also have to be coordinated appropriately. To the extent that current and future costs of global warming and correlated outcomes such as air pollution and water scarcity are disproportionately borne by poorer segments of the population, a strategy of green development can also be more inclusive and equitable than business as usual approaches.

While a target of Net Zero by 2070 is well within India’s capability, accelerating that goal by a decade or two, or flattening the emissions curve without changing the Net Zero target date, may be more challenging. In particular, dealing with the dominance of coal in electric power generation and industrial processes may require special attention to carbon capture at the project and plant level. Clear estimates of the resource costs and degree of technological innovation needed for improvement over a baseline strategy of emission reduction can help clarify the connection between national strategy and international resource commitments and financial flows. In this respect, India can serve as a role model and leader for all developing countries in achieving global coordination of the reduction of greenhouse gas emissions.

(The author is Professor of economics, University of California, Santa Cruz)

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