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The recent government decision to update the Nationally Determined Contributions (NDCs) under the Paris Agreement has revived the debate on how India can meet its green commitments as well as its rising energy needs.

Initially, there was anxiety that India may wait to update its NDCs till 2023 when the first Global Stocktake of climate actions of all countries begins. This worry has been put to rest. But, doubts persist over how the update of the NDC will advance India’s march towards a cleaner energy and greener economy.

The updated NDC includes increase in the two economy-wide targets relating to emissions-intensity of GDP and the share of non-fossil fuel based electricity capacity. But it has left out two other significant announcements made by the Prime Minister at COP 26, Glasgow — 500 gigawatt capacity of renewables and 1 billion tonne of CO2 emission reduction by 2030. Why were they omitted? Are these omissions a result of a well thought out policy? What impact will it have on the domestic ambition for clean energy?

The government appears to have been guided by the view that the left-out targets are of inconsequential nature and do not add extra value. Gigawatt capacity is implicit in the economy wide electricity capacity ratio if and when 50 per cent of the electricity capacity from renewables is achieved.

Similarly, the emissions reduction of a certain order from the ‘Business As Usual’ scenario would be a natural consequence if the economy wide emissions intensity of GDP falls. The CO2 reductions from the operations of Railways (70 million p.a.) and LED bulbs (30 million p.a.) alone may lead to a total of 1 billion CO2 reductions by 2030.

However, there is a strong feeling that the non-inclusion of publicly announced targets relating to GW capacity and CO2 reduction in the NDC is a case of missed opportunity. Their importance lies in their ability to give a specific direction to the strategy. Given the fact that NDC is only a statement of goals, the two left out targets could have partially filled the void in the strategy and acted as a template for actions of investors and planners.

No low emissions policy

Till date, India does not have a long-term strategy of low emission growth of economic and social sectors. There is no statutory regime either for climate actions. No guidance is available to the investors and planners for low carbon development either in the short or the long run. A low emission development strategy as required by the Paris Agreement is not in place even after seven years since the submission of the NDC in 2015.

On the other hand, India’s emissions in critical sectors — power, transport, industry, building and urban infrastructure — are bound to rise as the economy grows. Given the commitment to renewable energy, it is incumbent that the targets are set for each source of energy — conventional, alternative and renewable — that would take us towards a low emissions future in a specific time frame.

The update gives no indication of how this will be done. The net zero target is mentioned but the pathway for decarbonisation is not even hinted at. In fact, it wishes away the problem by emphasising that the NDC does not bind it to any sector specific obligation or action. The inability to indicate specific targets on supply or demand side for various sectors or sources of energy is bound to affect the process of decarbonisation.

States’ key role

Besides the long-term low emission strategy of growth of economic sectors, two other things that would determine the pace of decarbonisation of Indian economy are the involvement of the States and actions of the corporates. States are key players.

It is not enough to simply lay down policies at the national level. The constraints and priorities of the States are different. They understand and appreciate the benefits to economy more than the benefits to global environment. Second is the involvement of the corporates and businesses. Most of the corporates that swear by the science-based targets have only notional goals. They are yet to put in place decision-making mechanisms for investing in green projects having high climate risks.

Is it possible to do something in the course of current or future updates of NDC that would help this process? Encouraging States to have a GW capacity target and incentivising them for the purpose could be a possible option. Incentives of fiscal or non-fiscal nature for setting up the renewable energy capacity at the consumption level are as important as obliging the Discoms to buy renewable energy in a certain share.

Mobilising finance for employing low emission technologies and products is the other key intervention. Businesses do not take decisions merely on the promise of a goal. They require either a regulatory framework or a financial package that increases the scale of operations and reduces the risk on investments. The Reserve Bank of India has recently come out with a discussion paper on ways of mitigating climate risks for financial institutions. This should be taken to the logical end to devise the risk mitigation instruments that lower the cost of capital and risk of green investments.

An effective carbon market is the other way of lowering or mitigating the cost of operations by the corporate investors. The incorporation of CO2 reduction goal into the NDC would have given the right signal. India already operates a market in energy savings.

In view of the cross sectoral needs for decarbonisation, it is time that we allow this to grow into a full-fledged carbon market for domestic industry.

The writer is Distinguished Fellow, The Energy and Resources Institute (TERI), and a former civil servant