To fight climate change, the world is animatedly discussing ‘energy transition’, ‘boost to renewables’, and ‘decarbonization’. The Indian government is no exception.

Under the Paris Agreement, parties are required to communicate their Nationally Determined Contributions (NDCs) to combat climate change. These NDCs involve activities for reduction of greenhouse gases and also for building resilience to impacts of climate change.

India has communicated its NDCs in 2015. These include, among others, quantified targets to reduce the emissions intensity of Gross Domestic Product (GDP) by 33-35 per cent by 2030 from 2005 level and to achieve about 40 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. Additional carbon sink through more forest and tree cover by 2030 is also planned.

The global goal is to achieve net-zero emissions as early as possible in order to arrest the adverse effects of climate change. While developed countries have agreed to achieve net-zero by 2050, as a developing country India has declared its goal to achieve net-zero by 2070 at the COP26 (Conference of the Parties) held in Glasgow. The Indian goal is to be achieved through periodic enhancement of NDCs and corresponding domestic climate actions towards low carbon transition.

There can be no argument against energy transition towards non-fossil, green, renewable fuels. But the question is whether the world has adequate financial, technological and natural resources to make it happen in a time-bound manner.

Copper factor

Copper, a key industrial metal, is the metal for electrification. Whether it is photovoltaics or electric vehicles, grid and recharging infrastructure, copper is nearly indispensable. So, it is necessary to have a long-term view of the metals’ supply-demand fundamentals and how the price of this metal is likely to behave in the years to come, which might impact our electrification plans.

Studies have shown that copper demand is set to nearly double by 2035 and will continue to grow beyond that till may be 2050. According to S&P Global, copper’s traditional demand growth is 2.9 per cent annually; but energy transition technologies will escalate demand to 8.2 per cent per annum.

Even currently, there is a small mismatch between supply and demand. While world production of refined copper is at 23-24 million tonnes (mt), consumption demand is at 24-25 mt as per World Bank data. There is risk the mismatch will widen as the world moves towards greater electrification.

Importantly, China is the world’s largest producer (10 mt) and consumer (13-14 mt) of refined copper. As a mover and shaker of the world metals market, developments in China can potentially impact the global copper market. Even a small increase in Chinese demand can send the price soaring higher and vice versa. But the looming supply gap in this important metal can adversely impact electrification plans through renewables. The supply gap is sure to reflect in market prices and the market price action will be exaggerated because of the flow of speculative capital in the derivatives market.

Broadly, from the current levels, world copper prices can potentially double to reach say $15,000/t. It can make the cost of non-fossil fuel electrification somewhat unviable.

In our country, refined copper production has been gradually declining. From a high of 799,000 tonnes in 2016-17, output has gradually fallen to 364,000 tonnes in 2020-21, as per government data.

Worse, from being the net exporter (333,000 tonnes) in 2017-18, we have slipped to become a net importer of copper (-31,000 tonnes) in 2020-21. One critical reason for this serious slippage is that the Sterlite copper smelting plant in Tuticorin (Tamil Nadu) with production capacity of 400,000 tonnes a year has remained closed for the last four years.

The matter is in the court. Plant owner Vedanta now wants to sell the unit. Who will buy the plant and for what purpose is an entirely different question. But without being judgmental, it is necessary to recognise the adverse impact of closure of the plant on the economy, especially the country’s industrial metals sector.

The quest for Atmanirbhar can go for a toss if such issues are not addressed with a sense of urgency and fairness. Technologies to reduce the environmental impact are available.

This is but one example that must strike a warning bell for policymakers. While we may announce ambitious targets for energy transition including solar power and EVs, it is necessary to evaluate the domestic availability of natural resources. Import dependence is sure to raise risks — both external and internal — while moving towards the intended target.

For our country net zero will mean net positive. It translates to less pollution, reduced dependence on fossil fuels and more jobs. It would help sharpen competitiveness, advance sustainability and build resilience.

The writer is a policy commentator and commodities market specialist. Views expressed are personal