Council on Energy, Environment and Water Integrated | International | Independent

The Green Economy can be the New Economy: Arunabha Ghosh

(This interview by Karin Deckenbach was first published in the IKI India & Climate Policy Newsletter)

Dr Ghosh, how would you assess India's commitment to climate change goals and is the country on track regarding NDC implementation?

India committed to three main things under its NDC. The first is the target of 40 percent of electricity capacity being non-fossil by 2030. The second is the emission intensity reduction target of 33 - 35 percent by 2030 from 2005 level. And the third is a carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030. Now, on the first two, we are definitely on track. In fact, I would argue that in some regards we might be exceeding those targets.

For the third one, India's forest cover is by certain definitions increasing but it requires some further precision in making sure that this happens more effectively. The larger question is how progressive is India's climate policy. I would say in many respects, it is more progressive than has been the case with many advanced economies.

In which ways is India more progressive?

The way to define this is not just in absolute terms but also in relative terms. For example, when we kicked off our solar mission in 2010, we were producing less than 2000 MW of solar energy and had a target of 20,000 MW by 2022. Five years later, we expanded that target to 175,000 MW of renewables which was more than half of the entire electric system of about 300,000 MW that we had then. This means we are not only just adding in absolute terms, but also changing the mix. So as the system grows we are making sure that renewables share keeps growing.

This is very different from what China did, where they first built about 1,000 GW of coal-based power and then switched to renewables. It’s also different from what Germany did through the Energiewende. However, a lot of what India achieved was on the back of Germany's big push to renewables, which helped to drive down overall costs globally. Still, for India, a country with a much smaller per capita income, to be able to leapfrog in this manner is a big achievement. Basically, we’re trying to do in seven to ten years what took Germany two decades to achieve.

The other aspect is emission intensity or energy efficiency where some very progressive things have been done. One is at the household level where the switch to LED light bulbs resulted in a very large market for producers which drove down prices from about INR 300 for a light bulb to INR 40 or 50 (one sixth of the cost). This led to more than 300 million LEDs being deployed over the country. Another area of energy efficiency has been in the industrial sector. Since 2012, we kicked off the Performance Efficiency Trading scheme between the largest industries as well as programmes for efficient appliances.

Moreover, there have been other novel areas where progress in India has been faster than the rest of the world. India is the first country in the world to come out with a National Cooling Action Plan. This is an area where India is trying to leapfrog towards more efficient and lower global warming refrigerant alternatives. In addition, there is now a growing push towards electric mobility with a focus on public transport and the two-wheeler segment, targeting the poor more than the rich.

Finally, India has made tremendous progress on energy access. In 2015, when the Sustainable Development Goals were kicked off, India still had the largest number of people in the world without access to electricity. In the course of the last decade, about 700 million Indians got access to clean cooking energy and around 350 million Indians got access to electricity for the first time.

All these efforts show that India is moving towards a low carbon future and there have been signs of progression and progressiveness, both in relative terms and in absolute terms.

Do you also see untapped opportunities?

Yes, I see untapped opportunities in lower carbon pathways for industries and sustainable agriculture. India could definitely do more to experiment with new technologies, new business models, new financial models and behavioural change initiatives in these two areas.

In industries for instance, should we make steel with coal, as the rest of the world does, or should we attempt using green hydrogen as a substitute? In agriculture, should we continue with intensive green revolution and high fertilizer approaches or should we look more at natural farming and agroforestry-based systems? There are no silver bullets. But these are the two areas where additional work can be done.

Based on these actions, how do you see India's position in international climate negotiations? At the last COP Germany and the EU perceived a rather mixed performance by India?

I think the last COP revealed that globally there has been a significant decline in trust in the climate negotiation process. Let us first look at actions that happened around the Paris Agreement. First, India was a part of Mission Innovation that was kicked off.. On mitigation, India itself proposed the International Solar Alliance (ISA) along with France. ISA is the most internationally recognized treaty now. On adaptation, India's Prime Minister made a major announcement on the Coalition for Disaster Resilience Infrastructure last year.

The question around past-commitments is not just a rhetorical one. It is a very real one. Because every additional percentage of emission reduction that has not been achieved until 2020 increases what needs to be done by 2050. So, how quickly you do it will determine how much space is left for others.

So, why have these initiatives not been acknowledged in negotiations? The answer to this is the lack of trust. I boil it down to three issues:

One is the inability to truly understand the overhang of unmet commitments up to 2020. India has progressively made this point but developed countries have ignored this by focusing only on post-2020. However, this is not just a rhetorical point because it is related to the second issue which is about ambitions. Now, if the EU is saying, we have concluded a net-zero target for 2050, that is truly an achievement. However, what is this net-zero target against? If you have a target for 2050, the amount that you are trying to achieve could have been lower if you adapted better before 2020.

Second, it will matter how much you will do between 2020 and 2030 or rather between 2030 and 2050. Both are linked to what you have not achieved in the past. So, the question around past-commitments, the non-ratification of the Doha amendment, is not just a rhetorical one. It is a very real one because every additional percentage of emission reduction that has not been achieved until 2020 increases what needs to be done by 2050. So, if you now put everything into the future, how quickly you do it will determine how much space is left for others. Our analysis at CEEW suggests that the US, China, the EU and Japan will consume 49 percent of the available carbon space between now and 2030. So, the rest of the world will just have 51 percent. Now, genuine leadership would mean, to take the stuff I have not achieved till 2020 and add it to my NDC commitments after 2030. That would create a very different atmosphere because it would demonstrate that ambitions are not just some far beyond the generation story of 2050 but a here and now story... proving that we recognise what we have not done till 2020 and that we are going to act on it and we act on it fast – with the result that there is carbon space available for others.

The third aspect is how we are talking about finance and technology and here, unfortunately, everyone is at fault. We got ourselves locked into a definition battle of what is climate finance. India has some valid points and the OECD has some valid points but no one is entirely right. What really matters is: How are we creating a financial system that will crowd in the next Dollar, the next Euro of investment into a lower carbon opportunity? This is not going to happen unless we think about genuine ways in which institutional investments can flow into emerging economies. Not just talk-shops.

How could those real actions look like?

On the finance side, one point is – and it again relates to the past – the issue of the overhang of unsold certified emission reductions. Again, both sides have valid points. On one side, developing countries like China and India are holding billions of unsold CERs(Certified Emission Reductions)...

in India alone it is 700 million…

Yes, something around that. On the other side, developed countries argue, not all of this is certified, some of it is double-counting, some of it was cheating. As a result, we have a CDM ( Clean Development Mechanism) market that has completely collapsed. And this overhang is going to impact any new trading market that we try to develop post 2020. It is like trying to get married in the future without settling your divorce in the past.We have to figure out a settlement mechanism of these unsold CERs. Otherwise, the new market post-2020 will not emerge. Either it will collapse on day one because all these unsold CERs will be flooding that market or if you prevent them from flooding the market then the places where these new investments should take place will not engage in the new market saying: How do I know the next time I am going to get paid? How do I know you will not cheat again?

So, I think it is important that we figure out a discount settlement mechanism for unsold CERs, just like bankruptcy settlements. There, the creditors do not get all their money back but it does not mean they get no money back because of a discount settlement mechanism.

India demands something like a Dollar per unsold CER…

That is part of the negotiation. One might demand 25 dollars; others might demand 25 cents – then you have to negotiate. This is what arbitration proceedings are all about. Creditors might say I want all my money back, with interest. The company will say I don't have money to give you back, I'm going bankrupt. But then the arbitrator decides what an appropriate settlement is and who gets the money first and who gets later.

For this the international negotiations would have to set the frame…

Yes, the negotiations will create a framework. This is the CEEW proposal: We need a discounted settlement mechanism for unsold CERs so that the overhang of the past can be dealt with. This would create new confidence for project developers and investors to engage in the post-2020 Article 6 market.

The second thing that has to be done is multi-country, multi-risk hedging facilities. Today the delta between perceived risks and real risks for investing in projects in developing countries is huge. In India, while we are receiving 10.5 - 11 billion dollars annually in our renewable projects, what we need is 30 billion dollars. Now, that money is not coming because investors think it is risky to invest in India, Vietnam, Indonesia and so forth.

So, how do you protect developers and investors? Well, you create access to more institutional capital for solar projects developers, or electric mobility charger developers and institutional investors by creating a pool-risk mechanism so that the risk in one place can square off against the lower risks in another place. By pooling multiple risks and pooling projects across countries, you are – as we now say in the Coronavirus case – flattening the curve of risks. This will open up real institutional investments because it changes the credit rating of these projects. And it will make it possible for real institutional investments, both domestic and foreign, to come into this country.

Do you see a role for the Indian Government in flattening the risk curve?

It already has played a role. Indeed, some of our lowest rates for a solar project happened in 2017 because the central government and the state government gave a double guarantee. This project design principle with a credible off taker in terms of the Delhi metro and a large project being developed for Madhya Pradesh can be applied elsewhere as well. Through the International Solar Alliance, CEEW, on behalf of 17 countries, developed the design of a common risk mitigation mechanism. Of course, this is not the only mechanism. However, the point is you have to develop bespoke financial solutions that make sure that money flows where the sun shines the most. And that is so far not happening.

Finally, on technology. A CEEW study finds that a lot of the technology partnerships in climate negotiations or their side-lines have largely been restricted to being talk-shops. Almost none has been able to move along the spectrum beyond meetings and do project conceptualisation and R&D, leading to some large-scale testing and then commercial deployment…


Because we are not designing them for real action!We propose that we should have a G20 approach towards technology partnerships to bring large developing countries and the developed countries together, particularly in three pockets of technologies. One, technologies that are already available but need to be scaled, where you are helping small entrepreneurs develop a project plan to attract commercial capital to scale existing technologies. Second, where technologies are at a lab stage but have not been tested in the field for which commercial capital can come in. And third, what we call over-the-horizon technologies such as green hydrogen to manufacture steel or completely new areas of energy storage.

One example is public-private partnerships like the India-US Joint Clean Energy R&D centres, where you have government funding, you have co-financing from private consortia, the intellectual property is shared and you are able to pool resources in cash and kind. This is the multi-party effort needed to bend the curve in a particular sector.

What are the major obstacles for this to happen?

One obstacle is the lack of precision in what we are trying to achieve. It cannot be open-ended R&D, it has to be very targeted and the targets are not always set in international technology partnerships. Saying “let's do this R&D together” is very different from saying “the target of this R&D is to bring down the cost of energy storage to under 100 Euros per kilowatt hour”. That is a defined target. Related to that is the matter of prices. A lot of the new technologies are designed for high-cost economies and if you are not innovating for low-cost economies, then you are not able to translate that technology at scale somewhere else. That is the second problem.

The third problem is that we often restrict the funding channel to recognised state-led entities on both sides. Sure, if you entirely leave it to the private sector, they do not want to take big risks. But we should ensure that a private company lab in one country and the publicly funded lab in another country are able to collaborate. And that requires tweaks in the modalities of cooperation.

The fourth challenge is that we still have not figured out how to handle intellectual property. That does not mean that you do not protect intellectual property, rather we need models to delineate how you share and monetise it. Good examples are CERN in Switzerland which is a multi-country effort and the human genome project where the code was made public.

Start-ups often have an open-source approach…

Exactly. So, these problems identify the solutions. If you can tweak the nature of the cooperation by setting a target, understanding price sensitivity, making sure public and private entities are allowed to work together and intellectual property is being shared or open source, then you create a very different structure for technology cooperation.

On the other hand, the pressure on developed countries is growing. For Germany, it is said that by 2024 we need to practically offset all emissions and still meet our mitigation targets, no matter the cost – so could India simply wait for this to happen?

No, it cannot. I don't think that India is following that position because India recognises that it is highly vulnerable to climate change, in particular our agriculture and water systems. So, I do not think India is sitting around waiting for the world to solve the problem. Rather, there is a lot of action happening at three levels: India is fully engaged in domestic actions and international partnerships. In negotiations, India is engaged but there is a hard line because of the reasons I explained.

Do you see a difference between the local action and language the Government of India is using domestically for Indian audiences and India's language in international negotiations?

In part. Also because of the nature of the person who presents the messaging. Negotiators are meant to be hard-line. That is their job. Whereas policymakers are meant to create the market conditions for new investments to come.That is their job. I do not see an inconsistency here. The challenge will not be a tweak in the language at negotiations. The real challenges emerge if other sorts of economic challenges are happening. For example, a public health pandemic suddenly decelerating the pace of low carbon action. That is a bigger issue and the reason why I have been saying in a lot of my recent writings that we need Green Growth not just for the sake of some green projects. The Green Economy itself can be the economy. The Green Economy itself can save the economy because of the additional investments for new growth opportunities it represents. New job opportunities in renewables, in sustainable cooling, in sustainable agriculture, in the use of efficient appliances and power motors in the rural economy – these are all new areas of investment. When infrastructure is down, when consumer spending is down, when government spending is limited by fiscal limits, then you have to find something else to do. And the Green Economy is presenting us with opportunities to do so. So, we cannot think of sustainability or carbon climate action as just an issue for tree huggers. We have to move these issues from the margin to the mainstream – only then the entire economic structure will change.

In this light, how do you see these increasing demands for India to raise ambitions?

Well, it is quite expected that India is coming under pressure and it is also expected that India is going to say that we are not obliged to raise ambitions. I mean, things could have looked very different if this reduction in trust would not have happened. And overall, we should watch the actions rather than the words. Are India's actions decelerating, are we not implementing what we said we will be implementing? Are we not doing more than what we said we will be doing? And even if I am not formally converting into a commitment, am I not already doing more? And by doing more am I not presenting new opportunities for you to invest in my economy? Wouldn’t your battery or wind power manufacturers like to come and set up a shop in India? Wouldn’t you like to co-invest with me on a project in Southeast Asia? All these opportunities are here right now! So, is the EU only reading the text of the negotiators and is Germany, therefore, missing out on the real economic and investment opportunities that are available here or jointly elsewhere?!

With Prime Minister Modi's recent announcements on new targets for renewable energy as well as land use, isn't India in fact raising its ambitions?

Yes. It is just the absence of a piece of paper in a certain negotiation track. You can keep reading into that or you can look at what else is really happening.

And with this, should India take up a more pronounced role to lead the Global South?

Climate leadership is a crown that we all share. But the way in which we share it varies. I would argue that India has basically three elements of its soft power that it should leverage: Number one is the power of resistance. Number two is the power of example. And number three is the power of leadership.

Resisting what or whom?

Resistance is the principal resistance to any delusion of climate justice. I think India is legitimate in articulating and continuing to articulate that regardless of Paris and the fact that every country, small or big, has to act, we cannot dilute the principle of common and differentiated responsibility. So that power of resistance, as thorny as it is, as problematic as it sounds, also has its own power of being a principal stance. But this alone is not sufficient. Hence, the power of example and what India is doing at home becomes important. With all those things that are going on at home, I am not just resisting you on a matter of principle. I am also acting at home, on renewables, on efficiency, on cooling, on mobility, on agriculture, on industries, etc. And my example is a better example because I have a big country, a democracy. But, I am also a poor country. I do not have open cheques that I can write like the Chinese can. So, my example is more easily emulated by other poor countries because they also do not have open cheques that they can write.

So, on the basis of my domestic examples and policies, I can bring some developing countries together in specific areas and do more work. The International Solar Alliance is one of them.he Coalition for Disaster Resilient Infrastructure is another...and there might be more in the future.

In taking the Paris Agreement forward, do you have any advice on how European countries, in particular Germany, should collaborate with India?

I think the way forward is to cover two sides: What can Germany and the EU do for India's domestic actions? And what can Germany and the EU do for finance and technology partnerships?

How do we make sure that you are investing in our renewable projects? In our mobility transition? You have large German car companies in India, how do you get them to participate in the mobility transition that is going to happen in the EU and India? And similarly, for new technologies where we need public-private partnerships - on green hydrogen, on low carbon cement, on green ammonia and fertiliser, on sustainable petrochemicals. Let's do that together. And these actions will then create a renewed trust, which will have a positive drive for both sides in the negotiations as well.