Implications of a Net-Zero Target for India’s Sectoral Energy Transitions and Climate Policy

Conclusion

The net-zero debate has found many takers across the globe, with many countries announcing their intent to take their economies towards an ambitious net-zero goal in the next few decades. While all the key emitters have announced net-zero targets, India is still in the process of exploring the implications of a net-zero future. To the best of our knowledge, there has been no Indiaspecific study that analysed sectoral strategies related to alternative net-zero targets for the country. Our study addresses this gap by laying out four alternative net zero policy choices ranging from the most ambitious (2030 peaking – 2050 net-zero sc) to the least ambitious (2050 peaking – 2080 net-zero). The analysis focuses on carbon dioxide emissions from India’s energy sector, which forms the bulk of total GHG emissions. Within each of the peaking and net-zero-year policy scenarios, we analyse four that reflect the commercial availability, or lack of it, of CCS and hydrogen technologies.

Undoubtedly, we find that the pace of transition towards a net-zero future for India would be significantly faster in the most ambitious scenario. We find that the availability of CCS allows for a much longer presence of fossil sources in India’s primary energy mix, although even in this case, the decline in fossil energy has to be drastic. The commercial availability of hydrogen technology reduces the near-complete dependence of the industrial and transport sectors on electrification under net-zero scenarios. Competitive and technologically mature hydrogen implies that the long haul truck segment and some important processes in the hard-to-abate sectors can rely on this fuel, reducing dependence on electricity. Our results make it clear that hydrogen, while critical, is no silver bullet for the net zero challenge.

Irrespective of the policy scenario, it is evident that the need for electrification of end-use sectors would lead to a massive increase in electricity generation, much higher than that in the Ref sc, and that most of this electricity would be powered by solar energy. Nuclear energy would also have to play a key role in electricity generation, as it is the only zero-carbon electricity source that can provide baseload electricity if there is no possibility of coal usage with CCS. Ultimately, the feasibility of structural changes needed for a net-zero future must be examined in detail.

Our modelling approach mainly represents the implications of economic choices, which are a critical factor in shaping the future. Along with economics, however, there are other elements that are equally important and need to be considered while arriving at a decision. While we have discussed many issues related to the political economy of transition, issues related to just transition, as well as constraints related to land and water, are beyond the scope of our analytical framework. This can be regarded as a limitation of our approach. Any final choice must consider such aspects as well.

The choice and progress towards a net-zero future implies deep structural economic transformations. The approach of harnessing opportunities as and when they present themselves would not suffice. Neither would co-benefits as a central theme. The framing needs to go beyond co-benefits towards a broader macroeconomic framing that shapes and creates opportunities rather than waiting for them to materialise. It is reasonable to expect that there will be economic losses if the mitigation technology suite is costlier than the technologies currently in use. However, sectoral strategies can focus on sectors where cost effective options are available and start creating institutional strategies and economic incentives to accelerate the pace of their deployment. Understanding of economic costs is critical not to avoid or delay deep decarbonisation, but to deploy smart strategies to minimise the cost and create an economy of the future in the process.

Net zero implies the bull is taken by the horn. Planning without realising the size of the bull and the speed at which it is charging, however, is imprudent. Our research seeks to shed light on the magnitude of challenge and the pace of transition required across sectors by analysing alternative formulations of peaking and net-zero policy and breakthrough technology availability. We hope that this will create a better understanding of the net-zero debate in India and motivate stakeholders to have an informed debate on this issue.