New Climate Economy report urges New Delhi government to ease finance for renewables and cut reliance on polluting fuels
By Ed King
India’s unquenchable thirst for coal is bad news for the nation’s health, balance sheet and the world’s climate.
Coal accounts for 44% of India’s total energy consumption, with biomass and oil taking a 22% share each.
With a fast growing population and more than 300 million still without electricity, politicians have long championed coal as a cheap and practical solution to their energy needs.
But the rise in coal’s share from 33% in 1990 to 44% in 2012 comes at a price – economically and in the lungs of city dwellers.
The statistics tell a bleak story. The world’s top four polluted cities are in India. 15 of the world’s top 30 cities with high levels of ambient air pollution are in India.
In 2010, an estimated 630,000 premature deaths were associated with air pollution linked to the burning of fossil fuels.
“One recent estimate suggests that the price of coal in India needs to at least double if it is to fully reflect the health and other damages associated with coal use,” says the study.
The costs of importing the coal, oil and gas the country needs are also wreaking havoc on the economy, write the study’s authors.
“Energy has become central to the country’s chronic trade imbalance, with rising energy insecurity an important concern for policy-makers,” they write.
“India’s international trade deficit for fuels averaged an annual 6.4% of GDP over 2008–12 – twice the size of its current account deficit, which averaged 3.2% of GDP annually in this period.”
The answers are not easy in a vast country with a fast growing population. Data last week suggests India will become the world’s most populous nation by 2022, and host 1.7 billion people by 2050.
Over 30% of those living in extreme poverty live in India. To tackle this, the country needs the levels of fast growth that saw it drag 140 million off the breadline between 2005 and 2012.
That means an annual energy consumption growth rate of 4.6%, a doubling of energy consumption every 15 years, is likely to be maintained.
But the study offers some answers – while acknowledging that India’s legendary bureaucracy will likely prevent any radical policy changes in the near term.
One is the government needs to make it easier for clean energy developers to access finance and connect to the grid.
The authors says the Modi government’s goal for 100 gigawatts of solar by 2020 could be increased, given what they suggest is a real potential of 749 GW.
“While coal will remain an inevitably large part of India’s fuel mix, investment in non-fossil fuel power sources, such as solar, wind, nuclear and hydro, needs to be sharply boosted.”
The price of imported coal could be 30-50% higher than the cost of wind and solar by 2030, says the study, highlighting the need for urgent steps.
State energy boards, long protected by government, should be unbundled and in some cases privatised in an effort to tackle their woeful delivery records.
One example of this is transmission and distribution losses, which averaged 21% in 2011, three times higher than the US or China.
Another is the severe blackouts the country has faced in the past – notably the July 2012 two-day epic when a world record 620 million lost power.
Fossil fuel subsidies – which equalled 1.4% of GDP in 2011 – should also be phased out in a way that protects the poorest and most vulnerable.
According to the study fuel subsidies alone “represented some 13.7% of India’s budget expenditure in 2012/13”.
The government has already scaled back support for petrol and diesel prices, with plans in the pipeline to do the same with LPG and kerosene – staple fuels for the poor.
A coal cess (tax) has also been doubled to 200 rupees a tonne.
Still, the authors note agricultural users pay only 40% the sum for their electricity paid by industry or commerce, a rebate they argue does little to boost productivity.
At this report’s launch in New Delhi on Monday, environment minister Prakash Javdekar spoke of the world accepting a change in lifestyle and using only what is needed.
India was “doing its bit” ahead of a UN summit in Paris this December he said, when 195 countries could sign off on a pact to limit levels of greenhouse gas emissions.
The country’s climate plan is due out soon, and the “quantity and quality” of economic growth could be improved if the government targets a low carbon model, said Naina Lal Kidwai, chair of HSBC India and a member of the Global Commission – the body behind this project.
“The government’s ambitious goals for renewable energy and conserving our precious water resources recognize this,” she said.
“A low-carbon transition will improve our productivity and would allow us to enjoy cleaner air in our cities as it envisages us living in more compact, connected, and coordinated cities.”