India: Climate Change Negotiations – Outside-in view

Posted on January 25, 2011 by


Introduction

The Copenhagen Accord, though not a legally binding agreement reached between the parties, was the ‘ Common Minimum’  that could be achieved amidst the high tension and difficult bargaining positions. The accord called on Annex I countries to make their climate change pledges, and the Annex II countries to identify their nationally appropriate mitigation actions by 31 January 2010. India is a non-Annex 1 country to the Copenhagen Accord and has expressed conditional support for the Accord, given the huge difficulties in balancing the resources, requirements and demands.

India: Highlights

The key highlights of India and its significance to any climate change negotiation are

1. India is Asia’s third largest energy consumer.

2. It has committed to reducing emissions by 20-25 per cent below 2005 levels by 2020. This though is a voluntary target.

3. It has recently started pricing carbon pollution since July 2010 in the form of tax on coal.

4. It has one of the world’s largest ongoing renewable energy programmes, with nine per cent of its total generating capacity coming from renewable energy sources

5. A number of investment opportunities are bound to arise in the areas of energy efficiency, forestry and agriculture through either public-private partnerships or through CDM project activities providing carbon offsets for domestic carbon markets worldwide. Despite being implementer of second largest number of projects in CDM after China, the market to be served and the current penetration level provide significant opportunities.

India’s commitments in Copenhagen Accord

India has committed to reducing the emission’s intensity of its GDP by 20-25 per cent below 2005 levels by 2020. This does not include emissions from the agricultural sector for the calculations for emission intensity. This translates to a reduction of greenhouse gas emissions by 11 per cent below business as usual levels. India intends to employ forestry measures and become more energy efficient to meet its goals.

Regulatory framework in India

To honour the commitments made at Copenhagen, the Ministry of Environment and Forests has announced 24 initiatives in five broad areas: science and research, policy development, policy implementation, international cooperation and forestry.

The implementation proposals include in-principle approval given to 30 ‘solar cities’ with the aim of a 10 per cent reduction in projected demand of conventional energy through a combination of:

1. Energy efficiency and renewable energy

2. National Missions under the National Action Plan on Climate Change on solar, energy efficiency and strategic knowledge

3. Given that India is experiencing a real estate and infrastructure driven growth, a national conference to be held to stimulate green building materials and technologies

4. Fuel efficiency norms and mandatory energy efficiency ratings for key appliances

India’s policy implementation targets include a CDM Program with the aim of Indian CDM projects neutralising 10 per cent of its emissions by 2012.

India’s current energy policy and regulatory framework are built up of the Energy Conservation Act 2001, India Electricity Act 2003 and the 2005 National Electricity Policy. India’s Eleventh Five-Year Plan (2007-2012), provides for the promotion of renewable energy sources. The Central Electricity Regulatory Commission (Terms and Conditions on Tariff) Regulations 2009 ensures that the proceeds of carbon credits for approved CDM projects are shared between the project developer and purchasers of electricity. This incentivises both to seek involvement in renewable energy projects with carbon credit income streams. Ministry of New and Renewable Energy (MNRE) offers a number of centralised fiscal incentives to renewable energy projects. A system of feed-in tariffs and generation-based incentives for renewable energy has been implemented too.

Earlier this year, India’s Central Electricity Regulatory Commission (CERC) announced rules for trading with renewable energy certificates. These can be bought by companies to meet the requirements to purchase a minimum level of renewable energy according to the State renewable portfolio standards. A national agency will be put in place to administer the trading certificates. The Ministry of New and Renewable Energy is responsible for the promotion of renewable energy in India. A number of programmes have been set up, including a wind mapping program for the future development of wind power, identifying sites and building capacity for small-scale hydro power, financial assistance for biomass projects and a grants scheme for solar and solar thermal power.

Under the Energy Conservation Act 2001, India has established the legal and institutional frameworks for both the Central and State Indian governments to promote energy efficiency throughout the country. The Bureau of Energy Efficiency has established the Action Plan for Energy Efficiency, a comprehensive plan that covers

1. Industrial efficiency

2. Efficiency in residential and commercial buildings

3. Appliance efficiency through labelling schemes

4. Energy efficient agriculture

5. Education programmes.

India’s ‘science and research’ initiatives arising from its Copenhagen Accord commitments include the establishment of the India Network for Climate Change Assessment (INCCA). This initiative draws from the expertise of over 220 scientists from India’s premier research institutions, and aims to bringa science based approach to policy. The INCCA has been involved in tracking India’s greenhouse gas emissions pathways until 2030 under different assumptions and researching the role of India’s forests and tree cover as a carbon sink. Their assessment shows that forests neutralise 11 per cent of India’s annual greenhouse gas emissions.

Forests cover almost 20 per cent of the country’s landmass and forests with a crown cover of over 40 per cent have been increasing. The National Forestry Action Programme (NFAP) for sustainable forest development aims to bring one-third of the country’s geographical area under tree cover as mandated in the National Forest Policy. NFAP relies on both government sponsored projects and externally sponsored initiatives with funding from, among others, the World Bank, the Japan Bank for International Cooperation and AusAid. India’s recent initiatives on forestry include the Green India Mission (a $US2.5 billion project under the National Action Plan on Climate Change to fast-track re-forestation) and schemes for capacity building for forestry personnel and improved forest management. Forestry related activities have also been included in India’s employment guarantee scheme to fast-track reforestation.

A national policy on bio-fuels has also been approved to promote cultivation, production and use of bio-fuels for transport and other applications, with a focus on wasteland-grown inedible feedstock to be used for biodiesel.

India has recently introduced its ‘clean energy levy’ taxing both coal produced in and imported into India at a level of 50 Rupees per tonne. Although this does not seem a significant sum, the tax is expected to raise some $677 million in its first year, all of which will be channelled back into programmes aimed at reducing emissions. The clean energy levy, which for the first time prices carbon pollution in India, has been in operation since 1 July 2010.

Investment opportunities

As a rapidly developing economy with one of the highest projected greenhouse gas increases, there are bound to be a large opportunities in GHG reduction investments in India. To sustain its GDP growth rate, a tall order by itself, India must invest in massive increases in energy infrastructure. Much of this capacity will need to be delivered from conventional large-scale coal, hydro and nuclear facilities. However India has one of the world’s largest ongoing renewable energy programmes, with nine per cent of its total generating capacity coming from renewable energy sources. With a combination of voracious energy demands, energy security and climate change concerns, the Indian government is pursuing all feasible energy sources to balance its energy needs, including promoting renewable energy.

India’s eleventh Five-Year Plan includes targets for the renewable energy sector which must be met by 2012. The sources of installed renewable energy capacity targets are small hydro, wind, solar photovoltaics, solar water hearing and biomass power in that order. If such targets are to be met, wind will need to grow by 2.5GW in each of the next three years, small hydro and biomass will need to double over the same period while solar photovoltaics needs to increase over 20-fold. As such, significant investment opportunities are expected to arise in this sector.

Further opportunities will arise in the areas of energy efficiency, forestry and agriculture through either public-private partnerships or through CDM project activities providing carbon offsets for domestic carbon markets worldwide.

References

1. Article by Norton Rose on Asia Pacific climate change policy

2. CERC India website http://www.cercind.gov.in

3. Agneya’s analysis

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