India is forecast to be the world’s second-largest economy by 2050 – will its ambitions for “green growth” be the key driver that decouples economic growth from environmental degradation? Could green growth enhance India’s contribution towards keeping global temperature rise well below 2C, while also significantly addressing its unemployment problems? Without significant efforts by the third-largest emitter of greenhouse gas emissions and one of the fastest-growing developing economies, the Paris Agreement targets would be unattainable and so would many of the UN Sustainable Development Goals (SDGs). This piece unveils the cornerstone provisions of India’s recent Green Budget and reflects on the potential that lies in India’s green-growth strategies and green energy transition.
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Green Energy Transition: India’s Green Budget
India’s 2023-2024 budget is ground-breaking for its allocation of a whopping US$4.3 billion towards the country’s transition to green energy and meeting its “net zero by 2070” target. If intentions translate into action, this should put India firmly on the global map “as a leader in the global green energy market,” as envisioned by Prime Minister Narendra Modi.
Industrial investments in clean energy sources and enhancing energy efficiency are hailed as two of the most viable options for any country’s decarbonisation efforts, at any level of development.
Since India has historically had a fossil-fuel-based energy infrastructure, investments in renewable energy in recent years have the greatest potential to make a real difference to its climate footprint. India’s renewable energy capacity has witnessed an unprecedented growth of 396% in the past 8.5 years, amounting to a share of 42.5 % of the country’s total installed energy capacity at the time of the announcement of the 2023-24 budget. This has enabled the South Asian nation to meet its target of “175 GW of renewable energy by 2022” as submitted in its first National Determined Contribution under the Paris Agreement.
The 2023-24 budgetary allocations for national green energy schemes and projects (combined for solar, wind, hydrogen, bio-fuel, and other renewable energy sources) is around US$197 billion (or 9,874 crore rupees) – nearly 45% more than what the government expected to spend in 2022-23. This may put India well on track for increasing its non-fossil fuel capacity to 500 GW by 2030 – one of the five nectar elements (Panchamrit) of India’s climate action, as delivered by Modi at COP26 in 2021.
Green Hydrogen
A key aspect of India’s green energy transition strategy is the National Green Hydrogen Mission, which aspires to make India a Global Hub for the production, use, and export of green hydrogen. India aims to produce 5 million metric tonnes of green hydrogen annually by the year 2030, and the government has allocated US$2.4 billion to achieve this target. The bulk of this – about 89% – would be spent on the domestic production of green hydrogen and related manufacturing of electrolysers, where renewable energy is used to drive water electrolysis – a hydrogen production pathway that emits zero greenhouse-gas emissions.
Green hydrogen, which can produce high-temperature heat to power massive industrial processes, has huge potential to decarbonise heavy industry such as steel and cement – which together account for 50% of all industrial sector emissions and are “hard-to-abate” sectors, along with the fertiliser industry. Scientific studies also demonstrate how green hydrogen has the potential to be a game-changer as a chemical feedstock, as a clean transportation fuel for long-range heavy-duty vehicles, and as a technology for long-term energy storage, across seasons.
However, green hydrogen is a technology that is yet to be commercially viable primarily due to its high production costs. These are attributed to inherent inefficiencies related to its production and conversion to and from electricity. The US Department of Energy’s first Energy Earthshot – the Hydrogen Shot – aims to reduce the cost of green hydrogen from $5 per kilogram to $1 per one kilogram by 2031. Large industry groups in India, such as the Adani Group and Reliance Industries, have made strong commitments to invest in green hydrogen and reduce its cost to a “dollar per kilo.”
Due to its distinct advantage in low-cost renewable energy production, India has vast potential to become one of the most competitive global producers of green hydrogen.
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Only 2% of India’s $2.4 billion budget for green hydrogen is allocated to research and development, even though successful deployment at scale strongly hinges upon hydrogen research, development, enhanced investments in the hydrogen value chain, and technology commercialisation. There remains tremendous opportunity for knowledge sharing across the globe.
As per a report by the Institute for Energy Economics & Financial Analysis, the “best commercial use case” for green hydrogen would be for producing green ammonia fertilisers, which can ease pressure on India’s US$14.2 billion fertiliser subsidy burden and offer a cleaner substitute for expensive gas imports.
Other Key Aspects of India’s Green Budget
- In an effort to spur the manufacturing of electric vehicles, India has eliminated the import duties on the equipment to manufacture lithium-ion batteries. The upfront costs of electric vehicles have also been reduced through a reduction in customs duties for imported batteries from 21% to 13%. Budgetary outlays for the ‘Faster Adoption and Manufacturing of Electric Vehicles’ have also been significantly increased.
- For when the “sun doesn’t shine and the wind doesn’t blow,” significant investments have been promised in battery energy storage systems with 4,000 MWh capacity to be supported with viability gap funding.
- For promoting circular economy, the Budgets envisages building 500 new “waste-to-wealth plants” under the GOBARdhan Scheme.
- An amendment to the National Energy Conservation Act of 2001 is expected to present a great opportunity for enhancing energy efficiency in buildings and industry sectors.
- A Green Credit Programme will be notified under India’s Environment (Protection) Act “to incentivize and mobilize additional resources for environmentally sustainable and responsive actions.”
- Support will be provided to 10 million farmers (one crore) to transition to “natural farming” – which involves a form of regenerative agriculture where crops are grown without fertilisers, pesticides/herbicides, tillage, or weeding.
- A vehicle-scrapping policy for central and state government vehicles more than 15 years old, in order to reduce the government’s carbon footprint and encourage the use of clean-energy vehicles.
- The Mangrove Initiative for Shoreline Habitats and Tangible Incomes (MISHTI) facilitates mangrove plantations along India’s coastline and on salt-pan lands.
India’s Paris Agreement Commitments to Facilitate the Green Energy Transition
India’s commitments under its updated First Nationally Determined Contribution appear ambitious on paper. For instance, the country has pledged to reduce the carbon intensity of its GDP by 45% by 2050, from 2005 levels. However, India already achieved a 34%-reduction in its national emission intensity in 2022. At a rate of increase of 3% in GHG-emissions per annum, and a GDP (PPP) growth rate of 8% (as predicted by the International Monetary Fund), India is projected to reach its 45% reduction commitment before 2025. This assessment is corroborated by Climate Action Tracker (CAT), according to whose analysis India’s updated targets are easily met by its existing level of climate action.
Per CAT, India’s Long-Term Strategy for Low-Carbon Development (LTS) – submitted at COP27 – provides extremely limited information and no clear and demonstrable emissions pathway on how India will reach its “net-zero by 2070” target.
While India’s LTS emphasises the principles of equity, climate justice, and fair-share, its current policies and actions are still rated by global agencies as “insufficient” compared to its fair share contribution. Unfortunately, the long-term development of coal also seems to be a part of India’s strategy – an additional 26 GW of coal capacity is expected to be installed by 2026-27. Moreover, subsidies for fossil fuels are still nine times higher than that for renewable energy.
Yet, India’s updated NDC must be seen as a positive development in the post-pandemic era and a progressive step in the right direction. Other key quantitative targets in the updated NDC are – (1) Achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030 and (2) Create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030.
Most significantly, India’s climate ambitions are cast under the powerful paradigm of ‘Lifestyle for Environment’ – a call for a global movement that envisages “healthy and sustainable way of living based on traditions and values of conservation and moderation.” Central to this is the idea that long-term sustainability can only be achieved through tackling the root cause – the need for dramatic changes in cultural mindsets, towards more environmentally-conscious lifestyles, beginning at individual levels.
Changes in individual and community preferences must become a mass phenomenon to constitute a “large-scale transformation” of global demands, in order to drive changes in global supply dynamics, and ultimately spur more sustainable patterns of production and consumption. This suggests a ramp-up of demand-side solutions to climate change mitigation that also inspire “long-term shifts in industrial and government policies.” It is also, in the end, a call to deviate from the “mainstream fantasy” of neoclassical economics and its simplistic assumptions, where sustainability is inconsistent with a GDP-focussed definition of economic progress, and where other factors of well-being are more important.
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Can “Green Growth” Deliver Sustainable Development in India?
An interesting 2013 empirical study demonstrates that by pursuing massive clean energy investments, India has the potential to not only achieve significant reductions in its levels of CO2 emissions but to also attain considerable gains in employment. This puts the budgetary outlays in India’s seminal 2023-24 Green Budget on the right track.
A 2021 report by the World Economic Forum envisions a “Green New Deal” for India that has the potential to create 50 million net new jobs and close to US$15 trillion in economic opportunity by 2070, with $1 trillion of this opportunity coming to pass by 2030.
If implemented well, the 2023-2024 Green Budget could be the most significant step for India toward making the Green New Deal a reality. All stakeholders – government, private sector, civil society, and individuals must come together.
Last but not the least, India also needs to attract foreign (global capital) to meet its high ambitions for green energy transition targets. A question that figures prominently in the controversial debates on green growth (and applies to India as well) is whether green growth would be adequate to mitigate critical environmental pressures, to the extent necessary.
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