FACING INDIA’S GHG EMISSION Challenge

India has to develop, but a developing country needs more and more electricity. As per our country’s commitments, we have to further accelerate the process of decarbonisation. However, it is much tougher than said. The country has to overcome multiple challenges that need to chalk out the most feasible and sustainable solutions …

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In a conversation with Microsoft co-founder Bill Gates last month, Prime Minister Narendra Modi said that the parameters used to ‘measure progress’ are detrimental to the climate. He said that if we continue to judge a country’s development or economy by its steel consumption and energy usage, then progress would result in increased carbon emissions. He said that the world should develop and adopt the concept of Green Gross Domestic Product (GDP) that can be incorporated into the overall GDP.  He said the world needs to adopt a two pronged strategy: first, nature and climate friendly innovation, and second, environmental friendly lifestyles.

Understanding Greenhouse Gas (GHG) Emissions

Gases such as water vapour, carbon dioxide (CO2) and methane are responsible for creating a greenhouse effect by warming the earth’s surface and the air above it, and hence are referred to as Greenhouse Gases (GHG).

Global warming is proportional to cumulative GHG emissions, which means that the planet will keep heating for as long as global emissions remain more than zero. Climate damages, caused by global heating, will continue escalating for as long as emissions continue.

Climate Change in India

The average rainfall fell by 0.6m  while the average temperature increased by 0.50C over the period 1950-2018 (see Figures 1 and 2). Particularly, in India, there has been an increase in weather variability, temperatures regularly above 500C in certain regions and unpredictable rains in timing and quantity during the monsoon season. Agriculture and transport sectors are harmed. Climate change and increased pollution have a direct negative impact on individual’s health, over US$37 billion output loss due to premature deaths, morbidity, and increased deaths due to heat stress, malnutrition, malaria and diarrhoea.

Definition: Scope 1 and Scope 2 emissions are those that are owned or controlled by an organisation.

  • Scope 1 covers emissions from sources that an organisation owns or controls directly – for example from burning fuel in its fleet of ICE vehicles.
  • Scope 2 are emissions that an organisation produces indirectly from the energy it purchases and uses. For example, the emissions from the generation of electricity, used to power up EVs, fall into this category.
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Figure 1. Annual Precipitation…
(Sources World Bank, IMF)
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Figure 2. Average Temperature…
(Sources World Bank, IMF)

Definition: Scope 3 emissions  are a consequence of the activities of the organisation but occur from sources not owned or controlled by it.

  • Scope 3 encompasses emissions that are not produced by the organisation itself, nor from the result of activities from assets owned or controlled by them, but by those that it’s indirectly responsible for, up and down its value chain. An example of this is when it buys, uses and disposes off products from suppliers. Scope 3 emissions include all sources not within the scope 1 and 2 boundaries.

For many businesses, Scope 3 emissions account for more than 70% of their carbon footprint. Scope 3 emissions are under the control of suppliers or customers, so they are affected by decisions made outside the company (see Figure 3).

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Figure 3. Different types (Scope) of Greenhouse Gas Emissions…

Net Zero Emissions

Net Zero refers to a state where anthropogenic emissions by sources are balanced by removals by sinks. In this state, the GHG going into the atmosphere balances its removal out of the atmosphere, and global warming stops.

Net Zero is different from Absolute Zero / Zero Emissions, where no GHG emissions are attributable to an actor’s activities across all scopes. Under this definition, no offsets or balancing of residual emissions with removals are used. It (absolute zero) is a valid end-state target, but difficult to achieve initially.

It is international scientific consensus that, in order to prevent the worst climate damages, global net human-caused emissions of carbon dioxide (CO2) need to fall by about 45% from 2010 levels by 2030, reaching net zero around 2050. The Paris Agreement underlines the need for net zero. Net zero is the internationally agreed upon goal for mitigating global warming in the second half of the century. The IPCC concluded the need for net zero CO2 by 2050 to remain consistent with the 1.50C target.

How to Reduce Your Greenhouse Gas Emissions?

By cutting carbon emissions, carbon footprints or seeking low-carbon alternatives should help to tackle climate change. This can be done in two ways:

  • Lowering the emissions we’re sending into the atmosphere, from activities such as industrial processes, power generation, transport and intensive agriculture.
  • Removing greenhouse gas emissions from the atmosphere, for example by capturing carbon that’s created during industrial processes, or by planting more trees.

Regardless of whether you belong to the industry, power generation, industry, transport, or agriculture, to reduce GHG emissions, you need to:

  • Develop a full greenhouse gas emissions inventory
  • Incorporate Scope 1, Scope 2 and Scope 3 emissions
  • Understand your full value chain emissions
  • Focus your efforts on the greatest reduction opportunities

You need to treat Climate Change as a business problem rather than solely as a Corporate Social Responsibility (CSR). Committing to reach net zero will involve tackling your Scope 3 emissions.

GHG Emissions in India

India is the world’s third largest greenhouse gas (GHG) emitter, however, in terms of emissions per capita it has the lowest level in the G20. Figure 4 shows India has slightly more emissions than the European Union (EU) but only one third of the emissions per capita, while the United States has 7 times higher emissions per capita. Given India’s modern economic development began considerably later than that of advanced economies, it has a small contribution to global historical cumulative GHG emissions of approximately 3% (UNEP, 2022).

In the updated Nationally Determined Contribution (NDC) to the UNFCCC, India has committed to lower the emissions intensity of its GDP by 45% from 2005 levels by 2030. It also committed to achieve 50% of total installed power capacity from non-fossil fuel-based energy resources by 2030 and to put forward and further propagate a healthy and sustainable way of living (LiFE). India also committed to get to net zero emissions (NZE) by 2070 at COP26.

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Figure 4. Aggregate GHG Emissions…
(Source IMF, EDGAR, UNFCCC, FAO, EU)

India’s Power Mix in 2030

In the ‘Report on Optimal Generation Mix 2030 – Version 2’ released in April 2023, the Central Electricity Authority (CEA) has  projected how India’s energy mix for the power sector would look like in 2030. In 2022-23, India generated 73% of its power from coal and only 12% from renewable energy sources such as solar, wind, small hydro, pumped hydro and biomass. In 2030, CEA expects that power from coal would go down to 55% while the share of generation from renewables would rise to 31%.

Compared to the version 1 report published in 2020, the projections are fairly the same – except for solar generation that has been projected to go up from 19% to 23%. The total installed power capacity in 2030 is projected to be 777 GW, while the gross generation is expected to be 2440.7 BU.

To meet peak demand (typically in the evenings) which often does not coincide with peak solar generation, CEA has projected a requirement of about 60 GW of storage capacity by 2030, from both pumped hydro and battery storage, to store the excess solar generation.

The report also states an additional energy requirement of 250 BU by 2030 to meet India’s green hydrogen aspirations. This means that the generation from solar and wind needs to be ramped up significantly from the 2022-23 levels of 173 BU if hydrogen production is to be given an added priority.

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Figure 5. India’s power mix in 2023 vs 2030, generation (in BU)…
(Courtesy CEA, downToEarth.org.in/news)

India’s GHG Emissions Are on an upward Trajectory

Under current policies, India’s GHG emissions are on an upward trajectory. The power sector is the largest emitter in India, accounting for 37% of total GHG emissions, followed by the agricultural sector (21%), manufacturing (17%) and the transportation sector (9%). The blue line in Figure 5 shows India’s historical and projected total GHG emissions under current policies.

Note that historical emissions have been slowly but steadily rising since 2014 in line with economic development. With India’s ambitious growth plans a 41% increase in GHG emissions by 2030 is anticipated. Model estimates suggest that we will continue to see growing emissions levels up to 2040 and therefore, additional mitigation policies would be needed to bring India’s emissions trajectory down.

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Figure 5. GHG All Emissions…
(Source IMF)

Delays in Transition Will Be Costly

Economic growth is a key priority for India and would be accompanied by increased demand for energy. The status quo energy composition that relies heavily on brown fuels puts India’s emission trajectory in the opposite direction of an illustrative linear path to Net Zero Emissions (NZE) by 2070 (shown in red in Figure 5).

Delaying the switch to green energy will be costly for India for three reasons. First, India is currently planning substantial investments in coal-fired power plants that have typical lifespans of multiple decades and significant fixed costs. If the country wishes to close these plants before their full lifespan, these fixed costs will be amortised over a shorter period inducing high transition costs and risking stranded assets. Second, scaling up renewable alternatives requires solving challenges such as intermittency problems, storage and grid connections, which are easier to do over longer periods of time. Third, to ensure a just transition it will be important to retrain workers currently in sectors that we see a decline. This is also easier and less disruptive over longer time horizons.

Growth vs Emissions Challenge

Climate change poses challenging policy tradeoffs for India, but a path towards greener, stronger, and inclusive growth is possible. India faces important development goals, including to continue raising living standards for over a billion people. At the same time, it must be a critical contributor to reducing global GHG emissions as it is one of the largest emitters today in absolute terms.

Shifting away from coal is a formidable challenge, and the Indian government is taking a multipronged approach. The Indian economy relies heavily on coal that powers over 70% of electricity generation, and accounts for almost 40% of India’s CO2 emissions. Much of the industrial sector also runs on coal, and over 20 million people are dependent on the mineral, its extraction and use for employment either directly or indirectly.

The use of coal for electricity will remain a large component of source energy for the foreseeable future, but supercritical technology is being adopted to enhance the efficiency of coal fired power plants. Plans to adopt ultra-supercritical plants and develop advanced ultra-supercritical technology, which are estimated to have emissions savings of 15–20%.

Missions under the National Action Plan on Climate Change

  • National Solar Mission
  • National Mission for Enhanced Energy Efficiency
  • National Mission for Sustainable Habitats
  • National Water Mission
  • National Mission for Sustaining the Himalayan Ecosystem
  • National Mission for Green India
  • National Mission for Sustainable Agriculture

In its effort to shift towards renewable energy sources and reduce emissions, the Indian government has deployed many policy tools. Various forms of subsidies for renewable energy adoption and generation are widespread (e.g., PLI schemes for solar module and battery manufacturing, National Motor Replacement Program, FAME for EVs, LED streetlights and bulbs), as are regulatory requirements (e.g., RPOs for electricity, building efficiency standards, vehicle emissions standards, standards & labelling, bioethanol), and tradable energy certificates (RECs, PAT). These policies are helping India begin its shift towards lowering emissions. Without further efforts, however, India’s emissions are on track to continue to increase at a rapid pace. Investment in renewables will need to be scaled up substantially. This will require leveraging, in particular, technology transfer, international finance, and domestic debt markets.

DISCOMs – a Barrier to Decarbonize

One of the key challenges facing the power sector is the debt-distress of state DISCOMs. DISCOMs struggle to raise revenues amid underpriced electricity, inadequate subsidy payments and long-term purchase agreements with electricity generation companies. In addition, they face high energy losses (technical loss, theft, inefficiency in billing) and high commercial losses (default in payment and inefficiency in collection).

Given their heavy financial losses, DISCOMs have generally under-invested in improving power distribution or in upgrading the energy distribution infrastructure. Political constraints have historically impeded reforms to DISCOMs and their pricing structure. Furthermore, DISCOMs’ payment delays to renewable energy generators act as one of the major barriers to scaling up renewable energy in India.

The GoI has undertaken several initiatives to resolve DISCOM debt stress. Around USD 60 billion has been allocated across several programs since 2015 aimed at resolving debt stress while trimming electricity losses, gradually narrowing the cost-revenue gap, improving the reliability and quality of power supplies, and promoting more sustainable competition in the sector (Ujwal DISCOM Assurance Yojana (UDAY) 1.0 and 2.0, and the Revamped Distribution Sector Scheme). State governments took on the debts of DISCOMs in UDAY 1.0, but they nonetheless continued to face financial strains.

The use of smart meters has been recognized as an additional solution to minimise DISCOM losses – and that could aid demand side management as well as narrow the cost-revenue gap of stressed DISCOMs – but this has had slow progress. Revising electricity tariffs will also be important to address the question of DISCOM viability. Looking forward, such schemes remain critical as DISCOMs face a further hit to their financial stability (from revenue loss), distribution system issues (from reactive power, voltage impacts and reverse power flows) and demand forecast uncertainty as renewable energy ramps up.

Net Metering to Net Billing 

It is a common belief that an increase in solar generation would automatically result in a decrease in GreenHouse Gases (GHG) emission.  So strong is this belief that prosumers having solar roof tops do not feel guilty to bank solar units with their local electric utility only to draw them later in the night to charge their EVs (Electric Vehicles). They believe that they are entitled to draw (import) fossil fuel units at night at no cost simply by offsetting them against solar units that they have earlier generated and banked with the utility in the daytime, under the Net-Metering (NM) tariff scheme offered by the utility. The flawed NM tariff is thus incapable of reducing GHG emissions. It also results in fossil fuel based generation demand peaking in the evening and  load shedding.

For the electric utility, NM results in a dual problem – (a) need to search for a buyer for the solar energy exported while (b) compensating the solar rooftop customer by offering expensive carbon based or fossil fuel based energy at night at a discounted price that matches the lower cost of solar energy.

The solution is to shift from NM to Net Billing where the export and import of units are delinked and are independently billed.

Carbon Credits and Carbon Offsets

A carbon credit represents 1 tonne of CO2e that an organisation is permitted to emit. The number of credits issued to the organisation by a regulatory body represents its emissions limit or cap. Over-emitters turn to the carbon market to purchase carbon credits from an under-emitting organisation.

A carbon offset is also measured in tonnes of CO2e. However, unlike carbon credits that are created or distributed by a regulatory body and limited to regulatory jurisdictions, carbon offsets can be traded freely on voluntary markets around the world.

Carbon Offsets can be sold at approx. USD 40/ ton. It is important that the carbon credits and offsets be carefully audited as its misuse could severely impact genuine efforts to reduce carbon emissions.

Tripling Renewable Capacity by 2030

At the 28th Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC), there was a push for countries to agree on a global renewables target — a tripling of renewable capacity by 2030. India’s push to grow solar and wind bodes well in this context.  CEA projects that India’s renewable capacity and generation would quadruple from 109 GW to 392 GW and from 173 BU to 761 BU respectively in 2030.

CEA’s projections indicate that India is likely to over-achieve on its pledge to the Paris Agreement – to have 50% of installed power capacity from non-fossil sources by 2030. As per the report, India’s share of capacity from non-fossil sources – large hydro, small hydro, pumped hydro, solar, wind and biomass – will be 62% by 2030. The share will be 64% if nuclear power is considered.

It should be noted, however, that it is easy to quadruple the renewable capacity to 392 GW in 2030. However, it is difficult to substitute fossil fuel generation by the estimated 761 BU of renewable energy in 2030 and lower it down from the current levels.

With rising power demand, it is worth noting that while the share of coal is expected to reduce from 73% to 55% of power generation by 2030, coal power will rise in absolute terms between 2023 and 2030 –  by 19% in terms of capacity and by 13 per cent in terms of generation.

The power sector contributes 37% of India’s total GHG emissions. With growing energy demand as is expected of a developing country, power sector emissions are projected to rise by 11% – from 1.002 gigatonnes of carbon dioxide (Gt CO2) in 2021-22, comprising 8% of global power sector emissions to 1.114 Gt CO2 in 2030 at 10% of the corresponding global figure. On a per capita basis, this will be about half the world average even in 2030.

Conclusion

India faces a formidable challenge – on one side to continue raising living standards for over a billion people, while on the other to be a critical contributor to reducing global GHG emissions. India continues to be one of the largest emitters today in absolute terms.

The Indian economy relies heavily on coal which powers over 70% of electricity generation, and accounts for almost 40% of India’s CO2 emissions. Much of the industrial sector also runs on coal, and over 20 million people are dependent on the mineral, its extraction and use for employment either directly or indirectly. In its effort to shift towards renewable energy sources and reduce emissions, the Indian government has taken a multipronged approach. Various forms of subsidies for renewable energy adoption and generation are widespread (e.g., PLI schemes for solar module and battery manufacturing, National Motor Replacement Program, FAME for EVs, LED streetlights and bulbs), as are regulatory requirements (e.g., RPOs for electricity, building efficiency standards, vehicle emissions standards, standards & labelling, bioethanol), and tradable energy certificates (RECs, PAT) and most recently a carbon trading market. These policies are helping India begin its shift towards lowering emissions.

Without further efforts, however, India’s emissions are on track to continue to increase at a rapid pace. More efforts are needed to reach the 2070 net zero goal. Investment in renewables will need to be scaled up substantially. This will require leveraging, in particular, technology transfer, international finance, and domestic debt markets. Climate change poses challenging policy tradeoffs for India, but a path towards greener, stronger, and inclusive growth is possible.

Reducing GHG emissions will almost certainly have a negative impact on growth in the short run. On the positive side, there will be many benefits including improved health and productivity from reduced pollution.


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Vithal Kamat has a Doctorate in Artificial Intelligence from the University of New Brunswick, Canada as a Commonwealth Scholar in 1996. He completed Masters in Control and Instrumentation from IIT Bombay. He is associated with the Centre for Apparent Energy Research, Anand, Gujarat.

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