Date: May 30, 2008 Time : 1800 - 1930 Venue: Khemka Auditorium
Tackling Climate Change: An Indian PerspectiveShyam Saran,
Prime Minister’s Special Envoy
I wish to thank the Indian School of Business for arranging this interaction on Climate Change related issues. The ISB has justifiably earned an enviable reputation in nurturing creative entrepreneurship and professional management in India. I believe that awareness and understanding of major global issues confronting us today are indispensable to sound business planning and market strategies. I will make a brief presentation on why Indian business should be concerned about climate change and what are the risks and opportunities specifically relating to India as we strive to tackle the phenomenon of climate change.
I believe you are already familiar with the presentation I made to the Confederation of Indian Industry in Mumbai, entitled “Climate Change – From Back Room to Board Room - “What Indian Business Needs to Know about India’s Approach to Multilateral Negotiations on Climate Change” on 21 April 2008. I will avoid covering the same ground again. My focus will be on how India proposes to tackle Climate Change at the national level, and what role would the evolving multilateral regime play in furthering our national objectives.
Let me begin by informing you that the Government is currently in the process of finalizing its National Action Plan on Climate Change. This is likely to be released next month in June. The Plan will consider the risks posed to our country due to the phenomenon of Climate Change, based on careful scientific analysis and evaluation. Our strategy is to meet the challenge of climate change through sustainable development. The concept of sustainable development includes adaptation to consequences of climate change which has already taken place and is likely to take place. It would also include measures for mitigation or measures to reduce anthropogenic greenhouse gas emissions, which may result in the warming of our planet and a potentially catastrophic change in the global ecology and life-sustaining systems. Quite obviously, the preoccupation of countries like India is with adaptation, even while we press developed countries to undertake significant mitigation. This is particularly so since our own emissions are less than modest, compared to those of developed countries, whether on per capita or national basis. Our current per capita CO2 emissions are only 1.1 tonnes compared to more than 20 tonnes for the US. Our total emissions are just 4% of global emissions. And yet there is a continuing effort to brand us as a “major emitter”!
Adaptation to climate change that has already occurred, imposes a heavy economic burden on developing countries and this burden is due to the accumulated greenhouse gases in the atmosphere as a result of industrial activity in industrialized countries over the past 200 years. The principle of equity therefore demands that the developed countries should not only take the lead in mitigation but also acknowledge the liability for much of the adaptation costs that developing countries like India are compelled to incur. Our estimates are that 2.5% of our current GDP is being spent on adaptation measures, which include introduction of drought resistant crops, change in cropping patterns, disaster management, among others. It may also be noted that economic development is the best form of adaptation. Higher incomes would enable our people to cope with the consequences of climate change much more effectively, than if there continues to be widespread poverty.
Concerning mitigation, it must be clarified that as our economy develops and uses more commercial energy, India’s emissions are bound to rise. To expect India to pay the higher costs involved in emission-reductions, even while we cope with the increasing burden of adaptation, is simply not tenable. This does not mean that we want to have a license to spew as much greenhouse gases into the atmosphere as we can. Far from it. The energy intensity of our GDP growth has been consistently declining. We are delivering 8% growth with a less than 4% increase in energy consumption.
There are sound ecological and economic reasons for us to progressively shift to a low carbon economy. Unconstrained emissions have many adverse consequences, including on the health of current and future generations. Further, even if climate change were not an issue, we would still need to find non-fossil and renewable sources of energy, in a world where fossil fuels are becoming rapidly depleted, relative to rising global demand for energy resources. Therefore, if we do not wish to let energy become a significant constraint on our maintaining a high level of growth, a strategic shift to non-fossil and renewable energy is inevitable.
In this connection, I wish to inform you that in the multilateral negotiations, we have argued that the principle of equity implies the long-term convergence of per-capita emissions world-wide. Our Prime Minister has declared that we are prepared to make a significant contribution to the global mitigation effort by ensuring that our average per capita emissions will, at no time, exceed those of our developed country partners. This also constitutes a mutual incentive. The more ambitious our partners are, the lower the threshold we would be prepared to accept even as we traverse the path of sustainable development.
The proposed Action Plan is based upon the approach outlined above. It is not emission-centric like among our developed country partners. Rather, the eventual stabilization and reduction, if necessary, in our greenhouse gas emissions, would follow as a consequence of sustainable development, rather than the other way round.
The National Action Plan will also contain mechanisms for implementation of various policy measures, but for Indian business, it is important to know that we envisage a key role for the private sector and would welcome public/private partnerships to achieve the objectives of the Plan. There will also be an acknowledgement that in some areas, market mechanisms could be explored to deliver desired outcomes.
As would be apparent from what I have said so far, climate change and energy security are linked together. Industry runs on energy. Modern societies consume vast amounts of commercial energy. An overwhelming proportion of this energy comes from fossil fuels such as coal, oil and gas. In India, more than 50% of our energy requirements come from coal. We must adopt more efficient coal-based power production both for ecological and economic reasons. Similarly, urban transportation and domestic consumption would need to limit the use of oil and gas whose supplies are becoming scarce and, which are also major sources of carbon emissions. Business in India should expect that the compulsions of sustainable development and energy security will oblige the country to adopt progressively higher standards of energy efficiency and price fossil fuels in a manner that encourages a shift to renewable energy and energy conservation. Businesses which anticipate and provide for these developments will be better placed to deal with the emerging challenges of climate change.
It is my expectation that improving energy efficiency in industry and promoting energy conservation, will be our major preoccupation for the foreseeable future. The Government already has legislation to promote energy conservation – this is the Energy Conservation Act of 2001. The Act identifies 9 major energy-intensive industry groups, such as power generation, iron & steel, cement and paper and pulp among others, as the focus of conservation efforts, including through energy audits, identification of conservation measures and the monitoring of progress. The government has the legal authority to prescribe energy efficiency norms for various industries, which must be complied with. Such norms may be set in consultation with industry. It is in industry’s own interest to take the initiative in this regard and promote best practices in each sector. A survey of the current efficiency standards in these industry groups indicate that we have units which compare with the best in the world, or even exceed world standards. On the other hand, there are units which are at the bottom of the pile. The challenge for industry would be to bring the latter up to the higher end of the scale. Government would be ready to consider appropriate incentives in this regard.
The promotion of energy efficiency in Indian industry represents a major business opportunity for Energy Service Companies. The market for performance based contracts for improving energy efficiency is estimated at Rs. 14000 crores by an ADB Study Project. Typically, the Energy Service Company would undertake turnkey services ranging from energy audit, identification of potential energy savings through technological upgradation and/or improved management practices, arranging financial packages to cover the cost of upgradation, with financing being set off against cost savings from reduced energy consumption. A similar possibility exists in improving energy efficiency in current commercial and private urban building stock. There are existing technologies to make buildings more energy efficient and reducing electricity consumption substantially. Such upgradation, too, can be easily financed from savings on electricity use.
Despite the fact that there is a huge market waiting to be tapped, progress in creating Energy Service Companies has been limited. Part of the problem is the lack of commercial bank financing, but equally a general lack of awareness of the possibilities for profit in this area. Both industry and the banking sector need to focus attention on this area.
I will now turn to the international context in which India has to deal with the challenge of climate change. In my presentation at Mumbai, I had spelt out India’s approach to multilateral negotiations on Climate Change and tried to remove some of the confusion that has been created about the objective of these negotiations. What I want to share with you this evening is the scenario that is likely to unfold in the coming months at the various multilateral fora dealing with climate change.
Despite the fact that it is the industrialized countries which are responsible for the high concentrations of greenhouse gases in the atmosphere, there is a continuing and concerted effort to persuade so-called emerging economies like China and India to accept emission reduction targets alongside developed countries. The argument is that since the emerging countries’ incremental contribution to greenhouse gas emissions is now significant and increasing, emission cuts by developed countries would not make any appreciable impact on climate change, unless the major developing economies also join. There is even a dark threat being held out that failure by the emerging economies to accept reduction commitments, should be punished through the imposition of so-called “green tariffs” on emission-intensive products of these countries. This is an area of major concern and Indian business should be alive to this risk. At multilateral fora, we find a significant presence of business and industry organizations from developed countries, who not only monitor the negotiations carefully, but also try and influence the negotiating positions of their respective delegations. It is they who have pressed the argument that action on climate change must not “impair” their competitiveness vis-à-vis emerging economies. It is important that our business and industry work in close coordination with the official negotiating team and supplement the government’s efforts through their own lobbying and outreach activities. Protection under the guise of going “green” is a real threat. Government and industry will need to counter it jointly.
In addition to pressure on us to undertake emission reductions, there will also be an effort to seek an opening of our markets to so-called “climate friendly technologies” and climate change related goods. Most of these are actually dual-use and the demand to allow their entry into our markets duty-free, which is being assiduously advocated by the United States, is also becoming a matter of controversy. The developed countries are, at the same time, demanding that we liberalize our investment regimes if we want to encourage the transfer of capital and technology to meet our sustainable development needs. These moves are in direct contravention of the legal undertaking of developed countries, enshrined in the UNFCCC, where developing countries are entitled to receive, without any conditionalities, the transfer of technology and adequate financial resources, in order to engage in adaptation to climate change and to undertake any mitigation measures. Thus, the issue of climate change is being used as a market opening measure against developing countries. We have resisted and will continue to resist such attempts.
On the positive side, Indian industry has benefited from the Clean Development Mechanism (CDM) under the Kyoto Protocol through which developed countries are able to offset their emission reduction obligations through projects using clear technology in developing countries. The current CDM market is currently about $ 5-7 billion, but is expected to grow to $ 22 billion in 2012. In terms of number of projects, India has the largest portfolio. If the current project proposals in the CDM pipeline were to be approved, Indian companies would earn approximately US $ 4.8 billion from the sale of carbon credits by 2012. It is clearly our expectation that CDM not only continues beyond 2012, but in fact expands significantly. We are also engaged in the simplification of, and transparency in, the procedures for approval of CDM proposals. For Indian business, this could be a major and growing opportunity to access both capital as well as technology, while making climate-friendly investments.
Mr. Chairman, ladies and gentlemen, there is no doubt that Climate Change has become an over-riding preoccupation across the globe. Unfortunately, there continues to be resistance among the developed countries to approach this global challenge in the spirit underlying the UNFCCC, which is the principle of equity. Any approach, which does not acknowledge the development imperatives and the urgency of achieving poverty elimination in developing countries like India, is unlikely to enable a truly global response to the challenge of climate change. For our part, we will, through our Action Plan, undertake the measures necessary to launch India on a path of sustainable development. We are prepared to play our part as responsible citizens in the international community and make our own contribution to the global effort to tackle climate change. However, the scope and scale of our national effort would be greatly enhanced if the developed countries fulfill their obligations under the UNFCCC to transfer adequate financial and technical resources to developing countries, without prescribing extraneous conditionalities. In the ongoing multilateral negotiations, India will take the lead in ensuring an outcome that safeguards the right of our citizens to development, even as we contribute to the preservation of the fragile global ecology.
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