India's Climate Change Opportunity
India lags far behind rival China in wealth and development -- and also in the amount of carbon dioxide it spews into the atmosphere. Indian leaders say this explains why they shouldn't be expected to limit their greenhouse-gas output as China has just done. At global climate talks in Lima this week, they'll probably also point out that 1 in 4 Indians still lacks electricity, so the country can't afford any limits on economic growth.
In fact, India's relatively low level of development is exactly why it stands to benefit from setting aggressive emissions targets. It means, first, that the country has a chance to build smarter. According to one government estimate, some 70 percent of India's buildings in 2030 will have been constructed after 2011. Enforcing strict green building codes now, and providing financial and tax incentives to comply, would limit the carbon intensity of India’s growth and, at the same time, improve its air quality and help businesses save money.
In a similar way, the rapid expansion of India’s smaller cities offers an opportunity to upgrade public transportation and avoid productivity-killing gridlock. Eager to boost India’s manufacturing sector, Prime Minister Narendra Modi has already backed plans for efficient new rail freight corridors, an encouraging sign. If his government also rationalized pricing -- traditionally, high freight tariffs have subsidized passenger fares, while diesel subsidies, now lifted, made road transport artificially cheap -- it could enlarge the share of goods shipped by rail, which has fallen to less than a third.
For its own reasons, notably India's poor oil and gas reserves, Modi's government has already set ambitious targets for renewables, hoping to reach 100 gigawatts of solar power by 2022, from around 3 gigawatts today -- a commendably ambitious target. While that may be a stretch, the country is well-positioned to benefit from new energy storage and distribution technologies that can bypass the decrepit transmission grid. If Modi continues to eliminate subsidies as he's promised, his government could also invest more in energy research and development, and reduce the country's dependence on imported (mostly Chinese) green technology.
None of this would end coal's dominance in India's energy picture. It will long be the cheapest, and dirtiest, source of power, and the government has already laid plans to double state-run Coal India's output over the next five years. Right now, however, only about 6 percent of coal-fired power plants use so-called super-critical boiler technologies, which are much cleaner than older systems. As new plants come online between now and 2030, that proportion could be pushed to more than 50 percent.
Upping the existing coal tax and expanding it to other fossil fuels would also make clean energy more economically viable. Bigger investments in nuclear and hydropower projects could raise the proportion of energy generated by non-fossil fuels to a third by 2030.
Committing to these strategies -- say, by setting more ambitious targets for reducing carbon intensity, if not emissions -- won’t be cheap. Indeed, it could knock 0.15 percent off annual growth, according to a government estimate, if India gets no outside financial support for the effort. But the investment will pay long-term dividends, and it's a cost India can't afford to dodge.
With its long coastline and huge population (1.25 billion and counting), the country is worryingly vulnerable to flooding and other effects of climate change. And the costs of India's air pollution -- by some measures worse than China's -- in terms of lost lives, health care and potential political tensions are certain to rise. India should consider this week’s talks an opportunity to set itself on a healthier growth path -- for its own sake, no less than the world's.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.