India has been severely impacted by COVID 19 during the second wave in the first half of 2021, which has further reduced the resilience of climate change vulnerable populations already at risk of displacement by storms, floods, droughts and other climate disasters.
The Indian government has responded to the economic crisis by unveiling one of the largest stimulus packages in the world, equating to a share of around 11% of the country’s GDP in 2019. India’s overall COVID recovery stimulus package mainly supports activities related to industries likely to have a large negative impact on the environment by, for example, increasing the use of fossil fuels, and unsustainable land use.
However, India’s most recent stimulus (2021) is more climate-friendly, with two-thirds of the resources targeted towards a green recovery, including roughly USD 3bn in battery development and solar PV. While the additional stimulus is a positive step, India continues to support coal, with fresh loans to a number of thermal power projects, undermining a green recovery.
CAT analysis shows emissions to 2030 will rise less than in pre-COVID 19 projections, mainly because of the pandemic’s impact on the economy. India is continuing to expand its coal capacity, as a number of projects are under construction and several others have been announced, despite the utilisation rate of coal power plants falling. This risks profitability and stranded assets.
Based on current coal expansion plans, India’s coal capacity would increase from current levels of over 200 GW to almost 266 GW by 2029-2030, with 35 GW expected to come online in the next five years: an increase of 17.5% in coal capacity. India’s coal-fired power plant pipeline is the second largest in the world and is one of the few to have increased since 2015. A recent move to increase domestic coal production has opened coal mining to private investors, risking a fossil fuel lock-in as well as harm to areas of ecological significance. To get on a 1.5°C emissions pathway, it is important for India to phase out old, high-capacity power plants with lower efficiency and higher emissions, and stop any new coal capacity additions.
India provides subsidies for both fossil fuels and renewable energy, including direct subsidies, fiscal incentives, price regulation and other government support. While coal subsidies in absolute terms have remained largely unchanged since 2017, they are still approximately 35% higher than subsidies for renewables. India needs to provide price support, in the form of feed-in-tariffs, and the transfer of subsidies from fossil to non-fossil sources could be an important driver of higher penetration of renewables in energy mix.
India has not yet submitted updated 2030 targets (in its Nationally Determined Contribution - NDC) to the UNFCCC. Its current NDC target would be well overachieved with current policies.
The CAT rates India’s climate targets and policies as “Highly insufficient,” indicating that India’s climate policies and commitments are not consistent with the Paris Agreement’s 1.5°C temperature limit. Under India’s current targets and policies, emissions will continue to rise and are consistent with 4°C or more of warming when compared to a modelled domestic emissions pathway. India’s policies and action would result in overachieving its targets, but still only in line with 2°C warming when compared to its fair share contribution to climate action.
For India to improve its rating, it needs to increase its unconditional NDC target to significantly reduce the speed of emissions growth. With international support, India also needs to set an ambitious conditional target to curb its expected growth in emissions from its dependency on fossil fuels, and begin the shift to a net zero economy.
The CAT revised its rating methodology in 2021, shifting from solely rating government targets against a fair share contribution, to rating both targets and action against a fair share framework, as well as what needs to occur within a country’s own borders with financial support based on modelled domestic pathways consistent with 1.5°C.
Under the previous method, India rated “2°C compatible” (now ‘Almost sufficient’). The main driver for the change in rating is the updated CAT equity data: we revised the input data of equity literature and removed more studies in case they were based on a different sectoral scope, different gas scope or if the authors had published an updated study. For India, this leads to a significant change of the upper and lower bound of the fair share range, and therefore the rating as well.
Under current policies and action, greenhouse gas emissions (excluding LULUCF) are projected to reach a level of 3.84-4.02GtCO2e in 2030. The median value of emissions falls under the rating “Insufficient”, but the lower end of our estimate is just within the boundary for an “Almost sufficient” rating. We consider the lower bound to be more likely and use it as the basis for our ratings. The CAT rates India’s policies and action as “Almost sufficient” against its fair share contribution, which indicates that India’s current climate policies and actions are not yet consistent with the Paris Agreement’s 1.5°C temperature limit but could be with moderate improvements.
India has ambitious renewable energy policies, but its coal pipeline remains an issue. India has an ambitious 2022 renewable energy capacity target of 175 GW. As of July 2021, it was just shy of the 100 GW mark, with 98.9 GW of new renewable energy capacity installed, meaning that it is unlikely to reach the target. Ramping-up renewables in India can provide access to affordable power at scale. Falling auction prices for wind and solar, and increasing cost of coal-fired power generation will hasten the availability of affordable, renewable energy.
To be aligned with the Paris Agreement 1.5°C limit, India must phase out coal use from its power sector by 2040. The National Electricity Plan (NEP) in 2018 is projected to add more than 45 GW of coal-fired capacity by 2027, and a recent report from the Central Electricity Authority shows that in 2029-30 India’s coal capacity will be increased by 64 GW above 2021 levels. This would unnecessarily increase emissions, and risk stranded assets.
Recent developments in India’s coal sector indicate that only about 50% of planned coal capacity (6.8 GW) was installed in 2019–20, and the number of cancelled plants is also increasing (Central Electricity Authority, 2020b), but India still has one of the largest coal pipelines in the world. India would need to move faster towards decarbonising its energy sector.
India’s first NDC has three main elements:
- An emissions-intensity target of 33%–35% by 2030 below 2005 levels;
- To increase the share of non-fossil-based energy resources to 40% of installed electric power capacity by 2030 with support;
- To create an additional (cumulative) carbon sink of 2.5–3 GtCO2e through additional forest and tree cover by 2030.
We take India’s 40% non-fossil capacity target as being conditional on international support (“internationally supported target”) and rate this against where India’s emissions need to be for 1.5°C compatibility, based on modelled domestic pathways. With this we check if a country has a plan on how fast it could reduce its emissions if there were sufficient international support available.
The CAT rates India’s internationally supported target as “Critically insufficient”, indicating that India’s internationally supported target needs substantial improvements to be consistent with the Paris Agreement’s 1.5°C temperature limit. India has not yet submitted an updated NDC.
We interpret India’s emissions-intensity target as being its unconditional contribution to meeting the Paris Agreement. We rate this target against what India’s fair share contribution under the Agreement should be. We rate India’s emissions intensity target as “Highly insufficient.” The “Highly insufficient” rating indicates that India’s climate policies and commitments are not consistent with any interpretation of a fair-share contribution and lead to rising, rather than falling, emissions.
The CAT revised its rating methodology in 2021, including updates to its equity framework. For India, this led to a significant change of the upper and lower bound of the fair share range and therefore the rating as well. As a result, India’s target fair share target rating has fallen by two categories from what we used to call "2°C compatible" (now "Almost sufficient") to "Highly insufficient".
India does not have a net zero target.