Current Policy Projections
Our analysis shows that India can achieve its NDC target with currently implemented policies. Under current policy projections, greenhouse gas emissions (excluding LULUCF) are projected to reach a level of 3.2–3.3 GtCO2e in 2020 and 4.3–4.4 GtCO2e in 2030. This is a 46–50% increase in emissions from 2010 levels by 2020 and a more than doubling of 2010 levels by 2030.
The growth in emissions is in line with both the 2020 and 2030 intensity pledges, the achievement of India’s targets depends on actual economic growth levels. Population growth is one of the main drivers of India’s projected GHG emissions. By 2028, India is projected to overtake China as the largest country in terms of population. By 2030, India’s population is projected to grow to ~1.5 billion but the per capita emissions would still be far below the world average in 2013 (World Bank, 2017).
The Indian Government is considering long-term growth strategies over the period 2030–2045 that would result in a decoupling of carbon emissions from economic growth. In 2017, it commissioned three research institutes (The Energy Research Institute, the Observer Research Foundation and the Centre for Study of Science, Technology and Policy) to develop these long term low-carbon growth strategies (Scroll.in, 2017). The results of these studies were expected to be published in 2018 but had not been at the time of writing.
The power sector accounted for 32% of India’s total emissions (excluding LULUCF) in 2015. Data from the IEA shows that CO2 emissions from fuel combustion plateaued between 2014 and 2016, but this proved to be a temporary halt in growth, with emissions from energy rising by 4.8% in 2018, largely driven by emissions from coal power plants (IEA, 2019). Coal fired power generation accounted for 75% of India’s total power generation in 2015 (IEA, 2017b) which results in an emissions intensity of power supply (767 gCO2/kWh) far higher than the global average (475 gCO2/kWh).
India faces the significant challenge of providing universal access to reliable electricity. According to the IEA’s Energy Access 2017 report, 18% of the population still had no access to electricity in 2017, meaning reaching 100% electricity access in 2019 is likely to be out of reach, but universal access should be achieved well before 2030 (IEA, 2017a). With steady population and economic growth, India is likely to have the fastest-growing electricity market of any of the world’s biggest economies (IEEFA, 2015).
In January 2018, the Central Electricity Authority released the National Electricity Plan (NEP), which projects electricity demand and supply planning until the fiscal year 2026/27 (CEA, 2018). The NEP has a cumulative target of 175 GW renewable energy capacity by 2022, in line with the government’s renewable targets. Under current policies, the share of renewables in installed power capacity would be 29 – 40% (37% under the NEP) by 2022. By relying in part on hydroelectricity and nuclear power, India will reach its NDC target of 40% non-fossil generation capacity nearly a decade earlier than its target. Based on current policies, the share of non-fossil generation capacity will reach 60-65% in 2030, which corresponds to a 40-43% share of electricity generation.
Despite the fact that current policies in place will lead to an overachievement of targets laid out in India’s NDC, there is significant uncertainty over the future of coal power capacity in India. The NEP foresees coal-fired power capacity additions of 46 GW between 2022 and 2027 (CEA, 2018). Taking into account both capacity additions and retirements, India’s coal power capacity will reach 238 GW in 2027, a net increase of 46 GW from the installed capacity in 2017. This planned increase is not consistent with the Paris Agreement. In Paris Agreement compatible pathways for Asia, coal power generation would need to be reduced by 63% by 2030 [below 2010 levels], leading to a phase-out by 2037 (Climate Analytics, 2019).
There is a significant risk that these assets will be stranded. Expansion plans for coal-based generation have been found to be inconsistent with lower demand projections in independent studies (Shearer, Fofrich, & Davis, 2017). This is likely to exacerbate the issue of low utilisation rates of coal power plants, impacting their profitability and threatening to compound the already perilous financial position of distribution companies (Dubash, Kale, & Bharvirkar, 2018).
Rapidly declining costs of renewables means that renewables should be the preferred choice for distribution companies (The Economist, 2018). Other drivers of stranding risk include coal shortages, water scarcity and air pollution regulation (Worrall, Roberts, Viswanathan, & Beaton, 2019).
Since 2010, the Indian Government has doubled the coal tax—now called the GST (Goods and Services Tax) Compensation Cess, three times, reaching 400 rupees per tonne (around USD 3.2 per tonne) of coal produced and imported in the 2016–2017 budget. The GST Compensation Cess is effectively a carbon tax levied at source, with the revenue feeding into the National Clean Environment Fund that provides finance for renewable energy projects. The GST compensation cess generated revenues of USD 12 billion between 2010 -2018. But, subsidies to coal amounted to USD 2.3 billion in 2016 alone (IISD, 2018a). Removing subsidies for coal (and other fossil fuels) is an essential step to ensure effectiveness of the levied tax. Also, the government has often used the funds generated to meet other development needs, as opposed to using them to finance renewable projects which compromises the effectiveness of the GST (IISD, 2018b).
The National Electricity Plan also assumes that, while 0.4 GW of additional gas capacity will be added in the period 2017–2022, no additional gas-fired power plants will be deployed after 2022 as the availability of gas is uncertain in India. This trend is in line with a phase-out of unabated gas power as would be expected in a Paris Agreement-compatible global power sector. The NEP projects power sector emissions level of 1.0 and 1.2 GtCO2e in 2021/22 and 2026/27, respectively (CEA, 2018).
As a government think tank (NITI Aayog, 2017a, 2017b) has pointed out in two publications, both the government’s Draft National Energy Policy and the Three Year Action Agenda (2017–18 to 2019–20) include recommendations to increase domestic production and distribution of coal, oil and gas, which, if adopted by the government, will prove to be a significant threat to India’s climate goals.
With growing consensus among utilities, mining companies and policymakers on the competitiveness of renewables, removing price distorting subsidies will be essential to facilitate a rapid transition to renewables (Coal India, 2018; Gordon-Harper, 2018). Redirecting subsidies away from fossil fuels to renewable energy sources could lead to cost savings, as well as significant co-benefits such as reduced indoor air pollution (Laan, Viswanathan, Beaton, Shardul, & Gill, 2019).
For three consecutive years, renewable energy investment topped that of fossil fuel-related power investments and in 2018, investments in solar exceeded those in coal (McKenna, 2019). This is an important development, as the Paris Agreement implies the need for a major shift in investments, with global annual investments in low-carbon energy technologies overtaking fossil investments already by around 2025 (IPCC, 2018).
The original targets of the ”National Solar Mission”, one of India’s major renewable energy-related policies launched in 2010, was scaled up in 2015 to 100 GW solar, 60 GW wind, 10 GW biomass, 5 GW small-scale hydro (MNRE, 2010, 2015). This amounts to a total of 175 GW (cumulative target by 2022), with the government signalling its intention to scale this up to 227.6 GW (Darby, 2018). The current installed capacity of solar PV stands at 26.89 GW and wind at 35.28 GW (IRENA, 2019).With net capacity additions of only 9.2 GW of solar and 2.4 GW of onshore wind between 2017 and 2018 (IRENA, 2019), and growing concerns over grid integration, meeting the target of 175 GW by 2022 is not certain with current policies (Tongia, Harish, & Walawalkar, 2018).
Wind power is supported via a Generation Based Incentive, while state-level feed-in tariffs apply for all renewables. Renewable Energy Certificates (RECs) are in place that promote renewable energy and facilitate Renewable Purchase Obligations (RPOs), which legally mandate a percentage of electricity (8% by 2019) to be produced from renewable energy sources.
Competitive bidding is also used to promote wind power projects but has faced setbacks as the Solar Energy Corporation of India (SECI) cancelled 2 GW of wind tenders and reduced the upcoming tranche of bidding to 1.2 GW from the original proposal of 2.5 GW (Chatterjee, 2018). In May 2018, the Indian government announced a National Wind-Solar Hybrid Policy to promote large grid-connected wind-solar photovoltaic (PV) hybrid systems as well as new technologies and methods for combining wind and solar (Economic Times India, 2018).
The main instrument to increase energy efficiency in industry is the Perform, Achieve and Trade (PAT) Mechanism, which is implemented under the 'National Mission on Enhanced Energy Efficiency’. PAT resembles an emissions trading scheme (ETS) and has been in place since 2012. The scheme is currently in its second phase (2016–2019). PAT differs from traditional cap-and-trade systems as it sets intensity-based energy targets.
The current phase covers 621 facilities from 11 different sectors (including rail, electricity distribution, and refineries), and the target is to achieve on average energy savings of 8.9 Mtoe (373 PJ) from the participating facilities in 2019 below the 2014–15 baseline level (Government of India, 2016). Individual targets are calculated for each installation. Installations that exceed their targets can sell Energy Saving Certificates to installations that did not meet their target (EDF, CDC Climat Research, & IETA, 2015). The first cycle of the PAT scheme resulted in savings of 5.6 GW and 31 MtCO2e between 2012 and 2015 (BEE, 2018).
In addition to the PAT mechanism, India seeks to launch a pilot carbon market mechanism for micro, small, and medium enterprises (MSMEs) and the waste sector. These sectors have been chosen because they are not covered by existing climate policies and currently rely on outdated technologies, meaning they have a large emissions reduction potential. The pilot carbon market mechanism was slated to go into effect in March 2019 (Reklev, 2018), but at the time of writing it remains unclear what steps have been taken in this direction.
However, the Government of Gujarat has introduced the world’s first emissions trading scheme for particulate matter that covers industry (N. C. Sharma, 2019). This novel system could provide valuable insights to guide India’s adoption of market-based mechanisms to target emission reductions. Also, 37 companies in India are in the process of adopting an internal carbon price, with leaders including major cement producer Dalmia Bharat Cement Ltd (Rastogi, 2019).
India is driving forward the ‘Leadership Group for Industry Transition’, a group including other countries such as Sweden, Argentina, France and Germany, and companies, which aims to engage in an ambitious public-private effort to ensure that heavy industries meet the goals of the Paris Agreement (Kosolapova, 2019). It remains to be seen whether this will facilitate India’s low carbon transition in the industry sector. Key needs in the cement sector, for instance, include clinker substitution to facilitate decarbonisation of the cement sector (Biswas, Ganesan, & Ghosh, 2019).
In 2017 Indian Power Minister Piyush Goyal announced a target of selling only electric vehicles by 2030, which would translate into Indian EV sales of over 10 million a year by 2030. This target, which was later not further pursued, would have been consistent with the calculation that to reach full decarbonisation in the road transport sector globally by mid-century, the last fossil fuel car be sold before 2035.
In response to the Prime Minister’s ambitious announcement, the state-owned Energy Efficiency Services (EESL) announced its plans to replace 500,000 government cars with electric cars, but recent reports claim that government employees are refusing to use electric vehicles procured through EESL, citing concerns over mileage and performance (Ghosh, 2018).
Expectations on EVs sale development vary significantly. Some reports indicate the possibility of the government announcing a 30% (in new sales) target for 2030 (AMP; Shah, 2018; K. Sharma, 2018). This would be consistent with the targets of the intergovernmental EV30@30 campaign, of which India is a member (Clean Energy Ministerial, 2019). Another more recent report indicates that the Indian government aims to have electric cars make up at least 15% of vehicles on the roads by 2023 (Bloomberg, 2018). Current estimates predict an EV sales share of 7–40% in 2030 (TFE Consulting, 2018; Upadhyay, 2018).
Despite the ambiguity over targets, the government has taken steps to facilitate a transition to electric vehicles. The Faster Adoption and Manufacturing of Electric Vehicles in India (FAME – II) scheme is a key component of this mission. It came into effect in April 2019, and provides incentives to purchase electric vehicles, while also including provisions to ensure adequate charging infrastructure (Business Today, 2019).
These incentives include subsidies to reduce the upfront cost of electric vehicles, along with other incentives such as tax concessions (Ministry of Road Transport and Highways, 2018). The Ministry of Power recently released a notification which aims to ensure that there is at least one charging station available in a grid of 3 km2, and ensure that the electricity tariffs paid by EV owners and charging station operators is affordable (Ministry of Power, 2019).
Despite conflicting reports regarding national plans and targets, Indian states are taking action to promote EVs. By June 2018, Andhra Pradesh, Karnataka and Maharashtra had already announced official policies on EVs, and other states like Telangana, Uttar Pradesh and Goa were in the drafting phase. Andhra Pradesh, for example, also established a target of one million electric vehicles on the road by 2024 and Maharashtra a production target of 500,000 electric vehicles in five years (Thakker, 2018). The state of Tamil Nadu recently released its EV strategy with a host of incentives, including land subsidies to set up EV charging stations, and other manufacturing infrastructure, and tax exemptions to EV owners among a host of other incentives.
India’s first light vehicle fuel efficiency standards came into force in April 2017, setting efficiency targets for new vehicles that weigh under 3,500 kg with no more than nine seats (The International Council on Clean Transportation, 2014; Transportpolicy.net, 2017). The efficiency targets start at the equivalent of 130 gCO2/km in 2017 and fall to 113 gCO2/km in 2022 (Transportpolicy.net, 2017). The standards are based on the average weight of the fleet that manufacturers will sell in a year. Currently there are no CO2 emission standards for light commercial vehicles.
Given that well over half of India’s population generates an income from agriculture, this sector is particularly important. It is also intricately linked to the power sector as electricity is used for water pumping in modern irrigation. The heavily-subsidised power supply to agriculture in India has contributed to the use of inefficient pumps and a resulting excessive use of both water and power (Sagebiel, Kimmich, Müller, Hanisch, & Gilani, 2015).
The low quality of power distribution is evidenced by the large discrepancies in the average number of hours power is supplied to the agriculture sector between states: while West Bengal has an average of 23 hours a day, Karnataka only has six (Mallapur, 2018). To tackle some of the challenges facing the electricity-agriculture nexus, the Ministry of New and Renewable Energy recently notified the KUSUM scheme. The scheme provides for the installation of standalone off-grid solar water pumps for irrigation, and the solarisation of existing grid connected pumps to enable farmers to sell surplus solar power generated back to the DISCOMs (Government of India, 2019).
India’s National Bank for Agriculture and Development (NABARD) also has a number of initiatives facilitating climate change mitigation and adaptation, e.g. by educating farmers on the impacts of climate change. Programmes such as Rural Infrastructure Development Fund and the bank’s Infrastructure Development Assistance support, in part, projects with emission reduction potential including through biogas digesters, rural energy management, renewable energy, and improving energy efficiency (NABARD, 2019).
The National Mission for Sustainable Agriculture (NMSA), adopted in 2012, seeks to climate-proof and reduce emissions in the agriculture sector but is falling behind on implementation of planned schemes. The government has not been able to spend a large portion of the funding allocated to the Mission’s various components (e.g. soil health management, increasing tree cover, and enhancing productivity of crops) (Rattani et al., 2018).
The Indian Ministry of Environment, Forest and Climate Change has developed a new draft National Forest Policy 2018 to replace the existing, 30-year old policy (Government of India, 2018a). The draft calls for a minimum of one-third of India’s total geographical area to be under forest or tree cover and supports the NDC target of creating an additional (cumulative) carbon sink of 2.5–3 GtCO2e by 2030. The policy is set to guide forest management in India for the next 25 to 30 years. Corresponding regulation and rules will be amended or developed going forward.
The Green India Mission is expected to substantially enhance carbon sequestration, but in 2015–16, the Mission was 34% short of its plantations target. The Mission also has not been able to fulfil its goal of providing alternative fuel technologies to reduce emissions from burning of fuelwood. Only 30% of the Mission’s allocated funding was released for use in the next five years (Rattani et al., 2018).