Current Policy Projections
Our analysis shows that India can achieve its NDC target with currently implemented policies, i.e. it would not have to put any other policies in place. Under current policy projections, greenhouse gas emissions (excluding LULUCF) are projected to reach a level of 3.2–3.3 GtCO2e in 2020 and 4.5–4.6 GtCO2e in 2030. This is a 48–52% increase in emissions from 2010 levels by 2020 and a more than doubling of 2010 levels by 2030.
While this growth 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 in November 2018.
The power sector accounted for 32% of India’s total emissions (excluding LULUCF) in 2015. Given the fuel mix is dominated by coal-fired generation which was 75% in 2015 (IEA, 2017b), the emissions intensity of electricity supply in India is relatively high (767 gCO2/kWh in 2015).
On the other hand, per capita electricity demand in India is very low, at around 860 kWh/capita in 2015 (IEA, 2018a). In June 2014, the Government of India announced its commitment to achieve a reliable electricity supply for all by 2019 (Forum of Regulators, 2014). In that year, 19% of the population—244 million people—still had no access to electricity (IEA, 2016).
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 April 2018, the Central Electricity Authority (CEA) replaced its Draft Electricity Plan from 2016 with the new National Electricity Plan (NEP), which is valid through fiscal year 2026/271. The NEP provides electricity demand forecasts for the period 2017–2026/27 and calculates installed capacities from conventional and renewable energy sources needed to meet that demand (Central Electricity Authority, 2016). It also estimates emissions from the power sector, describes relevant policies, and outlines the corresponding human resources, funding and R&D-related developments. In our projections, we assume a growth of electricity demand of 5.4% per year from 2015–2030 based on the NEP.
The NEP incorporates and even exceeds both the 40% non-fossil capacity target in 2030 outlined in India’s NDC as well as the government’s own target to achieve a generation capacity from renewable sources of 175 GW in 2022. Given the uncertainty about the development of coal and renewables in India, however, the CAT’s current policy pathway reflects an underachievement of the RES target as the upper bound (BRIDGE TO INDIA, 2018) and an overachievement of the target representing the lower bound (Saluja & Singh, 2018; The Economist, 2018). The lower bound is based on the fact that India recently increased its 2022 capacity target for renewables to 227.6 GW. This means that the CAT’s current policy pathway encompasses—but does not explicitly reflect—the developments as laid out in the National Electricity Plan.
The cumulative target of 175 GW renewable energy capacity by 2022 as reflected in the NEP, would lead to a share of renewable capacity of 22–26% (25% under the NEP) by 2018. By relying in part on hydroelectricity and nuclear power, as foreseen in the NEP, India would be able to reach its NDC target of 40% non-fossil generation capacity by 2030 more than a decade earlier.
By 2030, non-fossil generation capacity will increase to 60–65%, which is a 40–44% share of non-fossil power generation. Under current policies, we estimate the average annual growth rate for non-fossil generation between 2016 and 2030 at around 9.8–10.6%—more than double the growth rate of overall electricity production. During the same period, under our current policy pathway, we project capacity additions of ~336–405 GW from non-fossil fuel sources.
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) (MNRE, 2015). As of March 2017, India had installed only 12.2 GW of utility scale solar PV capacity (CEA, 2018), but auctions in India have led to a 50% decrease in the cost of solar power in the past two years. If the price of solar PV continues to fall below two rupees per kWh, solar, as opposed to coal-fired power, will become the preferred choice for distribution companies (The Economist, 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 recently as the Solar Energy Corporation of India (SECI) cancelled 2 GW of wind tenders and the upcoming tranche of bidding has been reduced 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).
Since 2010, the Indian Government has doubled the coal tax—now called the Clean Environment Cess— three times, reaching 400 rupees per tonne of coal produced and imported in the 2016–2017 budget. The revenues from the coal tax feed into the National Clean Environment Fund, which provides finance to renewable energy projects.
There is still substantial uncertainty about the future of coal power capacity in India. In 2017, coal consumption increased by 4.8% or 27 million tonnes. Although committed to diversifying power supply and supporting renewable energy, the NEP projects net capacity additions of 46 GW until 2027 (The Economist, 2018).
India plans to close 22.7 GW of end-of-life coal power plants by 2021/22 and an additional 25.6 GW by 2026/27, totalling 48.3 GW. It also plans to reduce the emissions of all old power plants by implementing national standards: it will start this process in 2019 and complete it by 2022 (The Economic Times India, 2018).
Taking into account both capacity additions and retirements, India’s coal power capacity will reach 238 GW in 2027, 11 GW lower than in the Draft NEP. However, unlike the Draft NEP, which projected that no new coal capacity was needed after 2022, the final NEP foresees capacity additions in this period, in part due to coal compensating for a 30% reduction in hydropower generation as a result of insufficient rain/monsoons. There is a risk of at least some of this capacity becoming a stranded asset and utilities are already abandoning plans to build new coal plants. In the first half of 2018, the pipeline for the construction of coal-fired power plants shrunk by a quarter (Buckley & Shah, 2018). For example, India’s largest power producer NTPC shelved a 1,600 MW expansion of a coal plant in Talcher, Odisha, in February 2018 and confirmed in summer 2018 that it not does intend to pursue two additional planned coal power plants of 1,980 MW in Bihar and 1,600 MW and West Bengal.
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.
However, the Energy and Resources Institute (TERI) has assessed that no new coal based capacity may be needed before 2026 (The Energy and Resources Institute, 2017). A recent report by India’s national coal mining company, Coal India, also suggests that decreasing costs of solar and storage will have a “significant impact” on the coal industry. In the long term, they anticipate a substantial decrease in demand for coal and an eventual displacement of coal by renewables as a result of climate change and climate finance (Coal India, 2018; Gordon-Harper, 2018).
Also, according to the IEA, investment in renewable power in India topped fossil fuels for the first time in 2017 (IEA, 2018c). Such developments are critical because to reach full decarbonisation globally, no new coal plants should be built, and emissions from coal power should be reduced by at least 30% by 2025.
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 and 1.2 GtCO2e in 2021/22 and 2026/27, respectively, which is slightly higher than the figures calculated by the Draft Electricity Plan for the same years (CEA, 2018).
The Draft National Energy Policy published in June 2017 by a government think tank, the National Institute for Transforming India (NITI) Aayog2 contains projections for the energy sector in India up to 2040. It is built around the main objective of reducing energy poverty in India, increasing energy security and providing energy access to all its citizens at affordable prices.
It forecasts the share of renewable energy capacity to move above 60% by 2040 and the electricity generation from solar and wind in electricity mix to increase to 8–14% and 9–11%, respectively (NITI Aayog, 2017a). The CAT’s current policy range projects a generation share of 28–32% for all renewables in 2030. In this respect, compared to the National Electricity Plan and the CAT’s current policy pathway, the Draft National Energy Policy underestimates projections for generation from renewables. The Draft Policy forecasts a primary energy supply growth to 2.7–3.2 times of 2012 levels by 2040 and an increasing share of renewable energy in the primary energy mix to 7–10%, up from 3% in 2012 (NITI Aayog, 2017a). Note however, that in order to achieve a fully decarbonised power system by 2050 globally, the growth rate of renewables and other zero and low carbon power should be sustained until at least 2025 to reach 100% by 2050.
To enhance energy security, the plan suggests that India needs to decrease its dependency on overseas energy supply by ramping up domestic exploration and production of coal, as well as refining and distribution of oil and gas. The Draft National Energy Policy projects India’s primary energy mix, which includes energy consumption in the power sector, as well as other sectors such as industry and transport. The share of coal in India’s primary energy supply falls in relative terms to 44–50% in 2040 from 58% in 2015, whereas in absolute terms the coal consumption nearly doubles according to this document. This increase in domestic production could lead to an increase in emissions if it stimulates additional demand rather than simply displacing imports. An expansion of domestic fossil infrastructure may also lead to lock-in of fossil infrastructure in the coming decades, making it difficult for India to decarbonise energy demand in the long term.
In our CAT assessment, we did not quantify the Draft National Energy Policy since it presents a vision for India’s energy sector towards 2040 and does not suggest concrete measures for achieving the underlying objectives. The Plan is considered a guidance document for the government to plan their actions towards becoming more energy independent and sustainable.
The three year Action Agenda (2017-18 to 2019-20) published by NITI Aayog in August 2017 also advocates for reduced reliance on imports of coal, oil and gas (NITI Aayog, 2017b). At the same time, the plan appears to confirm all of India’s major existing energy policies, mentioning measures to achieve the 2022 renewable energy targets and reaffirming various energy efficiency measures. Similar to the Draft National Energy Policy, the Action Agenda also suggests an increase in domestic production of fossil fuels. This increased production may impact India’s NDC targets if it stimulates additional fossil-based energy demand or affects the implementation of the renewable energy and energy efficiency measures as stated above.
1 | The author of the National Electricity Plan, Central Electricity Authority, compiles and presents data in fiscal years that extend from 1 April of the first year to 31 March of the following year. For more information on how this is reflected in the CAT assessment, see the Assumptions section.
2 | NITI Aayog is a Government of India’s policy think-tank. The stated aim for NITI Aayog's creation is to foster involvement and participation in the economic policy-making process by the State Governments of India. Given its role, the proposed vision for the energy sector holds great importance for national climate policy making.
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. Its design has to be determined but a draft will be submitted to the Indian Ministry of Forestry, Environment and Climate Change by January 2019. 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 is slated to go into effect in March 2019 (Reklev, 2018).
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 per year by 2030. This target would have been consistent with estimates that to reach full decarbonisation in the road transport sector globally by mid-century, it is necessary that the last fossil fuel car be sold before 2035.
However, there are conflicting signals on the ambition and the likelihood of India adopting such an ambitious target (Sood & Ghosh, 2018; U N, 2018). Some reports indicate the possibility of the government announcing a 30% target instead (AMP; Shah, 2018; Sharma, 2018). Another more recent report indicates that the Indian government aims to have at least 15% of vehicles on the roads to be electric by 2023 (Bloomberg, 2018). Current estimates predict an EV sales share of 7–40% in 2030 (TFE Consulting, 2018; Upadhyay, 2018).
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).
Pilot projects have generated less than stellar results and manufacturers have expressed scepticism about, for example, insufficient charging infrastructure and profitability of EVs (Reuters, 2018). Indian consumers are both value and status conscious, something that has hindered the success of cheaper EV models such as Tata Motors’ Nano (Roy, 2018). This price sensitivity will continue to be a major driver in EV acceptance and influence India’s ability to achieve its EV ambitions.
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, 2022).
The speed at which India will adopt electric vehicles and whether plans will be embedded in regulation remains to be seen.
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.
In 2013, the Indian Government set up the National Electric Mission Mobility Plan (NEMMP) 2020 (Government of India, 2015a). As part of the Mission, the Department of Heavy Industry launched the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME India) scheme, which has been extended for the third time and will run until 30 September 2018 (Mukherjee, 2018). The scheme aims to support the development of the hybrid/electric vehicle market and targets a deployment of 6–7 million vehicles per year by 2020 (Government of India, 2015a).
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 pumpsets 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 Indian government is actively promoting the use of new solar pumping systems as part of the National Solar Mission (Shim, 2017). It provides a capital cost subsidy on solar pump systems and supports their deployment via an enabling framework and engaging key stakeholders.
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, n.d.).
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, 2018). 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).