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India’s Climate Bet: An Emerging Giant’s Alternative Route to Power

This piece originally appeared in Solutions (Volume 1: Issue 6) and is reposted with permission.

A native of Chicago, I spent my childhood summers with family in Udaipur, Rajasthan, then a verdant oasis in India’s most arid state. With each successive year, I witnessed with dismay the surrounding forests and lakes shrinking and drying up as factories and mines sprouted outside the city. My family, however, took it in stride as “the price we pay for development.”

I have never forgotten that firsthand lesson in environmental degradation, and in what seemed to me an unnecessary trade-off. What my family was faithfully expressing was the decades-old belief, held by India’s government and business elites, that development often comes at the expense of the environment. In recent years, that belief has been extended to climate change. India cannot be expected to act to reduce its spiraling greenhouse gas emissions without outside help, its diplomats have argued until recently, because combating poverty is a moral imperative and the national priority.

While this traditional view has some merit—it is hard to argue, for example, for reducing energy use in a nation where large swathes of the countryside are without electrification—it is increasingly one that does not add up. And for one simple, highly encouraging reason. India is beginning to demonstrate in its policies and actions that pitting climate and development objectives against each other is a false and unnecessary choice.

From Climate Laggard to Leader?

In the long-running drama of the United Nations climate change negotiations, India has generally been cast as a rogue player, refusing to curb its greenhouse gas emissions. Yet while Delhi likes to talk tough, its recent actions speak otherwise. While the United States Congress has conspicuously failed to pass comprehensive climate legislation to cap greenhouse gases, India has made significant policy strides toward a low-carbon economy.

At Copenhagen last December, India emerged as an unlikely partner, alongside the United States, China, Brazil, and South Africa, in brokering a political accord that saved the much-heralded climate summit from collapse. Delhi has since formally pledged to reduce the emissions intensity of its gross domestic product (GDP) by 20–25 percent from 2005 levels by 2020, which will slow the growth rate of its greenhouse gas output. While commitments made by developing countries are nonbinding (unlike those of industrialized nations), India’s pledge is nevertheless a major concession for a country that houses a third of the world’s poor and faces soaring energy demand to power development.

What’s more, unlike the United States, India already has a National Action Plan on Climate Change (NAPCC) in place to help meet its emissions commitment. Launched in June 2008 by Prime Minister Manmohan Singh, the NAPCC features eight national missions, ranging from climate research and development (R&D) to sustainable agriculture, with centerpiece scale-up programs for solar power and energy efficiency. Renewable energy, including wind and solar power, already accounts for 9.0 percent (16.5 gigawatts) of India's electric capacity. This is more than twice the 4.0 percent (53.4 gigawatts) that makes up the clean energy slice of the U.S. power sector, and Delhi aims to further double renewable power generation in the next four years.1

This wide-ranging policy agenda is not yet adequately funded and implementation will not be easy, if previous government efforts in advancing large-scale change are any indication. Nevertheless, the plan is impressively comprehensive, in contrast to the piecemeal mix of state sticks (renewable energy standards and regional cap-and-trade programs) and federal carrots (tax credits, the green stimulus package) that characterize current U.S. responses to climate change.

The most innovative and potentially transformative of India’s clean-energy policy solutions are highlighted later in this article. But to interpret the “what” of where India is heading with climate change solutions, it is first useful to understand the “why.”

India’s Climate and Development Policy: No Longer a Zero Sum Game

Why has India, over the past year, essentially abandoned its traditional approach of pitting clean energy and climate action against development in favor of preparing an aggressive effort to decarbonize its economy? I believe there are four key reasons.

  • First, the impacts. India, which houses a third of the world’s poor, will be at the frontline of climate change impacts as floods and droughts become more frequent and deadly, and yields for most crops decline. The 2009 monsoon season was a harbinger, bringing rains six times their normal volume and causing the worst floods South India has experienced in over a century. Shifts in temperature and precipitation patterns could trigger major repercussions for India’s agricultural sector. Temperature increases of as little as 0.5–1.5 degrees Celsius might trim yield potentials for wheat and maize by two to five percent. Ambitious global action to reduce the emissions that fuel climate change is very much in India’s interest.

  • Second, the politics. India wants to establish itself as a leading diplomatic player and a responsible global power, and to avoid always playing second fiddle to China. Leadership on climate change provides one pathway to this goal. Domestic politics also dictate that India improve its energy security in the face of soaring fossil fuel imports by developing alternatives. Today, coal and oil provide the umbilical cord for India’s energy supply, fueling 87 percent of all power and electricity. However, deployment of renewable energy, especially wind, is rising rapidly. And the government also has ambitious plans to boost nuclear power from its current three percent of installed electricity capacity, though it should be cautioned that similar plans over recent decades have failed to materialize.

  • Third, poverty reduction. Approximately 400 million rural Indians lack electricity and, for many, extending the national grid is prohibitively expensive. Enter distributed generation in the form of community-based, self-sufficient biomass and solar power. As the prices of these clean alternatives decline, distributed generation will increasingly become the obvious choice, not only for meeting basic household needs, but also for improving the productivity of businesses owned and operated by the poor, especially in rural areas. Moreover, clean energy can create new jobs, companies, and markets that can help stimulate more inclusive and sustainable growth in India.

  • Fourth, and perhaps most important, the economics. India is realizing that green energy can be cheap energy. The upfront costs of making buildings more efficient or switching to electric, two-wheel vehicles are outweighed over time by lower operational costs, producing a net economic as well as environmental benefit. Beyond that, India’s governing elite and many in the corporate sector see a big opportunity in the emerging, clean-energy market. Ashutosh Pandey, chief executive of Emergent Ventures India, one of the country’s largest consultancies, says his firm is diversifying into advising companies on investing in energy efficient technologies and renewable energy resources. “Companies see sustainability as a core issue now, and not just CSR [corporate social responsibility],” he told the Hindustan Times. “We are helping formulate many strategies around this. We are also investing in renewable energy within India, which is easily one of the most attractive markets today.” In the race to produce low-carbon products, India is also well placed to occupy a specific niche: namely, leveraging its ability to manufacture products cheaply, sometimes known as frugal engineering. India has a track record in developing $2,000 cars (the Tata Nano), $30 cataract surgeries, and most recently a $35 prototype tablet computer. Its entrepreneurs could equally turn their talents to creating cheap clean energy products to serve both the massive domestic market and other emerging economies.

India’s Green New Deal

This is the backdrop against which, in June 2008, Prime Minister Manmohan Singh signaled India’s intent to shift to a low-carbon economy by unveiling the comprehensive National Action Plan on Climate Change (NAPCC). Singh, a vocal advocate for the transformative power of science and technology, outlined a raft of ambitious existing and future policies and programs to address both climate mitigation and adaptation.

In so doing, he essentially abandoned the mindset that climate action must be at the expense of development progress. Despite this, Singh’s speech and subsequent roll out of the climate plan have not caused much public or political domestic debate. In sharp contrast to the divisive political battle over climate legislation in the United States, the three main coalition groups all back the NAPCC. (Although, no doubt, this support might waver as costly initiatives are rolled out.)

Delivering on the Prime Minister’s words, India has recently unveiled significant incentives for renewable energy. These include investment incentives for financial institutions; accelerated depreciation rates, ten-year sales tax exemptions, and customs and excise exemptions to stimulate private investment; attractive feed-in tariffs (prices at which utilities commit to purchase renewable energy); and renewable energy standards (which designate a percentage of power that utilities are mandated to source from renewables). Delhi also plans to roll out efficiency standards and codes for new appliances and buildings, and to launch a pilot trading program to incentivize energy efficiency.

While all these missions (see list) have merit, I want to focus here on those with the most potential to transform national markets and habits.

Energy-Efficiency Innovations

In the arena of energy efficiency, India is preparing to rival the United States in innovation and ambition—at least on paper. The National Mission on Enhanced Energy Efficiency has four key components: a pilot, market-based trading system for energy-intensive industries; a fast-track shift to energy-efficient appliances; financing instruments to help unlock demand-side, energy-efficiency improvements; and initiatives to improve the efficiency of power plants.

While the U.S. Senate has apparently shelved legislative efforts to introduce a cap-and-trade system to reduce carbon emissions, India is expected to enroll up to 700 major industrial polluters in a market-based mechanism to enhance energy efficiency later this year. Managed by the Bureau for Energy Efficiency (BEE), the pilot “Perform, Achieve and Trade” program will set a percentage by which participating companies (responsible for half of India’s fossil-fuel use) must reduce energy intensity within three years. Those that beat their targets will receive tradable energy permits which they can sell to plants that fail to meet their own targets and would otherwise face penalties. While less transformative than a national cap-and-trade system in terms of emissions reductions, the impact will be far from negligible.

Meanwhile, new nationwide certification standards for buildings will potentially transform the market for energy-efficient appliances and materials. Sectors including household equipment and appliances; hotel and office equipment; and industrial products will all be subject to mandatory efficiency standards and labeling requirements for new products.

<p>Image credit: Richard Morin/Solutions</p>

Image credit: Richard Morin/Solutions

The ball started rolling in January 2010 with mandatory energy-efficiency ratings introduced for four key appliances: refrigerators, air conditioners, tubelights, and transformers. India’s sprawling public sector will be required to procure only energy-efficient products which will help drive costs down. An energy-conservation building code will mandate maximum energy consumption norms per square foot for new commercial buildings. Commercial banks that invest in energy-efficiency projects will receive access to a partial-risk-guarantee fund to reduce the risks involved.

All told, India’s energy-efficiency plans will help avoid 20 gigawatts of additional electricity-generation capacity over the next four years and 100 million tons of greenhouse gas emissions annually, according to P Uma Shankar, the secretary of India’s Ministry of Power.

Solar Innovations

India’s climate, population density, and nonelectrified rural areas together provide ideal conditions for deploying solar-power solutions on a grand scale. In recognition of this potential, the National Solar Mission initiative lays the foundation for a clean-energy future. Its stated aim is to achieve 20 gigawatts of solar power by 2022, mostly via large photovoltaic (PV) and solar thermal power plants as well as rooftop PV systems. Other goals include replacing the use of kerosene lamps in rural areas with 20 million solar lighting systems, establishing a solar research center, and incentivizing PV manufacturing and skills training to boost the fledgling domestic solar industry. Several Indian states, including Andhra Pradesh, Gujarat, and Haryana, have also taken action by instituting statewide renewable portfolio standards (RPSs). India is expected to establish a national RPS this year, mandating that utilities get a certain amount of their energy supply from limitless natural resources such as solar and wind. Again, with this policy, India would leapfrog ahead of the United States, a country that has long debated, but so far failed to implement, such a market-transforming lever.

The Indian government proved to skeptics that these are not just paper commitments when it allocated financing for the solar mission in the 2010–2011 national budget as part of a 61 percent budget increase for the Ministry of New and Renewable Energy. Moreover, the budget introduced another bold initiative: a 50 rupee (approximately $1) tax on every ton of domestic and imported coal. The tax will capitalize a new National Clean Energy Fund that will help support solar technology development.

However, it will take a lot of money to attain the ambitious goals contained in the Solar Mission. Indian NGOs are already raising tough questions, for example, about how to ensure that solar subsidies focus sufficiently on the poor, especially those living without electricity.2 And beyond that is a wider question: to what extent can clean energy be prioritized in a nation where much of the population still lacks clean water, sanitation, and access to basic education and health care?

A Steep Mountain to Climb

While the roadmap Delhi has adopted is impressive, I am not arguing that the agenda described above will alone transform India in short order into a low-carbon economy. It won’t. Nor would I argue that it will significantly reduce India’s poverty levels and its greenhouse gas emissions overnight. It can’t.

It is daunting to think of the sheer costs, the technological know-how, and the hardware that will be required to scale up these solutions to a level where they can truly transform India’s society and economy. Despite Delhi’s policy leadership, experience also highlights the mixed execution capabilities of the Indian government.

There are several key barriers that India must overcome to translate its paradigm shift in climate politics into an on-the-ground shift to a clean-energy economy. First, costs. Not all investments in clean energy and efficiency are win-win. In a country where more people than the entire U.S. population survive on less than a dollar a day, pouring billions into building a future low-carbon economy will be a tough sell. Second, governance. Indian government at all levels is often plagued by mismanagement, corruption, and stifling bureaucracy, making the rollout of complex policies and programs an uphill struggle. Third, technological barriers. In the power sector, the current grid is antiquated and suffers from frequent electricity losses. Electricity tariffs rarely follow a rational pricing scheme. And while the renewables sector is growing, fossil fuels will continue to dominate India’s energy supply for decades, requiring expensive investment in additional alternatives such as carbon capture and storage (CCS) to help hold down greenhouse gas emissions.

Overcoming these cost, implementation, capacity, and technology issues can be accelerated with appropriate external assistance. But such assistance should not be viewed by industrialized nations as aid. Rather, enabling India (and other emerging countries that are major and growing energy consumers) to transition swiftly to a low-carbon economy is a global, public good that requires coordinated international action. As Prime Minister Singh declared in launching the National Action Plan on Climate Change, “Our success in this endeavor will change the face of India. It would also enable India to help change the destinies of people around the world.”


  1. Rao, N et al. An Overview of Indian Energy Trends 35-47 (Prayas Energy Group, Pune, 2009). 

  2. Sant, G, Deshmukh, R & Gambhir, A. Recommendations for National Solar Mission (NSM) (Prayas Energy Group, Pune, 2009). 

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