India’s Net Zero Strategy: India can be a model for developing countries

The recent Sixth Assessment Report of the Intergovernmental Panel on Climate Change made it clear that the world faces catastrophic consequences from rising temperatures unless nations make significant new efforts to change this trajectory, by reducing greenhouse gas emissions. “Net Zero” refers to offsetting new greenhouse gas emissions through other actions, to (supposedly) make emissions net zero. This concept has become the central point of action to deal with global warming and climate change induced by human activities.

At COP26 in 2021, the 26th Conference of the Parties that signed the United Nations Framework Convention on Climate Change in 1994, many countries agreed on goals to reach Net Zero by 2050 Although these targets are still too tentative to completely eliminate disaster risk, they represent a major step forward from previous agreements. However, countries like India, which are still relatively poor (China is four times richer than India, for example), have been reluctant to commit to goals that could prevent large segments of their population to improve their material well-being to such an extent that they can enjoy a decent life. The case here is that advanced countries, which created the current situation with their past emissions, should legitimately do more to solve the problem. At COP26, India agreed on a goal of Net Zero by 2070.

India has just over a sixth of the world’s population, but contributes just over 7% of global CO2 emissions. Its cumulative emissions are proportionately even lower relative to its population. This situation reflects the fact that it is still in the early stages of its development trajectory. Given this situation, India’s adoption of a Net Zero target of 2070 is entirely reasonable. The country has an achievable strategy for India to achieve this goal. A centerpiece of such a strategy must be the rapid adoption of renewable energy, particularly solar power. India needs rapid electrification for its development, and focusing on green electrification can help achieve Net Zero goals without sacrificing economic growth. In particular, India’s strategy will require significant new investment in solar energy.

Currently, electricity accounts for just over a quarter of total final energy consumption, and solar and wind capacity accounts for around 20% of this. To reach Net Zero by 2070, electricity generation capacity will need to increase by about 6% per year. This is not at odds with recent growth rates of around 8%, but will need to be maintained for a much longer period. Solar power capacity will need to grow faster, by about 10% per year. Transmission, distribution and storage will all need to be upgraded according to a green electrification strategy.

This is all totally doable, although that doesn’t mean the task is easy. But many of the challenges that will need to be overcome are broadly similar to those that arise in any long-term sustainable development effort. These challenges include managing the adjustment costs associated with structural change, overcoming vested interests, catalyzing innovation, and coordinating different aspects of change across different sectors. Integrating green goals into development adds an additional constraint to policy-making, but arguably also shifts the goal function in a direction that better measures well-being. As with any situation of externalities and public goods, government has a role to play in setting standards and ensuring that market prices more accurately signal social costs and benefits.

In the case of climate change, the global nature of the problem means that a country like India should receive financial support from countries that have historically been far greater cumulative contributors to the current dire situation. Some estimates suggest that India will need additional annual investment in the energy sector of 2.7% to 4.5% of its current GDP. This is beyond the government’s own resource capacity, but is certainly achievable with a mix of bilateral and multilateral contributions, done in a way that also encourages private investment. National policies must also be appropriately coordinated. Since the current and future costs of global warming and related consequences such as air pollution and water scarcity are borne disproportionately by the poorest segments of the population, a development strategy green can also be more inclusive and equitable than mainstream approaches.

While a Net Zero goal by 2070 is well within India’s reach, accelerating that goal by a decade or two, or flattening the emissions curve without changing the Net Zero target date, can be more difficult. In particular, addressing the dominance of coal in power generation and industrial processes may require careful attention to carbon capture at the project and plant level. Clear estimates of resource costs and the degree of technological innovation needed to improve a baseline emissions reduction strategy can help clarify the link between the national strategy and international resource commitments and financial flows. In this regard, India can serve as a role model and leader for all developing countries in achieving global coordination in reducing greenhouse gas emissions.

(The author is Professor of Economics, University of California, Santa Cruz)

Rebecca R. Santistevan