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In the IEA projection based on current and announced policies, coal remains the primary source of electricity generation, but its share reduces from 74% today to 47% in 2030 and 48% in 2040 as renewables expand from the current 18% to 45% in 2040, resulting in 40% carbon-intensity reduction (Figure 3.14). Despite its falling share, the expansionary trend in coal power is the reason why power sector emissions increase by almost 80% by 2040 from 1.2 Gt CO2 in 2017 to 2.1 Gt CO2 in 2040. Further information regarding the power sector outlook can be found in the Chapter 7 on electricity.
While industrial CO2 emissions contribute less than a quarter of the total, economic development in India, combined with several industrial initiatives, such as “Make in India”, lead to industrial emissions more than tripling by 2040 from 0.5 Gt CO2 in 2017 to 1.6 Gt CO2 in 2040. Primary subsectors contributing to this growth are those considered as “hard to abate”, with iron and steel continuing to account for around a third of emissions. Cement and chemicals, both accounting for about for around a tenth of emissions, are expected to grow significantly.
The transport sector represents a comparatively small part of GHG emissions in India, with its share expected to remain relatively stable. Nonetheless, overall it represents considerable growth from 0.3 Gt CO2 in 2017 to over 0.7 Gt CO2 in 2040. Road transport is almost solely responsible for growth in transport emissions, and this is expected to remain the case up to 2040.
Energy sector role in GHG mitigation policy
A National Action Plan on Climate Change (NAPCC) was adopted in 2008 with the aim of driving measures that promote India’s developmental objectives while addressing climate change as a co-benefit. This objective was to be implemented through eight national missions covering both mitigation as well as adaptation efforts, with the energy sector being instrumental in delivering upon their objectives. The eight missions are:
National Solar Mission
National Mission for Enhanced Energy Efficiency
National Mission on Sustainable Habitat
National Water Mission
National Mission for Sustaining the Himalayan Ecosystem
National Mission for a Green India
National Mission for Sustainable Agriculture
National Mission on Strategic Knowledge for Climate Change.
Missions that directly relate to the energy sector include: solar; enhanced energy efficiency; and sustainable habitat, which includes a sub-focus on buildings codes and energy conservation, urban transport planning, and waste management. However, the energy sector also has potential impacts on some of the less directly related missions, such as water. In 2015 four more missions were added, including for wind and waste-to- energy. States were instructed to elaborate their own Climate Change Plans, most of which have been completed.
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India is the third-largest national emitter of GHGs (after China and the United States), and with rapidly rising emissions, India also plays a key role in the international dialogue on climate change as a major developing country. In 2009 at the Conference of the Parties (COP) 15 in Copenhagen, India announced voluntary targets to reduce the emissions intensity of its GDP by 20-25% against 2005 levels by 2020. Then, in 2015 the GoI built on this target in its submitted Intended Nationally Determined Contribution (INDC), which became India’s first NDC after the GoI ratified the Paris Agreement in 2016. India’s NDC includes the following new energy sector-related targets:
To reduce the emissions intensity of its GDP by 33-35% from 2005 levels by 2030.
To increase the share of non-fossil fuel-based energy resources to 40% of installed electric power capacity by 2030,12 conditional on technology transfer and international climate finance support, such as the Green Climate Fund (GCF).
To create an additional (cumulative) carbon sink of 2.5-3 GtCO2-eq through additional afforestation by 2030.
At the UN Climate Week in New York, on 23 September 2019 Prime Minister Modi announced that India’s electricity mix should reach 450 GW of renewable energy capacity, which is more than the entire power plant fleet of India in 2019.
India’s NDC also prioritises efforts to adapt to climate change impacts (see section on climate change adaptation below). Additionally it provides a broad indication of the amount of climate finance support needed to reach the NDC’s goals to 2030, estimating some USD 213 billion for adaptation measures (USD 7.7 billion of which is for the energy sector alone) and around USD 834 billion for mitigation measures. The GoI is on track in implementing its NDC, through the policy drivers designed to implement the National Mission Programmes. The GoI estimates that implementing national climate plans would cost more than USD 2.5 trillion cumulatively between 2015 and 2030.13
India’s NDC also describes at length an impressive array of policies and plans related to climate change already underway in India. The key policies relevant for meeting the NDC goals of the energy sector relate to India’s NAPCC missions. While many of these policy drivers are instrumental to the NDC, they are also directly related to other areas of sustainable development as they are also crucial to addressing air quality, energy access and efficiency, or to enhancing renewables. Thus the key national missions will not only address climate change, but also deliver other objectives, highlighting the cross-cutting importance of climate action across the sustainable development goals.
According to several analyses, current trends point to India being able to meet its NDC targets.14 According to IEA estimates, the CO2 intensity target will likely be met or perhaps even surpassed by current and announced policies. Current and announced policies are estimated to reduce the emission intensity of India’s GDP by up to 43% from 2005 levels
12To attain this goal, some 200–340 GW of non-fossil fuel energy capacity would need to be installed by 2030, including a range of renewable energy technologies. This ambitious target could be within reach as it builds on the goal set by the Ministry of New and Renewable Energy of installing 175 GW of renewable energy capacity by 2022, of which 100 GW is solar power (Jawaharlal Nehru National Solar Mission).
13http://pib.nic.in/newsite/PrintRelease.aspx?relid=128403.
14See, for instance: https://www.wri.org/sites/default/files/pathways-meeting-indias-climate-goals.pdf and https://climateactiontracker.org/countries/india.
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by 2030. Equally, the target to achieve 40% of non-fossil fuel-based energy resources is well under way, with plans to add extensive variable renewable capacity to current renewable capacity that primarily consists of hydropower. The GoI recently announced target to increase its renewable energy capacity to 450 GW after previously committing to achieving 175 GW by 2022. This target means a fivefold increase in current renewable capacity and is also more than India’s currently installed electricity generation capacity. Delivering upon stated clean energy transition objectives and energy demand growth requirements in India will require increasing the annual level of investment in the energy sector by approximately 25% from 2018 levels on average during 2019-25 and by almost 50% on average during 2025-40.
Pricing of energy sector externalities
India has a range of energy sector-related carbon pricing initiatives, which are either implemented or at conception stage. The nationwide Clean Energy Tax on coal (or coal cess) was adopted in 2010, being levied on coal production and imports. The tax was initially set at INR 50 (USD 0.72) per tonne of domestic and imported coal, was quadrupled to INR 200 (USD 2.88) per tonne of coal in 2015 and doubled again to INR 400 (USD 5.75) per tonne in 2016.
The revenue was initially allocated to the National Clean Energy and Environment Fund (NCEEF) to invest in clean energy projects and technologies. A total of USD 4.2 billion were accrued in the NCEEF until it was subsumed under the Goods and Services Tax (GST) reform, which aims to bring several direct and indirect taxes under the federal GST. Coal production and imports remain subject to a coal compensation cess of about USD 6 per tonne of coal. The precise allocation of revenue from this cess is not earmarked. However, the Ministry of Finance expressed confidence that financing of clean energy and environment projects should not suffer from the GST reform.
Several other carbon pricing schemes are in scoping or pilot stages. For instance, the MoEFCC is contemplating two pilot carbon markets for micro, small and medium-sized enterprises (MSMEs) and also for the waste sector, in association with the World Bank’s Partnership for Market Readiness programme as outlined in India’s Market Readiness Proposal. MSMEs represent one of the sectors that has been identified with significant GHG mitigation potential, as they are a major energy consumer (22.5 Mtoe/year). 15 Despite a few initiatives and policy efforts to reduce the carbon intensity of the sector, the lack of data on the distribution of energy consumption within the MSME sector is a major barrier to implementation. A possible pilot carbon market in the sector is being discussed, including the formulation of appropriate policies, development of interim linkages, establishment of baselines and simplified monitoring, review, and verification systems. MSMEs also typically do not have the resources to engage in trading and establishing a registry for the large number of MSMEs would be challenging.
The waste sector is another potential candidate for a market-based mechanism. If not treated properly, increased waste generation leads to an increase in GHG emissions, due to methane and nitrous oxide formation. According to the Nationally Appropriate Mitigation Action (NAMA) for the waste sector, the sector’s emissions are expected to more than double between 2015 and 2030, from 19 Mt CO2-eq to 41 Mt CO2-eq.16 A market-based
15www.thepmr.org/system/files/documents/India%20MRP%20Final%2027%20Feb%202017.pdf.
16www.thepmr.org/system/files/documents/India%20MRP%20Final%2027%20Feb%202017.pdf.
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