The pursuit of sustainable development in India

Sobriété énergétique et croissance inclusive : l'Inde en quête d'un développement durable
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Article Index
Combining human development and energy…
Sustainable development in India
The indicators of inclusive growth
The priorities of India's 12th Five Year Plan …
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The search for sustainable development in India aims to develop not only a response to climate change but also more inclusive growth, effectively elevating the poorest populations towards better living conditions. The management of the energy supply, a critical issue for continued economic growth, as well as the control of greenhouse gas emissions are essential starting points on this journey.

India is at the crossroads of opportunities and challenges in her pursuit of sustainable development. It is among the largest economies and promises to experience high economic growth. India is also the world's largest democracy. But at the same time, a large section of the population does not have access to the bare minimum of the benefits of economic development, which in turn also affects lower penetration of the political and economic freedoms that a democracy promises. Maintaining high and inclusive growth rates is therefore a prime political, social and economic imperative for India. The prospects, and need, of high economic growth however, come with a potential conflict with the global imperatives of climate change. India is one of the lowest emitters of greenhouse gases (GHGs) in the world on a per capita basis. At 1.4 tCO2/person in 2010, India's emissions were less than one third of the world average of 4.5 tCO2/person, less than one fourth that of China and one twelfth that of the US. However, India has now become the third largest GHG emitter. At the same time, the large demography of the country is also highly vulnerable to climate change. The fact that the poorest of the poor are comparatively more vulnerable to climate change, even if public adaptation services are available, makes it all the more important for India to attain a higher level of economic growth with rapid poverty eradication as soon as possible. Thus India is in dire need of charting out a new political economy of sustainable development to balance these imperatives that are seemingly conflictual in the short run, but certainly mutually reinforcing from the perspective of long-term human development. Broadly this will imply a development process with a deepening of economic activities at a large scale so as to include the entire population in the development process. Arguably, with time the development trajectory is becoming increasingly environmentally efficient. For example, the emission intensity of GDP has improved in recent decades, primarily due to development and the deployment of efficient technologies. The concerns of climate change require the development process to overcome the time barrier alongside the barriers to scale. In other words, the climate change imperatives require that both development and deployment of climate friendly technologies happen in a shorter time frame and at a global scale. In a globally integrated economic order faced with global environmental challenges with serious national implications, to what extent India can craft and pursue such a political economy of sustainable development is the key question today, not only for India, but arguably for the world too. In this chapter we explore some contours of this challenge.

India's development challenge

The UNDP's Human Development Index (HDI) in its comprehensiveness of criteria capturing the aspects of economic well-being, social dignity and political freedom is arguably the best indicator to assess the developmental challenge a country faces. The 2013 Human Development Report ranks India at a low 136 out of 186 countries in terms of its HDI, indicating that India's development needs are still huge, and significant progress is needed for ensuring a better quality of life for her people. There is a positive relationship between HDI and per capita energy consumption. A minimum per capita energy consumption of 2.3toe/year is needed today to achieve an HDI of 0.9 (see Figure 1). However, it has also been observed that the late bloomers usually achieve transition to higher levels of human development at lower levels of per capita energy consumption. It could reasonably be argued that there is a high probability that an HDI of 0.9 could be achieved in future at a per capita energy consumption of 1.5 toe/year. In comparison to such an optimistically reduced need for energy, per capita consumption in India was 0.4 toe/year in 2011-12 with a corresponding HDI of ~0.5. The lower per capita consumption is constrained by, in addition to poverty, low levels of energy supply, which was 0.6 toe/capita/year in 2011-12. Moreover, it is not merely about low per capita energy consumption but also about access to energy services. There are close to 300 million people in India without access to modern energy services for cooking and lighting.

Although it is difficult to quantify sustainable development, its directional and procedural meaning is clear. It is progress on human welfare while maintaining balance between multiple social, economic and environmental concerns. Holden et al. (2014) have assessed the status of many countries with regard to sustainable development as a combination of four parameters: HDI (minimum 0.64), ecological footprint (maximum 2.4 global hectare/capita/year), Gini coefficient (maximum 40), and share of renewable energy out of total energy (minimum 26%). They found that in terms of its welfare distribution and ecological footprint, India is very much within the boundaries of sustainable development. However, the overall level of welfare is too low to be sustainable and India's energy system is on the boundary of sustainability. Hence, what India needs to move into the sustainable development zone is to rapidly improve its HDI and share of renewable energy. Given the positive relationship between HDI and energy consumption, India's HDI challenges can be summed up with one infrastructural goal, i.e. increasing the share of renewable energy at an accessible price.

India and environmental policy

The question of environmental degradation in India, be it at the national or global level, has always been understood as integral to developmental challenges. India articulated this view, along with other developing countries, right at the beginning of the setting of the global environmental policy agenda at the UN Conference on Human Environment, held in Stockholm in 1972; and restated this perspective at the 1992 Rio negotiations. The global community has also accepted it in similar terms to varying degrees. India has been a strong advocate of Article 4.7 of the United Nations Framework Convention on Climate Change which recognizes poverty eradication and socio-economic development as an 'overriding priority of developing countries'.

India's policy response to environmental challenges, by and large, has also been a response to its developmental challenges. The mainstay of India's strategy to address environmental issues, particularly climate change, is to increase its share of alternative non-traditional energy options and promote energy efficiency. This policy response began in the early 1970s, driven by the then immediate vulnerability to energy security in the light of the 1973 oil crisis. What, however, has changed because of climate change is that the development benefits that have been achieved so far, are likely to be undermined due to the risks to the natural, physical and economic infrastructure. The range of vulnerabilities relating to health, nutrition, access to potable water, sources of traditional livelihoods, ecosystem services, and life and biodiversity in and around the coast leaves the existing infrastructure inadequate to protect the gains of progress. Hence, climate change has superimposed a time and magnitude constraint on India's pursuit of development. India needs to develop quickly and at a higher rate, which in turn implies aggressively pursuing renewable energy and energy efficiency so that the necessary infrastructure can be built with lower GHG emissions.

Key stakeholders advocating sustainable energy

In the early 1970s it was the national government which recognized the need to promote new forms of energy with a view to protect the national economy from fluctuations in the international energy market. Being a party to the key international environmental agreements, beginning from the Stockholm Declaration in 1972 up to the signing of the Kyoto Protocol in 1997, India introduced legislation and policies to integrate environmental protection into development policies and programmes, specifically referring to international agreements in the preamble paragraphs (Atteridge et al., 2012).

From the late 1980s with the launch of modernization and renovation programmes to improve efficiency in industrial units along with the liberalization of the economy, the private sector also emerged, albeit slowly, as an important stakeholder. With increasing integration into the global economy and rising competition, private sector companies began to realize the importance of energy efficiency, along with the technological and cost barriers to achieve higher efficiencies yet remain competitive in the global market. Accordingly, the private sector has increasingly advocated policies to support energy efficiency. The success of demonstration projects with international support from Denmark and Germany in wind energy since the late 1980s, along with the rise of companies like Suzlon has also given impetus to the demand for policies supporting renewable energy. The experience of the Clean Development Mechanism (CDM) has been an added factor to build confidence among the private and public players in the economic viability of renewable and energy efficiency options.

During the last decade, particularly after the launch of the Fourth Assessment Report of the IPCC and India's National Action Plan on Climate Change, civil society and state governments have also emerged as key stakeholders. Civil society is primarily motivated to demand more aggressive action by the national government due to the safety and security concerns of the vast vulnerable population in light of the IPCC report and increasingly lower expectations from international climate negotiations. The state governments, on the other hand, are required to implement the National Action Plan on Climate Change (NAPCC) through their respective State Action Plans on Climate Change (SAPCCs) as well as policy targets (such as renewable purchase obligations). Given the resource and capacity constraints of states, as well as the opportunity that the SAPCCs provide for better integration with national policy implementation and hence availability of resources, states too have become very important advocates of climate relevant energy policies. All this experience has also led to the emergence of a significant number of experts and policy researchers which proactively advocate considered climate policy and energy policy integration.

Overall, transformation in India's energy sector has followed a top down approach where the national government has played a decisive role by not only setting the policy direction, physical targets, building infrastructure but also providing necessary incentives to other actors. The Accelerated Power Development and Reforms Programme (APDRP), initiated in 2002-03 to address the losses in power transmission and distribution is a good example of this approach. It resulted in a reduction in losses by a factor of over 9% during 2005-2014. Increasingly, the national government has followed a consultative process of policy and programme formulation to address the concerns of various stakeholders. The Perform, Achieve and Trade (PAT) scheme under the National Mission on Enhanced Energy Efficiency (NMEEE) is a very good example of how a central government body, the Bureau of Energy Efficiency (BEE) facilitated all these stakeholders to provide broad based inputs to policy-making, resulting in a very specific and complex, but ambitious, climate policy (Nandakumar and Shrivastava, 2013). Although, in some cases the issues between central and state governments remain difficult to resolve due to an inadequacy of resources and jurisdictional issues e.g. electricity subsidies.

Context of energy supply

The imperative of increasing the energy supply poses two types of challenges for India. First, India's energy supply is highly import dependent, and this dependency is likely to increase. According to the report of the Expert Group on Low Carbon and Inclusive Growth (Planning Commission, 2014), 40% of India's commercial energy supply comes from imported fuel. More than 70% of the petroleum requirement is met by imports, which is expected to increase to more than 80% by 2027. Even imports of coal, the fuel that accounts for 70% of India's electricity generation, are expected to increase from 10% in 2011-12 to 30% by 2027. Other studies also conclude in the same direction (e.g. TERI, 2014). The high import intensity of India's energy supply therefore not only poses concerns of energy security but also of the nation's current account balance. The fossil fuel import bill as a share of total export earnings for India has grown from 35% in 2000-01 to 60% in 2012-13. The total trade deficit in 2012-13 was $190 billion.

The second challenge relates to the contribution to CO2 emissions from the energy sector, in addition to the impact on air pollution and water resources that are associated with the extraction and use of these fuels, both globally and at a local level. The energy sector is the largest contributor to India's total GHG emissions. In 2007, the energy sector contributed 1,100.06 million tons of CO2 equivalent (CO2e) emissions out of a total of 1,904.73 million tons. Of this, 65.4% of the emissions were from electricity generation, 3.1% from petroleum refining and solid fuel manufacturing, and 2.9% from fugitive emissions due to the handling of coal, oil and natural gas. About 15% of total CO2e emissions (or 128.08 million tons of CO2e) were from fossil fuel and biomass combustion in both rural and urban residential households. Given that much of the infrastructure growth across sectors, whether it is in built-up infrastructure, power generation and transmission capacity, mobility provision, education or health related infrastructure, still needs to happen, India must plan a new development model to prevent long-term lock-ins into emissions-intensive infrastructure, fuels and technologies.

India's development challenge in a climate constrained world is therefore to enhance access to energy services for its vast population, aiming to improve HDI without compromising the macro-economic imperatives of a growing national economy as well as the ecological imperatives of global atmosphere.

Energy pathways for development till 2030

Different modelling studies estimate that India's energy supply requirements range from 1,146 million toe (Planning Commission, 2014) to 1,700 million toe (Government of India, IEP, 2006) by 2030, compared to 819 million toe in 2011-12. According to the Integrated Energy Policy (IEP), economic growth of 8% to 9% through to the year 2031-32 will require an increase in India's primary energy supply by a factor of 4 to 5, and its electricity generation capacity by 6 to 7 (both compared to 2003-04 levels). While this implies a primary energy supply growth of around 5.8% per year, commercial energy supply will need to grow at a faster rate of 6.8% per annum, as non-commercial energy sources will be replaced over time. According to the report of the Expert Committee on Low Carbon and Inclusive Growth, in a 'business as usual', or 'baseline inclusive growth' (BIG) scenario, the emissions intensity of GDP in PPP terms falls by 22% in 2030, compared to 2007; while in the low carbon inclusive growth (LCIG) scenario it falls by 42%. The per capita emissions are expected to be 3.6 Mt of CO2 by 2030 in the BIG, but could be reduced to 2.6 Mt of CO2 in the LCIG scenario. This is on account of: (a) a significant improvement in the energy intensity of GDP through demand-side measures (the energy intensity of GDP falls from 0.121 kgoe/$ GDP 2007-PPP in 2007, to 0.071 kgoe/$ GDP 2007-PPP, in 2030); and (b) changes in the energy mix that result in a reduction in demand for coal and crude oil by 20% and an increase in demand for natural gas by 11%, along with a six fold increase in the supply from non-fossil energy sources. Another source of reduced emissions however is the lower GDP that results from a change in the investment pattern in the LCIG scenario compared to the BIG. The report estimates that, compared to the BIG scenario, the LCIG will have a 0.16% lower GDP growth rate and a GDP of 3.33% less in 2030. Furthermore, to achieve a higher development indicator by 2030 compared to 2007, as shown in Figure 3, cumulative investments in the two scenarios are estimated to be more or less equal, but the LCIG scenario will require a 50% higher investment in the energy sector. This is on account of the fact that to generate the same amount of power from renewable energy sources, a comparatively larger installed capacity than from thermal sources is needed. This, however, also implies foregone investments in other sectors of the economy, particularly the social sector.

It is important to note that out of an estimated 27% reduction in emissions in the LCIG compared to BIG, 24% comes from a change in the energy supply mix. Hence, the outlook for 2030 is highly focused on renewable energy. The studies, however, rely greatly on the early availability of next generation technologies particularly in storage, concentrated solar thermal and bio-fuels.

The technological predicament

Theoretically, harnessing more and more renewable energy sources with a simultaneous improvement in energy efficiency can help achieve the twin objectives of energy security and climate change, in addition to addressing the pressure of India's increasing energy imports bill. India has already realized the significance of promoting renewable energy and energy efficiency. Over the last two decades, the energy intensity of the economy (measured in terms of the total final energy consumption in toe per million rupees of GDP at 2005 prices) has reduced by 50%. The share of renewable energy (excluding large hydro) in the total installed capacity has increased from 0.05% in 1992 to 12.7% in 2014. The two targeted missions, namely the National Solar Mission and the National Mission for Enhanced Energy Efficiency under the NAPCC have provided further impetus to this trend. A range of support instruments have been introduced to accelerate the uptake of renewable energy including subsidies for off-grid renewables, fiscal incentives for wind and solar power, and renewable purchase obligations with premium tariffs. In terms of energy efficiency the instruments include standards and labelling for appliances and cars, mandatory efficiency improvement targets for energy intensive industries (including power stations), performance contract based demand management measures, etc. Despite this rather commendable progress in terms of efficiency improvement and the inclusion of renewables in the energy system, India still has a long way to go. There are a number of barriers that make India cautious before it blindly pushes ahead with a green technology transformation, even though it is widely recognized to be in the national interest in the long run. To be able to realize the transformation of the energy supply mix, in addition to the timely availability of alternative commercially viable technological solutions across sectors, a rapid scaling-up of these options together with an accelerated build-up of supporting infrastructure, appropriate skill-sets, regulatory and institutional frameworks, and adequate renewable manufacturing capacities will also be needed. The development experience of many developing countries over the last seven decades suggests that there are three types of challenges that need to be addressed:

Higher costs of technologies

Although renewable energy options have become cheaper there are still significant cost barriers. In particular, the initial costs of green energy are very high. There are three types of barriers: (a) the already high cost of capital in developing countries deters investors from options with high capital costs, (b) the limited ability and willingness to pay for high cost energy makes these options economically less attractive, and (c) the feasible electricity tariffs - due to the need to provide energy services at accessible rates - do not cover the costs of supply and distribution and there is a limit to offset the impacts of these high costs through subsidies, particularly if the target is high. Similar barriers are faced in promoting energy efficiency measures. The high costs of most efficient products often do not meet the criteria of capacity and willingness to pay of the consumers and the acceptable pay-back period. To put the challenges posed by the costs of technology alone in perspective, at the macro level, the Expert Committee on LCIG estimates an additional energy investment of 1.5 % of GDP over and above the BIG scenario. The TERI study estimates the total undiscounted technology investment cost for the 100% renewable (REN) scenario to be about 42% higher than in the Reference Energy Scenario, requiring an additional investment of around 4% of the cumulative GDP between 2011 and 2051.

Innovation challenges

Very often the available technologies in the global market are not suitable for use in the Indian context, due to the specific climatic conditions that make certain technologies less appropriate. For example, India's high summer temperatures mean there would need to be a doubling of the current efficiency levels of air conditioners, while mantaining current prices to make an economic case for a high level of penetration. The full reliance on hydropower is difficult due to its dependence on the monsoon cycle, which requires compensatory fossil fuel-based electricity. The poor quality of available raw material can also offset the efficiency promises of new technologies. For example, the advanced clean coal technologies do not generate the same level of efficiency with Indian coal. Hence, green technology transformation in India cannot happen without research and development efforts to customize technologies to Indian conditions. With this background the transition of India's energy mix towards renewable energy poses grave innovation challenges. The theoretical possibility of 100% renewable by 2050 relies on the uptake and scale-up of several options that are currently not mature enough. For example, technological breakthroughs in third generation biofuels within the next two decades are critical for transforming the transport sector. Similarly, the REN scenario involves meeting all industrial heating requirements up to 700°C through CST technologies by 2051. This implies that CST technologies will have to be a commercially viable option even for small to medium manufacturers by 2031 in order to gain popularity and become the prevalent option in the next two decades. Furthermore, given the large share of renewables in the electricity mix, apart from the development of storage technology, improved grid integration and load management systems would be required with immediate effect (TERI, 2014).

Institutional capacities

India is a federal state and has been pursuing incremental decentralization of governance. It is necessary that institutional capacities exist at all governance levels to facilitate and accelerate transition. Unfortunately, there are large gaps in capacities, human as well as institutional, at these governance levels. The experience of designing the Perform Achieve and Trade (PAT) scheme of the National Mission on Enhanced Energy Efficiency revealed the capacity gaps in state agencies, financial institutions and the private sector, in relation to project evaluation and effective monitoring and verification (Nandakumar and Shrivastava, 2013). A general capacity gap in designing comprehensive policies and programmes has been observed at the state level in the process of the development of various State Action Plans on Climate Change (Dubash and Jogesh, 2014; Mishra et al., 2012). Although, many states have introduced policies that are relevant to climate change, their implementation remains a challenge on account of the limited institutional and financial capacities of states (Srinivas, 2013). In addition, it is critical to recognize from the beginning that the implementation of action happens at different levels of governance and at each level an issue is important for different reasons. Accordingly, challenges are also different. Any solution therefore must be built on this diversity of reasons at different levels and address the associated challenges.

India's strategy for sustainable development

India's Twelth Five Year Plan has sustainable development as its core focus and outlines various approaches to integrate sustainability into national development goals. It identifies economic growth, poverty eradication and employment, education, health, infrastructure, and environment and sustainability as national development goals. These are further unbundled into 25 specific parameters such as institutional capability, regional balance, reduction in inequality, productivity growth, agricultural growth, infrastructure investment, water resource management, science and technology, human capital and so on. These parameters can easily be mapped onto the various sustainable development goals being negotiated under the Rio process as well as the imperatives of climate change. For example, the development goals of energy access can be integrated into the mitigation imperative through efficient and clean energy technologies, along with reducing the demand for energy. Similarly, the goals of higher agricultural productivity and access to clean water can be integrated into the adaptation imperative through high yielding and heat resistant seed varieties, and water storage technologies and practices. Hence the Twelth Five Year Plan successfully integrates the imperatives of sustainable development and climate change in India.

A closer look at national development goal parameters suggests that India's road to sustainable development could be through the rapid and urgent deployment of green technologies with a view to address the issues of infrastructure development and the enhancement of productivity and sustainability. The Plan in fact suggests that actions should be thoroughly informed by science and technology and emphasizes the promotion of technological leapfrogging. Accordingly, the Plan has identified twelve focus areas which in a way encapsulate the principal development imperatives. In Figure 4, these twelve focus areas are assessed in light of the key challenges for transition discussed above. It is evident that except for the 'advanced coal technologies' focus area, the lifetime cost for sustainable development interventions in India is not a significant barrier. The major barriers are first cost and innovation capabilities. Except for the National Wind Energy Mission and the Vehicle Fuel Efficiency Programme, high initial costs are major impediments to India's quest for sustainable development. In areas where the success is dependent upon a large number of participants and multiple levels of governance - such as energy efficiency programmes, efficient faster adoption of green building codes, lighting, labelling and super-efficient programmes, improving the stock of forest and tree cover - institutional capacities need to be built for better awareness and penetration of the initiatives. The need and scope of technological innovation is equally relevant for the identified focus areas.

Levers for sustainable development

The challenges depicted in Figure 4 for deepening sustainable development in India raise an important question: can India on her own, and to what extent, accelerate the implementation of the identified strategies? India's experience so far suggests that it can certainly create positive momentum, but it may not be able to overcome the time barrier. For example, while the Jawaharlal Nehru National Solar Mission has been able to bring down the benchmark tariff for solar PV, from INR 17.91 per Kwh in 2010-11 to INR 8.75 in 2013-14, and for solar thermal from INR 15.31 to INR 11.9, it still does not make sense to go for significantly large-scale uptake until 2030 on account of high undiscounted system costs and a high subsidy component. Technological breakthroughs hold the key. While tariffs for wind have grown comparatively at a slower rate compared to thermal power during 2005-06 and 2013-14 (39.47% compared to 97.09% in Andhra Pradesh, and 23.53% compared to 67.11% in Karnataka) the average tariff for wind is still marginally higher than the average unit cost of thermal power. There is still a need for deployment at a higher scale.

Experience suggests that a large market for products and technologies not only brings down costs but also encourages innovation. In the process institutional capacities also develop through learning by doing. What is needed therefore is to build institutional capacities to provide a big push to market for new technologies which can simultaneously address the challenges of high initial costs and innovation. Such a large push to market is difficult for India to provide, particularly to attain the required level of penetration within a short time frame. Therefore, the lever to speed up sustainable development in India lies with strategic international cooperation to create sufficiently large markets for new technologies so that the economic process could gain a self-sustaining velocity for transformation.

There are already a number of international cooperation initiatives that support technological interventions. A list of these initiatives within the United Nations system and of partnerships focused on promoting technological change highlights the apparent lack of support for pilot projects (O'Connor, 2014). From India's perspective, it would be preferable if international support were mobilized for demonstration projects with considerable overlap with development and market formation. This could be done by undertaking large enough demonstration projects that send out clear signals for the private sector and to innovators on these 'new markets for new products'. Large scale demonstration projects would necessarily involve a meaningful policy and institutional engagement which in turn build capacities.

Conclusion

Integrating concerns of climate change and sustainability into development goals requires addressing barriers to development processes, as well as barriers to climate-friendly development strategies. Broadly, the barriers to the development process are concerned with those of a deepening of economic activities at a large scale so as to include the entire population in the development process. Arguably, with time the development trajectory has been growing in an environmentally efficient manner, for example there has been an overall improvement in the emission intensity of GDP due to the development and deployment of more efficient technologies. The concerns of climate change require the development process to overcome the time barrier alongside the barriers to scale. In other words, the climate change imperatives require that both development and deployment of climate-friendly technologies ,chnological options in as many places as possible with adequate participation of relevant stakeholders. Accordingly, one possible way forward could be to develop targeted business models, based on bilateral/multilateral cooperation, that address the challenges of high cost and institutional capacity and promote innovation and deployment of targeted technologies. Identification of lessons from the existing bilateral initiatives towards building multilateral cooperative business models may be a useful way forward in this direction.

Combining human development and energy conservation

Ranked 136th out of 186 developing countries, India still has a long way to go in terms of human development. With existing technologies, it may nevertheless realistically hope to improve the living conditions of its population at a lower energy - and therefore environmental - cost.
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Sustainable development in India

India is fully within the limits of sustainable development, but needs to improve its results in terms of energy supply and the fight against poverty, which are two interrelated goals.
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The indicators of inclusive growth

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The priorities of India's 12th Five Year Plan (2012-2017)

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