Development Dialouge: World Bank Study on Low Carbon growth : Newsletter - Jan.-Feb. 2010
A recent World Bank study – Energy Intensive Sectors of the Indian Economy: Options for Low Carbon Development – shows that a reduction in carbon intensity can be achieved while expanding energy services and reducing poverty. India has already had some success in reducing its carbon intensity, being one of the few countries whose carbon intensity declined in the 10 years preceding 2006, says Kwawu Mensan Gaba, World Bank’s Lead Energy Specialist and Charles Joseph Cormier, Country Sector Coordinator, India, the two authors of this report.
During the run-up to Copenhagen, where the international community is striving to come up with a comprehensive agreement to combat climate change, India made a significant announcement that it intends to reduce 20 to 25 percent of its carbon intensity by 2020 against a 2005 baseline. India has a relatively low carbon footprint and a steadily declining carbon intensity over the last decade, and this voluntary target will further India’s contribution. The World Bank’s forthcoming study – Energy Intensive Sectors of the Indian Economy: Options for Low Carbon Development – shows that a reduction in carbon intensity can be achieved while expanding energy services and reducing poverty. Doing so will require stronger institutions, leadership in implementing wide-ranging energy supply and efficiency measures.
Even though India has a low carbon per capita footprint, it has already had some success in reducing its carbon intensity, being one of the few countries whose carbon intensity declined in the 10 years preceding 2006. In fact, despite the strong economic growth during the second half of that decade, which could have been expected to have come with a higher carbon burden, India’s carbon intensity reduction was actually better in the latter half of the period.
According to our study, India’s carbon intensity from energy use is set to decline until at least 2031. The study examines the likely development trajectories of five sectors of the Indian economy that accounted for three-quarters of India’s CO2 emissions from energy use in 2007, namely power generation, energy-intensive industries (like iron and steel, cement, fertilizer, refining, pulp and paper, and aluminum), road transportation, commercial buildings and residential housing. It presents three carbon emission scenarios outlining the different growth paths that India could follow to 2031, the end of the Fifteenth Five Year Plan.
According to our model, the carbon intensity of these five sectors is set to improve by 33 percent between 2005 and 2031 (19 percent by 2020) with existing plans, but could improve by as much as 45 percent by 2031 (and 30 percent by 2020) with an all-out effort on the technical, financial and institutional fronts to reduce carbon emissions. Needless to say, these green measures come with additional costs. Preliminary estimates suggest that the large up-front costs could be recovered in the long-term by lower operating cost. To take the instance of electricity supply to the national grid, the cost difference between the least carbon-intensive scenario and the existing plans has been estimated at 14 percent. However the cost scenario has to be fully studied by all stakeholders to integrate the transaction costs involved.
The rate of decline will be determined by the timing of investments to maximize domestic sources of renewable energy, enhance energy efficiency, reduce distortions in energy pricing, and introduce advanced coal technologies and cleaner transport options. The all-out effort, which represents the lowest carbon pathway, encompasses measures such as the introduction of 20 GW of solar energy by 2020; the import of 20 GW of additional hydropower from neighbors in the region; the acceleration by 10 years of plans to reduce transmission and distribution losses; as well as the adoption of 340 greenhouse gas emission-reducing measures that have already been introduced in the country in 80 percent of the industrial sector. In addition to this, if efforts in the non-energy sectors like agriculture and forestry (which the Bank study did not examine) are also sustained, trends indicate that India could achieve its voluntary target while meeting its priority development objectives. Several improvements in technologies and practices in these sectors are known to help reduce carbon intensity, such as the reduction of methane emissions from irrigated rice production and livestock, the reduction of nitrous oxide from the use of fertilizers, afforestation, as well as reforestation.
An important step towards lower-carbon development over the longer term would be for India to achieve the targets it has set for itself in the Eleventh and subsequent Plans. Past performance indicates that challenges in implementation remain. In the energy sector, for example, there is a risk of achievement rates continuing at the roughly 50 percent success rate experienced for the addition of new generation capacity in the past three Five Year Plans (1991-2006). For India to rise above its past performance, it will need to ensure the availability of adequate finance and technical know-how; to strengthen the institutions delivering these targets; and to improve its skills-base. The likelihood of success also depends on putting in place a monitoring and evaluation system to detect any systemic slippages during program implementation and to ensure that early corrective measures are taken.
India is a responsible global player that shares an interest in limiting the negative effects of climate change and will decide what steps it will take to meet the development needs of its people while maintaining a low carbon trajectory. The findings in this study explore this development challenge within the menu of technological options currently available. Where there are synergies between cost-effective efficiency improvement and demand-management on the one hand and reduction of carbon intensity on the other, they should be pursued as a top priority.
This article was originally published in the Times of India on15 December 2009
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