Despite Biden's climate deal, India is set to forge ahead with fossil fuel acceleration

India will not reduce its growing dependence on fossil fuels but will invest in renewable technology as a requirement under various international climate agreements.

During the recently concluded Leaders’ Summit on Climate, India and the U.S. signed the India-US Clean Energy Agenda 2030 Partnership. India’s Prime Minister Narendra Modi said that “Together we will help mobilise investments, demonstrate clean technologies, and enable green collaboration.”

Despite being touted as a historic agreement, neither Biden nor Modi addressed the biggest elephant in the room: fossil fuel production and consumption in India, which is one of the highest in the world.

India will not reduce its dependence on fossil fuel, but it will invest in renewable technology, merely as a requirement under various international climate agreements. During the Summit, Modi pointed out that “India’s per capita carbon footprint is 60 percent lower than the global average,” hinting that it would be unfair for world leaders to expect India to carry the burden of emission reduction.

This falls in line with India’s recent approach towards other International Climate Agreements where India chose to refrain from committing to any form of reduction in fossil fuel production. Perhaps Biden was aware of this and much of the discussion was limited to clean energy and not on India’s proposed plans to increase fossil fuel production.

India has made sure that none of its climate policies impacts the fossil fuel sector adversely. This is because fossil fuel makes up the biggest portion of the country’s primary energy needs, including electricity. More than 70% of the electricity comes from Coal and fossil fuels account for 90% of all energy consumed in the country.

Reality of energy need in India

India does not consider its renewable installations as an insurance for future energy needs. The government and the DISCOMS (power distribution companies) are aware of this and continue to rely on fossil fuel sources that are abundant, accessible, affordable, and dependable.

Professor V Ranganathan, RBI Chair at IIM India and a Visiting Professor at the University of Pennsylvania, explains why India’s renewable ambitions are out of touch with reality and explains the problem with renewable intermittency. 

India on the other hand has been going gung-ho on renewables, bringing misery to coal-based electricity plants and their unwilling buyers, ie discoms, alike…. It is quite clear that solar and wind can be no match for good old coal-based electricity because the RE is intermittent energy, i.e. it provides only energy;  while the coal/storage hydro is continuous energy providing both capacity and energy…...Achieving viability through grid connection for solar and wind is the biggest deception because in this case the capacity cost is borne by some other continuous energy source in the grid…..The rare case where it is worth is when the renewable energy supply is in phase with the system peak demand. But it is seldom so,” says professor Ranganathan.

It would be suicidal for India to blindly trust renewable tech, when a large section of its population still remains in energy poverty. It is estimated that India’s per capita energy consumption is only around 30% of the world’s average and there are ongoing efforts to increase this.

India’s energy experts are aware of this and hence are persisting with an aggressive policy to increase fossil fuel production. International Energy Agency’s (IEA) Energy Policy Review for 2020 notes that “India is taking significant steps to enhance its energy security by fostering domestic production through the most significant upstream reform of India's Hydrocarbon Exploration and Licensing Policy (HELP) and building up dedicated oil emergency stocks in the form of a strategic petroleum reserve. The scale of these achievements is hard to overstate.” According to the IEA, “India spent a total of USD 25 billion on subsidies for the consumption of fossil fuels” in 2018 alone.

This hunger for growth in fossil fuel production, especially coal, was witnessed even during the on-going second wave of COVID-19 in the country. Coal India Limited, the State Coal agency and the largest coal producing company of the world, recorded an increased offtake of 54 million tonnes during April 2021, the worst month of COVID-19 infections in India. Coal production rose by 3.7% (year-on-year). Northern Coalfields Limited, which is one of the eight subsidiaries of Coal India Ltd, “has clocked a 32% phenomenal year-on-year growth in coal dispatch for April 2021.”

It is also noteworthy to mention India’s reliance on oil and gas. India is the 3rd largest oil consumer in the world after China and the US. It is the second largest oil refiner in Asia and largest exporter of Petroleum products in Asia. India is also the fourth largest importer of liquefied natural gas globally.

Given this high degree of dependency on oil and gas, India is investing a significant sum into the sector. $58 billion will be invested in oil exploration and production, and a further $60 billion will be invested in natural gas infrastructure by 2024. The country’s energy minister said that India is aiming to double its oil refining capacity by 2030 (from 250 million tonnes to 500 million tonnes). However, this is likely to be expedited, with Prime Minister Modi suggesting that India will double its refining capacity as early as 2025. Indian Oil Corporation, the nation’s biggest and state-owned refiner, aims to double petrochemicals output from its nine refineries.

Besides the energy reality that beckons India to continue on its fossil fuel path, there are other problems with the global climate change movement that discourages India from pursuing a renewable utopia. One of them is the unfulfilled climate financing aspect associated with the Paris climate agreement.

India remains adamant about the $100 billion annual climate fund

India has been leading the campaign for climate funding. It has always argued that the developed countries of the world must provide financial assistance for funding climate actions in less developed countries. This demand was put forward at the Paris climate agreement’s conventions and the country noted that it won’t implement climate action until and unless funding is provided in the order of billions.

As a result of this coordinated demand by India and other developing countries, the United Nations’ Paris Agreement officially incorporated a mechanism for providing a climate fund to developing countries.  Developed countries had an existing funding mechanism in place for the same purpose. Known as the Green Climate Fund (GCF), the existing mechanism was the agreement made at Cancun Agreements in 2010 to provide USD 100 billion per year by 2020. The same was adopted as a part of the Paris agreement in 2015 and a deadline of 2025 was set for the realization of the GCF.

However, the funding scheme faced an early setback when the Paris agreement’s biggest cash-cow United States decided to withdraw from the agreement. The U.S. eventually withdrew from the agreement and there was a huge gap in gathering funds required to be distributed.

In the concluding remarks of its 2021 Economic Survey, India made it clear that without the provision of US$ 100 billion per year target by Developed countries, developing countries would not be able to fulfill their climate commitments: “India’s proactive climate actions mainly rely on the domestic budgetary resources. Climate finance is critical to fulfil the execution of NDC targets submitted by India in a timely manner. Climate finance is an obligation of the developed countries as a part of their historical responsibility as they are the major contributors to the stock of GHG in the atmosphere accumulated since the industrial revolution. By 2020, the developed country partners had to fulfill the promised support of US$ 100 billion per year in the form of climate finance to the developing nations. This has not happened. The lack of required momentum in the scope, scale and speed of climate finance from developed to developing countries needs to be addressed. The enhanced new and additional financial resources, technological support and support in capacity building should be mobilized and delivered to strengthen the on-going climate actions in developing nations like India.”

“GCF’s first replenishment (2020- 2023) process so far witnessed 28 countries pledging resources to replenish the fund for an amount of $9.7 billion, which is even quantitatively lower than the Initial Resource Mobilization period,” the Economic Survey added.

In April 2021, India’s Environment Minister Prakash Javadekar stressed that the developed countries have forgotten their pre-2020 financial commitments.

They committed in Copenhagen, 100 billion dollars per year… but where is the money? There is no money in sight,” asked the Minister. He also noted that it is not realistic for India to move away from coal as renewables are expensive. “Now, we are saying don't use coal but the alternative has to be much cheaper than coal, only then people will do away with coal,” he said.

Now that the Biden administration has rejoined Paris, developing countries will be expecting the fund flow to be more streamlined. But it would still be short of the $100 billion per year original target, making it extremely unlikely for developing countries like India to honour their commitments made in their NDCs. Though India is assuring the world about its commitment to climate action, it will certainly not risk a renewable-driven slowdown in its economy.

India has invested in solar energy and is making ambitious plans for EV vehicle transition, but it has also invested heavily in fossil fuel production and continues to import a significant amount of fossil fuel. This twin trajectory is set to continue as the country is not in any mood to compromise on its GDP growth that has been already damaged due the first and second wave of COVID-19 outbreak.