Lowering carbon emissions is serious business. Serious enough to draw financing of $94.8 trillion over the next 38 years to meet the climate goals of just eight emerging economies— China, India, Indonesia, Kenya, South Africa, the UAE, Nigeria and South Africa—says a report by Standard Chartered. Of this, China needs $35.1 trillion, while India’s requirement is pegged at $12.4 trillion till 2060. However, an independent study by the CEEW Centre for Energy Finance estimated that India will need investments of $10.1 trillion by 2070, says Divya Datt, a Programme Management Officer at the India Office of the UN Environment Programme. “Of this, $8.4 trillion is required to scale up power generation, integration, distribution and transmission infrastructure. Another $1.5 trillion is required for green hydrogen production capacity.” While different reports point to varied estimates, the ballpark figure remains the same for the next 48 years.
A sector-wise break-up of the financial requirement, though, is only available for the next decade as industries, businesses and the government plan for 5-10 years, and not for 50. Nonetheless, considering carbon emissions of 2.44 billion tonnes in 2020, India has made big commitments, and appears to be on track to achieve them.
Sector-wise investments
The biggest emitters of greenhouse gases in India continue to be power generation units, industries—primarily steel and cement—and transport, and big investments are already deployed to tackle them. Planned investments for the next decade for non-fossil fuel industries are around Rs 35-45 lakh crore. As part of this, the government has introduced the production-linked incentive (PLI) scheme, which has an outlay of Rs 24,000 crore to promote domestic manufacturing of high-efficiency solar modules with full backward integration. Among industries, some major cement companies have committed Rs 1,400-1,700 crore for waste heat recovery systems (WHRS) in FY22, says ICRA. In the steel sector, JSW Steel plans to raise Rs 3,700 crore via green bonds, and Tata Steel has made provisions of producing 5 million tonnes of recycled steel in its capex plan of Rs 50,000–60,000 crore for the next five years.
The government’s initiative in the form of a perform, achieve and trade (PAT) scheme is a market-based compliance mechanism to accelerate efficiency in energy-intensive industries. “The energy savings achieved by notified industries is converted into tradeable instruments called Energy Saving Certificates issued by the Bureau of Energy Efficiency (BEE), and traded on power exchanges. The BEE has rolled out six PAT cycles till March 31, 2020, with a total of 1,073 designated customers covering 13 sectors. The target is to achieve energy savings of around 17 MTOE (million tonne of oil equivalent) that would result in reduced CO2 emission of 87 MT per year,” explains Rohit Ahuja, Head of Research and Outreach at ICRA.
Transport, as the third largest emitter, will get some big investments, too. For instance, Rs 1.8-2.2 lakh crore is earmarked for CNG; that includes the 8th, 9th, 10th and 11th rounds of investment by the Petroleum and Natural Gas Regulatory Board (PNGRB). “The government has resorted to an aggressive rollout of CGD (city gas distribution) networks to increase the use of gas. Accordingly, the PNGRB had authorised 86 geographical areas (GAs) under round 9, and 50 areas under round 10, taking the population coverage of CGD networks to 70.47 per cent from 19.86 per cent. Additionally, the 11th CGD Bidding Round for 65 GAs took the population coverage to 95 per cent,” says Ahuja. He adds that the government’s net-zero target has policy support for industries across sectors, which will spur investments towards new business opportunities and help in achieving net-zero goals.
Financial implications
When talking about returns on sustainable investments, a ready number isn’t available. “Investments in India usually aim for an RoI of 12-15 per cent. Most green energy projects (especially solar) have met these expectations,” explains Ahuja. If India achieves its net-zero target, its dependence on fossil fuels will come down to 10-15 per cent of total energy consumption from 75 per cent currently, he adds. “In a nutshell, India imports 80 per cent of its oil and gas requirements, and achieving net zero means saving on the high import costs.”
Agrees Datt. “The economic value of the cost of climate change that can be avoided because of these investments will be significant, and the return on these investments will be huge,” she says.
@nidhisingal