The outcome of the climate conference (COP29) in Azerbaijan has been disappointing. The meeting took place at a time of transition in American politics. While international climate negotiations remain stalemated, nature is moving inexorably towards becoming a hotter planet. The fight against global warming requires reducing emissions. Developed countries have accepted 2050, China 2060, and India 2070 as the deadline for energy transition to net zero emissions by 2070.
There are two developments that will cut short the transition time. The European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM), which will be effective from 2026, will result in penal customs duties on imports unless the carbon tax in exporting countries is hiked to the EU level. The second is increasing pressure to accept the ‘peaking’ of emissions. The G-7 Summit in Hiroshima last year, and Apulia in June 2024, called on the ‘major economies’ to accept the peaking of emissions by 2025. This was a reference to China and India as the EU and the United States have already accepted ‘peaking’.
The incoming Donald Trump administration may take the U.S. out of the climate agreements again. Regardless of this, we must take action to achieve a clean environment, for our own sake. But we cannot ignore India’s development imperative. We need more electricity to replace fossil fuels. India’s electricity consumption is a third of the global average. While developed countries and China have to diversify to clean energy sources, India has to grow and diversify.
These twin challenges entail much higher costs and require a longer transition time. However, we do not have the luxury of waiting till 2070 as pressure mounts for the ‘peaking’ of emissions. The ‘peaking’ year is an intermediate stage where emissions plateau before declining to the net zero stage. China has accepted the goal of peaking by 2030. India cannot remain an outlier indefinitely. At the most, we may have a decade when our emissions will be capped. A more compressed transition schedule means that we have to depend upon existing technologies. Small modular reactors and hydrogen will take more than a decade to become commercially viable.
Ramp up generation
Can we escape pressure for early peaking? While targets in climate negotiations may be voluntary, they will be enforced through bilateral tariff measures and international financing conditions. The peaking level will determine the quantum of energy available for future growth. We need to rapidly ramp up electricity generation to establish our claim to an energy level that is sufficient to sustain future growth before we are constrained to accept the peaking of emissions. China has 200 GW of new coal-based power plants sanctioned or under construction.
Watch: Key takeaways of COP29
Reaching net zero emissions (NZE) will entail growth in demand for electricity based on clean sources, as new sectors such as transport and industry are brought under electrification. This increase will be of a much higher order of magnitude than existing trends which are derived from the power sector alone. What is the minimum quantum of electricity needed to reach NZE? Which is the cheapest generation mix needed to achieve the minimum level? A Vivekananda International Foundation (VIF) Task Force on India’s Energy Transition in a Carbon-Constrained World mandated IIT Bombay to answer these two questions based on mathematical modelling.
It estimated the minimum quantum of demand for electricity as 21,000 Terawatt hours (TWh) by 2070. An International Energy Agency report has pegged India’s energy demand at 3,400 TWh by 2040. Different timelines make a comparison difficult. But it is worth keeping in mind that India’s energy consumption in 2020 according to NITI Aayog data was 6,200 TWh. Is it realistic to peg its energy demand two decades later at half the level of 2020, the pandemic year, when the economic activities were slow? This is a prescription for energy deficit and slow growth.
The Economist has suggested decoupling growth with energy. The West has not followed this paradigm. Will India’s service economy minimise the need for energy? Server banks needed to power the digital economy require a huge amount of energy. Generative AI will increase energy demand exponentially. This is why Microsoft and other tech giants are turning to nuclear power, which is the only source of clean, firm power at scale.
Cost and land
For energy transition, the choice lies between renewables and nuclear, the two forms of energy that are emission-free. But which of the two entails lower cost and land? The current renewables tariff does not fully take into account storage and transmission costs. A paper by the Central Electricity Authority last year acknowledged that the cost of renewables round the clock ranges from ₹4.95 per unit to ₹7.5 a unit (on the assumption of only six hours of storage). This is higher than the tariff for nuclear power at ₹3.80 a unit. The VIF-IIT Bombay study has also brought out that the renewable high option will cost the most ($15.5 trillion), while the nuclear high option will cost the least ($11.2 trillion) by 2070.
The VIF report has shown that the renewable high approach will require 4,12,033 square kilometres — double the total surplus land of 2,00,000 sq.km available in India. The nuclear high approach will require 1,83,565 sq.km. The renewable route for the production of green hydrogen will increase the demand for electricity for electrolysis and make land constraints worse.
On the margins of COP28 in the United Arab Emirates, a group of over 20 countries, including the U.S., France, and Japan have pledged to triple nuclear power by 2050. Nuclear power already provides 20% of electricity generation in the U.S. and 70% in France. Japan joined this group despite the legacy of the Hiroshima and Nagasaki bombings, and the Fukushima accident. In India’s case, there is a need for a sharper increase, as the share of nuclear power in generation is as low as 3%.
Ramping up nuclear power requires government support, as resources on this scale cannot be internally generated by the Nuclear Power Corporation of India Limited (NPCIL). Nuclear power also needs to be given the status of green energy as it is emission-free. Besides operationalising existing joint ventures between the NPCIL and public sector units, public-private partnerships with industries in hard-to-abate sectors should be encouraged given the looming EU deadline for enforcing the CBAM. The bulk of the additional demand for generation will have to be met by larger 700 MW-1,000 MW reactors.
The issue of finance
At COP29, developed countries committed a paltry $300 billion per year from diverse sources by 2035 against the demand by developing countries for $1.3 trillion. Will this distant goal survive the Trump presidency? Most of this will be non-concessional finance. Many developing countries cannot absorb loans. Multilateral development banks have their statutes, which will require amendment.
Green finance from private sources will come only if the tariff is raised, and the health of DISCOMs is restored. The government cannot bear the fiscal burden of energy transition. The public has to be sensitised to steep hikes in tariffs given the investment in creating new-generation assets. This requires political consensus.
COP29 has finalised the rules for carbon trading. This amounts to rich countries buying the carbon entitlement of the poorer countries to cushion their lifestyle changes. If we cannot diversify to clean sources by the peaking year, we will need carbon for our growth rather than a trade-off.
The energy transition is a fight for limited carbon space. No major economy is likely to diversify to clean energy before the global carbon budget runs out in the next 10 years. An equitable share in the remaining carbon space is crucial for future growth. We must establish our claim by establishing high-generation capacity. The EU and the U.S. have already claimed entitlement to remaining carbon space by unilaterally establishing their peaking levels. China will keep expanding its claim till 2030.
D.P. Srivastava is a former Ambassador and Coordinator of the Vivekananda International Foundation (VIF) Task Force on India’s Energy Transition in a Carbon-Constrained World
Published – December 23, 2024 12:16 am IST
