China’s policy shift, mega tender cancellations and policies levying taxes and duties on solar industry in India, feed-in-tariff cut in Japan have made 2018 the year of uncertainty for solar. However, surveys suggest that global PV solar installations will see nearly 18% rise in 2019, finally reaching and may be surpassing 100 GW capacity addition. Although, at the end of 2019, we would still be far from ‘0’ emission future, rising PV installation growth and emergence of new markets within developing countries will get us closer to that goal.
A blanket of CO2 has enveloped the world. And continues to deteriorate our climate. Frequency of heatwaves has increased, habitats have started to shift, spread of disease, raising sea levels and other not so subtle and often violent changes in the climate are now reality due to growing CO2 emission levels. Daily Global CO2 emission levels now stand at 406.47 parts per million. It is important to note that CO2 emission levels have never risen this high in last 400,000 years. Our fossil fuel usage is the primary reason behind this rise (80% of CO2 emissions come from fossil fuel combustion) that is presenting devastating changes within the environment. Fortunately, now the world is taking initiatives towards reducing the CO2 emission. However, the damage to the climate that we have done through decades of fossil fuel usage cannot be undone instantly; therefore, what the world needs is long term strategies to reduce carbon emission by adopting green energy and reducing fossil fuel usage.
A recent report by The Centre for Policy Research and International Institute for Applied Systems Analysis has predicted that India’s CO2 emissions from energy generation will nearly double in 2030 from its 2012’s emission figures. Although, this 91-98% increase in CO2 emission is still going to be in line with nationally determined (in Paris Agreement) CO2 emission level; factoring in 2012’s emission figures-2 billion tonnes of CO2, it is safe to say that the rise is considerable.
The Bittersweet Dilemma
The research report showed that recently introduced policies (2015 and beyond) are well in their way to lead India towards a faster than predicted green energy transition, which will shrink coal’s dominating share in India’s energy equation and reduce per capita emissions than today’s global average. In that case, we can come to an understanding that the policy interventions and Government initiatives towards renewable energy (especially solar) growth will have a material impact on reducing India’s future emissions.
The report also shines light on the fact that even if India’s emissions doubled by 2030, it will be lower than China’s equivalent emissions in 2015. Therefore, it can be considered as a progressive environment building up towards a sustainable green future, right?
Well, it is progressive indeed but we also have to understand that although, this is a move towards success, the picture is not very appealing right now. The efforts need to be considerably increased to reach and frankly surpass the goals. It will help us reduce our carbon emissions even more, which is a necessity.
The Current Scenario
Presently, India is going through terrible shifts in environment behaviour, due to increased CO2 emissions within the country and the world. There are unprecedented spells of hot weather, change in Monsoon bringing issues of droughts and flood, significant fall in crop yield that can destabilize the social, economic structure of the country, adding to the turmoil.
Research has found that areas in north-western India, Jharkhand, Orissa, and Chhattisgarh have seen considerable drop in crop yield and suspected to fall further due to changing climate. As India is dependent on agriculture and about 60% of its agriculture is supported by rain, higher or lower than average rains are affecting the country. Also, rising carbon dioxide levels due to global warming is suspected to shrink down the amount of protein in crops like rice and wheat, which are the primary food source for majority of the population in India. Such conditions are leaving populations at risk of malnutrition, low immunity and raising the risk of diseases affecting the population severely.
India recorded its hottest day in the city of Phalodi, Rajasthan, when the temperature reached 51 degree C and according to a research by MIT in the US, the temperature in India will further increase in coming years.
Coastal cities like Kolkata, Chennai, and Mumbai are also suspected to be affected by sea level rise. Rising sea-level and surges of storm would also impact agriculture, degrade groundwater quality, increasing the risk of contamination in water, and giving rise to diarrhoea and cholera.
With effects of climate change getting dangerous every year, countries like India need to boost efforts at reducing CO2 emissions now, which is an opportunity now through opting renewable energy transition (mainly solar). We, as a country, should understand that lowering our future CO2 emissions in comparison to industrial giant China’s past emission statistics (its 2015’s emission statistics) is not a win for us now and we need to rectify internal mechanics to support renewable energy growth. It is important to highlight that The Government of India introduced National Clean Energy Fund (NCEF) in 2010-11, as India’s carbon tax, levying duties on coal to fund cleaner energy projects and combat climate change. And in last 6-7 years, India has collected more than Rs 54,000 crore through clean energy cess by levying taxes on coal mined or imported. However, it is important to note that only half of the total collected cess (22,063 Crore) was transferred to NCEF from 2010-2017. From that amount, the investment towards projects were amount INR 17,469 crores from 2011 to 2017, and MNRE’s share from that amount was INR 12,429 Crore. On top of that, the Government of India using NCEF fund to compensate various state Governments for their loss in revenue due to GST, clearly contradicts with India’s green energy vision and initiatives.
India must utilize initiatives such as NCEF and incorporate other policies such as- carbon pricing, while supporting renewable energy growth through investment and encouragement. It is apparent that joining the fight against climate change is not a choice anymore it is a necessity. Although initiatives of the Government should be appreciated, we should not sit idly by the predictions of a marginal success. We need to focus at prioritizing the renewable energy industry and solving its critical issues through investment and policy intervention to create momentum and see our country solve not just energy issues, but create a better social and economic structure that works towards restoring the environment.
India saw the opportunity for growth in economic development through industrial capacity expansion and domestic manufacturing. Hon’ble Prime Minister, Shri Narendra Modi focused on manufacturing and brought forward a multi-pronged operation titled ‘Make in India’ to bring in new investments and encouragement for manufacturing growth, creating jobs, and socio-economic revolution within the country. And as expected, Make in India did attract investment, reducing knowledge curve and initiating technological growth within industrial setups. In such an environment, new and lucrative sectors like Solar, saw a bright future and possibilities for country wide improvements. But, the picture is not turning out to be that rosy.
Support & Expectations
Make in India was supposed to work on the same lines of tried and tested strategies that have helped many countries to transform into global suppliers by focusing on their manufacturing capacity expansion. The initiative was expected to create jobs, help develop long-term policies for R&D growth, faster deployments, and build capacity in manufacturing raw materials in a value chain, to satisfy domestic demand and ultimately capture the export market of progressive sectors like Solar.
To support Make in India to turn these expectations into reality, Government of India established Special Economic Zones (SEZs) and extended special benefits like- cheap water, electricity etc. The Government also offered special benefits to lucrative sectors like Solar, namely- exemption from excise duties, 10-year income tax holiday, exemption of sales tax in certain states, payment security mechanisms to cover the risk of default by state utilities/DISCOMs etc.
Additionally, Government also permitted 100% Foreign Direct Investment (FDI) under the automatic route for renewable energy generation.
As a result, India was able to excel in building a strong manufacturing set up in one of the fastest growing sectors like Solar. And with initiatives like Make in India running at full throttle, India stood a chance to surpass dominating solar countries like US and eventually China. However, the biggest challenges to make that happen is lack of support from Make in India.
The Current Reality
Making India a manufacturing hub can be the solution to all of the country’s woes. In fact, solar has already presented itself as a viable sector to invest in. The sector’s continuous leaps from 5 GW in 2015 to 10 GW in 2016 to ~25 GW in 2018 acts as a proof of its promising nature. And there are numerous examples where countries have become global suppliers in solar sector by focusing on manufacturing- like China. Although, Make in India could have helped India achieve a similar goal, India’s continuously growing dependency towards importing solar has removed that opportunity from equation. India spent $3.8 bn in FY 17-18 on solar module import, which has limited the progress in manufacturing capacity expansion, leading to a market scenario where foreign suppliers have claimed more than 80% share. In the same breath we need to highlight that China’s recent energy policy will lead to further fall in imported module prices, capturing demand of domestic manufacturing even more (currently Indian suppliers have less than 10% share in Indian solar market).
Additionally, continuous drop in solar tariff, cancelation of projects, and lack of green energy distribution to the grid is scaring away the investors, making it more challenging for Make in India to succeed.
On top of that, imposition of 25% safeguard duty on SEZ based solar manufacturing units in India stands to deal a damaging blow to country’s solar manufacturing industry, as India’s 40% of Solar panel Manufacturing Units and 60% of Solar Cells Manufacturing Units are currently located in SEZs. SEZs were built to support Indian manufacturing sector, and as the growth statistics, it has. And for continued growth, more support is needed not taxes, or duties.
It is, as it seems. But there is still time to turn things around. Make in India can still serve the purpose it was built for: economic and social growth through industrial development. However, intervention is needed in different strategic and operational layers.
- New policies are needed to address manufacturing issues regarding infrastructure, transport, taxation, power outages, labor laws, and taxation
- Low cost finances and longer tenure loans are needed to help solar project developers
- Investment in establishing R&D institutions is needed to support quality control and to reduce the knowledge curve
- Reducing import dependency
- Re-prioritizing solar and exempting it from duties, added taxes are also necessary
- Campaigns like National Skill Development Mission are already available, Government needs to invest in them and broaden their reach to create skilled workforce
- Extending the viability of industrial license, creating random inspection scheme, and reducing corporate tax rate by 25%-30% can aid in bringing foreign investment
As solar continues to gain global acceptance, this is the best time for India to focus on solar manufacturing, thus making power for all a reality while becoming a global supplier of solar components. Make in India is the perfect platform to launch this growth trajectory. However, much more focus on domestic manufacturing rather than importing is needed.
It is estimated that with focus on domestic manufacturing, India can overtake EU’s renewable expansion by 2022. And that would be just the beginning for India to become an energy reliant, economically strong, manufacturing hub of the world.
Curbing pollution and limiting global temperature rise is a necessity now. The Paris Agreement presented a platform from where initiatives for climate protection can be mutually taken by countries of the world.
However, consider these facts –
- Global energy supply through fossil fuels have reached from 6,100 million tonnes of oil equivalent (Mtoe) in 1977 to 13,700 Mtoe by 2014.
- Global energy related CO2 emissions are estimated to increase at an average of 1.0% from 2012 to 2040.
- From coal combustion alone, Asia’s CO2 emission is estimated to rise more than 2.2 billion metric tons in the future.
- Renewable energy (mainly solar) has reduced fossil fuel share by 22 per cent.
- 1 KW of green energy can reduce more than 3,000 pounds of CO2 annually.
We can come to a conclusion that green energy revolution is a necessity to stop climate degradation. And although it offers a reprieve from climate issues, countries working towards green energy transition is not enough to stop the spread of pollution from distorting the future of the world (dust and particulate matter (PM) may be reducing energy yield by 17-25 per cent annually in Northern parts of India and solar panels in Baghdad were seen to be producing less and less energy due to dust particles blocking the sunrays). We must take positive action towards reducing the pollution as well.
Carbon pricing or Pollution pricing can act as an efficient tool to reduce pollution, aiding green energy transition and climate restoration.
Carbon Pricing Or Pollution Pricing
Pricing pollution is quickly becoming one of the most important and promising methods of curbing pollution from the world. Business groups, investors- like The World Bank have made strides to encourage Governments and corporations to put a price on carbon to drive down emission, while speeding up green energy transition.
Why Supporting Pollution Pricing Is Necessary?
Price on carbon can shift the burden of the damage to environment and life through occurrences such as- health care costs from heat waves, damage to crops, damage to property and life due to droughts of flooding and sea level rise. By imposing tax on pollution production, these environmental issues can be reduced. The revenue generated from the taxation can be used to boost green energy transition, thus phasing out fossil fuels, which are the major contributors to pollution. This can serve as the most cost effective way of promoting climate protection and green energy generation. The carbon pricing can also support green energy market innovation through low-carbon drivers of economic growth.
Types Of Carbon Pricing
There are primarily two types of carbon pricing methods. Emissions trading systems (ETS) and Carbon Taxes.
Emissions trading systems (ETS)– are sometimes referred as cap-and-trade system, it imposes caps on the total amount of green house gas emissions and lowers the cap over time. Through this system, companies are extended emission permits. The purpose of ETS is to establish a market price for green house emission; and caps ensure that emitters keep to their emission levels, considering their pre-allocated carbon budget.
Carbon Tax– This system sets a price for carbon directly by establishing a tax rate on carbon content of fossil fuels or greenhouse gas emissions.
Depending on the economic and environmental standings, a country can select one of these components to restrict its carbon emissions. As it will promote green energy adoption, and climate betterment, carbon pricing will need additional policies for support.
- Some of examples of complementary policies include- setting fuel/energy efficiency standards for vehicles, buildings, heating and cooling systems.
- Offering tax breaks for energy efficiency improvements, auto feebates.
- Setting renewable portfolio standards and mandates for having a share of renewable energy within energy mix.
- Enforcing laws to stop de-forestation.
More than 40 countries like- The US, Germany, Chile, Brazil, and some of the EU countries have already implemented or in process of implementing these policies to support Carbon pricing.
Estimating that carbon pricing could reduce pollution by 80 to 90 million tonnes by 2022, US states like California have introduced state-wide policies in support of carbon pricing.
Climate awareness in Canada has seen nearly 97% of its residents to commit towards pricing carbon pollution. Provinces like Quebec and Ontario in Canada have implemented cap-and-trade systems- enforcing to get permits for carbon pollution, curbing the pollution rate.
India Walking Towards Success
To support solar energy growth in India, the country is also implementing supporting policies like carbon pricing. And as a result In 2017, 40 Indian companies out of 139 companies in Asia have put price on carbon.
Government of India’s initiative towards Perform-Achieve-Trade (PAT) policy for energy efficiency, and renewable energy certificate scheme have also supported carbon pricing. World Bank and the Government of India are working together to explore a domestic carbon market in micro, small, and medium enterprises.
Carbon pricing provides emitters financial incentive for choosing green energy solution as it will generate energy without levying taxes. And with the world, India is working towards restoring the climate by selecting green energy and initiatives that speed up transition from fossil fuel. However, considering the rapid growth of population and pollution, world wide efforts need to be increased to see expected results.
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