Economic Survey takes a pragmatic line for climate change policies 

Highlights

• Raw materials used in clean energy systems are concentrated in a select few countries outside India


• The availability of adequate and affordable finance remains a constraint


• Diversion of large scale funds to green energy can be a challenge for developing countries


• Despite the rapid scale-up of renewable energy capacities, India continues to depend on thermal power

The FY23 economic survey took a balanced approach about climate change policies. It narrated the steps being taken by India to combat greenhouse gases and transition to cleaner sources of energy. But to achieve the stated goals, the survey emphasised the need for renewed support from developed countries, especially in the areas of finance, technology transfer and capacity-building. Importantly the survey rightly highlighted the limitations and economic costs of the climate change policies.

Clean energy systems such as solar photovoltaic plants, wind farms, batteries and electric vehicles require greater amounts of critical and rare earth minerals, currently concentrated in a select few countries outside India. A rapid transition to green energy can exert greater demands on these resources, raising the risk of cost escalation and supply challenges. “A globally synchronised energy transition to non-fossil fuels might be difficult to pull off if adequate rare earth elements and critical minerals are not available,” warns the survey.

India lacks large scale capacities to manufacture solar modules, electric vehicle and utility scale storage batteries. Despite the recent government efforts to scale-up local manufacturing, India still depends on imports for solar module and battery components.

To build the required domestic capacities, India needs large amounts of money at affordable interest rates, another constraint. Till now the country has largely met its funding needs through domestic sources.

Neither can India afford to divert large amounts of money to the green energy transition. The country badly needs funds for infrastructure, education and healthcare. “Resources have competing use, and development strategies are not substitutable,” points out the survey.

The path to the green energy transition is therefore fraught with risks. Low-income countries like India are yet to adopt large scale energy storage systems. Solar and wind energy generation are prone to intermittency and generation risks.

The years 2021 and 2022 are a case in point. Despite a rapid scale-up of renewable energy capacities, most of the India’s electricity needs are met by thermal power. Moreover, as the country faced the risk of blackouts, the government diverted domestic coal to thermal power plants and pressed the high cost imported coal-based electricity plants into full production. Against the backdrop of recent experience, it is only prudent that India treads carefully on new energy investments.

“Countries might find themselves not scrapping coal-fired power plants, and the alternatives may be held up either due to a lack of technology, financial resources, skilled and trained human resources, or some combination of all three,” the survey adds.

To sum up, the warming planet warrants corrective actions by countries across the globe. While India has initiated several policy measures, to achieve rapid clean energy transition it needs substantial outside support.

(Please write in with your views to rimmalapudi.ram@nw18.com).