Economy

India Must Rebuild Its Economy Keeping a Green Focus

As plans are drawn for an economic revival, the government must reorder our economic agenda to withstand the next shock coming our way: climate breakdown. 

India is one of the worst affected countries by climate change and thus, needs to make giant moves towards achieving a green and decarbonised economy. A Stanford University study published in Proceedings of the National Academy of Sciences highlights that India’s economy is already 31% smaller than it would have been without climate change.

And now as India prepares to revive its economy, there are critical questions that must be answered. Can India go on with the same carbonised, inefficient and unsustainable development model, or should it make a move towards a low-carbon, resilient, regenerative economy? For a country aiming for a $5 trillion economy, it will be prudent to inextricably link its policy and investment with dimensions of sustainable development – social, economic, and environmental. There are three areas were India must start to work on to achieve the needed climate proofing of economy.

Achieving green energy goals

In a business as usual scenario, a major part of India’s energy demand in future will be met by coal, unless India opts to decarbonise the sector. To start, India will have to take steps to perforate the current siloed approach to energy policy. India needs to develop a strong policy narrative to manage the emerging challenges of economic development and meeting energy demands with the goal of environmental protection. This should start with developing an integrated energy data centre, to be able to trace all energy related data, and available to all players for commercial, policy, and advocacy matters.

The next step will be achieving decarbonisation, demand management, and achieving energy efficiency. India has set an ambitious renewable energy expansion target of achieving 175 GW capacity by 2022. To achieve this, it has also created a “clean energy fund” which is currently funded through a cess on coal production, and managed by the Ministry of Finance. This fund could be further augmented through the issuance of “green bonds” to renewable energy investments.

Having an integrated policy on energy will also see a huge impetus on the manufacturing of energy equipment in India. Just for meeting its solar energy targets, India depends on China for about 80% of the components used. As a promising market of the global solar industry, India should capitalise on this opportunity to create an alternative destination for solar cell, module and inverter manufacturing. A recent move of Adani Green Energy winning the bid from Solar Energy Corporation of India (SECI) to develop 8 gigawatts (GW) of solar projects, and establish 2 GW of additional solar cell and module manufacturing capacity, might change matters a little, but more than that India needs more investments and incentives for the sector.

Photo: Reuters

An important highlight of COVID-19 era has been the reverse migration of migrant workers from the industrial towns to the villages. This leads us to the policy imperative of creating more jobs in villages: the major challenge – the energy trap. About 31 million homes still lack access to electricity in rural India. Decentralised renewable energy (DRE) solutions, such as solar lighting systems and micro-grids, present significant opportunities. And as DRE solutions are labour-intensive, apart from energy, they hold the promise of creating local employment and entrepreneurship opportunities through utility renewable markets and solar rooftops.

India’s infrastructure needs a green boost

The COVID-19 crisis has just reinforced the idea of the failing infrastructure in India. To add to this, almost half the country is exposed to severe climate-induced disasters. India desperately needs to buckle up its infrastructure, and while it does so, it can give it a green boost. The country should see an uptick in investments in creating robust, well-resourced and resilient infrastructure. This should see better urban designs, investing in green buildings and spaces, pushing the development cart to smaller cities, investing in upgrading connectivity, easing information symmetry, greening of SMEs and local economy, and efficient waste management systems.

To give a green boost to the ailing infrastructure, financing will play a huge role. Green Bonds (just like corporate bonds but for green projects) have emerged as an innovative way to fund green projects. These can reduce the cost of capital and, thereby, improve returns.

In 2007, for the first time, European Investment Bank raised €600 million under the label “Climate Awareness Bond” dedicated for renewable energy projects and energy-efficient projects. Since then green financing has caught the attention of the world. Leveraging debt capital markets towards sustainable transport infrastructure development is another way.

The Indian Railway Finance Corporation Ltd (IRFC) recently established a Green Bond Framework for fundraising, for financing the Dedicated Freight Corridor project and electrification of the railways. India can look into establishing an agency for green financing, to fund the green infrastructure projects of the country. With many large banks, development agencies now looking into green financing, this could open doors to both funds and technology.

Following the Railways’ lead, India can look into establishing an agency for green financing, to fund the green infrastructure projects of the country. Photo: joegoauk63/Flickr, CC BY 2.0

Making agriculture climate-resilient 

India’s agriculture sector, employing half of India’s total workforce, has been growing at a slow rate of growth. Climate change related events could worsen this situation. Climate Change has been proven to have reduced crop yields and caused about US$9-10 billion in damage per year to the industry.

Making India’s agricultural systems climate resilient will be essential for a long term economic revival, and sustainable development. Work on climate-smart agriculture (CSA) techniques to enhance productivity, adoption of tools and techniques like zero budget farming to ensure food security and reduce costs, investments in R&D, strengthening extension management on CSA practices, watershed management will make the agricultural economy more resilient to climate vulnerabilities.

The recovery plan must consider what is valuable in and for society. It should be able to fulfil the long term perspectives and objectives. A green focus and climate proofing of the economy as we work to revive it, will help in realising the dreams of not just different segments of society but also the future generations.

Aakash Mehrotra is a novelist, blogger, and a consultant in international development working in South Asia and Africa.