Low Carbon the Future of Indian Industry
May 2013 saw carbon dioxide crossing the 400 ppm mark in the Earth’s atmosphere and over the last decade we have witnessed a frequency increase in climate change induced natural disasters. The Indian economy, which is facing significant growth challenges and stiff competition from other developing economies like China need to take into consideration new growth dynamics in the wake of natural resource constraints and the externalities of polluting industrial practices which may deliver short term results, but threaten long term economic sustainability. Low carbon economic growth is pegged at the next industrial revolution and may holds the answers to India’s sustainable yet competitive economic growth conundrum.
The developing world and India in particular need to look beyond the current industrial practices which not only improve resource and fuel efficiency but also reduce carbon output. Low carbon growth as a concept includes enhancing energy efficiency in a company’s overall operations and services, along with using electricity, thereby reducing the overall carbon-footprint. It entails a range of activities that need to be undertaken to slow down the release of carbon into the atmosphere including:
- The reduction of emission by on account of increasing efficiency in current processes
- The absorption of carbon using traditional methodologies and artificial techniques to reduce the carbon level
- The support for carbon reducing activities including technology financing and carbon trading
Here it is essential to understand how Business as Usual (BaU) is different from Low Carbon (LC) growth trajectories. BaU refers to the changes that industry is making or will make on its own to reduce energy consumption. The driver for these changes is the increasing cost of energy and the industry adapting to better technology to reduce their cost and stay competitive. On the other hand for LC the push has to be from the policy side where the governments provide incentives and levies penalties on the industry to adopt the LC growth path. While the BaU assures some reduction in GHG emissions, LC mode has GHG emission reduction as its means for business growth.
India is at a unique juncture in its growth trajectory. While the immediate GDP growth rates have faltered to around 5-6% in the wake of the global economic crisis and the Indian political scenario, the long term prospect of the Indian economy remains promising. Backed by an ever increasing middle class and the relatively younger population, consumption and production both have a steep growth path in the Indian economy. The question is, what kind of production and consumption should India be planning for? Resource, energy and carbon efficiency need to be the leading strategies for the both the activities to ensure some sense of long term triple bottom line sustainability.
The Indian economy has a relatively low carbon footprint per capita. Though India is ranked among the top 5 emitters, due to the size of its economy and population, the per capita CO2 emissions from fuel combustion, at 1.7 tonnes in 2007, was a fraction of the global average of 4.4 tonnes. India’s energy sector contributed 58 per cent of emissions followed by industry with 22 per cent and 17 per cent by agriculture, according to the Ministry of Environment & Forests, Government of India. India’s relatively low carbon footprint on per capita basis can be attributed to several factors. A significant segment of citizens still lack access to electricity and modern commercial fuels, and the low energy consumption of the poor generally contributes to low per capita emissions. The share of industry and service sectors at the expense of agriculture has increased drastically over the years, and services now contribute more than 50% of GDP. As the service sector has lower carbon intensity than industry, the overall GHG emission on a per capita basis remains low.
India, being a developing country where industrial growth has to play a much bigger role in the economic development going forward. The industrial contribution to the economy has been increasing at the cost of agriculture, the Ministry of Environment & Forest says. Although industries like power, iron and steel, cement etc. are crucial for India’s economic growth, they are also the most carbon intensive industries. The next phase of industrial development has to take lessons on progressive climate change and emerging regulatory frameworks from countries such as the United Kingdom who have reduced their carbon intensity substantially over the last two decades.
The low carbon and climate friendly growth poses some very big challenges for industry to ponder over. Low carbon technologies offer a lot of promise but are not very easy to implement. Challenges lie in the scalability and financial feasibility of innovative low carbon technologies, keeping in mind the short term profitability motive of most corporations given the challenging global economic scenario. Nonetheless, low carbon goals are completely aligned to single bottom line objectives of profitability whereas low carbon eventually leads to operational cost efficiency. Therefore research and development in low carbon technology warrants significant investments, with long term horizons. At the same time it opens doors for a series of new opportunities.
Namita Vikas is president and chief sustainability officer of YES BANK Ltd. YES BANK is currently working on a knowledge paper with TERI BCSD on “Low Carbon Industrial Growth – Finance Sector Perspective” which explores the opportunities, gaps and best practices in some of the most energy intensive industries currently covered in the Perform, Achieve and Trade (PAT) scheme of the BEE.
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