Climate Commitment: Ratification of Paris agreement to give an impetus to low-carbon growth

Ratification of Paris agreement to give an impetus to low-carbon growth

Climate change and clean energy are the latest buzzwords. In a landmark development, the first global climate agreement, which seeks to reduce the global temperature rise, will come into effect in November 2016. This was achieved after the requisite number of countries, accounting for 55 per cent of the greenhouse gas emissions, endorsed the climate agreement reached at the Conference of Parties (COP21) summit held in Paris in December 2015. The required limit to bring the deal into effect was met after India and the European Union ratified the agreement in early October 2016. On November 4, 2016, that is 30 days after the required limit was met, the United Nations Framework Convention on Climate

Change Paris agreement will become legally binding on the over 75 countries that have deposited their instruments of ratification, acceptance, approval or accession to the United Nations so far.

This is a significant milestone and will have far-reaching ramifications for the power sector in the long term. The agreement can be viewed as a signal to global financial and energy markets, triggering a fundamental shift from investing in coal, oil and gas as primary sources of energy towards zero-carbon ones such as wind, solar and nuclear power.

On its part, India is committed to reducing its emission intensity (emissions per unit of GDP) by at least 33 per cent by 2030, as compared to the 2005 levels. Further, at least 40 per cent of the electricity generated will come from non-fossil fuel sources by 2030. This translates into a renewable energy capacity of 350 GW by 2030, which is almost double the 175 GW renewable energy target set by India for 2022, including 100 GW of solar. Besides the Jawaharlal Nehru National Solar Mission, an important initiative that will help India achieve its energy targets, particularly solar power capacity addition, is the International Solar Alliance (ISA), an idea mooted by Prime Minister Narendra Modi and announced at COP21. Another commitment by India is the creation of an additional carbon sink of about 2.5-3 billion tonnes by significantly increasing the forest area.

Piyush Goyal, minister of state (independent charge) for power, coal, new and renewable energy, and mines, states, “India will meet the targets that we have set for ourselves in the Intended Nationally Determined Commitments (INDCs). Internally, we are hoping and aspiring to do even better than our stated commitment to reduce our carbon intensity and meet the INDCs. We will do everything in our power to ensure sustainable and inclusive development of India.”

The next steps involve putting in place legal and procedural frameworks for achieving the intended emission reductions, which are far more aggressive than any previously considered targets. This will compel fossil fuel-based majors to reconsider their future strategies, while renewable and clean energy companies will also look at ways to take advantage of this huge business opportunity. Meanwhile, the Department of Atomic Energy is preparing a long-term plan to augment investments in the nuclear power sector.

The following are some of the highlights of the Paris agreement:

  • Long-term goals: The long-term objective is to ensure that global warming stays well below 2°C (3.6 degrees Fahrenheit) and the temperature rise is limited to 1.5°C (2.7 degrees Fahrenheit). After 2050, the agreement states, man-made emissions should be reduced to a level that can be absorbed by forests and oceans.
  • Emission targets: In order to reach the long-term goal, countries agreed to set national targets or INDCs for reducing greenhouse gas emissions every five years. More than 185 countries have already submitted their targets for the first cycle, which will begin in 2020. While developed countries are expected to slash their emissions in absolute terms, developing nations are encouraged to do so as their capabilities evolve over time.
  • Review of targets: The Paris agreement urges countries to review and enhance their pre-2020 emission reduction targets and acknowledge the significant gap between the current pledges and what is required for confining the temperature rise to 1.5°C. They are expected to submit their revised INDCs every five years starting 2020.
  • Transparency: While there are no penalties for countries that miss their emissions targets, the agreement has transparency rules to encourage them to stay true to their commitment.
  • Finance: The agreement states that developed countries should continue to offer financial support to developing countries to help them reduce their emissions and adapt to climate change. It also encourages other countries to lend support on a voluntary basis. In this regard, the developed nations have agreed to raise $100 billion every year starting 2020.

The implementation of the climate agreement is a long-drawn process, which includes a phased introduction of its provisions. For instance, the facilitative dialogue to take stock of the collective efforts of countries towards the long-term goal of the agreement will begin only in 2018. In 2020, countries must update their pledges on carbon emission reductions, to be updated every five years thereafter. In 2023, a global stocktaking on mitigation, adaptation and finance will be undertaken followed by the second stocktaking in 2028.

A major challenge relates to adequate availability of climate finance. Although developed countries are committed to providing funding, there is no clarity on the nature of this finance, its source, accounting and distribution, which is deeply contentious. India alone has sought $2.5 trillion in finance for achieving its INDCs by 2030, so a global commitment of $100 billion pales in comparison. Therefore, a greater push will be seen over the next few years for mobilising this finance through a variety of public and private channels.

The global power sector will need to be virtually decarbonised by the middle of the century in order to limit the rise in global mean temperatures to 2°C. The only way to do so is through a mix of technologies including renewables and nuclear. Most renewable energy sources are now mature technologies. However, after a decade of intense promotions, tax incentives and investments, wind, solar, geothermal and biomass together still account for only 2 per cent of the global energy mix. Together, they reduce only 0.1 billion metric tonnes of CO2 emissions each year. The barriers to the more rapid deployment of these technologies are more financial than technical, political or scientific. The International Energy Agency has projected that in order to meet the desired emission reduction goals, the share of wind and solar power in global electricity production will need to reach about 2,000 GW each by 2050, producing a combined 10 trillion kWh per year at a construction cost of about $20 trillion.

Nevertheless, the recent developments bring a lot of cheer to supporters of the climate framework and are a good starting point for the next round of talks at COP22 being held at Marrakech, Morocco in November 2016. India hopes to play a prominent role during the upcoming talks while protecting its interests and strongly presenting the viewpoint of developing nations. The key issues it plans to raise include enhancing the pre-2020 commitments and action, mobilising the means of implementation of technology transfer, capacity building and climate finance before and after 2020, and detailing the modalities for the market mechanism, transparency and other parameters under the Paris agreement. Another issue that India will push for is furthering the agenda on sustainable lifestyles and climate justice in light of the extravagant lifestyles of developed countries with a high carbon footprint. There is also a need for tools that can help meet the adaptation, financial risk management and funding requirements for dealing with extreme and slow-onset events.

Further, the ISA, an idea introduced by India, is likely to be ratified at Marrakech. Its key objective is to provide a common platform to solar-rich countries to make collaborative efforts through novel policies, projects, programmes, capacity building measures and financial instruments to increase the solar energy capacity. The ISA’s informal target is to achieve 1,000,000 MW of global solar power capacity by 2030 at an investment of $1 trillion across 121 countries. This is an ambitious target given that the current capacity is pegged at around 230,000 MW. India has committed Rs 1.75 billion to the ISA’s corpus fund and for meeting the expenditure for the first five years starting 2016-17. To this end, the Indian Renewable Energy Development Agency and the Solar Energy Corporation of India, both part of the Ministry of New and Renewable Energy, have each pledged $1 million. NTPC has also committed $1 million to the corpus fund, and Coal India Limited and NALCO are expected to make similar contributions. India has also set aside 5 acres of land in Gurgaon, next to the National Institute of Solar Energy, to build the ISA’s headquarters. Including the normative cost of the land for the secretariat, India’s support to the ISA will be worth Rs 4 billion.

Net, net, clean energy technologies are becoming more scalable and economical, which will allow more countries to expand their renewables deployment. Largely driven by central government initiatives, India is also pursuing the low-carbon-growth model through wide-scale deployment of clean technologies, among other things. The road ahead is going to be highly challenging given that thermal capacity accounts for a large part of the country’s power production and consumption. However, general awareness about climate change and its effects is also increasing, and businesses are realising the importance of addressing environmental concerns to stay viable in the long run. Going forward, India hopes to put forth the case of developing nations at the upcoming COP22 in Marrakech, in order to secure consistent global political and industry commitment to ensure continuity in its emission reduction efforts.