Sharing the pain at Glasgow

In the run up to the COP26 Summit in Glasgow on 31st October, enthusiasm bubbles over. This is as it should be. Preserving the world as we know it requires cutting back on the 34 giga tons (2018) of annual CO2 emissions, 37 percent of which is by the 16 percent of the global population in high-income economies.

To be sure, income inequality is near universal. Empowered elites, beneficiaries of the “dual economy” syndrome, particularly in developing economies, enjoy “rich world” lifestyles and cannot evade their responsibilities. Pervasive inequality is the rationale for “common” global responsibilities for reversing climate change. But the aspect of “differentiated” responsibilities is just as important, for two reasons. First, it supports differentiating between the higher institutional and fiscal capacity in the rich world to change patterns of fossil energy consumption via technology versus low capacity in the developing world. Second, it reflects “climate justice”, by urging those who have benefited from the near exhaustion of the carbon emissions envelope, to reverse emissions and grow the available emissions envelop.

The salience of “differentiated responsibilities” was visible in Kyoto, 1997. But by Paris 2015, it had morphed into a “free for all” in which we all agreed to go our own ways, with the relatively light, individual responsibility of diligently sharing publicly what we were doing to green our economies—a bit like how divorcing partners treat their past responsibilities.

Over the past six years, the United Nations (UN) system, green activists, concerned citizens, and select industry groups kept alive the need to take more substantive action—an imperative confirmed by the working group for the sixth IPCC Report.

Preparing for Glasgow—the 26th Conference of Parties—the UN advocates that all countries commit to reducing global emissions to 45 percent below 2010 level by 2030, to meet the requirements for limiting temperature rise to 1.5oC and to work towards net zero emissions by 2050.

Three issues confront India at Glasgow. First, should we announce a net zero target date and, if yes, what  should it be? Second, should we commit to a defined transition path to reach net zero? Third, and related to the second, should we announce a date for peaking of emissions— code for abandoning coal as our primary energy source and our most abundant domestic fossil energy source?

Quo Vadis Net Zero

China and Indonesia have set the pace for the developing world by committing to net zero by 2060. India should use this date as a marker for its own commitment. With less than one-third of China’s per capita emissions (2019), India is surely justified in looking beyond 2060.

There is a 20-year lag between Chinese economic growth and ours. India’s per capita GDP of US $1,961 (constant 2010 $) in 2020 was achieved by China in 2001. China’s spectacular double digit growth rates over lengthy periods are based on its unique “characteristics” that privilege economic growth over equity, human rights or rule of law, which runs against-the-grain for democracies, including India.

Our highest annual average growth over a period of two decades was at 6.5 percent (constant terms) during 1993-2012. This was after a liberalised, open economy architecture was inaugurated. It will take us till 2040, even at an accelerated growth rate of 8 percent per year, to get to China’s per capita GDP of US $8,405 (constant 2010) in 2020. Subsequently, applying the four-decade long transition period adopted by China, we could notionally target net zero by 2080.

Indian exceptionalism

The question can well be asked if Indonesia—a large, lower middle-income country with a population of 273 million and per capita CO2 emissions that is 19 percent higher than India in 2018—can target 2060 for net zero, why not India? Indonesia’s dependence on coal for electricity generation at 30 percent is similar to  28 percent for India and 20 percent for China.

However, there are three reasons why India is different. First, Indonesia’s per capita GDP (2010 constant) at US $4,312 in 2020, is more than twice of India’s and is nearly half of China’s. Development needs weigh less heavily on them than on India. Second, neither Indonesia nor China are solely reliant on coal as the primary, domestic fossil energy resource. Unlike India, both Indonesia and China have significant domestic reserves of oil—2.5X and 5.6X respectively on per capita basis versus India, and similarly of gas—at 4.7X and 6.1X respectively, of India.

Are well-meaning, long-terms targets, like net zero, useful?

Long-term planning horizons consistent with technological obsolescence rarely go beyond 20 years. In new renewables, obsolescence strikes even earlier, in five to ten years, as older capital assets become cost uncompetitive. India’s veteran climate activist, Sunita Narain of the Centre for Science and Environment, advocates a decision horizon of not more than 10 years, to focus attention at Glasgow on an implementable strategy to reduce emissions in the medium term and firm up short-term plans for green investment, supported by cheap finance for the long-term transition.

An equitable transition

How best can the common responsibility, defined in the sixth IPCC report as reducing CO2 emissions by 45 percent over 2010 levels by 2030, be shared differentially across countries? A good way to think of “responsibilities” is to group countries by income, which is a proxy for fiscal and technological capacity, to fix the problem. Per capita emission of CO2 is a good metric for measuring achievement of reduction targets—since emissions relate closely to Anthropocene (human) activity. Refer to Table 1 below.

Interestingly, low-income countries—with population share of 8 percent (2019) and per capita income of US $821 (Atlas Method)—reduced their share of CO2 emissions by 25 percent over 2010-2018 as larger countries exited this group. Over 1998-2018, their emissions increased by 7 percent.

High-income countries— with population share of 16 percent and per capita income of US $46,036—reduced emissions over 2010-2018 by 5 percent and over 1998-2018 by 2 percent.

Emissions grew in upper- and lower-middle income countries over both time periods but differentially—less in upper-middle and more in lower-middle economies. The counter factual lesson derived from this differential experience is that economic growth is good for reducing emissions possibly, because it enhances domestic capacity to access better technology and heightens citizen expectations.

This was the logic behind the unredeemed pledge at Paris to transfer US $100 billion per year to developing economies for abating climate impact. Higher conditional transfers directly help the recipients. But by enhancing the poor world’s domestic fiscal ability to mitigate climate impact, they reduce the mitigation burden on donors.

Table 1 shows why low- or lower-middle-income countries like India, are unable to contribute immediately to emissions reduction. The economic burden is growth retarding, even if distributed per their share in global GDP. Consequently, reduction targets would be double, or more, of the targeted 45 percent for the richest countries. An alternative is to agree a common cap on per capita emissions with differential target dates and disincentives, as a self-regulating, dynamic mechanism to invest in green growth.

India’s Intended Nationally Determined Contribution (INDC) to reduce energy intensity of the economy by 33 to 35 percent over 2005 levels by 2030 is derived from acceptable constraints for green, future growth. It should be tweaked to reflect the new base of 2010.

The coal conundrum

Limiting future COemissions in India—principally netting out the gross emissions from a quadrupling of GDP by 2040—will depend on substituting coal for meeting incremental electricity demand.

Till 2040, the options are natural gas or nuclear power. Both have varying security and cost-related consequence. Hydrogen, blended with natural gas, is an option post 2040, once Green H2 becomes commercially viable.

India is not alone in this conundrum. It ranks third after China and the US as users of coal for electricity generation. Indonesia is the tenth largest (See Table 2 below). On a per capita basis, coal generation capacity in China, United States, South Africa, and South Korea is more than 4X; Germany 3X; Japan 2X and Poland 5X of India. Coal continues to be widely used and not just in the poor world.

For India, given its dependence on coal for electricity generation, emissions will continue to increase at least till 2040-2050, after which a three-decade long trend of declining emissions can start ending with net zero emissions by 2080.

At Glasgow

An asymmetric schedule for reducing COemissions, makes for a fair transition strategy across income groups of economies. Recent technology in fuels (Green H2), carbon capture and storage, gigawatt scale battery storage to overcome the intermittency constraint in wind and solar power and supply ancillary services to the grid, metallurgical innovations to improve the efficiency of production, and use of commercial energy—all need open-source, collaborative, research and development across country silos and between financiers, buyers, and sellers.

For India, the Quad opens new venues to deepen climate-related technological networks. Glasgow should focus on agreeing on mechanisms for equitable, quantifiable, differentiated responsibility for reducing emissions, whilst promoting faster economic growth in the bottom five income deciles—technology and the scale effects of global supply chains are already doing the rest.

Extracted from the authors piece in October 11, 2021

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