India’s path to carbon neutrality

The absence of a climate change law leaves pressing concerns for India’s achievement of emission reduction goals, write Priti Suri and Arya Tripathy

India is moving fast towards becoming the world’s most populous country, and is the third-largest greenhouse gas emitter after China and the US. To support its population of 1.39 billion people, India must make economic advancements in trillions of dollars. Consequently, balancing India’s development trajectory and its global commitment on carbon footprint is of crucial importance.

The carbon footprint is commonly understood as the total greenhouse gas emissions (GHG) caused by an individual, event, organisation or community. An increased Indian carbon footprint will have a cascading effect on its sustainable development goals and accentuate the existing climate change crisis. On the contrary, a carbon-neutral pattern that ensures zero net GHGs will augment international efforts for mitigating the risks of global warming and move towards sustainability.

A combination of long-term policies, binding norms and implementation strategies that aim towards sustainable development are fundamental if India is to strike the delicate balance between the need to grow its economy and preserve the environment for its future generations. Currently, there is no legislation that uniquely focuses on carbon footprint reduction and climate change, although a variety of environmental laws focus on pollution control, waste management and environment restoration.

Nonetheless, countering climate change is one of the key priorities for India. The judiciary has also shown active participation in ensuring sound environment governance. This article provides an overview of India’s global commitments to reduce its carbon footprint, select policy measures and judicial trends to propose a future course.

GLOBAL COMMITMENT

India signed the United Nations Framework Convention on Climate Change (UNFCC) on 1 November 1993 and has actively participated in its multilateral negotiations. On 2 November 2021, at the COP26 Summit in Glasgow, Prime Minister Narendra Modi presented India’s five goals to tackle GHG emissions, of which four have a timeline of 2030.

By 2030, India aims to: (1) build non-fossil energy capacity to 500GW; (2) meet 50% of energy requirements from renewable energy sources; (3) reduce total projected carbon emissions by 1 billion tonnes; and (4) reduce carbon intensity to less than 45%. The fifth goal is to achieve the net zero GHG target by 2070. Towards these, the prime minister emphasised the need for “lifestyle for environment” encompassing mindful and deliberate utilisation of resources, revolutionising diverse sectors, provision of climate finance from developed countries, and sharing of low-cost climate technologies.

The milestones set at COP26 are ambitious and require quid pro quo from developed countries. The UNFCC follows the equitable principle of “common but differentiated responsibility and respective capabilities”, which urges developed countries to provide financial assistance to developing countries for combating climate change.

India has maintained the narrative at each UNFCC climate talk, and the government believes that developing countries are unfairly positioned to bear the risks of climate change. Hence, developed countries should co-operate to share financial resources, transfer climate conducive technologies, and support capacity building to aid reduction of GHGs.

Aside from how international co-operation pans out, a great deal can be achieved with the implementation of national policies, incentives and taxes that aim to reduce GHG emissions and encourage alternative energy consumption patterns.

POLICY MEASURES

Some key policies that would aid India in achieving its lofty targets are below.

(1) The National Action Plan on Climate Change was launched on 30 June 2008 and contains the national strategy for implementing India’s commitments at the UNFCC. It proposes eight national missions to adapt and mitigate climate change impact, namely: (a) solar; (b) enhanced energy efficiency; (c) sustainable habitat; (d) water; (e) sustaining the Himalayan ecosystem; (f) green India; (g) sustainable agriculture; and (h) strategic knowledge for climate change.

These missions focus on India’s natural resources, the road map for their utilisation, the need to devise efficient and cost-effective technology, and require respective ministries to take implementation measures. Implementation of most of the missions is still underway except for the solar and enhanced energy efficiency missions.

Under the solar mission, the government has floated several schemes, such as solar parks and grid-connected solar rooftops, to incentivise increased generation of solar power. The sector has witnessed high-value acquisitions by energy companies, aggressive government steps to expand rooftop solar infrastructure, auction and award of public contracts for solar park development, and reduced customs duty on the import of solar modules.

The enhanced energy efficiency mission resulted in the passing of the Energy Conservation Act, 2001. The law established a dedicated regulatory body, the Bureau of Energy Efficiency (BEE), which is empowered to make regulations on a wide array of energy efficiency matters. However, the BEE has not made any regulations on energy efficient solutions as yet.

(2) The National Tariff Policy was issued by the Ministry of Power on 28 January 2016 under the Electricity Act, 2003, and one of the key objectives is to promote electricity generation from renewable sources. It recommends incentives for electricity projects that deploy clean development mechanisms (CDMs) and result in lower GHGs.

The CDM is a method for private parties to earn and trade carbon credits. It also contemplates determining renewable purchase obligations by fixing a minimum percentage that distributors must procure from renewable energy sources. Pursuant to this, the Delhi Electricity Regulatory Commission has notified the Renewable Purchase Obligation and Renewable Energy Certificate Framework Implementation Regulations, 2021, requiring distributors, captive users, open access consumers and other specified entities to fulfil their mandatory renewable energy purchase obligations on an annual basis.

Failure to comply may result in encashment of the bank guarantee or fixed-deposit receipt submitted by the obligated entities. Similar measures have been adopted in several states, but many still need to fully implement similar regulations.

(3) The National Electricity Plan is another policy under the Electricity Act, 2003, that was adopted in January 2018 and caters to electricity supply and demand management until fiscal year 2026-2027. As a major strategy for electricity accessibility, the plan sets a renewable energy capacity target at 175GW by 2022, which when achieved will result in reduced reliance on coal-based generation and a reduction in GHGs.

(4) The National Biofuels Policy was notified by the Ministry of Petroleum and Natural Gas on 4 June 2018, with the key objective of reducing import dependency on oil and gas by harnessing biofuels as a viable alternative. Despite the enabling policy, biofuel production and use remain low in India due to a lack of adequate infrastructure and incentives.

(5) The National Electricity Mobility Mission Plan was adopted by the Ministry of Heavy Industries & Public Enterprises on 18 March 2019 to set out the budget and road map for faster adoption, and the manufacture of electric vehicles in India. The target is to achieve 30% electric vehicles as transportation means by 2030, thus reducing fossil fuel consumption.

The above-mentioned policy measures are not legally binding and can be implemented when binding laws are formulated by central and state governments. Until such time, the policies only lay out an enabling framework that encourages voluntary action, but falls short of mandating GHG reduction obligations on citizens and corporates.

INCENTIVES AND TAXES

Coal continues to be the primary energy source in India and is heavily subsidised. However, the government is increasingly focused on providing direct subsidies, fiscal incentives, price regulation and support to renewable energy. For instance, under the enhanced energy efficiency mission, BEE launched a market-based “Perform, Achieve and Trade” scheme that sets out consumption limits for energy-intensive industries such as aluminium, cement, fertilisers and paper. Entities that reduce the consumption as per the laid targets are provided with an energy savings certificate. These certificates can be traded on power exchanges with entities that have not achieved their target, so that the net consumption impact is balanced.

In terms of government support, the National Clean Development Mechanism Authority enables Indian entities to obtain CDM credits. It approves emission reduction projects that allow the organisation to register with the UNFCC, and earn and trade certified emission reduction credits (each equivalent to 1 tonne of carbon dioxide).

These CDM credits can be then sold to industrialised countries for meeting their own emission reduction targets. Under this process, refrigerant gas manufacturer Gujarat Fluro-Chemicals became the first Indian company, and the third in the world, to receive approval under the Kyoto Protocol as early as 2005.

Apart from incentives, the government historically levied coal cess on production of coal, lignite and peat. With implementation of the Goods and Services Tax Act, 2017, coal cess was scrapped and now the government levies GST Compensation Cess at the rate of INR400 per tonne of coal and lignite sold. This money is utilised to finance clean energy alternatives. Nevertheless, there is need for additional emphasis to streamline the incentive schemes as there is lack of implementation consistency and awareness on the manner in which these can be availed.

JUDICIAL TRENDS

As there is no focused law on carbon footprint, the judiciary has stepped up and passed rulings on pertinent carbon footprint concerns. The right to a clean environment is recognised as a fundamental right under article 21 of the constitution, and courts have been guided by this core principle to impose exemplary fines, issue directives to state pollution control boards and state governments for climate change actions plans, mandate environmental clearance for polluting projects, and require reparations. Some instances:

(1) Hanuman Laxman Aroskar v Union of India. The Supreme Court (SC) permitted construction and operation of a greenfield airport at Mopa, Goa, requiring the concessionaire to adopt and implement a zero carbon programme as part of environmental clearance.

(2) MC Mehta v Union of India. The SC passed directives prohibiting sale and registration of vehicles conforming to older emission standards effective 1 April 2020.

(3) Hindustan Zinc Limited v Rajasthan Electricity Regulatory Commission. The SC upheld the Rajasthan government’s directions to captive power plants mandating minimum renewable energy procurements on an annual basis.

(4) Ratandeep Rangari v State of Maharashtra. The National Green Tribunal ordered central and state pollution control boards to ensure compliance with an environment ministry notification that prohibited the use of coal with more than 35% ash content at thermal power plants as an essential step to lower carbon footprint.

FUTURE COURSE

In order for India to achieve the global commitments, it is imperative that the country puts in place a dedicated climate change law, as well as exploring available options for funding climate change initiatives.

The majority of environmental laws focus on waste management and pollution control, and carbon footprint and its consequences remain largely a policy subject. There is no mechanism for environmental audits and, consequently, the degree of accountability is diluted.

Further, there is an absence of a carbon and emission trading mechanism in the country. In 2012, a private member bill, the Climate Change Bill, was introduced in the parliament that provided for GHG reduction targets, establishment of a National Committee on Climate Change, carbon budgeting and carbon trading schemes. However, the bill could not meet the requisite majority and was dropped.

The absence of a statute leaves the myriad concerns of climate change to executive decision-making, judicial intervention and industry practices. This results in a lack of consistency and deeply impacts the implementation steps. The void could keep India farther away from meeting the COP26 goals, and a meaningful action plan can be achieved only through a codified statute.

Any climate protection law that India enacts must embody a set of coherent and realistic norms. It must have a wider scope that factors in different environment quality indicators, available natural resources, energy budgeting, supply and demand analysis, provision for auditing, disaster management, manner of making restorations, and a well-structured accountability matrix.

India would also need additional funding avenues to implement carbon reduction steps. For instance, India’s first climate-focused fund, Green Growth Equity Fund, was approved by the UNFCC on March 2021 with the objective of investing in low-carbon and climate-resilient platforms.

The fund leverages investments internationally and is managed and mapped by sustainability goals. Similar funding vehicles are crucial for accelerating sustainable growth of the renewable energy sector. Global energy companies have shown increased participation in public-private partnership projects, equity and matching grant funds, and alternative investment mechanisms that invest in clean climate technologies and develop, finance, construct and operate renewable energy projects.

But there is also hesitancy due to higher capex, longer gestation periods, reluctance on the part of financial institutions to finance new developers and inherent risks in new technology. To boost funding, the government must look closer and evaluate the existing system of subsidies, taxation, foreign investment laws and the overall investment climate. It will also be important to engage dedicated environment fund managers, as well as develop new impact assessment frameworks that focus on the sustainability index and not merely a return on investment.

Regulatory and funding road maps thus become key strategies for India to achieve its carbon footprint global commitments. Until such time as there is clarity on the legal regime, increased awareness and ease of investments in climate friendly projects, a sound environment governance mechanism will be hard to achieve.

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