A squeeze on climate goals

Rising commodity costs may derail energy transition targets. Policymakers must be alert

At the United Nations climate summit in Glasgow in November 2021, member countries reaffirmed the Paris Agreement’s goal of limiting the increase in the global average temperature to well below 2°C above preindustrial levels and pursuing efforts to limit it to 1.5 °C. The geopolitical context changed soon after the meeting, with Russia invading Ukraine in February. The war and a supply squeeze by energy-exporting countries pushed up international fossil fuel rates. According to a report in HT on Thursday, the surge in prices and stagnant domestic production of natural gas is compelling India to change its clean energy transition road map and revert to using domestic and imported coal. Before the spike in fuel prices, India planned to reduce its carbon footprint by 33-35% of its 2005 levels by 2030. At Glasgow, India committed to achieving net-zero carbon emissions by 2070. Reminding the world that adequate availability of energy at an affordable rate is one of the most important factors for economic growth, petroleum and natural gas minister Hardeep Puri told the World Economic Forum on Wednesday that the crude oil price of $110 a barrel was “not sustainable”, and it is fuelling inflation. Rising commodity prices have also increased the cost of producing solar PV modules, wind turbines, and biofuel. This, says an International Energy Agency report, could impact the profitability of the renewable energy industry and may have a longterm impact on the cost of clean energy transitions. For example, the recent surge in metal prices globally might not lead to the expected reduction in manufacturing costs of electrolysers, which could impact India’s green hydrogen goals. Additionally, an analysis by Climate Risks Horizons, a policy research organisation, shows that there has been a slippage of about 52 GW (solar and wind, as of April) in India’s goal of 175 GW of renewable energy by 2022. The additional renewable energy generation would have saved at least 4.4 million tonnes of coal, the biggest contributor to the climate crisis.

The challenging global commodities scenario has put India in a difficult position. But, as the recent heatwaves showed, the government must not shift its long-term focus on rethinking India’s energy mix, improving the health of the discoms, and investing in renewable energy. It must also keep pushing the western world to meet its climate finance and green technology commitments. Only a synergy of both approaches can help India weather these headwinds.