Exploring a US Green Marshall Plan for India
NEW DELHI TOLD KERRY THAT INDIA WAS WILLING TO TAKE A DEEP GREEN PATH. MODI’S COMMITMENT TO RENEWABLES AND HIS CONCERN ABOUT THE CLIMATE CRISIS WERE SECOND TO NONE. BUT THE JOURNEY NEEDED TO BE MAPPED, DEMARCATED AND FUNDED TO THE HILT
President Joe Biden used this week’s climate summit to reassert America’s leadership of the world’s most important multilateral issue. He announced an emissions target for the United States (US) and climate funds for developing countries.
What the US wants to do with emerging economies could prove more decisive. Despite its unwieldy name, the India-US climate and clean energy agenda 2030 partnership, announced by Prime Minister (PM) Narendra Modi, bears watching. The US appetite on this front is enormous, the potential for India is almost as large, but the devil’s in the details, as US climate envoy John Kerry found on his earlier visit to India.
Kerry outlined his green vision for India in early March. Given India needs $600 billion to make a complete green transition, finance is the country’s biggest challenge. But, he said, a “small consortia” of countries and “major investment houses and asset managers” are ready to help India with “some of the finance and transition”. The consortium already includes Japan, France, Denmark and Norway. The United Kingdom may sign up soon. There is an echo of the Eisenhower administration’s Aid India group of 1958 but this time with a carbon agenda.
The initial US vision was burning bush stuff. Kerry told consortium members and Indian officials he could envisage paying for the closure of all of India’s coal-fired plants and mines. He didn’t stop there — perhaps New Delhi could be paid to drop its plans to use natural gas as a stepping stone fuel and go a deep forest green. The catch was he wanted India to announce a net-zero target. In other words, India would commit to contributing no more global carbon emissions in three or four decades.
New Delhi felt this was too fast and furious. India pumps out about 2.5 billion metric tonnes of black stuff, about
7% of the global total. To take this to zero even while growing its Gross Domestic Product was more mythology than public policy. Before and during his visit to New Delhi in April, the US envoy was told not to make it all about net-zero. He got the message and kept mum when he met PM Modi.
What New Delhi did tell Kerry was that India was more than willing to take a deep green path. Modi’s commitment to renewables and his concern about the climate crisis were second to none. But the journey needed to be mapped, demarcated and funded to the hilt. New Delhi was ready to seriously consider a “greenbacks for green energy” understanding. The new Modi-Biden clean energy partnership makes it public but also provides a testing period for both sides. Fixing a carbon peak year for India will be the likely first milestone.
New Delhi is pleased at pushing Kerry back, but it also needs to give serious thought at what is on offer here. The world is going on a climate downslope that will accelerate rapidly. India needs to lay out an aggressive carbon-reducing plan going beyond renewables and green hydrogen, one that brings in energy efficiency, electric mobility and more. This is about clean air, but also about guaranteeing the country’s economic future.
The European Union will impose carbon tariffs on imports sometime this year. The Biden administration plans to follow suit. Similar laws will be imposed on investors — effective financial penalties if your money is going into infrastructure or projects that are carbon-lax. Soon an Indian car-maker will not be able to raise capital or export its products if it’s not wholly viridescent. The cars have to be electrical or hydrogen, the factory powered by renewables, and subcontractors environmentally certified. As NITI Aayog’s Amitabh Kant has argued, “The world will increasingly pay a premium for carbon-free products.”
Then there are the coming technologies. Made in India will die a slow death if it is not among the best at batteries, electric vehicles, solar power widgets, smart grid equipment, biofuels and so on. The next Saudi Arabia will be the country that produces hydrogen better, cheaper and cleaner than anyone else. India gets this, but its weakness is evident in its recent National Hydrogen Mission, which has everything except money.
Which is why India should apply its mind to what amounts to a Green Marshall Plan. China is racing to grab the green future. PM Modi can be applauded for India’s solar accomplishments, even as he has spent six years struggling to shut down India’s ultra-dirty subcritical coal plants. Things will be much easier if the funding and knowhow for such moves is on tap, including for handouts and re-skilling to minimise the social costs. Trade, capital and technology will flow to the economies that are green and growing. If India sensibly leverages Kerry’s consortium and the new US partnership, the warp jump into the 21st century that it already wants to do will be smoother and cheaper. It could also become a partner to the US, Japan and others in all the relevant technologies. There is an obvious geopolitical undercurrent. India would automatically align with the standards and supply chains of the West rather than China. Then, Beijing has yet to come bearing green gifts. Even its Belt Road Initiative is wreathed with smoke and soot.
The US is ready, willing and presumably now a bit more realistic. Indians, as Kerry said in early March on climate, “are determined to lead and to be an important player here…and we want to work with them.”