Two recent stories underscored the complexity of the task at hand. One, published in Bloomberg (biturl.top/mqy2Qr), highlighted the frictions, high costs and inconvenience faced by buyers and sellers of alternative energy, demonstrating the absurdity of forcibly trying to wean the world off fossil fuels.
The other, published by the International Monetary Fund (IMF) (biturl.top/3i6ram), illustrated that even as obstacles are faced in securing our clean energy supply channels, market forces are creating additional sources of significant energy demand, such as data centres for artificial intelligence (AI) and crypto mining, worsening the supply issues and undermining the net-zero goal.
The issues laid out demonstrate that the energy transition problem is two-fold. Securing and integrating green energy supplies are not as straightforward as one would expect. Secondly, even if the supplies are secured, this alone would not enable the world to progress towards net-zero.
If the demand is not calibrated by policymakers, the energy supply will forever be left to play catch-up with exponentially higher demand, thus indefinitely delaying the goal of attaining a net-zero world.
This is also responsible for the share of fossil fuels in global energy consumption having dropped a measly two percentage points in two decades—from 78.5% in 2004 to 76.5% in 2023 (biturl.top/emAVny).
The energy transition is easier said than done. Fossil fuels are integrated into every facet of our technologies and productive processes and are essential for many applications too long to be exhaustively listed. There will be no Lego toys without fossil fuels (tinyurl.com/dppyhbws).
Therefore, the focus must go beyond merely substituting traditional energy sources to incentivise the right energy sources that allow us to move to a low-carbon path without compromising our developmental goals.
In India, the recent budget announcements promoting nuclear energy, more efficient thermal power plants, rooftop solar installation in over 10 million households, and emission targets for the industrial sector reflect the government’s commitment to supply-side initiatives.
The budget also seeks to promote the creation of pumped storage units, thus facilitating higher levels of renewable energy integration by addressing the intermittency issue and reducing the critical mineral import dependence required for battery storage systems.
Second, while the world is focused on finding ways to green our energy consumption, they ignore the root of the problem i.e. overconsumption. Current measures focus on greening the means to sustain existing consumption levels while ignoring that behavioural shifts in consumption patterns, lifestyle choices and resource utilisation are necessary to reduce carbon emissions.
A case in point is the emerging global obsession with electric vehicles, which seek to replace gas-powered vehicles with alternatives that require nearly 10 times the minerals a conventional car needs.
Mining and processing these minerals only demands more energy to sustain an existing lifestyle. Along with the mad rush in the developed world to scale up energy-guzzling data centres, this epitomises misplaced priorities at worst and poor sequencing at best.
Policies adopted in the West have largely overlooked the potential of promoting individual-level actions and their impact on reducing overall emissions in the economy.
While India has yet to reach the levels of per-capita income and per-capita emissions witnessed in the developed world, awareness created early can be a powerful tool in the fight against climate change. The collective sum of individual actions can contribute greatly to the mitigation efforts.
Some actions include being mindful of how we consume energy (for instance, setting the air conditioner temperatures between 24 to 27 degrees Celsius), using public transportation more, integrating more plant-based foods in our diets, minimising water wastage, and keeping our local surroundings clean.
Since the transportation sector is a large consumer of fossil fuels, public transport systems must be a big part of the solution. Incentivising and subsidising private mobility runs counter to the goal of reducing fossil fuel dependence.
Investments made in making public transportation efficient, reliable, comfortable, accessible and safe will be far more rewarding. Comparative statistics show that over 80% of urban residents in developed countries live within 500meters of public transportation.
In comparison, over 50% of urban residents have convenient access to mass transit in Brazil and China (biturl.top/yArMna). In India, only 37% of urban residents have easy access to public transportation.
To emulate their success, India needs to develop integrated transport systems that connect buses, metro rails and other modes of transport. Ensuring effective mass transit infrastructure in urban areas is integral to reducing our energy intensity and achieving energy self-sufficiency.
Lastly, demand-side policies must also be complemented by measures that seek to curb excessive use of water (tinyurl.com/msm5tpp7) and energy, such as data centres for AI or crypto mining.
Regardless of whether these technologies are, on balance, public goods, their insatiable demand for water and energy warrants a tax on their resource usage to ensure accountability for the threat they pose to the energy-ecology-environment balance. Demand management produces tangible and positive externalities.
Thanks to a slew of energy efficiency standards, fuel consumption standards for vehicles, and energy consumption norms for industries, India has succeeded in creating annual energy savings of around 51 million tonnes of oil equivalent, amounting to 6.6% of the total primary energy supply of the country.
In conclusion, emulating the Western model that has contributed to the current global climate crisis is not a viable path. India can lead by example, crafting policies that focus on its developmental goals while simultaneously addressing both sides of the energy equation.
Continuing the strides made for securing supplies, the country must complement them with the Indian ethos-inspired demand management. Similarly, advanced nations must introspect and craft ways to rein-in their energy demand.
Not doing so could lead to unprecedented financial and resource demands while intensifying geopolitical vulnerabilities and stress, inevitably leading to conflicts.
V. Anantha Nageswaran & Akash Poojari are, respectively, chief economic advisor to the Government of India and consultant in the ministry of finance.
These are the authors’ personal views.
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