And in World News, India too is Roiled
Global and national events are infusing new urgency into climate and energy policies.
I said four months ago that this blog would go local when we plunged into the journey I’m now on in India. This post is an exception. Much has happened globally and on a national scale in India with energy and climate since I began my circuit around the subcontinent.
Those events are shaping what’s happening on the ground locally, to the point I thought it’s worth telescoping out and focusing on the big picture briefly again. It’s the only way to make sense of some of what I’m seeing almost no matter where I stop in India.
The first development is Russia’s invasion of Ukraine. Putin’s aggression has sent global commodity markets from food to fuel into gyrations, almost without exception in an upward direction. India is a long way from the battlefield, but it has been slammed by the fallout.
India’s current account deficit — a key measure of the foreign currency available to purchase the goods and services Indians need from abroad — has widened significantly as it spends more to import commodities like oil, coal, gas and fertilizer. The spike in oil prices has been especially problematic, likely widening the trade deficit for this one product to $100 billion in the year ending next March, according to one Indian bank’s analysis. That compares to $56 billion last year.
Meanwhile, the government’s budget is being strained by a doubling of the amount it must spend on subsidies for fertilizers alone — now looking like about $20 billion for the fiscal year. That’s double what it spent last year. The subsidies are needed to keep already struggling farmers from being hit by skyrocketing global prices.
The war in Ukraine has also threatened global food supplies, since both the perpetrator and victim countries in the war are huge suppliers of wheat. That actually looked like the one benefit the invasion would deliver for India, which is the world’s second largest producer of wheat after China.
Until…
The second big development since I arrived in India: a record-breaking heat wave. The soaring spring temperatures, especially across India’s northern breadbasket, scorched enough of what was expected to be a bumper wheat crop that India has wound up limiting exports to make sure it had enough for itself.
That was a huge disappointment for both India and the international community. India could really have used the money from those exports, given the other hits it’s taking from the war. For the rest of the world, fears over food shortages only grew.
Beyond the wheat crop damage, the heat wave sharply raised Indians’ awareness that climate change is already exacting huge costs, both economically and on their health. Headlines and evening talk shows highlighted the succession of new highs in April. The international press also took notice. I got in on the story with this article for The Atlantic.
Unlike many other climate impacts India is experiencing — recall or see posts, here, here and here, and look out for many more examples in posts to come — this one encompassed virtually the entire country at the same time. It made clearer that the nation may eventually face a never-ending crisis as South Asia is expected to be the region hardest hit by climate change. The wheat farmer I sat down with in India’s north and the mango grower I chatted with in the south (whose fruit suffered a sort of heat stroke on the tree) each recognized their common plight.
That doesn’t mean official India will now proceed straight to addressing the country’s growing climate challenges, of course. Indians have long been acutely aware they have the world’s most polluted cities, but little has been done to address that problem. Still, the heat wave embedded climate change into Indians’ consciousness in a way it wasn’t before. Hopefully it left at least a kernel of concern about India in the consciousness of the wider world, though follow up stories after the wave of international media attention have been few.
How are these developments reverberating through India and then back out again to the world? I mentioned the two obvious ways, the disappointing wheat crop that won’t be saving a hungry world and new awareness of the vulnerability of what soon will be the world’s most populous country. But that’s only the beginning.
On the energy front, India, like every nation, is scrambling to get its hands on any and all sources of energy it can at the moment. That’s meant suddenly buying 20-fold more oil from Russia at firesale prices. Still, the absolute amount remains small compared to Russia’s production, India’s overall consumption and what Europe itself continues to purchase from Russia (though that last of these is set to change).
The purchases aren’t rooted in devotion to, or dependence on, Russia — though there’s certainly a bit of the former and quite a bit of the latter. They’re driven more by the cost savings in an environment where every little bit helps. But the seeming support for Russia — or, at best, what one of the smartest India analysts around calls “studied neutrality” — has concerned some European leaders and the Biden administration.
India has also raced to find more coal, both domestically and abroad. It’s even started talking again about building more coal-fired electricity generation. This deeply concerns anyone worried about greenhouse gas emissions, a group that also includes European leaders and the Biden administration.
How much further will India push on these two fronts, risking the ire of European and U.S. leaders? It’s hard to say. I can envision two opposing scenarios.
The benign and hopeful scenario is that India’s purchases of Russia oil level off at around the current level — about half of what Europe will continue to import if its leaky embargo is implemented as planned. Even discounted oil isn’t worth the savings if it creates additional dependence on Russia by weakening India’s increasingly important trade and defense relationship with France and, most importantly, the U.S.
India is already uncomfortably reliant on Russian arms and weaponry, the wisdom of which its leadership must be questioning at this point given Russia’s military struggles and a growing international isolation pushing it closer than ever to Indian rival China.
Likewise, yes, Indian leaders may be committed — resigned? — to a coal-dominated energy mix for a very long time to come. Coal provides 70% of India’s electricity, which cannot be changed overnight or even in a decade. But they know very well that coal is not India’s energy future. It’s hugely polluting and at this point significantly more expensive than renewable energy like solar and even wind power. Indeed, India’s coal-fired generators have been operating at only a fraction of their full capacity in recent years as renewable energy has gone up and energy demand has flagged due to a slowing economy that was then slammed by covid.
The fact is, despite India’s devotion to coal, the government is eager to grow renewable energy as fast as possible. They’ve long said this doesn’t preclude the use of coal, since energy demand is expected to grow quickly in the coming decades. But they may find that after a surge in coal to beat the current energy crunch, renewables begin to grow swiftly enough to drop plans for future plants and seriously tackle how to begin shutting down the oldest existing ones.
This impulse would get a major boost if the government’s ambitious plans to jump-start a solar panel manufacturing industry work. In April, Prime Minister Narendra Modi’s administration introduced a 40% duty on imported panels in a bid to level the field with China’s far cheaper panels. It is also offering financial incentives to India-based manufacturers. Renewable energy developers such as Renew Power, Acme Solar and Greenko are all launching panel manufacturing operations.
Traditional fossil-fuel behemoths Reliance Industries and Adani Group — the first led by India’s second-richest man and the second by the richest — are also moving aggressively into panel manufacturing. I recently visited (and posted about) Reliance’s manufacturing base in the city of Jamnager. The ground was being leveled for the panel plant literally right next door to the world’s largest oil refinery (ironically also one of the largest buyers of Russian crude these days).
I also had a chance to tour a factory owned by Goldi Solar in the city of Surat, in western India, that assembles imported panels into the modules that go up in solar parks. The company is busily preparing the site for a new factory where the panels themselves will be manufactured. I’ll write up a post shortly with the full story on that.
There’s even a U.S. company, First Solar, planning to build a solar panel factory in southern India. First Solar — as well as the Indian manufacturers — have a golden opportunity not only to supply India with panels but also to export to the U.S. The Trump administration, keen to encourage a diversification of panel manufacturing away from China, exempted India from duties it imposed on Chinese-made panels, which they argued were being dumped overseas markets below manufacturing cost.
Before the Ukraine invasion sent fossil fuel prices soaring, some worried the costs these tariffs would add to developing new solar power could stifle growth. But analysts and several senior industry leaders I talked with argue that high fossil fuel prices will assure solar remains the first choice for new power generation. That will likely remain true even — or especially — when battery and other electricity storage means are added in, despite the further costs those entail.
That’s the optimistic scenario, and one I think is probably the most likely.
But there’s also a worrying counter-scenario that could overshadow, or even overwhelm, this course of events. I’ve posted about the underlying dynamics before, here. In short, tensions are growing between countries with developing economies such as India and wealthier, economically developed countries. Developing countries are acutely aware they bear little historic responsibility for global warming, and yet they are most exposed to its impacts. Developed countries, which produced most of the greenhouse gases in the atmosphere today, have the wherewithal to reduce emissions but are making woefully slow, if any, progress. To make matters worse, the developed countries promised a decade ago to begin providing at least $100 billion of annual funds for climate measures to the developing countries.
Developed countries have yet to come through. They will likely fail to come up with that $100 billion at this November’s United Nations global climate summit, either.
If the war in Ukraine festers or even escalates….if EU leaders and the Biden administration take India to task for refusing to condemn Putin and purchasing ever greater quantities of his oil… well, that’s a recipe for a trainwreck of a climate conference.
These climate conferences may have delivered precious little in terms of leading the climate fight over the decades, the landmark agreement in Paris being the standout exception.
But a collapse in global climate diplomacy at this critical time would be a huge setback. This is the danger.