Why decarbonise? And how?

India needs to ask if it is necessary to undertake serious domestic action for decarbonisation, irrespective of pressures from rich countries. India and other major developing countries have been at the receiving end of pressure by rich industrialised countries for several years, urging them to reduce their greenhouse gas emissions. They argue that if these developing countries don't do so, irrespective of any emissions reductions by the rich countries, the world will be plunged into climate catastrophe (untrue); that without them on board, the US will not participate in emissions reductions (self-serving); and that global emissions reductions on the scale proposed by them will involve GDP loss of not more than 1-2 per cent (almost certainly much higher!). The arguments have to be seen in the context of India's per-capita emissions being just 1/20th of that of the US, and from 1/8th to 1/15th of other rich countries, with most developing countries also placed similarly. Over the next year-and-a-half of the climate change negotiations that are to be concluded in December 2009, one may expect the pressure to be greatly intensified, no matter which party assumes power in the US. However, we need to ask ourselves, is it necessary to undertake serious domestic action for decarbonisation, irrespective of these pressures? ‘Decarbonisation' refers to reduced use of fossil fuels — coal, oil, natural gas, that emit CO2, the principal greenhouse gas. India is said to have very large coal reserves, sufficient to last about 300 years at the current rate of use. However, extracting this coal often means construction of railway lines to remote areas, felling of dense natural forest, and, in case of open cast mining, reducing several hundred thousand hectares of forest or farm lands to wastelands and displacing poor rural folk. Underground coal mining, on the other hand, is one of the most hazardous occupations. Further, burning of coal results in large-scale air pollution and huge quantities of fly-ash. Significant natural gas has been discovered on land and undersea in India in the past decade. However, the scale is still too small to significantly displace coal. Import of gas over land routes is either politically risky, or nearly impossible because of the terrain (like in the Himalayas). Undersea pipelines may avoid these problems, but are believed to be still too costly. That leaves oil. The phenomenal rise in oil prices over the past six months, nearly doubling to $127 a barrel, is no happenstance. It is increasingly becoming clear that the much-anticipated ‘peak oil' phenomena is here, and to stay. ‘Peak oil', refers to the fact that roughly when one-half of the global oil reserves have been exploited, in a situation of increasing demand, oil prices would rise irreversibly. This is not a casual hypothesis. It is based on the well-known fact that for a given oilfield, initial production levels are low, but rise as investments are made on extraction facilities. However, in due course, when the easily accessible deposits are exhausted, further investments are necessary, leading to increased cost, but reduced output. Aggregate this pattern over the globe, and world production will necessarily peak long before the oil actually runs out. The above graphic tells the story. India's oil production peaked around 1997, the US in 1970, the rest of the world, except for Saudi Arabia, around 2003. Saudi Arabia and the other Middle-East producers may also have peaked; despite the price rise, OPEC has been unable to increase production. Clearly, in India's case energy security considerations are paramount, and provide strong justification for decarbonisation, irrespective of climate change. How does one actually accomplish the task? There are just three primary energy sources worldwide that can fully replace fossil fuels for all time to come. First, nuclear, using thorium (of which India has the world's second largest reserves). Second, biomass (not edible crops, but crop residues and fuelwood plantations). Currently, India's annual output of crop residues is equivalent to 530 million tonnes of coal! Finally, solar. Just 1 per cent of India's land area, at current conversion efficiencies, can produce enough power to meet India's needs till 2030. By way of comparison, 17.5 per cent of India's land area is wasteland. Unfortunately, nuclear power is bedevilled by plurilateral denial regimes for technology and fuel supply (enriched uranium, of which India has very little, to feed reactors that convert thorium into nuclear fuel). However, the story for solar and biomass is different. Technologies for solar power (PVs and thermal) are still too expensive in relation to coal based power — Rs 20 per unit against Rs 2-3. Technologies for conversion of cellulose in the biomass to liquid fuels — ethanol, but also other petroleum replacement fuels — are under development worldwide, but are still not competitive with oil at current prices. Clearly, the costs must come down, if deployment is to accelerate. These are mutually reinforcing processes. However, technologies for power production from biomass consumption are already cost effective. A stylised account of technology diffusion in market economies is as follows: As progress in basic science shows pathways for new technologies that are better than existing ones, innovators translate the science into numerous specific technologies based on the pathways. These compete in a market environment, itself shaped by policies, regulation, and infrastructure. Market acceptance prunes the competing technologies, and further development reduces costs. Deployment of the surviving technologies based on a few of the pathways accelerates; costs also reduce due to increased scale; and constant incremental R&D (and ‘tinkering') improves features, market acceptability, and further reduces costs. When the Model-T was introduced, steam, electric, gas engines based on wood burning, gasoline and diesel, all competed in the automobile market. Today, only gasoline and diesel survive, and are much improved, more efficient, and cheaper (in real terms) than at the turn of the last century. If nothing else, the operational requirements of the First World War ensured the demise of the others. The key to accelerating this process for any technology, in this case, solar- and biomass-based energy, is for policy and regulatory measures to crank-start the market. Several well-analysed suggestions are available, as well as international experience. Principally, they involve cross-subsidisation for a limited period by the conventional technologies (through, for example, feed-in tariffs on a sliding scale over time) and scaling up demand through regulatory mandates requiring energy suppliers to purchase a certain, and increasing percentage of conventional fuels. A trading regime for excesses over, and shortfalls from, the regulatory mandates would ensure cost-effectiveness. India's energy policies are a complex amalgam of political economy, fiscal, market, and energy security concerns. However, technological and economic change have a nasty habit of superseding old shibboleths. In a changing world, energy policy too, must change.