Renewable Energy: Can India Become Competitive While Pursuing Climate-Resilient Development? Difficult but possible

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The recently released report of the Intergovernmental Panel on Climate Change (IPCC) in February 2022 made it clear that the future lies in climate-resilient development, or nothing. In the wake of COP26, he suggested serious and urgent attention to adapting climate risk management and mitigation policies, so that the 1.5 degree temperature target is met. One would think that this means substantial investments in renewable energy, clean technology, infrastructure and related sectors, perhaps at the expense of others, and at the expense of competitiveness.

Given the abundance of traditional energy sources like coal and their reliance on related industries, some of our states like UP, MP and Odisha may not be naturally competitive in these areas. They may be losers in this race to attract investment. This can exacerbate inequality, unemployment and poverty, while simultaneously undermining their ability to generate income and their competitiveness. Moreover, job creation due to this change could also be concentrated in the more developed states of India, resulting in regional disparities and also loss of livelihoods. So the question is, can competitiveness, our jobs agenda and our climate-resilient investments go hand in hand?

The IPCC report also warns of the risks of mismatching in policy design and implementation. This can have negative consequences for society, especially for vulnerable groups. It suggests some favorable conditions to ensure optimal design and implementation of these policies. In a recently published article
white paper on Improving India’s Competitiveness for Inclusive Economic Growth, jointly organized by CUTS International, the Institute for Competitiveness and the Institute for Industrial Development Studies, we examine the conditions conducive to improving and maintaining India’s competitiveness and found substantial similarity with the conditions mentioned in the IPCC report. These are:

Investment in intangible assets: Competitiveness for inclusive growth is underlined by strengthening social and economic infrastructure in the areas of education and health. The IPCC report also stresses that the feasibility and effectiveness of climate change mitigation policies depend not only on the development of physical infrastructure but also of social infrastructure. This would strengthen the adaptive capacity of vulnerable groups through the diversification of their livelihoods and employment, as well as access to basic services and infrastructure. Thus, investment in health and education will be essential for building competitiveness and human capital, as well as for climate-resilient development.

Better convergence between policies and actors: For competitiveness, it is essential to ensure convergence between different policies and actors, both inside and outside government and at different levels. According to the IPCC report, if policies focus on isolated sectors, this would lead to poor adaptation. It emphasizes a multi-sectoral and multi-actor approach and inclusive planning, in order to minimize adaptation failures. This means that public sector companies, private actors, trade unions as well as civil society organizations should all be involved in policy design, as this would ensure that all stakeholder interests, especially the most vulnerable, such as local communities and the poorest, are taken into account.

Modernization and capacity building of public institutions: Building the capacity, strength and credibility of institutions is the backbone of an economy’s competitiveness. The IPCC report also recognizes that effective adaptation can be limited by institutional and technological capacities. He notes that effective implementation of adaptations through financial and technological resources is only possible when supported by institutions that can understand the requirements.

Cooperative Federalism: This principle is at the heart of all factors. In particular, the IPCC report repeatedly stresses the importance of coordinated action at all levels of governance. Our White Paper on Competitiveness also places sufficient emphasis on coordination between the three levels of governance and between services. This is particularly relevant in a country like India where existing economic inertia and disparities have a negative impact on competitiveness.

India is already on a clear political path towards climate-resilient development, as evidenced by its ambitious commitments at COP26. This would require infrastructure development, for which the government encourages foreign and domestic investment, through programs such as production-related incentives. The private sector is also making sufficient progress by investing heavily in renewable energy, electric mobility and non-fossil fuel sources, towards its own decarbonization goals. These investments will propel India’s competitive growth, create jobs and contribute to climate change mitigation.

However, such a transition for adaptations to climate change must be done in a fair, just and equitable way, taking into account the existing skills and the competitiveness of the different regions. Investments must serve both development and adaptation objectives. Only when climate-resilient development occurs with inclusive growth, and equity and justice are prioritized, can it lead to sustainable results.

India must seek to achieve the twin goals of economic growth and meeting its own climate goals, through carefully crafted and implemented policies to attract public and private sector investment. Given the extreme inequalities in India, policies to achieve these goals must prioritize sustainability (for future generations), inclusiveness (for vulnerable groups) and equity (to reduce economic disparities ). This can only happen when the fundamentals of a competitive and climate-resilient economy, as outlined above, are in place. India’s future as a competitive economy, contributing to global climate change goals with equitable domestic growth, lies in this integration.

The authors work for CUTS International, a global research and public policy advocacy group.

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