Leadership Coalition on Energy and Industry Transitions

We do not yet live in a dematerialized world. Development is still dependent on increasing inputs of materials and energy, to fuel the processes of industrialization and urbanization. As a still relatively poor country in per capita terms, India must supply its economy with ever greater quantities of affordable and reliable flows of energy and materials. How it does so will be crucial to determining both local environmental issues like air pollution or forest destruction, as well as global environmental issues like climate change.

With its very high population density, India is – at least in per capita terms - a structurally resource poor country. In 2017, India contributed only 0.9% of world crude oil production, and 0.8% of world natural gas production. India has only 0.3% of world proved oil reserves and 0.6% of world proved natural gas reserves. India imports large volumes of coking coal and scrap steel in order to supply its steel industry. Thus, for India resource and energy security are paramount concerns. In the face of these considerations, it is simply inconceivable that India could follow a resource intensive development pathway charted by the early industrializers like the United States or the United Kingdom.

Currently, India’s per capita greenhouse gas emissions are less than half the global average, and 8 times lower than those of the high emitting developed countries. However, because of its size, India is today the fourth largest emitter of energy related greenhouse gases, after China, the United States, and the European Union. Given its domestic interests, India has always tried to balance its focus on development with a focus on environmental protection and increasingly climate mitigation.

India’s energy intensity of GDP is lower than the G20 average. India’s precocious deployment of clean energy means that its energy sector is likely never to hit the levels of carbon intensity that were reached by China and the developed countries before it. Already, India has 86 GW of renewable energy generation capacity, and renewable electricity reached an 11% share in total generation in 2019. Coal’s share in total electricity generation peaked in 2015 and has declined by about 6 percentage points since then.

By 2030, the government is targeting about 450 GW of renewable energy generation capacity, a target that would imply coal’s share in electricity generation falling to around 50% by that date. This would be an unprecedented transition for a country of India’s low income per capita. India would have been one of the only major economies to have charted such a pathway at this stage in its development. Clearly, there are challenges with this objective. The power sector is financially stressed, and the grid integration of variable renewables is not easy. But with the cost of renewables falling so dramatically, there is no doubt that India’s power system will look quite different 20 years hence.

While it is right to celebrate India’s successes in laying the foundations of a lower carbon power sector, it is important to note that energy transition is not limited to just the power sector. To reduce emissions in line wit the 2 degrees goal, all sectors must contribute, including those where today the challenge appears more technically or economically challenging.

Today, the iron and steel sector is the largest energy consuming sector among India’s industry sector. The sector already emits about 242 million tons (Mt) of CO2 and this is projected to grow to 837 Mt by 2050. This represents almost 40% of India’s total CO2 emissions today from all sectors and all fuels. Clearly, this level of emissions increase would be incompatible with India’s role in global efforts to limit warming to 2 degrees. However, the iron and steel sector has traditionally been excluded from global mitigation efforts and national policies, because of policy-makers’ concerns about harming the international competitiveness of this important sector. However, as new and promising pilots of new technologies are underway, international interest in transition pathways are increasing. Testament to this is the industry coalition spearheaded by Sweden and India, which was unveiled at the UN Secretary General’s Climate Action Summit in September 2019. The Indian Minister of Petroleum and Natural Gas & Steel Shri Dharmendra Pradhan has asked the Steel industry in the country to work towards the mission of green steel, stating: “As a responsible nation, we are contributing towards mitigating climate change. We have set an ambitious plan of achieving 450GW capacity of renewable energy. I appeal to the industry to work towards achieving the mission of “Green Steel”. Industry must deploy technology, innovation to develop environment friendly processes.”

In the report that TERI is releasing at this session, TERI outlines what a pathway towards low carbon steel by 2050 would look like. Firstly, there is still considerable potential to lower emissions by promoting the highest standards of energy efficiency, and the development of a resource efficient economy. This would allow the most efficient use of resources and energy and contribute to stimulating the Indian economy. Secondly, transition technologies like HIsarna are currently being piloted in Europe. Being owned by TATA Steel, HIsarna could be applied in Indian steel, providing up to 40% emissions saving compared to the current dominant technologies. Finally, breakthrough steel manufacturing technologies are expected to be technically and commercially competitive by 2040 and could be deployed in India. This applies in particular to hydrogen-based steel manufacture, whose deployment in India could be part of the broader development of the hydrogen economy in India.

sUltimately, the topic for this plenary and the subject of the report to be released is the nexus between the energy transition and the industry transition. New energy technologies requires new industrial capabilities, and lowering the carbon footprint of industry will require both an industry and energy revolution.