Carbon Credits: India’s Ethical Environmental Trading and Global Climate Challenge

This article first appeared in Forbes India on 1st November 2023.

India’s Carbon Credit Trading Scheme is vital in mitigating climate change. However, carbon markets, challenges, and the ethical implications of trading emission permits must balance profit and morality in combating climate change.

The world is facing a critical threat with climate shift It is a monumental issue that endangers everyone, irrespective of their economic status or where they live, whether in a developed or developing nation. This threat is immediate and clear to us all. The urgent requirement is to lower greenhouse gas emissions, including carbon dioxide (CO2) and methane (CH4). However, achieving emission reductions is costly, typically requiring substantial projects.

Governments are employing carbon trading as a strategy to decrease their emissions. Market-based strategies for carbon mitigation have rapidly expanded since the 2015 Paris Agreement, with 73 national/sub-national jurisdictions encompassing 11.66 billion tonnes of CO2e emissions, equating to about 23% of worldwide greenhouse gas emissions. These solutions encompass carbon pricing and cap-and-trade systems, with prominent examples in the EU, UK, Sweden, and China. This market-driven approach is designed to create economic incentives for nations and companies to lessen their impact on the environment.

Nearly every action we take, from travelling and farming to simply watching a video, releases gases like CO2, contributing to the greenhouse effect and climate change. In the Indian context, our primary energy source is coal, which, when burned to generate power, releases significant amounts of CO2. The sole viable approach to curbing emissions in this context is to capture the CO2 emissions from thermal power plants and store them underground. These essential products, like carbon capture and sequestration, are crucial for moving toward a decarbonised economy and lifestyle. However, they come at a high cost. Shifting toward an economy with reduced carbon emissions requires a substantial financial investment. One pertinent question is who will shoulder this financial burden. One possible solution lies in carbon markets. These markets could play a role in addressing this issue by facilitating financial arrangements for emission reduction efforts.

Carbon Trading: A Market-Driven Solution

On June 28, 2023, the Ministry of Power, Government of India, officially introduced the Carbon Credit Trading Scheme 2023, also known as carbon offsets.  But what exactly are carbon credits, and what is the carbon market? Carbon credits, or carbon offsets, are units of measurement that represent the reduction or removal of greenhouse gas emissions, such as CO2, below a specific benchmark. You earn carbon credits when you engage in activities that decrease these emissions or actively remove greenhouse gases from the atmosphere. Each carbon credit is equivalent to one metric ton of CO2 or equivalent emissions that have been reduced or eliminated. Like company shares, these carbon credits can be traded in a market. Entities typically purchase them with a legal obligation to reduce their greenhouse gas emissions but cannot do so through other means. Organisations that voluntarily commit to emission reduction can also buy these credits. This interplay between the instrument known as a carbon credit and sellers and buyers creates a carbon market.

Carbon trading is not a recent concept, as it was initially introduced under the Kyoto Protocol 1997. It involved granting certified emission reduction certificates (CERs) to those who successfully reduced emissions or removed greenhouse gases, like CO2, from the atmosphere. These CERs could be traded in the market, and this system continued for several years. However, the prices of CERs eventually plummeted, leaving many Indian companies with substantial quantities of worthless CERs.

Today, there are numerous carbon markets worldwide, which broadly fall into two categories: the voluntary market and the compliance market.  In the voluntary market, buyers are not legally bound to reduce emissions but do so voluntarily to improve the environment, even if it involves a cost. Prominent global companies like Google, Microsoft, Apple, and Shell participate in the voluntary market. In 2020, the voluntary carbon market was estimated to be worth $2 billion, but experts suggest it could grow to $50 billion by 2030, depending on the market price of carbon credits.

On the other hand, the compliance market involves buyers who are legally obligated to reduce emissions. This market typically operates through a cap and trade mechanism. This mechanism sets emission baselines or allows a specific level of emissions. Entities bound by law must limit their emissions to the level set by the authority. If their emissions fall below this level, they receive carbon credits. However, if their emissions exceed the designated level, they can purchase carbon credits from entities that have successfully reduced their emissions. This cap-and-trade market is sometimes referred to as the allowance market, with the carbon credits in this market known as allowances.

The Birth of India’s Carbon Credit Trading Scheme

India lacks a formal carbon pricing system but applies implicit carbon taxes to coal and petroleum products. Introducing carbon pricing is perceived as a less disruptive approach to generating revenue, albeit one that necessitates careful consideration, including dealing with potential political complexities. India may need to adopt carbon pricing due to mounting global pressure and the potential impact of carbon-related trade barriers.

Now, let’s examine the notifications issued by the government of India in June 2023. It is a significant step towards establishing an Indian carbon market, where carbon credits are generated, sold, and purchased within India. This market will operate through the cap and trade mechanism. The Ministry of Power will identify the sectors and obligated entities, set emission intensity targets, and then pass this information to the Ministry of Environment, Forests, and Climate Change for notification.

The Ministry of Power will base its decisions on the Bureau of Energy Efficiency (BEE) recommendations. The BEE will be the administrator and the authority responsible for issuing carbon credits. The Central Electricity Regulatory Commission (CERC) will regulate the trading of carbon credits, while the POSOCO will maintain a central register of obligated entities and record all trading transactions. A National Steering Committee, composed of officials from the Ministries of Power and Environment, along with expert members, CEA, CERC, and other relevant entities, will assist the BEE in implementing the scheme. While this is a significant step towards an Indian carbon market, many details and processes, such as naming sectors, entities, emission targets, and verification procedures, still need to be worked out.

Challenges in Establishing a Vibrant Carbon Market

The commendable efforts of the Indian government to establish a carbon market come with a host of formidable challenges. First and foremost, the task of generating demand is a primary concern. In any market, the delicate balance between supply and demand is crucial. Given the government’s intention to impose emission reduction obligations on various sectors, such as cement, steel, and electricity, supply of carbon credits is expected to be substantial. However, the critical question remains: who will be the purchasers of these carbon credits? Without a harmonious alignment between supply and demand, there is a looming risk of plummeting carbon credit prices, potentially discouraging companies from pursuing emission reduction activities.

The second major challenge involves the establishment of emission limits, commonly known as baselines. Setting these baselines can become highly contentious, as different companies with varying technologies and raw materials may object to uniform emission limits. The government’s past experience with the PAT (Perform, Achieve, and Trade) scheme, primarily focusing on energy efficiency, offers insights into the dynamics and challenges of cap and trade mechanisms. Nevertheless, it’s essential to recognize that the carbon credit market is significantly larger and more complex.

Another challenge in this endeavor is the potential inclusion of a secondary market for carbon credits, which might lead to speculation by investors. While such a secondary market can add depth to the overall carbon market, it necessitates careful regulation to prevent adverse consequences. Additionally, the incorporation of derivatives in carbon credits, such as futures and options, presents another complex issue that requires meticulous consideration.

Lastly, ensuring a robust regulatory framework for carbon markets is a substantial challenge. Determining which regulatory authority will oversee the market, coordinate cap and trade mechanisms, and enforce compliance is pivotal to the success of the carbon credit trading scheme. These challenges collectively underscore the intricate nature of establishing a thriving carbon market in India.

Policy Challenges in Tradable Emission Permits: Balancing Profit and Morality

As we navigate the three key policy challenges mentioned earlier, a more profound question emerges: Can tradable emission permits combat air pollution effectively? Is pollution merely a business cost, or should we hold excessive polluters morally accountable? To address these dilemmas, we must consider not only economic aspects but also the environmental values we aim to preserve.

This perspective is akin to allowing individuals to pay for littering, raising significant concerns. Instead of weakening the moral condemnation tied to environmental degradation, we must focus on strengthening it. Allowing affluent companies and nations to purchase their way out of substantial reductions in energy consumption could have far-reaching consequences. Such a practice undermines the principle of shared sacrifice, crucial for global cooperation on environmental issues. When wealthy countries or companies can evade significant reductions in energy use by buying pollution rights or investing in emission reduction projects abroad, two vital principles are eroded: viewing nature as a resource to be exploited and diminishing the spirit of shared sacrifice needed to establish a global environmental ethic. Combatting global warming goes beyond designing incentives and securing international commitments; it hinges on shifting environmental norms and attitudes. Cultivating a new environmental ethic that promotes restraint and shared sacrifice may be essential, even if it means implementing a global market for pollution rights. Thus, it is the moment to bring ethics, sociology, economics, and the environment onto the same page for a sustainable future.

The Unseen Impact: How Climate Change, Smart Grids, and Data Consumption Shape Our World

The article is first appeared in ISB Blog on 9th Oct 2023

Is data really helping us to reach our environmental goals? Does question ring the bell? We all hear more means better! Let’s see.

Reimagining the Global Response to Climate Change Disasters

A typhoon hitting Japan, landslides in India, wildfires in the U.S., and storms in Germany – four distinct natural disasters spread across the globe. Despite their visual impact, these events often fail to evoke a strong response when featured in the news. We tend to quickly move on to more captivating stories, as these climate change-related incidents seem remote, happening to others far away and lacking a clear antagonist.

However, let’s reconsider this perspective. The truth is these events profoundly impact our lives in ways we may not fully grasp. They affect the food we consume, the money we possess, the treats we indulge in, and even the beverages we enjoy. Climate change-induced extreme weather exerts its influence on all these aspects and more.

UN COP conferences enable world leaders to commit to emission cuts, limiting global warming to 1.5°C by 2050. Alongside political implications, digital and IS technology aids in monitoring and addressing climate solutions. It’s both a part of the solution and seen as contributing to issues like e-waste and dark data. Responsible digitalisation is key. Technology is essential for net zero, requiring practical shifts toward a climate-friendly society.

The Smart Grid Revolution: From Traditional to Digital

Coming from the Electricity sector, I understand that this part of the energy is supported by one of the largest machines called “Grid”; also, 27% of the total of 51 billion tons of carbon emission is through this machine. Further, globally, we are making our grid a smart grid to make this grid more accessible, robust and resilient. The term smart grid means different things to different people. One of the simplest ways to think of the smart grid is as a computerised version of the traditional distribution grid, i.e. sensors in various locations on the grid to collect data without manual intervention. Now, the smart grid can be classified broadly into two distinct component types: distribution automation – involving the distribution grid as it extends from local community substations to customer premises and smart meters – the devices at the customer premises that measure electric usage.

In 2022, over 1 billion smart meters were in use, a tenfold rise from 2010. By the end of 2023, around 13 billion connected devices with automation and sensors are projected, a significant increase from a decade ago. Estimates suggest this could grow to over 25 billion by 2030. A similar trend is observed in power grids, with roughly 320 million distribution sensors globally. These devices generate valuable data: smart meters track consumption, while sensors provide real-time grid insights. effectively, this data predicts usage patterns, anticipates grid stress and enhances power system management.

The Data Dilemma: Balancing Energy Efficiency and Environmental Impact

To achieve this, data must be collected, stored, analysed, and shared while upholding privacy and cybersecurity. This poses significant challenges for power systems but offers substantial benefits. In the European Union, improved data sharing could unlock over 580 GW of flexible energy resources by 2050, covering more than 90% of grid flexibility needs. Data utilisation enhances energy efficiency, optimising heating and cooling, and fosters innovation for new power services and products. It expedites power restoration post-faults.

In reality, data access encounters obstacles. Complex interoperability layers hinder seamless use, missing chances to benefit power systems. Thus, global smart meter data utilisation remains below potential, with just 2% to 4% currently enhancing grid efficiency. Transmission System Operators admit to underusing data opportunities. A survey of 10 TSOs reveals control rooms do not fully utilizing analytics, even with digitalised grids. While data collection increases, much lies dormant or isolated, holding untapped potential.

In the middle of data’s dominance, the energy sector produces 200 exabytes annually. Yet, data centres, the unsung heroes managing this, consume alarming energy. In 2022, they used 220 terawatt hours, contributing 2.5% to 3.7% of global emissions, up 10% in two years. Unstructured data, 80-90% of generated content, grows 50% faster than structured data, posing challenges. Extracting insights to cut energy usage becomes complex, hindering progress and sustainability.

Hidden Carbon Footprint and Dark Data

Telecom operators consume 2% – 3% of global energy, ranking them highly energy-intensive. Rising energy use amplifies their carbon footprint, affecting the environment and their standing with socially conscious investors. The pandemic, surging digital demand, and the need for high-speed communication have escalated energy consumption. The ICT and telecom industry significantly influence CO2 emissions and waste due to an expected 60% annual growth in global data traffic. Telecom providers must manage network capacity and embrace eco-friendly practices for sustainable large-scale operations. According to an IBM report, 60% of all data loses its value almost immediately after it is collected.

Similar to single-use plastic, accumulating single-use data significantly impacts the environment. The internet is highly energy-intensive, powered by data centre centres (large server setups). As connections grow, energy consumption will rise. By 2025, IT might consume 20% of global electricity and emit up to 5.5% of carbon emissions, surpassing many countries. Dark data, unused and stored, adds to internet-related emissions.

Data’s Energy Intensity: Overlooked Environmental Concern

Climate activism targets fossil fuels, but the data’s energy intensity is often overlooked. Government policies can minimise data capture, prioritising immediate benefits. A case in point is India’s Revamped Distribution Sector Scheme (RDSS), investing INR 3.08 billion to enhance the weakest link in electricity—the distribution sector. Among its components, 250 million smart prepayment meters are commissioned, generating significant data. However, many service level agreements (SLAs) result in dark, unused data accumulation. Smart meter deployment should mark a key step towards a low-emission future. We must avoid inadvertently hindering net-zero goals.

Additionally, we need to acknowledge the environmental impacts of our digital footprint and encourage users to lessen them. A 2020 BBC report suggests tactics like less frequent device upgrades, reducing unused email subscriptions, and favouring SMS over internet messaging apps.

The geopolitical race for resources: Navigating the path to a successful energy transition

The article is first appeared in Forbes India on 4th July 2023

Examining the intersection of climate change, resource competition, and the energy transition, this opinion piece highlights challenges, consequences, and the need for sustainable innovation in achieving a successful transition

In the past decade, climate change has emerged as the most pressing issue humanity has faced thus far. In response to this challenge, the energy transition has gained widespread attention globally. However, the momentum was briefly disrupted due to the Covid-19 pandemic. Despite this setback, we successfully combated the pandemic and are ready to confront an even more significant challenge. Over the past year, the energy transition has experienced a considerable interest surge, as evidenced by Google Trends. It reached a popularity score of 100 in November 2022, coinciding with the United Nations Climate Change Conference, also known as COP27 or the Conference of the Parties of the UNFCCC.

Energy transition exhibits higher search interest in developing nations, with decreased popularity observed as we move towards more affluent regions. The energy transition has historically involved shifting from less economically viable and efficient energy sources, such as wood/biomass, to more efficient and financially favourable alternatives like coal, oil, gas, and nuclear power. Commercial incentives primarily motivated these earlier transitions, which fostered economic growth and improved energy accessibility for a wider population.

However, the current energy transition differs significantly as it is primarily driven by the urgent need to achieve climate targets, address environmental challenges, and decarbonise the global energy system. According to International Renewable Energy Agency (IRENA), renewables have been the dominant source of capacity additions in the global power mix in recent years. In 2020, adding new renewable capacity accounted for 82 percent of the total installed capacity, marking an increase from 73 percent in 2019 globally.

Unearthing the Environmental Challenges of Energy Transition

The energy transition necessitates the utilisation of non-fossil fuel sources such as solar and wind power. The construction of technologies like solar panels, windmills, and batteries is essential to harness energy from these sources. However, the production of these technologies requires extensive mining of non-renewable materials, surpassing the scale of current mining operations for coal or other minerals. In essence, our path to sustainable growth involves significant environmental excavation. Acknowledging that mining can have severe consequences for local ecosystems and populations is essential. The crucial question pertains to the extent and locations of the required mining activities and their implications for climate security and geopolitics.

History demonstrates that power dynamics also transform when the dominant energy source changes. Countries that can leverage energy transformation to their advantage gain economic and political superiority, positioning themselves at the forefront of the global order. Consider the United Kingdom’s dominance through coal or how oil propelled the United States to become a global superpower. This illustrates that access to and control over energy resources directly translates into the ability to shape geopolitical power dynamics. We face the challenge of implementing human history’s most significant energy transition while racing against a ticking climate clock. A new power generation is emerging, with critical materials at its core, enabling decarbonisation and digitalisation.

What is the current situation regarding these materials? On the demand side, we are witnessing the initial stages of an exponential growth curve. If we consider lithium as an example, a vital component for batteries, global production has already surged by nearly 300 percent from 2010 to 2020. Isn’t this positive news? It signifies that the process of decarbonisation is underway. The downside to our envisioned “clean” future is that it will require significantly larger materials than before. To exemplify this, the International Energy Agency (IEA) conducted a study revealing that, at the present level of innovation, an electric car necessitates six times more mineral resources than a traditional car. And this is merely the beginning, according to the World Bank. To meet the clean energy technologies demand by 2050, the expected global production of minerals like graphite and cobalt will increase by 500 percent.

Geopolitical Shifts: Energy Transition’s Resource Race Unveiled

Now, let’s shift our focus to the supply side. The entities currently involved in mining and processing minerals and the location of future deposits to meet rising demand provide insights into how the energy transition will reshape geopolitics. For instance, countries such as Chile and Australia dominate lithium extraction, the Democratic Republic of Congo is a major player in cobalt extraction, Indonesia and the Philippines hold significant control over nickel extraction, and China is the dominant force in rare earth minerals extraction. Moreover, China also has a strong position in processing these minerals. Consequently, the global balance of power is undergoing a significant restructuring due to this natural progression of the energy transition.

China is actively pursuing access to additional mineral resources through its Belt and Road initiative. On the other hand, the US and EU are considering reshoring critical mining and processing activities and redirecting their international partnerships to ensure access to a more excellent supply of minerals. Japan is exploring its oceanic marine reserves to establish strategic accounts. While Russia’s invasion of Ukraine may seem unrelated to the developments above, it is worth noting that Ukraine possesses significant mineral wealth. Additionally, Ukraine was one of the two countries that had partnered with the European Union to diversify and develop supply chains for critical raw materials, specifically to support the EU’s decarbonisation efforts and foster closer political and economic integration with Ukraine. Eight months after the partnership was established, the invasion occurred. While mineral resources may not entirely explain the conflict, they cannot be disregarded when analysing the events. The race for critical raw materials is leading to a new competition for resources, with major players focusing on countries abundant in mineral deposits.

Interestingly, many of these countries are primarily in Africa, Latin America, Central Asia, and Indo-Pacific. The International Institute for Sustainable Development (IISD) has created a map that depicts the geographic distribution and deposit sizes of the various materials required for decarbonisation. Notably, a significant number of these deposits are situated in countries that exhibit relatively high levels of corruption, according to corruption indices.

The Nexus of Climate Vulnerability and Resource Exploitation

The Notre Dame Institute has published another map highlighting the correlation between countries vulnerable to climate change and those rich in natural resources. Additionally, many crucial ecosystems that must be safeguarded and restored to stabilise the global climate, reboot the hydrological cycle, and protect biodiversity are in the same fragile countries mentioned in the IISD map. These countries also happen to possess vast mineral deposits. Disrupting or destroying these ecosystems through mining, deforestation, or other activities would undermine ecological integrity. This raises an important question: Does the fight against climate change inadvertently lead us down a more dangerous path for the environment and humanity? Our modern economies have progressed and expanded over the past two centuries with a glaring blind spot, namely the exploitation of fossil fuels and the unintended consequences that ensued.

The critical lesson is that we must consider the potential unintended consequences before shifting to alternative energy sources, technologies, and materials. The stakes are incredibly high, as they encompass our future and extend to encompass our humanity and nature. Decarbonisation is unquestionably the path we must pursue. There is no doubt about that. However, this path also requires us to envision a future beyond decarbonisation. A climate-safe lot is necessary for peace, but achieving such a future necessitates peace among us and the environment. To establish peace, we must bring about significant changes in international politics and how we conduct business and economics.

Redefining Innovation: A Sustainable Energy Transition Perspective

Science can provide crucial information on where it is environmentally safe to conduct mining activities and where it is not. In areas deemed unsafe for mining, we should act as if those minerals do not exist and establish protected areas where no mining licenses can be granted. Where mining does occur, we can integrate socioeconomic and ecological regeneration into business models.

If decarbonisation is essential for human survival in the global public good regime, then the materials required for decarbonisation should be collectively managed under a worldwide public good administration. The alternative is conflict and the breakdown of our planet. While we work towards designing this regime, countries at the centre of the resource competition should receive competent and coherent support to address the common challenges of geopolitical competition and climate disruptions. Investing in conflict resolution, fighting corruption, and fostering context-specific resilience should be top priorities during the global energy transition.

Merely switching from one energy system to another is insufficient. Instead, we need to reduce our energy and material demands. This begins with significant public and private investments in circular economic models prioritising recyclability and material substitution. Additionally, developing ecological assessments for supply chains that consider greenhouse gas emissions, as well as water, soil, biodiversity, and overall material and energy footprints, is crucial.

Shifting our perspective on innovation is essential. Innovation in our era revolves around bringing our economic activities within the boundaries of our planet. Anything that aligns differently from this goal, even if it seems innovative, is business as usual. So, a successful energy transition entails a regime that can engulf everything under social, political, economic and, most importantly, environmental security.

Are Solar Panels and Wind Turbines the Answer to Climate Change?

The article is first appeared in ISB Blogs on 22nd May 2023

In the past, the world was beautiful, but humans took it for granted and caused damage by burning fossil fuels, cutting trees, and polluting. This led to changes like melting ice caps and rising sea levels, and animals suffering. In order to control the damage, some people realised their mistakes and started to recycle, conserve water, use renewable sources of energy, and clean up pollution. With time, the world started to heal, and animals began to thrive again. Now, people live in a beautiful world once more.

Are we following the story we want? We all want to solve climate change, but the current narrative of relying on technical solutions like solar panels and electric cars may not be the solution. Developing nations like India are rapidly adopting solar panels without considering the challenges faced by early adopters like Germany and USA. Solar rooftop electricity costs twice as much as solar farm electricity, and both require a significant amount of land and the latter requires long transmission lines to evacuate power, which can negatively impact wildlife and local communities. We are also working on technical solutions, with the significant challenge being the intermittent nature of solar and wind power. Proposed solutions included converting hydroelectric dams into massive batteries by pumping water uphill during peak generation times to be used later for electricity when needed.

Renewable Energy Challenges and the Nuclear Solution

Initially, wildlife concerns about renewable energy didn’t seem significant compared to other issues, such as house cats killing billions of birds each year. However, as time went by, these problems persisted and worsened. Due to geographic limitations and conversion expense, California, committed to renewable energy, has yet to convert many hydroelectric dams into batteries. Water scarcity and climate change also make it challenging to use water for energy storage rather than irrigation.

California has stopped solar farms from sending excess electricity to cities due to reliability concerns, and they pay neighbouring states to take it instead. Wind turbines threaten large bird species, unlike cats which mainly kill common birds. Building solar farms requires clearing wildlife habitats, leading to the relocation and deaths of desert tortoises, as seen with Ivanpah. Renewable energy has natural limitations and challenges with integrating unreliable power onto the grid, resulting in economic costs. Despite the decreasing cost of solar panels and wind turbines, California and Germany have seen significant price increases in electricity. In contrast, France, which relies on nuclear power, pays almost half as much for electricity as Germany while generating twice as much clean energy.

Nuclear power is much more reliable than renewable sources, generating power 24/7 for about 90% of the year. A global comparison of nuclear and solar power deployment over the last 40 years reveals that investing in nuclear energy could have provided Germany with 100% clean energy and transportation for the exact cost as renewables.

The Safety and Environmental Benefits of Nuclear Power

The safety and waste disposal concerns of nuclear energy are reasonable but scientific studies over 40 years have consistently found nuclear power to be the safest energy source. According to the WHO, about seven million people die annually from air pollution, which nuclear plants don’t emit, thus saving almost two million lives to date, according to climate scientist James Hansen.

What about the environmental impact of nuclear power? Uranium fuel is incredibly energy dense, with a small amount being able to power your entire life. Compared to a solar farm like Ivanpah, California’s last nuclear plant Diablo Canyon generates the same amount of electricity but takes up 450 times less land. Solar panels require 17 times more materials than nuclear plants, including all the fuel used. Nuclear waste is safely contained and internalised, with all the waste from the Swiss nuclear programme fitting into a single room. In contrast, other methods of generating electricity emit waste into the natural environment as pollution or material waste.

The Dilemma of Renewable Energy: Environmental Concerns and Beliefs

Solar panels are often considered environmentally friendly, but there is no plan for disposal at the end of their 20–25-years lifespan. Experts fear they will be shipped to poor countries, where they will be disassembled, exposing people to toxic elements like Lead and Cadmium. This raises the question of whether efforts to save the climate harm the environment. Historically, humans have moved towards more energy-dense fuels like coal, oil, natural gas, and uranium. This has allowed for improvements like forest regrowth and decreased air pollution. Poor countries are still transitioning away from wood and dung as their primary energy sources, a positive change.

Nuclear energy is clean and energy-dense but unpopular due to historical reasons. While all types of clean energy are believed to address climate change, reducing nuclear energy may be necessary to scale up solar and wind, like in France. However, nuclear plants are challenging to ramp up and down compared to natural gas, which can handle the variability of solar and wind. The shift to renewables like solar and wind in areas with primarily nuclear and hydro grids could increase carbon emissions. Oil and gas companies have invested in promoting solar and wind due to their understanding of these challenges. International events like the California natural gas leak and Germany’s coal mining project affecting Hambacher Forest show the challenges of phasing out nuclear energy for solar and wind. Despite this, there are positive developments, like the citizen’s jury in South Korea voting in favour of expanding nuclear energy and voters in Arizona rejecting a proposal to replace nuclear energy with natural gas and solar. Even the Netherlands announced an increase in reliance on nuclear energy due to the inability of solar and wind to meet climate targets alone.

As climate change became a pressing issue, many embraced idealistic solutions like using renewable energy to live harmoniously with nature. But with new information, we’re starting to question our beliefs. The dilemma is whether we’ll continue letting renewables harm the planet, knowing they can’t save it.

Hidden impact of semiconductor manufacturing on climate change

First appeared in Times of India on 22nd February 2023

Semiconductor manufacturing contributes to 31% of global greenhouse gas emissions, and the increasing usage of electronic chips drives this upward trend. The production of smart meters and other electronics requires a substantial amount of electricity and fossil fuels. Improving product quality and longevity is crucial to combat the negative impact of product manufacturing on the environment. 

A very promising Annual Union Budget 2023-24 of India continues to focus on infrastructure development. The capital outlay for infrastructure was announced at more than US$ 100 billion, which is ~ 3.3% of GDP. Out of which, it is pledged to invest US$4.3 billion in green technology to clean up the country’s economy. This massive investment calls for huge government and also market procurements across sectors. 

Global efforts to address climate change: A multidimensional approach

From the Kyoto protocol in 1992 until the recent CoP-27 conference in Sharm el-Sheikh, Egypt in November 2022, over 2,860 laws and policies related to climate change have been implemented by 193 countries and the European Union. These policies include 2,203 measures to reduce emissions, 1,338 provisions for adapting to climate change, and 424 aimed at reducing catastrophic risks. According to the Climate Change Laws of the World (CCLW) database, policymakers’ policies related to electricity, forestry, food security, land use, transportation, and energy have received the most attention. It appears that addressing climate change requires a multi-dimensional approach that covers both the supply and demand aspects of decarbonisation to tackle this global crisis effectively.

Backed up by global affluence, our headcount is projected to touch 10 billion by 2060. This entails doubling raw material consumption across economies. Though UN “Sustainable Development Goal (SDG) 12.2” targets efficient use of resources, there is a little conscious realisation of the energy and material consumption that takes place while manufacturing the products. Reports indicate that manufacturing contributes to 31% of global greenhouse gas emissions (~50 billion tons per year). This is more than electricity generation, contributing to 27% of the total emission. There is a continuous increment in the contribution to emissions through manufacturing. Contrary, the demand for steel, the primary metal in our society, is decreasing by 2% annually. Transport on the road and by air is becoming much more efficient. Aircraft nowadays are 70% more efficient than those in 1958.

The increasing role of semiconductors in rising global emissions

Then the question is – then, what is that increasing the emission? The answer is; semiconductors. Electronic chip usage is rising by 35% annually. Given how quickly technology is developing and how many people are getting added to the global population, this proportion will continue to rise. Digital gadgets use substantially more energy (7%) than is consumed globally (3%) by all devices combined. According to a life cycle analysis by Micro Commercial Components Corp. (MCC), fabricating semiconductor circuits on a 150-mm wafer uses 285 kWh of power or 1.6 kWh per square centimetre. In addition to electricity, fossil fuels used for semiconductor production include heavy oil, gas, LPG, and kerosene.

To understand the impact, let’s take the example from the policy initiative of the Government of India (GoI) for rolling out 250 million smart meters across the country. This injects another set of the semiconductor chip into the electrical circuit. Additionally, smart metres bring a variety of components, including back-end servers and communication infrastructure, both of which are semiconductor by-products. For ease of calculation, consider only one circuit of 150mm wafer per smart meter, which would require 285kWh of power to manufacture, which further comes out to be 71.250 GWh (285x 250 x 106 kWh) of electricity for 250 million such pieces. The energy cost of manufacturing electronics, polymers, dyes, etc., has not yet been determined.

Improving product quality and longevity for sustainable development

This calls for strategies to lessen the adverse effects of product manufacturing on the environment while preserving economic development and quality of life. To achieve this, we might improve the quality and increase the lifespan of the things we use. Along with benefiting the environment, higher-quality products also positively impact the economy. 

A study conducted at the National Institute for Environmental Studies of Japan analysed the extension of car lifetimes and its impact on the economy and the environment. The study found that extending car lifetimes by one year and shifting household consumption patterns from waste-intensive cars to waste-intensive services resulted in GDP growth of around 2 billion yen. This growth compensated for the economic loss from a decline, and the transition from a manufacturing product-intensive society to a service-intensive society led to a reduction in waste landfill volume of 200 thousand tonnes, which included residuals from car shredders, over the five-year study period from 1990 to 1995.

It’s time for economies and governments to focus on designing and implementing policies and regulations to improve the quality and longevity of the products used by individuals and institutions, especially government institutions, with tendencies of repeated expenditure. We must enforce product lifetime warranties to protect our environment and the public exchequer from these kinds of often occurring expenses. 

This will not only enforce quality and reliability in all the products but the money saved from repeated expenses can be spent on decarbonisation targets for the nation and contribution to the entire global issue of climate change.

Financial time bomb: The risks of climate inaction to the global economy

First appeared in Forbes India on 14th Feb 2023

The world is facing a financial time bomb due to economic risks from climate change. Climate change is causing billions in losses globally and affecting the economy. Transitioning to a low-carbon economy is necessary to reduce emissions, but difficult for financial institutions. An abrupt market sell-off could trigger a financial crisis.

For the last 300 years, fossil fuels have been the first love of economic development; they symbolise prosperity and happiness. Historically energy transition is to move from a less economical and efficient form of energy to a more efficient and more economical form, i.e., wood/biomass to coal and then to oil, and finally, the emergence of renewable energy sources such as solar, wind and green hydrogen. Earlier transitions were more because of commercial incentives, which bolstered economic growth and allowed greater energy access to the broader population. Nevertheless, this energy transition is different and is driven by the need to meet climate targets, the challenge of environmental change, and the market to decarbonise the global energy system.

Economic risks of climate change

Climate change is putting our weather system on steroids, and extreme weather events are everyday occurring. Hurricane “Ian” in the US resulted in the loss of US$ 100 billion and 101 lives; severe heatwaves in Europe during June and July last year brought the worst draughts in the previous 500 years; wildfires in Spain and Portugal were again a consequence of climate change event when both countries experienced driest climate in last 1200 years. Even India, according to Climate Change Performance Index (CCPI), released at COP 27 in November 2022, is amongst the top 5 best-performing countries in Climate Change, faced the wrath of nature through different events across the country on 241 of 273 days from January 2022 to October 2022, as per the report by the Centre for Science and Environment (CSE), a public interest research and advocacy organisation.

The CSE report mentions these events cost “2,755 lives, affected 1.8 million hectares of crop area, destroyed over 416,667 houses and killed close to 70,000 livestock.” It looks like we are living in a new normal, which includes more extreme events and disaster risks.

On July 27, 2022, the Reserve Bank of India (RBI) published a discussion paper on climate change and sustainable finance. It was different for several reasons; one, the tone and tenor of the document were quite away from the traditional style of the RBI; second, without mincing words, the central bank said that climate change is for real and is an economic risk; third, it mentions without mitigation, not just Indian industry, but the entire financial sector is vulnerable. So, in the future, it recommends that banks begin reflecting climate risk on their balance sheets and lending propositions, which will have clear implications for the Indian industry and its credit. Therefore, climate inaction has made us sit on a financial time bomb.

Physical consequences, such as severe weather conditions and the carbon transition resulting from shifting to a less carbon-dependent economy, are the two primary causes. Physical vulnerabilities are increasing in frequency and severity. These threats impacted the economy’s financial stability as they directly affected property, industry and agriculture. In 2019, climate catastrophes cost the world’s economy US$146 billion. Insurers covered a total of US$60 billion of it. According to Swiss Re, one of the biggest insurance firms, extreme weather occurrences are becoming more frequent and severe. This indicates that many sectors are preparing for future losses that will be considerably more serious. Moreover, these losses are not merely data or news headlines but have bearing on tens of millions of people.

Is climate change triggering the financial time bomb?

So, how might climate change lead to a financial disaster? Let’s take the potential consequences of catastrophic incidents like the sinking of Joshimath, Uttrakhand, as an example. In the event of such an incident in a populous location, not only would the property be destroyed, but there will be loss of human lives, nature, and livestock. According to reports, in 2021, natural disasters caused a loss of US$ 280 Bn, and approximately 60% of this total was uninsured. This implies that mortgage and commercial lenders like banks will never get repaid by uninsured homeowners or businesses. An increase in such incidents will result in bad loans, which may push banks to go for higher interest rates or extend fewer loans. Potential homebuyers and companies will find it difficult to obtain financing, and it won’t be long until the economy grids. The Global Financial Crisis (2007-2008) was brought on by banks realising that assets backed by real estate had almost lost all their value. Hence, the global economy shrank due to the subsequent credit crunch.

Transition to a Low-Carbon Economy

To safeguard ourselves against increasing natural calamities, we must transition from a high to a low-carbon economy. During fluctuating financial markets, businesses with a high carbon intensity lose value. This transition may be challenging for financial institutions if it is sudden. To achieve carbon neutrality, more nations are pledging to cut their CO2 emissions and use carbon-capturing technologies to bring in the necessary checks. However, many firms will need to alter their processes and operations to move towards carbon neutrality. For instance, most oil companies have yet to change strategies to incorporate more renewable energy sources in their operations. More renewables in the energy system will entail less consumption of oil and hence a decline in the company’s worth and, finally, less appeal to investors. This may lead to a market sell-off if businesses in an industry stay the same for a low-carbon future.

Financial markets may experience a shock if this occurs with more planning. There could have a ripple effect due to the interconnection of the global financial system, and industries that have already invested in green finance, like sovereign green bonds etc., will also lose. The financial markets worldwide are so intertwined that; a tsunami in Japan or wildfires in California might affect your stock investments or a worker’s retirement plans somewhere in Europe. A carbon tax is one factor that may influence investors’ positions in the market. These taxes, which would charge businesses based on their emissions, are now being debated in numerous nations. Governments expect that having these businesses pay more would encourage them to reduce their pollution to firms whose output is overly dependent on coal, gas, and oil. The banks that have lent money to these businesses may need stability.

How to reduce the risks posed by climate change?

The most fundamental step is to design, develop and implement the policies and investments to facilitate the transition to a new climate economy which is low carbon and climate resilient. Additionally, we need a focused approach to our financial systems because they are crucial for the operation of our economies. For instance, the European Union is putting the European Green Deal into practice by working on several initiatives. In an effort to revitalise the Indian economy and generate employment, the government of India recently unveiled sovereign green bonds and a significant US$4.3 billion investment in green technologies. These policies can help to revitalise economic growth while carving the path towards net zero. 

Investing in a low-carbon society may also have broader economic advantages. According to IMF, the world economy may profit from a 5% of GDP green investment, together with progressively rising carbon taxes and attention to those impacted by the transition; this can boost growth by 0.7% annually over the next 15 years.

Climate change is the biggest issue for society, and we may be the last generation who have the opportunity to overcome this challenge. This brings the greatest opportunities of our lifetimes too. We can generate avenues of growth and employment by investing in climate resilience and innovative technologies. Climate change has both a human and environmental toll and a substantial financial cost and could lead to the world’s next big financial crisis. It’s a financial timebomb in the making if not curbed on time.

Green Bonds – A leap towards energy transition

Yes, 2023 is shaping up to be a significant year for India with energy transition and green economy as the centre of discussion. Also, as the G-20 presidency, the country will have a key role in shaping global economic discourse and promoting growth and sustainable development.

The budget 2022-23 pledged to invest $4.3 billion in green technology to clean up the country’s economy and create jobs. Though, decision on utilisation this money for green initiatives is yet to be taken and government guidelines are awaited but the intentions are very clear.

In this endeavour, Green Bonds, which were announced during last budget, Ministry for Finance and Corporate Affairs has approved the final Sovereign green bonds framework* for India during the month of December 2022. This is a step closer towards India’s commitment under “Panchamrit”, which was elucidated by the Prime Minister during COP 26 at Glasgow in November 2021. Even though we have narrowly missed the target of 175 GW capacity by 15 GW, (till May 2022 country’s installed renewable capacity was ~160 GW), Sovereign Green Bonds will further strengthen India’s commitment towards its nationally determined contribution.

Climate change has direct threat to the existence of life on the planet and in last one century we are straining and exploiting natural resources in the name of economic and financial growth. Therefore, it’s critical to connect environmental projects with capital markets and investors and channel capital towards sustainable development – and Green Bonds are a way to make that connection.

Over the last few years, Green Bonds have emerged as an important financial instrument to deal with the threats of climate change and related challenges. Worldwide if we look at the trajectory of green bond framework, first it started with companies, when first issue was made in 2007 by European Investment Bank. Since then there were many countries, organisations and institutions who joined this bandwagon and have issued bonds with cumulative value of $US 1 Trillion. 

In India, Yes Bank was the first institution who issued Masala Green Bond in 2015 in the wake of increasing global demand of green bonds. Masala bonds are not typical Green Bond but off-shore issuance which are local currency dominated. Here, Yes Bank issued green bond to International Finance Corporation (IFC), the private sector wing of the World Bank. IFC on behalf of Yes Bank issued these Bonds in the London Stock Exchange. Since then many companies like Adani Renewables, Aditya Birla Group (ABG) and financial institutions are looking forward to issue Green Bonds.

Let’s see what are green bonds and how do they work and why its gaining so much of popularity across – So, there’s a whole new bond market within the bond market. Bonds as we know them work like this: An issuer, most often a company or a government, raises money by offering bonds to investors. They’re basically IOUs, an exchange for getting money up front, when you sell the bond, you pay the bond holder back over a certain amount of time with interest. Issuers use these bonds to raise money to invest in their business, employees, infrastructure, anything you name it. But green bonds are different. The fundamental differences that it’s about what it’s financing, first and foremost. Money raised from these are earmarked for projects that are positive for the environment. The one key difference is that the issuer makes a non-binding voluntary commitment to earmark the proceeds and use them for specific environmentally-friendly projects. So, it could be renewable energy, energy efficient buildings, clean transportation, clean water, but from a structure standpoint, they tend to be the same as the traditional bonds that issuer would bring to market, minus the green commitment.

Government of India is looking forward to raise some part of their regular market borrowing through Green Bonds. Last month, Reserve Bank of India (RBI) announced that it will, for the first-time, issue Sovereign Green Bonds worth Rs 16,000 crore, in two tranches of Rs 8,000 crore each in the current financial year. The RBI said it will issue 5-year and 10-year green bonds of Rs 4,000 crore each.

On 25th Jan, during maiden issuance, they got oversubscribed owing to robust demand. For the 10-year green bond – New GOI SGrB 2028 – the RBI received 170 competitive bids worth Rs 19,367 crore – nearly five times the notified amount of Rs 4,000 crore. Of this, the RBI accepted 57 bids worth Rs 3,948.646 crore. For the 5-year green bond, 96 competitive bids worth Rs 13,525 crore were received.  

Though experts are pointing out that India is little late on the scene as we were waiting for some sort of proof of concept but I think it’s a timey move by GoI. In 2021, sustainable bonds market topped US$ 650 billion which is 8% – 10 % of the total bonds issued worldwide. Access to financing is getting easier in addition to various Governments, globally, some big household names are getting into this space like by March 2021, Apple spending from “green bonds” hits US$ 2.8 billion; Pepsi issued US$ 1 billion in green bonds to fund its sustainability initiatives. In February 2021, Goldman Sachs enters green bonds market with US$ 800 million deal. 

The market here is bigger than just green bonds. According to Moody’s, by end of 2021 $490 billion of green, social and sustainability bonds combined were issued and issuance is growing. Sustainable bonds break out into three categories: Green, social, and sustainability. Social bonds would be used primarily for social purposes. It could be affordable housing, or micro finance. And the sustainability bond category here basically means a bond meets both green and social standards of issuance. The biggest slice of the pie goes to green bonds. So it’s a huge diverse mix. Banks, corporates and governments. Anyone issuing or the ability to issue a bond is issuing, especially when they have the eligible assets to do so. Most issuances so far have been considered investment grade. That means independent rating agencies say those issuers are most likely to repay their debts. The other side of the bond market is riskier, often called high yield bonds or even junk bonds. The buyers are the big pensions, the big asset managers.

The market is evolving to include sustainability-linked loans or bonds. The interest rate is typically tied to the achievement of some sort of sustainability target, the coupon could step up by 25 basis points, for example, if a targets not hit some point into the life of the bond. It’s almost as they’re setting themselves up that they could have a financial penalty, should they not achieve their goals. So, there’s only been about US$15 to US$ 20 billion of sustainability-linked bonds to date, but the vast majority of that has been in the last six months or so. So, a lot of growth potential there, just still very early stages to kind of size the market. And we’ll also see a rise in different labelled products like blue bonds or gender bonds Blue bonds have been issued as a way to look at marine projects or ocean or water projects. Under these bonds there are some gender bonds, last year in U.S. a bank issued social bond they called a racial equity bond.

Though the market is very big but accountability and regulatory aspects are at very nascent stage. Globally, when it comes to accountability, to date, it’s been largely, sort of a best practice, document-driven market. But at this point, it’s been a regulatory light market for the most part. The green bond principles, which are sort of a best practice document that was put out by the International Capital Market Association. For a green labelled bond, if the issuer is complying with the principles, the green bond principles, then there’s certain parameters, certain guidelines they have to follow. There’s four core requirements that these bonds must meet, but it’s a non-binding voluntary commitment. First is use of proceeds. It’s basically the legal document that details how the money raised will be used for green projects. And to determine what’s green, there’s what’s called a taxonomy. The taxonomy’s main objective is to help set the course on what is green. Think of it as a dictionary or catalogue of what we mean by green. The other core components include process for project valuation and selection, management of proceeds, and reporting. They’re all interconnected. And essentially, it advises issuers to keep up-to-date information on how the money is being used and the project’s environmental impact. How are you going to manage the proceeds during the time of the bond, you’re going to use a tracking system or you’re going to ring-fence it, the proceeds? And of course, how will you report on those is really the fundamentals on what the green bond principles is trying to lay out. All of this can be subject to second party opinions, external reviews, and even verifications and certifications. It’s not one of the four key principles, but it’s like it’s essentially a fifth and many issuers are doing it. And then they’ll oftentimes will bring an external reviewer in to provide an opinion on the credentials of the offering and whether it aligns with either the green bond principles. And that’s what investors actually rely on. They rely on that verification that second party opinion, or certification of the green bond. Think of those stamps we generally see on coffee or paper towels, even ice cream, that are meant to signify to buyers that whatever they’re buying is ethical or sustainable. When we pick up a product in the supermarket, and we make a decision on whether we buy the same product, but of a different brand, if one has been, you know, stamped by WWF or Rainforest Alliance, we have a tendency to go, “I trust that label.” It is a marketing component that comes with an assurance behind it that you can buy this product and know that the due diligence has been done. But issuers don’t have to do this, for instance in US, if the issuer decides to use all the money raised for something else, there’s no regulation in place to punish them.

In India, the framework for Sovereign Green Bonds comprises of Green Finance Working committee under the chairmanship of Chief Economic Advisor with some environmental specialists from NITI Ayog, representatives from Ministry of Environment, representatives from Ministry of Renewable Energy and so on. Additionally, there is an accountability mechanism which is being put across to keep check on the investors and its spending. More details are in the framework released last year.

The project and spending will be reviewed by an independent agency and report will be available in public domain. Also, a rating and performance evaluation mechanism has put in place, which is called a shading methodology; dark green, medium green and light green where dark green means excellent and project concurs with all the principles there is no risk of say “green washing”. Subsequently, medium and light green shades mean some concerns which investor has to work upon.

Climate risk is now a financial risk. Therefore, transparency is important for investors, in order for them to better understand the climate risk exposure to their investments. And that’s what the second opinion gives them: more transparency on these risks. Impact reporting has been very, very important since the very beginning of the green bonds, but it’s been an iterative process.

Therefore, in addition to moving large amounts of capital, Green bonds have the ability to catalysed a change in investor behaviours. Not only for green bonds, or for social bonds, or sustainable bonds, they may start asking questions about everything they invest in and that’s going to be the capital markets of the future.

Climate change poses the greatest threat to humanity. The effects of climate change can set back decades of progress made across globe. The scale of the issue is unsettling, environmental shocks will become more extreme and more frequent. No single government or institution can solve this problem alone and most importantly we are the last generation that can alter the course of climate change, and we require investment on a scale we have never seen before.

An Ecosystem where Homoeconomius = Homosapien !

References –

Pride & Prejudice of Energy Transition

Since last decade, climate change is the biggest problem of humanity till date and energy transition is the response to the same. Across stakeholders, the trend has picked up the interest globally again, after a 2 years’ diversion due to Covid-19. We all fought quite well with the pandemic and now we are back to overcome bigger challenge. In last one-year energy transition has scored quite significantly in google trends (please check the image below). It touched the score of 100 as favourite word of Google in the month of November 2022 i.e. during United Nations Climate Change Conference or Conference of the Parties of the UNFCCC, more commonly referred to as COP27.

On side notes, it is more searched in developing nations and popularity decreases as we move towards affluence. 

Historically energy transition is to move from less economical and efficient form of energy to more efficient and more economic form i.e. wood/biomass to coal and then to oil and finally the emergence of gas and nuclear. Earlier transitions were more because of commercial incentive which bolstered economic growth and also allowed greater energy access to broader population.

Nevertheless, this energy transition is different and is clearly driven by the need to meet climate targets, meet the challenge of environmental change and essentially the need to decarbonize the global energy system.

According to IRENA,, capacity additions to the global power mix have been consistently dominated by renewables in recent years. In 2020, new renewable capacity addition reached 82% of the total installed capacity, compared to 73% in 2019.

This transition would require to harness the non-fossil sources of energy like the sun and the wind. And to generate the energy from these sources we obviously need to build technologies such as solar panels, windmills, batteries etc. Further all these require to mine huge quantities of non-renewable materials which would need bigger mines as compared to what we have today for coal or any other mineral.

Our ticket to green growth, in other words, is digging deep in the environment. Now we know that mining can have grave impacts for local ecosystems and populations. But the point is how much and where we’re going to have to dig, and what that means for climate security and for geopolitics.

History tells us that when the dominant source of energy changes, power relations change as well. Countries that can transform energy to their own advantage, can gain the upper hand economically and politically, and then can put themselves at the centre of the global order. Think of the United Kingdom and coal, for instance, or how oil determined the ascendance of the US to a global superpower.

What that tells us is that the access to and processing of energy literally materializes into the ability to shape geopolitical power dynamics. And today, we’re facing the challenge of implementing the biggest energy transition in the history of humankind under a ticking climate clock. The race is on for a new generation of power. At the heart of which we have all of the critical materials that we need to decarbonize on the one hand and digitalize on the other.

So what’s happening with them? On the demand side we’re at the beginning of an exponential demand curve. If you take lithium as a proxy, a key component for batteries, global production already increased by just short of 300 percent between 2010 and 2020. Isn’t it a good news? It means that decarbonisation is in motion.

The not so good news is that our “clean” future is going to be more materially intensive than before. If you take a simple measure for it, the International Energy Agency (IEA) study indicates that with the current level of innovation, an electric car requires six times more mineral inputs than a conventional car. And this is only the start. The World Bank tells us that with the current projections, global production for minerals such as graphite and cobalt will increase by 500 percent by 2050, only to meet the demand for clean energy technologies.

Now let’s look on the supply side Who currently exploits and processes minerals and where deposits to meet future demand are located tell us exactly how the transition is going to change geopolitics. So if you look at a material such as lithium, countries like Chile and Australia tend to dominate extraction, for cobalt, the Democratic Republic of Congo dominates extraction, for nickel, countries like Indonesia and the Philippines tend to dominate extraction and for rare earths, China dominates extraction. For all aforementioned extractions, China dominates processing. So, whole global balance of power is getting rehauled with this transition which is off course natural phenomenon.

China is currently trying to gain access to more mineral resources through its Belt and Road Initiative. The United States and Europe are both thinking of reshoring critical mining and processing and orienting some of their international partnerships to facilitate access to more mineral resources. Japan is exploring some of its oceanic marine reserves to build strategic reserves. Now at first sight, Russia’s invasion of Ukraine has nothing to do with whatever is being mentioned above. But Ukraine happens to be mineral rich. It also happens to be one of only two countries that had struck a partnership with the European Union to diversify and develop supply chains for critical raw materials. That partnership was specifically designed to help the EU decarbonize and in the process to better integrate with Ukraine from a political and economic perspective. Eight months after the partnership was struck, the invasion took place. Now, mineral resources may not explain everything about the war. But they certainly can’t be ignored in analyzing the events.

Because when it comes to the race for critical raw materials, what’s actually happening is that we’re headed right back into a new scramble for resources, at the heart of which you find all of the big players eyeing countries with vast mineral deposits. And yet so many of these countries that are located, for the most part, in Africa, in Latin America, in Central Asia and in the Indo-Pacific. The International Institute for Sustainable Development (IISD) produced a map representing all of the different materials that we need in order to decarbonize, their geographic location and their deposit size. As it so happens, a lot of the deposits are located in countries that rank fairly high on corruption indices.

Another map was published by Notre Dame Institute which shows the countries that are climate vulnerable are also the ones that are resource endowed. Also, those big ecosystems that we need to protect and regenerate in order to stabilize the global climate regime? To reboot the hydrological cycle and to protect biodiversity? Many of these big ecosystems are located in the same fragile countries that were mentioned in map of IISD. They also happen to sit on vast mineral deposits. Changing or eliminating these ecosystems through mining, through deforestation or anything else would undermine ecological integrity.

So, the big question – is this fight against climate change pushing environment and humanity towards more dangerous path?

Our modern economies have advanced and grown for two centuries through the gigantic blind spot of fossil fuel exploitation and its unintended consequences. The big lesson here is that we can’t afford to just shift to a different set of energies, technologies and materials without paying attention to the unintended consequences. The stakes are too high. They involve our future and bigger question is they also involve our humanity and nature.

Decarbonisation is the way forward. There’s not one single doubt allowed about this. But the way forward also demands of us that we start imagining our future beyond decarbonisation already. A climate-safe future is a necessary condition for peace. But we won’t achieve a climate-safe future without peace among ourselves and with environment. And to build peace, we need to shake things up in international politics and in the way that we do business and economics.

So where do we start?

  • Science. Science can tell us exactly where it is safe to mine and where it isn’t, from an ecological perspective. Where it is not safe to mine, we need to act as though these minerals did not exist and establish protected areas under which no mining licensing can take place. Where mining does take place, we can integrate socioeconomic and ecological regeneration within business models.
  • Global public good regime. If decarbonisation is a matter of human survival, then the materials that we need in order to decarbonize should be managed collectively under a global public good regime. The alternative is conflict and planetary breakdown. So while we figure out exactly how to design this regime, the countries at the heart of the scramble for resources should receive adequate support, competent and coherent support to face off the joint challenges of geopolitical competition and climate disruptions on the other hand. In other words, investing into conflict resolution, into the fight against corruption and into context-specific resilience, should be top priorities of our global energy transition.
  • New ways to do business and economics. We can’t just switch from one energy system to another. What we need instead is to reduce our need for energy and for materials. And that starts with massive public and private investments into circular economic models that favour recyclability and material substitution. Followed by developing ecological assessments for supply chains that account for greenhouse gas emissions, but also for water, soil, biodiversity, material and energy footprint all at once.
  • Innovation. All of this can only happen if we start shifting our thinking about innovation. Innovation in our times is about bringing back economic footprint within planetary boundaries. Anything else, even the coolest of new products, if it isn’t aligned with that goal, it’s not innovation, it’s business as usual.

So, successful energy transition entails a regime which can engulf everything which comes under social, political, economic and most importantly environmental security.

Digitisation – Making grid future ready

Electric grid is becoming more and more important when we are looking towards electrifying the whole economy due to climate change.

There is so much uncertainty with regards to climate change. How we have looked into the past will not help how we look into the future. So when we are thinking of the grid which is the backbone of the any country’s critical infrastructure, a backbone of national competitiveness and economic growth. So without a reliable and resilient grid we have threats to that competitiveness. Electricity grid is one of the biggest testimony of ingenuity and it is serving its purpose from quite some time. Now there is lot of demand coming to grid due climate uncertainty and our goals for net zero to bring in more renewables to this biggest machine.

Now that we need to think of grid for future it important to think of ways to bring in the reliability and resilience. The recent memory of Texas grid failure episode in US, which resulted in ~5million people without power for multiple days. This is an indication that we shall be prepared for the impact of extreme weather on the grid as Texas experience extreme cold and in California in 2020 it was extreme heat which made the grid issue.

Weather events have gone more and more severe typically in particular regions. The weather events like “Sandy” is getting more and more extreme, though in India we are still better as compared to western parts like US where the grid is getting older and more fragile. These events strain the power ecosystem, though the sector is getting ready for bitter weather events but there are other areas as well which are getting involved due to climate change like extreme rains, wild fires, which can’t be handled by the grid alone. This calls for the interconnection working with various other departments within government. Therefore, this becomes more important than ever for both social and economic security of the nation when electricity is the backbone of the critical infrastructure of a country.  

Due to these climate changes, generation technologies are changing significantly. More renewables are getting part of the grid and also they are becoming much more distributed and we are moving away from old central generating plants. These distributed energy has introduced many new generators like rooftops, small solar plants etc. This makes virtually each person living in a city a generator. Therefore, we need technology to control all these new generators.

Digitisation which is sweeping all other industry will sweep power sector as well.

We generally turn-on a blub by just a flip of a light switch and never just think from what is that powering the electricity bulb and from where it is coming? It’s our grid, which making it happen and this light bulb and the complexity happening behind the scenes on the electric grid, is a key piece to solving the climate crisis. It’s how we’re going to mitigate the risk of extreme storms flooding our cities, avoid scorching the Earth with severe drought, and ensure that our children and grandchildren inherit a habitable planet, but we need to rethink how the grid works and our relationship with it.

We need to stop transacting with the grid and start interacting with it. But before we go talk about the future of the grid, let’s go back to that light switch. When you turn it on, it closes a circuit that connects your light bulb to the rest of the electric grid.

The grid senses this new demand, and somewhere, probably far away from your light bulb, a power plant generates just a little more power. That adjustment happens basically instantaneously. Across the whole grid, we have less than a minute’s worth of storage, so the electrons flowing through your bulb were produced just moments beforehand. As users of electricity, our experience is completely transactional: Flip switch, consume power, pay bill. We don’t need to know how it works; it just does.

But what happens when it doesn’t work? What happens if that power plant doesn’t increase its generation to meet the demand from your laptop?

Blackout !!!!

Not just for your light bulb, but across the whole grid. Now, historically the grid has prevented blackouts a certain way. As demand varies over the course of the day, big power plants, primarily fossil fuel power plants, ramp up and down to match it. But that is not going to cut it if the grid is going to solve climate change.

Right now, over 50% of the power flowing on the grid comes from fossil fuels. Producing that power contributes one third of global greenhouse gas emissions. As is, the grid is a huge contributor to climate change, but going forward, it’ll be an even bigger part of the solution.

Now the solution?

It’s not just as simple as replacing existing fossil generation with carbon-free alternatives. To solve climate change we’re going to need to electrify basically everything: transportation, heating, manufacturing. By doing that, by electrifying everything, the grid becomes integral to addressing nearly 75% of global greenhouse gas emissions. But by doing that, we will double how much electricity we need, and all of it has to come from carbon-free sources.

So the question: “How do we solve climate change?”

actually turns into:

“How do we build and operate a grid without fossil fuels?”

Now, renewables are finally ramping up.

Today, wind and solar produce roughly 10% of the world’s electricity, but integrating them into the grid isn’t always seamless. Before, the only thing we had to worry about was uncertainty in demand, but renewables add uncertainty and variability to generation too, and that uncertainty causes high price volatility.

Here’s a simple example:

A wind farm is happily spinning along, generating low-priced power, but suddenly the wind stops blowing, and to keep meeting demand, another more expensive power plant makes up the difference, causing prices to skyrocket.

Now, imagine hundreds of thousands of wind and solar farms spread across the grid. That’s the grid we need to solve the climate crisis, but it means that these price dynamics will happen millions of times over.

We need to moderate these dynamics, while preserving the stable and reliable electricity that we have today. To do that, we’ll be reimagining how the grid works. Rather than ramping fossil fuel power plants to meet demand, renewables will be spreading across the grid, rapidly adjusting their production as weather conditions change.

Electric vehicles will be acting as mobile batteries, drawing and then contributing power to the grid wherever they’re connected. Smart thermostats and appliances will be making our buildings a little warmer or colder, or shifting the time of day that our dishwashers run to better match when power is available. Intelligent factories will be automatically adjusting their production, increasing throughput when power is abundant and scaling back as prices rise.

Massive batteries will be absorbing energy in periods of excess and returning it to the grid when supplies run short. The grid is becoming this interactional place, with all of these components working together to ensure balance and stability. But what’s missing here is the underlying technology that ties all of these interactional components together.

This grid needs a brain.

Each device will be responsible for making its own decisions. Those decisions will depend on algorithms that predict future costs and availability of electricity. Just like we use weather forecasts to decide whether to bring a sweater, the pieces of our future grid are going to need price forecasts to know when to use or produce power because remember, if the grid isn’t in perfect balance:

Blackout !!!

The brain needs to be using rapid, hyper-localized, physics-based forecasts of grid dynamics across both short and long timescales. We need to confront the real world – competing values, and interests; questions of political, technological, economic feasibility -to make that brain a reality.

Digitalisation is a new era for power systems or we can also say for energy ecosystem as whole. The term digitalisation is an amalgamation of three aspects; IDA (can be read “idea”)

1.      Interconnections

2.      Data

3.      Analytics

The first step is to establish the channels for interconnections between human to machines and also machines to machine(s); which can help to generate data; further putting analytics on top, of can help us to develop intelligence for effective decision making.

AI and physics based algorithmic models can help us to anticipate the needs of the grid. These algorithms can guide each battery, each thermostat, each factory to make the choices that keep our grid operating efficiently and reliably. It will not only solve the climate crisis but digitisation can prepare a solution which have self-regulating capability to keep conditions favorable to life. It’s a lot like an ant colony acting beyond the awareness of each individual ant, and our future grid is exactly the same.

All of our daily actions must work symbiotically to maintain a healthy, stable system. We have all the pieces that we need to solve the climate crisis, or at least most of them. We have batteries, we have renewables, we have smart thermostats. Now we just have to bring them all together.

It requires us to stop transacting and start interacting with the grid. It requires us to become the grid. 

Natural Gas – Fuel for 21st Century India

As we are entering into 2021, with high hopes, more population and a bad climate; it’s really important that we take futuristic decisions to one of the most significant aspects of our lives, “energy”. 

The global energy landscape is presently undergoing considerable changes. For any emerging nation, the policy to obtain and meet the energy supplies and energy developments are crucial ingredients of the overall economic strategy. Proficient use of resources and long-standing sustainability in its utilization is of key significance for economic development. Given 17.7% of the world’s population and 2.4% of the globe’s geographical area, India has meager known fossil fuel reserves. 

According to a report of Energy Information Administration (EIA), India was the third-largest consumer of crude oil and petroleum products after the United States and China in 2019. The demand for crude oil in 2019 reached 4.9million b/d, compared to less than 1 million b/d of total domestic liquids production. However, the unprecedented 2020 drastically lowered India’s growth which affected the requirement of one of the most significant products of the consumer index; petroleum products—primarily jet fuel, gasoline, and diesel—with the most acute demand destruction occurring during the second quarter of 2020. COVID 19 also plummeted electricity demand. 

Despite of the slowdown even in immediate pre-COVID period; experts, think-tanks and business houses are hopeful; once India’s economy recovers from the pandemic, India’s transportation and industrial sectors is likely to expand under economic development; a rising population; and government policy initiatives that increase highway and airport infrastructure, promote Indian manufacturing, and increase liquefied petroleum gas (LPG) use in the residential sector.

Energy is central to achieving India’s development ambitions: bringing electricity to those who do not have it; and developing infrastructure. India’s demand for energy will increase significantly out to 2035, driven by economic growth, urbanisation, rising incomes and industrial activity.

Energy consumption in the country has almost doubled since 2000 and the potential for further rapid growth is enormous. India’s energy consumption is set to grow by 165% the fastest among all major economies her share of global demand will rise to 11% in 2040. India’s urbanisation is a key driver for energy consumption, as it is expected an additional 300 million people are expected to live in India’s cities by 2040. 

Coal is by far the largest contributor in the energy mix, but India’s recent climate pledge underlined the country’s commitment to the growing role for renewable energy sources. The share of coal in the energy mix will fall to 50% by 2040, while the share of renewables rises from 2% to 13%. India’s energy consumption has increased many folds but still its per capita energy demand remains low, which is around 1/3rd of the world’s average.

Now to swiftly move towards pre-COVID growth and maintain the sustainable growth path while striving towards reduction in greenhouse gas emissions and finally slowly moving away from dirtier fuels such as coal and crude oil, natural gas can be the 21st century fuel for India. According to, IEA Energy outlook, typically, natural gas emits 50-60 percent less CO2 when combusted in an efficient power plant compared to emissions from a typical coal plant. When compared to solid and liquid fossil fuels, natural gas scores quite well on the criteria such as transportability, storability, combustion efficiency, convenience, cleanliness and flexibility of use. Also, natural gas may reduce dependence on oil from unstable Middle East and West Asia by sourcing gas from Central Asia.

In India, there is a space of around 60% to support the base load of power generation, wherein it can use coal and natural gas as a main fuel efficiently and more environmentally friendly way. Despite public posturing for renewable energy in an international arena, India would continue to depend on coal and natural gas for power generation in the long run. The primary reason behind this argument is that renewables such as solar and wind have relatively lower capacity utilization factor compared to coal and natural gas based power plants. That means 160 GW of solar and wind installed capacity could translate to actual production of 32-40 GW. Therefore, natural gas becomes the next best alternative for cleaner and large scale electricity production in India. 

India also faces the challenge of ensuring the financial health of its power sector which is dealing with surplus capacity, lower utilisation of coal and natural gas plants, and increasing shares of variable renewable energy. Central Energy Regulatory Commission (CERC) progressed towards improved real-time markets.The creation of a competitive wholesale power market will be vital for improving the utilisation of India’s generation capacity. 

India’s power system is currently experiencing a major shift to higher shares of variable renewable energy, which is making system integration and flexibility priority issues. International experience shows that natural gas can provide ‘always-on’ power and in addition provide a quick ramp up and down to meet fluctuating demand at a fraction of the cost. During the recent pan India ‘switch-off’ of lighting load on 5 April 2020, it was the quick ramping capability of natural gas power (along with a much larger share of hydro power) that maintained grid stability when 31 GW of load was lost and regained within 10 minutes. 

Off course natural gas is fossil fuel but to quickly manufacture PV cells, dynamos, wind turbines etc, under Atamnirbhar Bharat, which can increase the share of renewable energy in India’s energy mix would require natural gas as a source of continuous energy supply. Additionally, natural gas investments are not only helpful in the immediate sail of high growth path but also the same infrastructure can be used to transport zero-carbon energy source, hydrogen, which can be the fuel of the future. 

Natural gas can not only satisfy the energy hunger of India for sustained economic growth but can also help in meeting the environmental goals in short run. It is evident that the fertilizer sector has been the largest beneficiary of natural gas followed by power and city gas distribution (CGD). Therefore, not only urbanization and industrial growth, agricultural growth is highly dependent on natural gas, which makes NATURAL GAS true fuel for 21st century India.