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Three factors that can derail India's growth

April 29, 2010 11:11 IST
Climate change, water, land won't be the only obstacle to India's growth prospects; water and land have an almost equal potential to derail things, says Chandra Bhushan.

The last two years have seen a flurry of reports projecting India's long-term greenhouse gas emissions trajectory.

Most of the reports talk of the huge emissions-saving potential in all sectors of the Indian economy, and the ease with which we can avoid emissions - some on our own and some with financial help from the developed world through emissions trading. But is the task of reducing emissions in India so simple?

A look at the six most emissions-intensive industrial sectors - steel, cement, aluminium, fertilisers, paper and power, which account for over 60 per cent of India's CO2 emissions - shows many of them are actually operating at global best levels.

India's cement industry is one of the most efficient globally due to its use of modern technologies and blending materials (flyash and slag).

Urea plants, especially gas-based ones, are today defining global-best practices. Eighty per cent of the aluminium industry is already using global best smelting technology; the remaining are converting as they cannot compete due to high energy costs. India's coal-based thermal power plants are more efficient than the global average.

The country's biggest power utility, NTPC, operates at 33 per cent efficiency, one of the highest in the world given the sub-critical technology and poor quality coal the company uses.

Of course, efficiencies would rise by installing supercritical and ultra-supercritical power plants, but India's poor coal quality and high temperature and humidity will always impede efficiency gains.

The sectors that are lagging behind, and will in future lag behind, are steel and paper. This is largely because of raw material and fuel constraints and the characteristics of the industries themselves.

Steel production is moving towards the coal-based sponge iron route because of non-availability of coking coal; by 2030, 60 per cent of steel will be made from sponge iron which is energy-inefficient and polluting, and has lower potential to improve efficiency. The developed world reduced the emissions-intensity of steel by using scrap.

We don't have that luxury. The technology choice we are making - coal-based sponge iron - means steel production will remain emissions-intensive even if we use all known and available technologies.

The paper sector is hamstrung by problems of small size, multiplicity of raw materials, technological obsolescence and multi-product nature of plants.

The saving grace (so-called) is the decisive shift in raw material - instead of wood, bamboo and agro-residues, more paper in India will be produced from wastepaper and market pulp.

This will reduce the emissions intensity significantly. But this is akin to outsourcing emissions. The tragedy is, India's paper industry can become carbon-neutral by sequestering carbon through its social and farm forestry (ITC claims to be a carbon-neutral company), but it seems that the sector would rather import wastepaper and market pulp than work with farmers to raise wood.

Considering the present performance of these emissions-intensive sectors, the view that India's rising greenhouse gas emissions are due to inefficient industry and power sectors is completely off the mark. But the larger question is the technological future for these sectors. How much more emissions-reduction can be achieved by improving technology and management practices?

Carbon-constrained growth path

An 8 per cent GDP growth rate for the next 20 years means production in all sectors, other than fertilisers (urea), will grow four-five fold. Steel production is likely to reach 300 million tonnes in 2030 compared to 60 million tonnes today; production of cement will rise from 181 million tonnes now to 922 million tonnes, while power from utilities will jump to about 3,200 terawatt-hours (TWh) compared to 750 TWh now.

Energy price is a big driver of change, especially in India where industrial energy cost is one of the highest in the world.

In the normal course, Indian industry will adopt energy-efficient technologies; this is already apparent in all sectors. By 2020, other than power, most sectors in India will operate at best available technique (BAT) levels or what can be practically achieved, considering the characteristics of the industry.

In the power sector, everything will depend on how ambitious we are in deploying low carbon/renewable technologies. Cost would be the major factor, as high-end renewable technologies like solar are very expensive today.

Reducing emissions after 2020 will be a challenge. By 2020, India will exhaust all "low-hanging" options as well as high-end commercialised technologies. Post-2020, new, high-cost and not-yet-commercially-available technologies will be required to reduce emissions significantly. India's voluntary commitment to reduce emissions intensity of its GDP (excluding the agriculture sector) by 20-25 per cent by 2020 in comparison to the 2005 level, assumes a new significance.

The 2020 commitment is easy to meet. It will cost, but not enough to be left undoable. The tough part begins after 2020, when the emissions intensity of the sectors starts to stagnate once we cross the current emissions-efficiency-technology threshold.

The options are either to change the energy source (from coal to renewables) or develop new revolutionary technologies.

Both are theoretical as of now. By 2030, even if India installs 100,000 Mw of solar energy (none of this exists today), 90,000 Mw of onshore and offshore wind energy (only 11,000 Mw of onshore wind energy currently exists), 50,000 Mw of biomass power (1,800 Mw currently), 100,000 Mw of hydropower (38,000 Mw at present), 30,000 Mw of nuclear power (4,500 Mw currently) and 50,000 Mw of gas-based power (18,000 Mw now), coal will still have to provide close to 60 per cent of the total power generation.

After all this, we will still not be able to substantially reduce our dependence on coal. India also faces the challenge to provide affordable power to a huge number of people who are still not connected to the grid. The bottom line, therefore, is that reducing emissions in an 8 per cent growth trajectory post-2020 is going to be tough.

This message must go out loud and clear to the developed world, which thinks it can "buy" its way out of the climate crisis by reducing emissions in developing countries. It is for this reason that India must not give up on its demand for an equity-based global agreement on climate change.

Climate change won't be the only obstacle to India's growth prospects; water and land have an almost equal potential to derail things.

Water

Freshwater withdrawal today by steel, cement, aluminium, fertiliser, paper and power sectors is equivalent to the total domestic water demand (around 42 billion cubic metres per annum).

Freshwater consumption (water that is lost through evaporation, products and wastes in industries) equals the total drinking and cooking water needs of India (5.6 billion cubic metres per annum). The difference between freshwater withdrawal and consumption is the wastewater discharged by industries, which pollutes our rivers, lakes and groundwater.

By 2030, freshwater withdrawal by these six sectors will increase by 40 per cent and freshwater consumption by more than three-fold. A three-fold increase in consumption means less water will be available downstream for other users. There is already a growing conflict between industry and local communities on water scarcity and pollution. This will exacerbate in future.

Land

Currently, around 0.7 million hectares (ha) of land are occupied by these six sectors - 0.4 million ha to mine coal, iron ore, limestone and bauxite, and 0.3 million ha for the plants. In an 8 per cent growth trajectory, another 1-1.3 million ha will be required by these six sectors - which means the amount of land needed in the next 20 years will be far higher than what they have acquired in last 60 years.

It is important to understand that India has an adverse land-population ratio (per capita land availability is a mere 0.25 ha), and acquiring land for industrial and mining projects is a major cause of conflict. Land is already a major resource constraint in the present economic model, and this would worsen unless ways of "inclusiveness" are devised in which local communities benefit proportionally.

India has always faced what may be called "the challenge of the balance": just growth, or growth that is "just" to the people and the environment. The "old" challenge of natural resource management still remains; we now have a "new" challenge of climate change. The future growth story of India depends on how we address both.

The author is associate director, Centre for Science and Environment. He is the author of Challenge of the new balance, which analyses low carbon growth options for the six most emissions-intensive sectors and their land, water and resource requirements.
Chandra Bhushan
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