Renewable Energy: Can India Become Competitive While Aiming for Climate Resilient Development? Difficult but possible

The recent Intergovernmental Panel on Climate Change (IPCC) report of February 2022 has made it clear that the future lies in climate-resilient development, or nothing. Following the COP26, she proposed to pay serious and urgent attention to adapting climate risk management and mitigation policies in order to reach the 1.5 degree temperature target. One might think that this means significant investment in renewable energy, clean technology, infrastructure and related sectors, perhaps at the expense of others and competitiveness.

Given the abundance of traditional energy sources such as coal and their reliance on related industries, some of our states such as UP, MP and Odisha may not be inherently competitive in these areas. You could lose in this race to attract investment. This can exacerbate inequalities, unemployment and poverty while threatening their ability to generate income and compete. Furthermore, due to this shift, job creation could also be concentrated in the more developed states of India, leading to regional disparities and also livelihood losses. So the question is, can competitiveness and our employment agenda and climate resilient investment go hand in hand?

The IPCC report also warns of risks of mismatch in policy design and implementation. This can have adverse consequences for society, particularly for vulnerable groups. It suggests some prerequisites to ensure optimal design and implementation of such strategies. In a recently published
White paper on Improving India’s Competitiveness for Inclusive Economic Growth, co-curated by CUTS International, Institute for Competitiveness and Institute for Studies in Industrial Development, we reviewed the conditions for improving and sustaining India’s competitiveness and identified significant similarities with the conditions stated in the IPCC report Celebration. These are:

Investments in intangible assets: Competitiveness for inclusive growth is underlined by strengthening social and economic infrastructures in education and health. The IPCC report also highlights that the feasibility and effectiveness of climate action depends not only on the development of physical infrastructure but also on social infrastructure. This would improve the adaptability of vulnerable groups through diversification of their livelihoods and employment, as well as access to basic services and infrastructure. Therefore, investing in health and education will be crucial for building competitiveness and human capital and for climate-resilient development.

Better convergence between policies and actors: Ensuring convergence between different policy areas and actors both inside and outside government and at different levels is essential for competitiveness. According to the IPCC report, policies that focus on isolated sectors would lead to mismatches. It emphasizes a multi-sectoral, multi-stakeholder approach and integrative planning to minimize misalignment. This means that public sector companies, private actors, trade unions as well as civil society organizations all need to be involved in policy-making, as this would ensure that all interests of stakeholders, particularly vulnerable ones such as local and poorer communities, are taken into account .

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

Cooperative federalism: This principle is at the core of all factors. The IPCC report in particular emphasizes the importance of coordinated action at all levels of government in several places. Our Competitiveness White Paper also places sufficient emphasis on coordination between the three levels of governance and between departments. This is particularly relevant in a country like India, with existing inertia and economic inequality that are detrimental to competitiveness.

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

However, such a transition to adapt to climate change needs to be done in a just, fair and equitable manner, taking into account the existing competencies and competitiveness of different regions. Investments must serve both development and adaptation goals. Only when climate-resilient development occurs with inclusive growth, and prioritize equity and justice, can it produce sustainable outcomes.

India must seek to achieve the twin goals of economic growth and meeting its own climate goals through carefully curated and implemented strategies to attract public and private sector investment. Given India’s extreme inequalities, to achieve these goals, policies must prioritize sustainability (for future generations), inclusion (for vulnerable groups) and equity (to reduce economic inequality). This can only happen when the basic building blocks of a competitive, climate-resilient economy, as discussed above, are in place. India’s future as a competitive economy that contributes to global climate protection goals with equitable domestic growth lies in this integration.

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

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