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#2 - What happens now

How India's natural resources may pay the price for an economic reboot

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Lou Del Bello

May 14 2020

7 mins read

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Hello and welcome to this week’s edition of Lights On, a newsletter that brings you the key stories on energy and climate change in South Asia. 

Today it’s all about what we can expect in a post-Covid India. I take a look at how the government is speeding up environment reforms so it can attract businesses, and with emissions falling for the first time in four decades, I ask experts how this blip could become a trend.

Is the environment the price to pay to save the economy?

  • India’s controversial environmental clearance reform makes it easier to get the green light for high impact projects
  • It’s now easier for rogue businesses to clean their compliance records

While India braces for a lockdown extension, the government is getting ready to reboot the economy, which after the crisis is expected to shrink by 10%, after growing by 5% in 2019. Part of this effort involves a 20 trillion rupee ($265 billion) relief package detailed on Wednesday by the Finance Minister, but India is also trying to lure foreign companies that are moving out of China, offering a land pool double the size of Luxembourg to those who choose to set up shop in the country.

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Jim Corbett National Park at dawn, Uttarakhand

To make things easier for foreign and domestic businesses, the Modi administration is rolling out a comprehensive update of India’s environmental clearance regulation, known as Environment Impact Assessment notifications (EIA), which critics say will enable companies to cut corners on the development of a vast range of industrial projects, including mining, the construction of power plants, harbours, highways and hydroelectric dams.

Compared to the existing rules, the new package extends the number of projects that won’t need environmental clearance before starting construction, eases monitoring requirements and reduces the chances of public consultation in which civil society can engage with private developers. “It’s now clear that the environmental approval phase is just a matter between two parties, the government and the industry,” says Kanchi Kohli, a senior researcher with the Center for Policy Research in Delhi.

Take the case of a developer who starts a project without obtaining proper permissions. In 2017, India created a mechanism to regularise these violations, but with the new policy “you now can admit you have not complied [without facing serious legal consequences], and the amnesty scheme has been normalised.”

Many have criticised the government for passing a key piece of legislation during lockdown, when it’s difficult for the public and other experts to scrutinise it and raise objections. But Kohli says that the timing is intentional: “The idea is that business needs to continue for the economy to function. So the government wants to give the impression of a functional environment industry where you can come and easily obtain your permissions.”

India is far from the only country in which governments have put the environment on the chopping board for the sake of the economy. This trend is observed everywhere, according to Carroll Muffett, president and CEO of the Washington based non-profit Center for International Environmental Law.

“In the midst of the Covid-19 pandemic, we're seeing governments and corporations responding in ways that profoundly limit the public's ability to engage in decision making processes”, he says. For instance, “in the construction of new petrochemical plants, companies like Shell in Pennsylvania have argued that they are essential businesses and need to continue,” he says, “despite the fact that undertaking that construction is going to expose their workers to pandemic risks.”

“Even more troubling is the rollback of environmental requirements that we are seeing both in the US and worldwide,” Muffett says. For example, in many cases the monitoring of hazardous facilities or big construction projects is being eased “on the ground that, ironically, the people conducting the monitoring are not essential, even if the business is,” Muffett says. “This is really a worst case scenario from the perspective of the environment.”

The environmental benefits of the lockdown in terms of emissions reduction and clean air are noticeable, but in practice they are modest and short-lived. But the way governments lay the ground for a post-pandemic environmental governance will have far reaching impacts for decades.

Read more:

Here you can download the EIA draft text with the highlights I discussed with Kohli.

If you want to stay up to date with the issue, here’s Influence Map, a data driven project that is tracking environmental rollbacks among other climate and policy.

And CEIL has a report out on how the oil and gas industry are trying to avoid a looming demise by lobbying governments in times of pandemic.

India’s emissions are down: Now what?

  • The reduction will only be a temporary blip without systemic reform of the energy sector, experts say
  • A first cash injection will save distribution companies from bankruptcy but won’t be enough to support a clean transition

For the first time in four decades, India’s emissions have fallen this year, a result of an extraordinary slump in energy demand due to the Covid-19 emergency that mostly affected the coal sector. However, as analysts at the Centre for Research on Energy and Clean Air (CREA) explain in Carbon Brief this week, the lockdown effect adds to an economic slowdown that had already affected energy demand, as well as a growth in renewables that are competing with coal. For now, the recorded 1% dip in carbon emissions is more of a brief respite from a sustained growth rather than a trend. But as India recovers from the crisis, a green stimulus could be an opportunity to reset the energy system. 

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Rickshaws at peak time in Dwarka, Delhi

On Wednesday, the Finance Ministry promised $12 billion (900 billion Indian rupee) to the national distribution companies, which have struggled to collect payments under lockdown. It will be in the form of loans that they can take to clear their debt to the power producers and avoid bankruptcy. 

But according to analysts this isn’t going to solve the power sector crisis, let alone enable a green transition. Kashish Shah, a researcher at the Institute for Energy Economics and Financial Analysis in Australia, says that the measure accentuates the vulnerability of the thermal power sector in India, because it keeps them tied to the expensive contracts they have signed with coal power producers. These contracts, known as PPAs (Power Purchase Agreement) bind utilities to pay a fixed amount on top of what they owe for the energy they consume, which normally accounts for 50% of the overall tariff.

After the initial cash injection, India can hope for a more comprehensive package in the coming months. CREA’s analyst Sunil Dahiya shares his top three spending priorities to kickstart a green transition in India:

  • The relief package should help distribution companies move away from expensive contracts with coal producers. Instead, the government should aggressively push for shutting down old power plants.
  • It should enable distribution companies to move towards renewable energy and install pollution control equipment as fast as possible.
  • In the transport sector, the new emission standards that entered into force on April 1 this year are a good start, but the government should build on that by investing in public transport and boosting the uptake of electric mobility.

Read more:

Carbon Copy is a newsletter covering air pollution, energy and climate change, with great insights on where India is heading in its green transition. In today’s good news, India’s first round the clock solar power plant, with a planned 400MW capacity, will supply continuous power by running in combination with a hybrid wind/hydro plant, or storage.

Your voice matters: Let me know how to make Lights On even better! I am @loudelbello on Twitter, or you can write me an email on lou@lightson.news

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