Opinion
Whose burden is it anyway?
13 Dec 2010 |
Mr Saurabh Gupta
| The Financial Express
The need for promoting energy efficiency is well-known. Insufficient capacity additions, increasing environmental concerns and energy and peak shortages are key reasons why the country has to promote energy efficiency. According to the Integrated Energy Policy, the potential of demand side management (DSM) is about 15% of the total electricity demand. But despite that, implementation of demand side energy management measures remains poor.
By the Energy Conservation Act 2001, state-designated agencies (SDAs) should coordinate, regulate and enforce provisions of the Act in their areas. However, in most cases, the ministry of renewable energy's state nodal agencies are doubling up as SDAs without a commensurate increase in manpower and skill sets. As a result, not much progress has been made on the ground and these institutions continue to focus on promotion of renewable energy rather than energy conservation.
Besides, distortionary electricity pricing has inhibited the promotion of energy efficiency. Electricity prices in India are either directly subsidised by the state governments (especially for agricultural consumers) or are cross-subsidised by other categories such as industrial consumers, thereby, leaving little incentive for efficient utilisation of electricity for most.
The lack of motivation of utilities is also a barrier. The conventional theory that the primary business of the utilities is to sell electricity and not to save it still holds sway. The focus has always been on improving efficiency at the supply side, with the demand side more or less ignored.
This precisely explains the reason why dedicated DSM cells are either not being created by the utilities or, if created, remain dysfunctional. Further, there have been failures to capitalise on the learning from various DSM interventions.
Utilities have taken up several initiatives over the years to promote energy-efficient appliances through pilot projects. However, these schemes have been largely limited to the lighting segment and failed to translate into bigger programmes. The experience has not been utilised to develop programmes/schemes for other segments or sectors.
High initial cost and poor awareness and information about energy efficient products are some of the barriers that need to be addressed.
However, there is no single solution that can be prescribed to address these barriers. A mix of policy, regulatory, financial instruments and interventions are required to address these barriers and to promote energy efficiency in the country.
For greener pastures: Slowly but gradually, green jobs are becoming the order of the day
08 Dec 2010 |
Ms Himani Upadhyay
| The Pioneer
There is a colour distinction in the different kind of jobs that exist in the market today. White and blue collar jobs have become passé. Off late a new job category has emerged that has caught the fancy of many. It is referred to as 'green/low carbon' jobs and has become one of the most used phrases in the lexicons of politicians and corporates. For some, it is emergence of new employment opportunities in a limited job market and a route out of unemployment. For others, particularly for the environmentalists, they are crucial for combating climate change. With the attention that these jobs have garnered with respect to climate change action, it does not come as a surprise that what perhaps began as rhetoric to counter climate negativity is now developing into an area with extraordinary promises.
But not everybody is excited by this new category of jobs. Some argue that these are mere trendy phrases that have gained popularity and have ambiguous meanings and connotations with little agreement on what constitutes a green/low carbon job. As terms like low carbon jobs, green jobs, clean energy jobs, are often used interchangeably and therefore, cause confusion. Due to the associated ambiguities, common definitions often limit such jobs to certain industries that are generally regarded as green.
For example, in the US green jobs are often defined solely as those related to renewable energy and energy efficiency. The ILO refers to low carbon employment as "economically viable employment which reduces environmental impacts to sustainable levels". There are some which refer to employment in sectors that 'make up the clean energy economy', including energy efficiency, renewables, alternative transport and fuels as low carbon jobs. The UNEP recognises these jobs as either those that conserve energy or help realise alternative sources of energy and thereby accelerate the transition of global economies to low carbon pathways. However, there is also a wider interpretation of the concept looking beyond energy and linking low carbon issues to a broader set of environmental activities that include conservation and rehabilitation to preserve bio-diversity, restore degraded land, combat erosion and remove invasive aliens.
Irrespective of the hazy definitions, renewable energy investments are expected to rise. This can broadly generate two types of employment opportunities: Direct and indirect.
Direct employment includes jobs created in manufacturing, design, construction, installation, operation and maintenance of the different components of the technology. Indirect jobs refer to jobs created in the supply chain or those jobs that get created through 'multiplier effect'. For example, there are important jobs such as that of consultants who are key actors in the growth of renewable energy technologies as they play a vital role in the penetration of these technologies. Also professional profiles like those of energy auditors and energy managers are not directly linked with low carbon jobs but they often play an important role in promoting energy efficient technologies. Also it is important to consider that services provided by these indirect jobs are often a pre-requisite for deployment of low carbon technologies.
Of the many sectors that can offer low carbon employment, renewables contribute a significant number. Irrespective of the above arguments, jobs in renewables are likely to grow as industries, business and economies by large shift to renewable energy. These numbers are expected to increase in the next few decades as State and national Governments have mandated to increase the share of renewables in the energy mix.
Despite the failure of the climate negotiations at Copenhagen to reach a legally binding treaty to limit Green House Gas emissions, it is widely accepted that action with respect to construction of windmills, solar power and bio-mass plants will continue. This will not only have positive implications for energy security but also have environmental, economic, social, and technological development.
It is challenging to gauge the total number of green jobs that exist nationwide. The job of a welder at wind turbine factory is considered as a green/low carbon job, but what about the factory's accountant? While the first is direct job the latter is an indirect job.
India is emerging as one of the destinations with a huge low carbon employment potential. According to a TERI study, which assesses the potential of direct employment creation in India with respect to transition of energy sector to a low carbon pathway with a focus on the solar and wind energy sectors, notes that if the Government targets are achieved as scheduled, more than two lakh jobs could be created in the wind sector by 2020. For solar photovoltaic, these numbers add up to two lakh jobs. The study also notes that up to 10 million jobs have been estimated by various studies in the bio-fuels sector if Government achieves its target of village coverage and industrial bio-fuel production. Though these numbers are indicative in nature, they put forth a strong case for low carbon employment potential that exists in India and how it can be one of the important co-benefits of investment in the renewables.
The multiplier effect of promoting renewable energy sector is also expected to be substantial. For example, the jobs so created would require specialised skill sets both at technical and administrative level. There would be requirement for different types of professionals in R&D, planning, execution, operation and maintenance of technology.
An important step towards this would be to identify the gaps that exist in the present skill sets in the work force. Policies and programmes that facilitate capacity building and skill development could be incorporated in areas like the workforce with required skills are timely available for different stages of the technology. Also a parallel process could be initiated to identify appropriate national and State level authorities that can provide training and build capacity to address the gaps that exists. An integrated approach is thus required that considers the associated co-benefits while formulating policies and programme for these sectors.
Franchisee model has a long way to go
15 Nov 2010 |
Mr Saurabh
| The Financial Express
The franchisee system in power distribution has not taken off despite provision for central financial assistance. Out of 1,61,373 villages where Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) funds have been utilised, only 42% villages operate through a franchisee system.
Individuals were included in the distribution sector as franchisees to initiate public-private partnership at the lowest level, and to promote entrepreneurial capabilities of local youth. The Electricity Act, 2003 allows a utility to grant franchisees for certain functions in a distribution area.
Further, appointment of franchisees were made mandatory in villages where RGGVY fund is being utilised. The aim was to ensure revenue sustainability of rural distribution.
However, the absence of a grievance redressal mechanism is hampering the growth of the franchisee movement. The weak financial position of most franchisees operating in rural areas and their short contract duration of a year are not conducive to the stability of the franchisee business model. The delay in payment of incentives to franchisees is another major turn-off. These flaws need to be corrected to make the model attractive.
Utility employees look at the mechanism with suspicion and treat franchisees as sub-contractors rather than business partners. There appears to be an apprehension that the appoint ment of a franchisee could be a precursor to privatisation.
Teri\'s recent study on working of franchisees in states like Andhra Pradesh, Karnataka and Orissa has indicated encouraging results on loss reduction and consumer satisfaction. However, it has recommended further measures like periodic review to strengthen and speed up implementation of franchisees.
A regular review of the working of the franchisee model can be useful in reducing losses in rural areas. It has been observed that to fulfill their obligation of setting up franchisees under RGGVY, utilities are establishing a simple version of the franchisee model that is, revenue-based collection model. But the Centre\'s Rural Electrification Policy states that the franchisee should be linked to input energy of the area. The simple franchisee model should act as an introductory step. With experience, the basic model should be upgraded to an advanced version, to ensure sustainability of rural electricity supply.
There should be a time-bound shift from the simple model to a more comprehensive one. Clearly, successful implementation of the franchisee model requires immediate interventions at institutional, financial and operational levels.
Seek the peace dividend
15 Nov 2010 |
Dr R K Pachauri
| The Times of India
To write about other aspects of India's foreign policy in the wake of US President Barack Obama's visit may appear odd. But India has undoubtedly become a favoured destination for many world leaders with positive perceptions about its role in global affairs as it moves ahead economically. India still faces serious challenges in its relations with some countries. In this context, it is heartening that China's Premier Wen Jiabao is likely to visit before the end of the year.
India's economic success, despite our inability to wipe out large-scale poverty, is a clear driver of the interest the world is showing. Newsweek magazine recently came out with an assessment of different countries, in which India was ranked third for economic dynamism among low-income countries. It also ranked different world leaders against various criteria. Manmohan Singh was ranked highest as the leader other leaders love. The reasons for this distinction were that "the Prime Minister, a sophisticated former economist, played the key role in India's emergence as a world power, engineering the transition from stagnant socialism to go-go capitalism". Highlighting our prime minister's unassuming personal style "that really inspires awe among his fellow global luminaries", praise was also forthcoming on his being "modest, humble and incorruptible".
Singh has been uniquely successful in international relations, quite apart from leading India's economic transition. India's recent success in the international arena includes the nuclear deal with the US, a major strategic landmark. The growing warmth between India and the countries to the east is also an important strategic shift which would suit this country's long-term interests.
However, it is now time for India to fully realise and accept its position as a major player globally. Our relations with neighbours need urgent and concentrated action. Pakistan remains a dominant fixation in our foreign policy, but we have not yet come to grips with initiatives by which we can mend fences with our most important neighbour. India-
Pakistan tensions continue to sap the energy of the South Asian region as a whole and remain a major drag on closer cooperation within SAARC.
A change is long overdue, given that India was partitioned over 63 years ago. A generation has gone by while old animosities and prejudices have not. We still tend to view Pakistan in the light in which it existed 20 years ago. Our concerns about terrorism in that country and the dangers it holds for us are genuine and founded on reality. However, that is not Pakistan in its entirety. A large section of its population fervently seeks peace with India, particularly now that Pakistanis see themselves as victims of terrorist threats.
Symptoms of change in Pakistan are very clear, including in the media. A respected former sports official from Pakistan who attended the Commonwealth Games praised India effusively for the conduct of the Games and was obviously moved by the noticeably enthusiastic applause the Pakistani contingent received during the opening ceremony. Pakistani newspapers reported this, which would not have happened a few years ago. They now carry a substantial amount of news about Bollywood stars and their lives in a departure from past practice. Discussions with senior officials in Pakistan now reveal a deep longing for peace and security.
Born on soil now part of Pakistan, Prime Minister Singh has a unique opportunity to show boldness and resolve in mending fences with our neighbour. The extent of pride displayed by residents of the village Gah in district Chakwal, Singh's birthplace, perhaps far exceeds pride manifested in villages where Pakistan's own leaders were born.
On September 26 each year, Gah rejoices and celebrates Singh's birthday. This year was an exception because only two days earlier, his classmate from school, Raja Mohammad Ali, expired and the villagers were in mourning. A visit by our prime minister to this village purely on personal grounds would be a gesture that would stir sentiments of friendship in Pakistan. The opposition cannot fault this, given Atal Bihari Vajpayee's bold initiative to travel to Lahore.
Normal relations with Pakistan are imperative because India can never achieve its place in the world if its neighbourhood remains troubled and prone to meddling by outside powers. Singh has a unique window of opportunity for bold and timely action that future generations on the subcontinent would remember and be grateful for. If Great Britain and Northern Ireland can end decades of hostility and terrorism, there is no reason why India and Pakistan cannot live as friendly and peaceful neighbours.
Europe has provided a unique example of nations that have fought each other for centuries but are now bound together as a political and economic entity - the European Union. There is no reason why South Asia could not emerge at least as an economically integrated entity which would have lasting benefits for the hundreds of millions of the poor in this part of the world. India would then attain its full potential on the global stage.
If major strategic interests are to guide our external relations in the remaining years of the UPA government, a determined initiative by Singh to improve relations with Pakistan acquires overwhelming priority. A personal visit to Gah very early could transform attitudes across the border.
Accountability for regulators
01 Nov 2010 |
Dr Leena Srivastava
| The Financial Express
Investment is a key growth constraint of the Indian power sector. However,
going by the response to Coal India's IPO, the market seems to be flushed with
funds. It is not clear why financial closure of power projects remains such
a big challenge. The answer probably lies in the framework conditions that govern
the sector.
Despite nearly two decades of experimentation, we have not been able to decide
the shape and form of power distribution reforms and also whether these are
essential to ensuring the flow of revenues needed to make investments viable
in this sector. The few experiments that were undertaken to privatise distribution
remain inconclusive on performance, with the distribution utilities in Delhi
seemingly under tremendous financial stress.
Delivering the Khazanah Global Lecture in Malaysia on October 27, Prime Minister
Manmohan Singh identified rapid economic growth and equity-carrying the large
number of poor in the country on the path to prosperity-as the main pillars
of India's development . He also emphasised on balancing economic growth with
long-term environmental sustainability given the continuing dependence of a
large percentage of India's population on the agricultural sector and, therefore,
the need to preserve the ecosystem services that they are so dependent upon.
His elucidation of India's approach to development reinforced once again India's
commitment to equitable development and environmental sustainability.
The same clarity of vision needs to be carried forward in areas of concern that
the Prime Minister has highlighted, including the state of infrastructure. At
a very conservative level, India's infrastructure needs will double from current
levels in the next ten years and further double in less than a decade after
that. Looking at the power sector explicitly, both peak and energy shortages
are estimated to be above 10%--by comparison Malaysia has a reserve margin of
40%. And in the year 2009-10, India added a mere 9,585 MW of capacity against
a target of 14,507 MW.
A key initiative in addressing the framework conditions was the effort to distance
the electricity business from political interference by setting up independent
electricity regulatory commissions at the central and state levels. Unfortunately,
despite repeated appeals to the powers-that-be in the government, the desperate
need to enhance the credibility of these newly founded institutions has not
been taken care of. Many well-wishers have flagged the need for reviewing the
process of selection of regulators and strengthening the capacity of commissions.
How long will India
19 Oct 2010 |
Mr S K Chand
| The Financial Express
The ensuing IPO of Coal India Limited (CIL) is the best thing to happen to the Indian coal industry. CIL, a mammoth monopoly for several decades, will now be held accountable to scores of shareholders. After the nationalisation of the coal industry in the early 1970s, the coal sector has remained opaque under CIL, with minimal reforms compared to other energy sectors.
The CIL's advertising campaign for the IPO, which opiates us with a feeling of great coal-richness, is a powerful one. "We are the world's largest coal reserve holder" shouts the advertisement quoting from a Credit Rating and Information Services of India Ltd (Crisil) report. Crisil and some others including Credit Analysis and Research (CARE) have rated the IPO a Grade 5 on the basis of, inter alia, dominance of CIL in the Indian coal industry (read monopoly), high turnover, low cost of production and strong fundamentals.
The reports and advertisements convey that there are huge domestic coal reserves with CIL and the energy security of India is, and would remain, intact for decades to come. Though there are serious shortages of coal in India currently, this is a passing phase and, therefore, there is no cause for worry.
Are we really as coal-rich as made out by the advertisements? The facts seem to be at a variance with the claims made.
The fact is that instead of using an internationally acceptable procedure for reporting geological resources, the Geological Survey of India (GSI) continues to report the coal resource base annually on the basis of Indian Standard Procedure (ISP) code of 1956 vintage. ISP is a purely geological classification system, with total disregard to the economic or technical feasibility of extraction of the reported resources. Various categories of reserves (such as 'proved', 'indicated' and 'inferred') are based only on the density of exploratory boreholes drilled in the ground. The resources (and not reserves) as reported under ISP are cumulative and gross geological information, which includes even the coal that has been extracted and burned during the last couple of centuries of coal mining in India. Thus, this figure would continue to increase year after year and stands at 276.81 billion tonnes (BT) as on April 2010. However, being highly inflated, this figure cannot and should not form the basis for future energy planning for the country.
There is a range of numbers for coal reserves in India mentioned in the draft red herring prospectus (DRHP), filed by CIL, which is quite confusing. It quotes the Integrated Energy Policy Report of Planning Commission, (August 2006) wherein it is mentioned that "known coal reserves are projected to last for over 80 years at the 2006 levels of production", which again gives a picture of abundance of domestic coal resources.
Various sources in the recent past have estimated the country's total extractable reserves (including over 200-odd captive coal blocks allotted to private parties and others) to last for only 40-50 years. The Tenth Five-Year Plan estimated it at less than 18 BT in 2002. The Central Mine Planning and Design Institute estimated it to be less than 40 BT in 2001, later revised to 52 BT in 2005. Planning Commission estimated that at a 5% rate of growth of coal consumption, India's domestic coal reserves may last only for 45 years, which translates to about 50 BT. The Expert Committee on Road Map for coal sector reforms and the Integrated Energy Policy: report of the Expert Committee, indicate that India has an estimated 56-71 BT of extractable coal.
CIL in its DRHP has also posted a figure of 64.8 BT as the total coal resources available to it as on April 2010, as classified under ISP guidelines with geological reserves of proved, indicated and inferred categories being 52.55 BT, 10.3 BT and 1.94 BT, respectively. From the total coal resources of 64.8 BT, only 30.36 BT had been considered for mining studies (mine planning and feasibility studies) from which CIL finally estimates extractable reserves to be only 21.8 BT.
The meagre extractable reserves are the result of decades of cherry-picking by CIL. In its effort to maximise profits and cover up inefficiencies, CIL has been exploring and exploiting only shallow deposits, which is evident from the fact that almost 90% coal production comes from opencast mines from a depth of less than 200 metres. A GSI report shows that over 60% of gross geological resources lie within 300 metres. CIL has no plans for digging any deeper than 300 metres for more coal.
However, with burgeoning energy demand led by the power sector, CIL, in the near future, will be forced to explore and exploit deeper seams for maintaining its production levels. It will become essential for the 'world's largest coal producing company' to invest heavily in the very near future if it is to remain the numero uno. This would mean that future cost of coal production would be much higher compared to what CIL is currently incurring and with much reduced profits.
Under Asian skies
24 Aug 2010 |
Dr R K Pachauri
| The Hindustan Times
The 16th South Asian Association for Regional Cooperation (Saarc) summit held earlier this year in Bhutan focused on climate change. The subcontinent is facing unprecedented disasters with extreme precipitation events in many locations and public perception seems to link these with climate change.
Single events like those occurring in Pakistan, Ladakh and Uttarakhand can't, on a scientific basis, be ascribed to human-induced climate change. But on the basis of assessed observations the Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC) has come up with clear findings.
It's been stated clearly that the frequency of heavy precipitation events has increased over most areas. There is also an increase in the frequency and intensity of floods and droughts apart from the incidence of extreme high sea level having increased worldwide (defined as the highest 1 per cent of hourly values of observed sea level at a station for a given reference period). The situation in a large area of Pakistan is tragic. At the same time, a cloudburst in Ladakh has led to intensive damage to property and many deaths. Children in Uttarakhand have lost their lives as a result of a massive downpour. Pakistan, in particular, needs global assistance on a gigantic scale because over 20 million people would need to be rehabilitated and fed.
The threat of large-scale outbreak of diseases, as a consequence of floods, would overwhelm the ability of existing services and infrastructure to deal with the problem. India's offer of $5 million for emergency relief is a welcome gesture, which, fortunately, the Government of Pakistan has accepted. However, given the scale of requirements of assistance that Pakistan now faces, it'd be appropriate for India to increase this assistance to a much higher level.
Nature sees no political boundaries, and in this respect it's heartening that the summit in Thimphu chose climate change as the central theme. In the final declaration from this summit, the leaders of Saarc nations emphasised the need to initiate a process to formulate a common Saarc position for the forthcoming Conference of the Parties (CoP) to the United Nations Framework Convention on Climate Change (UNFCCC) to be held in Cancún, Mexico.
On the eve of the Rio Summit in 1992, all the Saarc nations requested India to organise a briefing workshop in New Delhi, conducted by The Energy and Resources Institute (Teri). A similar request by Pakistan and Sri Lanka was also met through a similar workshop organised by Teri before the CoP in Kyoto in 1997.
The impacts of climate change, though diverse across the subcontinent, have several commonalities. The AR4 found that climate change is expected to exacerbate existing stresses on water resources stemming from population growth and economic and land use change, including urbanisation. While this is an observation applicable to most parts of the globe, it's particularly relevant to South Asia. Furthermore, on a regional scale, mountain snow pack, glaciers and small icecaps play a crucial role in fresh water availability. Widespread mass losses from glaciers and reductions in snow cover over recent decades are projected to accelerate throughout the 21st century, reducing water availability, hydropower potential, and changing seasonality of flows in regions supplied by meltwater from major mountain ranges (e.g. Hindu-Kush, Himalaya, Andes) where more than one sixth of the world population currently lives.
Unfortunately, the extent of research and monitoring of glacier activity related to the Himalayas is inadequate in South Asia. On the other hand, there is a considerably higher level of measurement, monitoring and research on glaciers in Tibet. In a well-researched paper, a group of Chinese scientists have concluded, "It's possible that the warm-dry trend in the Central Himalayas will continue under the projected future warming and that glacier retreat will accelerate".
South Asia is particularly vulnerable to the impacts of climate change and a coordinated and cooperative approach for meeting this challenge across the Saarc region would benefit every member-country, through pooling of expertise and consolidation of experience.
The Bangladesh Rural Advancement Committee - a well-known non-governmental organisation from Bangladesh - is active today in the flood-hit areas of Pakistan, using a wealth of expertise gained from tackling perennial floods in Bangladesh.
The first step is to ensure linkages among research institutions in the region because we need to assess projected future impacts of climate change using sophisticated modelling with downscaled global climate models. This is being carried out by Teri for many Indian states where the diversity of ecosystems and topography is such that the impacts of climate change are also diverse. Through the creation and dissemination of relevant knowledge related to climate change, the public and governments of this region can be sensitised to action that is needed for adaptation to the impacts of climate change and appropriate mitigation measures.
The Bhutan summit needs an urgent follow-up by bringing various institutions and organisations together to meet this common challenge, and as a unique confidence-building measure. Political barriers should not come in the way of ensuring the welfare and livelihoods of the current and future generations.
You and I can make Kyoto-2 work
03 Aug 2010 |
Dr R K Pachauri
| The Asian Age
The 16th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) is due to begin in less than four months from now, at Cancun, Mexico. As yet there are very few indications of significant milestones being achieved at that meeting. There are some who believe that the outcome of Cancun might turn out to be somewhat similar to the lack of strong steps forward witnessed last year at the 15th COP in Copenhagen.
For several months now there has been an expectation that the Senate of the United States would pass, in some form, a proposed bill that was introduced largely through the initiative of Senator John Kerry. However, this piece of legislation has not made any progress and for a variety of reasons most observers believe that perhaps legislation will not take place in the US till after the Congressional elections due to take place in November this year. After that what happens would depend largely on the political complexion of Congress as it emerges with a large number of new members.
Meanwhile, there are those officials in the administration who believe that much can be done through action by the executive branch of the government, particularly given the powers that the judiciary has provided to the United States Environment Protection Authority (USEPA). A very clear regulation to improve the energy efficiency of automobiles in the US is already in place. Another area where improvements in energy efficiency are economically viable is in the building sector. In fact, there are significant differences in energy efficiency of same-size buildings and for somewhat similar climates as between some countries of Europe and the US. A programme of incentives and disincentives could bring about an early and substantial improvement in energy efficiency in buildings in the US and, therefore, there could be a significant reduction in the emissions of greenhouse gases (GHGs). The Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC) clearly specifies that the most effective instrument for bringing about mitigation of GHGs would be placing a price on carbon. A substitute for this would, of course, be a set of incentives, disincentives and regulatory requirements that could achieve similar results in the short term.
There is currently a growing concern on the possibility of a gap developing between the end of the first commitment period of the Kyoto Protocol and the beginning of the second. The first period would be terminated at the end of 2012. However, if there is no agreement on actions to be taken in the second commitment period then clearly there is a possibility of the second period coming into force after a gap of time. It is with this in view that a proposal has now been introduced for discussion and possible action, by which some of the rigid requirements of the original version of the Kyoto Protocol - which is currently in force - would be modified to allow flexibility in countries joining and exiting the Protocol as an agreement emerges for the second commitment period. All this is being proposed essentially to see that an agreement is in place well before the end of 2012 and with adequate provision of time for the second commitment period coming into force without a gap.
While a global agreement has enormous significance for protecting the global commons, such as the earth\'s atmosphere which today is characterised by a rapid increase in the concentration of GHGs, action at the local level across the globe is now becoming increasingly imperative. The likelihood is that through widespread awareness on the likely impacts of climate change in different parts of the globe and the means by which mitigation of GHGs can take place, substantial action can be triggered at the local level across the globe. These actions will also create adequate confidence and a substantive basis to facilitate an agreement being reached at the global level.
One reason for expecting initiatives by communities and societies irrespective of any global agreement lies in the enormous co-benefits that would accrue from reduced GHG emissions. This is likely to happen because those actions which reduce these emissions, such as higher levels of energy efficiency in various sectors of the economy and a major increase in exploitation of renewable resources of energy, would also carry several attendant benefits. These would be in the nature of lower levels of air pollution at the local level which would create a range of health benefits, higher levels of energy security globally, higher employment, such as through projects based on renewable sources of energy and higher agricultural productivity which would ensure higher food security.
There is now growing evidence based on long-term observations which indicates that there is an increase in the intensity and frequency of floods, droughts, heat waves and extreme precipitation events. Public concern on this is also growing. It is not merely based on dissemination of the results of the AR4 but also as a consequence of observations by communities themselves on trends in changes of the climate systems which they are witnessing. The media, of course, has an important responsibility in spreading the results of scientific assessments, both in respect of the impacts of climate change and related adaptation measures as well as on opportunities and benefits associated with mitigation. It would, therefore, be reasonable to assume that understanding the human and economic costs of inaction and the net benefits from action would certainly create responses at the grassroots level that in the aggregate would provide the basis for a global agreement.
Meanwhile, it is important that the negotiators who are engaged in coming up with a future agreement, particularly in respect of the second commitment period of the Kyoto Protocol, devise practical and flexible approaches by which the second period is not delayed and does actually come into force by January 1, 2013. The world now has adequate experience in devising appropriate agreements that ensure a fair and effective response to the challenge of climate change across the globe and across all societies - an agreement that would hold and can be brought into force by a sizeable majority of nations.
Calculated risk
20 Jul 2010 |
Dr R K Pachauri
| The Asian Age
I wrote about the BP oil spill in the Gulf of Mexico in these columns on May 11, 2010. As it happens, the leak has now been plugged and while there is assurance about success being achieved to clean the spill, as of now a huge volume of oil is polluting the surface of the ocean and large quantities are being washed ashore. It is sad to see pictures of birds and other creatures suffering and dying and the continued threat not only to these living beings but also to those who are either living on the beaches of the affected areas or would like to enjoy recreation in these seaside locations.
The cost of environmental degradation worldwide is hardly ever estimated in precise terms. Of course, the cost to human society and human beings cannot be measured in dollar terms, such as in the case of air pollution that leads to high morbidity and mortality. There are varying estimates of how many people actually die as a result of air pollution, and in 1997, when The Energy and Resources Institute (TERI) released its \'Green India 2047\' report, documenting this country\'s record of environmental protection in the first 50 years of Independence, the figure we came up with of air pollution-induced mortality was staggering. A large part of the deaths that take place as a result of air pollution occur on account of indoor air pollution.
Sadly, even today over two billion people in the world carry out cooking indoors using poor quality biomass whose large quantities of emissions often remain trapped indoors because of poor ventilation in dwellings. TERI\'s estimate was that in India a total of 2.5 million lives are lost annually as a result of air pollution, including both rural as well as urban areas. The worst affected live in urban locations, particularly slum dwellers who are normally huddled in shanty towns by the roadside. They are, therefore, not only victims of indoor air pollution arising out of the burning of inferior quality cooking fuels but also outdoor air pollution which is created by dense automobile traffic and growing road congestion.
The lack of proper information and evaluation of the cost of environmental damage is one reason why the normal approach of various societies to risk management remains flawed and inadequate. The case of the Gulf of Mexico oil spill is a typical example of how expected benefits, say from deep sea drilling as in the case of the Deep Water Horizon well, are never measured against expected damage, which would be a function of estimated probabilities and the extent of damage associated with mishaps. In the case of low-probability but high-impact events or outcomes, the cost of timely prevention may appear high but is often fully justified because even with low probability if the impacts from a mishap turn out to be very high, the damage caused is incalculable and totally unacceptable in today\'s world. The need for risk management is best illustrated by the Bhopal gas tragedy: With the knowledge that the damage caused by the possible release of lethal gas would be staggering, even if the probability of such an occurrence was seen to be low, the owners and managers of that facility should rightly have invested adequately in safety prevention right at the beginning. But the world has apparently ignored the lessons it should have learnt from Bhopal.
One major problem which leads to the neglect of risks to society or negative impacts on the environment is the divergence between private costs and benefits versus social costs and benefits. In India, soon after Independence, we cut forests on a large scale because there were huge private benefits associated with exploitation of forest resources, but there was no consideration of the social costs that were incurred as a result. Much of the threat to wildlife today is a result of lack of attention and importance we attached to maximising net social benefits by conserving the forestry wealth of the country. The benefits from conserving forests and biodiversity often translate into private benefits as well, particularly for tribal societies who depend for their livelihood on ecosystem services provided by nature around them. Destruction and damage imposed on these ecosystem services has a direct adverse effect on the livelihoods of such communities which undoubtedly leads to social alienation as well. Clearly, the economic implications arising out of such alienation are seldom taken into account on an explicit basis. Each project at the micro level must necessarily look at the entire range of implications that it could have on society at large, even if its \'private benefits\' are attractive.
What is an area of continuing neglect at the micro level and can so easily be resolved is compounded several times over when it comes to global action. If we take the case of climate change, even though some may believe that the science of climate change does not tell us about likely negative impacts with precise, quantified probabilities, the sheer scale of the damage that could take place should compel decision-makers and society at large to adopt a sound risk-management approach. This is all the more justified because the actions required to mitigate the emissions of greenhouse gases and thereby help stabilise the earth\'s climate are really attractive for a variety of reasons, particularly in view of the co-benefits that arise as a result. Could it be that our myopia and consumerist desire to produce and consume more and more goods and services blinds us to the assessment and prevention of risks from the actions that we are taking today?
There is, of course, no need for alarm in any of these areas of human endeavours but perhaps we should at least consider Mahatma Gandhi\'s advice that clearly highlighted the choices before us: \'A technological society has two choices. First it can wait until catastrophic failures expose systemic deficiencies, distortion and self-deceptions\' Secondly, a culture can provide social checks and balances to correct for systemic distortion prior to catastrophic failures\'. At a minimum we should move away from self-deception in these matters.
Ideas for a better mineral policy
19 Jul 2010 |
Dr Maria Ligia Noronha
| The Economic Times
Many years of regulatory neglect have resulted in a growing disquiet towards mining in India. Distributive and environmental conflicts are evident in many mineral states. State collusion with the mining industry supports the view that the government does not always reflect the interest of the people. National and local regulatory frames are often in conflict. Land is a key contested site, given many unfair appropriations and inadequately-compensated damages to arable land.
If the country is to develop its mineral wealth, it needs to do things differently, not only because mining creates negative impacts, but also because mineral-rich states, such as Jharkhand, Orissa and Chhattisgarh - home to 65% of India\'s bauxite, 71% of coal and 46% of iron ore - are amongst those with the highest incidence of poverty. We need a more just mineral policy that focuses not just on rules and regulations that are indeed key, but also on more holistic outcomes from such development. To paraphrase from Amartya Sen\'s The Idea of Justice, what is required is \'the realisation of justice in the sense of nyaya, which is not just a matter of judging institutions and rules (niti) but judging societies themselves\'.
A mineral policy from a people\'s outcomes perspective will require, on the process side, not only improved coordination across and between government levels, but also operationalisation of popular sovereignty. This should involve a consultative process to establish \'no-go\' areas for mining; strict adherence to free prior, informed consent (FPIC) regarding project proposals; institutionalised, regular consultations with local bodies and gram sabhas, and an ombudsman for appropriate oversight of minerals development practice. Apart from environmentally- and socially-responsible practices from operators, appropriation, management and an equitable distribution of resource rents are key to support and ensure comprehensive outcomes.
The Teri study in 2007 on compensation issues argued that while compensation systems exist, these are unsatisfactory in scope and execution. Some recommendations of the study are found in the draft minerals policy, as well as in the XIII Finance Commission Report. But more is needed, including more coordination, given that mineral development involves different ministries. Policy also needs to create more permanent income streams to ensure intergenerational equity as these are exhaustible resources.
Australia\'s resource super profits tax (RSPT) has some lessons for India. It seeks to mop up 40% of the supernormal profit of the mining companies, replaces royalty and is supported by a lower rate of company income tax. The proceeds are to be used for wider budgetary support, but also in a pension fund. It is triggered at a threshold rate of 6% (long-term government bond rate) and has a 40% safety net for project losses. The tax triggered protests across Australia, and was a reason for Kevin Rudd\'s fall. While the tax may admit some reform in design and insufficient prior consultation, it is, in principle, required, given the rising prices of minerals.
India too needs such a tax. Economic rent from a natural resource is a surplus that arises from the intrinsic qualities of the resource, which may also be linked to its scarcity, and is not a product of the sweat and capital of the operator. High mineral prices over the last decade have significantly increased rents, but failed to benefit the public at large. The company\'s share of resource revenues should be based on the expected return from the capital invested which, in any case, already allows for interest plus the risk premium needed in the sector, and includes market-determined cost of all other factors of production. The surplus over this should belong to the owner.
In the Indian case, the owners are the federating states for onshore and the Centre for offshore minerals. Or the surplus could be treated as a fiscal commons and be collected by the Centre and shared with the states through fiscal transfers, but with a clear weight in favour of the mineral-rich but poor states. Whether and what share of the economic rent is captured by the owner depends on the kind of contractual relationship between the government and the company. India could, for example, examine the benefits of rate of returnbased profit-sharing contracts. This would involve an additional profits tax with negotiated rates. The threshold is fixed so that the investor gets an agreed rate of return, and when this is achieved, additional taxes are levied. For mineral riches to help the poor, clear guidelines for investment and use of funds collected through these taxes, and accountability and transparency are key.
Such funds can be used for conditional cash transfers to improve nutrition, education and health; to build physical and social infrastructure; and to invest in financial instruments that give safe and secure returns to fund current and inter-generational state outlays.
Such policy innovations will not only improve outcomes, but also reduce the \'above ground\' risks for companies.