Untraditional SecurityOCTOBER 9, 2022

Industrial Revolution through Environmentalism: Green Tech Race between India and China

Team Red Lantern Analytica

Directorate of Intelligence

Net zero refers to reducing greenhouse gas emissions to as close to zero as feasible, with any leftover emissions being reabsorbed by the atmosphere, for example by seas and forests. India has committed to achieving the net-zero emissions by 2070. Achieving net-zero will require tremendous innovation for both energy transition and industrial decarbonization. India has been through three full phases of Industrial Revolution. The first phase itself introduced modern technology to India and the next phases were a refinement into the same. Consequently, every industrial age has made companies more efficient, productive and profitable. The impact of industries on our environment, however, has continued unabated.

Boston Consulting Group, the American global management consulting firm in its latest report titled, “The Next “Digital”: Unlocking $50 Billion Green Tech Opportunity”, stated that green-tech growth is driven by the increasing adoption of sustainable use, cases across IoT (Internet of Things), cloud computing, data platforms & analytics, digital twin, and blockchain, indicating clear positive signs of a vast opportunity of $45-55 billion every year. This is expected to grow at 25-30% annually over the next five years.

This BCG report illustrates that COP26 (26th United Nations Climate Change conference held in Glasgow, United Kingdom in 2021) has been a major milestone event for governments, corporations & citizens of the world, in realizing the impact of our existence on the environment. It has mobilized the private sector globally, with 5,200+ businesses & 450+ financial institutes, accounting for 40% of financial assets, committing to science-based net-zero targets. The good news is that green-tech investments have increased from $5 billion in cumulative investments in 2016 to $10 billion in cumulative investments in 2021.

For green-tech investors, IoT, analytics, and cloud computing are the favourites, with each technology accounting for more than $3 billion in investments respectively. Moreover, while the bulk of this growth is expected in developed economies in North America and Europe, as illustrated by the report, Asia is also expected to grow rapidly with various countries, including India, committing to net-zero targets under the Paris agreement and its subsequent Conference of Parties. Moreover, as per the latest analysis done in 2021, by World Economic Forum and Oliver Wyman corporation, approximately US$50 trillion in incremental investments is required by 2050 to transition the global economy to net-zero emissions and avert a climate catastrophe. However, most countries cannot easily provide such support through huge investments, and it tends to remain a global challenge unless a more inclusive stakeholder capitalist model is adopted.

While many countries are marshalling their financial institutions to adequately support industry innovation, China is advantaged given the state’s vital role in both the financial sector and beyond, the fact that is largely associated with it having a communist identity. This offers China a unique opportunity to champion the green-tech revolution through homegrown yet globally appealing innovations and strong financial sector support. The subsidies provided by the State has helped the green energy sector to develop that led to reduction in the cost solar and wind energy by a half of its earlier costs. However, they are still expensive than the coal generated electricity but China is uniquely placed in order to undercut its rivals’ costs.

The formula credited to make China the global manufacturing giant it is today are low-cost labour (in many instances sourced free from ethnic minorities kept as prisoners in Concentration Camps which the Chinese Communist Party prefers to call as “Re-education Camps), cheap money (with dubious records as the Chinese state is notorious for its exceptionally opaque system) and plenty of raw materials (made possible in many cases by Chinese Debt traps on poorer nations where China forces the Debt taking countries to award exclusive mining and industrial licenses to Chinese state owned firms), not to mention the other atrocities like human organ trading and DNA profiling of Muslim minorities of Uyghur and Turkic rootd, and persecution of Falun Gong and Tibetans by China in order to derive such benefits in its favour. These questionable practices looks to have boosted the green technology industry that for decades was hobbled by high costs. China’s success in this field is reciprocated by the fact that China already has over 50 percent of the global market for solar panels. Its companies are now looking to export their wind turbines.

Analysts say as technologies advance and a wider market for these systems develops, the costs of wind and solar power will come down to the point where they match that of coal-powered electricity on a grid. At that point, solar and energy producers could sell electricity without state aid and this in China is getting more closer to reality.

As for India, as per the India Energy Outlook Report of 2021, over 80% of its electricity produce comes from burning coal, oil and biomass. Energy usage has doubled in India, since 2000 and, power generation accounts for more than half of the country’s CO2 emissions. The IEA (International Energy Agency, a Paris-based autonomous intergovernmental organisation) predicts that the growth in India’s demand for energy will outpace any other nation until at least 2040. At the same time an appraisal report published by the UNDP and the article by NITI Aayog quoting the same, has stated that conventional electricity grids are difficult to extend to remote areas, and hence alternative solutions can be found in green energy technology.

To make the most of India’s green energy potential for its Aspirational Districts, two complementary interventions can be suggested. The first is to boost the manufacture of green energy technology through Production-Linked Incentives. This will generate supply, increase exports of world-class green energy products, and create employment. The second is to install and commission small-scale green energy capacity across the Aspirational Districts. Its usage by the community will improve the quality of life, vitalize the local economy, and generate demand. All of this together will generate a cycle of socioeconomic growth.

Solar energy currently accounts for just 4% of India’s power generation. The IEA report predicts that India shall need to spend $1.4 trillion over the next 20 years to make its energy supply sustainable – that’s 70% more than provided in current government policy planning. As the domestic oil and gas supplies seem to be unable to keep pace with growing demand and the said report warns that price and market volatility could cause India problems unless it switches to a green energy future. Big infrastructure and machinery investments will be needed to deliver India’s rapid economic growth and the IEA says this must be sustainable, otherwise the new equipment could account for 60% of all emissions by the late 2030s.

Despite the challenges, India’s achievements to date have been impressive, that can be seen through the successful campaign to promote the use of highly energy efficient LED lighting by most households. On the other hand, with the growth in renewable energy, many consumers still face unreliable electricity supplies and over 600 million people still use firewood for cooking. The IEA says reliable power supplies are also key to reducing India’s chronic levels of air pollution. In the World Economic Forum’s Energy Transition Index, 2020, India, which was ranked 74th out of the 115 nations studied, was singled out as one of only 11 nations to have made “consistent and measurable progress on their energy transition over the past six years.

Although, India is regarded as the third largest contributor in the carbon dioxide emissions as of 2022, yet the growth that India is making towards attaining the goal that has been set out by itself for itself seem achievable. The key to it is being persistent from all directions. To challenge China and its growing influence and hegemony in not just Asia but the world, India needs to up its game to meet the demands of the market while catering to the Environment as well. Only when the goal of Sustainable Development is clear and set out large, can India reach to the great heights in the green technology, thereby making its name and giving a threat to China in becoming the next superpower.

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[1] This is the organisation’s central paradox: SAARC is designed to keep contentious disputes outside the room, but those disputes can determine whether the room is convened at all. India–Pakistan tensions have repeatedly obstructed summit-level engagement, while the deterioration of Pakistan–Afghanistan relations adds another layer of friction. The consequences are not confined to diplomacy. When leaders cannot meet, it becomes harder to secure political direction, approve ambitious initiatives and reassure officials that cross-border projects will survive the next crisis. Still, it would be too simple to attribute SAARC’s paralysis exclusively to one bilateral relationship. The consensus rule gives every member a veto, and weak implementation, limited institutional resources, uneven political commitment and low levels of regional economic interdependence have also constrained the organisation. A serious revival therefore requires more than a summit announcement. 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