‘Carrot & stick’ policy for faster green transition, ET EnergyWorld


Policy consistency, technological innovation, and penalty on polluters will together accelerate the energy transition and the country’s drive towards sustainability, top industry executives said during a panel discussion as part of the ET

“In India, what we have suffered in the past is a lack of clear, sustainable long term policy solutions. Now, it seems to have changed… We need to be clear on one thing: we cannot keep changing this. So today it’s EV (electric vehicle) and tomorrow it should not become hybrid, or tomorrow it should not become some other technology solution,” said Rajeev Chaba, CEO Emeritus, MG MotorIndia.

“Long-term policy is important, so the industry does not get confused.” India has begun focusing on EVs as part of the larger drive to clean up road transport, which almost entirely depends on oil and gas and produces enormous emissions that must be tackled to achieve climate goals. The government has offered purchase subsidies and production-linked incentives with an aim to boost local production of EVs and help build its local supply chain, which is overwhelmingly dependent on China today.

EV sales have risen and MG Motor’s Chaba expects its share in new passenger vehicle sales to rise to 30% in 2030 from just about 2-3% today.

Consumers are asking for sustainable products, which are also affordable, he said, adding that the younger generation is willing to pay a premium for such products, while the older generation is still focused on cost.

To cut emissions, original equipment makers (OEMs) could reduce the consumption of metal in cars by beginning to use thinner but stronger steel, said Dilip Oommen, CEO of ArcelorMittal Nippon Steel India, a joint venture between the world’s leading steel companies.

This thinner steel would, however, be more expensive on a per unit basis than the commonly used sheets today but due to its lower weight could ultimately reduce the overall cost for the carmakers.

“The point is the entire value chain has to be green,” Oommen said, explaining how fuel providers, steel makers, and car manufacturers are all linked and all the participants in the value chain must act to have a significant impact on industrial emissions.

Companies’ decarbonisation plans are under increased scrutiny from lenders and equity investors, Oommen said, adding that higher cost has been a big hurdle in the adoption of sustainable technologies. The cost of green hydrogen is prohibitive and it must come down to $1.5 per kg from $5-6 today, he said. And in the intermediate phase, the steelmakers can use natural gas in their blast furnaces.

He also pushed for the carbon capture utilisation and storage (CCUS) technology, arguing that the country should at least begin with carbon storage and the utilisation could follow. The need is to ensure that we reduce the use of fossil fuels for generating power, he said. May be (use) nuclear energy, which has its issues but at least it’s a clean fuel, he added.

Tapping scrap to reuse steel was a good idea but had its limitations, he said. “The availability of scrap is going to diminish,” he said, adding that as more countries try to pursue the same path, import of steel scraps will sharply reduce and India will have to largely depend on domestic scrap.

Major steel products would have a life of about 30 years and compared to today’s requirements, India didn’t produce or consume much steel 30 years ago, he said, explaining why the domestic supply of scrap would be limited.

Oommen also pushed for penalties for emitters and rewards for those who reduce emissions. India is beginning to develop a carbon market, which will encourage industries to switch to cleaner paths. Businesses need “certain clarity of direction” for a smoother transition, said Anirban Mukherjee, managing director & partner – Boston Consulting Group (BCG).

“We need to act fast, but we should not confuse speed with haste.” The global economic recovery from the pandemic, the supply chain disruptions, and the Ukraine war brought on the world an unprecedented energy crisis in the past two years, pushing some countries to increase the use of highly polluting coal. The developed world faced a cost-of-living crisis and this cast doubt on whether an orderly energy transition can be achieved.

While the broader national climate goals have been set, there was a need to “go sector by sector” and chart a preferred path to sustainability, Mukherjee said.

Digitalisation in general and the increased use of artificial intelligence could come in handy in attacking climate problems by bringing in low-cost solutions, Mukherjee said, adding that startups could help in this. India still has limited startups in the energy and mobility value chain but will likely expand as the market scales up, he said. “But if you look at the unicorns in Europe, they are across the board — they are in carbon accounting, carbon markets, mobility, alternative fuels, hydrogen.”

To really move fast and be effective, the industry will need a collaborative approach, said MG Motor’s Chaba. “We know the building blocks. The need is to have a lot of partnerships and collaborations because one person or one institution cannot do it on its own,” he said.

Technology companies are going to play a major role in society’s green pursuit, Chaba said. “They are going to disrupt all industries,” he added.

Industry urged to use domestic tech, innovation

India has laid a well-structured climate road map backed with the right policies and is on track to achieve its green goals, environment secretary Leena Nandan said while advising the industry to double up efforts at using local innovations and sustainable tech.

“We are absolutely on track and raised the bar higher,” Nandan said during the ET Sustainability Forum’s panel discussion, referring to India’s 2070 netzero goal as well as the pledge to source 50% of national energy consumption from non-fossil fuel sources by 2030.

“The road map is very well structured, organised in terms of not just the thinking, but also the policy interventions.” Globally, businesses are increasingly expected to switch swiftly to sustainable practices, and such demands, which initially came from the government or the regulators, are now also coming from other segments of society.

“We are moving to a regime where consumers expect sustainability not just in terms of product but also the process,” she added.

Increased consumer expectations may force companies to act faster. Also, the consumers expecting sustainable products and practices are also often those willing to pay a higher price for such products and services.

Regulations with respect to sustainability by Sebi have also been evolving in the country. “There is a lot of consultation (by Sebi) and that has been done on a regular basis with the industry so that there is a commonality of understanding,” she said.

“And of course, the focus of the ESG is that it has to be something which does not ultimately become (some) kind of ‘greenwashing’ because that is something that has become a concern.”

Technology and innovation can play a critical role in the faster transition. “There is a lot of innovation in our country. So now the time has come when the industry also has to take advantage of this innovation.”

[Brand Connect Initiative]

  • Published On Jun 16, 2023 at 10:58 AM IST

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