Stories to Watch: Looking back, looking forward

In this special edition of Stories to Watch, we give you our picks of the major climate, energy, and environment stories in 2020, and look ahead to policy developments that could shape the year to come.

Stir in the Power Sector: What to watch in 2021

By Ashwini K. Swain

Despite – and perhaps, because of – COVID-related disruptions, 2020 was a pivotal year for India’s electricity sector. While the pandemic exacerbated existing weaknesses in the sector, the Central government came up with several interventions and reform proposals to address immediate disruptions as well as longstanding electricity challenges. Some of these reforms were lauded and some were resisted. These reform prescriptions collectively have left important signals in favour of an electricity transition but fail to provide clear and coherent pathways.

The year 2021 will be crucial in defining the pathways to the ambitious targets set for the sector. The year also marks the beginning of the fourth decade of electricity reforms since the sector was opened to private investment in 1991. Three particular developments are worth watching in 2021.

• The Centre is planning to launch a Rs 3 trillion distribution reform programme. The reform-linked and performance-based bailout – to be financed by multilateral funding agencies – seeks to make distribution companies financially viable by 2025. Periodic bailouts have been a regular feature of electricity reforms, but without much success. It is worth watching how this largest-ever-bailout scheme builds on past experiences and engages with political opportunities and costs of reforms at the state level.

• In 2020, the Centre sought to simultaneously stimulate coal and renewable energy. The year also saw embryonic domestic demand for a coal phaseout, with some making economic and environmental arguments for the accelerated retirement of old, polluting coal power plants and no new coal capacity. It will be critical to see how these demands shape up in 2021.

• In 2020, India put restrictions on importing electrical equipment and prioritised domestic manufacturing. 2021 will be critical as the outcomes of this policy approach will be more evident. It will also be a critical year for shaping the policy approach towards domestic manufacturing. The Centre has already announced tax incentives and production-linked incentives to promote domestic manufacturing. It is worth watching how the government incentivises innovation and domestic intellectual property development while addressing redistributive concerns.

Uncertainty around India’s electricity demand in 2021 and beyond

By Anna Agarwal and Rajas Pandey

The lockdown measures and the economic slowdown in response to the pandemic have had a drastic impact on India’s electricity demand. Electricity demand from April to November 2020 was about 5% lower year-on-year, with the initial months of the lockdown witnessing much larger drops in demand. This unprecedented slowdown in electricity demand has been observed around the world. The IEA estimates that global electricity demand in 2020 will fall by 2%; in comparison, the fall in electricity demand after the 2009 global financial crisis was only 0.6%. Since the majority of the reduction in demand is due to lower commercial and industrial activities, the dominant source of revenue for Indian discoms, this has further added to the financial woes of discoms. On a brighter note, the share of renewables in the supply mix increased in the past few months.

It is estimated that India’s electricity demand in 2025 will be 7-17% lower compared to the case had we not been hit by the pandemic. As indicated by these wide-ranging estimates, there is a great deal of uncertainty about the trajectory of energy demand in 2021 and the years to come. A lot will be determined by how the pandemic evolves (and in turn, how the government and society responds), pathways of economic recovery, and how lasting the structural and behavioural changes brought about by the pandemic in a post-COVID world are.

Ordinance to create new air quality commission a milestone, but raises many questions

By Nona Uppal, Sharon Mathew and Santosh Harish

An increase in stubble burning in Punjab, coupled with adverse meteorological conditions that are seasonal in nature, resulted in a severely polluted late-October and November 2020 in the National Capital Region (NCR) and much of North India. In response, the Supreme Court (SC) set up a committee under retired SC judge, Justice Madan Lokur, to monitor stubble burning in NCR. Justice Lokur had chaired the “green bench” of the Supreme Court and passed crucial judgments cracking down on polluters. The Central Government subsequently promulgated an ordinance, drafted and cleared reportedly in a week and with no public input, constituting the ‘Commission for Air Quality Management in National Capital Region and Adjoining Areas’ (CAQM). CAQM’s jurisdiction spans the NCR and it has powers to override other agencies in this region. CAQM also replaced the five-day-old Lokur Committee, and the Environment Pollution (Prevention and Control) Authority created in 1998.

While the CAQM is a significant milestone for Indian air quality governance by recognising airshed management principles, the ordinance was a missed opportunity in developing a broader framework for other polluted regions in India. The CAQM marks a shift from committees formed under judicial and administrative orders with limited powers, to a greater onus on the executive. However, the dominant role of the central government in the CAQM also raises questions on federalism. Already, its ability to penalise stubble burning has emerged as a sticking point during the farmer protests, with the central government conceding to demands that the commission not impose fines.

The central government has appointed members of the Commission, with MM Kutty, as the Chairperson. Barring a few directions such as requiring NCR industries to switch over to PNG, the Commission remains in its setting-up phase, raising questions about the timing of its creation during the most polluted time of the year.

In 2020, climate change showed no signs of slowing

By Mandakini Chandra

In a year that will forever be known for the COVID-19 pandemic, climate change showed no signs of slowing. The EU’s Copernicus Climate Change Service announced that 2020 was on par with 2016 as the warmest year ever recorded. Scientists confirmed that several landmark extreme weather events – from the bushfires in Australia to the record-setting temperatures in the Arctic – were made more likely due to climate change. In India, a string of extreme events ­­– including record-high summer temperatures, locust infestations, and Super Cyclone Amphan (the fiercest and most expensive storm in the Bay of Bengal this century) – served as a grim reminder of the costs of a climate-disrupted world, even if definitive climate linkages are yet to be drawn. The country’s first comprehensive report on the impacts of climate change also forecasted more frequent and intense heat waves, droughts, and cyclones by the end of the century. Across the world, extreme weather events exacerbated losses in communities that were already hard-hit by the virus, confirming scientists’ predictions that “compound risks” would complicate recovery efforts.

Following widespread calls to “build back better,” this year also saw a flurry of economic stimulus packages promising climate and energy gains. For example, a third of the EU’s 1824.3 billion euro-package is expected to target ‘climate-related’ projects. Nigeria promised to install solar energy in 5 million households. Chile and Colombia have pledged to invest in ‘sustainable’ growth, with the latter allocating $4.1bn towards renewable energy projects. In the final weeks of 2020, US Congress passed a $900bn COVID-19 relief bill that will phase out hydrofluorocarbons and allocate $35bn towards clean energy innovation. Despite these advances, many countries have simultaneously redoubled their investments in high-carbon energy infrastructure and technology, prompting this year’s UNEP Emissions Gap Report to note that “the opening to use rescue and recovery measures to support a low-carbon transition has largely been missed.”

2020 was also the year of net-zero targets. China announced its pledge to achieve carbon-neutrality by 2060, to the surprise of many. Japan, South Korea, and Switzerland announced their intentions to reach net-zero emissions by 2050. Climate Action Tracker says these new targets have put “the Paris Agreement’s 1.5°C goal within striking distance.” PM Modi recently told an audience that India was the only major country on track to meet its goals under the Paris Agreement – a statement that was reiterated by India’s environment minister earlier this month. These efforts by countries to position themselves will likely intensify as nations meet in Glasgow for COP26 in November 2021.

Environmentality is a collection of ideas, perspectives, and commentary by researchers at the Initiative on Climate, Energy and Environment, Centre for Policy Research, New Delhi. Views and opinions expressed in this blog are solely those of the authors. They do not represent institutional views.