The government too wants to see a demand revival that is decidedly green. “There is an opportunity to prioritize efforts that work towards building a clean, resilient, and least-cost energy future for India, including electric vehicles, energy storage, and renewable energy programs”, notes a report by Niti Aayog
and Rocky Mountain Institute. “Towards a Clean Energy Economy: Post-COVID-19 Opportunities for India’s Energy and Mobility Sectors, 2020”.
Transition is, however, easy to show in energy sector. Not so in other sectors yet the pace has, surprisingly, risen. Automobile makers Maruti and Hyundai having fixed the emission norms in cars are investing to meet the corporate average fuel efficiency (CAFE) standards. They mandate changes in engines instead of just in emissions from the cars. Those standards will need to be adopted from April 2022, even though the industry body SIAM has warned the government not to ask the manufacturers to implement them as the “investments are very steep and the commensurate revenues have not been realised by the industry due to lack of consumer demand”.
In August, energy think tank Teri spearheaded a pledge
by Indian business as a “call to action” to repurpose their business activity to stimulate green growth in the wake of the Covid 19 pandemic. The list included the Tata group companies, Godrej, Flipkart, Delhi Airport and BPCL. Tellingly, the other major industrial groups stayed away. This ambivalence is particularly discerning in the insurance sector. The sector has become a key driver of the green story abroad, but despite the tie ups with those names, the domestic sector has yet to come up with implementable ideas to push investment in environmentally sound sector. Yet they risk being targeted by global investors
. As a study by OMFIF, the Official Monetary and Financial Institutions Forum, which describes itself as an independent think tank for central banking notes
socioeconomic resilience in the face of risks such as the pandemic and climate change is moving to the forefront of agendas across the financial sector.
There are some easy options the government is also exploring. The World Bank, for instance, has advised India to build its recovery green by expanding employment in forest related activities. “India can use the Mahatma Gandhi National Employment Guarantee Scheme (MGNREGS) and the Pradhan Mantri Garib Kalyan Rojgar Abhyaan
- which have a combined annual outlay of $20 billion - to build the country’s green infrastructure. These programs can help restore forests at scale, improve the quality of pastures, forests and wetlands, control erosion and forest fires, as well as sequester carbon and conserve biodiversity”, two of the Banks’ authors have written in a blog piece.
Of course there is room for tokenism. The recently signed India Denmark economic framework is labelled a Green Strategic Partnership principally as a nod to the Nordic nations’ focus as an environment champion. There has been better initiatives though. The centre has linked additional borrowing by the states to reforms in the electricity sector and while it has opposed by IISD as hard to understand
it does goad them to switch to lower power renewable energy.
As a result of these combined moves India based companies are being forced to examine the green option much more deeply this year, despite facing the largest ever recession. A Ficci-Dhruva Advisors survey among company CEOs puts the broader recovery of the economy despite the healthy PMI and GST numbers at still at least a couple of quarters away. Over 30 per cent of the companies expect their capacity utilisation to remain below 50 per cent even in the second quarter. There are of course sectors which have perversely benefitted from the move away from green in the pandemic. None more so than the plastics industry. In his Independence day speech of 2019, Prime Minister Narendra Modi had fast forwarded the plan to eliminate the use of single use plastics set for 2022 meaning to coincide it with the evocative date of October 2, the 150th birth anniversary of Mahatma Gandhi. The recycling industry was expected to take the brunt of the high manpower brunt of the phase out plan, still most city governments were within an inch of banning the use of plastic with less than 50 microns, the usual definition of single use plastic. The pandemic has pushed back the plan by years as this Business Standard
report noted. India produces close to 15,800 of metric kilotonne of polymers annually and aims to hit 3 per cent of the global export market by 2025 according to PlastIndia Foundation, an association representing the plastics industry. Jigish Doshi, President of the foundation, notes with relief, stay safe with plastics has become the tagline from the pandemic.
The same pandemic has, counter intuitively, made small business and local shops pivot the opposite way with a vengeance. An Amercian Express survey of this universe shows 45 percent of small businesses have started accepting contactless payments while 34 percent of this universe has started contactless methods of delivery to their consumers. These involve significant additional investments for each business, but the fear of losing more business has made them undertake it.
This will not be adequate though. Lesser says overall, climate commitments continue to fall short of what is needed. “Only a fraction of companies have made net-zero promises, only a small segment of countries have put sufficient policies in place, and green stimulus packages thus far fall short of the investments needed to achieve a path that meets the Paris targets”. This is despite the short term window that has opened up for tapping the global markets, as another research report notes “2020 will end up being a very strong year for sovereign (bond) issuance even though it fell off a cliff in March”.
There are costs. As balance sheets need to be repaired post the pandemic the enthusiasm for green money will be costly. An Oxford Economics Report notes achieving carbon neutrality by 2050 won’t be easy. “We estimate it will require a huge increase in global energy investment – in excess of 1% of world GDP”. So after the initial recovery if growth prospects dim, support for green deals that require new borrowing at higher costs could be hard to come by for Indian companies. Add to it the costs of digital transformation and artificial intelligence and companies are looking at significant additional leverage.