India needs finance to achieve net zero goal: Sunil Duggal, CEO, Vedanta

India is not amongst the top three carbon emitters, yet it has decided to take a leadership role in finding solutions. Joining an increasing list of countries promising to achieve net zero emissions targets, India has promised to cut its carbon emissions to net zero by 2070 (albeit missing the goal of reaching the target by 2050). Sunil Duggal, CEO, Vedanta Limited in conversation with Business Today says if India manages to stay on path (for net zero) over the next decade, it will be the biggest global story of the next decade. Edited excerpts.

 
BT: What role will the next decade play for India in achieving its net-zero target of 2070?

SD: India has not caused the climate change problem and yet it has decided to take a leadership role in finding solutions. Net zero target is one part of that. The biggest global story of the next decade will be India’s rise as an economic powerhouse with sustainability and climate mitigation inextricably linked to it. No other country has attempted this so far. We will make history.

Of course, this will present a challenge for the government, society and industry as certain disruptions to business as usual will become the norm.  But every challenge is also an opportunity. The Government will have to continuously draw and redraw the overall policy framework for the energy transition. Industry must voluntarily and sensibly make operations sustainable, even if means a compromise with profitability in the short run. Similarly, every individual needs to ask themselves if their every action is leading to making this world a better place to live or not.

Achieving Net Zero by 2070 will depend upon progress made by 2030. A total mindset change from all stakeholders has to take place in the next ten years. After that, we will move to auto pilot.

BT: What are the challenges you foresee before the country?

SD: The energy transition and climate mitigation require big ticket investment. A minimum of $1 trillion in the next ten years. That’s 33 per cent of GDP at current levels and 20 per cent of GDP when we become a $5 trillion economy. Financing will be the key challenge especially if the advanced countries do not deliver on their promise of delivering concessional finance to emerging economies. In addition, there will be challenges like the current low level of R&D spending (0.7 per cent of GDP only), high taxation burdens, inadequate infrastructure for India wide energy distribution, slower adoption of EV’s which may be expensive for a highly price sensitive consumer market.

BT: What are the 5 or 10 immediate steps the country should take towards this goal?

SD: Firstly, India should create the policy and institutional structures which facilitate the rise of green finance. There are promising signs in the green bond market. It needs nurturing. Secondly, the energy transition will be heavily mineral-intensive. To ensure that we don’t move from import dependency on oil to import dependency on minerals, we must encourage exploration and mining of minerals like copper, zinc, bauxite, lithium, cobalt, etc. which are critical for energy transition initiatives like solar & wind energy, electric vehicles, battery storage, etc.

Next would be to facilitate building up domestic manufacturing of solar panels and wind turbines so that costlier imports can be avoided and renewable power is available at a cheaper cost. India should close down old and inefficient coal-fired power plants and taking steps to reduce emissions from existing assets. Lastly, focus on new technologies and their commercial viability like green hydrogen, storage, batteries.

BT: Which are the industries that need immediate attention for lowering India’s carbon emission and with what solutions?

SD: Heavy manufacturing industries like cement, fertilizers, aluminium, chemicals, steel and transportation are the two sectors which need to be decarbonized for the biggest impact. We can improve energy efficiency straight away; try and use renewable power for some aspects of the production chain. In road transport, we have to wait for the cost of vehicles to come down along with quickly developing the necessary infrastructure. For a sector like aviation, the use of ethanol and other biofuels is already being experimented.

BT: Do you believe India can achieve its net-zero goal? What work, policies, would be required for the same?

SD: Of course it can. It must. It will. As I have already said, it needs a mindset change and plenty of finance.

BT: What kind of annual funding would the country need towards achieving this goal? Where can the country source it from?

SD: As I have already said, it requires at least $100 billion a year. A big chunk has to come from advanced countries who are responsible for creating the problem of climate change. Only a limited amount can come from the government as the budget is limited and has so many completing claims. A significant portion can come from multilateral institutions in the form of concessional loans. The biggest part, I believe, must come from the private sector, from banks, bond markets, equity investors as they shift focus from business as usual to the new, emerging sectors and technologies.

BT: We talk about green technologies but do they have a clean footprint?

SD: Well, if electric vehicles are powered by electricity generated from coal or fossil fuels, then they do not have a green footprint. So, the entire ecosystem must be run by green technologies for a proper impact. Needless to say, some green activities may also involve some limited emission of carbon but at a much lower level than conventional technologies. They will be at a level that can be netted out to zero.

BT: Are there technologies that can help India capture carbon?

SD: All the current technologies for carbon capture and usage are in the pilot stage.  India needs to incentivise R&D into CCU (carbon capture and utilisation) and CCUS (carbon, capture, utilisation and storage) and push for an industry-academia alliance to solve teething problems of cost, CO2 leakage, and scaling of technology. Once these problems are solved then only India can think of a significant reduction in GHG emissions.

 

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