Business Today

Time to Go Green

The private sector should be given incentives to reduce greenhouse gas generation
Ashok V Desai   Delhi     Print Edition: May 21, 2017

It is April, but the temperatures in north India are already touching their June levels. By the time we get to June, they may well be even higher: the past few years have been breaking maximum temperature records, and so may this year. We think of the unprecedented heat only in terms of discomfort and palliatives - a fan, a water cooler, an air conditioner, or a trip to cooler climes - these are the times when people recognize the wisdom of planting a son or daughter in America or Europe. But, however much India may have prospered, most of its people are far from such financial comfort as would enable them to send a child abroad. For them, the costs of summer heat are tangible.

In a paper Robin Burgess of London School of Economics put out in March with other economists, they ask how many additional deaths unusually hot days result in. They run correlations on figures of temperatures and mortality in 1957-2000. For the United States, the answer is virtually zero. For India, suppose the long-term average temperature in a district on a particular day in the year is 70-74 degrees Fahrenheit (21-23 degrees Centigrade), and it goes up to 97 degrees in one year. That day will see 0.03 per cent more deaths than average in the United States, but 0.74 per cent more deaths in India. That may not sound much; but if the high temperatures last for a fortnight, it will result in 10 per cent more deaths.

Ashok V Desai

The higher deaths are almost entirely in villages; urban death rates are little affected by temperatures. It could be because villagers have to spend more time in the open and are more exposed to sunshine, or because high temperatures increase evaporation, reduce crop yields, and leave farmers and agricultural workers poorer. And death is only the extreme; those millions who are not dispatched will seek relief that will cost resources and reduce work done.

India has done virtually nothing to combat global warming; in fact, it has impeded international action at times. It is not the only country to do so; and it believes it has good reason to be obstructive, namely that its historical contribution to accumulated greenhouse gases is small. But global warming does not distinguish between virtuous and vicious countries; it affects all of them - the already warm tropical countries more than ones closer to the poles. They must all combat global warming together - by using technologies that reduce generation of greenhouse gases. India has been asking advanced countries to share their knowledge of such technologies, with little effect. Technology is a valuable asset, and advanced countries want to be paid for its use - if they are prepared to part with it at all. It may be unreasonable for them to deny India its use; but such lack of reason is a part of national sovereignty.

Hence it is in India's interest to accumulate such assets. It should invest in inventing or imitating such technologies; and since the government of India is not very good at technological innovation, it should give the private sector an incentive to reduce greenhouse gas generation. The best way to do so is to tax fuels that generate greenhouse gases. India's energy consumption is 650 million tonnes oil equivalent. The international price of crude oil is currently $50 a barrel, or $350 a tonne. So, the international value of India's energy consumption is $227.5 billion or `13.65 lakh crore. Arun Jaitley's 2017 budget proposed to spend `21.47 lakh crore. A tax of one-third (33 per cent) on energy would enable the finance minister to abolish income tax. A tax of a fifth (20 per cent) would be more than sufficient to abolish excise duties. I think Indians would be delighted to be rid of these vexatious taxes, and would get down seriously to economise on energy if they were energised by the end of these taxes.

The writer is a senior economist and was chief consultant in the Finance Ministry from 1991 to 1993

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