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India’s energy boom: Cause for hope or fear?

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Hello everyone and welcome back. As we dive into today’s newsletter, I want to start with big news from Canary Wharf, where the IFRS fund operates. You may remember that at COP26 the accounting body revealed An ambitious goal Establish global standards for green disclosure with the launch of the International Standards Board (ISSB).

The ISSB is now teaming up with the Global Reporting Initiative (GRI) to adapt to their sustainable standards, with each being represented on the other’s advisory body. The goal is to address the uncertainty about how the GRI-based standards will integrate with the new standards coming from the ISSB. The two bodies are Promises to cooperate closely To avoid conflicts and confusion between investor-focused capital market standards developed by the ISSB, and the GRI reporting framework with a greater focus on social and environmental impacts.

But today’s newsletter takes us from London to Mumbai, where Simon interviewed a number of business leaders about India’s push for low – carbon development. And James Farnieh highlights a serious controversy over Australia’s carbon credit market. Please continue reading. Patrick Temple-West

Will India help or interfere with the global climate struggle?

“We will always be seen as a punching bag,” Present Jane, CEO of the Indian Electric Company JSW Energy, told me last week. Took the bulk of the blame On the dilution of the wording of the final agreement on coal. Like other business people I met on my trip to Mumbai, Jane saw the country’s damn goat as a scandal given the fact that other large economies have much higher carbon emissions per capita. “I truly believe we are doing a lot more than what is expected of us,” he said.

I spoke to Jane during my first visit to Mumbai since 2019, when I finished a three-year post as the city’s FT reporter. Since my departure there has been a growing focus on India’s green economy: Prime Minister Narendra Modi has pledged to triple renewable electricity capacity in this decade, pledging to zero carbon emissions by 2070. This month Mumbai authorities – where there are shiny new electric buses – went further and said the city would come To this target by 2050.

India’s energy transition speed has powerful implications for the global climate struggle. Under the base scenario in an International Energy Agency report Last year, India’s carbon dioxide emissions – already the third highest in any country – were expected to rise by 50% by 2040, completely eliminating Europe’s projected emissions cuts at the time.

But as the IEA noted, there is huge potential for India’s development to go in a much cleaner way: “More than any other large economy, India’s energy future depends on buildings and factories that have not yet been built, and vehicles and devices not yet built. Buy… It represents A huge opening for a policy to steer India on a safer and more sustainable path. “

And as this policy emerges at an accelerated pace, some of India’s major corporations – and the investors who fund them – are recognizing a historic opportunity. The business empires of Mukesh Ambani and Gutam Adani, the two richest people in India, have pledged $ 126 billion in green energy investment.

Local financial activity in this area still has room for growth. EverSource Capital – a joint venture between the private equity group Everstone and its subsidiary BP Lightsource – is one of the few Indian funds focusing on clean technology opportunities. EverSource was established with initial funding from the UK and India governments – which was crucial in securing the interest of private investors, CEO Dhanpal Jhaveri told me. With a $ 741 million management, EverSource’s investments range from a solar park developer to an electric bus operator.

Investing in India’s clinical technology space has come with some headaches, said Jabhari, who has just analyzed a possible investment in electric cars. “There is still no market in India – several thousand cars are sold a year,” Jabhari added. While these sales are growing at an annual growth rate of more than 100 percent, it is impossible to say how much India’s path will follow other major economies. “It’s a completely different market structure. It’s very difficult.”

Still, executives are similar about the chances of financing clean energy – even as foreign fund executives have cooled in the wider Indian market in recent months. “If I say I want money for green businesses, it’s a whole other ball game,” Prawer Sinha, CEO of Tata Power, told me. Jane from JSW agreed, pointing to the $ 700 million green bond issue. His company last year invested in hydroelectric energy.

Mukesh Ambani, Chairman of Reliance Industries © Reuters

But there are some crucial differences with the West. In developed countries, the application of solar and wind power has aided the rapid cessation of coal burping smoke plants. In India, the first priority is not replacement but additional capacity.

The country’s electricity consumption is 1,208 kilowatt-hours per person, according to the latest data released in 2020. That’s about a tenth of the U.S. figure. So it would be illogical, Jane said, for India to close existing coal plants as quickly as Western counterparts. “There is a responsibility to bring every citizen to a respectable level,” he added. “They need power.”

Despite this, new coal plants are falling off the agenda, mainly due to the huge declines in solar energy costs in the last decade. “No one is ready [sign new agreements] Buy long-term from coal-based plants, “said Sinha of Tata Power. A major unit of India’s largest conglomerate in terms of sales, his company wants renewable energy to account for 80% of its production capacity by 2030, compared to about 30% today.

One complicating factor, however, is the government’s push to spur the production of local solar panels through financial incentives – and impose tariffs on Chinese imports. This is a necessary step, Sinha said. “In the world, people have shied away from their responsibility and said everything will be made in China,” he added. “India needs to create the production infrastructure.”

Others in the sector are concerned about the significance of delaying localization for the rate of increase in solar capacity. Low-cost Chinese manufacturing “has really funded a large part of India’s energy transition,” said Mahesh Coley, co-founder of Grinco, a large renewable energy company this week Signed a deal With steel producer ArcelorMittal. The impetus for localization “will definitely bring back the transition to the sector” in the short term, Coley warned.

Anand Mahindra, Hugh

Anand Mahindra, Chairman of the Mahindra Group © Bloomberg

But all the business leaders I spoke to seemed confident in the government’s commitment to the impetus for clean power. “From a geopolitical point of view, independence from oil has become incredibly important,” Anand Mahindra, chairwoman of the Mahindra conglomerate, told me.

And there is no question about the scope of the green investment opportunity before us. The renewable energy level that India is aiming for by 2030 – 500 gigawatts – is almost seven times the installed capacity of the entire UK electricity system. And with about 20 million vehicles sold annually in India, it is set to become – eventually – a huge market for electric transport.

To some foreign observers, India’s economic growth seems to be one of the biggest obstacles to reducing global emissions. But in the eyes of the business leaders I met last week, the country has moved with impressive speed to spit out its economy, even as rich countries Failing to recruit Promised financial support. “We want to be climate advocates, a climate agent,” Jahbari told me. “But the idea that we can close the coal plants and fully electrify the transportation system in India tomorrow – that will not happen.” Simon Mundi

Australia’s carbon credit system under fire

Australia has over the years developed a reputation for being the most prominent climate retard in the rich world, but it has long maintained its huge carbon credit program as a saving grace. The government, through the Australian $ 4.5 billion ($ 3.4 billion) emissions reduction fund, has poured billions into all sorts of reduction projects, from natural fixation through planting trees and carbon in the ground, to avoiding emissions through the burning of methane emitted from landfills.

The plan has created a vibrant carbon-credit market that extends far beyond government direct funding. Companies seeking to offset their emissions and claim “carbon neutral” status have become major buyers of these credits.

But according to a new study by law professor at the National University of Australia Andrew Macintosh, a leading carbon market expert who was involved in the development of the Australian Carbon Credit Unit (ACCU) framework, the whole thing is a scam. He found that most of the credits do not represent a “real or additional reduction,” and called for the entire system to be thrown away – and the regulator overseeing it dismantled.

“People get ACCU for not clearing forests that will never be cleared; they get credits for growing trees that are already there; they get credits for growing forests in places that will never maintain permanent forests; and they get credits for running electric generators in large landfills that would work anyway.” , said.

“What’s going on is fraud on the environment, fraud on taxpayers and fraud on unknowingly private buyers of ACCUs, including private households who purchase ACCUs to offset their personal emissions.”

It was damn things from a very reliable source. The clean energy regulator said it would evaluate the study, but insisted that projects it regulates “have a high level of appreciation” and did not accept Macintosh’s claim that 70 to 80 percent of the credits were actually worthless.

The study focuses on three forms of carbon reduction: avoiding deforestation, forest regeneration and burning methane from landfills. But other methods are also criticized. Professor Richard Jacquard, an agricultural scientist and expert on carbon cycles at the University of Melbourne, told Moral Money that carbon credits in soil – which are growing in popularity – are also very dubious, as they are often given in places that could not actually last. Carbon in the soil for the long term.

The allegations are detrimental to the Australian government’s flagship climate policy. But are there broader lessons for global carbon markets?

According to the Australian Institute’s think tank, Polly Heming, who previously worked on the government’s carbon neutral certification program, governance is even more of an issue in other jurisdictions. “What’s really worrying about Australia is that we’re one of the only government – controlled carbon marketers. Most carbon credits [globally] Are under voluntary certification programs. “The fact that we are a government program and have not yet done it right is incredibly worrying,” she said. James Parnihu

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