India’s Global Climate Ambition and its Impact on the Manufacturing Sector

Climate change is one of the most significant and difficult issues that the development world has ever confronted. Previous months have seen a blast of action on environmental change, to the place where it is currently exceedingly difficult to get a paper without learning about a significant new environment related drive from the business or policymaking local area. This isn’t is to be expected, as plainly environmental change will have economy-wide effects, and make administrative, physical, and reputational gambles for a wide scope of organizations.

India is among the nations generally powerless against environmental change. It has probably the most noteworthy thickness of monetary action on the planet, and extremely huge quantities of destitute individuals who depend on the regular asset base for their livelihoods, with a high reliance on precipitation.

Environmental change would address extra weight on the biological and financial frameworks that are as of now confronting colossal strain because of quick industrialization, urbanization and monetary turn of events. The new report by IPCC makes sense of the inescapable impacts of environmental change and is surprisingly serious and dangers will raise with higher temperature and furthermore making an irreversible effect.
 

Climate Change and Manufacturing Sector
India’s gross domestic product (GDP) at current prices stood at Rs. 51.23 lakh crore (US$ 694.93 billion) in Q1-FY22, as per the provisional estimates of GDP for the Q1-2021-22.

Manufacturing is considered as one of the potential and high growth sectors in India. Under the aegis of “AtmaNirbhar Bharat Abhiyaan” ,Hon’ble Prime Minister of India has launched the ‘Make in India’ program which aims to position India on the world map as a leader in manufacturing and give global recognition to the Indian economy.

India’s GDP has been performing below par as per the forecasted numbers and recently RBI has lowered outlook for FY 2022-23 to 7.2% and this has been done in view of the fact that economic activity is barely above pre-pandemic levels however is recovering steadily.
 

Over the next 50 years, it is believed that the effect of climate change will be more visible in major sectors leading to annual losses. These industries are services (government and private), manufacturing, retail and tourism, construction, and transport an currently account for more than 80% of India’s GDP of which more than 14 % of weightage is aligned with manufacturing sector. A study done by Deloitte assesses that by 2070, these five industries alone would experience an annual loss in the value added to GDP of more than $1.5 trillion per year.
 

India’s Climate Change policy has been articulated through two key documents i.e. National Action Plan on Climate Change(NAPCC) adopted on June 30, 2008 and the other being Intended Nationally Determined Commitments(INDC) submitted to the UN Framework Convention on Climate Change(UNFCCC) in October 2, 2015. The 8 National Missions spelled out in the NAPCC were set against this backdrop. During COP26, India has opened its clean energy targets to the wider audience committing to move towards net zero by 2070 and shall reduce the total projected carbon emissions by one billion tonnes from now onwards till 2030.

The Road Ahead
Now is the time when India need to act for preventing the country from eluding $35 trillion in economic potential over the next 50 years due to lack of proper effort against climate change, a new report from the Deloitte Economics Institute has said.

Decarbonisation is the new economic engine- Rapid decarbonisation can lead to gains for India’s economy of nearly US $11 trillion in present value terms by 2070 and the options fall into one of the following three categories:

Government Schemes like The Perform, Achieve and Trade (PAT) : The EE market is in the 7th cycle of PAT and the energy saving certificates (ESCerts) are playing a key role in creating a “pull strategy” for converting industries to sustainable divisions.

Internal Carbon Pricing : Internal carbon pricing encourages innovation and sustained economic competitiveness. This innovative mechanism increase overall efficiency, helps in forecasting low carbon economy and thereby yielding profits.

Demand-side measures: Decreasing the demand for an industrial product should lead to lower production and CO2 emissions. For example, increasing the circularity of products, e.g., by increasing recycling or reuse of plastics and steel, would lessen CO2 emissions by reducing the production of virgin materials.
 

Energy-efficiency improvements: Bringing topics like Energy Efficiency from “shopfloor” to “Board room” , thereby creating more awareness amongst decision makers.

Electrification of heat: Emissions from the use of fossil fuels to generate heat can be abated by switching to furnaces, boilers, and heat pumps that run on zero-carbon electricity, thereby leading to optimum utilisation of resources.

Biomass usage: Like hydrogen, sustainably produced biomass can be used in place of some fuels and feedstocks. Depending on the fuel or feedstock required, biomass in a solid (wood, charcoal), liquid (biodiesel, bioethanol), or gaseous (biogas) form can be used. For example, steel producers in Brazil use charcoal as a fuel and feedstock instead of coal, and chemical producers in several European countries experiment with bio-naphtha in chemicals production.

Industry 4.0: is creating a revolution the companies used to manufacture products and thereby creating a rapid change to industries, technology and business processes in the 21st century due to increasing interconnectivity and smart automation(like IOT). There is a need of using digitisation technologies that shall lead to process improvements and support in the betterment of climate change.

India’s transformation will need technology, finance – and leadership. If successful, it would blaze a trail for the emerging world.

Time for an Action
Climate change endangers the well-being of people and the planet. Delayed action risks triggering impacts of climate change so catastrophic our world will become unrecognizable. A concerted, global effort to leverage resources across countries will be needed to mainstream these new technologies. India must lead the charge if we are to reap the benefits of these new approaches to manufacturing, lest we end up in the historical trap of technology dependence and the resulting apathy to resource efficiency. A thoughtful and holistic strategy is required to be developed for catalysing climate ambitions from India and thereby paving the way for low-carbon development model.

- Rahul Sharma, Manager - Strategy and MD’s Offfice, CESL