The climate change debate

India needs to develop a proactive agenda for the climate change negotiations in order to ensure that the idea of equity is adequately highlighted and its own interests are protected.

AMBUJ D. SAGAR

EVER since the signing of the Kyoto Protocol in December 1997, the climate issue has been heating up for India and the other developing countries. Before Kyoto the onus was on the industrialised countries to agree to legally binding commitments to contro l their greenhouse gas (GHG) emissions. But once this group took on such commitments, it is not surprising that the attention turned to the developing nations. After all, the really cheap opportunities for GHG abatement mostly lie in these nations, and " international cooperation" could greatly help the industrialised countries reduce the costs of meeting their targets by funding emission reductions in developing countries and then applying the credits for this reduction in their own countries (this appr oach was incorporated into the Kyoto Protocol and is termed the Clean Development Mechanism (CDM)). Details of the CDM and other flexibility mechanisms of the Kyoto Protocol are to be worked out at the sixth Conference of the Parties (COP-6) at The Hague in November 2000 - agreement on the principles, rules, modalities and guidelines governing these mechanisms is vital to the implementation of the Kyoto Protocol. While the Protocol mostly focusses on the industrialised countries, the design of the mecha nisms will be of immense consequence to India and the other developing countries.

Furthermore, now that the industrialised countries have finally agreed to make some commitments (consistent with the requirement in the Climate Convention for the industrialised countries to take the lead in dealing with climate change), there has been a n immediate step-up in the analysis and rhetoric (especially in the United States) with regard to the South's rising emission levels. It is likely that after COP-6 the focus will shift to binding commitments for the developing countries. There is no doub t that the developing countries should participate in a GHG-abatement regime - not only is this mandated by the Climate Convention, but this makes sense for India since it should (in theory at least) offer the country a way to make its economy more effic ient and also gain secondary benefits (such as reduced levels of local air pollution). The real questions that remain pertain to the conditions, timing, and nature of India's participation in any such regime.

It is from this perspective that developments such as the signing of the Joint Statement on Energy and Environment during the recent visit to India by President Bill Clinton, must be examined and India's own strategy in respect of the climate change nego tiations be refined and strengthened. It is imperative for India to link its stance on short-term issues, such as those on the CDM, with its long-term interests. This will require developing an aggressive and pro-active negotiating strategy.

Although the CDM may hold the promise of financial resources in the short term, agreeing to it without adequately considering India's long-term interests may turn out to be a costly bargain. So far India has been rightly cautious about the CDM. But the c ountry has not developed, in any substantive way, an alternative approach that bridges the current North-South gap and safeguards its long-term interests. One possibility would be to build a consensus among the G-77 countries to engage themselves on the CDM issue conditional upon the industrialised countries' willingness to address issues of long-term interest to India, namely, a fair allocation of the atmospheric commons. The latter is the key issue in the climate negotiations, and one on which the Nor th has assiduously avoided any discussion.

Such an allocation can be done only on the basis of a transparent, objective and logical framework, consistent with the principles on which the Climate Convention is based, to share the global problem. They would not have to try and strike deals for clea n technologies on concessional terms - doing so on a bilateral basis, as under the CDM, automatically puts India at a disadvantage. Once the North has compensated the South for the utilisation of its atmospheric resources, the latter could go shopping in the international technology market and reap the benefits of competition among suppliers. Such a course is impossible under any bilateral approach.

Beyond this linkage with its own long-term interest, India also has to do its homework on what it wants out of participation in the CDM. The Indian private sector has in the last couple of years been showing substantial interest in this mechanism. Its su dden interest in the climate issue, after a marked lack of concern earlier, appears to have been kindled by the possibility of receiving potentially large infusions of technology and/or financial resources under the CDM. But a private sector-driven agend a on the international cooperation front could lead to an undue emphasis on the simple acquisition of technology rather than on building indigenous R&D capabilities. Indian industry has little interest in, and does very little, R&D (which, in fact, is on e of the main reasons for its lack of dynamism in many sectors) - it accounts for less than 20 per cent of India's already meagre national R&D spending (compared to countries such as Japan where industry R&D spending is over 70 per cent of the national t otal or the U.S. where the corresponding figure is now about 65 per cent. When evaluated as a fraction of GNP - a standard metric in the science and technology arena - industrial R&D expenditures in India are over an order of magnitude smaller than in Ja pan and the U.S.). Climate change is a long-term problem and it will require, among other things, a technology-driven transition to a more GHG-efficient economy. This in turn will require indigenous capability to improve existing, and develop new, techno logies. Given its limited financial resources, it is infeasible for India to move its economy onto a more climate-friendly trajectory in the long term simply by acquiring technologies.

Thus it is in India's own interest to use the climate issue to build up and strengthen energy R&D capabilities. And it is particularly important that this also happens within the private sector - at present India's energy R&D efforts are confined almost completely to public-sector undertakings (PSUs). The performance of R&D in the private sector is critical for the development and diffusion of technologies deemed suitable by industry. This is not to say that the PSUs' R&D programmes should be ignored - they should be further strengthened too. Thus, upgrading the technological capabilities of its own industry should be a central objective of India's CDM strategy. And the initiative for this has to come from the government - there is no guarantee that le ft to its own devices the private sector will do this, given its track record. Since it is the Government of India that is the signatory to the FCCC and is ultimately responsible for ensuring that India will meet its commitments in the long term, it is w ithin its rights to set conditionalities on the domestic industry's participation in the CDM.

There is one more issue regarding the CDM. This pertains to benefit-sharing under CDM projects - that is to say, what will be the implicit price per tonne of carbon (or its equivalent for other GHGs) that we will get from any project? Consider the amount of carbon saved as the commodity being produced by CDM projects. The production cost of this commodity can be thought of as the total investment for the project divided by the total amount of carbon saved. But each tonne of this carbon credit transferre d to the North obviates the need for GHG abatement there with much higher marginal costs; otherwise these projects will not exist. The key issue for India is, then, to capture a part of this difference between the local production cost of the commodity a nd the expenditure avoided to the "buyers". Could coordination, for example among the major developing countries, that is, the suppliers of CDM credits, be useful in this regard? Such thinking should be a central part of Indian strategy with respect to t he CDM.

VIEWED in this context, the Joint Statement on Energy and Environment presents a mixed picture. From one perspective, it is heartening that the Indian government did not acquiesce blindly to the United States on the CDM issue and other contentious issues under the Kyoto Protocol. And India did not accept any commitments - the targets of a 10 per cent share for renewable energy in nationwide electricity capacity addition by the year 2012, as well as a 15 per cent improvement in energy efficiency by 2007- 08 are only a statement of intent - although the Joint Statement may be projected by the U.S. as an acceptance of voluntary commitments or a reversal of India's position. Already, the previous statement signed by Jaswant Singh and U.S. Secretary of Energ y Bill Richardson in October 1999 has been interpreted in the U.S. as proof of a change in India's posture. Given that India has staunchly opposed voluntary commitments (as have most other countries), it is important for India to indicate to its G-77 col leagues that this Statement is not an abdication of responsibility to stand united with them on the climate issue. There is also some concern that an expression of these targets in a bilateral forum lends them greater credibility. Once again, the Indian government needs to highlight clearly that these are non-binding expressions of intent to orient the trajectory of the Indian energy economy and these cannot be taken to have any deeper meaning in the climate discussions. Most industrialised countries, f or example, did not even come close to meeting the non-binding FCCC-related targets agreed to by them in 1992 in a multilateral forum, that is, to roll back, by 2000, their GHG emissions to 1990 levels, without any repercussions for them. It should be cl arified that as in that case, if India cannot meet its intended targets, all that it is guilty of is ambition in its domestic environmental goals.

On the downside, however, the Statement seems to focus more on clean technologies than on R&D and technological capabilities - the U.S. obviously looks at India as a market for such technologies. But the history of cleaner production efforts has shown th at these require not just advanced technologies but improved management and innovation within firms. Thus the absence in the Statement of a major and central focus on R&D and on strengthening indigenous capabilities is a lacuna that will need to be modif ied in further discussions on the climate issue. The one notable failing of the Joint Statement was the lack of success on the part of India in getting an acknowledgment of the importance of the allocation issue for India. This, however, may not be due t o lack of effort on India's part - over the years the U.S. Government has taken great pains to keep this issue off the climate change agenda.

THE road to, and from, COP-6 will be far from smooth. Given that this is a particularly critical juncture for India in the climate negotiations, special care must be taken to discuss and integrate the important issues. This will require analytical effort s not just from the government, but also by non-governmental organisations, industry, academia and other research institutions. Policy options and strategies need to be debated among all the participants, as opposed to the current approach that often rel ies on individual, direct lines of communication to the government and does not allow scrutiny by other experts of the analysis behind specific positions. The transparency engendered by the former approach will not only improve the quality of the analysi s and build synergy among the participants but also help in building a national consensus on the climate issue.

While exact are difficult to obtain, the governments of industrialised countries spend between $2 to 3 billion a year on climate-related research. The portion of this amount set apart for policy research, combined with private funds (from industry and fo undations), has created a powerful machinery for policy analysis within the North. Given the complexity of the climate issue, a few bureaucrats and a small number of individual experts in India cannot hope to match the huge analytical firepower the count ries of the North have invested in to protect their interests. India has done reasonably well in the past in safeguarding its national interests on this issue, but instead of being complacent, it must develop creative approaches to utilise better its dom estic expertise to develop a national strategy. This is India's best bet to counter the heat that it will increasingly feel in this arena.

Lastly, as the domestic policy debate in the industrialised countries has shown, given the fundamental inter-linkages of GHG emissions with almost all forms of economic activity, the GHG abatement issue must be analysed in the context of its implication for national economies, in terms of competitiveness and development trajectories. Hence, in the industrialised countries, the national stance on the issue has been guided mostly by economic, not environmental, considerations, and by domestic, not global, interests. And recognising the importance of the issue, decisions about it are made at the highest levels of government. It is this aspect of the climate debate - that it is an issue with substantial economic and strategic implications for India - that needs to be driven home to the politicians who cannot look beyond trade and foreign investment, nuclear issues and Pakistan on the foreign policy agenda. The media, with the help of analysts, could play a crucial role here by educating the public and the politicians about the importance of the issue for India.

All of this add up to an ambitious agenda, but one that is consistent with the importance of the climate issue. Major decisions will be made in the climate change arena over the next few years, decisions that will have significant and long-term implicati ons for India. India's efforts, along with those of the other developing countries, will determine the extent to which the issue of equity is injected into the discussions, and whether India's national interests and the global climate can be protected si multaneously.

Ambuj D. Sagar is a Research Fellow at the John F. Kennedy School of Government at Harvard University, and is currently a visiting researcher at the Tata Energy Research Institute.