Economic growth and luxurious narratives

Faltering economic growth provides an opportunity for fresh ideas on energy policy and climate change strategy.

A couple of weeks ago I attended a seminar on ‘Low carbon growth strategies for Karnataka.’ Here is a collection of my thoughts on the topic and the discussions that took place at the seminar.

India and most of its states enjoyed 8+ per cent annual economic growth for the better part of the last decade. This growth was quite prolific and for many non-economist observers, it appeared to be chugging along on its own steam. A whole host of narratives sprung up from different corners on how sacrificing on a few percentage points on economic growth could help promote their cause and lead to better outcomes overall for India. In the process, there was a certain instrumental maligning of economic growth that was not always evidence-based.

The UPA government’s narrative of inclusive growth is perhaps the dominant narrative of the time – essentially saying that many Indians were not able to enjoy the fruits of economic growth and this required a rights-based, redistribution-led approach to make it ostensibly more inclusive. Other narratives in the environmental space include ‘(ecologically) sustainable growth’, low-carbon growth and many more, which while acknowledging that growth was necessary, wanted the growth to have a far lower ecological cost or much lower carbon emissions, even if it sacrificed several percentage points.

With annual economic growth lower than 5 per cent today, many of these narratives feel anachronistic. These “growth-modifier” narratives were only possible because the Indian economy was enjoying a high growth rate. Apart from creating fiscal space in the short run for entitlement and subsidy programmes, high growth also created the narrative space that could house such ideas. This space has rapidly vanished over the last two years but various organisations and campaigns have failed to adapt to changing circumstances. Low-carbon economic growth is one such.

A low-carbon growth strategy for Karnataka appears superfluous for a second reason. It is far from clear whether Karnataka has a growth strategy at all. As The Transition State previously showed, Karnataka has grown more slowly and alleviated less poverty both compared to the national mean and to other higher income states in India. The new government in Karnataka that was formed in 2013 has failed to articulate an economic policy or bring about any large reforms thus far. Advocating for low-carbon growth strategies in the absence of a basic growth strategy seems out of place.

Poverty and Growth - Higher Income States

There is also a false equivalence between low-carbon growth and renewable energy-led growth. Low-carbon growth essentially focuses on climate mitigation and ignores adaptation (this blog would advocate for exactly the opposite,) calling for sectors like energy, transport and agriculture to adopt policies that reduce emissions. Ignoring international climate negotiations and India’s position for the moment, these low emission options are further constrained by misconceptions.

Nuclear energy and LNG are two prominent energy options that are both low-carbon but non-renewable. LNG produces less than 40 per cent of the emissions that coal does per unit of electricity generated and will likely be the leading reason for the United States reducing its carbon emissions over the next decade and more. On the other hand, nations like Germany which are trying to phase out nuclear power have already increased carbon emissions as a part of its Energiewende strategy, instead of decreasing them. The larger battle for climate change cannot be won by taking nuclear energy off the table, even if it is politically correct to do so. Evidence be damned.

Finally, most narratives on energy debates ignore the Indian context. High income countries are mostly those whose energy demands have plateaued, and thus “either-or” questions on energy options are justified. Coal or LNG, nuclear or renewables, wind or tidal, and more. All have associated trade-offs, and nations can choose based on domestic considerations and global pressures.

India’s energy demands are growing as the economy grows, and millions of Indians still do not have access to adequate electricity for domestic use. With an energy elasticity of growth at 0.9-1, it means that a doubling of India’s GDP will require us to nearly double power generation capacity. This is inescapable. So instead of an “either-or” debate, we must ask how we can increase power generation from all sources. How public policies can be designed such that it is easier to do business in the energy sector is an important question. It takes years to set up and operationalise all types of power plants, with bureaucratic and regulatory hurdles lengthening the process significantly. This along with growing political risk have to be managed far better.

Proponents of renewable energy also have a chance to shift from advocating for subsidies to make renewable energy work, and instead think of what policy changes can make it easier to deploy wind turbines, solar farms and more. Faltering economic growth is providing an opportunity for fresh ideas on energy policy and climate change strategy. And the cost of squandering them will be very high.

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