Is India cleaner than China

Global energy

Joachim Betz

To person

Dr. rer. soc., born 1946; adjunct professor at the University of Hamburg; research assistant at the GIGA Institute for Asian Studies, Rothenbaumchaussee 32, 20148 Hamburg. [email protected]

A sustainable global energy policy, and even less a sustainable climate policy, is absolutely impossible without the responsible cooperation of the emerging countries, especially the emerging powers China and India. This applies regardless of how climate-friendly and energy-saving the classic industrialized countries of the Organization for Economic Cooperation and Development (OECD) are. [1] China came in 2013 for 22.4 percent of global energy demand and 27 percent of global CO2Emissions to India for 5.7 and 6 percent respectively. By 2040, the shares of these countries - based on relatively cautiously estimated economic growth and the energy and climate policy measures already implemented or planned - are expected to be 23.4 and 25 percent (China) and 9.8 and 14.1 percent (India ). [2] In the meantime, China has overtaken the USA as the largest energy consumer and producer of greenhouse gases; India is expected to leave the USA behind in terms of emissions by 2035, but not in terms of energy consumption. For both indicators, China and India will account for almost all of the global growth through 2040.

With regard to the consumption of global energy reserves, this is less of a worry, because technological innovations (keyword: fracking) and the discovery or exploitation of new deposits will not shrink as quickly as feared. If the global consumption of fossil energy resources does not increase further, the proven coal reserves will last for 122 years, oil and gas for 52 and 61 years, respectively. [3] Of course, the economically exploitable deposits will concentrate even more than before on the Arab and Central Asian regions; at the same time, China and India's dependence on oil and gas imports (and increasingly also on coal) will grow. This prospect aroused fears in both countries about the continuation of their own economic growth and promoted an economically nationalist policy of securing energy sources abroad, which takes little account of the political quality of the supplier countries.

The growing contribution of both countries to emissions-related global warming is more worrying and will continue to rise unless a radical change in policy occurs. In order to preserve the chance of limiting global warming to no more than two degrees Celsius, the total emissions must be 1,000 gigatons of CO2 be restricted. However, two thirds of this global carbon budget was already exhausted in 2014. [4] The conclusion of the contract at the climate conference in Paris in 2015 does little to change this shrinkage, as the national emission reduction obligations (INDCs) previously reported there are still well above the path of two degrees Celsius. [5] China and India alone will consume around 50 percent of the remaining carbon budget [6] if they do not take further steps to save energy and promote renewable energies. This does not relieve the classical industrialized countries of the need to do something similar for their part, nor does it negate the historical responsibility of the rich countries for most of the enrichment of the atmosphere with greenhouse gases, which the Chinese and Indian governments like to invoke. But China and India also follow selfish paths in terms of energy and climate policy and reduce their consumption and emissions less than would be appropriate to their aggregate per capita share of the remaining carbon budget or a distribution of the adaptation costs according to the lowest adaptation costs in an international comparison. [ 7] That has already struck the less prosperous developing countries, which therefore also demanded greater efforts from these two countries.

China and India are facing similar challenges: further economic growth and poverty reduction, the growth of the middle classes who are keen to consume and a necessary structural change to higher-quality production, security of energy supply and reduction of air pollution - all of these must be reconciled with one another. Since the energy sector is responsible for around three quarters of greenhouse gas emissions in both countries, it makes no sense to artificially separate energy, climate and general environmental policy; the prospects for afforestation, land use improvement and waste management can therefore be disregarded. It is central to understanding the position of China and India at climate conferences and in relation to their own energy policy first their strong economic dependence on fossil fuels, especially coal, Secondly their increasing dependence on the import of these fuels, both of which will only be reduced slowly and to a limited extent by the expansion of renewable energy sources (plus the promotion of nuclear energy). The governments of both countries are therefore not unjustifiably concerned about the security of their energy supply and are making every effort to diversify their suppliers and supply routes (via pipelines or gas terminals), to better develop their own dwindling sources and to focus more on the exploration and production of oil - and investing gas sources abroad through state-owned energy companies.

In both countries, the large population figures, increasing prosperity and the growing share of industry in the gross domestic product ensure that the reductions in emissions and energy intensity of production that are definitely presentable are overshadowed by further economic growth. Consequently, the governments of both countries have not given a short-term target for capping their emissions in preparation for the conference in Paris, but have postponed this cap to 2030 (China) or indefinitely (India).

Chinese energy sector

In China, coal dominates energy consumption more than any other emerging power with a share of two thirds; in the case of electricity production, it is almost 90 percent (albeit with a slightly decreasing trend). [8] China currently consumes almost half of the world's coal production. Even if all plans to develop renewable energies and to save energy are implemented, the share of coal will remain very large in the medium term. The dominance of coal is not surprising as the country is by far the largest coal producer and has 14 percent of the world's reserves. As in India, some of the Chinese coal is of inferior quality, and extraction is becoming increasingly difficult and expensive because of the need to deepen the shafts. The reserves are mainly located in the northern and western provinces, which are difficult to deal with the associated environmental problems. In contrast, consumption is concentrated in the coastal regions. Since 2002, China has had to import more and more coal. Because the domestic production costs have risen sharply, among other things because of new coal taxes and the closure of hundreds of mines, which the government enforced to protect the environment. The Chinese coal industry is highly fragmented and is mainly dominated by state-owned companies and to a lesser extent by municipal companies. The latter have already been closed many times due to their inefficiency. Foreign investments have been permitted since 2008, including the planned expansion of coal liquefaction.

The second most important source of energy in China is oil: it accounts for 20 percent of energy consumption. Although domestic oil production is increasing rapidly, it cannot keep up with consumption; the import quota has now risen to over 50 percent; in 2035 it will be 72 percent. In 2014, China became the largest oil importer ahead of the US. Deliveries are mainly from the Middle East, but also from African countries. Gas accounts for 5 percent of energy consumption - and the trend is rising, as gas is intended to partially replace coal as an energy source in order to reduce air pollution. China has had to import gas since 2007, and the import quota is already a third. In order to increase delivery security, the import of liquefied gas via terminals was advanced, and numerous pipelines were laid to Central Asian suppliers as well as to Myanmar and Siberia. The Chinese oil and gas sector is organized oligopolistically: The market is essentially dominated by three large corporations. Private foreign investors are in fact limited to offshore production and more difficult domestic production facilities. Since 2009 there has been a state oil reserve that is supposed to ensure consumption for 120 days. The oil and gas prices are regulated by the state, but are geared to the world market with a certain delay. Since 2011 there has been a tax surcharge on oil and gas production to encourage efficiency gains.

So far, nuclear energy has only covered 1 percent of energy demand in China - despite the rapid expansion of capacities, which was slowed down after the Fukushima incident. Renewable energies are to account for 15 percent of energy consumption by 2020; Chinese investments in these energy sources have been highest in the world for years. Due to the price, hydropower is the main source and currently accounts for 2.2 percent of energy consumption, but at least 17 percent for electricity generation. When it comes to wind power, too, China is now the second largest consumer in the world. At the same time, there is heavy investment in the development of solar energy; leading manufacturers of wind power and solar systems are based in China. Nonetheless, wind and solar energy only account for 1 percent of Chinese energy consumption. The remaining approximately 6 percent is accounted for by traditional energy sources (dung, wood, etc.).

Indian energy sector

In India, around two thirds of energy demand is met by fossil fuels - and the trend is increasing because poor households are increasingly switching from biomass to electricity when cooking. [9] This will intensify as the network is expanded; 20 percent of the population are still without electricity. Coal, the most important and currently by far the cheapest energy source, accounts for a proportion of energy consumption that is significantly above the international average and (in contrast to China) is growing: in 2013 it was 44 percent. It is mainly used for the production of electricity, steel and cement. Although India is the third largest coal producer in the world and has considerable reserves, it is also importing more and more because the dominant state supplier (Coal India) has lagged behind the production target for years and the state railways cannot handle the transport from the production areas to the customers. Due to its inferior quality, Indian coal is also comparatively expensive and often unsuitable for industrial coking. State-owned companies are allowed to mine coal for general demand, but private companies only for their own use. Their interest remains cautious, however, because Coal India assigns the extraction areas to them and therefore reserves the best for itself. Additional obstacles to a rapid increase in coal production are the slow processing of environmental regulations, problems with the acquisition of land (because of the necessary consent of the owners and their compensation) and resistance of the well-organized workers to efficiency increases and privatization. The Indian government has promised to remedy a number of problems and is determined to double coal production by 2019, but some of the legislative proposals are stalling. [10]

Oil covers 23 percent of India's energy demand. Its funding has stagnated since the mid-1990s. Increasing imports are putting a considerable strain on the already strained current account; by 2030, the oil import quota is expected to rise to 90 percent. The oil reserves that can still be developed are largely offshore (in the Bay of Bengal), so they are relatively expensive to extract. The oil sector is also dominated by state-owned companies, although private companies from Germany and abroad have been allowed to hold shares of up to 100 percent in new oil and gas projects since 1999. However, their initially keen interest in the exploitation of deposits quickly subsided. The state-owned companies also retained a dominant influence on the refineries and pipelines, and the state often set the sales prices well below the provision costs and only partially compensated the companies for the shortfall. With oil prices rising around the world, this system could no longer be maintained. The prices for gasoline, later for diesel, were brought almost to world market level and the subsidies for kerosene and household gas were reduced.

The production of gas, which accounts for 6 percent of energy consumption, rose only moderately despite newly discovered reserves. From 2004 India will have to import increasing amounts of gas. This will increase with the planned conversion of a number of power plants from coal to gas and the increased use of gas-powered vehicles. As with oil, state-owned companies are the main producers and also hold a monopoly on transport and distribution. Gas prices are regulated according to a complicated formula, with power plants and fertilizer manufacturers being favored, as is the case with delivery. Gas imports are suffering from a lack of gas terminals and unsolved problems with the expansion of pipelines that would have to run through Pakistan.

The minimal share of nuclear power in the energy supply has essentially to do with the nuclear isolation of India after the 1998 nuclear tests. After the subcontinent was cut off from the supply of fuel and nuclear technology for a long time, the nuclear agreement with the USA led to the reopening in 2008. As a result, the Indian government has significantly expanded its plans to build new nuclear reactors (there are currently 21); but its implementation still suffers from legal differences with American companies over liability in the event of nuclear accidents. In addition, the protests of the Indian population against the planned nuclear facilities are increasing.

Renewable energies are becoming an increasingly important part of the Indian energy mix; their share is currently around 27 percent. Hydropower has so far been number one in renewable energies, but expansion has been delayed for years due to problems with land acquisition and resettlement. Biomass has traditionally been an important component of rural energy supply, but is likely to lose its importance due to the connection of rural communities to the power grid. Wind energy will account for the next largest share of renewable energies, but will soon be overtaken by solar energy, the expansion of which is being pushed by the Indian government. India is already in fifth place worldwide in terms of wind power generation, has considerable capacities for expanding solar energy and a considerable number of companies for the production of wind and solar power systems. Although electricity from solar and wind power plants is still significantly more expensive than that from coal-fired power plants, despite various discounts, the difference is shrinking quickly and will almost be leveled in 15 years. It should be noted, however, that even with the implementation of the ambitious expansion plans, renewable energies can only cover a moderate part of the increasing energy demand. Further problems are the insufficient expansion of lines in the regions of main consumption, the mixed compliance with feed-in regulations in some Union states, the temporary suspension of tax breaks for wind turbines, unrealistic targets for the expansion, still high import quotas for the systems and the not inconsiderable space requirement renewable energy sources.