Remarks by USAID/India Mission Director George Deikun at ASSOCHAM Summit on Clean Development Mechanism and Carbon Trading in India held on July 18, 2008 at Hotel Oberoi, New Delhi

July 18, 2008

USAID/India Mission Director George Deikun lighting the ceremonial lamp along with Mr. Kapil Sibal, Honorable Union Minister for Science and Technology and Earth Sciences, Government of India at the ASSOCHAM Summit on Clean Development Mechanism and Carbon Trading in India held at New Delhi. Photo Credit: USAID/India

Ladies and Gentlemen,

At the outset let me congratulate ASSOCHAM for taking the initiative in organizing this seminar. The timing could not have been better since Indian Government recently released (June 30, 2008) a National Action Plan on Climate Change and the group of G8 countries issued a declaration on Environment and Climate Change on July 8, 2008.

In my brief comments today, I intend to speak about the climate change issues in backdrop of the above two developments to promote India’s energy security in an environmentally sustainable manner.

Let me however begin by recognizing the strong positive correlation between energy use, economic growth and human development. This link is well understood and it is obvious that India needs to significantly increase its per capita consumption to provide a minimally acceptable level of well being for its people.

At the same time India’s economy needs to grow rapidly over the next two to three decades to eliminate endemic poverty. While significant progress has been made in several infrastructure sectors such as telecommunications and roads, the power sector has continued to lag behind despite introduction of several legal, policy and regulatory initiatives.

Studies by several experts indicate that if India is to continue growing at 8% over the next 10 years, the country’s power demand is likely to grow by over 100% from the current levels of 120 GW. The most ambitious projection, recently released by McKinsey, pegs the power demand to reach 315-335 GW levels by 2017. This increase is driven by (a) rapid growth in India’s manufacturing sector (b) increase by 14% per annum in residential consumption (c) electrification of over 100,000 villages under Ministry Of Power’s RGGVY (Rajiv Gandhi Grahmin Vidyutikaran Yoganna - National Rural Electrification) program and (d) realization of currently unmet demand due to load shedding.

The planned capacity additions will significantly increase emissions as the power sector is one of the principal contributors to green house gas emissions. It is in this context that I believe that the National Action Plan on Climate Change (NAPCC) released by Prime Minister Man Mohan Singh on June 30 is very timely and recognizes the fact that developing countries such as India and China have an important role to play in dealing with this global challenge. We are glad to note that India is open and willing to engage in multilateral negotiations under the auspices of the United Nations Framework Convention on Climate Change (UNFCC).

There are several positive features in the NAPCC which if translated into constructive and sustained action, have a potential to yield significant gains. The plan acknowledges need for further steps and has also emphasized public awareness and if needed, legislation at the central and state levels, to arrive at appropriate delegation of responsibility and authority for meeting some of the goals.

The eight national missions to be established under NAPCC have been asked to evolve specific plans spanning the remaining years of the 11th five year plan and the 12th five year plan. These plans will include objectives, strategies, plan of action, timeliness and monitoring and evaluation criteria. It is imperative that these plans are evolved with broad consensus among various stakeholders, including the private corporate sector and other consumers, and simultaneously establish institutional mechanism to monitor implementation progress over time.

We believe that the focus on energy efficiency and solar energy will attract significant attention and perhaps have the maximum potential to contribute to the larger objective of enhancing India’s energy security.

On energy efficiency a target of saving 10,000 MW has been considered by end of 2012 based on ongoing programs and four new planned initiatives. We believe that energy efficiency should be the mantra for all sectors undergoing rapid expansion such as buildings, manufacturing industries and water pumping for irrigated agriculture.

USAID has a rich and wide experience of working with Government of India on various aspects of energy efficiency. We collaborated on framing the Energy Conservation Act and establishment of the Bureau of Energy Efficiency (BEE) in 2001. Since then we have been engaged with BEE on various initiatives, the most recent being building codes, the Energy Conservation Building Code (ECBC), and launching training programs for architects and engineers for the Code’s implementation. The Green Building Centre in Hyderabad constructed as a public-private project is a shinning example of internalizing international and domestic best practices in building design and construction. USAID worked with Confederation of Indian Industry (CII) and Government of Andra Pradesh on this project which has since spurred an active Green Building movement throughout India.

Efficient utilization of energy in pumping ground water for irrigation also presents a significant potential for improving efficiencies. More than 30% of India’s electricity is used for pumping ground water. Pumps used in India are generally of small size and often have low efficiency. There is also related issue of ground water exploitation as water tables are fast receding deeper. It is critical that all options for internalizing efficiency in these two related sectors are explored. This may mean that politically difficult options such as pricing reform may need to be considered as a part of the strategy. USAID’s Water-Energy Nexus project (WENEXA) is working in collaboration with a number of utilities to develop sustainable solutions to this challenge.

Related to energy efficiency is the concept of bringing reduction in demand through efficient management of transmission and distribution networks. India’s ATC losses (Aggregate Technical and Commercial Losses) at 35% are among the highest in the world. Given that better management and technology can reduce losses to below 10%; it is possible to save over 15 GW through this route. We realized this problem early and have collaborated with Ministry of Power through an innovative project called DRUM (Distribution Reform, Upgrades and Management) to showcase best practices in management of distribution business and to build capacity of engineers and managers in electricity distribution companies. Over the last 4 years more than 20,000 staff have been trained under this project and a unique MBA program in Energy Management been institutionalized at Delhi’s Management Development Institute. one of India’s top business schools.

It is intended that 1000 MW of solar capacity is to be created by 2017. This is good! But we believe more is possible given the size of India and its high incidence of solar radiation over India.

There is also a need to look at policy initiatives to expand the market for renewable projects including solar. Thus instruments such as Renewable Energy Portfolio Standards, Renewable Energy Certificates and possible fiscal incentive packages will be needed. We have initiated a dialogue with Ministry of New and Renewable Energy (MNRE) to work on some of these issues as we believe that rapid expansion of renewable energy sources in India’s energy mix will be critical for meeting the climate change challenge and India’s energy needs in a sustainable manner.

I would like to end with a reference to clean coal and its applications in India and the South Asian region. According to studies, burning coal has caused about 40% of global CO2 emissions in recent years. Although India and other South Asian countries have ratified the Kyoto Protocol, they are only mandated to monitor and report emissions. Nevertheless recent developments such as the Washington Declaration of 2007, the UNFCC Conference in Bali and the most recent G8 Summit are beginning to focus increasingly on getting developing countries such as China and India to take concrete actions to reduce emissions. It is doubtful that goals such as stabilizing CO2 at 550 pppm by 2050 can be achieved without cooperation from China, India and other sizeable developing countries.

Technology transfer and cooperation can help. Carbon capture and sequestration (CCS) is a technology that would allow the continued use of coal as the CO2 emitted by their burning would be captured and pumped underground into sealed geologic formations such as depleted oil and gas reservoirs for long term storage. China and India have been parties to the US Department of Energy’s (DoE’s) FutureGen project which envisioned an integrated gasification combined-cycle technology (IGCC) plant with CCS. It is estimated that CCS could reduce CO2 emissions up to 90% and should be part of a global strategy to reduce greenhouse gas emissions. An intermediate step for CCS is to use captured CO2 for enhanced recovery of oil and gas where this is feasible. Mandating reductions in CO2 emissions via regulation will also help although mandates could also raise costs more than necessary. Once these incentives are in place and CCS technology is deployed in large scale and in multiple sites in the US, India, China or elsewhere, the technology should be available for worldwide application and probably at more affordable costs.

I would like to conclude with the message that we might be well at the beginning of the next technological boom based on alternative energy – the computing boom of the 1980s, the internet boom of the 1990s, and the biotech and nanotech boomlets of the early 2000s will be followed by the green energy boom of 2008 and beyond. The rapid, sustainable growth of the green and clean energy boom may well dictate the success the world will achieve in resolving the climate change issue.

Thank you.