Climate Change and Energy Transition: Dealing with Trade-offs | Indian Economy for UPSC CSE PDF Download

 Page 1


CHAPTER
06
CLIMATE CHANGE AND 
ENERGY TRANSITION: 
DEALING WITH TRADE-
OFFS
Despite being one of the fastest-growing economies in the World, India’s annual per 
capita carbon emission is only about one-third of the global average. India envisions a 
'Viksit Bharat' by 2047, which translates to 'Developed India'. This vision and the goal 
of achieving Net Zero carbon emissions by 2070 guide the country’s interventions for 
high and robust economic growth, which is inclusive and environmentally sustainable. 
Access to stable energy at a reasonable cost at a pace required to power ambitious 
targets while on a low-carbon pathway is a sine quo non for development. This task 
is a challenge, considering that cleaner and greener energy sources require viable 
battery storage technologies and access to critical minerals to allow these sources to be 
stable energy suppliers. Balancing development needs with a low-carbon pathway is a 
tightrope, especially when financed predominantly through domestic resources.
INTRODUCTION
6.1. Since the last Economic Survey was written, there has been no dearth of conferences, 
meetings, and summits dedicated to climate change. It continues to dominate policy and 
other discourses around the world. It provides a ready-made topic for think tanks, experts, 
and policy wonks to appear suitably concerned. However, the world is realising what experts 
and policymakers in advanced nations are resisting - that its current approach to dealing with 
climate change is flawed for one very simple reason. It continues to ignore trade-offs. But 
practical men and women have been unable to avoid recognising trade-offs. Countries had to 
push back their own timelines.
6.2. The United Kingdom postponed its decision to ban the sale of vehicles that run on petrol 
and diesel for five years from 2030 to 2035. Germany had to dilute its rules for banning boilers 
running on fossil fuels before they could be passed. The rise of alternative political parties 
in developed nations is attributed to the public's resistance to climate-related rules that are 
perceived as unfairly targeting the poor and low-income by raising their cost of living. According 
to Bloomberg, German businesses cite rising energy costs as the single biggest reason for 
relocating out of the country
1
. That is the crux of the challenge that governments are grappling with.
6.3. Alternative energy sources require fiscal subsidies to be affordable. However, most 
governments worldwide are fiscally stretched, especially after dealing with the economic and 
1  ‘Germany’s Days as an Industrial Superpower Are Coming to an End’, 10th February 2024, Bloomberg (https://
www.bloomberg.com/news/features/2024-02-10/why-germany-s-days-as-an-industrial-superpower-are-
coming-to-an-end)
Page 2


CHAPTER
06
CLIMATE CHANGE AND 
ENERGY TRANSITION: 
DEALING WITH TRADE-
OFFS
Despite being one of the fastest-growing economies in the World, India’s annual per 
capita carbon emission is only about one-third of the global average. India envisions a 
'Viksit Bharat' by 2047, which translates to 'Developed India'. This vision and the goal 
of achieving Net Zero carbon emissions by 2070 guide the country’s interventions for 
high and robust economic growth, which is inclusive and environmentally sustainable. 
Access to stable energy at a reasonable cost at a pace required to power ambitious 
targets while on a low-carbon pathway is a sine quo non for development. This task 
is a challenge, considering that cleaner and greener energy sources require viable 
battery storage technologies and access to critical minerals to allow these sources to be 
stable energy suppliers. Balancing development needs with a low-carbon pathway is a 
tightrope, especially when financed predominantly through domestic resources.
INTRODUCTION
6.1. Since the last Economic Survey was written, there has been no dearth of conferences, 
meetings, and summits dedicated to climate change. It continues to dominate policy and 
other discourses around the world. It provides a ready-made topic for think tanks, experts, 
and policy wonks to appear suitably concerned. However, the world is realising what experts 
and policymakers in advanced nations are resisting - that its current approach to dealing with 
climate change is flawed for one very simple reason. It continues to ignore trade-offs. But 
practical men and women have been unable to avoid recognising trade-offs. Countries had to 
push back their own timelines.
6.2. The United Kingdom postponed its decision to ban the sale of vehicles that run on petrol 
and diesel for five years from 2030 to 2035. Germany had to dilute its rules for banning boilers 
running on fossil fuels before they could be passed. The rise of alternative political parties 
in developed nations is attributed to the public's resistance to climate-related rules that are 
perceived as unfairly targeting the poor and low-income by raising their cost of living. According 
to Bloomberg, German businesses cite rising energy costs as the single biggest reason for 
relocating out of the country
1
. That is the crux of the challenge that governments are grappling with.
6.3. Alternative energy sources require fiscal subsidies to be affordable. However, most 
governments worldwide are fiscally stretched, especially after dealing with the economic and 
1  ‘Germany’s Days as an Industrial Superpower Are Coming to an End’, 10th February 2024, Bloomberg (https://
www.bloomberg.com/news/features/2024-02-10/why-germany-s-days-as-an-industrial-superpower-are-
coming-to-an-end)
Economic Survey 2023-24
180
health dislocations caused by the pandemic. Many countries also tax fossil fuels heavily. By 
clamping down on their usage, governments will lose those revenues. Geopolitically, the thrust 
on renewable energy and electric vehicles has set off a race to secure critical minerals and rare 
earths. China has positioned itself as an indispensable source of several of these materials. 
Securing supply in crunch times is a matter of concern. Nuclear energy is the cleanest and 
safest option. However, some nations are reluctant to consider it given that their public 
overestimates probabilities of rare events, as humans are wont to. Three-mile island, Chernobyl 
and Fukushima, loom large in people's minds. Prof. Daniel Kahneman, who passed away earlier 
this year, would have chuckled.
2
  
6.4. Relatively common metals like copper and nickel are going to become scarcer. In 'The 
Material World', Ed Conway wrote that the world might need more copper in the next few 
decades than it has ever used since the metal was known to humans. Not just copper but other 
metals will also be in short supply. The price of energy transition will be too much for most 
nations. It will only get worse. More importantly, extracting materials and minerals requires a 
tremendous amount of energy. Analysts in JP Morgan wrote
3
, "… just developing the forecasted 
wind and solar capacities would require ~10EJ of energy during 2024-30, which is equivalent 
to ~20% of our projected global energy demand growth over the same period (forecasts based 
on our Global Energy Outlook) and will emit ~1,450 mn tonnes of CO2e (~207 mn tonnes on 
average, equivalent to the annual emissions of Pakistan or Argentina in 2022). Additionally, 
the projected penetration of electric vehicles in the global light-duty vehicle fleet requires 
another ~10EJ of energy to build and charge these EVs.”
6.5. The other factor is time. Nowhere in the world has energy transition of this scale 
happened within the short time envisaged. Vaclav Smil wrote in 2014,
4
"… each widespread 
transition from one dominant fuel to another has taken 50 to 60 years…. Energy transitions 
on a national or global scale are inherently protracted affairs. The unfolding shift from 
fossil fuels to renewable energy sources will be no exception. It will require generations of 
perseverance.” In fact, he wrote that the more effective solution was to lower overall energy 
use. Alas, that is one advice that the world is either unable to or unwilling to heed. It is hard 
to fault developing countries for not wanting to curb their energy consumption. It is morally 
wrong to tell developing countries to abandon their aspirations for better living standards so 
that developed countries can maintain their ways of living in cleaner environments and cooler 
climates.
6.6. However, the Paris Agreement signed in December 2015 did precisely that. It trumped 
the Sustainable Development Goals agreed upon barely three months earlier. Professor Mike 
Hulme wrote, 
5
 "The goal of securing global temperature within a certain numerical range 
took precedence over a broader set of welfare ambitions, in part because of the success of 
2 His research showed that humans beings consistently overestimate the probability of rare events
3  “The Energy Transition”, 18th April 2024, Global Energy Strategy, JP Morgan
4  Vaclav Smil: ‘A Global Transition to Renewable Energy Will Take Many Decades’, Scientific American, January 
2014 (https://www.scientificamerican.com/article/a-global-transition-to-renewable-energy-will-take-many-
decades/)
5  Hulme, Mike. Climate Change isn't Everything: Liberating Climate Politics from Alarmism (p. 51). Polity Press. 
Kindle Edition.
Page 3


CHAPTER
06
CLIMATE CHANGE AND 
ENERGY TRANSITION: 
DEALING WITH TRADE-
OFFS
Despite being one of the fastest-growing economies in the World, India’s annual per 
capita carbon emission is only about one-third of the global average. India envisions a 
'Viksit Bharat' by 2047, which translates to 'Developed India'. This vision and the goal 
of achieving Net Zero carbon emissions by 2070 guide the country’s interventions for 
high and robust economic growth, which is inclusive and environmentally sustainable. 
Access to stable energy at a reasonable cost at a pace required to power ambitious 
targets while on a low-carbon pathway is a sine quo non for development. This task 
is a challenge, considering that cleaner and greener energy sources require viable 
battery storage technologies and access to critical minerals to allow these sources to be 
stable energy suppliers. Balancing development needs with a low-carbon pathway is a 
tightrope, especially when financed predominantly through domestic resources.
INTRODUCTION
6.1. Since the last Economic Survey was written, there has been no dearth of conferences, 
meetings, and summits dedicated to climate change. It continues to dominate policy and 
other discourses around the world. It provides a ready-made topic for think tanks, experts, 
and policy wonks to appear suitably concerned. However, the world is realising what experts 
and policymakers in advanced nations are resisting - that its current approach to dealing with 
climate change is flawed for one very simple reason. It continues to ignore trade-offs. But 
practical men and women have been unable to avoid recognising trade-offs. Countries had to 
push back their own timelines.
6.2. The United Kingdom postponed its decision to ban the sale of vehicles that run on petrol 
and diesel for five years from 2030 to 2035. Germany had to dilute its rules for banning boilers 
running on fossil fuels before they could be passed. The rise of alternative political parties 
in developed nations is attributed to the public's resistance to climate-related rules that are 
perceived as unfairly targeting the poor and low-income by raising their cost of living. According 
to Bloomberg, German businesses cite rising energy costs as the single biggest reason for 
relocating out of the country
1
. That is the crux of the challenge that governments are grappling with.
6.3. Alternative energy sources require fiscal subsidies to be affordable. However, most 
governments worldwide are fiscally stretched, especially after dealing with the economic and 
1  ‘Germany’s Days as an Industrial Superpower Are Coming to an End’, 10th February 2024, Bloomberg (https://
www.bloomberg.com/news/features/2024-02-10/why-germany-s-days-as-an-industrial-superpower-are-
coming-to-an-end)
Economic Survey 2023-24
180
health dislocations caused by the pandemic. Many countries also tax fossil fuels heavily. By 
clamping down on their usage, governments will lose those revenues. Geopolitically, the thrust 
on renewable energy and electric vehicles has set off a race to secure critical minerals and rare 
earths. China has positioned itself as an indispensable source of several of these materials. 
Securing supply in crunch times is a matter of concern. Nuclear energy is the cleanest and 
safest option. However, some nations are reluctant to consider it given that their public 
overestimates probabilities of rare events, as humans are wont to. Three-mile island, Chernobyl 
and Fukushima, loom large in people's minds. Prof. Daniel Kahneman, who passed away earlier 
this year, would have chuckled.
2
  
6.4. Relatively common metals like copper and nickel are going to become scarcer. In 'The 
Material World', Ed Conway wrote that the world might need more copper in the next few 
decades than it has ever used since the metal was known to humans. Not just copper but other 
metals will also be in short supply. The price of energy transition will be too much for most 
nations. It will only get worse. More importantly, extracting materials and minerals requires a 
tremendous amount of energy. Analysts in JP Morgan wrote
3
, "… just developing the forecasted 
wind and solar capacities would require ~10EJ of energy during 2024-30, which is equivalent 
to ~20% of our projected global energy demand growth over the same period (forecasts based 
on our Global Energy Outlook) and will emit ~1,450 mn tonnes of CO2e (~207 mn tonnes on 
average, equivalent to the annual emissions of Pakistan or Argentina in 2022). Additionally, 
the projected penetration of electric vehicles in the global light-duty vehicle fleet requires 
another ~10EJ of energy to build and charge these EVs.”
6.5. The other factor is time. Nowhere in the world has energy transition of this scale 
happened within the short time envisaged. Vaclav Smil wrote in 2014,
4
"… each widespread 
transition from one dominant fuel to another has taken 50 to 60 years…. Energy transitions 
on a national or global scale are inherently protracted affairs. The unfolding shift from 
fossil fuels to renewable energy sources will be no exception. It will require generations of 
perseverance.” In fact, he wrote that the more effective solution was to lower overall energy 
use. Alas, that is one advice that the world is either unable to or unwilling to heed. It is hard 
to fault developing countries for not wanting to curb their energy consumption. It is morally 
wrong to tell developing countries to abandon their aspirations for better living standards so 
that developed countries can maintain their ways of living in cleaner environments and cooler 
climates.
6.6. However, the Paris Agreement signed in December 2015 did precisely that. It trumped 
the Sustainable Development Goals agreed upon barely three months earlier. Professor Mike 
Hulme wrote, 
5
 "The goal of securing global temperature within a certain numerical range 
took precedence over a broader set of welfare ambitions, in part because of the success of 
2 His research showed that humans beings consistently overestimate the probability of rare events
3  “The Energy Transition”, 18th April 2024, Global Energy Strategy, JP Morgan
4  Vaclav Smil: ‘A Global Transition to Renewable Energy Will Take Many Decades’, Scientific American, January 
2014 (https://www.scientificamerican.com/article/a-global-transition-to-renewable-energy-will-take-many-
decades/)
5  Hulme, Mike. Climate Change isn't Everything: Liberating Climate Politics from Alarmism (p. 51). Polity Press. 
Kindle Edition.
Climate Change and Energy Transition
181
climate scientists and Government negotiators in characterising the goal of climate policies in 
terms of a single, and seemingly simple, index. Yet, …global temperature is a seriously flawed 
index for capturing the full range of complex relationships between climate and human 
welfare and ecological integrity.”
6.7. Not only have development goals been downgraded in the process of elevation of 
containing global emissions to the pinnacle of all economic policies, but developing nations are 
also being threatened with a carbon tax at the border, in full negation of the spirit of common 
but differentiated responsibilities and respective national capabilities that was supposed to 
have undergirded the Paris Agreement.
6.8. It would be a comedy if it were not real and tragic. Even as developed nations prepare to 
impose a carbon tax at the border on imports coming into their countries laden with carbon, 
they are ramping up energy demand like never before, thanks to their obsession with letting 
Artificial Intelligence (AI) guide, take over and dominate natural intelligence. One of the 
leading global technology companies promised to achieve Net Zero by 2030 at the turn of 
the decade. But, the race to dominate the emerging technology of Artificial Intelligence has 
caused its emissions to be higher by 30 per cent by 2023. In a research report
6
 published in 
April, analysts in Goldman Sachs wrote that the demand for power in the United States would 
experience a growth not seen in a generation, thanks to AI and that "transmission, one of the 
major bottlenecks for clean energy transition, and the addition of data centres and AI could 
exacerbate this". This and other issues pertaining to managing energy demand as a sensible 
way of dealing with climate change are examined intensely and analysed forensically in Chapter 
13 in a special essay.
6.9. However, these developments should convince any reasonable reader that the developed 
world has not only tied itself into knots but is also contributing – wittingly or otherwise – 
to deepening and entrenching poverty and inequality in developing and consigning them to 
perpetual underdeveloped status by coercing them into prioritising emissions over their 
economies. Developed countries, having relied on a fossil fuel-based growth strategy for 
the past two centuries to reach where they are today, seek ambitious cuts in emissions from 
developing countries, pushing them to adopt policy measures, instruments and production and 
energy systems that are distinctly different from the carbon-emitting traditional strategies that 
fuelled the growth of the former. The fact that these novel pathways are untested or trusted is 
apparent from the recent deliberations of the G7 countries on ending the use of unabated coal 
power plants only in the first half of 2030,
7
 even when their carbon emissions peaked several 
decades ago. Japan and Germany did not agree to this. In contrast, Germany has written into 
its legislation a final target to shut coal plants by 2038, while Japan has yet to set a date. This is 
a recipe for intra and international conflicts.
8
  
6  ‘Generational growth: AI, data centres and the coming US power demand surge’, 28th April 2024, Goldman 
Sachs Equity Research
7  G7, Climate, Energy and Environment Ministers’ Meeting Communiqué, (Torino, April 29-30, 2024),  https://
www.meti.go.jp/press/2024/05/20240501001/20240501001-a.pdf.
8  Francesca Landini, G7 to sign exit from coal by 2035, but may offer leeway, sources say, Reuters, (April 30, 
2024), https://www.reuters.com/business/energy/g7-ministers-agree-coal-plants-shutdown-by-2030-2035-
uk-says-2024-04-29/.
Page 4


CHAPTER
06
CLIMATE CHANGE AND 
ENERGY TRANSITION: 
DEALING WITH TRADE-
OFFS
Despite being one of the fastest-growing economies in the World, India’s annual per 
capita carbon emission is only about one-third of the global average. India envisions a 
'Viksit Bharat' by 2047, which translates to 'Developed India'. This vision and the goal 
of achieving Net Zero carbon emissions by 2070 guide the country’s interventions for 
high and robust economic growth, which is inclusive and environmentally sustainable. 
Access to stable energy at a reasonable cost at a pace required to power ambitious 
targets while on a low-carbon pathway is a sine quo non for development. This task 
is a challenge, considering that cleaner and greener energy sources require viable 
battery storage technologies and access to critical minerals to allow these sources to be 
stable energy suppliers. Balancing development needs with a low-carbon pathway is a 
tightrope, especially when financed predominantly through domestic resources.
INTRODUCTION
6.1. Since the last Economic Survey was written, there has been no dearth of conferences, 
meetings, and summits dedicated to climate change. It continues to dominate policy and 
other discourses around the world. It provides a ready-made topic for think tanks, experts, 
and policy wonks to appear suitably concerned. However, the world is realising what experts 
and policymakers in advanced nations are resisting - that its current approach to dealing with 
climate change is flawed for one very simple reason. It continues to ignore trade-offs. But 
practical men and women have been unable to avoid recognising trade-offs. Countries had to 
push back their own timelines.
6.2. The United Kingdom postponed its decision to ban the sale of vehicles that run on petrol 
and diesel for five years from 2030 to 2035. Germany had to dilute its rules for banning boilers 
running on fossil fuels before they could be passed. The rise of alternative political parties 
in developed nations is attributed to the public's resistance to climate-related rules that are 
perceived as unfairly targeting the poor and low-income by raising their cost of living. According 
to Bloomberg, German businesses cite rising energy costs as the single biggest reason for 
relocating out of the country
1
. That is the crux of the challenge that governments are grappling with.
6.3. Alternative energy sources require fiscal subsidies to be affordable. However, most 
governments worldwide are fiscally stretched, especially after dealing with the economic and 
1  ‘Germany’s Days as an Industrial Superpower Are Coming to an End’, 10th February 2024, Bloomberg (https://
www.bloomberg.com/news/features/2024-02-10/why-germany-s-days-as-an-industrial-superpower-are-
coming-to-an-end)
Economic Survey 2023-24
180
health dislocations caused by the pandemic. Many countries also tax fossil fuels heavily. By 
clamping down on their usage, governments will lose those revenues. Geopolitically, the thrust 
on renewable energy and electric vehicles has set off a race to secure critical minerals and rare 
earths. China has positioned itself as an indispensable source of several of these materials. 
Securing supply in crunch times is a matter of concern. Nuclear energy is the cleanest and 
safest option. However, some nations are reluctant to consider it given that their public 
overestimates probabilities of rare events, as humans are wont to. Three-mile island, Chernobyl 
and Fukushima, loom large in people's minds. Prof. Daniel Kahneman, who passed away earlier 
this year, would have chuckled.
2
  
6.4. Relatively common metals like copper and nickel are going to become scarcer. In 'The 
Material World', Ed Conway wrote that the world might need more copper in the next few 
decades than it has ever used since the metal was known to humans. Not just copper but other 
metals will also be in short supply. The price of energy transition will be too much for most 
nations. It will only get worse. More importantly, extracting materials and minerals requires a 
tremendous amount of energy. Analysts in JP Morgan wrote
3
, "… just developing the forecasted 
wind and solar capacities would require ~10EJ of energy during 2024-30, which is equivalent 
to ~20% of our projected global energy demand growth over the same period (forecasts based 
on our Global Energy Outlook) and will emit ~1,450 mn tonnes of CO2e (~207 mn tonnes on 
average, equivalent to the annual emissions of Pakistan or Argentina in 2022). Additionally, 
the projected penetration of electric vehicles in the global light-duty vehicle fleet requires 
another ~10EJ of energy to build and charge these EVs.”
6.5. The other factor is time. Nowhere in the world has energy transition of this scale 
happened within the short time envisaged. Vaclav Smil wrote in 2014,
4
"… each widespread 
transition from one dominant fuel to another has taken 50 to 60 years…. Energy transitions 
on a national or global scale are inherently protracted affairs. The unfolding shift from 
fossil fuels to renewable energy sources will be no exception. It will require generations of 
perseverance.” In fact, he wrote that the more effective solution was to lower overall energy 
use. Alas, that is one advice that the world is either unable to or unwilling to heed. It is hard 
to fault developing countries for not wanting to curb their energy consumption. It is morally 
wrong to tell developing countries to abandon their aspirations for better living standards so 
that developed countries can maintain their ways of living in cleaner environments and cooler 
climates.
6.6. However, the Paris Agreement signed in December 2015 did precisely that. It trumped 
the Sustainable Development Goals agreed upon barely three months earlier. Professor Mike 
Hulme wrote, 
5
 "The goal of securing global temperature within a certain numerical range 
took precedence over a broader set of welfare ambitions, in part because of the success of 
2 His research showed that humans beings consistently overestimate the probability of rare events
3  “The Energy Transition”, 18th April 2024, Global Energy Strategy, JP Morgan
4  Vaclav Smil: ‘A Global Transition to Renewable Energy Will Take Many Decades’, Scientific American, January 
2014 (https://www.scientificamerican.com/article/a-global-transition-to-renewable-energy-will-take-many-
decades/)
5  Hulme, Mike. Climate Change isn't Everything: Liberating Climate Politics from Alarmism (p. 51). Polity Press. 
Kindle Edition.
Climate Change and Energy Transition
181
climate scientists and Government negotiators in characterising the goal of climate policies in 
terms of a single, and seemingly simple, index. Yet, …global temperature is a seriously flawed 
index for capturing the full range of complex relationships between climate and human 
welfare and ecological integrity.”
6.7. Not only have development goals been downgraded in the process of elevation of 
containing global emissions to the pinnacle of all economic policies, but developing nations are 
also being threatened with a carbon tax at the border, in full negation of the spirit of common 
but differentiated responsibilities and respective national capabilities that was supposed to 
have undergirded the Paris Agreement.
6.8. It would be a comedy if it were not real and tragic. Even as developed nations prepare to 
impose a carbon tax at the border on imports coming into their countries laden with carbon, 
they are ramping up energy demand like never before, thanks to their obsession with letting 
Artificial Intelligence (AI) guide, take over and dominate natural intelligence. One of the 
leading global technology companies promised to achieve Net Zero by 2030 at the turn of 
the decade. But, the race to dominate the emerging technology of Artificial Intelligence has 
caused its emissions to be higher by 30 per cent by 2023. In a research report
6
 published in 
April, analysts in Goldman Sachs wrote that the demand for power in the United States would 
experience a growth not seen in a generation, thanks to AI and that "transmission, one of the 
major bottlenecks for clean energy transition, and the addition of data centres and AI could 
exacerbate this". This and other issues pertaining to managing energy demand as a sensible 
way of dealing with climate change are examined intensely and analysed forensically in Chapter 
13 in a special essay.
6.9. However, these developments should convince any reasonable reader that the developed 
world has not only tied itself into knots but is also contributing – wittingly or otherwise – 
to deepening and entrenching poverty and inequality in developing and consigning them to 
perpetual underdeveloped status by coercing them into prioritising emissions over their 
economies. Developed countries, having relied on a fossil fuel-based growth strategy for 
the past two centuries to reach where they are today, seek ambitious cuts in emissions from 
developing countries, pushing them to adopt policy measures, instruments and production and 
energy systems that are distinctly different from the carbon-emitting traditional strategies that 
fuelled the growth of the former. The fact that these novel pathways are untested or trusted is 
apparent from the recent deliberations of the G7 countries on ending the use of unabated coal 
power plants only in the first half of 2030,
7
 even when their carbon emissions peaked several 
decades ago. Japan and Germany did not agree to this. In contrast, Germany has written into 
its legislation a final target to shut coal plants by 2038, while Japan has yet to set a date. This is 
a recipe for intra and international conflicts.
8
  
6  ‘Generational growth: AI, data centres and the coming US power demand surge’, 28th April 2024, Goldman 
Sachs Equity Research
7  G7, Climate, Energy and Environment Ministers’ Meeting Communiqué, (Torino, April 29-30, 2024),  https://
www.meti.go.jp/press/2024/05/20240501001/20240501001-a.pdf.
8  Francesca Landini, G7 to sign exit from coal by 2035, but may offer leeway, sources say, Reuters, (April 30, 
2024), https://www.reuters.com/business/energy/g7-ministers-agree-coal-plants-shutdown-by-2030-2035-
uk-says-2024-04-29/.
Economic Survey 2023-24
182
6.10. The impact of climate change will affect developing countries disproportionately because 
these countries are already vulnerable and less resilient and must prioritise their economic 
development needs. Though not part of the problem, developing countries are part of the 
solution. Developing countries have already accepted the need for ambitious greenhouse gas 
emissions reduction, as evidenced by their Nationally Determined Contributions (NDCs), on the 
condition that the developed countries provide resources at a reasonable cost. Incorporating the 
impact of climate change into the development model, also called the low-carbon development 
pathways, requires access to technology and financial resources in the order of trillions of 
dollars. Even by conservative standards, the estimate of resource requirement (considering 
that not all the needs have been costed) ranges between USD 5.8 - 11.5 trillion till 2030
9
. With 
financial resources and technology not reaching developing countries at the desired pace, 
quantity, or terms, economic growth, and prosperity, albeit sustainably, will equip developing 
countries with the strength to address climate change.
6.11. Globally, recognising trade-offs is critical to bringing climate goals into the realm of 
feasibility and acceptability. To recognise trade-offs, we need to be  able to ask the right and, 
more importantly, honest questions.
6.12. One such question is “Is imagining a world without climate change all that useful? It 
almost goes without saying that if we could keep the benefits of fossil-fuelled industrialisation 
and jettison the negative side effects of climate change, we would do so. But what makes 
decision-making so thorny is that for most climate-sensitive societal outcomes….the net effect 
of fossil-fuelled industrialisation and technological change has been good…Thus, “without 
climate change” is not always the most relevant hypothetical counterfactual, and often 
“without fossil-fuelled industrialisation and technological progress” is more relevant. This 
framing gives a more honest and holistic picture of the state of the climate change problem, and 
it does not misleadingly paint the current systems as being less attractive than they actually 
are. When we assess the best course of action going forward, we must compare alternative 
systems and weigh the benefits of avoided climate change against the costs of transitioning 
to alternative energy and agricultural systems over time. This is the only way to be accurate 
and forthright on the trade-offs we face.”
10
 
6.13. Fittingly, the last word of this introductory section should be left to Mike Hulme, who 
has been studying the phenomenon for more than four decades:
"Climate change isn't everything. It is quite easy to imagine future worlds in which global 
temperature exceeds 2°C warming which are 'better' for human well-being, political stability 
and ecological integrity, for example, than other worlds in which – by all means and at all 
costs – global temperature was stabilised at 1.5°C."
6.14. As for India, despite the challenges mentioned above, managing the impact of climate 
change while ensuring that developmental priorities continue to get the focus has been the 
hallmark of its growth strategy. The chapter reviews India's initiatives and performance in 
9  The First report of the Standing Committee on Finance on the determination of the needs of developing country 
Parties related to implementing the Convention and the Paris Agreement, https://tinyurl.com/5n92sppt.
10 Patrick Brown, A Rhetorical Ambiguity That Propagates Climate Misinformation, Breakthrough Institute, (July 
3, 2024). https://thebreakthroughjournal.substack.com/p/a-rhetorical-ambiguity-that-propagates. 
Page 5


CHAPTER
06
CLIMATE CHANGE AND 
ENERGY TRANSITION: 
DEALING WITH TRADE-
OFFS
Despite being one of the fastest-growing economies in the World, India’s annual per 
capita carbon emission is only about one-third of the global average. India envisions a 
'Viksit Bharat' by 2047, which translates to 'Developed India'. This vision and the goal 
of achieving Net Zero carbon emissions by 2070 guide the country’s interventions for 
high and robust economic growth, which is inclusive and environmentally sustainable. 
Access to stable energy at a reasonable cost at a pace required to power ambitious 
targets while on a low-carbon pathway is a sine quo non for development. This task 
is a challenge, considering that cleaner and greener energy sources require viable 
battery storage technologies and access to critical minerals to allow these sources to be 
stable energy suppliers. Balancing development needs with a low-carbon pathway is a 
tightrope, especially when financed predominantly through domestic resources.
INTRODUCTION
6.1. Since the last Economic Survey was written, there has been no dearth of conferences, 
meetings, and summits dedicated to climate change. It continues to dominate policy and 
other discourses around the world. It provides a ready-made topic for think tanks, experts, 
and policy wonks to appear suitably concerned. However, the world is realising what experts 
and policymakers in advanced nations are resisting - that its current approach to dealing with 
climate change is flawed for one very simple reason. It continues to ignore trade-offs. But 
practical men and women have been unable to avoid recognising trade-offs. Countries had to 
push back their own timelines.
6.2. The United Kingdom postponed its decision to ban the sale of vehicles that run on petrol 
and diesel for five years from 2030 to 2035. Germany had to dilute its rules for banning boilers 
running on fossil fuels before they could be passed. The rise of alternative political parties 
in developed nations is attributed to the public's resistance to climate-related rules that are 
perceived as unfairly targeting the poor and low-income by raising their cost of living. According 
to Bloomberg, German businesses cite rising energy costs as the single biggest reason for 
relocating out of the country
1
. That is the crux of the challenge that governments are grappling with.
6.3. Alternative energy sources require fiscal subsidies to be affordable. However, most 
governments worldwide are fiscally stretched, especially after dealing with the economic and 
1  ‘Germany’s Days as an Industrial Superpower Are Coming to an End’, 10th February 2024, Bloomberg (https://
www.bloomberg.com/news/features/2024-02-10/why-germany-s-days-as-an-industrial-superpower-are-
coming-to-an-end)
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health dislocations caused by the pandemic. Many countries also tax fossil fuels heavily. By 
clamping down on their usage, governments will lose those revenues. Geopolitically, the thrust 
on renewable energy and electric vehicles has set off a race to secure critical minerals and rare 
earths. China has positioned itself as an indispensable source of several of these materials. 
Securing supply in crunch times is a matter of concern. Nuclear energy is the cleanest and 
safest option. However, some nations are reluctant to consider it given that their public 
overestimates probabilities of rare events, as humans are wont to. Three-mile island, Chernobyl 
and Fukushima, loom large in people's minds. Prof. Daniel Kahneman, who passed away earlier 
this year, would have chuckled.
2
  
6.4. Relatively common metals like copper and nickel are going to become scarcer. In 'The 
Material World', Ed Conway wrote that the world might need more copper in the next few 
decades than it has ever used since the metal was known to humans. Not just copper but other 
metals will also be in short supply. The price of energy transition will be too much for most 
nations. It will only get worse. More importantly, extracting materials and minerals requires a 
tremendous amount of energy. Analysts in JP Morgan wrote
3
, "… just developing the forecasted 
wind and solar capacities would require ~10EJ of energy during 2024-30, which is equivalent 
to ~20% of our projected global energy demand growth over the same period (forecasts based 
on our Global Energy Outlook) and will emit ~1,450 mn tonnes of CO2e (~207 mn tonnes on 
average, equivalent to the annual emissions of Pakistan or Argentina in 2022). Additionally, 
the projected penetration of electric vehicles in the global light-duty vehicle fleet requires 
another ~10EJ of energy to build and charge these EVs.”
6.5. The other factor is time. Nowhere in the world has energy transition of this scale 
happened within the short time envisaged. Vaclav Smil wrote in 2014,
4
"… each widespread 
transition from one dominant fuel to another has taken 50 to 60 years…. Energy transitions 
on a national or global scale are inherently protracted affairs. The unfolding shift from 
fossil fuels to renewable energy sources will be no exception. It will require generations of 
perseverance.” In fact, he wrote that the more effective solution was to lower overall energy 
use. Alas, that is one advice that the world is either unable to or unwilling to heed. It is hard 
to fault developing countries for not wanting to curb their energy consumption. It is morally 
wrong to tell developing countries to abandon their aspirations for better living standards so 
that developed countries can maintain their ways of living in cleaner environments and cooler 
climates.
6.6. However, the Paris Agreement signed in December 2015 did precisely that. It trumped 
the Sustainable Development Goals agreed upon barely three months earlier. Professor Mike 
Hulme wrote, 
5
 "The goal of securing global temperature within a certain numerical range 
took precedence over a broader set of welfare ambitions, in part because of the success of 
2 His research showed that humans beings consistently overestimate the probability of rare events
3  “The Energy Transition”, 18th April 2024, Global Energy Strategy, JP Morgan
4  Vaclav Smil: ‘A Global Transition to Renewable Energy Will Take Many Decades’, Scientific American, January 
2014 (https://www.scientificamerican.com/article/a-global-transition-to-renewable-energy-will-take-many-
decades/)
5  Hulme, Mike. Climate Change isn't Everything: Liberating Climate Politics from Alarmism (p. 51). Polity Press. 
Kindle Edition.
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climate scientists and Government negotiators in characterising the goal of climate policies in 
terms of a single, and seemingly simple, index. Yet, …global temperature is a seriously flawed 
index for capturing the full range of complex relationships between climate and human 
welfare and ecological integrity.”
6.7. Not only have development goals been downgraded in the process of elevation of 
containing global emissions to the pinnacle of all economic policies, but developing nations are 
also being threatened with a carbon tax at the border, in full negation of the spirit of common 
but differentiated responsibilities and respective national capabilities that was supposed to 
have undergirded the Paris Agreement.
6.8. It would be a comedy if it were not real and tragic. Even as developed nations prepare to 
impose a carbon tax at the border on imports coming into their countries laden with carbon, 
they are ramping up energy demand like never before, thanks to their obsession with letting 
Artificial Intelligence (AI) guide, take over and dominate natural intelligence. One of the 
leading global technology companies promised to achieve Net Zero by 2030 at the turn of 
the decade. But, the race to dominate the emerging technology of Artificial Intelligence has 
caused its emissions to be higher by 30 per cent by 2023. In a research report
6
 published in 
April, analysts in Goldman Sachs wrote that the demand for power in the United States would 
experience a growth not seen in a generation, thanks to AI and that "transmission, one of the 
major bottlenecks for clean energy transition, and the addition of data centres and AI could 
exacerbate this". This and other issues pertaining to managing energy demand as a sensible 
way of dealing with climate change are examined intensely and analysed forensically in Chapter 
13 in a special essay.
6.9. However, these developments should convince any reasonable reader that the developed 
world has not only tied itself into knots but is also contributing – wittingly or otherwise – 
to deepening and entrenching poverty and inequality in developing and consigning them to 
perpetual underdeveloped status by coercing them into prioritising emissions over their 
economies. Developed countries, having relied on a fossil fuel-based growth strategy for 
the past two centuries to reach where they are today, seek ambitious cuts in emissions from 
developing countries, pushing them to adopt policy measures, instruments and production and 
energy systems that are distinctly different from the carbon-emitting traditional strategies that 
fuelled the growth of the former. The fact that these novel pathways are untested or trusted is 
apparent from the recent deliberations of the G7 countries on ending the use of unabated coal 
power plants only in the first half of 2030,
7
 even when their carbon emissions peaked several 
decades ago. Japan and Germany did not agree to this. In contrast, Germany has written into 
its legislation a final target to shut coal plants by 2038, while Japan has yet to set a date. This is 
a recipe for intra and international conflicts.
8
  
6  ‘Generational growth: AI, data centres and the coming US power demand surge’, 28th April 2024, Goldman 
Sachs Equity Research
7  G7, Climate, Energy and Environment Ministers’ Meeting Communiqué, (Torino, April 29-30, 2024),  https://
www.meti.go.jp/press/2024/05/20240501001/20240501001-a.pdf.
8  Francesca Landini, G7 to sign exit from coal by 2035, but may offer leeway, sources say, Reuters, (April 30, 
2024), https://www.reuters.com/business/energy/g7-ministers-agree-coal-plants-shutdown-by-2030-2035-
uk-says-2024-04-29/.
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6.10. The impact of climate change will affect developing countries disproportionately because 
these countries are already vulnerable and less resilient and must prioritise their economic 
development needs. Though not part of the problem, developing countries are part of the 
solution. Developing countries have already accepted the need for ambitious greenhouse gas 
emissions reduction, as evidenced by their Nationally Determined Contributions (NDCs), on the 
condition that the developed countries provide resources at a reasonable cost. Incorporating the 
impact of climate change into the development model, also called the low-carbon development 
pathways, requires access to technology and financial resources in the order of trillions of 
dollars. Even by conservative standards, the estimate of resource requirement (considering 
that not all the needs have been costed) ranges between USD 5.8 - 11.5 trillion till 2030
9
. With 
financial resources and technology not reaching developing countries at the desired pace, 
quantity, or terms, economic growth, and prosperity, albeit sustainably, will equip developing 
countries with the strength to address climate change.
6.11. Globally, recognising trade-offs is critical to bringing climate goals into the realm of 
feasibility and acceptability. To recognise trade-offs, we need to be  able to ask the right and, 
more importantly, honest questions.
6.12. One such question is “Is imagining a world without climate change all that useful? It 
almost goes without saying that if we could keep the benefits of fossil-fuelled industrialisation 
and jettison the negative side effects of climate change, we would do so. But what makes 
decision-making so thorny is that for most climate-sensitive societal outcomes….the net effect 
of fossil-fuelled industrialisation and technological change has been good…Thus, “without 
climate change” is not always the most relevant hypothetical counterfactual, and often 
“without fossil-fuelled industrialisation and technological progress” is more relevant. This 
framing gives a more honest and holistic picture of the state of the climate change problem, and 
it does not misleadingly paint the current systems as being less attractive than they actually 
are. When we assess the best course of action going forward, we must compare alternative 
systems and weigh the benefits of avoided climate change against the costs of transitioning 
to alternative energy and agricultural systems over time. This is the only way to be accurate 
and forthright on the trade-offs we face.”
10
 
6.13. Fittingly, the last word of this introductory section should be left to Mike Hulme, who 
has been studying the phenomenon for more than four decades:
"Climate change isn't everything. It is quite easy to imagine future worlds in which global 
temperature exceeds 2°C warming which are 'better' for human well-being, political stability 
and ecological integrity, for example, than other worlds in which – by all means and at all 
costs – global temperature was stabilised at 1.5°C."
6.14. As for India, despite the challenges mentioned above, managing the impact of climate 
change while ensuring that developmental priorities continue to get the focus has been the 
hallmark of its growth strategy. The chapter reviews India's initiatives and performance in 
9  The First report of the Standing Committee on Finance on the determination of the needs of developing country 
Parties related to implementing the Convention and the Paris Agreement, https://tinyurl.com/5n92sppt.
10 Patrick Brown, A Rhetorical Ambiguity That Propagates Climate Misinformation, Breakthrough Institute, (July 
3, 2024). https://thebreakthroughjournal.substack.com/p/a-rhetorical-ambiguity-that-propagates. 
Climate Change and Energy Transition
183
addressing climate change, discusses energy transition issues, and deliberates upon the status 
of the multilateral negotiations. The chapter ends by exploring the options and the way forward
PRESENT STATUS OF INDIA’S CLIMATE ACTION
6.15. India has adopted the mission-mode approach to address climate change. The National 
Action Plan on Climate Change (NAPCC)
11
  outlines the strategy to enhance the sustainability 
of the country’s development path. Based on the principles of achieving high economic growth 
while also improving the ecological sustainability of India's developmental path, NAPCC 
includes nine national missions covering solar, water, energy efficiency, forests, sustainable 
habitat, sustainable agriculture, sustaining the Himalayan Ecosystem, strategic knowledge for 
climate change, and the recently added mission on human health. A broad spectrum of climate 
action - adaptation and mitigation, including demand side management - is being taken through 
the programme. States and Union Territories (UTs) have been encouraged to prepare their 
State Action Plan on Climate Change (SAPCC) consistent with strategies in the NAPCC.  So far, 
34 SAPCCs are operational, laying out sector-specific and cross-sectoral, time-bound priority 
actions for the state. 
6.16. India has made significant progress on climate action. The addition to the installed solar 
power capacity was 15.03 GW in 2023-24, reaching a cumulative of 82.64 GW on 30 April 
2024.
12
 Under the National Mission on Enhanced Energy Efficiency, the eighth cycle of the 
Perform Achieve and Trade (PAT) scheme
13
 was notified in June 2023 for the period 2023-
24 to 2025-26 and covers sectors like Aluminium, Cement, Chlor-Alkali, Iron & Steel, Pulp 
& Paper, and Textile with a total energy saving target of 0.3370 MTOE (million tonnes of oil 
equivalent). The PAT scheme in its various cycles has resulted in a significant amount of energy 
savings and a reduction in greenhouse gas (GHG) emissions (Box 2).
6.17. As a result of the coordinated action, most targets of the first NDC were achieved well in 
advance. For instance, the country achieved 40 per cent cumulative electrical power installed 
capacity from non-fossil fuel-based energy sources in 2021 and reduced the emission intensity 
of India’s GDP from 2005 levels by 33 per cent in 2019– nine and eleven years before the 
target year of 2030, respectively. The NDC was further updated in August 2022.
14
  The target to 
reduce the emissions intensity of India’s GDP was enhanced to 45 per cent (from the earlier 33-
35 per cent) by 2030 from the 2005 level, and the target on cumulative electric power installed 
capacity from non-fossil fuel-based energy resources increased to 50 per cent (earlier 40 per 
cent) by 2030. As of 31 May 2024, the share of non-fossil sources in the installed electricity 
11  National Action Plan on Climate Change (NAPCC), Frequently Asked Question, December 01, 2021, PIB,  https://
static.pib.gov.in/WriteReadData/specificdocs/documents/2021/dec/doc202112101.pdf.
12  Year-wise Achievements, M/o New and Renewable Energy, https://mnre.gov.in/year-wise-achievement/.
13  Perform, Achieve and Trade (PAT) is a regulatory instrument to reduce Specific Energy Consumption in energy-
intensive industries, with an associated market-based mechanism to enhance the cost-effectiveness through 
certification of excess energy saving which can be traded. Currently, the eighth cycle of this scheme is under 
operation, https://beeindia.gov.in/en/perform-achieve-and-trade-pat-0.
14  India’s Updated First Nationally Determined Contribution Under Paris Agreement (2021-2030), (August 2022), 
Submission to UNFCCC,https://unfccc.int/sites/default/files/NDC/2022-08/India%20Updated%20First%20
Nationally%20Determined%20Contrib.pdf.