Decarbonization market in India and the world
The relevance of research
A decarbonized economy is a new socio-economic and technological economy based on low-carbon energy sources, with a minimum amount of greenhouse gas emissions into the atmosphere, in particular carbon dioxide. The transition to a low-carbon economy on a global scale can bring significant benefits to both developed and developing countries. Many countries around the world are developing and implementing development strategies to achieve low greenhouse gas emissions. These strategies aim to achieve social, economic and environmental development goals while reducing long-term greenhouse gas emissions and building climate resilience
Purpose of the study
Analysis of the state of the decarbonization market, assessment of the market size, analysis of competitors, as well as identification of factors affecting the decarbonization market
Content
Chapter 1. Key concepts of the market
1.1. Low carbon economy model: background, concept, principles
1.2. Mechanism for the sale and purchase of carbon credits
1.3. CO2 allowance purchase rates
Chapter 2. The global market for decarbonization
2.1. Dynamics of the global decarbonization market, 2018-2020
2.2. EU - volume of carbon credits in 2018-2020, forecast until 2026
2.3. Other leading countries in the decarbonization of the economy
2.4. Forecast of the volume of the global decarbonization market until 2026
2.5. Assessment of the potential of the decarbonization market in the world in the future until 2050
2.6. Cases of the implementation of the decarbonization process in the world (5 cases)
Chapter 3. Indian Market Decarbonization
3.1. Size of the Indian decarbonization market
3.2. Indian Decarbonization Market Size Forecast to 2026
3.3. Assessing the Decarbonization Market Potential in India to 2060
3.4. State policy in India in the field of decarbonization: regulations, programs, projects
3.5. Key private decarbonization projects in India
Chapter 4. Industries in India (TOP-20), the most sensitive to the process of decarbonization
4.1. Industry name, industry growth rate in 2018-2020
4.2. The impact of global decarbonization on this industry in India
1. Oil and gas industry
2. Coal industry
3. Electric and thermal power engineering
4. Renewable and hydrogen energy
5. Nuclear power
6. Water supply and sanitation
7. Ferrous metallurgy
8. Non-ferrous metallurgy
9. Production of chemicals
10. Transport
11. Mechanical engineering and metalworking
12. Cement industry
13. Construction, repair and maintenance of buildings
14. Collection, recycling and disposal of waste (including CO2 capture)
15. Forestry, logging and production of wood materials
16. Pulp and paper industry
17. Livestock
18. Growing crops
19. Glass industry
20. Other high-tech industries that contribute to digitalization and decarbonization and not included above
4.3. Estimation of losses for enterprises of this industry in India in the future until 2026
Chapter 5. Venues for Acquisition of Carbon Credits
5.1. Sources of Acquisition of Carbon Credits Abroad for Indian Companies
5.2. Possible measures to reduce losses for exporting enterprises in India from the decarbonization of the economy in the world
5.3. Certification of carbon credit companies
Chapter 6. Impact of decarbonization on macroeconomics in India and the world
6.1. Share of industries dependent on decarbonization in India and the world in GDP
6.2. Implications for the global economy of the formation of the decarbonization market
6.3. Impact on the macroeconomics of India of the formation of the decarbonization market
Chapter 7
Research excerpt
Terms and abbreviations
Principles of ESG (environmental, social, governance) - principles of sustainable development / environmental, social and managerial responsibility. When following these principles, a business or government considers environmental (for example, impact on the atmosphere and waste management), social (for example, labor protection and employee turnover) and managerial (for example, risk management and information transparency) factors when making decisions. A number of foreign investors invest their funds only in companies that comply with the principles of ESG.
GHG stands for greenhouse gases.
CO2 is carbon dioxide.
CO2-eq. - Conventional unit, which is used to estimate greenhouse gas emissions (including for calculating the carbon footprint). Measured in tons, it refers to the amount of carbon dioxide emissions that is equivalent to the sum of all greenhouse gases, based on their different climate impacts.
A carbon footprint is the totality of all greenhouse gas emissions produced directly and indirectly by an individual, organization, activity or product.
Scope 1 - direct greenhouse gas emissions from economic and other activities.
Scope 2 - indirect greenhouse gas emissions associated with the consumption of purchased electricity and heat.
Scope 3 - indirect greenhouse gas emissions associated with the consumption of goods and services in the upper and lower segments of the production chain.
A carbon unit (CU) is a unit of the assigned amount of greenhouse gas emissions established by the Protocol and international requirements, an emission reduction unit and an absorption unit. A carbon unit is equal to 1 tonne of carbon or CO2 equivalent and is used:
to measure emissions and removals of greenhouse gases, the established number of national quotas for greenhouse gas emissions (carbon credits);
as a unit of emission reduction;
as a unit of absorption.
UE is a special commodity in the carbon market.
Depending on the mechanism for reducing greenhouse gas emissions, carbon units can be presented in the form of greenhouse gas emission quotas, carbon credits, carbon certificates (instead of ""carbon"", the word ""carbon"" or CO2 is also often used).
According to the Indian Greenhouse Gas Emissions Control Act, adopted in 2021, a carbon unit is the verified result of the implementation of a climate project, expressed in the mass of greenhouse gases equivalent to 1 tonne of carbon dioxide.
A carbon credit is a generic term for any tradeable certificate or permit representing the right to emit one tonne of carbon dioxide or another greenhouse gas equivalent (tCO2eq). Carbon credits were developed as a market mechanism for reducing greenhouse gas emissions. Carbon credit is an integral part of the ""Cap and trade"" program, developed and launched in 2005 specifically to control greenhouse gas emissions into the atmosphere (Cap - emission quota, trade - sale of quotas).
Carbon market (other name: carbon credit market) is a market in which carbon units (carbon credits, carbon certificates) are circulated in accordance with certain standards to prevent or reduce greenhouse gas emissions. The carbon market consists of regulated (obligatory) and voluntary.
VCM - voluntary carbon market (voluntary carbon market).
Climate Action Tracker is a research group that aims to monitor actions to reduce greenhouse gas emissions. The group monitors emission reduction efforts in 32 countries (including India), which account for more than 80% of global emissions.
ICAP (International Carbon Action Partnership) is an international partnership to combat greenhouse gas emissions for governments and authorities at the state, regional and supranational levels that are creating or have already completed the construction of a greenhouse gas emissions trading system (ETS). ICAP members have the opportunity to discuss interoperability issues between different systems and design elements of the ETS, and share examples of how the ETS works best to create a well-functioning global carbon market. The partnership has 31 members and 5 observers on four continents.
IEA - International Energy Agency (IEA - International Energy Agency).
NOAA - US National Oceanic and Atmospheric Administration.
IAEA - International Atomic Energy Agency (IAEA) - is an international organization for the development of cooperation in the field of peaceful use of atomic energy.
UNFCCC - United Nations Framework Convention on Climate Change.
ETS - Emissions Trading System (STK - Greenhouse Gas Emissions Trading System, also referred to as the Emissions Trading System (ETS) for short). greenhouse gas emission quotas).
EUA - European Union Allowances (a European carbon unit traded on stock exchanges and representing a permit for greenhouse gas emissions).
EU CBAM - EU Carbon Border Adjustment Mechanism (TUR - EU Cross-Border Carbon Regulation Mechanism; other Indian names: Import Carbon Adjustment Mechanism, CAR - Cross-Border Carbon Tax).
The CBAM certificate price is the average closing price of emissions permits in the EU Emissions Trading Scheme auctions over the previous week.
CCUS / CUU - carbon capture, utilization and storage (capture, utilization and storage of carbon (CCU - Carbon capture and storage).
OECD member countries are member countries of the Organization for Economic Co-operation and Development.
APG - Associated petroleum gas.
LULUCF - Land use, land use change and forestry.
NZE - Net Zero by 2050: A Roadmap for the Global Energy Sector
""Green"" bonds are any debt instruments, the proceeds of which are used exclusively to finance ""green"" projects.
CORSIA - Carbon Offsetting and Reduction Scheme for International Aviation is a carbon offset and reduction scheme aimed at reducing CO₂ emissions for international airlines.
LULUCF - Land use, land use change and forestry
Chapter 1. Key concepts of the market
1.1. Low carbon economy model: background, concept, principles
Prerequisites for the decarbonization of the economy
Since the beginning of the industrial revolution in the mid-270th century, largely ""thanks"" to increasing consumption of fossil fuels and deforestation, the concentration of carbon dioxide in the Earth's atmosphere has risen from parts per million to record levels.
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Mankind ""managed"" to launch some natural processes that have severe consequences for the climate: the melting of the ice of the Arctic, Antarctic and Greenland (the release of huge volumes of water), the acidification of the waters of the oceans (reducing the absorption of CO2 from the atmosphere), the emission of huge volumes of methane during the thawing of permafrost and others.
Unfortunately, there is not a single forecast for the next hundred years showing that the climate can ""stabilize"" and the average annual temperature on the planet will return to levels familiar to humans and ecosystems. The IPCC predicts further warming, in the most pessimistic scenario - extremely rapid, over 50C by 2100.
The consequences of global warming, according to scientists, are natural disasters such as storms, rainstorms and abnormal heat. Between 2000 and 2019, the UN Office registered 7348 major natural disasters worldwide, almost twice as many as in 1980–1999.
Climate change is already felt in many parts of the world, and the forecasts are completely apocalyptic - with a multiple increase in mortality and a loss of up to 45% of world GDP on the horizon before 2100. Continued emissions of greenhouse gases could cause highly undesirable long-term climate change on a global scale, with severe, widespread and irreversible impacts on people and ecosystems. As a result, there is growing pressure from civil society, NGOs and investors on businesses and governments to ensure immediate action, adequate to the scale of the threat.
The concept of decarbonization of the economy
Over the past two decades, the world has been undergoing a gradual change in worldview - the need for a transition to a new type of economic growth based on the paradigm of sustainable development (ESG) is being increasingly discussed. The idea of continuously increasing prosperity (and increasing consumption of natural resources) is being replaced by a more balanced view that meeting the needs of mankind should be carried out ""without compromising the ecosystem and future generations.""
The most important aspect is the fight against climate change. Today there is a worldwide recognition of the danger of global warming and the importance of intensifying efforts to combat it. This was also confirmed by the UN climate conference in Glasgow, held in November 2021, where balanced and adequate decisions were made.
A scientifically substantiated consensus was the thesis of anthropogenic emissions of greenhouse gases as the main cause of climate change. Therefore, in order to counter the climate threat at the global level, extraordinary measures have been taken in recent years to reduce greenhouse gas emissions into the atmosphere.
The concept of decarbonization is a targeted effort to reduce greenhouse gas emissions, which in the future should lead to a reduction in the burden on the environment.
Low-carbon economic development is a variant of the concept of sustainable development aimed at preventing the catastrophic consequences of global climate change in this century. Plans and scenarios for such a development model have become widespread in the world in recent years.
Low-carbon economy / decarbonized economy - a new socio-economic and technological economy based on low-carbon energy sources, with a minimum amount of greenhouse gas emissions into the atmosphere, in particular carbon dioxide. The transition to a low-carbon economy on a global scale can bring significant benefits to both developed and developing countries.
Many countries around the world are developing and implementing development strategies to achieve low greenhouse gas emissions. These strategies aim to achieve social, economic and environmental development goals while reducing long-term greenhouse gas emissions and building resilience to the effects of climate change.
A globally implemented low-carbon economy is a necessary prerequisite for the transition to a zero-carbon economy.
Principles of a low-carbon economy:
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Reducing the consumption/burning of carbon-containing fossil fuels should play a key role in achieving the climate goal and in creating a low-carbon economy globally and in most countries. At the same time, specific ways of transition to a low-carbon economy and its final format differ depending on the starting socio-economic, resource and other characteristics of individual countries.
The world has moved from decarbonization in theory to full-scale practical action. The initial stage of these actions - the formation of the renewable energy industry - is already behind in many countries. In modern reality, other means of reducing greenhouse emissions are receiving more and more attention, among which hydrogen technologies stand out in particular.
Basic principles of decarbonization of the economy in terms of the structure of energy production and consumption:
The share of low-carbon technologies in electricity generation is growing.
The share of electricity in final energy consumption is growing (electrification of energy consumption).
A significant portion of energy consumption that cannot be directly electrified is decarbonized with the help of hydrogen. We are talking about the use of hydrogen in industry (metallurgy, cement production, etc.), the transport sector (aviation, heavy road and sea transport), and heat supply.
In the case of such a widespread introduction, hydrogen acquires a value comparable to the current energy raw materials (oil, gas, coal).
To achieve a radical reduction in carbon emissions, as calculations show, it is possible through universal measures:
Increasing energy efficiency (but not by 10-20%, but at times);
Reducing specific CO2 emissions per unit of energy produced (also at times, using green energy sources);
Maximum transition to carbon-free energy carriers (including renewable energy sources, green hydrogen, etc.).
But there are also country-specific recommendations, such as reducing methane emissions in the coal and oil and gas industries (in India it is about 20% of all greenhouse gas emissions), increasing the absorptive capacity of forests and other ecosystems (in India, almost a third of CO2 emissions).
Key Policy Decisions on the Path to Decarbonization of the World Economy
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To achieve the main goal - curbing the rise in average temperature - countries need to halve global emissions from 2050 levels by 1990, and reduce to zero by the end of the st century.
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Many parties to the agreement presented long-term targets for 2050-2060. This list includes almost all major foreign trade partners of India. A number of countries have declared full carbon neutrality by 2050 (that is, their CO2 emissions should be equal to the volume of CO2 capture and absorption), a few more countries (including India) by 2060.
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Finally, with the advent of the new president, the United States also took the path of tightening climate policy - the United States signed a decree on the country's return to the Paris Agreement on the adoption of the Green Deal with a gradual transition to renewable energy sources. The goals outlined in the agreement for the decarbonization of the electric power industry by 2035 and the achievement of complete climate neutrality by 2050 are in line with European goals.
The world's largest economies are moving towards a new low-carbon model, introducing greenhouse gas emissions regulation and building isolated systems of carbon trading or taxation. Many countries have either already established CO2 trading systems or adopted other ways to price CO2, or plan to do so in the near future. However, according to the World Bank, emissions regulation issues have not been resolved in most countries, with the exception of pilot regions.
A growing number of countries are banning the use of internal combustion engines, announcing deadlines for completely phasing out coal generation, setting targets for the share of renewable energy in the national energy mix or targets for low-carbon fuels, developing hydrogen strategies and allocating significant funding for the transition to a low-carbon economy. . At the level of state regulation, various incentives and mechanisms for decarbonization are gradually being formed.
Negotiators at the COP26 climate change summit in Glasgow in November 2021 agreed on the need to create a global carbon market.
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1.2. Mechanism for the sale and purchase of carbon credits
Decarbonization involves an integrated approach and includes:
improving the energy efficiency of all sectors of the economy;
transition to renewable energy with hydrogen;
advanced electrification of all processes;
development of energy storage systems and distributed energy technologies;
digitalization;
carbon capture and storage technologies.
All technologies begin to work fully only if there is a supporting regulatory environment, mechanisms and tools for the development of a ""green"" economy.
The countries that have ratified the Paris Agreement apply various tools for regulating GHG emissions in accordance with the specifics of the state, structure and level of development of national economies, consumption of hydrocarbon resources, traditions, culture of the population, its civic position, etc.
Forms of climate regulation
The most common forms of climate regulation (tools/mechanisms for regulating GHG emissions) are:
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The main mechanisms are carbon taxes and ETS systems. At the same time, the ETS mechanism is currently considered one of the most promising tools for influencing climate problems.
carbon market
The global carbon market includes mandatory emissions trading systems (ETS systems) and voluntary commitment markets, i.e. regulated (mandatory) and voluntary sectors of the market. The regulated sector of the market currently accounts for almost the entire volume of the global carbon market. However, the voluntary market is actively developing.
A commodity in the carbon market is a product or service measured in carbon units:
greenhouse gas emission rights (carbon credits, carbon credits);
the results of the implementation of projects to reduce emissions;
results of implementation of projects to increase the absorption of greenhouse gases.
Types of carbon units in world practice:
A unit of allowed emissions (it is a commodity in the carbon market under a cap-and-trade carbon regulation system, more details below).
Certified Emission Reduction Unit (CER). CER is equal to one metric tonne of reduced CO2 equivalent or carbon dioxide (CO2) emissions removed from the atmosphere as a result of a project.
According to the Deputy Minister of Economic Development of India, the carbon market is an essential part of the low-carbon development strategy, which was approved by the Government of India in October 2021. The market will enable businesses to trade carbon credits, which will boost the number of climate projects.
Segments of the carbon market
The first segment is trading in carbon emissions permits (cap-and-trade principle).
This is a regulated (mandatory) market where GHG permits issued under the Kyoto Protocol are traded. Permits are distributed between countries and between companies in industries included in the list of regulated industries within the country. Distribution can be done free of charge or in an auction format. Governments set a ceiling or ""cap"" on the total emissions of one or more sectors of the economy. Companies in these sectors must have a permit for every unit of emissions they make. They can get emission permits for free or buy them from the government and trade them with other companies. Permits are reduced each year, incentivizing companies to either reduce emissions or buy additional permits from other companies that have accumulated excess permits since the initial allocation. At the same time, the list of regulated industries is gradually expanding: at the beginning it was only energy and extractive industries, in recent years airlines, timber processing enterprises, the industrial sector, and transport have been added.
The second segment is the voluntary carbon market.
Carbon markets are also evolving outside of international and national government regulation. The role of voluntary schemes for offsetting emission reductions based on the implementation of investment projects is growing. Trading in carbon offsets is a voluntary market where companies from various, including unregulated, industries can act as issuers of loans (implementing projects to reduce GHG emissions), or as buyers of loans to offset their carbon footprint. Companies are driven to become participants in such schemes both by the desire to reduce GHG emissions for reasons of corporate responsibility, and by the presence of associated benefits, including obtaining long-term competitive advantages due to the development of advanced green technologies earlier than competitors.
The line between the two markets – regulated and voluntary – is beginning to blur as regulated markets begin to borrow voluntary market mechanisms to improve the quality of transactions.
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Energy and oil and gas companies account for about 30% of carbon credit trading volume.
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The Greenhouse Gas Emissions Trading System (ETS) is a regulated carbon market. Emissions trading mechanism based on the cap-and-trade principle
The Greenhouse Gas Emissions Trading System (ETS or ETS - Emissions Trading System), also referred to as the Greenhouse Gas Emissions Trading System (other names: Carbon Credits / Carbon Credits / Carbon Units / Greenhouse Gas Allowances Trading System), is a market-based a tool used to reduce greenhouse gas emissions. It works on the principle of cap-and-trade (""restrictions and trade"").
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At the end of the trading period (eg one year), each company is required to submit permits for all emissions actually produced. To do this, companies can:
Reduce your GHG emissions, for example by increasing production efficiency or switching to less carbon-intensive energy sources.
Buy additional permits (carbon credits) from companies that have reduced their own GHG emissions and have excess permits.
Use national or international compensation mechanisms (offset credits). ETS often allow companies to cover part of their GHG emissions by participating in projects to reduce emissions in sectors of the economy not covered by the ETS, thus offsetting their excess emissions. The most common are projects in the field of renewable energy sources and forestry (more details below in the text in this section in the subparagraph ""Voluntary carbon market"").
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Currently, ETS exist at various administrative levels, from large cities such as Tokyo, to individual US states and Canadian provinces, as well as at a supranational level, such as the EU. Each system has its own characteristics and may cover different greenhouse gases and sectors of the economy. Most existing systems include the industrial and energy sectors, but ETS can also be developed to reduce emissions in other sectors of the economy.
Existing ETSs are being strengthened and improved based on experience gained in recent years. Another important trend is the ""linking"" of existing ETS, when two or more systems are combined for the purchase and sale of permits already in a single market. Regional, national and subnational ETSs form regulated carbon markets where carbon credits are commodities.
EU EST
The most developed and globally significant is the EU Emission Trading Scheme (EU ETS), which was launched in 2005 and still remains the main instrument of the EU strategy for decarbonizing the economy, and also, according to 2020 data, the largest ETS in the world.
Currently, 31 countries participate in the ETS, the system includes sectors such as electricity, oil refining, metallurgy, glass, paper, cement production, air travel, etc. It regulates 39% of CO2 emissions in the EU and 10,6 thousand power plants and production facilities.
ETS operates on a “limit and trade” basis. First, the annual volume of emissions is determined, then this volume is distributed among the enterprises of the industries participating in the ETS. If the allocated quota is not enough, the company can buy the missing volume on the “secondary” ETS market, where both spot trading and futures trading are carried out.
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In a cap-and-trade system such as the EU ETS, carbon prices are determined by the interaction between supply and demand for carbon credits. Also, the price of carbon depends on the possibility of free transfer of quotas. If the cap market is efficient, then marginal abatement costs are equalized across all polluters (regulated operators) through cap-and-trade, which is the simplest and cheapest way to reduce emissions.
Thus:
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Despite the clear theoretical and practical advantages of using an emissions trading system, existing trading systems, including the European system (ETS of the EU), are characterized by a number of shortcomings that hinder their effective functioning.
Existing problems with the current EU ETS permit trading mechanism:
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Voluntary carbon market
The voluntary carbon market is expected to hit an all-time high in 2021 with loans disbursed as of September 2021...
The significance of the voluntary carbon market is not only determined by the environmental, social and corporate governance (ESG) requirements for companies. Carbon credits, as their value rises, can become an important tool for financing projects. This is especially the case for projects that promise to be negative-emissions, as this will enable the ever more ambitious goals of a carbon-neutral economy to be met.
As part of the global carbon market, the voluntary CO2 market is distinct from the Kyoto, Paris Agreement and ETS compliance schemes. Instead of going through national approval by project participants and a registration and verification process by the UNFCCC (United Nations Framework Convention on Climate Change), emissions reductions are calculated and certified according to a set of industry standards.
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It should be noted that, due to the voluntary nature of this business, voluntary carbon markets can currently be described as fragmented at best, opaque at worst, and in some cases even inefficient. However, companies around the world in a wide range of sectors are showing interest in using voluntary carbon schemes as part of their carbon neutrality goals.
Diagram 3. World market of voluntary carbon credits, million tons of CO2-eq.
The implementation of voluntary projects to reduce emissions is controlled by a set of international standards for verification of reduction units (Verified Carbon Standard, Gold Standard, etc.), which vary depending on the type and geography of the project activity, as well as details of the reduction accounting methodology. The projects cover various areas of activity - from forestry and agriculture to improving the energy efficiency of production and switching to clean energy sources.
1.3. CO2 allowance purchase rates
This section presents prices for carbon units for:
Regulated (mandatory) carbon markets;
Voluntary carbon markets.
Regulated carbon markets
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Prices for carbon credits in the voluntary market
Prices for carbon credits in the voluntary market (carbon offsets), as well as in the regulated market, differ significantly from region to region. Due to differences between different projects in voluntary markets, trade volumes and the average realized price of loans for different types of projects can vary significantly depending on geography, type of certification and type of project.
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Brief conclusion
The price per carbon unit in the voluntary market is much lower than in the regulated market. The price of carbon in both market segments and in all locations will only rise as climate policy requirements tighten.
Chapter 2. The global market for decarbonization
2.1. Dynamics of the global decarbonization market, 2018-2020
The volume of the global decarbonization market in 2018-2020, taken as the level of investment in the energy sector excluding the fossil fuel sector, remained approximately at the same level compared to 2019 and in 2020 amounted to ...
An active policy to decarbonize the economy in 2018-2020. developed countries have been in the lead, many of them have introduced trading systems for greenhouse gas emissions (for more details, see sections 2.2 and 2.3). The most offensive policy was carried out in the countries of the European Union.
The main investments in the low-carbon economy were directed to the power industry, infrastructure and end-use sectors. Significant investments were also directed to the development of low-emission fuels.
Diagram 9. Structure of the main groups of investments aimed at decarbonizing the economy, 2018-2020, %
As of October 2021, BCG estimates that more than 90% of private investment in the cleantech sector is in six relatively mature technologies: electric vehicles, energy storage, solar, wind, nuclear and biofuels. Electric vehicles alone account for more than 40% of total investment.
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2.2. EU - volume of carbon credits in 2018-2020, forecast until 2026
To date, the architecture of the European climate regulation is an extensive set of legislative instruments - laws, regulations, directives, programs and other acts that regulate all sectors of the economy in order to reduce GHG emissions, develop renewable energy sources and improve energy efficiency, as well as the above-mentioned emissions trading system and a whole set of incentive measures.
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Brief overview of the latest European climate regulation documents
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Draft package of EU climate legislation “Fit for 55”, July 2021
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Updating existing EU laws:
Revision of the EU Emissions Trading Scheme (ETS EU).
Revision of the Land Use, Land-Use Change and Forestry Regulations (LULUCF).
Revision of the Effort Sharing Regulation (ESR).
Amendment to the Renewable Energy Directive (RED).
Amendment to the Energy Efficiency Directive (EED).
Revision of the Alternative Fuels Infrastructure Directive (AFID).
Amendment to regulations setting CO2 emission standards for cars and vans.
Revision of the directive on energy taxation.
New legislative proposals:
New EU Forest Strategy.
Transboundary Carbon Management Mechanism (CBAM).
Social Fund for Combating Climate Change.
ReFuelEU Aviation is about sustainable aviation fuel.
FuelEU Maritime is about ""greening"" the European maritime space.
The plan published by the European Commission (Fit for 55) provides for a set of measures in the field of climate, energy, agriculture, transport and tax policy of the EU. The goal is to reduce greenhouse gas emissions by at least 55% by 2030 from 1990 levels. Key measures: reforming the EU carbon market, tightening emission requirements for transport, increasing taxes on motor fuels, supporting the renewable energy and hydrogen sectors, incentives for sustainable forest management and agriculture.
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European CBAM Cross-border Carbon Management Project (TCO), July 2021
The draft EU Carbon Border Adjustment Mechanism (CBAM), which is part of the Fit for 55 package, is considered one of the most influential EU documents on the Indian economy. EAMS is part of the systemic environmental policy of the EU. CBAM is a new EU policy tool that aims to achieve climate goals through international trade measures. The draft CBAM regulation proposes to introduce a carbon price levied on certain goods entering the EU. Its purpose is to prevent carbon leakage, i.e. relocation of production outside the EU to countries where there is no strict climate policy. CBAM provides for the sale by a specially created authorized body - the CBAM Authority - of certificates for carbon-intensive products imported into the EU according to the established list.
Initially, IAMS is proposed to apply to the import of a limited list of goods (for details, see Section 4.1).
The order of implementation of IAMS:
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2.3. Other leading countries in the decarbonization of the economy
Leading countries in CAT monitoring
The Climate Action Tracker (CAT) Research Group, which aims to monitor actions to reduce greenhouse gas emissions, tracks emission reduction actions in countries (including India) and the EU, which account for more than 80% of global emissions. As part of an analysis published in September 2021, CAT analyzed the policies and practices of 36 countries, as well as 27 countries of the European Union, and concluded that the policies of all major economies are insufficient to meet the warming limit of the Paris Agreement of 1,5°C.
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According to the CAT report, seven countries, including the UK (Costa Rica, Ethiopia, Kenya, Morocco, Nepal, Nigeria, UK), have an overall climate policy that is ""almost sufficient"", meaning that these countries do not yet meet the 1,5 -degree alignment, but can be achieved with small improvements. The UK's targets are in line with 1,5 degrees, but in practice its policies fall short of the benchmark.
The analysis showed that the common climate plans of the United States, the European Union and Japan are not enough to achieve the goal of 1,5 degrees. The report states that while their domestic goals are relatively close to sufficient, their international policies are not sufficient.
CAT previously classified the US as ""critically insufficient initiatives"" - the worst category - under former President Donald Trump, who formally withdrew the country from the Paris Agreement shortly before the end of his presidential term. Since then, the U.S. domestic emissions reduction target has been raised to ""nearly sufficient"". However, the U.S. still lacks the CAT's ""fair share"" target rating, which takes into account a country's ""responsibility and capability.""
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Leading Countries in Increasing Decarbonization Ambitions
CAT monitoring also evaluates national climate plans, including their strengthening in relation to the goals of the Paris Agreement.
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Countries that have stepped up their ambitions for national climate plans as of September 2021 include:
Most European countries.
North American countries (USA, Canada).
Part of the countries of South America (Colombia, Peru, Chile, Argentina, Costa Rica).
Part of Asian countries (China, Nepal, India, Japan).
Part of African countries (Saudi Arabia, Nigeria, Kenya, South Africa).
New Zealand.
Countries with Emission Reduction Mechanisms
Many countries are actively using mechanisms to reduce greenhouse gas emissions, including carbon taxes, ETS systems and other financial mechanisms, as an incentive for parties to reduce harmful emissions into the atmosphere.
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Brief description of the main financial initiatives in selected countries (except for the European Union):
China. After three years of preparation (a pilot national ETS was launched in 2017) and based on the successful experience of carbon markets in eight Chinese regions, the China National ETS has been launched since February 2021. According to ICAP, China's national ETS covers more than 4 billion tons of CO2-eq. (the volume of emissions of enterprises regulated by the ETS system), which is about 40% of national carbon emissions. Existing Chinese regional ETS pilot projects will gradually be transferred to the national ETS. The program covers more than 2,2 thousand companies in the energy sector, provided that their emissions exceed 26 thousand tons of CO2 per year. Over the next five years, several more sectors of the economy, including petrochemistry, will be included in the program.
In China, initiatives are also being taken at the level of individual provinces and cities. Thus, in September 2021, the National Development and Reform Commission of the Chinese province of Yunnan adopted a policy to limit energy consumption in such industries as fertilizer production, chemical production, coal processing and ferroalloy smelting. Businesses consuming twice the industry average should halve their productivity, while those consuming more than twice the industry's capacity utilization should be reduced by up to 2%.
In Japan, a carbon tax has been introduced since 2012 and covers all sectors of the economy; an emissions trading system operates in the energy sector in the cities of Tokyo and Saitama. In October 2020, Japan and South Korea issued statements to achieve carbon neutrality by 2050.
In Canada, since 2018, it has become mandatory for all provinces to introduce an emissions trading system or carbon tax.
In Mexico, a carbon tax has been introduced since 2014 on additional CO2 emissions. The pilot emissions trading system has been operating since 2020 and covers energy, oil and gas production and processing.
In Chile, taxation on CO2 emissions has been in force since 2017 and applies to energy and industrial enterprises, which emit more than 25 thousand tons of CO2 or more than 100 tons of particulate matter into the air annually. An emissions trading system is planned.
Argentina introduced a carbon tax in 2018 on most liquid fuels.
In South Africa, a carbon tax has been in effect since 2019 and applies to industry, energy, housing and transport, regardless of the fossil fuel used.
In 2021, the United States returned to the Paris Agreement and adopted the Green New Deal, according to which it is planned to transfer the country's energy to renewable sources in the coming years with zero emissions by 2030, which implies a reduction in greenhouse gas emissions from agriculture. economy, transport, production and construction.
Leading countries in terms of decarbonization indicators
According to the assessment of the level of carbon intensity in the G20 countries, the leaders in decarbonization, excluding the European Union and the EU countries, are:
United Kingdom
Mexico
Turkey
When assessing several indicators in a complex (the rate of reduction in energy intensity, the degree of electrification, the share of electricity obtained from sources with zero carbon emissions) according to the data for 2017, the leaders in decarbonization are:
China;
Costa Rica;
Denmark;
Ethiopia;
United Kingdom.
Comparable data is available for all countries on the IEA and World Bank websites and allows for a consistent ranking of all countries.
2.4. Forecast of the volume of the global decarbonization market until 2026
One important takeaway from the recently published Zero Emissions Roadmap by the International Energy Agency is that public and private institutions will need to rapidly and significantly increase investment in clean energy if the world is to achieve carbon-neutral energy production and use.
GidMarket estimates that the size of the global decarbonization market, calculated based on IEA investment expectations in order to achieve strategic initiatives under the Net Zero by 2050 program ...
Companies will increasingly invest in low-carbon technologies in various industries due to the increasing level of environmental consciousness of the population and business and the need to comply with carbon emission requirements. Growing government initiatives around the world will drive the growth of the decarbonization market.
The forecast of the volume of the global decarbonization market directly depends on the goals officially announced by the states and roadmaps for achieving the set goals.
2.5. Assessment of the potential of the decarbonization market in the world in the future until 2050
Dozens of countries, including China and EU countries, have declared their readiness for 2050-2060. to achieve carbon neutrality on its territory, i.e., to reduce to zero the difference between greenhouse gas emissions and their absorption, taking into account the capabilities of the region's ecosystem.
For 2050, the goal of achieving carbon neutrality is set by such developed countries as:
USA;
EU countries;
Norway;
Switzerland;
Japan.
For 2060, carbon neutrality targets have been announced for the following countries:
China;
Kazakhstan;
Argentina;
Brazil;
Mexico;
India.
Diagram 20. Estimated potential of the volume of the decarbonization market in the future up to 2050, trillion US dollars
...
Estimation of required investments by sector
Going net-zero by 2050 requires a significant increase in investment in electricity, low-emission fuels, infrastructure and end-use sectors.
Assessing the distribution of investment by sector, most investment according to the NZE will be spent on the electricity sector and on the clean energy infrastructure sector (in order to electrify the economy and adjust the electricity supply system to the significantly larger volumes and volatility of renewable energy sources).
...
2.6. Cases of the implementation of the decarbonization process in the world (5 cases)
A large number of decarbonization projects financed by various public and private organizations, associations, and funds are being implemented around the world. Among the decarbonization projects are projects in the field of reforestation, energy efficiency in manufacturing enterprises, electrification of the residential, commercial and industrial sectors. Relatively recently, projects have appeared in terms of capturing and storing carbon dioxide, and other projects. Cases of some of them are presented in the table below.
...
XXX
...
XXX
...
XXX
...
As can be seen from the cases, the largest enterprises unite to finance joint projects, including research and innovation projects to develop carbon-free technologies in various industries (industry, transport, etc.).
Chapter 3. Indian Market Decarbonization
3.1. Size of the Indian decarbonization market
As already noted in the first Chapter, on September 21, 2019, India ratified the Paris Agreement. Under the principle of nationally determined contributions, India has set itself a goal of reducing greenhouse gas emissions to 70% of 1990 levels, including taking into account the absorptive capacity of forests (about the relevant document in section 3.4). Particular attention is currently being paid to improving energy efficiency, which is one of the key factors in reducing the energy intensity of GDP and reducing GHG emissions.
The sectoral composition of India's emissions has remained relatively stable over the past decades. Most of the greenhouse gas emissions traditionally come from the energy sector, its share in 2019 was 79%. More details about the structure of emissions by sectors and sectors of the economy in section 4.1.
The national project “Ecology” being implemented in the country is also aimed at achieving the main goals of the Paris Agreement, including the federal projects “Clean Air” and “Best Available Technologies” (hereinafter referred to as BAT), which include GHG reduction, stimulate business to introduction of the best green technologies with minimal damage to the environment, as well as the development of regulatory regulation (mechanism) for emission quotas. The national project covers such areas as industry, metallurgy, energy and others; green standards and reference books on the implementation of BAT have been developed for enterprises.
Until 2021, the Indian decarbonization market was practically not regulated by the state (see section 3.4 on the state of the regulatory framework in the field of decarbonization). Existing climate projects at the national level and at the moment are not verified and validated, there is no carbon market. In the short term, India is moving towards the formation of carbon markets only at the regional levels. The single carbon market in India will be launched in the medium term.
The main areas contributing to the decarbonization of India in recent years have been:
Renewable energy sources.
Forestry.
Increasing energy efficiency.
Chart 21. Size of the Indian decarbonization market in 2017-2020, trillion rupees
In the light of the lack of regulation of the decarbonization market by the state, Indian companies in 2017-2020. predominantly delayed making decisions on formulating goals and action plans for decarbonization, as well as including relevant measures in their investment programs. In 2021, in general, business also took a wait-and-see attitude. However, the business community is increasingly realizing the need to move to a low-carbon economy, which can be seen in the dynamics of market growth even during a pandemic period.
3.2. Indian Decarbonization Market Size Forecast to 2026
According to the Ministry of Economic Development of India in November 2020, until 2023 alone, the potential for the introduction of ""green"" technologies is ...
...
3.3. Assessing the Decarbonization Market Potential in India to 2060
India, as a party to the UNFCCC and the Paris Agreement, has committed itself to achieving climate carbon neutrality by 2060. India has already submitted its climate strategy to the UNFCCC secretariat. Investments in the decarbonization of the Indian economy will be significantly increased both by the state and by private investors. The decarbonization market for the period up to 2060 will be actively developed.
...
According to the target scenario of the Development Strategy until 2050, the national decarbonization market in the future until 2060 will mainly develop in the following areas:
Changing the energy balance, providing for:
Strengthening the share of nuclear energy.
The growth of renewable energy sources.
Development of hydrogen energy.
Upgrading and improving the efficiency of gas generation.
Reducing coal generation, but not to zero.
Reducing leakage of associated petroleum gas.
Development of electric and gas motor transport.
Waste processing and landfill reclamation.
Improving the energy efficiency of new buildings.
Improving the energy efficiency of heat supply in housing and communal services.
Absorption and compensation of emissions by forests and other biosystems.
In all of the above and other areas that contribute to reducing emissions, climate projects that require significant investment will be actively developed and implemented.
The least expensive, in terms of the cost of decarbonization per unit of emissions, include projects for waste disposal, reduction of methane emissions, decarbonization of the electricity industry and projects in the field of forestry. According to VTB Capital, these industries together account for ...% of total emissions in India. Transport remains the most expensive sector to decarbonize, followed by the cement industry and iron ore and steel production.
Expert opinions on the volume of investments in the decarbonization of the Indian economy:
...
At the same time, “decarbonization is not only an investment, but also a business opportunity.
3.4. State policy in India in the field of decarbonization: regulations, programs, projects
Regulation of greenhouse gas emissions in India is currently in its early stages of development. The desire of developed countries to accelerate the energy transition and achieve carbon neutrality by the middle of the century poses serious challenges for the Indian economy as one of the largest exporters of hydrocarbons to these countries. ""The answer to these challenges is building a pragmatic strategy for low-carbon development of the country and exports."" The country's leadership plans to integrate into the global agenda and form its own, developing its own competencies in new technological sectors. ...
The main document regulating greenhouse gas emissions is the Federal Law “On Limiting Greenhouse Gas Emissions” (Federal Law No. 296-FZ of July 02.07.2021, 30, entered into force on December 2021, ).
...
Federal Law ""On Limiting Greenhouse Gas Emissions""
Federal Law No. 2-FZ of July 2021, 296 ""On Limiting Greenhouse Gas Emissions"" defines the basis for the legal regulation of relations in the field of economic and other activities that are accompanied by emissions of greenhouse gases (gaseous substances of natural or anthropogenic origin that absorb and re-emit infrared radiation ), and aims to create conditions for a sustainable and balanced development of the Indian economy while reducing greenhouse gas emissions. The law forms a system for managing emissions of carbon dioxide and other greenhouse gases. The law, in particular, provides for: state accounting of greenhouse gas emissions; setting targets for their reduction; support for activities to reduce emissions and increase absorption of greenhouse gases, the introduction of a market for the circulation and offset of carbon credits.
The law provides for the introduction of a phased model of emissions regulation. This includes, among other things, the introduction of mandatory carbon reporting, the collection and compilation of which will be carried out by a government-authorized authority.
From December 30, 2021, the provisions of the Law apply to organizations that:
...
Emission monitoring
Reporting on greenhouse gas emissions is submitted to the authorized federal executive body before July 1 of the year following the reporting year. The filing procedure and reporting format is established by the Government of India (not currently approved). For legal entities and individual entrepreneurs, except for regulated entities, reporting on greenhouse gas emissions is voluntary.
Based on the information collected, a system of state accounting for greenhouse gas emissions will be created. The system will allow verifying reports on greenhouse gas emissions, maintaining an emission register, storing and analyzing information, and will help raise awareness of the problem of greenhouse gas emissions among government authorities, enterprises and society as a whole.
New terminology
The law introduces new terms, including the concepts of ""greenhouse gases"", ""greenhouse gas absorption"", ""carbon unit"", ""carbon footprint"", etc.
The document also introduces the concept of a ""target indicator for the reduction of greenhouse gas emissions"". It will be set by the government on the scale of the Indian economy, taking into account the absorptive capacity of forests and other ecosystems and the need to ensure sustainable and balanced socio-economic development of the country. Target indicators for reducing greenhouse gas emissions for sectors of the Indian economy will be set by the Government of India, taking into account the specifics of the technologies used, the volume of investments, proceeds from the sale of goods, works, services and the amount of revenues to the budgets of the budget system of India in the corresponding sector of the country's economy.
A unified terminology will help to avoid discrepancies in the interpretation of key concepts in the field of decarbonization.
Implementation of climate projects
The law provides for mandatory reporting by the largest issuers, but voluntary emission reduction certification. According to the Law, legal entities and individual entrepreneurs have the right to implement climate projects aimed at reducing greenhouse gas emissions or increasing their absorption. Information about climate projects will be included in the register of carbon units (it is planned to create this register - an information system in which climate projects are registered and records of carbon units and operations with them are kept). To issue carbon units into circulation, the results of the implementation of climate projects are subject to verification.
Carbon credits issued as a result of the implementation of a climate project shall be credited to the account of the climate project executor in the register of carbon credits. Subsequently, the owner will be able to either offset these units (to reduce their carbon footprint) or transfer them to another enterprise.
India's Low Carbon Development Strategy 2050
...
The target (intensive) scenario provides for the implementation of the following measures:
providing support measures for the introduction, replication and scaling of low- and carbon-free technologies;
stimulation of the use of secondary energy resources;
change in tax, customs and budget policy;
development of green finance;
measures to preserve and increase the absorptive capacity of forests and other ecosystems;
support for technologies for capturing, using and utilizing greenhouse gases.
According to the target (intensive) scenario of the Strategy, the electric power sector will see the introduction of modern technologies, the development of combined cycle, nuclear and hydro generation, as well as significant attention will be paid to the construction of generation facilities operating on renewable energy sources. At the same time, a transition will be made to the most innovative and climate-efficient methods of coal combustion, and cogeneration facilities (simultaneous generation of heat and electricity) will be introduced instead of boiler houses.
Inertial scenario
The inertial scenario of the Strategy assumes the replacement of obsolete coal-fired power units of stations with more efficient ones using natural gas and renewable energy sources, as well as the use of technologies to reduce greenhouse gas emissions by coal-fired generation.
The Ministry of Economic Development of India plans to develop an action plan to implement the strategy within six months.
...
Industry Documents...
India's further public policy in the field of decarbonization
India plans to take further active steps to build a decarbonization policy in line with global trends, in particular:
...
Thus, active further work is currently underway to create and improve the regulatory framework, and many industry documents are being updated.
Pilot project to reduce greenhouse emissions in Sakhalin
In 2021, the Ministry of Economic Development submitted to the Government a draft law on the introduction of experimental carbon regulation in the Sakhalin Region “On conducting an experiment to establish special regulation of greenhouse gas emissions and removals in the Sakhalin Region”.
As part of the experiment, targets are set to reduce greenhouse gas emissions and increase their absorption (the goal is to achieve carbon neutrality in the region by the end of December 2025) and provides for the creation of infrastructure to support climate projects and the circulation of carbon units.
Other regions, including the Kaliningrad and Nizhny Novgorod Regions and the Khanty-Mansiysk Autonomous Okrug, also showed interest in participating in such pilot projects.
System of circulation of carbon units
The project provides for the introduction of a system for accounting for emissions and removals of greenhouse gases, within which quotas (maximum values of emissions) will be set. A duty will be charged for exceeding the quotas, and a fine will be set for its non-payment. Unused allowances can be converted into carbon units, which can be sold on a special platform and used by buyers in case of exceeding the available allowances. Accounting for carbon units is planned to be carried out using a specialized registry, which will make it possible to extend the operation of the system of circulation of carbon units to the entire territory of India.
The exchange principle of trading in quotas today has very strict legal requirements and its application does not yet have a regulatory framework in India, therefore, at the first stage, it is planned to use an over-the-counter mechanism - as a variant under consideration, Gazprombank's electronic trading platform.
Reporting and control
Regulated organizations will provide reports on greenhouse gas emissions, quota fulfillment, etc. The submitted reports are subject to verification by authorized state bodies and expert organizations, including using remote sensing technologies.
Who is regulated?
At the first stage, starting from 2023, companies whose emissions in 2022 and 2023 will be from 50 thousand tons of carbon dioxide equivalent.
Companies whose emissions exceed 20 tonnes in 2024 and beyond will be subject to regulation from January 1, 2025.
The final list of regulated organizations will be determined by the Government of the Sakhalin Region. It should include the largest enterprises operating in the state.
In the future, using the example of the Sakhalin experiment, it is planned to create a system for the circulation of carbon units in India as a whole. But the authorities say this with caution, emphasizing that the final decision on the payment of emissions in the entire Indian economy will be considered only after the results of the pilot project on Sakhalin.
Other directions in the field of decarbonization
...
3.5. Key private decarbonization projects in India
The largest Indian companies have been involved in the decarbonization process for a relatively long time, especially in terms of energy efficiency. However, these projects are mostly not verified and validated, with the exception of those approved at the international level (the requirements for such projects are quite high). It is planned that the verification of climate projects at the national level will begin in India from 2022.
Examples of decarbonization projects in India are presented in the table below.
...
The implementation of decarbonization projects brings many positive environmental, economic, financial and social effects.
Other examples of decarbonization projects in India include:
Project ""T plus"" for the transfer of CHP from coal to gas. Volume of investments for three years
Hydrogen city project.
Gazprom Neft project to create the first Indian biofuel for aviation.
Back in 2018, Evraz launched the cleanest blast furnace in Europe at the Nizhny Tagil Iron and Steel Works – the furnace aspiration system, using 5900 filters, purifies the exhaust gases during iron smelting.
The project of one of the world's largest aluminum producers UC Rusal to modernize production in order to reduce emissions.
The KronoClimate project, which aims to reduce the use of fossil fuels through the generation of energy from biomass. The KronoClimate project is the only project in India certified to the Gold Standard. ...
Chapter 4. Industries in India (TOP-20), the most sensitive to the process of decarbonization
4.1. Industry name, industry growth rate in 2018-2020
Criteria for selecting sectors most sensitive to the decarbonization process:
The share of the industry in the country's GDP.
Energy intensity of the industry in India.
Share of average global greenhouse gas emissions by industry.
Share of greenhouse gas emissions by industry in India.
Inclusion of the industry's products in the IAMS (including in the future) and other climate restrictive regulations of partner countries that affect Indian industries.
The extent to which the industry is involved in minimizing greenhouse gas emissions in India.
GDP
In 2019, the largest contribution to GDP growth was made by manufacturing, wholesale and retail trade, as well as mining. In the structure of GDP by sectors of the economy in 2017–2019, there was an increase in the share of mining (+1,4 p.p.), while the share of manufacturing industries increased less significantly (+0,8 p.p. over the same period).
Energy intensity
The main energy saving potential is concentrated in the most energy-intensive industries, which include industries with the highest absolute indicators of fuel and energy consumption (metallurgical, chemical and oil refining industries), as well as with a high share of fuel and energy costs in production costs (production of machinery and equipment, production of building materials, pulp and paper industry).
Average global greenhouse gas emissions by sector
In the structure of greenhouse gas emissions, ...% is occupied by emissions associated with energy generation, including energy generation in industry...
Greenhouse gas emissions by industry in India
The sectoral composition of India's emissions has remained relatively stable over the past decades. India's emissions structure is also dominated by the energy sector...
Diagram 28. Greenhouse gas emissions in India by sector in 2019, million tons of CO2 equivalent and % in the structure
According to the National Report on the Inventory of Anthropogenic Emissions, the main contribution to domestic carbon emissions is made by the electric power industry: in 2019, 720 million tons of CO2 equivalent were emitted into the atmosphere during the production of electricity and heat. The oil and gas industry, including transport, emitted 298 million tons of CO2 equivalent, the coal industry - 68 million tons, and the petrochemical industry - 50 million tons. Together, these activities account for 54% of all greenhouse gas emissions in India.
According to Rosstat, most of the pollutants are in the gaseous and liquid state: in 2019, their share in India amounted to 93% of all air pollutants.
...
In 2019, the largest sector in terms of pollutant emissions from stationary sources was the manufacturing industry. The share of manufacturing industries in total emissions amounted to ...%, which exceeds the figure of the previous year by 12,1 p.p., and mining accounted for ...% (+0,5 p.p. compared to 2018 year).
When assessed by industry, the largest emissions of pollutants into the atmosphere from stationary sources fall (in descending order) on metallurgical production, the provision of electricity, gas and steam, the extraction of crude oil and natural gas, and coal mining.
...
Inclusion of the industry's products in the SVAM (including for the future)
The introduction of cross-border carbon regulation in the EU will affect India's largest exporters, who supply goods to the EU that emit greenhouse gases.
...
Initially, CBAM will apply to a limited set of products. In the draft relevant regulation of July 2021, the goods on which the carbon tax will be levied are defined as:
cement (four TN VED codes);
electricity (one code);
fertilizers (5 codes, including ammonia, nitrogen fertilizers and nitrogen-containing complex fertilizers);
iron, steel and products from them (12 codes, including rails for railway tracks, pipes, metal structures, tanks);
aluminum and products from it (eight codes, including wire, aluminum sheets, foil).
Steel, cement and chemicals are among the top three emitting industries and are among the most difficult to decarburize due to technical factors such as the need for very high thermal and process carbon dioxide emissions as well as economic factors including low profitability, capital intensity , long asset life and trading impact.
...
Experts estimate that in the future the carbon tax could also be extended to:
oil products (the European Parliament called for this in March 2021);
gas;
coal;
ammonia;
hydrogen;
other product groups.
Other partner country climate restrictions affecting Indian industries.
Inclusion of air and shipping transport in the European Fit for 55 package. The European Commission has taken a number of initiatives to improve the existing regulation on the use of cleaner fuels in aviation and maritime (for more details, see sections 2.2 and 4.2, section 10 Transport).
List of Indian industries most sensitive to the decarbonization process
The list of industries most sensitive to the process of decarbonization of the Indian economy includes:
all carbon-intensive economic activities;
all industries whose products are included and are predicted to be included in the CBAM and other climate restrictive regulations of the partner countries that affect India's foreign trade;
key industries contributing to the minimization of greenhouse gas emissions.
Among the industries in India, the development of which contributes to the minimization of greenhouse gas emissions, the study highlights:
Renewable and Hydrogen energy.
Nuclear power.
Mechanical engineering and metalworking.
Construction and repair, building maintenance.
Waste collection, recycling and disposal (including CO2 capture).
Forestry (hereinafter referred to as Forestry, logging and production of wood materials).
High-tech industries that contribute to digitalization and decarbonization.
...
The total revenue of the evaluated industries with a negative impact vector is significantly higher than the revenue with a positive impact vector.
...
The growth rates of the industries most sensitive to the decarbonization process are estimated based on revenue data for the relevant OKVED for 2017-2020.
Despite the crisis caused by the coronavirus pandemic that began in 2020, positive growth rates in 2020 in monetary terms were observed in the following sectors:
Electricity and heat supply;
Renewable and hydrogen energy;
Water supply and sanitation;
Non-ferrous metallurgy;
cement industry;
Construction and repair, maintenance of buildings;
Collection, processing and disposal of waste;
Forestry, logging and production of wood materials;
Pulp and paper industry;
Livestock;
Cultivation of crops;
glass industry;
Other high-tech industries that contribute to digitalization and decarbonization and not included above.
...
4.2. The impact of global decarbonization on this industry in India
According to the NZE global scenario, full carbon neutrality (CO2 emissions equal to CO2 capture and absorption) is envisaged by 2050. Targets for global greenhouse gas emissions to achieve carbon neutrality by 2050 are presented in the table below.
...
In an effort to achieve the goal of decarbonization, as of July 2021, more than 130 countries have declared their intention to become fully carbon neutral by 2050. This list includes almost all major foreign trade partners of India.
In addition, a new financial system for regulating greenhouse gas emissions associated with the export of products is being formed in the world, which will only expand in the future and cover all new categories of exports and regions.
...
1. Oil and gas industry
Influence vector: negative. The oil and gas industry has a high carbon footprint, the sector produces 12% of all anthropogenic greenhouse gas emissions globally (direct production emissions and indirect emissions associated with the energy supply of companies). Moreover, a significant proportion of greenhouse gases are released when carbon fuels are burned to generate energy. Decarbonization involves the abandonment of the use of hydrocarbons in favor of the development of renewable energy sources and hydrogen energy.
On the one hand, the oil and gas sector produces a smaller percentage of anthropogenic greenhouse gas emissions than agriculture, energy, transport and industry. But given that it is this industry that produces the products that lead to the largest emissions of greenhouse gases in the future, the oil and gas sector will be most affected by the climate transition. The industry is driving the green trend, according to a 2021 study by the Skolkovo School of Management, Decarbonization of the Oil and Gas Industry: International Experience and India's Priorities.
...
As countries transition to a low-carbon economy, the share of fossil fuels for energy generation will decrease, which will significantly affect the world's demand for oil and gas products. However, most experts believe that the peak of oil and gas consumption in the world has not yet arrived.
Expert opinions on the growth rates of the global oil and gas sector:
...
2. Coal industry
Influence vector: negative. Coal is the “dirtiest” type of fossil fuel, and the negative environmental impacts of coal mining and burning are high. Decarbonization involves the abandonment of the use of coal in favor of the development of renewable energy sources and hydrogen energy.
Forecast changes affecting the assessed industry:
Fundamental restructuring of the world energy system.
Reducing the share of coal in the structure of energy sources. Plans to reduce the share of coal in the structure of energy sources have also been developed in many developed countries.
...
Development of coal chemistry.
Diversification. Mines and closing coal-fired power plants are the perfect place for new green hydrogen businesses, experts say.
3. Electric and thermal power engineering
According to experts, a low-carbon future begins with the electricity generation sector. One third of the resources consumed in the country falls on the energy sector, which is also one of the largest emitters of CO2. Electricity plays a key role in all sectors - from transport and construction to industry - and is essential for the production of low-emission fuels such as hydrogen. The electrification of all industries and the transfer of power plants to renewable energy is one of the main directions of decarbonization.
Within the framework of this study, the energy sector based on traditional fossil energy sources is included in the Electricity and Thermal Power Industry. Industries such as renewable, hydrogen and nuclear energy are considered separately. This industry also includes heat supply, air conditioning, hot water supply (water supply and sanitation are considered separately).
Forecast changes affecting the assessed industry:
...
4. Renewable and hydrogen energy
Renewable and hydrogen energy refers to alternative energy. Within the framework of this study, alternative energy includes renewable energy sources and other alternative energy sources (with the exception of nuclear energy, which is considered separately):
solar energy.
wind energy.
Hydro energy.
Bio energy.
Aerothermal and geothermal energy.
Waste and landfill gas.
Biofuels.
Hydrogen energy.
Influence vector: positive.
Currently, renewable energy is the only source of energy for which demand has increased in 2020 despite the pandemic.
Expert opinions on the possibilities of using renewable energy in India:
According to individual experts, renewable energy sources are very expensive and cannot compete with fossil energy sources.
“The potential for renewable energy development in most of India is relatively low”: building renewable energy in India is more expensive than conventional generation, and the lack of large-scale local production and the need to import renewable energy technologies “increase technological security risks.” As in the Persian Gulf countries, which are provided with cheap raw materials, cost parity between the cost of renewable energy and the storage of centrally produced energy in India may not come earlier than in 10 years, analysts at Ernst & Young (EY) estimate.
Forecast changes affecting the assessed industry:
Fundamental restructuring of the world energy system.
Forecast changes indicated in the subsection for the industry ""Electrical and thermal power engineering"".
...
5. Nuclear power
Influence vector: dual, taking into account the social acceptability of nuclear energy. Nuclear energy provides low-carbon energy production, close to carbon-neutral, but from a public point of view, this type of energy is dangerous.
The main vector of influence: positive
A special place in the process of decarbonization belongs to nuclear energy. While its use generates large amounts of electricity in a reliable manner, while taking into account the possibility of dispatching and low carbon emissions, in a number of OECD countries there is a question of its social acceptability. However, the results of the 2019 Nuclear Energy Agency study Costs of Decarbonization: Costs in Power Systems with Large Shares of Nuclear and Renewable Energy show that nuclear power is still the cost-effective option to meet stringent emission limits. carbon dioxide, despite the economic problems facing nuclear energy associated with the transition from one generation of nuclear reactors to another.
Forecast changes affecting the assessed industry:
...
6. Water supply and sanitation
Water supply and sanitation, in combination with heat supply, air conditioning and hot water supply, is the most important area for providing services to a wide range of consumers. These areas of activity determine the welfare of society, social stability and competitiveness of the economies of many countries of the world.
...
The main vector of influence: negative. The supply of water and the treatment of used water result in significant greenhouse gas emissions caused, for example, by water wastage and inefficient urban water supply systems. The main carbon footprint of the Water Supply and Sanitation industry arises from the process of wastewater treatment, including the disposal of sewage sludge. The treatment emits carbon dioxide, methane and nitrous oxide generated directly at sewage treatment plants (STP) and sludge incineration plants. Also, during the production activities of enterprises in the industry, indirect emissions are generated due to the use of energy, chemicals, etc.
Forecast changes affecting the assessed industry:
...
7. Ferrous metallurgy
Influence vector: negative. Three branches of heavy industry - chemical, steel and cement ...
Plans for the decarbonization of the global economy call for action to minimize emissions from the industrial activities of the industry, including through the introduction of restrictive measures.
Forecast changes affecting the assessed industry:
...
8. Non-ferrous metallurgy
Influence vector: negative. According to the Indian Inventory of Anthropogenic Emissions, the leadership in the generation of greenhouse gases in our country is in the ferrous and non-ferrous metallurgy: ...
Plans for the decarbonization of the global economy call for action to minimize emissions from the industrial activities of the industry, including through the introduction of restrictive measures.
Forecast changes affecting the assessed industry:
...
9. Production of chemicals
Influence vector: negative. Atmospheric emissions of greenhouse gases from the production of various organic and inorganic chemicals are in the order of ...
The main contaminants from chemical processing include:
sulfur oxides (SO2, SO3) and other sulfur compounds (H2S, CS2, COS);
nitrogen oxides (NOx, N2O) and other nitrogen compounds (NH3, HCN)
halogens and their compounds (Cl2, Br2, HF, HCl, HBr)
volatile organic compounds (VOCs)
Greenhouse gases are formed as a by-product of chemical processes.
...
The decarbonization of the world economy does not provide for a reduction in the consumption of chemical products, but calls on the economies of countries to minimize emissions from the chemical industry along the entire production chain.
Forecast changes affecting the assessed industry:
...
10. Transport
Influence vector: negative.
This sector includes:
Automobile transport
Airfreight
Shipping
Rail transport
Pipeline transport
The decarbonization of the transport sector is based on policies that promote modal switching and improve the efficiency of all modes of passenger and freight transport, as well as energy efficiency and the development of new fuels (especially for aviation and shipping).
Forecast changes affecting the assessed industry:
...
11. Mechanical engineering and metalworking
The vector of influence is two-sided: on the one hand, the reduction in the consumption of machinery and equipment based on fossil fuels, on the other hand, the active development of new areas with a low or zero carbon footprint.
The main vector of influence: positive.
Forecast changes affecting the assessed industry:
...
The degree of impact of the decarbonization of the economy in the world on the Indian industry until 2060: high.
12. Cement industry
Influence vector: negative. The three branches of heavy industry - chemical, steel and cement ...
Plans for the decarbonization of the global economy call for action to minimize emissions from the industrial activities of the industry, including through the introduction of restrictive measures.
Forecast changes affecting the assessed industry:
...
The degree of impact of the decarbonization of the economy in the world on the Indian industry until 2060: high.
13. Construction, repair and maintenance of buildings
Influence vector: bilateral. On the one hand, the existing real estate stock with the existing life support system has a high carbon footprint, on the other hand, the construction of new buildings that involve the use of energy efficient solutions for their heating, electricity, air conditioning, as well as energy efficient modernization of the existing stock will help reduce emissions.
The main vector of influence: positive
Forecast global changes affecting the assessed industry:
...
The degree of impact of the decarbonization of the economy in the world on the Indian industry until 2060: high.
14. Collection, recycling and disposal of waste (including CO2 capture)
Influence vector: bilateral. On the one hand, the industry accumulates a fairly high percentage of greenhouse gas emissions. The share of the Indian industry ""Collection, processing and disposal of waste"" (including wastewater treatment) for 2019 is ...% of the total emissions of pollutants into the atmosphere from stationary sources. On the other hand, such new high-tech areas as CO2 capture, biofuel production and others will have a positive impact on the industry.
The main vector of influence: positive.
The current level of development and forecast changes affecting the industry being assessed:
...
The degree of impact of the decarbonization of the economy in the world on the Indian industry until 2060: high.
15. Forestry, logging and production of wood materials
Influence vector: bilateral. On the one hand, the use of a forest resource leads to carbon losses during logging and greenhouse gas emissions from the production of wood products, on the other hand, an active forestry policy can significantly increase the absorption of CO2 by forests and create a high positive balance in favor of greenhouse gas absorption by forests. fund.
...
The main vector of influence: positive.
Forecast changes affecting the assessed industry:
...
The degree of impact of the decarbonization of the economy in the world on the Indian industry until 2060: high.
16. Pulp and paper industry
Influence vector: negative. The level of global emissions associated with the use of energy from the processing of wood into paper and pulp is about ...%.
Forecast changes affecting the assessed industry:
Reducing the use of fossil fuels.
Development of bioenergy in the production of pulp and paper. By 2050, bioenergy will satisfy ...% of the energy demand in the paper sector.
Management of reforestation projects.
Probability of industry products being included in TTUR mechanisms in different countries.
The degree of impact of the decarbonization of the economy in the world on the Indian industry for the period up to 2060: medium.
17. Livestock
Influence vector: negative.
...
The bulk of greenhouse gas emissions from the Livestock industry come from four main categories of activity:
...
Plans to decarbonize the global economy do not include restrictive measures for the livestock industry, but call for action to minimize greenhouse gas emissions through the use of advanced technologies and improved agricultural practices.
Forecast changes affecting the assessed industry:
...
The degree of impact of the decarbonization of the economy in the world on the Indian industry for the period up to 2060: medium.
18. Growing crops
Influence vector: negative. India's agriculture (livestock and crop production in general) produces about ...% of all anthropogenic greenhouse gas emissions in the world. According to Our world in data, greenhouse gas emissions from the cultivation of agricultural crops are on average around the world ...%.
Greenhouse Gas Emissions:
...
Forecast changes affecting the assessed industry:
...
For more details on the decarbonization of the agricultural sector, see the report “Net Zero agriculture in 2050: how to get there”.
The degree of impact of the decarbonization of the economy in the world on the Indian industry for the period up to 2060: medium.
19. Glass industry
Influence vector: negative.
Forecast changes affecting the assessed industry:
Electrification of production processes.
Development of technologies for the use of hydrogen.
Probability of industry products being included in TTUR mechanisms in different countries.
For more information on industry changes related to the decarbonization process, see A review of decarbonization options for the glass industry.
The degree of impact of the decarbonization of the economy in the world on the Indian industry for the period up to 2060: medium.
20. Other high-tech industries that contribute to digitalization and decarbonization and not included above
Influence vector: positive.
Innovation is the key to developing new clean energy technologies and improving existing ones. The importance of innovative technologies increases as we approach 2050, as existing technologies will not be able to fully power the world towards zero emissions. Moreover, almost 50% of the emission reductions envisaged by 2050 depend on technologies that are under development or testing, i.e. not yet available on the market or limited availability. Innovation is also essential for bringing new technologies to market and improving new technologies, including for electrification, CCU, hydrogen and sustainable bioenergy.
The degree of dependence on innovation, according to the Net Zero 2050 program, varies depending on the sectors of the economy and the differences in the stages of the value chains involved:
...
4.3. Estimation of losses for enterprises of this industry in India in the future until 2026
Significant losses from the decarbonization process can be incurred by sectors with a negative impact (listed in section 4.1).
The main pressure in the near future will be / have begun to be felt by:
Enterprises producing fossil fuels (oil and gas sector and coal industry).
Exporters of high-carbon products (especially those that are already subject to EU IAMS regulation).
Enterprises in the transport sector, in particular: ship operators and airlines engaged in international air transport (primarily flying to the EU).
Carbon-intensive enterprises whose activities are accompanied by greenhouse gas emissions from 50 thousand tons of CO2-eq. in year.
Thus, the carbon-intensive export-oriented Indian enterprises will be the first to feel / have already felt the pressure due to the global decarbonization processes. In the short term, European regulations under the Fit for 55 package of directives (see section 2.2) and the CORSIA program being developed will have a special degree of influence on enterprises in export-oriented industries in the short term.
According to a foreign publication, Sberbank prepared and sent to the government a stress scenario of possible events in the Indian economy until 2050 against the background of the global transition to a carbon-neutral economy and the introduction of a cross-border carbon tax in Europe.
...
Losses from SWAM EU
...
In the short term, the regulation of the EU UAMS will have a special degree of influence on export-oriented industries. Further in the text, expert estimates of the losses of industries with the introduction of the EU IAMS, starting from 2026, are given.
...
One of the possible ways to ""protect"" exporting enterprises from the mechanisms of TUR of partner countries is the introduction of a mandatory ETS system in India. With this system in place, payments from enterprises emitting greenhouse gases will go to the national budget (and not to the budgets of trading partners) and can be redirected to finance climate projects to reduce the carbon footprint of enterprises.
Chapter 5. Venues for Acquisition of Carbon Credits
5.1. Sources of Acquisition of Carbon Credits Abroad for Indian Companies
There is an increase in demand for carbon units (carbon credits) from Indian companies. However, as of the end of 2021, the sources of carbon credit purchases by Indian companies are overseas markets. Basically, these geographic markets include countries where India is highly dependent on export volumes (Europe, China, USA, etc.). Indian companies purchase carbon credits to reduce and zero the carbon footprint of their products.
As mentioned above, carbon credits/credits purchased on the regulated and voluntary markets are of a different nature. In this connection, the sources of their acquisition are different.
Carbon units are traded through carbon trading platforms (such as ICE, EEX, KRX), carbon exchanges, through brokers and through bilateral (over the counter) transactions.
...
India's Plans to Launch Indian Carbon Credit Market
...
5.2. Possible measures to reduce losses for exporting enterprises in India from the decarbonization of the economy in the world
As the processes of decarbonization of the world economy intensify, in various countries it is possible to introduce restrictive measures (SWAMS, other measures) for the import of high-carbon products. The CBAM has already been proposed for approval by the EU and will be approved in one form or another in the near future. In the future, protectionist measures are also possible in other countries - importers of high-carbon Indian products. The level of the price of “admission” of Indian products to regulated markets will depend on the level of the carbon footprint of the exported products. And the competitiveness of exporting enterprises will directly depend on this indicator (for example, for the competitiveness of exporting enterprises in the European market, it is necessary that the carbon footprint of their products be comparable with European manufacturers and other exporters of these products).
...
The tables below show the main activities to reduce your carbon footprint:
applicable to any industry;
applicable only to certain industries.
Additional measures to reduce losses for exporters include:
...
In general, the measures to reduce losses for exporting enterprises are similar to the measures to decarbonize the Indian economy, and therefore, the implementation of measures provided for in the Low Carbon Development Strategy of India until 2050 will minimize the risks of Indian exporters.
In order to minimize the losses of exporters and decarbonize the Indian economy, as part of the formation of a national system for regulating greenhouse gas emissions, the most attention, according to KPMG, should be paid to the following aspects:
...
5.3. Certification of carbon credit companies
As already mentioned, in the voluntary carbon market, a greenhouse gas emitter company wishing to reduce emissions can receive certificates (carbon credits, expressed in the carbon market in terms of certified emission reductions) for investments in a climate project.
Scheme for obtaining a certificate (carbon credit) for investment in a climate project
A greenhouse gas emitter wishing to reduce emissions implements its own reduction project, which must be appropriately registered and certified to a selected voluntary standard. For example, it invests in forest plantations or upgrades energy infrastructure.
Approximate stages of project registration:
Preliminary check of the project for compliance;
Examination of the project (conducted by the Commission of the Standard);
Validation audit (conducted by the validation and verification body - the auditor);
Preparation, verification and registration of technical documentation;
Validation of project activities (carried out by the validation and verification body - the auditor).
Once projects are certified according to the selected program's strict set of rules and requirements, certified carbon credits are issued to project developers. The certifying organization, working on a certain methodological base, calculates the volume of reductions, about which it issues an appropriate certificate.
The certificate includes a certain amount of CO2 reduction units (the so-called carbon units) and acts as a certifying document when calculating the ""carbon footprint"" of the issuer's products. In other words, the certificate confirms that the company has reduced emissions by a certain percentage - the carbon footprint of products will be proportionally reduced by this amount. The ETS of various jurisdictions may provide for the possibility of offsetting certified carbon credits on a regulated market.
...
For use in the Indian climate project system, the national standard must include:
description of categories (types) of covered projects;
requirements for the composition and content of project documentation;
methodology for developing and monitoring the project, including: establishing the operational and organizational boundaries of the project; determination of the baseline (the scenario of greenhouse gas emissions, reflecting their most probable dynamics in the absence of this project);
the procedure for determining greenhouse gas emissions from the project;
the principle of additionality of the project (a description of the conditions under which the implementation of the project is possible in the absence of other effects other than reducing greenhouse gas emissions or increasing their absorption);
project results monitoring plan;
determination of the crediting period (the period of time during which the release of carbon units under the project is possible);
additional effects that arise in connection with the implementation of the project according to this standard.
The list of national standards used in the Indian system of climate projects, according to the draft Concept, will be maintained by the federal executive body authorized by the Government of India.
Prospects for a Global Voluntary Carbon Credit Market
For businesses, the transition to renewable energy becomes a kind of competitive advantage that ensures sustainability in the future. The impact of environmental risks on business is increasing. On the part of investors, more and more attention is paid to the assessment of non-financial indicators of companies, ESG factors. Access to foreign markets and attraction of international financing depend on them. So, today in the world more than 80 trillion dollars are invested taking into account ESG factors. And investment funds that have adopted the principles of responsible investment of the United Nations have committed to allocate half of their assets in accordance with the policy of sustainable development.
...
Chapter 6. Impact of decarbonization on macroeconomics in India and the world
6.1. Share of industries dependent on decarbonization in India and the world in GDP
Decarbonization, to a greater or lesser extent, affects almost all sectors of the economy both in India and in the world. At the same time, some industries have a negative vector of influence, and some industries receive significant benefits from the process of decarbonization of the economy. New markets are emerging and actively developing. The degree of impact on the industry depends on the intensity of the transition to a low-carbon economy, the selected priorities and mechanisms at the global and national levels.
The following is an estimate of the share in GDP for the top 20 industries selected for analysis in Chapter 4 as the most sensitive to the decarbonization process.
Share of industries dependent on decarbonization in India
The top 20 industries most sensitive to the decarbonization process account for about ...% of the country's GDP (hereinafter, the estimate for 2019-2020 is based on net sales revenue).
...
6.2. Implications for the global economy of the formation of the decarbonization market
According to experts, in the absence of climate action, climate change can lead to a multiple increase in mortality and a significant loss of global GDP on the horizon until 2100. The cost of climate change damage is periodically assessed by the Organization for Economic Co-operation and Development (OESD), various institutions and global organizations. According to the most recent report from the Swiss Re Institute from April 2021, if climate change is not addressed, the global economy could lose up to 20% of global GDP by 2050. Postponing climate action, even in the short term, will also lead to a reduction in global GDP (a 2% reduction in GDP if measures are postponed until 2025).
...
The main factors stimulating GDP growth at the global level:
Increased investment (both private and public) in the electricity, low emission fuels, infrastructure and end-use sectors.
Increasing the number of jobs. The IEA estimates that employment will increase by 9 million globally. (in the field of clean energy by 2030 will increase by 14 million people, but in the field of oil, gas and coal will decrease by about 5 million). Results vary across regions, job gains do not always occur in the same region or correspond to the same skill set as job losses.
Economic growth in engineering, manufacturing, construction, green technology sector.
...
At the same time, the macroeconomic impact will depend on many other factors, including:
Sources of government spending financing.
Benefits from improved health.
Changes in consumer accounts.
Widespread impact of changes in consumer behavior.
Potential for increased productivity through accelerated energy innovation.
However, the impacts will be lower than estimates of the cost of climate change damage. It is also likely that a coordinated, orderly transition can be made without major global systemic financial implications, requiring close attention from governments, financial regulators and the corporate sector.
...
6.3. Impact on the macroeconomics of India of the formation of the decarbonization market
According to the World Bank, India is among the ten countries that emit the most emissions, both in absolute terms and per capita. India produces the same amount of CO2 as the entire region of Latin America (and the population and GDP of India are 4 times less). Waste is produced twice as much as in the EU, with the incomparable size of the Indian economy (in terms of GDP, 9 times less than the EU economy).
When comparing individual indicators of decarbonization in India and in the world, for all of the indicators presented in the table below, the indicator values of India are weaker than in the whole world, including: the share of primary energy from fossil fuels and carbon intensity is higher, renewable energy consumption and costs for R&D below.
...
The main features and challenges for the Indian economy arising from the decarbonization of the Indian and global economies are:
...
The main risks from the energy transition by 2050:
drop in export earnings;
employment;
the problem of single-industry towns;
potential loss of Indian leadership in global energy;
loss of budget revenues;
problems of energy companies in the absence of transformation and the possible bankruptcy of some of them.
Without state regulation, these processes can lead to the stagnation of the Indian economy. In order to ensure the growth of the Indian economy in the context of the global and national energy transition ...
...
Chapter 7
Global climate change is no longer an exclusively scientific, environmental problem, but is increasingly becoming a matter of domestic and foreign policy, business, international financial institutions and transnational corporations.
In May 2021, the International Energy Agency released the ""Net zero by 2050: a roadmap for the global energy sector"" program. According to the program, the key to preventing the worst effects of global warming lies in the energy sector, as it accounts for about three-quarters of greenhouse gas emissions. The world community must radically change the old ways of obtaining, transporting and using energy, the document says. According to the Net Zero by 2050 program, almost 90% of electricity will be produced from renewable energy sources, the rest will be taken over mainly by nuclear energy. Also, one of the ideas of the program is to transfer all power plants to RES by 2035.
Plans to decarbonize the global economy call for action to minimize emissions and switch to non-fossil fuels, including through the introduction of restrictive measures. After the official publication of the CBAM project in the EU in July 2021, experts reported on the possible introduction of a cross-border carbon tax in the United States, China and other countries.
Active measures to decarbonize the economies of all major foreign trade partners of India, as a country with a high level of dependence of the economy on exports, have led to increased action at the Indian level. India is currently developing a package of measures aimed at the transition to a low-carbon economy. Adapting the Indian economy to the energy transition is a long-term challenge. Main risks: “lagging behind in the development of key technologies and exclusion from the perimeter of trade in key components.”
In the context of decarbonization, the world market needs:
...
Recommendations for Indian companies in the process of decarbonization:
...
Diagrams
Figure 1. Mechanism of regulated and voluntary markets
Figure 2. Current and implemented ETS in the world as of December 2021
Diagram 3. World market of voluntary carbon credits, million tons of CO2-eq.
Diagram 4. Dynamics of prices for permits for greenhouse gas emissions of individual ETS for the period from 28.03.2008/30.09.2021/2 to / / , US dollars per tonne of CO equivalent
Diagram 5. Dynamics of prices for EU ETS greenhouse gas emission permits for the period from January 2021 to 04.01.2022/2/ , euro per tonne of CO equivalent
Diagram 6. Dynamics of Weighted Carbon Price, US dollars per tonne of CO2 equivalent
Diagram 7. GEO1! futures price dynamics, USD per tonne of CO2 equivalent
Diagram 8. Dynamics of the global decarbonization market in 2018-2020, USD trillion
Diagram 9. Structure of the main groups of investments aimed at decarbonizing the economy, 2018-2020, %
Diagram 10. Dynamics of the volume of the European carbon market, 2016 - 2020, million tons of CO2-eq.
Diagram 11. Ratio of European and other carbon markets, 2016-2020, mln t СО2-eq.
Diagram 12. Dynamics of the volume of the European carbon market, 2016-2020, billion euros
Chart 13. Ratio of European and other carbon markets, 2016-2020, billion euros
Chart 14. Forecast of the size of the European carbon market, 2021-2026, billion euros
Figure 15. Status of countries on strengthening national climate projects
Figure 16. Map of existing and ongoing financial initiatives to reduce greenhouse gas emissions
Diagram 17. Structure of other main carbon markets in real terms, %
Chart 18. Forecast of the global decarbonization market in 2021-2026, USD trillion
Diagram 19. Estimation of the potential of annual investments in the energy sector in the future up to 2050, USD trillion
Diagram 20. Estimated potential of the volume of the decarbonization market in the future up to 2050, trillion US dollars
Chart 21. Size of the Indian decarbonization market in 2017-2020, trillion rupees
Chart 22. Forecast of the Indian decarbonization market in 2021-2026, trillion rupees
Chart 23. Forecast of the Indian decarbonization market until 2060, trillion rupees
Diagram 24. The ratio of private and public funding of projects for the decarbonization of the Indian economy, %
Figure 25. Scheme of planned carbon regulation in India
Diagram 26. Structure of gross value added by main sectors of the Indian economy for 2019, %
Figure 27. Structure of global greenhouse gas emissions by sectors of the economy
Diagram 28. Greenhouse gas emissions in India by sector in 2019, million tons of CO2 equivalent and % in the structure
Chart 29. Exports from India to the EU in 2020, potentially subject to carbon tax (according to the draft TIP of July 2021), million euros and % in the structure of the assessed product groups
Diagram 30. BCG forecast for EU carbon tax payments for imports of goods from India included in the EU CBAM project in 2030, USD mln
Chart 31. BCG forecast for EU carbon tax payments for imports of goods from India that could potentially be added to the EU CBAM project in 2030, USD million
Diagram 32. RBC's forecast for annual EU carbon tax payments for imports of goods from India included in the EU CBAM project, million euros and % of the structure of the assessed goods
Tables
Table 1. Prices for greenhouse gas emissions of individual ETS as of 15.10.21/ /
Table 2. Rating of the main emitters of CO2-eq. by the level of sufficiency of initiatives to achieve goal 1,5C of the Paris Agreement
Table 3. Cases of the implementation of the decarbonization process in the world
Table 4. Main documents of India in the field of decarbonization of the country's economy
Table 5. Targets for the business-as-usual and intensive scenarios of India's Low-GHG Socio-Economic Development Strategy to 2050
Table 6. The main further actions of the state to decarbonize the Indian economy and improve the regulatory framework
Table 7. Case studies of private decarbonization projects in India
Table 8. Structure of air pollutant emissions in India for 2019, million tons,
Table 9. Emissions into the atmosphere of pollutants from stationary sources, by type of economic activity, thousand tons
Table 10. Goods included in the CBAM project (as amended on 14.07.21/ / )
Table 11. Top 20 sectors most sensitive to the decarbonization process
Table 12. Dynamics of revenues of the assessed industries, 2018-2020, billion Rs.
Table 13. Dynamics of revenue of groups of assessed industries with negative and positive vectors of influence and the share of revenue in the total volume by assessed industries, 2018-2020, billion Rs., %
Table 14. Growth rates of assessed industries in 2018-2020, %
Table 15. Growth rates of revenue for groups of industries under assessment with negative and positive vectors of influence, 2018-2020, billion Rs., %
Table 16. Forecast indicators of greenhouse gas emissions according to NZE, million tons of CO2 equivalent
Table 17. The degree of impact of global decarbonization on the industry in India in the future until 2026 and until 2060
Table 18. Oil demand and price forecast according to IEA scenarios
Table 19. Key milestones in the transformation of the global construction sector
Table 20. Dynamics of costs for reforestation in India, thousand Rs.
Table 21. List of industries with a negative impact vector from decarbonization processes and with an export focus
Table 22. Types of losses of enterprises in the medium term
Table 23. Investments of enterprises in decarbonization by sectors (sorted by level of investment), billion Rs.
Table 24. Estimated losses of enterprises in high-carbon industries due to the introduction of EU IAMS by various experts, million euros
Table 25. Primary trading floors of major ETS
Table 26. Main Trading Exchanges for Trading Carbon Credits
Table 27. General measures to reduce the carbon footprint applicable to enterprises in various industries
Table 28. Measures to reduce the carbon footprint applicable to oil and gas enterprises
Table 29. Measures to reduce the carbon footprint applicable to the coal industry
Table 30. Main voluntary standards for certification of CO2 emission reductions in the voluntary carbon market
Table 31. Groups of sectors sensitive to decarbonization in GDP, India, 2019-2020, %
Table 32. Share of sectors with a negative impact vector in GDP, India, 2019 and 2020, %
Table 33. Share of sectors with a positive impact vector in GDP, India, 2019 and 2020, %
Table 34. The share of individual industries in GDP for the latest available reporting period, comparison of the global indicator with India, %
Table 35. Forecast of average annual GDP growth rates up to 2050 under the STEPS scenario by regions and major countries, %
Table 36. Macroeconomic indicators under the NZE scenario
Table 37. Compared individual indicators of decarbonization in India and in the world, for the latest available reporting period, %
Table 38. India's Macroeconomic Forecasts under India's Low GHG Emission Social and Economic Development Strategy 2050
All reports