COP29: What's On India’s Climate Action Agenda In Baku?

As the Conference of Parties (COP 29) of the United Nations Climate Change Conference (UNFCC) is set to take place in Baku, Azerbaijan, from November 11-22, 2024, India is poised to enter the carbon trading market with an eye on meeting climate goals set by the Paris Agreement. The government is reportedly in the process of determining carbon dioxide (CO₂) emissions intensity targets for specific industries. It is also planning to establish a carbon market centred on compliance―requiring firms to achieve particular energy efficiency targets.

Though Prime Minister Narendra Modi may not attend the conference, India appears ready to put forth a mix of agendas. Modi previously addressed COP 21 in Paris in 2015, COP 26 in Glasgow in 2021 and COP 28 in Dubai in 2023. During the Glasgow Summit, the Indian government, led by Modi, had ambitiously promised to cut its emissions to net zero by 2070. The declaration faced criticism from global climate activists for missing key summit goal for parties to commit to reach that target by 2050. Nevertheless, it was the first time that India committed to setting a net zero target for emissions.

The other goals set by India include provisions for acquiring 50 per cent of India’s energy from renewable resources by 2030, cutting down emission intensity of the Gross Domestic Product (GDP) by 45 per cent and reducing total projected carbon emissions by one billion tonnes. It also announced 500 gigawatts (GW) of non-fossil electricity capacity.

Climate activists at home have lauded Modi’s efforts to tackle climate change by apparently leaving the ball in the court of the developed world. “It is India’s expectation that the world’s developed nations make $1 trillion available as climate finance as soon as possible,” Modi had said in Glasgow, adding, “Justice would demand that those nations that have not kept their climate commitments should be pressured... climate finance cannot lag climate action.”

In the last decade, the Bharatiya Janata Party (BJP) government as well as Modi has tried to project India’s image as a global leader in climate action by launching several schemes, the last being a green credit initiative. Last year in Dubai, the prime minister had proposed India would host the COP summit in 2028, further cementing the image of an ecologically responsible nation. He additionally called for more inclusive policies to help developing countries prevent, mitigate or deal with climate calamities.

So what is India expecting from COP 29?

Money Talks

This year, one of the key issues to be negotiated by India includes an agreement on a fair and ambitious New Collective Quantified Goal on Climate Finance (NCQG) amounting to at least $100 billion per year prior to the 2025 period. The NCGQ is a key element of the Paris Agreement, which was adopted in 2015 to strengthen the global response to the threat of climate change. The $100 billion goal covers climate-related activities under two categories: mitigation, which includes efforts to cut down greenhouse gas (GHG) emissions, and adaptation, which includes efforts to build resilience to climate impacts and shifts.

“The obvious priority this year is to reach a decision on the new financial architecture, the NCQG,” says Subrata Chakrabarty, associate program director for climate at the World Resources Institute.

India is the third largest country in terms of renewable energy capacity in the world, after China and the US. Harjeet Singh, global engagement director of the Fossil Fuel Non-Proliferation Treaty Initiative feels that India is on track to achieve its target to get 50 per cent of its electricity from non-fossil fuel sources by 2030. “By now, about 45 per cent of the country’s electricity is coming from non-fossil fuel sources. The investments in solar and wind energy are in keeping with that. So that seems to be an achievable goal,” he says.

To meet its emission goals, India would require more than 40 gigawatt of capacity annually that will require huge investments. “Particularly, some of the challenges we face domestically include upgrading grid infrastructure and managing intermittent renewable energy sources. Battery storage continues to remain a challenge, which is why the government is investing a lot more in that direction,” says Singh.

The key issue again remains finance, which will be India’s main agenda in COP 29, which many are calling a “Finance COP”. India has already mentioned its requirement of $1 trillion to meet its climate goals. India is also supporting a call that developing countries need $1 trillion annually to meet their climate commitments.

Last year, COP 28 in Dubai failed to deliver on Article 6 of the Paris Agreement, which governs carbon markets. Article 6 allows countries to meet their climate targets by trading carbon credits earned from the reduction of GHG emissions. Chakrabarty states that several key issues with regard to the operationalisation of Article 6 and carbon markets need to be ironed out.

Ironing out Article 6

Discussion is also expected on Article 6 of the Paris Agreement, which sets out how countries can pursue voluntary cooperation to reach their climate targets. There are three key issues regarding Article 6.

The first is in reference to authorisation. Authorisation is a process by which a country allows use of the generated carbon credit by another party or country in order to meet their NDC targets. The crunch issue is that - what would be the process of authorisation, what would be the format and content of the authorisation statement, and whether there will be a possibility to revise or revoke the authorisation after it has been issued by host country. These issues have been debated for some time now by parties but no consensus has been reached yet.

The second issue is the inter-operability between registries. There are two types of registries under Article 6: Article 6.2, the international registry which is related to the trading of credits between two parties and the Article 6.4 which is related to the markets and mechanism registry. “There are certain parties that do not have the capacity or capability to have their own registry. These parties have previously articulated that they want the functionality of registry wherein they can create their accounts and that needs to be done in Article 6.2 International Registry. They want the movement of Article 6.4 emission reduction units to Article 6.2 where they can hold and trade it or transaction it later. But there are other parties with a different opinion about it and don’t want such functionality to be created,” Chakrabarty explains.

The third issue pertaining to Article 6 is about reporting. Multiple reporting requirements have been created after the Glasgow summit. “When are the parties required to report these, how they would report and in what format, the structure of the Agreed Electronic Formats (AEF), table of contents of AEF etc still need to be ironed out. Until then, operationalisation may or may not be possible,” Chakrabarty, who will be attending the conference in Baku, states.

Carbon Markets & Climate Goals

India is the third largest emitter of carbon dioxide in the world after China, and the US, and is followed by the EU, Russia and Japan. These countries together account for 49.2 per cent of global population, 62.4 per cent of global GDP, 66.4 per cent of global fossil fuel consumption and 67.8 per cent of global fossil CO₂ emissions, as per the European Commission’s Emissions Database for Global Atmospheric Research.

As per recent analysis by the Paris-based International Energy Agency, an autonomous intergovernmental organisation, India’s emissions have been growing. As the economy saw rapid growth in 2023, expanding by 6.7 per cent, the country’s CO₂ emissions grew faster than the GDP, at slightly more than seven per cent. This increase was notably driven by the continued rapid recovery in economic activity following the slowdown caused by the Covid-19 pandemic. “Steel and cement output both soared―in both cases faster than the GDP. Electricity demand also grew rapidly. However, a closer examination of the data reveals some important cyclical drivers, like bad monsoons,” the report noted.

The Energy Conservation (Amendment) Bill was introduced in the Lok Sabha in August 2022 with a view to add provisions that facilitate the achievement of COP 26 goals, and introduce concepts such as the mandated use of non-fossil sources and carbon credit trading to ensure faster decarbonisation of the Indian economy. The Bill was passed in both houses the same year and was called “futuristic” by the then Union power minister R K Singh and stipulated the “use of non-fossil sources”, including green hydrogen, green ammonia, biomass and ethanol for energy and feedstock and establish carbon markets in the country. Under the new laws, the government may require designated consumers to meet a minimum share of energy consumption from non-fossil sources. Different consumption thresholds may be specified for different non-fossil sources and consumer categories, as per the PRS India, a non-profit.

The Act essentially empowers the Union government to specify a carbon credit trading scheme. It also empowers the government to specify energy consumption standards, energy conservation code for buildings and also specifies the consumption standards for equipment and appliances that consume, generate, transmit or supply energy. It also brings in stricter fines and punishment for those who flout the norms.

Questions, however, have been raised on whether the Union Ministry of Power is the appropriate body to regulate this carbon trading scheme. Carbon credit refers to a tradable permit allowing the holder to emit a specified amount of carbon dioxide or other GHGs such as methane and nitrous oxide.

The recent move by the government to set up carbon credit trading is often looked at with suspicion by energy and climate activists due to the track record of how some of these markets have performed globally. There have been increasing instances of ‘greenwashing’ where corporate companies try to meet their emission targets on paper, without any meaningful reductions in actual emissions.

A strong regulatory oversight mechanism needs to be in place to carry out and regulate carbon emission trading, which in a country like India can be challenging. There are also issues related to the transparency and rigour of how these markets are run. “I would not rely too much on carbon trading schemes, given their performance in the global renewable market,” notes Singh.

He further adds that carbon credit trading schemes do not address the fundamental issues with the use of fossil fuels. “The 2022 Act encourages adoption of cleaner fuels, but does not mandate or provide a timeline of how we are going to move away from fossil fuels,” he says. The Act also fails to provide any clarity on how the carbon credit certificates are to be traded and who the regulatory body for such trading would be. Critics also wonder whether the market regulator for carbon credit trading should be specified in the Act or not.

The Act also provides no clarity on whether the same activity may be eligible for renewable energy, energy savings and carbon credit certificates. It does not specify whether these certificates will be interchangeable.

Activists further feel that the carbon markets are just one of the tools and that instead of banking on carbon trading, developing nations should develop direct policy measures and regulations that allow them to move away from fossil fuels and adopt renewable sources. “Some of the steps that are being taken on hydrogen—which can help address the challenges where there are certain sectors which are hard to abate, such as steel, cement and aluminium,” adds Singh.

The Question of Equity

When it comes to the issue of energy equity, it’s the poorer, marginalised populations in rural and semi-urban areas that suffer due to insufficient access and geographical discrimination as urban areas and industries tend to get higher priority. Emphasis on equity would also include improving quality of supply, ensuring affordability, addressing the regional and rural-urban disparities.

“Of course, industries are prioritised more to make sure they get a regular power supply. That’s why, when we talk about India’s emissions going up because of the use of coal and energy access, the fact is that we have a huge gap. Industries and urban areas are prioritised more when using that limited resource,” says Singh.

India has tried to meet the access gap by increasing energy production itself. This can be seen in schemes like the Saubhagya scheme, or the Pradhan Mantri Sahaj Bijli Har Ghar Yojana, an initiative launched in 2017 to provide electricity to all un-electrified households in India. Schemes to ensure affordability have also been introduced, particularly in rural areas or for the poor or marginalised to get initial units free or at subsidised rates. There is talk of rooftop solar, which can help improve energy access and affordability in remote or underprivileged areas.

“All the star rating products or appliances that are in use today are a way to improve energy efficiency, irrespective of the economic strata. If you generate awareness, even poorer households would consider investing more in renewable energy to save on electricity in the long-run,” says Singh.

But decarbonisation cannot just happen on the supply side. It needs to happen equally on the demand side as well.

“When we talk about decarbonisation of any particular sector, there are two sides that need to be looked at―the supply side and the demand side. If we take action on supply side―like let’s say in electricity supply―and we can decarbonise our power sector and infuse more and more renewable energy. As long as the demand side is not efficient, we will be catering to the inefficient electricity demand. So both things need to go hand in hand. Efficiency from the demand side is as important as bringing in options from the supply side,” Chakrabarty explains.

International Geopolitics

Under the mantle of climate talks, COP is also an avenue of international geopolitics, collaboration and competition. The annual COP conferences are an important opportunity for international collaboration on climate change. This year’s COP is focused on how to make finance available to developing countries for climate action.

However, the upcoming summit has already run into controversy, owing to its host. Azerbaijan’s economy is highly dependent on fossil fuels, meaning that Azerbaijan’s government, which will preside over the summit, has a strong incentive to avoid rapid multilateral progress towards phasing out fossil fuels, says Ruth Townsend, senior research fellow, Environment and Society Centre. The ‘Finance COP’ will be the third consecutive COP held in an “authoritarian” state, and the second consecutive COP hosted by a petro-state. “Taken together, the ‘troika’ hosts make up the world’s 4^th largest oil producer, after the US, Russia and Saudi Arabia,” Townsend notes.

NDCs embody efforts by each country to reduce national emissions and adapt to the impacts of climate change. A new round of NDCs is due by February 2025, ahead of COP30, which are likely to be decided or announced during this summit. The ‘troika’ of COP have promised to ‘advocate strongly for early submission’ and promised to demonstrate their commitment by submitting ‘1.5°C-aligned NDCs, guided by the UAE Consensus’. For countries heavily dependent on fossil fuel use, especially in the developing world, this is likely to be a challenge.