India's energy subsidies reach 9-year peak at $39.3 billion amidst global crisis
India's energy subsidies have soared to a record $39.3 billion in the fiscal year 2023, marking a nine-year high, according to the latest findings. The surge is attributed to the nation's broad-based strategy to enhance its energy supply in light of the 2022 global energy crisis and its burgeoning energy needs.
India faces clean energy challenges as energy demand soars, global fossil fuel subsidies rise
The 2022 global energy crisis, together with India's growing energy demand, has led the country to adopt a hybrid approach, expanding all forms of supply in 2023. This approach has pushed India's total energy subsidies to 9-year high of USD 39.3 billion for the fiscal year ending 2023, states a new IISD report.
India Faces Clean Energy Challenges as Energy Demand Soars and Global Fossil Fuel Subsidies Rise
March 11, 2024
March 12, 2024, New Delhi—The 2022 global energy crisis, together with India’s growing energy demand, has led the country to adopt a hybrid approach, expanding all forms of supply in 2023. This approach has pushed India’s total energy subsidies to a 9-year high of INR 3.2 lakh crore (USD 39.3 billion) for the fiscal year ending 2023 (FY 2023), new research suggests.
In recent years, India has positioned itself as an international climate leader, steering the G20 under its presidency to call for global renewable energy capacity to triple by 2030 while also funding decarbonization measures to decouple the fast-growing economy from greenhouse gas emissions and reach net-zero targets.
However, clean energy subsidies accounted for less than 10% of total energy subsidies in FY 2023, while coal, oil, and gas subsidies contributed around 40%. The majority of the remaining subsidies were for electricity consumption, particularly in agriculture.
In 2023, like many countries, rising energy demands and the impact of the international energy price crisis following Russia’s invasion of Ukraine led India to put several measures in place that significantly increased support for fossil fuels. With an aim to protect low-income households, India responded to peaking fossil fuel prices in 2022/2023 by capping retail prices of petrol, diesel, and domestic liquefied petroleum gas; cutting taxes; providing direct budgetary transfers to businesses and consumers; and supporting existing energy supplies. As a result, oil and gas subsidies rose by 63% in FY 2023 compared to FY 2022, according to a report by the International Institute for Sustainable Development (IISD).
The report, titled Mapping India's Energy Policy: A Decade in Action, reveals that subsidies for coal also rose by 17% over the same period. The latest figures from the International Energy Agency also show that coal accounts for 45% of India’s total primary energy supply in 2022, up from 43% in 2020. Altogether, fossil fuel subsidies were five times greater than clean energy subsidies.
Rapid economic growth, on course to drive India to become a USD 5 trillion economy by 2027, means that the government is investing in all forms of energy supply. In FY 2023, both clean energy and fossil fuel subsidies grew by around 40%.
“While fossil fuel subsidies have reduced by 59% since their peak in 2013/2014, without further targeting and a return to a market-based pricing regime, they could mount again, resulting in budgetary impacts. This is undesirable, as untargeted fossil fuel subsidies are an inefficient way of supporting low-income households, and they shrink the fiscal space available for supporting clean energy technologies," said co-author of the report Swasti Raizada, Policy Advisor at IISD.
“The current approach not only perpetuates dependence on price-volatile and geopolitically risky fossil fuels but also delays India’s own clean energy goals for 2030. Clean energy solutions can instead deliver sustainable economic growth and reinstate India’s global climate leadership as an agenda-setting country with a practical vision for eliminating pollution and meeting essential climate goals.”
The report also recommends that the government could consider earmarking a portion of its fossil fuel tax revenues to support its emerging just transition needs.
Deepak Sharma, Policy Analyst at the IISD, said: “Previous studies show that India will require significant investment to make its energy transition just, sustainable, and inclusive. India’s state-owned enterprises will be a critical part of this shift. As their majority shareholder, the government should ensure that all fresh capital going to these entities is linked to India’s net zero commitments.”
Media Contacts:
Swasti Raizada (IISD) – sraizada@iisd.org
Harry Cockburn (IISD)– harry.cockburn@iisd.net
Using Systemic Approaches and Simulation to Support Transformation Toward Sustainable Mobility
Transport is a crucial part of modern society, connecting communities and fostering development. However, the impact of the transport sector on the planet is huge, causing over 20% of global carbon dioxide emissions. It is therefore one of the main drivers of climate change while also having significant direct and indirect negative impacts on human health. This project aims to drive investment towards sustainable mobility and transport.
As populations and cities grow, the world’s transport networks will need to expand and modernize to meet demands. Sustainable transport can provide safe, accessible, efficient, and resilient mobility while minimizing carbon dioxide and other emissions. Despite these benefits, sustainable transport infrastructure is not being developed at the scale needed to adapt to ever-increasing climate impacts and to meet net-zero targets by 2050.
All infrastructure investments generate benefits and costs, which is why it is crucial to identify, quantify, and analyze all impacts surrounding a project. We use our Sustainable Asset Valuation (SAVi) methodology, which is rooted in systems thinking and uses tools like spatial, Excel-based, and system dynamic models, to provide a more holistic understanding of the value of sustainable transport infrastructure by weighing the environmental, economic, and social co-benefits of a project. These approaches can be key instruments for helping investors, planners, and policy-makers make informed decisions about sustainable transportation investments.
For this project, we will deploy the SAVi methodology in 9 countries, as well as providing capacity building and training activities for policy makers and decision-makers. The general goals of this project are threefold:
To review strategic frameworks, methods, and models for sustainable transport.
To generate evidence of the societal benefits of a variety of projects, considering direct, indirect, and induced social, economic, and environmental project outcomes.
To inform decision making for upscaling investments in sustainable transport, also in the context of green and resilient recovery packages.
The project will specifically estimate investment avoided costs and added benefits of sustainable transport based on social, economic, and environmental indicators with a view of informing and influencing decision making on project selection, financing strategy, and implementation. It will also focus on the macro-economic level by providing an estimation of the contribution of sustainable transport to national sustainable development, considering its role in strengthening growth and in reducing public and private costs.
This will result in increased knowledge of the benefits of investing in sustainable transport infrastructure, as well as guide decision-makers on why and how to plan, choose, and implement sustainable transport and mobility-related investments.
Transport is a crucial part of modern society, connecting communities and fostering development. However, the impact of the transport sector on the planet is huge, causing over 20% of global carbon dioxide emissions. It is therefore one of the main drivers of climate change while also having significant direct and indirect negative impacts on human health.
As populations and cities grow, the world’s transport networks will need to expand and modernize to meet demands. Sustainable transport can provide safe, accessible, efficient, and resilient mobility while minimizing carbon dioxide and other emissions. Despite these benefits, sustainable transport infrastructure is not being developed at the scale needed to adapt to ever-increasing climate impacts and to meet net-zero targets by 2050.
All infrastructure investments generate benefits and costs, which is why it is crucial to identify, quantify, and analyze all impacts surrounding a project. Our Sustainable Asset Valuation (SAVi) methodology is rooted in systems thinking and uses tools like spatial, Excel-based, and system dynamic models to provide a more holistic understanding of the value of sustainable transport infrastructure by weighing the environmental, economic, and social co-benefits of a project. These approaches can be key instruments for helping investors, planners, and policy-makers make informed decisions about sustainable transportation investments.
We led this three-session webinar series on valuing sustainable transport with SAVi:
Session 1: Thursday, November 16, 10:00–11:30 CET
Sustainable Transport Investment: a case study in Coimbatore, India
In the first session, we introduce the role that sustainable transport infrastructure can play in producing economic, social, and environmental benefits. We take you, step-by-step, through our SAVi methodology, which uses a combination of system dynamics, spatial modelling, climate data, and financial analysis to assess the environmental, social, and economic performance of infrastructure assets. We then look at this in focus through the lens of a case study of a non-motorized transport network in the city of Coimbatore, India.
Session 2: Tuesday, November 21, 10:00–11:30 CET
Systems Thinking for Sustainable Transport Projects: a case study in Bandung, Indonesia
In the second session, we delve deeper into systems thinking and systems dynamics. We introduce causal loop diagrams and examine how the simulation and interpretation of a variety of scenarios can help assess sustainable transport infrastructure investment options. During this session, we present a case study of a bus rapid transit system in Bandung, Indonesia.
Session 3: Thursday, November 23, 16:00–17:30 CET
Integrated Cost-Benefit Analysis for Transport Projects: a case study in Bogotá, Colombia
In the final session, we explore the added value of integrated valuations and cost-benefit analyses versus more traditional project costing approaches. We also demonstrate how to identify key added benefits and avoided costs for sustainable transport projects and how this enables decision-makers to delve beneath the surface of a transport project, looking at the longer-term benefits throughout its life cycle. This is illustrated by the case study of a mass-rapid transit system in Bogota, Colombia.
Strategies to secure a robust and responsible battery supply chain
This report aims to provide a strategy to guide policy-makers in sourcing lithium responsibly to promote clean energy manufacturing in India, with the aim of supporting low-carbon economic growth, creating equitable jobs, and helping to mitigate climate change impacts. It analyzes strategies of mineral-rich nations, key importing nations, and international companies, to provide recommendations for policy-makers and industry to secure lithium supply.
Lithium is a key mineral used in lithium-ion (Li-ion) battery technologies and is anticipated to play a pivotal role in driving the uptake of electric vehicles and stationary storage applications over the next decade. Its criticality is reflected in its inclusion in the critical minerals list of eight major global economies (the United States, European Union, Japan, Canada, Australia, China, Republic of Korea, and India), one of only three minerals to be included in an assessment by all eight countries (the others being tungsten and cobalt). In 2023, India reaffirmed lithium’s importance by designating it as a “critical” mineral along with 29 other minerals. The International Energy Agency (IEA) also forecasts that lithium for clean energy will see the fastest growth in global demand among different critical minerals, growing by 17 times between 2022 and 2045 under the IEA’s net-zero scenario, underscoring its unique importance in driving the energy transition.
India’s geostrategic allies and competitors have long recognized the importance of lithium in maintaining their industrial competitiveness and have taken steps to secure access to lithium resources through direct investments in overseas mines and long-term supply agreements, as well as setting up processing and refining capabilities. In contrast, Indian companies have thus far played a negligible role in the lithium battery supply chain, which, if left unaddressed, may create energy and economic security risks for the country. A lack of decisive action to secure a lithium supply in the coming decade could leave India behind in the race to develop a Li-ion battery manufacturing base and stymie the development of key industries such as electric vehicles and stationary storage applications, hindering India’s economic growth and job-creation potential.
The report would be useful to several Indian ministries, state-owned enterprises, such as Khanij Bidesh Limited (KABIL), as well as industry actors in India seeking to establish a presence in the global lithium supply chain.
India's Potential in the Midstream of Battery Production
Strategies to create a globally competitive EV ecosystem in India
India could become a hub for electric vehicle (EV) manufacturing and recycling with the right incentives and government policies that can meet strong domestic demand for EVs and take advantage of the growing manufacturing sector. This report summarizes consultations with over 25 companies and actors to determine what factors are crucial in the considerations of companies on where to invest in and expand manufacturing.
In India, transportation currently accounts for 14% of greenhouse gas emissions. With over 300 million vehicles currently on the road and 200 more million to be added in the next two decades, India faces a massive challenge to electrify its road vehicles and reach its goal of net-zero by 2070. However, this challenge also provides India with a tremendous opportunity. As the 4th largest producer of automobiles, the transition to EVs provides a huge economic opportunity if India localizes EV and battery manufacturing.
India could become a hub for EV manufacturing and recycling with the right incentives and government policies that can meet strong domestic demand for EVs and take advantage of the growing manufacturing sector. India can immediately become a vital segment of the battery supply chain by producing battery cells and expanding mineral processing. This report summarizes consultations with over 25 companies and actors to determine what factors are crucial in the considerations of companies on where to invest in and expand manufacturing.
This report gives an overview of India’s targets and current state of play and then discusses battery supply chain fundamentals that need to be critically assessed to understand where India has the strongest comparative advantage. It closes by outlining key companies’ decision-making factors and assesses India’s potential comparative advantage against each factor.
This hybrid event discusses strategies to create an internationally competitive electric vehicle (EV) ecosystem in India. The country has the potential to become a hub for EV manufacturing and recycling with the right incentives and government policies by producing battery cells and expanding mineral processing. However, India faces a challenge in sourcing critical minerals to develop locally- made batteries that will power the EV transition, which gives rise to two priorities. On the one hand, recycling existing batteries can secure a certain domestic supply of critical minerals while creating local employment. On the other hand, Indian companies will need to source primary raw minerals abroad in the short- to medium-term.
To contribute to this discussion, the project partners, the International Institute for Sustainable Development (IISD), the Indian Council for Research on International Economic Relations (ICRIER), and Invest India launch and present the findings of three reports at this event:
An assessment of India’s midstream potential
A lithium sourcing roadmap for India
ICRIER “Sampada” model for assessing the macroeconomic impact of Rajasthan’s Waste Recycling Park on battery waste recycling.
Kanchi Gupta, Program Manager, ClimateWorks Foundation
Keynote Session
Sanjiva de Silva, Counsellor, Energy and Resources, Australian High Commission
Gaurav Joshi, Deputy Secretary, Ministry of Heavy Industries
Periasamy Kumaran, Officer On Special Duty, Ministry of External Affairs
Session 1: India’s potential in the battery supply chain
Presentation of Report
Tom Moerenhout, Senior Associate, International Institute for Sustainable Development Abhishek Bansal, Senior Investment Specialist, Invest India Arishna Saxena, Senior Investment Specialist, Invest India
Panel Discussion
Devashish Aneja, Vice President Partnerships, C4V
Deb Mukherji, Managing Director, Omega Seiki Mobility Vikram Handa, Managing Director, Epsilon Carbon
Q&A
Session 2: Critical minerals strategy for India
Presentation of Report
Siddharth Goel, Senior Policy Advisor, International Institute for Sustainable Development
Rajesh Chadha, Senior Fellow, Center on Social and Economic Progress Murtiani Hendriwani, Policy Advisor, Intergovernmental Forum on Mining, Metals, Minerals and Sustainable Development
Manish Dua, Principal Consultant, Benchmark Minerals Intelligence Rishabh Jain, Senior Program Lead, Council on Energy, Environment and Water
Q&A
Session 3: Macroeconomic impacts of a circular economy
V. P Yadav, Scientist ‘F’, Central Pollution Control Board Vijai Singhal, Director, Greenhub Systems Private Limited
Parveen Kumar, Head Research and Development, Exigo Recycling Suneel Pandey, Director Environment and Waste Management Division, The Energy and Resources Institute
G20 Summit Agreement Fails To Strengthen Coal Phase-Down Even As Data Show High Per Capita Coal Emissions
As world leaders gather in New Delhi for the Group of 20 (G20) Summit–with 19 member countries and the European Union–data show that a majority of the group still has very high per capita coal power emissions. At the summit, countries agreed to "pursue further efforts" to limit the global average temperature rise to 1.5 degrees celsius, agreeing to "encourage efforts to triple renewable energy capacity globally" but the G20 New Delhi Leaders Declaration included no new commitment on phasedown of coal power or on phasing down all fossil fuels.
Solar Feeders Promise to Fulfil Solar Targets in Agriculture
Several Indian states like Maharashtra are pushing hard for increased solarization of their agricultural feeders to allow consistent power to its farmers during daytime. Some states like Bihar which don’t have any operational off-grid solar pump scheme have also planned to jump onto the bandwagon.
