Note: This transcript is auto generated and lightly edited.
ARVIND: I mean, in terms of partners, I can't see India really relying on other partners for solving its own. I think it's going to be about technology. It's going to be about you know, having the political will domestically to clean some of the things, to eliminate some of the subsidies, to create governance mechanisms.
MONICA: Welcome to Policy for the Planet, a podcast exploring the global response to the climate crisis. We'll unravel the complex tradeoffs of different policy choices to steer us toward sustainable solutions and public well-being.
I'm Monica de Bolle, a senior fellow at the Peterson Institute for International Economics.
Welcome to the conversation.
India is a unique case of climate change: as a poor country with tropical temperatures, it faces severe climate threats like drought and torrid heat. But India is a large enough country with real resources to mitigate risk. And it has taken action, investing in renewables, reducing its greenhouse gas emissions, and lowering reliance on fossil fuels.
Joining us today to discuss India's climate actions is Arvind Subramanian, senior fellow at the Peterson Institute for International Economics. He was chief economic adviser of India from 2014 to 2018. He oversaw important initiatives such as tax reform, a new bankruptcy code, and creation of a financial and digital platform to expand connectivity and implement universal basic income goals.
Hi Arvind and welcome to the show. I'm very happy to have you on this episode to talk a little bit about India and how things are looking with respect to climate change. if you could please give us a little bit of background on what is India currently doing in the realm of climate change and how is climate change affecting India?
ARVIND: Yeah, I think before I actually plunge into saying what India is doing, I think it's worth stepping back and kind of seeing India's broader role in this whole climate change challenge. I think a good place to start is, know, Esther Duflo, who won the Nobel Prize in October last year, she gave a lecture where she made the point that India is in quite an unusual situation vis-a-vis climate change, because on the one hand, as a poor and tropical country, it stands to be severely affected by climate change, much longer hot days, higher temperatures, less rainfall, and all the consequences that follow. But on the other hand, India is also big enough that it has some agency, it can take action. And so both on the kind of being heard side as well as being able to do something, India traverses both those sides very nicely. And so that makes India kind of somewhat unique in this space. India is a big, because of the population, India is a big CO2 emitter. I think it's now the third largest in the world.
So both India is going to lose, also India needs to contribute and has the ability to contribute. So that's, think, the broader context for India. I think it's worth keeping in mind.
MONICA: And if I may, just on that note, because that is a very interesting point, it is a very good way of thinking about some of the countries in the global south, because obviously there are other countries like India, which are big, I'm thinking here of Brazil, which are big, which have a stake in the climate agenda, but at the same time are largely affected by climate change for the same reasons, exactly the same reasons India is.
And yet, you know, they have this like India, Brazil is like India and having this dual kind of perspective. On the one hand, it can contribute a lot to the climate agenda, but it is very much affected by climate change as well. that I think is an interesting way of looking at the global South.
ARVIND: Yeah, and so in terms of now the contribution that India can or should make, I think the first point to note is, I think, a striking finding, which I was a discussant for Esther's lecture. And I think what is pretty unusual about India is that it has defied a regularity in development, which goes by the name of the environmental Kuznets curve. What that means is, of course, that all countries, you know, take the West US and the UK, they began when they were poor, they started industrializing. they were so kind of they were dirty industrializers, you know, all kinds of environmental pollution, including CO2 emissions, those rise over time with development.
Then after a certain point in time, when they become rich, when their populations demand better environment, when they have more resources to address them, then their pollution levels starts declining. That's why you see this inverted U. First pollution rises and comes down. Now China, a late industrializer, is also following the same trajectory. It's been rising and then at some point it will start to come down.
I think what is really unique about India is that it has completely defined this environmental Kuznets phenomenon because on the one hand, its level of CO2 emissions per capita has been quite low and the trajectory has been very flat. The rise and fall trajectory is not there at all for India. So it's low at every comparable level of development when you compare India with China or the US or the UK, its per capita emission levels are like a fraction of what those countries emitted. And even the trajectory that you see is just basically flat. And at some point, it will start declining. So what that means is that if you were to look at it a bit analytically, India has already contributed a lot to climate change by not traversing the trajectory of the other countries as a whole.
Now, we calculate that had India done the same trajectory as China, it would have emitted, I think, something like 80 billion tons of carbon less than accumulatively than otherwise, which is quite a big amount. And of course, the reason why India hasn't been such a CO2 emitter is because you know the the Indian model of development is based on services rather than manufacturing right so so some of that has been due to that model and the other of course is that India has been fairly inefficient in being able to supply energy to its population so these kind of two features you know it's an unusual development model it's been actually inefficient in you know supplying its population with basic needs like energy both of those have contributed to India being a good global citizen in terms of CO2 emissions and so on. So that's, think, a first order point that's worth keeping in mind when we think about India and what it should come.
MONICA: These are very interesting points and I think critical to think about a country like India and its peculiarities, which as you are pointing out are many. I do have a follow up on this though, because while you've mentioned that the sort of development slash Kuznets curve for India is rather flat compared to other countries over time and even countries that of course developed long before India did, but others that developed more recently.
And you gave some of the reasons for that. And one of the reasons you gave to us now was the question of the inefficiency in supplying energy to the population. So I guess the question that comes to mind is, and what if the government becomes more efficient or if the country becomes more efficient in providing energy to the population, what would you expect then to happen to that kind of emissions footprint from India? Do we expect to see something a lot more or not really?
ARVIND: Well, you see, think a lot is going to depend upon how quickly India is able to make the transition to renewables. Because there is no doubt that India's energy needs are far from fulfilled. The average Indian, still, although he or she is connected to the grid, they don't have the kind of quality uninterrupted access and the kind of the energy related goods like air conditioning in a hot climate, transport, et cetera. So I think energy consumption is going to rise over time as the average Indian becomes richer and as the supply of energy becomes more efficient. And there's no compromising on that.
As I say, the energy requirement for anyone in India should be no less than the energy consumed, whether it be in Paris, Texas or Paris, France, it should be the same. So there's no compromising on that. The only question is that, can that energy requirement be met, but at much lower levels of emissions? And that's where technology and the renewables transition comes in. so India is a very ambitious, the prime minister is personally committed to the green transition.
India is trying to invest a lot in renewables. The fact that the price of renewables has come down, especially solar, I think makes it more likely. However, the transition has not been as rapid or efficient as it should be. And that's where I think, for example, even if you look at capacity addition, India versus China, mean, India is nowhere close to China. So there are a number of bottlenecks, I think, that are impeding the transition. And we can talk about them as we go along.
MONICA: So let me switch a little bit and ask you something because you've mentioned how India's economy, as we know, is very much services based as opposed to manufacturing based, although obviously there's manufacturing in India. So the question I have for you has to do with AI, artificial intelligence and data centers because
India has them, they're big and they are becoming more popular and there is research from various places, including research being done here in the United States, suggesting that data centers and AI in particular, we even have an episode on that, contribute a lot to pollution, to water issues, and so on. Is India facing these issues too?
ARVIND: Well, that's a good question. And I think India is beginning to face these issues. think it's not yet. Clearly, I think India thinks it has going to be heavily invested in AI and data centers and things. But remember that the pressure on India. So on the one hand, yes, even though we do services, not manufacturing, the new services as it were, maybe as energy intensive as the old manufacturing was. We don't know, but it's looking like it's going to be quite energy intensive. there again, mean, India is again going to go down that path. And so the only way you square that with the emissions thing is through the use of renewables as it were.
So the renewable thing is key to whether, you become richer, therefore you'll consume more energy or the structure of production, even though it's different, it becomes as energy intensive. mean, so renewables are going to be key to the Indian transition.
MONICA: So then, with that in mind, I do have to ask you this. India does make the argument, and some other countries in the Global South make the same argument, by the way, that since climate change was brought about by the rich and developed countries, that the developing world, or the Global South in this case, has less responsibility for solutions. Do you think that makes sense, or does this make sense to you? And what do you think of all the promises from rich countries to help poor countries adjust? Or less developed countries.
ARVIND: Yeah, you know, I think one of the great advantages of President Trump coming into power is that, you know, it kind of exposes the hypocrisy of, you know, the international community, which for all these years has been saying, you know, you you do the cuts, we will provide you with the finance and, you know, all the money for the transition. And there was all this, you know, bickering about, you know, did the 100 billion actually, what is it composed of? Is it incremental? All those kind of absolutely, I think, senseless, hypocritical, acrimonious arguments are now being exposed for what they are, namely that the West neither has the ability nor the inclination to make these transfers to developing countries. So therefore, I think this whole old debate about who is responsible, etc., is becoming less and less relevant because in any case, the West is not going to provide, was never going to provide, and now it's going to clear.
So it's pretty much now clear that the only way that you get the successful renewables transition is if technology becomes genuinely cheaper so that it becomes actually financially viable to deploy renewables instead and substitute them for fossil fuels. the whole, know, see, because remember, I think that we forget that the Biden administration, when they came in, I think they made this, I think, absolutely correct calculation that the old model where you said, you you have carbon taxes, etc., either in the form of carbon taxes or cap and trade, you know, that was completely politically unsaleable, certainly in the United States.
That's why all those legislative efforts to Kerry and Waxman and Markey went nowhere. So they basically decided that you can't have a climate change realistic agenda based on taxation, hardship, degrowth. And they very cleverly said, they pivoted to saying, no, no, it's all going to be about renewables. We're going to make renewables cheaper. It's going to be pro-growth. It's going to create jobs. And I think that was a very good political economy calculation. And that's exactly the calculation in India as well. India is not going to impose these huge carbon taxes in order to cut emissions, et cetera. It didn't happen in the US. It ain't going to happen in India as well.
Now, that being said, I think there are really two important things to note about India's contribution to climate change or what it can contribute. Firstly, if you look at petroleum and therefore the whole transportation sector, etc. India taxes petroleum on average better than most countries in the world. Certainly it has higher levels of petroleum taxation than the United States. So when it comes to petroleum and transportation, India is a very good global citizen, know, de facto taxing carbon at reasonable international rates. One.
Second, I think the place where India really falls short is in the electricity and power sector, which of course is a huge part of consumption of energy in India. there, whereas in petroleum, India de facto taxes carbon, in the power and electricity sector, India actually subsidizes and so there's negative carbon taxation. Now the thing is that India needs to get rid of this for its own domestic welfare for the sake of its citizens. These carbon subsidies that India gives to its farmers, to its households creates a lot of negative effects within India itself.
Cheap power for agriculture means that farmers are overusing power, the water table is declining, we grow too much rice in certain parts of India. There's also a lot of health effects that happen because of this.
And of course, there's a lot of pollution that happens because of this. For example, people don't realize that if you go to Delhi three months or four months of the year now, you have these air quality levels where if you think that a normal level is about 45, 50, India is routinely six, seven, 800, and even crosses 1000. That's also related to subsidizing electricity and power because that's one of the mechanisms. So India needs to get rid of these subsidies for its own sake.
And so most of India's environmental challenges are domestic challenges, whether it's air quality or soil or river quality, etc. India needs to do that. And therefore, eliminating these subsidies will be India's long overdue favor to its own citizens and collateral benefit the global community as well. So, as I say, if India internalizes its domestic costs of what it does, the international benefits will also be quite significant.
MONICA: That is a very, an excellent way of putting it in something that is not just specific to India, but something that is much broader because obviously these kinds of subsidies that you mentioned, subsidies on electricity and even in other countries, subsidies actually on fossil fuels more broadly. This really is an issue because all countries do it and it's not in their interest in any way or shape or form in what you've said, you know, with respect to India, the same goes for other countries as well.
ARVIND: Monica, there's a little bit of, there's one, again, a distinctive Indian aspect to this. Is that, look, all countries or many countries subsidize energy or fuel consumption. You know, in Iran, it's petroleum. Nigeria, it's petroleum. In some countries, it's power. So all countries do it. And I think what is somewhat distinctive about India is the fact that I, you know, my colleagues and I have calculated that something like, I would say two thirds of this subsidy, carbon subsidy goes to not just the middle class, but to the pretty well off the top 10, 15 percent of the population. So, so in some sense, therefore, eliminating these subsidies is not, you know, going to hit the poorest sections of the population.
MONICA: That's extremely inefficient.
ARVIND: So in that sense, it's not lose-lose, but maybe even win-win because there's no reason why the middle class and the rich shouldn't pay for the cost of power or the cost of electricity and so on. So in that sense, I think it is both desirable and because of this feature that it benefits the well-off, it should be more politically feasible than we might otherwise think.
MONICA: That's an excellent point. I'm going to switch over to climate financing because you sort of touched on it when we spoke about, you know, some of the high-progressive that goes on in these climate discussions. I do want to ask you about this. Climate financing in India. What can we say about these issues?
ARVIND: I mean, know, point number one is that there's no international financing of any serious thing that's going to come, right? So everything has to happen domestically, right? One, the more the technology is viable, the less the need for subsidization as it were, But I think that there is no getting away from the fact that all these resources will have to come from the government domestically.
So that is why if you can get rid of some of these subsidies which are wasteful, you also then get the resources to be able to do, whether it's mitigation or adaptation or whatever, I think you will get the resources. there's no getting away from the fact that you need sound domestic finances in order to be able to generate the resources. For example, supposing you do have to subsidize some renewables, for example, still because it's not viable. It has to come from government budgets. therefore, think rapid growth, which will then provide the resources, taxation, having growth and sound public finances is the key to actually also financing the renewables transition in many of these countries.
Because let's say once again, categorically, there will be no financing coming from the west of any meaningful sort for mitigation, let alone adaptation, for the foreseeable future.
MONICA: And that message I think is very important because it has nothing to do with the current protectionist trend in the world or anything like that. This is something that precedes all of that and that was already there.
ARVIND: Very good point. I think that, you know, we've seen this every cop, know, now it's been in COP30, right? Paris was whatever COP20 or whatever. But you see this, you know, every time you had the same dynamic, you know, one side says, but you're responsible and then you should pay up. And the other side says, yes, yes, we're paying up. You know, it's been, you let's be honest, it's been a bit of a farce and theater. And the sooner we, you know, we expose it for what it is, which is what I think the Trump presidency will do, has or even already done, kind of makes the challenge clear. No more illusions about climate finance. But that having been said, there's an important point here though, that countries like India still think of measures that the EU is going to take like carbon border adjustment mechanism. As protectionist measures.
So I think that, I think on the one hand, if advanced countries in the West don't provide finance, but then on the other hand, they also take actions that seem, are perceived as protectionist. I mean, that seems doubly unfair. And I think that needs to be addressed in some form or the other.
MONICA: Yes. Yeah, that's an excellent point. On this, are there any partners that India might take to help push their climate goals? Or as you already said, will in the end this be more of an India that's doing its own kind of thing? In other words, figuring things out on its own.
ARVIND: I think pretty much so. I think this is something that India will have to see. The thing is that India is a big country in that sense. It pays the penalty for being a big country because if India were 30 small countries, which it is de facto 30 quasi-fiscal, 29 quasi-fiscal sovereign entities, nobody would say, that one of the 30 countries is a problem because there's kind of a size penalty because of its large population. But that also means that it may have the resources to act on this. And so it will have to do it itself.
I mean, in terms of partners, I can't see India really relying on other partners for solving its own. I think it's going to be about technology. It's going to be about, you know, having the political will domestically to clean some of the things, to eliminate some of the subsidies, to create governance mechanisms.
You know, the other interesting thing about India is that, you know, the power sector that we spoke about is actually, given India's federal structure, is mostly the responsibility of the state governments, not the federal government. And therefore, you know, there's a kind of dynamic there that every state government has to kind of contribute on its own. And what tends to happen is that if subsidies are given by one state, other states tend to follow, you get this competitive populism, which has been very detrimental to addressing the problems of the power sector. I mean, that dynamic has to be broken as well.
MONICA: Yes. So you've given us a lot of food for thought, I think, to not just think about India, but think about the global South more generally. mean, India, as you pointed out, has some particularities, but a lot of the issues that India faces are the same issues that other developing countries face. And it's good to hear, you know, just upfront things like...
There is a lot of hypocrisy around. Let's get the hypocrisy out of the way so that countries can start figuring things out and really understand that they're on their own to a large extent. They have to figure this out domestically, which is the message for India and the message for other countries, I assume. What else would you like to say? What else is missing that we haven't touched on?
ARVIND: You know, I guess, see, what I would say in conclusion is that if you look at the world more broadly, not just climate change, but also in terms of what's happening on trade and governance and security, that, you know, we are looking at a world where there's going to be much more fragmentation.
Much less cooperation of a major sort. And therefore, I would say the challenge for in some ways the global community and for the global South is how do you get global public goods? For example, in this case, know, cheaper batteries, for example, right? How do you get global public goods without global public cooperation? I think that's kind of, I think the central challenge of our time.
MONICA: Well, thank you very much, Arvind. This was a fascinating conversation and I'm very happy that you've come on the show and hopefully we can have you back soon.
ARVIND: Thanks very much. Thank you for having me.
MONICA: You've just finished an episode of Policy for the Planet — thanks for joining us! Don't forget to rate, review and subscribe.
Special thanks to Jennifer Owens and Alex Martin, our producers, Melina Kolb, our supervising producer, and Steve Weisman, our editorial adviser. This podcast is brought to you by the Peterson Institute for International Economics. Learn more at piie.com.
Until next time, here's to creating meaningful impact. Stay motivated, stay curious.
