The case for a comprehensive climate bill in India

The United States recently passed the Inflation Reduction Act (IRA) of 2022 with an expenditure of $370 billion to decarbonize its economy. The IRA, which has little to do with current price inflation, is hailed as the “biggest climate expenditure in US history” and the start of a “new era for climate technology”. President Joe Biden also recently signed the US CHIPS and Science Act, which will invest a historic amount in science, technology and manufacturing. These two laws are intended to help the United States maintain its technological competitive advantage vis-à-vis its main challenger, China. But what does this mean for India? Does it offer lessons for India’s climate travel and strategy?

Let’s first look at what the IRA focuses on. It systematically aims to reduce emissions in different sectors: building, industry, transport and energy. It includes investments to promote improvements in residential energy efficiency; tax credits for wind, solar and storage; manufacturing tax credits; nuclear credits; clean hydrogen tax credits; and incentives for clean vehicles, clean refueling/recharging and biofuels. The investments and tax credits included are in sync with the $80 billion investment envisioned under the bipartisan infrastructure law passed last November. Overall, the IRA seeks to reduce greenhouse gas emissions while positioning the United States to compete with China in the climate technology space.

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India has seen its own climate related legislation including the new Energy Conservation Bill of 2022. Under it, India has approved the establishment of a carbon. It also promises to increase renewable energy generation capacity while specifically imposing its consumption on certain sectors. The Electricity (Amendment) Bill 2022 aims to facilitate greater competition in the distribution of electricity while providing automatic rate adjustments based on changes in the cost of fuel. The cabinet also endorsed India’s Nationally Determined Contributions, which included a commitment to reduce the country’s gross domestic product emissions intensity by 45% by 2030 (compared to 2005 levels) and achieve a cumulative installed capacity of 50% for electrical energy from non-fossil fuels. sources the same year.

This wave of climate-focused legislation is a great sign that Indian lawmakers have their eye on the ball. But are we doing enough? No. India needs a comprehensive climate bill – with a clear vision, a multi-sector strategy and substantial investments – to make the country a climate tech powerhouse and seize the moment for climate action.

The IRA is a geostrategic decision by the United States that also aims to ease domestic concerns about inflation by reducing its dependence on hydrocarbons, considered a major cause of price instability. In this dual purpose, it offers several lessons for India. First, the IRA will enable the United States, through all contemplated investments in climate technology and manufacturing, to identify and deploy at scale the solutions needed to achieve net zero by 2050. Considered with the investments outlined in the CHIPS Act, this will allow the United States to reduce its current dependence on China for much of its climate technology supplies. India is committed to achieving carbon neutrality by 2070. To achieve this in a realistic and self-sustaining manner, India must also invest heavily in climate technologies and domestic manufacturing.

Second, as the name of the law suggests, the IRA is part of a long-term effort to limit the impact of volatile energy bills on retail prices. As fuel costs for Indian consumers have risen and remain exposed to global oil prices, India could use its green plans to achieve similar goals.

Third, several policies included in the IRA could be adapted to the Indian context. First, it includes tax credits up to $7,500 (about 6 lakh) on the price of a new electric vehicle (EV). These credits can be transferred to the dealership at the time of purchase, so you get cashback instantly instead of having to wait until you file your taxes. This should boost the adoption of electric vehicles. Although India has an incentive program, it lags behind many other countries in the adoption of electric vehicles. Tax credits could give it a boost.

The IRA is also offering 5 years of tax credits to make sustainable aviation fuel more competitive than jet fuel. This fuel reduces emissions by 50-80% compared to jet fuel and can be used for existing aircraft. India’s Transport Minister Nitin Gadkari spoke at the recent Mint Mobility Summit about using India’s ethanol manufacturing capabilities to produce aviation-grade biofuels. This requires political interventions.

The IRA is also setting aside $5 billion for low-carbon purchases by the US government to promote the use of clean materials. The central government and Indian state governments could engage in a similar process to stimulate national innovation. This will hopefully lead to price reductions, which could in turn encourage a similar increase in low-carbon purchases by the private sector.

Overall, India needs to invest enough – and early – to build domestic climate technology manufacturing capabilities, improve uptake of existing climate technologies, and enable innovation. The country needs comprehensive climate legislation at the earliest if it wants to become a world leader in climate technology. And it is only by becoming one of the first leaders that India can emerge victorious from this great technological game.

Anirudh Suri is a non-resident scholar at Carnegie India and author of “The Great Tech Game”.

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