How emissions-intensive are our industries?
A note on CSE’s latest report, Challenge of the New Balance
Mumbai, June 1, 2010: In January this year, India had declared that it will voluntarily reduce emissions intensity by 20-25 per cent by 2020 in comparison to the 2005 level. Will it be able to do so? A recent report by Centre for Science and Environment (CSE), a New Delhi-based research and advocacy organisation, says that top industrial sectors of the country are quite well equipped to meet the target.
But what will India do beyond 2020? The study notes that in an alarming trend, in all high-polluting sectors, the technology options for emissions reduction will stagnate after 2020. According to CSE, a reduction in emissions after 2020 will not be possible without impacting growth, unless new, revolutionary and not yet commercialized technologies are developed and deployed quickly.
The report, titled Challenge of the New Balance, is perhaps the first study in India to look at options to reduce emissions, their feasibility and the costs involved, and understand the low-carbon roadmap and technology pathways for the future. CSE did a presentation on the study here today, in association with the Indian Institute of Technology-Bombay.
The CSE study
In 2009, CSE began analysing the six most energy- and carbon dioxide emissions-intensive industrial sectors in India to find out how Indian industry performs – and will perform in future - in terms of reduction in emissions. These six sectors – power, steel, cement, aluminium, paper and pulp and fertilisers - together accounted for over 60 per cent of India’s carbon dioxide emissions in 2008-09.
Elaborating on the study and its objectives, Chandra Bhushan, associate director, CSE and the author of the study, says: “Today, there exists a reactionary consensus that India’s rising carbon dioxide emissions are due to an inefficient industry. Is that true? We have tried to find the answer through this study. We have collected, verified and used data from all major companies to show how the six sectors perform, what are the technology options that they could use to reduce their energy and emissions intensities, and what would be their growth trajectories like.”
To do all this, the study examines the sectors under two scenarios - Business as Usual (BAU) and Low Carbon (LC).
The BAU scenario is based on changes that industry is making on its own and will make in the future due to increasing energy prices. Increasing energy prices is already forcing industries to improve their energy efficiency and thereby, reduce carbon dioxide.
In an LC scenario, the industry is mandated by the government to reduce carbon dioxide emissions to meet international obligations. In this scenario, the industry is forced to adopt new emerging technologies and the power sector is forced to deploy large-scale renewable energy technologies.
How the sectors fare
The study unearths a mixed performance from the six sectors, with some performing at the global best level, some displaying immense potential, and yet others constrained by their unique characteristics. Indian aluminium, fertilizer and cement sectors are already operating at the global best levels, whereas paper and pulp and steel sector is lagging behind because of the unique characteristics of the industry.
The CSE study says that India’s thermal power plants are more efficient than the global average. The country’s biggest power utility, NTPC, operates at 33 per cent efficiency, one of the highest in the world given the sub-critical technology and poor coal quality the company uses.
In a BAU scenario in the power sector, emissions intensity reduction is 18 per cent by 2030, largely because of improvements in coal-based power plants. In an LC scenario, emissions intensity can reduce by as much as 35 per cent by 2030 - but this option is expensive as it means huge investments in new renewable technologies and low-carbon fuels.
The study also says that the cheapest way to reduce emissions from power sector by undertaking aggressive demand-side management and reducing transmission and distribution losses. Just making more energy by saving and through increased efficiency could add as much as 20 per cent to India’s gross power generation by 2020.
The cement industry’s high performance – one of the best in world - is credited to the use of modern technologies and blending materials (flyash and slag) for cement production. The sector, says the CSE study, can further lower its emissions intensity by increasing the proportion of blended cement in its total production – in a BAU scenario, the reduction can be by 25 per cent by 2030 while in an LC scenario, it could come down by 35 per cent.
The fertiliser sector, on its part, does not have major technology options for reducing emissions and will have to rely on changing the feedstock – from naptha and fuel oil to natural gas. The industry can grow and still reduce its total CO2 emissions by 2 million tonne per annum in 2020 with respect to 2008-09 levels, simply by changing its feedstock. But the sector faces a critical shortage of natural gas.
In aluminium, 80 per cent of the sector is already using global best smelting technology. Options to reduce emissions are limited; companies are therefore opting to change the fuel itself in order to go low carbon – using hydroelectricity, or, as in the case of Iceland, geothermal power.
But India has few such alternatives. Therefore, says the CSE study, the growth of this sector here means a four-fold increase in total emissions in the BAU scenario. In an LC scenario, emissions intensity reduces, but only if 30 per cent energy is sourced from renewables.
The paper and pulp industry performs poorly in terms of energy use, and its CO2 emissions are high. The sector has begun changing its raw material from diverse wood and non-wood sources to wastepaper and market pulp. As a result, in a BAU scenario, emissions intensity reduces by 30 per cent by 2030. In an LC scenario, emissions intensity can reduce by as much as 40 per cent by 2030, but this will require retiring all old plants and investing in new energy-saving technologies.
“Steel will be the problem sector for India,” says Chandra Bhushan. “This sector will not be able to reduce emissions intensity significantly because of the technology choices it is making today – moving from blast furnace process route to sponge iron. Close to 60 per cent of India’s steel will be produced using sponge iron in which emissions efficiency gains are few.”
The CSE study shows that for further efficiency in energy consumption and emissions control, the steel sector will have to completely re-configure its technology and raw materials.
The resource crunch
Another key issue that the study focuses on is the resource crunch that is staring India in the face. While the country is poised to move ahead on an 8 per cent GDP growth rate annually over the next two decades, the CSE study contends that there are major resource constraints – related to land, water and raw materials - to this growth story that economists talk about but have hardly taken into account in their projections.
The 8 per cent growth paradigm means that production in all the studied sectors will grow four-five fold. For instance, steel production is likely to reach 300 million tonnes (MT) in 2030 compared to 60 MT today, while the production of cement will reach 900 MT from 190 MT in 2008-09. The mining sector will grow concurrently.
But do we have the resources to support this growth, asks Chandra Bhushan. Currently, around 0.7 million hectares (ha) of land is occupied by these six sectors. In an 8 per cent growth trajectory, an additional 1.0-1.3 million ha of land will be required by them – which means the amount of land needed by these six sectors in the next 20 years will be far higher than what they have acquired in last 60 years.
India has an adverse land-population ratio (the per capita land availability is a mere 0.25 ha). This is compounded by the fact that India’s remaining mineral deposits, especially coal, iron ore and bauxite, exist largely in areas that are characterized by large forest covers, big tribal populations, extreme poverty and naxal unrest. Protests, civic unrest and violence over land acquisition for industrial and infrastructure projects have been widely reported. Acquiring land, therefore, will not be easy unless policies change or ways of ‘inclusiveness’ are devised in which local communities benefit proportionally.
Similarly, freshwater availability is an equally important constraint to growth. Freshwater withdrawal today by the six sectors is equivalent to the total domestic water demand of the country (around 42,000 million cubic meters per annum). Freshwater consumption (water that is lost through evaporation, products and wastes in industries) equals the total drinking and cooking water needs of India (5,600 million cubic meters per annum). The power sector today alone accounts for over 80 per cent of all industrial water use in the country.
India's 8 per cent growth trajectory means that by 2030, freshwater withdrawal by these six sectors will increase by 40 per cent and freshwater consumption by more than three-fold. A three-fold increase in consumption means less freshwater will be available downstream for other users. There is already a growing conflict between industry and local communities on water sharing in many parts of the country; the increase in consumption will exacerbate it.
In the light of all this, according to Chandra Bhushan, what the CSE study shows is that the world – and India -- has to seriously rethink and rework its economic model for the future.