Two Birds with one Stone: Harnessing India’s Solar Energy Capabilities through Trade

EP 3 of #TradeTales- The (Not So) Fairytale of International Trade

Let’s face it, India is going to experience one of the hottest summers this year and is in fact going to be third among the world’s hottest nations. India is now going to be hotter than most middle eastern desert nations by the end of 2024 and this is just the beginning of summer. According to a recent assessment report, India stands third in the list of most vulnerable countries to climate change. In the past five decades, India has witnessed over 700 heat waves, claiming over 17000 lives.

Cities in India such as Bangalore, once known for their salubrious climate and lush gardens haven’t been spared from this heat wave. In order to combat this heat wave, most Indians have sought refuge in domestic air conditioners to beat the heat, but is this really the solution? While temporarily this seems to solve the problem, most of India’s energy needs for personal electricity consumption are sourced by coal power plants, these also prove to be a significant source of CO2 emissions in the air. It is predicted that by 2050, India’s electricity consumption for air conditioners shall exceed Africa’s entire energy consumption.

While air conditioners are only a short-term solution, it is time to think of long-term solutions, that not just addresses climate resilience but shall also ensure a just transition into renewable energy sources. India’s per capita energy consumption and its reliance on non-renewable energy sources have significantly increased. This implies two important things – a sign of development by increasing electricity access and a downside that means greater GHG emissions. This also brings to light India’s potential for renewable energy generation, estimated at 2,109,654 MW as of March 31, 2023, which is only going to increase in the forthcoming years. Of this potential, 35.50% is allocated to solar energy, with four states having the highest potential to harness this – Rajasthan, Maharashtra, Gujarat and Karnataka. Highlighting this transition into renewable energy, the report by the International Energy Agency, notes that solar power witnessing a remarkable growth rate of 23.68% from the fiscal year 2021-22 to 2022-23. The math underscores India’s untapped potential towards a just transition towards renewable energy. ?

A recent report by the Peterson Institute for International Economics highlights, India could become the next China, not just in terms of its population, but also in terms of its economic development. Rising geopolitical tensions between US and China, are now prompting most US-based companies to shift their base to India. So, what does this have to do with climate change, energy consumption and most importantly, trade?

The answer is simple – the global economy now grapples with geopolitical tensions in the world’s oil hub, climate change and a slow economic growth. Of these challenges, climate change being the most urgent of them all. In this backdrop, here are some solutions to make India more resilient towards its climate crisis and rising temperatures. So, how can India hit two birds – climate change and foster development, with one stone – trade?

Chapter 3 of India’s Foreign Trade Policy for 2021-2026, talks about “Developing Districts as Export Hubs”, which aims to galvanize districts of the country to become export hubs by identifying products and services with export potential, addressing barriers for exports, support local exporters and find potential buyers outside India. The achievement of this goal is sure to address climate resilience as well as sustainable development. ?

Rising temperatures means increased opportunities to make hay while the sun shines. The per capita energy consumption in India has grown significantly, ironically forcing domestic producers to import solar cells. A peculiar case of import-export has been witnessed, with solar cell manufacturers exporting to the West while Indian domestic producers are importing from countries such as Vietnam, Thailand and China to meet the needs of the solar energy sector. As a result, while India's exports are flourishing, its import bill for solar cells has also nearly tripled, with significant growth in import shares of these Southeast Asian countries. In order to achieve India’s target of transition to renewable energy, the government has envisaged a “Production-Linked Initiative” which would require massive investment from its trading partners. ??

In order to address this peculiar situation, here’s something that would need further consideration – an equitable marriage of the “Developing Districts as Export Hubs” along with the “Production-Linked Initiative” to harness the true potential of the solar energy industry. There is a need to identify those districts in four of the states mentioned above for solar energy production and pooling resources for their development. Once this has been achieved, the building of the necessary infrastructure would be the next step, which also means employment generation in these areas, pulling in the local people into the workforce, simultaneously inviting the need for ancillary services to flourish in the area, a significant step towards achieving the sustainable development goals. Drawing the technology for dissipation and storage of such solar energy into the equation would help those states in the country to not just meet their energy needs but also transition to renewable energy. While this proposal is for addressing the bigger picture, there still lies the need for taking care of India’s per capita energy consumption. Installation of solar panels in homes, gated communities and neighborhoods towards self-sustenance. A part of this solution would be merged to meet the equipment needs, which directly translates to the marriage of Developing Districts as Export Hubs” along with the “Production-Linked Initiative” schemes by the Government.

This solution aims to address the micro-level intervention to address the climate crisis and India’s developmental goals. Bridging these interventions into the macro dimension of the equation is crucial. As Kuhlmann highlights, there is a need for a new discipline of law and policy, “Micro International Economic Law”, a discipline that aims to bridge the macro level interventions of trade agreements and the micro level policy implications. ??

India’s recent FTAs with the UAE and Australia explicitly recognize the need for emphasis on the social and environmental dimension to trade, signifying the affirmation to address these issues mutually on a larger scale. This indeed to some extent hints towards micro international economic law, however, it is unclear if contextually these provisions have done what requires to be done – forging grass root level impact with the intentions of the language elucidated in the trade agreements.

India now stands at a critical juncture where it can leverage its growing economic influence and substantial renewable energy potential to address the urgent climate crisis while fostering sustainable development. The fusion of the "Developing Districts as Export Hubs" initiative with the "Production-Linked Incentive" scheme presents a strategic opportunity to not only enhance India's export capabilities but also significantly advance its renewable energy sector, particularly solar energy. All these proposals align with the principles of “Micro International Economic Law”, bridging the gap between macro trade agreements and micro-level policy execution. As New Delhi’s new coalition government brings itself to speed on the new policy challenges and opportunities, ?the time is ripe to cement these initiatives, ensuring they create tangible impacts that resonate from local communities up to the national level, making them a cornerstone in India's strategy against climate change and for economic development.

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