On a whim and a prayer

India’s unilateral decision to undertake a reduction in the carbon intensity of its growth is, on the face of it, a farsighted decision. Despite the brouhaha about how it will affect industry and future growth, it’s the right thing to do because no country — howsoever poor — can deny responsibility for the environmental damage it inflicts through careless growth. 

However, we have no blueprint for action. Neither Manmohan Singh nor Jairam Ramesh seem to have a gameplan on how we’re going to achieve what is promised. On the contrary, in the last five years, Singh’s government has done everything possible to promote the use of carbon fuels — by subsidising them. It’s difficult to see how the prime minister is going to get his politically-tough policy choices implemented when he has been fighting shy of raising fuel prices for much of his first term. He paid for the fuel subsidies by looting our own public sector oil companies.

Bringing down carbon intensity calls for a systemic response which will have many, many consequences — all of them political. The easy part is to direct investment towards energy-saving and green technology. For a government which can gift away several hundred thousand crores of rupees in needless subsidies to the non-poor, spend over Rs1,86,000 crore to revive growth, and write off over Rs71,000 crore to farmers, it should not at all be difficult to redirect resources towards research on solar and wind energy, energy-saving devices, and the works.

Spending brings political dividends, but the shift in energy intensity goalposts will bring more losers than winners. Many energy-intensive industries will decline. Prices will rise in the short run, as the cost of turning green is passed on to consumers. And the short run can stretch for years. We should be prepared to see a deceleration in growth — for higher prices and costs will have to be combined with deflationary policies. 

The big question: are we prepared for the ‘butterfly effect’ of policy on polity? The term butterfly effect comes from chaos theory, where final outcomes can be completely unexpected given a very small initial impetus. Metaphorically, it is said that a butterfly flapping its wings in the Gulf of Mexico can cause a typhoon in Texas.

The 20-25% cut in carbon intensity promised by 2020 will create a butterfly effect that will hugely impact Indian politics. Several populist programmes will have to be rethought. The crown jewel in the UPA’s pot of populist programmes is Nrega — the national rural employment guarantee scheme. But it has a direct impact on carbon intensity and green policies. 

When money is handed over to the poor, they spend more on food. This is the prime reason why food prices are zooming. As the poor earn more, small and marginal farmers suddenly find that labour costs also rise — and this becomes a spur for further food price increases. In cities, food prices are becoming a big political issue. When this boils over, there will be pressures to invest more in agricultural productivity, which means more fertilisers and pesticides. The green way out would be to emphasise organic farming, but this means reducing food output in the short run (unthinkable), raising fertiliser prices, and removing subsidies. Which government will volunteer to do this? Fertilisers come largely from carbon-based feedstocks. 

Now think energy. If green power has to be given greater play, power costs will rise. Feeding solar power into the grid will cost at least four times as much, which means higher power subsidies, unless we raise power prices for homes and industry. If this is somehow pushed through, the sticker prices of industrial and consumer goods will go up. Which government will have the gumption to weather the urban storm as a result of this? And we haven’t even talked about fossil fuels. The only way to go green on energy is to raise the prices of petrol and diesel, and restrict the subsidies on cooking gas and kerosene. Which politician will handle this hot potato?

Scores of industries — from automobiles to engineering, steel and cement to chemicals — will see costs rise as they adjust to the new norms on carbon intensity. The pressure to trim costs elsewhere may result in downsizing labour, and urban consumers will be a disgruntled lot. Thousands of old automobiles will have to be junked — and we know how everyone resists the idea of scrapping any vehicles.

These are only a few of the consequences of reducing carbon intensity. One does not know what caused Manmohan Singh and Jairam Ramesh to make a bold dash to climate heroism. But the nation will pay a heavy price for something they haven’t yet been told anything about. We are on a whim and a prayer — Manmohan and Jairam Ramesh’s whims and everybody else’s prayers.