Last week, Saurabh Shome and I reported that India’s proposed massive investments in clean power will cost about $50 billion more than generating the same power with coal. As we note in our paper, Less Smoke, More Mirrors, India is considering such investments “despite the absence of any meaningful international pressure to cut emissions, no guarantees of compensatory financing, and a continuing American failure to adopt stringent emissions limits.” With this initiative, India joins China, South Africa, and other industrializing countries that have begun large clean technology programs at their own expense. In the process they have knocked the conventional climate-development debate into a cocked hat. Consider the following contrasts between Old Think and the New Reality.
Old Think: The pre-Copenhagen mantra of developing countries (including India):
The industrial countries caused this problem; the industrial countries should solve it. Developing countries should only adopt clean technology if the industrial countries will cover the extra cost.
New Reality: India and other rising industrial powers have decided to go ahead anyway. What explains this change? Theories abound. In the Indian case, my colleague Arvind Subramanian sees a big role for India’s great-power ambitions. Industrial policy may also play a part, since Indian and Chinese leaders know that renewable energy is a major new arena for global competition. Greater energy independence is probably a factor. Worry about the impact of climate change certainly plays a role. As my colleague Bill Cline has reported, major Indian regions are likely to suffer agricultural productivity losses greater than 40% if we stay on our current emissions-intensive track. And sea-level rise will displace millions of people in coastal China if we continue on the present course. Finally there is Tuvalu’s ethical challenge in Copenhagen, leveled at India and China as well as the industrial nations: How can you claim the right to emit so much carbon that you will surely submerge us?
Old Think: From US critics of carbon emissions regulation:
We can’t afford to impose more costs on our industries, when competitor countries like India and China are refusing to do anything. They’ll simply steal market share from us and emit more carbon at the same time, so nothing will be gained.
New Reality: India has undermined this claim with stunning force, because its $50 billion initiative imposes an annual cost on the average Indian that is equivalent to $200 per year for the average American (who is 45 times richer). This $200 individual tab is far higher than the Congressional Budget Office’s estimate of $175 per householdfor the Waxman-Markey cap-and-trade bill that has been blocked by Senate opponents because “we can’t afford it.”
India’s message to the US couldn’t be clearer: Stop complaining and join us on the front lines.
Old Think: From critics of proposed global emissions limits:
Climate change is uncertain, carbon mitigation is costly, and poverty remains a serious problem. Under these conditions, the industrial countries should not pressure developing countries to divert scarce resources to mitigation.
New Reality: This critique has become farcical, because developing countries have decided to pressure themselves. In fact, the argument is now reversed. Because developing countries are devoting major scarce resources to mitigation, the industrial countries must immediately respond in kind. Europe has already anted significantly, so the spotlight now shifts to the US, Japan, Australia and Canada.
Old Think: A corollary refrain about loans from the World Bank:
Climate conditionality must be rejected, because it is tantamount to ramming costly mitigation down the throats of poor clients who would never pay for it otherwise.
New Reality: Far from ramming mitigation down any throats, the World Bank will now have to scurry to catch up. Bank management beware: Your institution’s status as a leading 21st-century player is clearly in jeopardy. Your major clients are now investing in clean energy at levels that dwarf your own resources, while you continue to subsidize coal-fired power projects like Tata Ultra Mega and Medupi. You risk consignment to history’s dustbin, financing yesterday’s dirty technology with an obsolescing staff that cannot attract bright young technical graduates who see the future more clearly. You have made a good start with the Clean Technology Fund’s decision to invest massively in North African solar power. Embrace that path, for the sake of your own future.
So, thanks to leadership from India, China, South Africa and others, we have just had an abrupt game change. Its implications for Old Think are easy to summarize: Gone, baby, gone.
Now the global dialogue begins anew, with novel implications for all the players.