[The program sets a goal of cutting energy use
an average of about 4 percent per unit of output at the factories. Those that
save extra energy can sell their savings to plants that fail to meet their
targets. It is a market-style system akin to cap-and-trade, but the “cap” is an energy
efficiency target. Linking the savings to output lets India reduce the
intensity of energy use but still increase production to meet its needs as a
developing nation.]
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A view of ACC's
Gagal Cement Plant in India's northern state of Himachal
Pradesh. Credit ACC
Limited
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SAN FRANCISCO — India, the world’s
third-largest producer of greenhouse gas, after China and the United States,
has resisted international pressure to commit to capping planet-warming
emissions. But when it comes to saving energy, India is moving ahead briskly.
Its innovative and closely watched program
called Perform, Achieve and Trade, is designed to
encourage hundreds of the nation’s largest industrial plants to keep their
energy use in check.
The program sets a goal of cutting energy use
an average of about 4 percent per unit of output at the factories. Those that
save extra energy can sell their savings to plants that fail to meet their
targets. It is a market-style system akin to cap-and-trade, but the “cap” is an energy
efficiency target. Linking the savings to output lets India reduce the
intensity of energy use but still increase production to meet its needs as a
developing nation.
“What’s being launched is a national program
of trading in certificates representing energy savings,” said Noah Sachs, a law
professor at the University of Richmond in Virginia, who spent the spring
studying the program. “It’s really interesting. There’s no other country in the
world that’s doing this so ambitiously.”
India’s motivation stems partly from climate
concerns, but it is mostly about being thrifty with energy across its growing
economy. The nation imports a large and increasing amount of fossil fuels,
including coal, which is its dominant source for generating electricity. Energy
saved by factories could be made available for economic development and to
provide electricity to the nearly 300 million Indians who lack it.
Nearly 500 industrial plants are covered by
the program, which takes full effect next year and applies to factories in
eight industries, including aluminum, cement, steel, thermal power and
textiles. The plants together accounted for about 36 percent of the total
fossil fuel consumption in India in 2010, according to the country’s Bureau of
Energy Efficiency.
“The Indian program is particularly promising
because it is a national, as opposed to a regional or statewide or provincial,
program,” said Richard Sandor, the chairman of Environmental Financial
Products, a firm that has helped introduce several climate-related financial
exchanges.
At the beginning of the program, the
government sent auditors to verify each plant’s energy use and economic output:
for example, the number of tons of steel a plant might produce. The plants were
then given energy reduction targets — generally between 1 percent and 8 percent
per unit of output — to achieve over three years. Less-efficient plants were
asked to save more energy than plants that were already efficient, said Ajay
Mathur, director general of the Bureau of Energy Efficiency.
Next year, from April to June, the factories
will be evaluated again. Companies that save more energy than their targets
required will receive certificates that starting in August they can then sell
to companies that do not meet targets.
In crafting Perform, Achieve and Trade, Mr.
Mathur’s agency looked at aBritish program that offers industrial
companies a tax break if they meet energy-efficiency targets. Officials also
studied an American cap-and-trade program, created in the
1990s to combat acid rain, that caps emissions of certain air pollutants and
allows companies to trade emissions permits among themselves, a system that
helps ensure that pollution-reduction measures are cost-effective.
Many questions remain about how well India’s
program will work. Nobody knows how many companies will meet their targets next
year, how much trading will take place or how much the certificates will cost.
Both Indian government officials and outside experts emphasized that the
program was in an early phase.
“It is a start for energy efficiency in India,
but it is not clear how much a success the program is, since the first round is
still to end” next year, Aruna Kumarankandath, who works on renewable energy
issues at the Center for Science and Environment, a New Delhi environmental
group, said in an email.
Of the 478 plants in the program, at least 217
reported that they had already met their targets by the end of March, a year
ahead of time, according to the Bureau of Energy Efficiency. About 60 other companies
seemed to be on a path to meet it. (The bureau has not verified the reports.)
Professor Sachs of the University of Richmond
said that the program’s initial goals did not substantially exceed
energy-efficiency improvements that many Indian industrial plants would have
made anyway because of competitive pressure or other factors. He noted,
however, that the least-efficient plants might be forced to make improvements
beyond business as usual.
Saurabh Kumar, a former official at the bureau
who now works at Energy Efficiency Services Limited, a company overseen by the
government, said that it was important to start conservatively and that he
expected the targets to be stronger in the next three-year phase of the
program. That phase will begin by 2016 at the latest, after the first round’s
effectiveness is assessed.
“We are following a gradual approach,” Mr.
Kumar said. “It is good to be inclusive to begin with and then ratchet up the
standard.”
Several industry representatives expressed
support for Perform, Achieve and Trade and its goal of encouraging factories to
save more energy. But Rupa Naik, executive director of the All India
Association of Industries, and Vijay Kalantri, the association’s president,
noted that new plants would have an easier time making efficiency improvements
than existing ones. The cost to Indian industry of achieving the program’s
targets “will be in the billions” of dollars, they said in a joint email
comment.
K.N. Rao, director for energy and environment
of ACC Limited, a major Indian cement manufacturer, said that the three-year
window helped ensure that the energy targets were largely achievable. Still,
for various reasons, “some units are finding it difficult to meet the target,”
he said in an email.
One key to the program is ensuring the
independence of the auditors who measure the energy use and economic output of
the plants. The auditors are trained and accredited, Mr. Mathur said, and about
10 percent of the plants will be audited for a second time, by another auditor,
to verify the initial report.
In the next three-year phase, Mr. Mathur said,
India’s program will expand to more sectors, possibly including refining,
petrochemicals, railroads and electricity distribution. Smaller industrial
plants will also be covered.
