SARAN ASKS INDIAN INDUSTRY TO COMMIT TO A LOW CARBON ECONOMY

UNCLAS SECTION 01 OF 02 MUMBAI 000189

SIPDIS

SIPDIS

STATE FOR G, OES/FO, OES/PCI, OES/EGC, AND SCA/INS
DEPT OF ENERGY FOR TCUTLER, CGILLESPIE, MGINZBERG
USDOC FOR A/S BOHIGIAN
NSC FOR DAN PRICE AND ROBERT DIXON
CEQ FOR JAMES CONNAUGHTON

E.O. 12958: N/A
TAGS: SENV ENRG ECON TSPL TRGY KSCA KGHG IN
SUBJECT: SARAN ASKS INDIAN INDUSTRY TO COMMIT TO A LOW CARBON ECONOMY
WHILE GOI NEGOTIATES ON THEIR BEHALF MULTILATERALLY

REF: A. NEW DELHI 844

B. MUMBAI 113

MUMBAI 00000189 001.2 OF 002



1. Summary: In a tough speech to Indian industry in Mumbai,
Special Envoy for Climate Change Shyam Saran stated that the
Indian government would resist calls for uniform standards for
carbon emission reductions. Any global deal would have to take
into account a country's relative development, as well as its
historical and current carbon output. Saran also explained that
despite this position, India would focus on reducing its carbon
footprint domestically. Indian industry was largely unmoved
however, noting that industry has already begun to pursue clean
and green energy solutions to avoid the increasingly high cost
of traditional fossil-fuel based energy sources. End Summary.

2. At a climate change conference on April 21 organized by the
Confederation of Indian Industry, Shyam Saran, the Special Envoy
from the Prime Minister's office, outlined the Indian
government's position on climate change. Saran stated that
while India is pursuing the development of a low-carbon economy
domestically, multilateral dynamics are different. Multilateral
negotiations on climate change are grounded on the principle of
equity, Saran explained, but he assured listeners that the
government realizes the "real" and "serious" threat of climate
change and is taking domestic measures to address this challenge
expeditiously.

3. Saran noted that India's contribution to total carbon
emissions is "modest" and that India and other developing
countries bQieve in the "polluter pays" philosophy. Saran also
emphasized that it is not justifiable to extrapolate current
emission trends in India to 30-40 years in the future. He
highlighted the difference between "survival" emissions from
developing countries and "lifestyle" emissions from developed
countries. For example, 600 million Indians do not have access
to energy today and Saran argued that their need for energy
cannot be compared to a more developed country's need for energy
that can be regulated by a tax on auto emissions or a carbon
tax. For these reasons, he continued, developed countries
should compensate developing countries for lowering carbon
emissions both today and in the post 2012 period, by the
transfer of financial resources and technical know-how.

4. Saran also laid out India's position in multilQeral climate
change negotiations. While the first commitment period expires
in 2012, India believes that the only item to be renegotiated is
the future emission reduction targets for developed countries.
In addition, India's responsibility to support emission
reductions is not to be linked to any conditionality. Finally,
developed countries cannot be allowed to use the sectoral
approach to climate change to argue for globally binding
industry-wide norms to address international competiveness, he
maintained (Note: This is in contrast to what he told CODEL
Pelosi about one month ago. Reftel A). Saran explained that
the sector-based approach to climate change prescribes the
negotiation of internationally binding emission norms for
specific sectors; he opined that the sectors will be
particularly energy-intensive ones like the cement industry. He
believes that supporters of this approach can argue that
international competiveness requires all countries -- including
developing countries like India - to adhere to these binding
emission norms. Saran warned that "developed countries who
adopt sectoral standards among themselves will use the
competitiveness argument to levy protectionist tariffs against
the products of developing countries." Developed countries
advocate a zero tariff regime for green goods, but this can
distort trading patterns by using trade competitiveness
arguments, he continued. Instead he argued that green goods
should have their IPR regime adjusted to allow for cheaper
adoption by developing countries. He also argued for the
creation of a venture capital fund, whose purpose would be to
enable developing countries to adopt green technologies.

5. After laying out India's "tough" stance on climate change
multilateral negotiations, Saran explained that India will
pursue a strategy of environmentally sustainable development
domestically. He pointed out that energy growth in India is
significantly lower than economic growth. India has achieved an
8-9 percent GDP growth rate with a mere 4 percent increase in
energy consumption, he noted. This trend can continue and
accelerate if the government and the private sector works
together to develop energy conservation measures in high-energy
intensive industries, he continued. The reliance on expensive
and exhaustible energy resources will constrain India's growth,
and new technologies and renewable sources of energy have to be

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employed to ensure predictability and affordability, he warned.
So, India will have to increase its energy efficiency standards
and accelerate the development of renewable energy sources like
nuclear power, wind, solar, and biomass.

6. Saran said that the government will announce a national
action plan for climate change in June. Previewing aspects of
this plan, he stated the GoI wanted to create carbon sinks by
planting additional forests, increase water conservation and
address solid waste management. He noted that Indian industry
is ahead of the curve in terms of energy efficiency and as a
result the GoI was starting to believe that market forces would
be the best mechanism for ensuring energy conservation.
Addressing those critics who believed India has not done its
part to address climate change, he stated that India was already
spending close to 2.5% of its GDP on adapting to climate change.
He also pointed out that India's cement industry is now the
world's most energy efficient and a major industrial group was
about to make a USD5 billion investment in solar energy in India.

7. After the speech, Indian corporate representatives told
Congenoff that, in contrast to Saran's message, they really were
not concerned whether India agrees to emissions limits or not.
This view reflects what Indian corporate leaders told Speaker of
the House Nancy Pelosi and her delegation in Mumbai in March
(reftel B). Corporate India's biggest concern appears to be how
to help small and medium enterprises go green; it is a
widespread belief that large enterprises will be able or are in
the process of making the leap to green business practices
without much government help. Businesses also commented that
carbon credits, though helpful, were increasingly difficult to
secure because of increasing scrutiny by the U.N. on proposed
projects. Businesses also pointed out that small companies
cannot afford the project advisory and audit fees, which amount
to USD 5,000-10,000, that are required to get the project
certified by the U. N. The increasingly high prices of and
seeming scarcity of energy in India are enough to make them look
at energy conservation, irrespective of the carbon credit
incentive.

8. Comment: While the Indian government continues to "talk
tough" multilaterally and to justify India's exclusion from
legally binding emission reductions, Indian industry is
unilaterally increasing its R&D efforts to develop alternative
clean energy technologies. In discussions with clean energy
companies, Congenoffs heard that the carbon credit trading
incentive system under Kyoto is not the main driver behind these
energy conserving measures. High energy costs of around 30-40
percent of total manufacturing costs forces Indian industry to
conserve and efficiently use energy and to explore alternative
non-conventional energy sources in order to remain economically
viable and globally competitive. Perversely, while the media
and political classes are talking about the heavy toll high
energy prices are taking on the economy, they appear to have
been the best possible driver towards energy conservation and
building a green economy in India.
KEISER