SPECIAL ENVOY STERN HEARS THAT INDIAN INDUSTRY IS READY TO

UNCLAS SECTION 01 OF 05 MUMBAI 000320 SENSITIVE SIPDIS STATE FOR OES/PCI, OES/EGC, AND SCA/INS STATE FOR SECC TODD STERN DEPT OF ENERGY FOR TCUTLER, CGILLESPIE, MGINZBERG E.O. 12958: N/A TAGS: SENV ENRG ECON TSPL TRGY ETRD IN SUBJECT: SPECIAL ENVOY STERN HEARS THAT INDIAN INDUSTRY IS READY TO COOPERATE ON CLIMATE CHANGE MUMBAI 00000320 001.2 OF 005 ¶1. (SBU) Summary. Special Envoy for Climate Change Todd Stern met with several leading private Indian businessmen to ascertain their views on mitigating climate change. He found that India's private sector is actively engaged in clean technology investment, particularly for renewable energy. In contrast to the conventional rhetoric of the Indian government, the corporate sector is looking for pragmatic cooperation with U.S. industry and government, particularly in regard to accessing the latest technology and training to use that technology. Indian business leaders also believe that nuclear energy is a viable clean technology option to meet India's energy needs and are waiting for legislation from the Government of India (GoI) that would allow private section entry into this arena. The Special Envoy (S/E) came away believing that the Indian private sector is eager to move forward on clean energy. End Summary. Indian Business Leaders Certain That Government of India Wants a Positive Outcome at Copenhagen -------------- ¶2. (SBU) On July 18, S/E Stern met Jamshyd Godrej, the Chairman of consumer durables manufacturer Godrej and Boyce, senior executives of the $60 billion Tata Group, and Mukesh Ambani, Chairman of Reliance Industries, India's largest privately sector corporation. Throughout the three meetings, these business leaders shared their opinions about potential USG cooperation with the Indian government and the likelihood and desire for a deal at Copenhagen. Both Jamshyd Godrej, and senior officials from the $60 billion Tata group of companies believe that the Indian government ultimately wants a successful round of negotiations at Copenhagen. They acknowledge that the GOI's public rhetoric is at times bellicose, but believe that the GOI is much more willing in private to pursue a deal. Dr. Jamshed Irani, the Director of the Tata Sons group, pointed out that in a vibrant democracy like India, it is difficult for politicians to publicly focus on an issue like climate change that will not win them votes. As a result, Irani noted, there is a questionable commitment to renewable energy and climate change at the ministerial level in India. When asked by S/E Stern, the businessmen gave very different answers to his question about who in the GoI is influential in making climate change policy besides the Prime Minister and his special envoy Shyam Saran. Godrej singled out Jairam Ramesh, the Minister for the Environment and Forests as being very important. In contrast, Mukesh Ambani disagreed and stated that Ramesh was not very influential. Ambani thought that Finance Minister Pranab Mukherjee, Power Minister Sushilkumar Shinde, and Oil and Natural Gas Minister Murli Deora were far more important than the Environment Minister. Ambani also told Stern that the U.S. should ask India to open up the country's nuclear industry to private investment; he believes that nuclear power was a clean, cost-effective and proven alternative to the high carbon emitting coal-fired plants that India is currently building. Godrej Stresses that Indian Government Is Serious About Climate Change Despite Public Posturing -------------- ¶3. (SBU) Godrej expanded that, from Copenhagen, the Indian government wanted two deliverables: access to clean technology being developed in the West through partnerships with Indian companies, and access to the funding necessary to utilize that technology at home. S/E Stern said that the U.S. is ready to enthusiastically encourage partnerships in technology MUMBAI 00000320 002.2 OF 005 development, but unwilling to compromise on intellectual property. S/E Stern also stated that he agreed with U.K. Prime Minister Gordon Brown's statement that significant financial assistance should be provided to the developing world, stating that the U.S. would be a major contributor to this effort. Godrej pointed out that funding is the bigger deliverable because it can be used to bring in technology, training, and resources. Godrej also highlighted that the Indian public sector was already playing a part in mitigating climate change, notwithstanding the government of India's (GOI) reluctance to accept binding emission reductions. For example, the government put labels on appliance products which informed consumers about the energy saving potential of purchasing this product; this successful program was modeled after the U.S. EnergyStar program. Godrej Emphasizes Need For Clean Technology To Be Economically Viable -------------- ¶4. (SBU) Jamshyd Godrej also explained his personal involvement in the development of the Godrej-CII Green building in Hyderabad, which at the time of its completion in 2004 was the most energy efficient building in the world and the first building in India to receive a platinum rating under the U.S. Green Building Council's (USGBC) LEED Green Building Rating System. Godrej highlighted the economic potential of green buildings; he claimed that such buildings cost five percent more to build but save 30 to 40 percent in annual operating costs due to energy savings. Godrej emphasized that he did not believe in government subsidies for clean technology, and that green projects must be commercially viable without government subsidies. However, he agreed that commercializing renewable energy sources like solar may need government assistance to kick-start development, but ultimately must stand on their own. Consumers will only "go green" based on cost, and not because of altruistic motives, he continued. Adoption of an Increasing Share of Renewable Energy Sources Challenging -- But Not Impossible -------------- ¶5. (SBU) In a meeting with Dr. Jamshed Irani and other senior Tata executives, Irani emphasized that equitable and inclusive growth is still a challenge for India despite the country's over 7 percent growth rate over the past five years. Prasad Menon, the Managing Director of Tata Power, acknowledged that India's development must take a different -- and more sustainable -- path from the one taken by developed nations. Although India's per capita energy consumption is extremely low, using non-renewable energy sources to provide electricity to the 400 million Indians who currently have no access to electricity would have disastrous consequences both for India and the world, he continued. Menon stated that sustainability is a core strategy for Tata Power, which is India's largest private sector power utility company. Currently, the company draws 17 percent of its power capacity from hydroelectric and wind power, with a goal of increasing this to 25 percent by 2017 and 35 percent by ¶2030. The company is focusing on solar, wind and geo-thermal energy sources to achieve this goal. However, Menon emphasized that coal, which due to its abundance in India currently accounts for over 60 percent of India's energy mix, continues - and will continue - to be the primary source of fuel for power generation both for Tata and within India. Unfortunately, he added, Indian coal tends to be dirtier and less efficient than MUMBAI 00000320 003.2 OF 005 coal used in the developed world. Development of clean coal technology is therefore extremely important, he said. Irani remarked that he sees the potential for Tata to draw perhaps 5-7 percent of their electricity from nuclear power by 2030, and remarked that current Indian law does not permit privately operated nuclear facilities. In short, the Tata group believes that there is the potential for approximately 40 percent of India's power to be drawn from renewable sources (including hydroelectricity) or nuclear sources if the GOI pursues an aggressive renewable energy strategy and provided private participation in nuclear power generation is allowed. However, they pointed out that renewable energy alone (excluding hydroelectricity) can at best account for only 14-20 percent of India's energy basket. ¶6. (SBU) Both Irani and Menon had several suggestions for encouraging the adoption of renewable energy sources within India. Irani pointed out that India had already leapfrogged technologies in the telecommunications realm; he noted that currently 600 million people use mobile phones today even in small villages; this is a stark contrast to even a decade ago when only India's urban elite had access to landline phones operated by government-owned companies. Similarly, a renewable or clean energy revolution could take place in India if awareness about the benefits of this technology spread to rural India's population of over 700 million. Knowledge of the benefits of this technology would cause rapid adoption, even in villages, if it were seen to be in the interest of the people, Irani explained. Menon agreed and added that a large push needs to be made for the promotion of clean technology and renewable energy in rural areas of India and to convert rural villages to green villages. Solar, agri-mass and wind can be packaged as a total energy solution to the rural population and they can be encouraged to grow crops which capture carbon dioxide. Assistance and Partnership with the West is Key to Clean Technology R&D -------------- ¶7. (SBU) Menon elaborated on Tata Power's ongoing research and development in renewable technology. Tata is currently developing an enhanced geothermal power project in Australia after acquiring a stake in Australian firm Geodynamics, with the ultimate aim of using this technology in India for similar renewable energy projects. Menon believes that this technology is still many years away from being put into use, both from a technical and from a cost point of view but has the potential to generate 5000 MW of power. The company is also working with the state-owned Oil & Natural Gas Corporation on carbon capture and sequestration for an enhanced oil recovery project that captures carbon dioxide from the plant, compresses it and transports it to depleted oil wells. ¶8. (SBU) Menon noted that the technology for carbon gasification and storage, like most other renewable energy technologies, is expensive. U.S. technological and financial assistance is needed to commercialize this technology as a source of income. Similar cooperation on solar technology, storage, and batteries would also help India develop more renewable energy sources. Banmali Agrawala, Executive Director of Tata Power, pointed out the need for technologies to be suited to Indian conditions; he gave the example of wind turbines being developed for wind speeds in India rather than those in the U.S. Menon also suggested the formation of a consortium of countries working to develop key renewable energy MUMBAI 00000320 004.2 OF 005 or clean energy technologies. Such a consortium, in Menon's view, could initially work on the development of three critical technologies with soft loans provided by international funding agencies. Soft loans and grants are needed to encourage R&D in clean energy, he added. ¶9. (SBU) Menon expressed concern about language in the U.S. climate change legislation that was recently passed by the House which appears to be directed towards countries like India who do not accept binding emission reductions. He suggested that a Congressional delegation of eight or nine senators that are particularly opposed to concessions or compromise with India on emission caps come to India and see what private industry is already doing to reduce carbon emissions, which he believes would alleviate some of their concerns. Irani questioned the ministerial commitment from the GOI towards a concerted effort regarding climate change; he notably called the Prime Minister's plan on emissions "bulky" and believes that the private sector is the better avenue for results on the issue. Irani and Menon both believe, however, that the GOI wants a deal on climate change. They both also believe that the GOI is putting on the table much less than what is actually being done in India at this point. Mukesh Ambani Sees Nuclear Power As Part Of The Solution To The Climate Change Problem -------------- ¶10. (SBU) In another meeting, Mukesh Ambani of Reliance Industries Limited echoed Irani's remarks about the mobile phone technology revolution in India, and further emphasized the role of the private sector as well as his personal role in this dramatic shift. Ambani pointed to the emergence of nuclear energy as a significant source of power in India; S/E Stern agreed that nuclear is becoming part of the solution to climate change, causing many opponents of nuclear power to reassess their views. Ambani told S/E Stern that the key to the transformation of nuclear energy in India would be for the Indian Government to allow private companies to participate in this sector. Ambani gave the example that 75,000 MW of nuclear power is superior to 75,000 MW of coal, but that India is currently building 75,000 MW of coal using inexpensive Chinese technology that is difficult to retrofit. Ambani believes that nuclear power will be cheaper than coal in the long run due to low labor costs in India and if the cost of pollution is factored. (Note: Anil Ambani, the estranged brother of Mukesh Ambani, owns the company Reliance Power which is building several of the coal-fired plants that Mukesh Ambani described. Anil Ambani is also planning to move into the nuclear power arena. Past experience shows that when the Ambani brothers compete against each other, the competition is fierce and often ends with legal action. End Note). ¶11. (SBU) Ambani predicted that solar energy would also be an economical solution to climate change. He explained that at a research facility in Thane, near Mumbai, Reliance was experimenting on developing a "solar cold chain." In order to ensure that pharmaceutical products that require refrigeration reach their rural destinations safely, his engineers are developing solar powered refrigeration units. Ambani expanded that the answer to meeting the needs of the hundreds of millions without electricity is decentralized electrification, which can best be provided by solar energy. The key he noted was to make any solution affordable to the masses in India because then it can be affordable anywhere in the world. MUMBAI 00000320 005.2 OF 005 ¶12. (SBU) Comment: All interlocutors seemed to recognize the need for further action on the issue of climate change, and in fact are already working on a variety of renewable energy projects. These individuals are all from the highest echelon of Indian industry, and hold a great deal of influence within India. They are motivated by the fact that developing renewable energy is economically expedient and not because of government support or subsidies. They all recognize that the GoI has taken a hard line in negotiations on the issues of emission caps and renewable energy, but insist that India is willing to do more on renewable energy than they are willing to offer. It may useful to continue to further engage with Indian industry in the run up to Copenhagen to ascertain India's true commitment to mitigating climate change. FOLMSBEE