By Jane Nakano & Michelle Melton
Energy analysts are keen to identify the next “big thing” that will significantly drive demand or supply in the global energy system. In the early 2000s, the energy world was taken by surprise at the strong and persistent upsurge in Chinese energy demand, which affected the price outlook for many energy commodities in ways that analysts had not anticipated. As China’s energy demand growth begins to moderate, companies, analysts, investors, and others have often wondered whether India is the next China — and therefore, whether there will be a dramatic uptick in Indian energy demand along the lines of what happened in China earlier in the century.
So is India the next China? There are some key similarities between the two countries when it comes to energy that makes the analogy appealing. Both countries, for example, are significant energy consumers that have large and increasingly urban populations. Both are trying to increase meaningful energy access and reduce poverty through export-led manufacturing growth (although China has recently attempted to move away from this growth model). Moreover, both have influential energy-oriented state-owned enterprises. However, there are also notable differences that belie an easy comparison. Appreciating these differences is important if we are to properly gage the scope and nature of the impact India’s rise may have on the global energy market dynamics. These include the countries’ different growth trajectories, the way their respective energy sectors are structured, and the significant differences in the regulatory and policymaking environment in the two countries.
Beyond these differences, China is fundamentally a much richer country that has shown stronger and more consistent growth rooted in energy-intensive manufacturing. The prospects for India to catch up—and the energy impact of such a rally—are unlikely in the next few decades, but how close India comes will depend on the pace and scope of Indian economic growth. Given these differences, it is perhaps less exciting, but more accurate, to conclude that India is unlikely to chart the same path as China.
The International Energy Agency’s (IEA) recent special report on India, a part of the annual World Energy Outlook, offers some new insights and data to help facilitate the comparison. Below we highlight some key similarities between the two energy juggernauts as well as the features that distinguish the two countries. Most of the data below comes from this new report, along with other resources.
Push for Renewables and non-fossil generation
Similarity: Both India and China have prioritized increasing the deployment of non-fossil energy sources. The Indian target is to deploy 100 gigawatts (GW) of solar capacity and 60 GW of wind capacity by 2022, (compared with 3 GW and 22 GW currently installed, respectively). The Chinese aim to have 150-200 GW of solar and 250 GW of wind installed by 2020 and achieve 20 percent of energy consumption by 2030 from non-fossil sources (requiring a deployment of 800-1000 GW in non-fossil capacity).
In addition, nuclear and hydroelectric power play an important role as non-fossil fuels in both countries. China is the world’s largest hydroelectric generator, with over 20 percent of electricity generation coming from hydroelectric resources, compared with 16 percent in India. Both countries also already rely on civilian nuclear power generation in their electricity mix, and their stated plans are to expand their installed nuclear capacity.
Difference: China dwarfs India in terms of the investment deployed and overall renewable capacity installed, whether in terms of solar, hydro, or wind. The U.S. Energy Information Administration , and China is the leading investor in renewable energy. Installed, on-grid wind capacity in China is over 76 GW. While India is making huge strides on its renewables deployment, the country’s target of 100 GW of solar by 2022 is largely seen as aspiration.
With regards to the civilian nuclear power sector, India’s capacity is relatively limited from the years of isolation from the global nuclear market, while China is building out more reactors than any other country. Moreover, China is looking to export its reactor technology and become a major global nuclear reactor supplier, something that India is unlikely to be able to accomplish within the next two decades.
Greenhouse gas emissions
Similarity: India and China are both among the largest emitters of greenhouse gases. Together with the United States, the three countries are responsible for almost half of global annual energy-related CO2 emissions. Compared with the United States, however, emissions in both China and India are low on a per-capita basis. In India, per capita emissions are 1.6 tons, about a third of the global average and a quarter of the per capita level of China. In China, per capita emissions are 6.2 tons (similar to the per capita emissions of the European Union).
Difference: India remains a much smaller contributor to climate change on per capita and cumulative bases than China—in addition to emitting less than a third of the per capita emissions of China, India has contributed about 3 percent of historical energy-related CO2 emissions since 1890, compared with China’s 10 percent.
The country’s forward-looking climate goals and emissions trajectories also differ. India argues that more developed countries should take the lead on reducing emissions and that India needs room to develop and provide energy access for the 19 percent of the population that does not have access to electricity. India has pledged to reduce the carbon intensity of its economy 33-35 percent by 2030 compared with 2005 levels. While it is a positive step, this will not do much to slow its greenhouse gas emissions, which are projected to triple to 5 gigatons in 2040. Indian carbon dioxide emissions are projected to grow over the next several decades regardless of scenario, being the largest single contributor to the rise in global emissions.
China has recently been seen as taking significant action to reduce greenhouse gas emissions, pledging to peak emissions around 2030 and reduce the carbon intensity of its economy by 60-65 percent compared to 2005 levels by 2030. However, its emissions will still cumulatively and annually be larger than Indian emissions.
Energy-related CO2 emissions by selected country and region in the New Policies Scenario
Similarity: Both countries have complex energy regulatory and policy machinery that traditionally employs a five year national economic planning cycle.
Difference: India’s energy policymaking is highly fragmented and decentralized, with a strong tradition of federalism. In India, the federal government has control over mineral and oil resources, nuclear energy and some taxes. States, by contrast, have jurisdiction over water and land rights, natural gas infrastructure, and taxation of mineral rights and the consumption and sale of electricity. In other areas, they share power, such as over electricity, forestry, and economic planning. There is no institutional body that has overarching authority over a national energy policy. Several ministries share power over various aspects of energy policy and energy infrastructure, which can result in fragmented decision-making. In addition, the country’s policy direction may shift as electoral mandates change.
Energy policy making in China is much more centralized and top-down. The overall policy direction of the country is set by the State Council, in accordance with the vision of the Chinese Communist Party. The State Council’s various organs, primarily the National Development and Reform Commission (NDRC), formulate and implement most of the important energy policies. These policies are conveyed across the vast country through provincial level NDRCs to ensure that the will of the central government does not get misconstrued. There is no federalism in China, as in theory the provinces are subordinate to the central government, although the reality of implementation is often messier.
Ms. Jane Nakano is a Senior Fellow with the Energy and National Security Program at CSIS. Ms. Michelle Melton is an Associate Fellow with the Energy and National Security Program. Read the IEA’s new special report on India here.