This originally appeared as an op-ed in The Economic Times on September 28, 2021. The introductory paragraphs are reprinted below with permission.

In recent months, India’s biggest private sector players have made ambitious clean energy commitments. Reliance India Ltd announced clean technology investments worth Rs 75,000 crore; ArcelorMittal pledged Rs 19,000 crore for solar power; and Adani Green raised Rs 9,570 crore in debt financing. Backed by India’s billionaires, these announcements herald a new chapter of clean energy expansion in our country. But why aren’t our energy public sector undertakings (PSUs) also at the forefront of India's energy transition?

PSUs continue to play a vital role in India’s energy sector and the wider economy. Energy sector PSUs account for seven of India’s 10 Maharatnas — firms that have an annual turnover of more than Rs 25,000 crore. Over 50 per cent of the country’s power generation is publicly owned. Just two PSUs produce around 90 per cent of the country’s coal output. Publicly-owned oil marketing companies are responsible for 57 per cent of refining and almost all retail distribution. Since independence, these companies have been vehicles of nation-building, creating millions of jobs and generating revenue for the government. But as the world shifts away from fossil fuels, India’s energy majors, unfortunately, continue to invest in them.

Read the full article in The Economic Times.

This article was originally published in IISD's Trade and Sustainability Review, Volume 1, Issue 3. 

Electric vehicles (EVs) are revolutionizing the world of road transport. The global EV market grew 43% annually on average over the last five years, and the worldwide automobile market penetration rate of EVs stood at about 2.6% in 2019.

This is expected to explode during the coming decade.

Many COVID-19 recovery packages in countries including China, Germany, France, and Canada, as well as the newly proposed plan in the United States, focus heavily on EVs. Deloitte predicts that annual new sales of EVs will top USD 30 million by 2030.

To date, India lags behind other key markets such as China, Europe, and the United States. The global EV stock reached 7.2 million units in 2019, of which 47% were in China, 25% in Europe and 21% in the United States. The rest of the world accounted for only 600,000 units, with just 170,000 sold in India.

But EVs are of great interest in India. The electrification of road transport serves multiple purposes. It is a green industrial policy that supports a post-pandemic economic recovery. It is intended to reduce oil imports and strengthen energy security. And it is central to reducing air pollution and mitigating climate change. It is a central component of net-zero ambitions worldwide and an important carbon emission reduction measure, second only to greening power sectors.

“Almost 97.5% of all electric vehicles sold in India were two-wheelers, indicating an especially strong market in the two- and three-wheeler segment.”

Those objectives feature strongly in India’s push to electrify transport.

While less than 0.5% of Indian car sales in 2019 were EVs, the level of stock here is not the right indicator by which to judge the country’s readiness or interest. India sold 69,000 units in 2017–2018 and about 143,000 units in 2018–2019. This indicates a strong growth rate that is likely to accelerate in the next years. Almost 97.5% of all electric vehicles sold in India were two-wheelers, indicating an especially strong market in the two- and three-wheeler segment.

The national government and state governments have adopted several encouraging policies since the start of the pandemic. Nationally, for example, the government has incentivized the deployment of e-buses and charging stations. On the state level, Telangana has exempted the first 200,000 two-wheeler EVs from road tax and registration fees, while Gujarat will offer government subsidies for students purchasing two-wheeler EVs, and rickshaw drivers and self-employed people buying three-wheeler EVs. In 2020, Delhi also launched a progressive EV policy including purchase incentives based on battery range and category.

These measures are promising, but need more streamlining and coordination between policies from the central government, state governments, and local (city) governments.

Suitable Policy Framework and Incentives Are Needed

To truly improve EV adoption and India’s role as a value chain participant, the government cannot rely solely on subsidies; it will also need to attract more private investment to the country. The good news is that there are positive signs of investor interest. Just last year, Tesla announced the opening of a factory in Karnataka in southwest India, and venture capitalists are expected to invest more than USD 300 million in EV companies across the country.

This, however, pales in comparison to global investment in EVs.

Of known automaker investment plans before the pandemic, at least USD 300 billion was earmarked for EV investment in the next 5 to 10 years. More than 45% of that budget was intended for operations in China, with most of the remainder divided among Germany, the United States, South Korea, Japan, and France. To become a major EV investment destination, India must create the right policy framework and incentives.

It has started doing so with the government’s Faster Adoption and Manufacturing of Electric Vehicles scheme, or FAME. The program, launched in 2015, aimed both to promote EV adoption and to incentivize manufacturers to build EVs in India. In the first phase of FAME, the government provided USD 130 million in subsidies to support the purchase of electric two-wheelers and three-wheelers and hybrid and electric cars and buses. The first phase was generally considered a success as far as sales are concerned.

FAME’s second phase was a considerable upgrade to USD 1.4 billion of EV subsidies, of which about 85% was earmarked for purchasing subsidies and 10% to charging infrastructure. It started in 2019 and was intended to run until 2022.

A core component of this phase was again to accelerate local manufacturing. Two years in, however, the results are not what had been anticipated. By early 2021, only about 10% of the EV deployment target for Phase 2 had been reached.

“To truly improve EV adoption and India’s role as a value chain participant, the government cannot rely solely on subsidies; it will also need to attract more private investment to the country.”

The Society of Manufacturers of Electric Vehicles said this was because of a slower evolution of the domestic component manufacturing market and regulatory requirements for fiscal incentives that keep EV costs too high. Additionally, an uncertain medium-term regulatory environment and the lack of affordable finance continue to deter private investment.

As a result, the Indian EV revolution is not yet at cruising speed, and policy priorities were moved to deployment and investment ahead of local manufacturing requirements. The government also launched a production-linked incentive scheme to encourage companies to start manufacturing EV batteries locally.

An updated analysis of investor, trade, and skill gap barriers is needed to tweak the regulatory environment in a way that facilitates such deployment and value chain investment. This process could also be the perfect moment to kickstart policy coordination and design related to end-of-life EVs, particularly with regard to urban mining and EV battery repurposing and recycling.

India Can Play a Key Role in EV Battery Recycling

In terms of end-of-life EVs, India is also not yet prepared. In all fairness, few major players are.

About 70% of hazardous waste in global landfills comes from e-waste. Just 94,000 metric tons of lithium-ion batteries (LIBs) were recycled globally in 2019, most of them from portable consumer electronics. In the next decade, however, EV batteries will start flooding the end-of-life battery market. The World Economic Forum forecasts that for half of those EV batteries to be recycled by 2030, recycling capacity would need to grow by a factor of 25.

Currently, however, the EV battery recycling industry suffers on different levels, from profitability linked to relatively cheap primary raw material costs, to changing chemical compositions of EV batteries and inefficiencies in the recycling process. While China has specific guidelines on removing, discharging, disassembling, and storing used EV lithium-ion batteries, the other major players—i.e., the United States, Europe, and Japan—still struggle with a regulatory framework that would facilitate profitable recycling.

“With the right incentives and policy framework, India can leapfrog some EV battery recycling barriers and become a major player within the next decade.”

Reassuringly, the number of patents in EV battery recycling has increased dramatically in the last 10 years, showing the potential for innovation.

With the right incentives and policy framework, India can leapfrog some EV battery recycling barriers and become a major player within the next decade. The potential is huge, with a global market expected to surge to 705,000 end-of-life LIBs by 2025 and to 9 million by 2040—most of which will be EV LIBs.

Like China, India has a major EV growth market and would thus be able to count on a reliable supply of end-of-life batteries in the future. Unlike China, India does not have global supply chains for primary materials such as lithium and cobalt, and so urban mining and recycling are also needed for India to become a large-scale EV battery manufacturer.

The first stages of EV LIB recycling are also barely automated and thus require a lot of manual labour. Here, too, India could have a comparative advantage compared to other major players since it has a large population and lower labour costs compared to Western countries.

India’s Government Has Its Work Cut Out

The success of circular economy policies is not guaranteed, however. It took China a decade of regulatory development to become the market leader in LIB recycling.

India’s government has work to do—from improving regulations related to battery collection, transport, and storage, to coordinating training programs to handle batteries; from crafting labelling and traceability requirements to clarifying contractual and ownership models; and from improving extended producer responsibility to facilitating clustering and joint ventures that can drive efficiencies and cost reductions.

It is clear that EVs are set to transform global road transport, and India will be a colossal market for deployment. It is both logical and necessary that India also seek to become a manufacturing hub that can contribute to both EV value chains and battery recycling.

To do so, however, the government needs to analyze barriers and adjust its regulatory and institutional frameworks to accommodate those barriers and attract private investment on a larger scale.

Tom Moerenhout is a Senior Associate with IISD’s Global Subsidies Initiative.

A hot cup of freshly brewed tea is a beverage beloved by many. But how often do we think about the origins of each neatly packaged tea bag on our kitchen shelf? Millions of people across the planet earn livelihoods from the tea industry, but many tea-producing regions face a myriad of sustainability challenges. From climate change impacts to price fluctuations, producing tea can be a volatile business.

As part of our advisory services work for governments, IISD’s State of Sustainability Initiatives (SSI) team conducts research to identify practices to help address these challenges. These practices include the use of voluntary sustainability standards (VSSs)—certification schemes that define a set of requirements for producing and selling products sustainably. Here are three examples of how VSSs and other measures have been used effectively in Kenya, India, and Sri Lanka.

Kenya

Tea production provides five million Kenyans with livelihoods

Tea is a big industry in Kenya. First introduced to the country in 1903, it now contributes an estimated 5 million direct and indirect jobs. That means 10% of Kenyans rely on the industry for their livelihoods, including more than half a million smallholder tea farmers. 

Kenya is also one of the top tea-exporting nations, with an export value of a whopping USD 1.2 billion in 2019. It is leading the way in the trade of sustainable tea, with nearly all of its tea production complying with VSSs like Rainforest Alliance and Fairtrade. But with so many people relying on the industry, has this made a difference to farmers’ incomes?

Certification and training can help ensure fair, stable wages

Thanks to the growing global demand for sustainable tea, complying with VSSs can provide farmers with access to new markets, which can offer higher prices and premiums. Providing fair wages is also often part of the criteria for certification. For example, Fairtrade sets a minimum price for most of its products and provides farmers with additional funds to invest in the community. When used to fix roads and bridges, this can also improve farmers’ connections to supply chain actors.

In Kenya, Farmer Field Schools also help train farmers in how to use sustainable production methods, such as better pest and soil fertility management. Introduced by the Kenya Tea Development Agency Holdings Limited and partners in 2006, the schools have helped producers increase yields. Studies show that they have also encouraged farmers to work collectively to source equipment and sell their produce—all of which can enhance farms’ profitability.

India

Poor working conditions and inequality affect tea growers in India

Records suggest that tea drinking has been part of Indian society since the 12th century. Cultivation was escalated by the British in the 19th century, and India is now one of the world’s leading tea-producing countries. In 2016, the Tea Board of India estimated that the country produced 1.3 billion kilograms of tea.

However, studies have shown that many tea plantation workers are denied their rights to decent working conditions. Tea-growing regions like Assam and Darjeeling often experience labour conflicts over issues like wages and access to healthcare. In addition, women bear the biggest brunt of inequality as they are most likely to be involved in plucking, which is low-paid and can lead to health issues.

Certification and policies can improve living standards

Respect for human rights and protecting the health of workers are two criteria often included in VSSs. In India, almost half of tea is produced under the Trustea label, a VSS developed specifically for the Indian context. Trustea includes requirements for appropriate working conditions in their criteria for certification, including the provision of adequate training, maternity entitlements, and equal pay.

The Indian government has also helped improve working conditions for tea farmers and workers. For example, the Plantation Labour Act legally requires plantations to provide certain health and welfare benefits, from housing to medical facilities. Additionally, organizations like the Ethical Tea Partnership are increasingly focusing on gender equality projects, such as training to enhance women’s nutrition and participation in decision-making.

Sri Lanka

Sri Lankan tea production is vulnerable to climate change

Sri Lanka is one of the oldest tea-producing regions in the world. Ceylon tea exports contribute to around 2% of the country’s GDP, and the industry supports more than 450,000 smallholder farmers. Due to favourable climates, tea is primarily grown in the central highlands and southern inland regions.

However, given that Sri Lanka is a developing island nation, tea production is particularly vulnerable to stresses induced by climate change. Rising temperatures, unpredictable weather patterns, and pests are putting strain on an industry already weakened by competition and labour costs. What is more, these challenges are exacerbated by deforestation and the excessive use of chemicals and pesticides.

Certification and governments can support climate adaptation

Many certification schemes seek to help communities adapt to climate change. The Rainforest Alliance runs programs in Sri Lanka that help workers adopt climate-smart agricultural practices. They educate tea farmers on how to maintain tree cover and reduce synthetic pesticide use. Their research shows that such practices benefit not only the environment but also the profitability of certified farms.

In addition, the Sri Lankan National Adaptation Plan for Climate Change has outlined a strategy to combat the effects of climate change. Measures range from introducing new heat, drought, and flood-tolerant cultivars to establishing a climate communication system that connects with tea farmers via mobile and Internet alerts. 

Learning From Others

Amid a variety of intense and complex sustainability challenges, these examples show that there is a range of approaches that can help tea farmers adapt and thrive. The impacts of these practices are the subject of ongoing research, but it appears that VSSs can play a major role in the quest for a more sustainable tea industry—particularly when supported by measures put in place by governments and other actors that support farmers. Identifying such practices forms a central part of the SSI team’s advisory services work, as it can help inform authorities seeking to tackle similar challenges.

This blog was written from research conducted by Vivek Voora and Sara Elder. The author would like to thank Sara Elder, David Perri, and Cristina Larrea for their valuable feedback on earlier drafts of this article.