Global investors must not apply standards related to sustainability and Environment, Social and Governance (ESG) norms indiscriminately for developing countries, Chief Economic Adviser V. Anantha Nageswaran said on Wednesday.
Dismissing concerns about India’s continued reliance on coal-fired power, he pointed out that this was not out of sync with the developed world, as even European countries were reconsidering their stance against non-renewable energy sources like coal and have shown renewed interest in nuclear power that India is very actively pursuing.
“Many countries still rely on coal, including developed nations,” the CEA said in a discussion at the FinTech Festival India. “We should not just look at the proportion of coal-fired power plants, but also the trend… the share of power generated by non-fossil fuel-based power plants is increasing,” he added.
‘Energy security trumps green interests’
“Austria, Denmark and Germany have either restarted their coal-fired power plants or delayed their shutting down. They have said they will cut down reliance on Russian oil and gas from the end of this year and phase it out over the next few years… So when push comes to shove, energy security becomes more important for every nation rather than the so-called green transition. That cannot be different for developing countries,” Mr. Nageswaran asserted.
The transition towards completely green energy sources needs to involve different sources of energy, Mr. Nageswaran said, including nuclear power and natural gas. “In Europe, after Germany swore off nuclear power plants, they are also now re-examining it. The U.K. is very interested too,” he pointed out.
Many of the standards that satisfy investors, such as sustainability and ESG norms cannot be applied indiscriminately in developing countries that need more time and distinct pathways compared with the developed world, the CEA said.
“In the process of ensuring that only genuine green projects are funded, the risk is that we exclude a lot of countries from receiving the kind of investment they need, which will further compound the problem. As of many things in life, the road to hell is paved with good intentions and there is always scope for unintended consequences playing out,” he cautioned.
“So when we talk of crowding in private investment, developing standards, we have to make sure that countries’ pathway and the context are both taken into consideration,” he underlined.
“We always have to keep one eye on our development priorities as well as preparing for the long-term climate change mitigation efforts. This is a balancing act and there is no ready template to manage this. We have to improvise as we go along, by keeping the goals in mind,” he said.
The CEA also blamed the rise in global inequality to the global monetary policy of easy money and a ‘winner takes it all’ system that has pervaded the world economy over the past two decades, starting with the East Asian crisis in the late 1990s.
“Every time there was an economic slowdown, central banks used low interest rates and liquidity as the only answer which in turn led to quick recoveries in asset prices, of stocks and real estate. When asset prices go up, those who have assets can use them as collateral to raise even further money to invest more. So basically, what has happened in the last 20 years is that the global economy has been driven more by asset markets rather than by real economic activity and that is the big driver of inequality,” he noted.