Issue: April 2017
 
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Cover Story
Labour force has the capability to define the growth and development of any country. It plays the most important role in any economic activity. It is ...
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  Labour Reforms in India by Srirang Jha
  The second lead article describes in detail the areas where labour reforms are required and what reforms measures could be implemented
  Labour Policies and Labour Welfare: An International Comparison by Pradeep Agrawal
  The author gives a comprehensive comparitive study of the labour policies and labour welfare measures in the international arena comparing it with the Indian situation.
  Ensuring Gender Justice in Labour by Neetha N
  The special article for this issue focuses on the plight of women in the labour force.
  Reforms in Child Labour Law by Helen R. Sekar
  The focus article of this issue is on child labour. The author gives an indepth analysis of the problem of child labour in India.
 
 
  Energy at threshold – Imminent role of Infrastructure as energy carriers.
Megha Jain

E

conomic growth, increasing prosperity, a growing rate of urbanization and rising per capita energy consumption has widened access to energy in the country. One common cognizance is that 85% of the total energy requirements are met by fossil fuel (non-renewable energy sources) in India despite of unlimited growth potential for the solar photovoltaic industry. Energy consumption is closely correlated with the size of a country’s economy. Transport predominantly relies on fossil fuel based energy[i] resources. Fossil fuels account for over 79% of the primary energy consumed in the world, and 57.7% of that amount is used in the transport sector and are diminishing rapidly[ii]. The World Energy Forum has predicted that fossil-based oil, coal and gas energy reserves will be exhausted in less than another ten decades (et al. 2010). Figure-1 provides energy usage (kg of oil equivalent per capita) for India from 1991 to 2012.

Fig-1: Energy use (kg of oil equivalent per capita) for India

Source: Author’s Representation from World Development Indicators[i] (WDI) databank

The above figure represents the eminent rising movement in energy usage (per capita) for India from 1991 to 2012. India witnesses 68.5% increment in the energy disposal in 2012 over 1991 (post industrialisation). The trend seems to be positive in years to come.

Transport is a crucial infrastructure needed for the developmental process. Effective modes of transport - including quality roads, railroads, ports, and air transport - enable entrepreneurs to get their goods and services to market in a secure and timely manner and facilitate the movement of workers to the most suitable jobs. The progress of human race has followed closely the growth and development of transportation[i]. It accounts for a major share of energy consumption in India, especially the petroleum products. The road transport sector is the largest consumer of commercial fuel energy within the transportation system in India and accounts for nearly 35% of the total liquid commercial fuel consumption by all sectors. One of the major reasons for increased energy consumption in the road transport sector has been the rapid increase in both passenger and freight traffic due to growing urbanisation.

Ripple effect of Infrastructure in economic growth as energy carrier

The concept of connectivity through the development of regional infrastructure that links one country to another is not really new to Asia. History shows that transport connectivity in Asia started with the Silk Road in 13th century[ii]. Better infrastructure would also support market conditions that are conducive to growth by improving competitiveness, productivity, and environmental sustainability, and would therefore support social and economic progress. Conceptually, infrastructure may affect aggregate output in two main ways: first, directly because infrastructure services enter production as an additional input, and second, because they raise total factor productivity (transition impacts) by reducing transaction and other costs thus allowing a more efficient use of conventional productive inputs[iii]. In the short-run, a dollar spent on infrastructure construction produces roughly double the initial spending in ultimate economic output[iv]. The biggest effects of infrastructure spending occur in the manufacturing and business services sectors which are energy intensive.

Furthermore, the more systemic development chal­lenges[v] of today’s world - from social stability, to rapid urbanization, climate change, technological changes and globalized issues such as food and energy crises - call for more complex and interconnected infrastructure solutions (Figure 2).

Figure-2: Infrastructure Engagement (energy intensity) in a Changing World

Transformational Engagement

Source: World Bank Group report on Transformation through Infrastructure (2011)



The above figure depicts the transformational engagement of the changing world through infrastructure as the epicenter. Tackling these second-generation energy related issues (climate change, social stability, globalisation, growth, access, technology and urbanisation) will require actions by and across sectors. These actions can potentially accelerate growth and shift clients towards a more sustainable development trajectory. For example, adaptation to climate change is feeding demand for infrastructure that is more resilient to natural disasters, while mitigation calls for an infrastructure that is less energy intensive and therefore less environmentally damaging. Mitigating the effects of climate change requires a certain type of investment in transport and energy. Investment decisions in the energy sector have implications on water use and therefore on agriculture and the environment. Construction expense for infrastructure such as energy and transportation sector is enormous and construction period is also long.

Key concerns of Infrastructural development in an Energy Secure Economy

The success of physical infrastructure (transportation) is highly dependent upon the level of energy in the economy. In fact, transport sector is the largest user of energy in the economy[i]. The consumption of energy is likely to grow up further with economic growth, population growth, rapid industrialization, urbanization and agricultural modernization[ii]. The key question is that whether transport promotes energy consumption in the economy, particularly in India. Theoretically, transport and energy are well integrated. On the one side, energy is a component to transport and on the other side, transport is a key determinant to energy.

Conventional approaches to long-term ‘energy security’, especially economic modelling approaches, tend to zoom in – in part or at best in full – on the supply side of primary energy sources (PES) or energy carriers. Before the advent of liberalisation long-term energy security responsibility resided with the large multinational oil companies and mainly public companies in other energy domains. Both the scale factor of supply, conversion and transport infrastructure and length of supply chains appear to be inversely related to energy services security.

A key question of how to achieve a secure energy economy on longer timescales is: how can the population in a defined area achieve, at lowest long-term social cost, an acceptable level of certainty of meeting its needs for end-use energy services? In assessing this question, a given level and distribution of overall living standards and compliance with given standards for environmental impacts are points of departure. The insecurity related long-term social cost would be in terms of reduction in overall material living standards, increase in global socio-economic inequity and/ or an increase in environmental cost. In the current infrastructural energy economy of the developing countries, end-use energy services are mainly energized – directly or indirectly – by oil, natural gas, and coal. This fossil fuel based energy sources are responsible for two third of the carbon emissions (one of the major contributor of greenhouse gases pollution). Figure-3 furnishes the fossil fuel based energy consumption (in % of total).

Figure-3: Fossil fuel energy consumption (% of total) - India


Source: Authors’ representation from WDI databank


The above radar graph stipulates the increasing size of oval from 1995 onwards till 2012. The fossil fuel based energy consumption (as % of total) has increased for India, crossing 70% figure post 2007. The trend remains positive in future years, describing the proliferating reliance on fossil fuel based energy sources (prone to environmental degradation).

Some of the significant obstacles in the energy contained (climate constrained) infrastructural development are listed below:

A) Reliance mainly on non-renewable energy sources, it is astonishing that 80% of the world’s total energy requirements are still met by non-renewable energy sources (mainly fossil fuels: coal and oil). Transport sector is the one of the major user of the same.

B) Identifying the sustainable energy systems, although experts debate the sustainability of  global fossil fuel-based energy infrastructure, it seems clear that current generation is extracting energy resources (to meet infrastructural requirements) and filling the earth’s atmosphere with the combustion products of fossil fuels faster than they can be recycled by natural processes.

C) High energy intensity and poor energy efficiency, the physical infrastructure is highly energy intensive and ironically, the fuel (energy) efficiency still remains poor due to demographics of the country (poor road conditions, obsolete technology etc.). In this context, society must decouple its demand for energy from its need for continued economic growth. Improving energy efficiency offers an excellent opportunity for transport Green House Gases (GHGs) mitigation.

D) Eco-efficiency, for individual consumer items (soaps, plastics, packaging, etc.) the introduction of such eco-efficient products can proceed rapidly. However for energy this is a greater challenge. Therefore the design and implementation of a sustainable or eco-efficient energy infrastructure needs to look not only at the mix of energy resources and technological components, but how to develop new components and introduce them over time.

E) Technology and Resource initiatives, at present, market demand is limited by the relatively low cost of fossil fuels and the relatively high cost of most alternative energy sources in most regions. In addition to R&D on alternative and efficient technologies, there is still an unmet need for R&D on energy systems.

F) Taxes and Subsidies, in addition to the high cost of capital, transport operators have to bear a high dose of taxation. Over the years, the tax incidence per vehicle in India has been rising steadily. It is now the highest in the world. Tradable permits are of course not the only economic instrument available to promote sustainability in the energy sector.

G) Paucity of alternate energy resources, currently there is shortage of alternative energy sources, including oil sands, shale oil, coal-to-liquids, biofuels, electricity and hydrogen based renewable energy resources. These alternates are far too expensive. Large purchase-price differential exists between conventional and energy fuel-efficient vehicles such as hybrids.

H) Insufficiency of institutional reforms, there is absence of institutional regulations relating to strengthening of agencies responsible for the energy infrastructure to implement, monitor and evaluate effectively. Integrated transport and urban planning pose abundant energy related issues.

Conclusion

Energy is an essential component of economic development, and energy sector decisions and practices will play a central role in determining the sustainability of development in every country, region and sector. At the same time, decisions and practices in other sectors have a very direct effect on energy supply and demand options. Energy sector policies and investments must be coordinated with those in the key energy end-use sectors: transportation, housing, construction and manufacturing. A sustainable energy infrastructure will ultimately utilize an extensive range of energy resources, distribution systems and end-use technologies. Progress towards a sustainable society is not a sprint, but a marathon. The development of a sustainable energy infrastructure will happen as a result of continuous improvement by individuals and organizations who have the knowledge and the incentives to take a long-term view.

Key Policy Implications

The transport sector remains one of the most challenging areas for improving energy efficiency. It is the fastest-growing energy consuming sector in the Asian Region. Energy Consumption is driven by rapid urbanisation as well as rising living standards and the presence of transportation fuel price subsidies in many countries. To achieve significant energy savings in physical infrastructure (transportation), following policy implications could be beneficial:

·                     Transport system efficiency: Governments could enable policies that increase the overall energy efficiency of national, regional and local transport systems and promote shifts of passengers and freight to more efficient modes. To attain these, the transport policies should ensure – users pay the economic, environmental and energy security-related costs of the transport system, the transport infrastructure is built and maintained to support the most energy efficient, economically efficient and environmentally benign transport modes and urban and commercial development planning takes into account the likely implications for transport and energy demand.

·                     Shift from Non-Renewable to Renewable Energy resources: there could be considerable efforts to diversify energy usage to renewable sources of energy/ low carbon fuels (like alternate fuel usage, solar and bio energy usage, hybrid technologies) including the development of infrastructure for the supply and distribution of different types of energy. Motor-vehicles powered by electricity or hydrogen hold the potential to solve a number of challenges that relate to automobile use for climate change (deterioration of local air-quality, security of energy supply, and high fuel prices). Substituting alternatives for fossil fuels holds the potential to solve prime climatic issue. Techno-diversity shall be promoted.

·                     Mandatory vehicle fuel/ energy efficiency standards: Government could adopt and regularly update fuel-efficiency standards for vehicles on roads. These standards shall introduce and regularly strengthen mandatory fuel-efficiency standards for light-duty vehicles, establish testing procedures for measuring fuel efficiency of heavy-duty vehicles and adopt fuel-efficiency standards for those vehicles and harmonise or increase the comparability of vehicle fuel-efficiency test methods.

·                     Measures to improve vehicle fuel/ energy efficiency: Government could adopt measures such as labelling, incentives and taxes to boost vehicle efficiency and accelerate the market penetration of new efficient vehicle technologies. That shall include vehicle fuel economy labels, vehicle taxing to encourage more fuel efficient vehicles and infrastructure support incentive schemes for low carbon emitting fuel efficient vehicles.

·                     Improving vehicle operational efficiency through eco-driving and other measures: Governments could adopt a range of measures to improve vehicle operational efficiency, including:  making eco-driving a required element of driver training and requiring manufacturers to provide in-car feedback instruments in new cars. Energy use reductions can be achieved by minimizing the energy demand, by rational energy use, by recovering heat and the use of more green energies.

·                     Public transport and low energy modes: 23% fewer vehicle kilometers, and a reduction in 27,000 square kilometers of parking is possible by 2050 by applying shift and avoid polices to reduce the need for energy intensive modes[i]. The returns from energy efficiency offset costs and enable governments maintaining close control of budgets to advance public transport projects. Engaging the many stakeholders that are involved in urban transport is critical to policy success.

·                     Transformation of energy grid: Revolutionizing the transportation market by electrification and transforming the energy grid by widespread adoption of renewable energy sources will require innovative new ideas for energy storage systems. Lithium based systems provide considerable headroom for improved energy densities.

·                     Long term sustainable energy development efforts: Governments can use performance standards and economic instruments to direct private investment and behavior in the energy sector, even when competition, privatization and deregulation are limiting governments’ ability to use more traditional policy tools. As in other aspects of energy policy, governments need to ensure that private sector decision makers consider long-term social and environmental goals when making major energy infrastructure investments.

 

 

Notes:



[i] http://www.iea.org/W/bookshop/463-Energy_Efficiency_Market_Report_2014

 

References

 

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The author is Sr Manager (Tata Motors)/ PhD Scholar

- Faculty of Management Studies, Delhi University

 

mmeghajain@gmail.com

 

 


 


   
 
 
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