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: In her speech to Parliament last week, President Patil declared that one of the top priorities for her government would be ‘energy security and environment protection’. The intention is commendable. India and other developing countries face a triple challenge of increasing income growth, building energy infrastructure and confronting climate change. Reconciling these challenges would depend on financing, regulatory and institutional reforms, and international cooperation.

The energy needs of developing countries cannot be underestimated. About 1.6 billion people live without electricity and 2.5 billion lack access to modern energy sources. Even in fast-growing China and India, more than half the population relies on traditional biomass for cooking. This gap is a powerful driver of poverty, and a brake on economic growth and employment generation. With 1.4 billion people living in extreme poverty, for developing countries the priority is to use energy policy to stimulate growth.

In India, rapid economic growth is putting pressure on an energy infrastructure suffering from decades of under-investment. Compared to 2004-05, electricity consumption in India is expected to increase six-seven times to 3600-4500 TWh by 2030. Planning Commission estimates that by 2031-32 (end of the 15th plan), India will need total installed capacity of 800-1000 GW, up from around 160 GW today.

When magnified to the global level, the scale of investment envisioned has critical implications for greenhouse gas emissions and, as a result, climate change. Non-OECD countries will account for almost the entire increase in energy-related CO2 emissions from now until 2030 (see figure). According to the International Energy Agency’s reference scenario, three-quarters of the projected increase would come from China, India and the Middle East. Although rich countries bear the primary responsibility for climate change, reconciling the energy and growth imperatives in developing countries would undermine the response to climate change.

Could renewable sources deliver the energy needed to fuel high economic growth rates? The answer: unlikely in the short term, but essential in the long run. Investments and capacity in renewable energy vary greatly across countries. In terms of installed capacity, India is fifth globally while China is in the lead. In recent years India has invested heavily in wind power and to an extent in biofuels and solar energy. But its overall investments lag behind other major developing countries, with a compounded annual growth of 52% during 2004-08, compared with 104% in China and 171% in Brazil (see figure).