NATURAL RESOURCES AND SUSTAINABILITY ASSIGNMENT

NATIONAL MISSION FOR ENHANCED ENERGY EFFICIENCY

By, Naivedya Parakkal (33090) Puneet Jain (33101) Rishabh Dwivedi (33102) Tanuj Sharma (33118)

CONTENTS
1. Introduction .............................................................................................................................. 3 2. Objectives of the mission ....................................................................................................... 3 3. Clean Development Mechanism ........................................................................................... 5 3.1 NMEEE through CDM ...................................................................................... 5 4. Responses to the Mission ....................................................................................................... 6 4.1 Support 4.2 Dissent 4.3 Opportunities 4.4 Perceived Threats 5. NMEEE and Climate Compatible Development ................................................................ 8 5.1 Adaptation and Mitigation- Strategies and Objectives .................................. 9 5.2 Development Strategies ..................................................................................... 9 6. NMEEE and the Sustainable Development Framework .................................................. 10 7. Reasons for Policy Formulation .......................................................................................... 10 8. Shortcomings of the Policy .................................................................................................. 11 9. Recommendations ................................................................................................................. 12

1. Introduction
Today our country is facing the challenges of being an economy developing at brisk rate and degrading the environment as well. We are also contributing to the increasing greenhouse emissions in the atmosphere which is coming from increased industrial activity and high consumption patterns even in two tier and three tier countries. Our development is closely linked with the natural resources and the climate change will be affecting our further plans on the road to become an advanced nation. Therefore there was a need to develop a strategy which can address both environment sustainability and development of the nation. When we look at per capita energy consumption of India, we find it to be among one of the lowest in the world (510 against the world average of 1900). The researches have suggested that by the rate at which we are developing our energy demands will be as high as 4-5 times in the coming 10 years and up to 20 times by the year 2050. Looking at these needs the National Mission for Enhanced Energy Efficiency was developed which can reduce our overall consumption of energy without compromising with the growth happening in various sectors. Ministry of Power and Bureau of Energy Efficiency were instrumental in developing the policy and a steering committee of Ministry of power made the final draft which was implemented. To give thrust to this Ministry of Power has declared the year 2009 to be the year of energy efficiency.

2. Objectives of the Mission

National Mission for Enhanced Energy Efficiency is a very ambitious and comprehensive mission which aims at making India as an energy efficient country through innovations in instruments and processes. The plan mandates the aim to be fulfilled by four initiatives which will work in different domains. Combining these initiatives together we can achieve the objectives of the mission. These initiatives include: PAT: A market based mechanism to enhance cost effectiveness of improvements in energy efficiency in energy-intensive large industries and facilities, through certification of energy savings that could be traded. (Perform Achieve and Trade) (Exhibit 1:Institutional design)

 MTEE: Accelerating the shift to energy efficient appliances in designated sectors through innovative measures to make the products more affordable. (Market Transformation for Energy Efficiency) EEFP: Creation of mechanisms that would help finance demand side management programs in all sectors by capturing future energy savings. (Energy Efficiency Financing Platform) FEEED: Developing fiscal instruments to promote energy efficiency (Framework for Energy Efficient Economic Development) Key action components in these initiatives include: A. PAT: 1. There was identification of 477 designated consumers from 8 different sectors (thermal Power Plants, Iron & Steel, Aluminum, Cement, ChlorAlkali, Pulp & paper, Textile and Fertilizer) which aimed at saving 7 million tonnes of oil equivalent of oil by the end of 2011. 2. The targets for these designated consumers were setup with consultation of expert committee and notifying these consumers regarding their roles and duties. 3. To conduct periodic surveys for all DCs in order to explore potential for energy saving. 4. Issuing energy saving certificates to these DCs in an unbiased and just way and make the entire process transparent and accessible.(PAT-net) B. MTEE: 1. Bachat Lamp Yojana was implemented and under the scheme 29 projects have been prepared. Also 215 CFL bulbs have been distributed in the rural and semi urban areas. 2. SEEP: Super energy efficient Program initiated the provision for compensation to the manufacturers of energy efficient products so that they can sell and produce these products at an efficient rate. C. EEFP: 1. Bureau of energy efficiency entered in MoUs with some financial institutions like PTC India, HSBC, Tata capital etc., for cooperation on energy efficiency and to share knowledge. 4

2. PTC India has financed various projects like providing solar electrification to the Rashtrapati Bhavan, ESIC Hospitals in Delhi etc. 3. HSBC developed training modules which can train professional regarding efficient use of energy. D. FEEED: 1. There are two funds allotted for this purpose: Partial Risk Guarantee Fund (PRGF) and Venture Capital Fund. There has been an allocation of 170 crores for these funds. 2. An extensive study on the potential of national monetary and fiscal policy for efficient use of energy was made and the results were used in implementing the policy.

3. Clean Development Mechanism approach

CDM approach explains the fact that the greenhouse gases must be reduced in the environment. It was after the implementation of Kyoto protocol that the approach was taken up extensively. The CDM approach talks about achieving sustainable development while keeping the objectives of environment conservation in mind. This mechanism advises the developed nations to promote and invest in renewable energy options in the developing countries. This will create a win-win situation for both the countries as the developing countries will have more renewable energy produced without harming their resources and the developed nations will earn energy certificates which can be traded.

3.1.

NMEEE through CDM approach:

On critically analysing the National Mission for Enhanced Energy Efficiency we find that it falls in the purview of Clean Development Mechanism approach. The projects under NMEEE aim at enhancing both sustainable development without hindering the environment which is more or less the underlying principle of the CDM approach. The mission regards allocating funds for technological improvements by collaborating with the developed nations i.e. by technological information sharing. This program also talks about focussing on developing infrastructure for the growth of renewable energy resources. This is not only in sync with clean development mechanism, but also aims at addressing the mitigation strategies. The mission also talks about collaborating with 5

various multinational companies in order to gather funds for developing infrastructure and green projects.

Exhibit 1: PAT Institutional Design:

4. Responses to the mission

This mission is comparatively new and therefore hasnt matured enough to attract too many responses. This has been seen as an important step by the Indian government for environment sustainability in this development phase. 4.1 Support The mission is being considered by top environmentalist as an important step to conserve energy which in turn will lead to lesser emissions of greenhouse gases. 6

Greenhouses gases have been a debate for more than a decade and catastrophic impact is being anticipated. This mission would indirectly address this issue. This mission has also alleviated India in the eyes of other developed nation as a country which is willing to significantly contribute to the global energy concerns as well as meeting the global challenges of changing climatic conditions. NMEEE has been considered as leapfrog over the carbon intensive growth phase1 by the Indian Government. However, barring very large industries which find it feasible to adopt the PAT mechanism, the Small & Medium Scale industry of the same sector are not yet showing much enthusiasm. 4.2 Dissent Energy Audits of commercial and industrial facilities require a large amount of time to gather data and process. This takes a lot of time and effort and only after that solution can be chalked out. Trained and experienced engineers are required for such audit but remuneration has been a major point of dissent. There are a few areas in Maharashtra and nearby states where farmers are unhappy on the land acquisition.This land is acquired for setting up windmills.2 Biomass-based power plants, which are expected to provide an additional source of income for local people as they sell their agricultural wastes, have also affected many rural poor. Those who depend on agricultural waste for fire-wood and fodder are unhappy with biomass procurement for electricity generation since it directly competes with their own use and needs.3

4.3 Opportunities i. For Energy Efficiency Financing Platform (EEFP)

There is a huge scope for banks and FIs in highlighting working with BEE to analyze and to prepare successful models for energy efficiency financing. It would also help in leveraging BEEs technical expertise for energy efficiency financing initiatives.

ii.

For Framework for Energy Efficient Economic Development (FEEED)

BEE will hire full-time FIs for implementation and project appraisal activities for evaluation of the proposals that came up for poverty reduction and growth facility.
1

B. B. Tandon and P. K. Vasudeva, Inclusive Growth and Sustainable Development: Ideal for Indian Economy (New Delhi, Deep and Deep Publications pvt ltd), p. 20. 2 AFD, Jamwal and Lakhanpal, 2008.The Policy Paradoxes of India's Clean Energy Development 3 AFD, Khandari and Pallavi, 2010. The Policy Paradoxes of India's Clean Energy Development

iii.

For Market Transformation for energy efficiency (MTEE)

Similar to the interest subsidy framework under PAT, Bureau of Energy efficiency also plans to take support from FIs for implementation of the subsidy program and the manufacturers for super-efficient appliance (SEAs) will also need to make investment for undertaking large-scale production.

4.4 Perceived threats One of the threats that can come up in the future can be explained through Rebound theory. This theory hypothesizes that people who own efficient appliances use them more and thereby more energy is consumed than before. Another point of concern is the huge funds that are allocated which might attract the corrupt politicians crippling the mission. Already 300 crores have been spent in the mission without any significant and visible development. Many environmentalists also hypothesize that energy efficient technology will lead to higher capital investment which would force industries to reduce wages to remain viable in the initial phase. This reduction in real wage rate is unacceptable and against labour policies.

5. NMEEE and Climate Compatible Development

India, like any other developing country has seen unprecedented economic growth in the past two decades. This economic expansion and rising affluence of several sections of the society has led to a huge increase in energy consumption. According to a planning commission report, India is the worlds fifth largest energy consumer and the total primary energy consumption has increased by over 72.6% since 19804. The transition from the use of biomass to the use of fossil fuels is also a result of this rising affluence. This has resulted in an exponential increase in carbon dioxide emissions with the energy sector accounting for nearly 93% of the total carbon dioxide emissions5. Climate change has also resulted in increasing constraints on energy resource availability resulting in an energy resource scarcity.

Planning Commission, 2007. Eleventh five year plan, Chapter 10-Energy. [pdf] Available at: http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v3/11v3_ch10.pdf
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Jyoti Parikh, Manoj Panda, Ganesh Kumar, Vinay Singh, 2009. CO 2 emission structure of Indian economy, Energy [Online] Available at: http://www.irade.org/egy_2307-with-corrections.pdf

The NMEEE uses a low carbon development strategy to achieve mitigation objectives. It also aims at addressing the energy resource scarcity by adopting adaptation strategies. 5.1 Adaptation and Mitigation- Objectives and Strategies 6 Adaptation strategies mentioned in the missions document which have been adopted to address the energy resource scarcity caused due to climate change include 1. Shifting permanently to renewable sources of energy. 2. Incorporating energy efficiency in energy supply and demand. 3. Encouraging a shift in the market towards energy efficient appliances. The mission is primarily concerned about mitigation as the main objective is low carbon development. The mission aims at achieving annual savings of more than 23 million toe (tonnes of oil equivalent) and carbon dioxide emission mitigation of 98 million tonnes per year. These objectives are to be achieved by using a co-benefits strategy which is being used to achieve the mitigation objectives through appropriate adaptation strategies. This includes 1. Tax or duty exemption for promotion of energy efficient equipments within an industry. 2. Promotion of energy service companies. 3. Energy-intensive industries to be given incentives such as certification of energy savings for adopting cost-effective improvements in energy efficiency. 5.2 Development Strategies Development strategies can either be pro-growth or pro-poor. Pro-growth development strategies are concerned with issues of rising affluence while pro-poor development strategies are concerned with the alleviation of persistent poverty. The NMEEE has very elaborate and well defines pro-growth strategies such as capacity building initiatives to address energy efficiency in various industrial sectors and the adoption of FEEED (Framework for Energy Efficient Economic Development).

Ministry of Power, BEE, Government of India, 2008. NMEEE: Draft mission document [pdf] Available at: http://www.nicracar.in/nicrarevised/images/Mission%20Documents/National%20Mission%20for%20Enhanced%20Energy.pdf

However, there is no emphasis on pro-poor development strategies in this mission. The issue of energy efficiency within the household has not been addressed at all. The environmental health risks associated with the indoor use of kerosene stoves and chulhas have not been mentioned. The recommended shift from fossil fuels to biomass, though would result in cleaner fuel, does not take in to account the fact that this might result in a decrease in the availability of fodder and fuel for poor households and affect their livelihood. Therefore this mission does not address issues such as gender inequality, poverty alleviation or social empowerment.

6. NMEEE and the Sustainable Development Framework

The NMEEE is completely in sync with the sustainable development framework as the basic tenet of the mission is to ensure sustainable development by an appropriate mix of the 4 Es, energy, efficiency, equity and environment. Through the adaptation and mitigation strategies recommended in the mission document, economic and environmental sustainable development has been completely covered as growth, efficiency, pollution mitigation and protection of natural resources have been adopted as aims of the mission. However, despite institutions and governance mechanisms being in place to ensure the implementation of this mission, the social aspect of sustainable development has not been addressed completely. The incentives provided are mainly for energy-intensive industries and large-scale suppliers of energy. The lack of energy efficiency at the house-hold level, which makes India one of the lowest in the world in terms of per-capita energy efficiency has not been addressed at all and no part of the mission discusses aspects of inclusion, empowerment or social equity.

7. 7Reasons for Policy Formation

The national mission for enhanced energy efficiency (NMEEE) is related to climate change and comes under National Action Plan. There were quite a few reasons that forced the government to bring such a policy. Some of them are as follows:1. There was a strong need for a mechanism which was market based and had the capability to enhance cost effectiveness with regard to energy efficiency in energy intensive large industries and other similar settings. This is planned to be achieved
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Arjit Sengupta and Saurabh Kumar, 2009. Roadmap for India in Energy Efficiency, Bureau of Energy Efficiency, India.

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through certification of energy saving which can be traded (Perform, Achieve and Trade). 2. There was a need of new innovations in certain designated sectors and accelerate the shift to appliances which are energy efficient. This is planned to be achieved through Market Transformation for Energy Efficiency (MTEE). 3. There was a requirement of creating mechanisms that would help in financing demand side management programs in various sectors by capturing future energy savings. This is planned to be achieved through Energy Efficiency Financing Platform (EEFP). 4. There was also a requirement felt for promoting various energy efficient fiscal instruments. This is planned to be achieved through Framework for Energy Efficient Economic Planning (FEEEP). 8. Shortcomings of the Policy There are few points which need to addressed as far as this policy is concerned. These points are needed to be kept in mind while designing anything else for the policy. One of the main points is the lack of widespread awareness amongst regulators, policy makers, industry and general public about various energy efficient technologies. They have very limited knowledge about the efficacy and use of these technologies which is a great hindrance in the successful implementation of the policy. Also in developing country such as ours there is a limited technological capacity for manufacturing and designing energy efficient products. The difficulties also come in deploying these practices and technologies in the market place. There is also a growing concern for technological asymmetry where the small and medium enterprises have very less access to energy efficient technologies as compared to their private or multinational counterparts. This is especially prevalent in India just like most other developing countries of the world. In EE sector this particular phenomenon can be easily observed. Also the successful implementation of these energy efficiency projects require huge amount of transaction cost which are at most times very difficult to come by. Here one of the methods that can be used is bundling. The results collected from various sources show that bundling is generally profitable and can be a way for future in implementing the energy efficiency

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projects successfully. The results also show that when bundling actually lowers the cost, it increases the benefits to a bundle and reduces the transaction cost. One of the other shortcomings of this policy is the dispersed nature of the end-users. There are various technical, financial and informational barriers which come directly from the dispersed nature of the end-user. Again in a country like ours this is more prevalent and becomes a hindrance for the success of the policy.

9. 8Recommendations
There are few things that can be kept in mind while implementing the policy which can help in ensuring the success of the policy. Few sectors which come under the category of high energy sectors can be focused rather than including all the sectors under the purview of the policy. There are nine such high energy sectors where more attention can be devoted. The scheme should identify specific technologies and facilities which can help in energy savings. Another thing that can be done for the success of policy is to increase the issuances of CERs (Certified Energy Reduction). A greater emphasis should be laid on capability of monitoring of the project hosts so that it can be conducted in a smooth, efficient and sustained manner. This can be done in partnership with the government where in the government can make it an essential requirement of energy audit. Promotion of ESCOs (Energy Service Company) can also prove to be beneficial for the success of the policy. The credibility of these ESCOs can be increased by selecting them through a specialized process such as competitive bidding. Along with this these ESCOs can be accredited by several rating agencies like CRISIL and ICRA. There have been 35 ESCOs which have been accredited and rated on the basis of their performance in various fields. Also an enabling environment for foreign investments should be made by various mechanisms such as tax credits and allowing discounts on imports.

TERI, Delhi 2010. Joint Policy Research on co-benefits in tackling climate change and improving energy efficiency in India.

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REFERENCES
1. Ministry of Power, BEE, Government of India, 2008. NMEEE: Draft mission document [pdf] Available at: http://www.nicra-

car.in/nicrarevised/images/Mission%20Documents/National%20Mission%20for%20 Enhanced%20Energy.pdf 2. Jyoti Parikh, Manoj Panda, Ganesh Kumar, Vinay Singh, 2009. CO2 emission structure of Indian economy, Energy [Online] Available at: http://www.irade.org/egy_2307-with-corrections.pdf 3. Planning Commission, 2007. Eleventh five year plan, Chapter 10-Energy. [pdf] Available at: http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v3/11v3_ch10.pdf 4. B. B. Tandon and P. K. Vasudeva, Inclusive Growth and Sustainable Development: Ideal for Indian Economy (New Delhi, Deep and Deep Publications pvt ltd), p. 20. 5. Arjit Sengupta and Saurabh Kumar, 2009. Roadmap for India in Energy Efficiency, Bureau of Energy Efficiency, India. 6. TERI, Delhi 2010. Joint Policy Research on co-benefits in tackling climate change and improving energy efficiency in India.

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