Protectionism In Renewable Energy Industry: India's Power Minister Calls Out US And Europe

India's power minister Raj Kumar Singh has said that western nations' efforts to subsidise their domestic renewable energy industries are equivalent to "protectionism" and will hinder developing countries' climate ambitions.

Singh specifically cited the US Inflation Reduction Act and Europe's green hydrogen auctions, which offer significant subsidies to renewable industries, as measures that would undermine the growth of clean energy production in emerging economies like India.

In an interview with the Financial Times, Singh stated, "This protectionism - I saw that in the Inflation Reduction Act in the United States. I see that in this green hydrogen auction in Europe".

Singh went on to criticise the developed world for preaching the importance of free trade to the rest of the world while simultaneously erecting barriers.

"We've had the developed world lecturing the rest of the world on how important free trade is...And here they themselves are erecting barriers," he said.

Singh's criticism comes days ahead of Prime Minister Narendra Modi's state visit to Washington scheduled later this week.

According to the FT report, Singh said that he was considering asking the Prime Minister to raise concerns about IRA with US President Joe Biden.

Singh clarified that his concern was not for the transition.

"It’s for making sure that other people are not able to compete," Singh was quoted as saying in the FT report.

Furthermore, Singh accused developed economies of hypocrisy for advocating the phasing out of coal, which is India's primary energy source, more aggressively than other fossil fuels such as oil and gas.

India, with its massive population, has set an ambitious goal to shift towards renewable energy.

The government aims to achieve 500 gigawatts of renewable capacity by 2030, with over 160 GW already built.

Additionally, the country plans to reduce coal's share in power generation from 70 per cent to around 35 per cent.

To safeguard its renewable energy sector from Chinese competitors, the Modi government has implemented import tariffs on solar components and introduced incentive programmes to encourage domestic manufacturing.

One such scheme is a subsidy for green hydrogen production.

However, experts believe that the subsidies offered in the IRA, which was passed last year, far outweigh these advantages.

The IRA provides over $350 billion in grants, tax credits, and loans for renewable energy.

According to Abhishek Malhotra from the Indian Institute of Technology in Delhi, the US offers manufacturer subsidies of around $3 per kg of green hydrogen, while India's plan is expected to provide less than $1.

The US climate finance law has faced objections from countries ranging from South Korea to France.

India and the US are seeking to strengthen economic and military ties in response to China's increasing assertiveness, as Modi's state visit takes place.

Singh stated that the two sides aim to finalise an agreement that standardises green hydrogen production standards and enables cooperation.

New Delhi will resist attempts by companies to move manufacturing overseas in search of maximising subsidies, according to Singh.

He stated, "We're not going to lie down and allow people to walk over us," and added that duties would make it difficult for them to sell back into the country.

India has set a target of achieving net zero emissions by 2070, but it has also resisted global pressure to eliminate coal use.

Policymakers argue that there is no practical way to meet India's rapidly growing energy demands without burning more of the heavily polluting fuel.

Singh criticised rich countries for their failure to fulfil a 2009 pledge of providing $100 billion annually in climate finance to developing countries.

Singh stated, “I am not going to compromise on the availability of power for my growth. So, you can’t say, ‘I’ll continue burning gas while you stop burning coal’.”

He further added that the country is growing and hence, the availability of power cannot be compromised.