Moving China-India without Oil

A few weeks ago me and a few colleagues from CSE attended the Delhi International Renewable Energy Conference (DIREC) 2010 here in India. During one of the Transport sessions, a transport expert said that "higher oil-prices might be a more decisive force than policy-instruments to change the transport sector". In fact, this might already be happening.

The Wake-Up call

In 2007 the International Energy Agency´s (IEA) Chief Economist Fatih Birol stated that ”if we don´t do something very quickly, the wheels may fall off”.  One year later world oil prices became high enough to constitute an oil shock that triggered a recession in the US – and other economies- through significant and interconnected impacts on the auto, housing and financial sectors. In an effort to hold back the domestic effects of the global crisis, Chinas response has been a massive increase in investment in domestic transport that does not depend on oil.

Where India has underinvested in its public transportation, China has embarked on what has been described as the ”largest railway expansion in history”, committing more than $1 trillion to expand the rail network from 78,000 to 120, 000 km of which 18, 000 km is to be capable of supporting high-speed passenger service (200-350 km/h). The stimulus investment, initiated late in 2008, has also provided substantial support for electrification of road vehicles, with a focus on battery technology. In a recent book called ”Transport Revolutions”, transport policy experts Richard Gilbert and Anthony Perl sketch out in profound detail that the share of electric versus ICE-based propulsion is to rise from zero in 2009 to about 3,5 % by 2011. If the share grows at that rate until 2025, perhaps a third of travel by automobile will be powered by electric traction. As a result, China is developing a flourishing transport manufactoring sector that can lead the world in producing much needed electric vehicles and rail systems. This would be much as the UK´s early 19^th-century boom in production of the steam engine and the automotive boom in the US did for the 20^th century production of cars during the oil age.

As moves have been made in the right direction in China, India clearly excels in information technology and has shown willingness to explore unusual forms of electrified transportation, such as monorails in Mumbai and Banagalore and PRT projects, which could be steps to shift India´s mobility away from todays dependence on oil. However, leadership makes the difference between recognition of a need and meeting the need.

Did you say leadership?

A key part of the challenge that lies ahead for both India and China will involve producing fiscal and administrative incentives from the top that put local governments on track to reorient transport development. While Chinas cities are hierarchically ordered with powerful and empowered mayors at the top, state governments in India are reluctant to devolve power to the cities. Part of Indias problem is that they dont have any systematic approach to it´s transport problems, with core leadership from centre to the local level. For India, the country seem at first glimpse to be ungovernable, partly because it is a two track democracy between state elites and a pluralistic society, and partly because every aspect of government seems in permanent election mode. 

Governments in China are more than grateful to avoid such electoral considerations and can easier justify policies that impose costs on society today but yields benefits in the future. Chinas Achilles heel is, however, that wrong decisions may be more likely to made and sustained without the accountability provided by political opposition. The fact that there has been more digging of the hole of increased dependence on oil in road and air transport stems from a wrong decision that has not been exposed of sufficient pressure to reconsider it. In the Indian subcontinent, the bigger risk is that the governing process becomes mired in institutionalized conflict that impedes sufficient actions. Yet, Indias belief in its people can also be the main way to break out of the downward oil-spiral just as the mass movement threw away colonialism in 19^th century.

But the reality in India is that oil consumption in the subcontinent grew by 49 % between 1999 and 2009, and dependence on imports grew from 66 % of consumption to 76 %. As the oil-price shock of 2008 has served to begin moving China toward electrification of transport, the question is if India will embark on this kind of path or wait for another oil-price-induced recession?

The clock is ticking fast and India has every reason to follow Chinas path to fully launch the electrification of transport. Then we might finally see a race to the top, rather than the bottom.




This article is a small summary of the book " Transport Revolutions: Moving people and freight without oil" and the McKinsey report "Indias urban awakening: Building inclusive cities, sustaining economic growth"/ Jesper