Editorials/Opinions Analysis For UPSC 25 January 2023
Contents
- The Environmental Impacts of Liquified Natural Gas (LNG)
- A reminder of India’s urbanisation policies’ flaws
The Environmental Impacts of Liquified Natural Gas (LNG)
Context
LNG is being used to compensate for lost Russian gas supplies as a result of the Ukraine conflict. Despite being billed as a short-term fix, many fear that the gas is here to stay as the EU becomes the world’s largest LNG importer.
Relevance
GS Paper-3: Climate Change, Energy and Environment
Mains Question
What exactly is LNG (Liquefied Natural Gas)? What effect does it have on the climate? (words 250).
What exactly is LNG (Liquefied Natural Gas)?
- LNG is natural gas that has been reduced to a liquid state (liquefaction) by intense cooling to approximately -161 degrees Celsius (-259 Fahrenheit).
- This liquid gas is 600 times smaller than its original volume and weighs half as much as water.
- The compressed fossil fuel, which is almost entirely composed of methane — a potent greenhouse gas — can be transported around the world by ship.
- Once at its destination, the cargo is regasified in a floating terminal and redistributed via pipelines.
- However, despite LNG’s export potential, the high cost of liquefaction and production has limited its market.
- Energy is also required for the cooling, liquefying, and transport processes, as well as the post-transport regasification procedures.
Do you know?
- Natural gas is the most important energy source in Europe. Because of its role in domestic heating, gas demand rises each winter.
- Gas is selling for ten times the price it does in the United States on European commodity markets.
- According to Bank of America, the average European household’s electricity and gas bills will be €1,850 ($2,100) in 2022, up from €1,200 in 2020.
- Europe is reliant on imported gas, with Russia accounting for 40% or more of those imports.
What is the Environmental Impact of LNG?
- Significant Energy Requirement: o It takes a significant amount of energy to extract natural gas from a reservoir, transport it from the gas field to the LNG facility for processing, chill gas to such low temperatures, and hold it at that temperature before it is warmed and regasified after a long sea or train journey.
- During the liquefaction process, 10-25% of the energy in the gas is lost.
- Methane Leakage Risk: o Methane loss throughout the supply chain contributes to LNG’s high emissions.
- Because LNG’s production and transport processes are much more complex, the risks of methane leakages along the production, transport, and regasification chains are simply much higher, and thus much more emissions-intensive.
- Greenhouse Gas Emissions: According to the US-based nonprofit Natural Resources Defense Council, LNG emits “about twice as much greenhouse gas as regular natural gas” (NDRC).
- LNG processing is so energy- and carbon-intensive that it can produce nearly ten times the carbon emissions of piped gas.
- Several stages Required:
- The numerous stages required to transport LNG from the wellhead to the market result in “very high imported emissions intensity” when compared to piped gas, which has emissions limited to upstream, transport, and processing.
Effects on India
- To help ease demand for gas to heat and power homes and businesses, ten cargoes of liquefied natural gas (LNG) destined for Asia were recently diverted to Europe.
- The sharp increase in global coal prices benefited domestic suppliers such as Coal India. As the supply shortage in key overseas markets worsened and prices skyrocketed, demand for coal from domestic sources increased. Despite increased output from Coal India and other producers, supply remains tight.
- Over 70% of India’s power is generated by burning coal, with natural gas accounting for only about 5%. As a result, rising natural gas prices had a limited impact on India’s power generation costs.
Key Issues
- Increased additional costs: By the end of the decade, additional costs for Germany’s gas imports could reach up to €200 billion ($212 billion), doubling consumer gas bills.
- Fear of Stranded Assets: There is a corresponding fear that overcapacity in LNG infrastructure and long-term regasification contracts at German LNG ports will result in stranded assets, delaying the phase-out of fossil fuels.
Conclusion
- Promoting energy efficiency and renewable energy is the long-term solution to Russia’s gas shortage.
- Countries can save more gas than new LNG terminals by investing in building efficiency alone.
- It could be a major setback in the effort to limit global warming.
A reminder of India’s urbanisation policies’ flaws
Context
The World Bank report “Financing India’s Urban Infrastructure Needs: Constraints to Commercial Financing and Prospects for Policy Action” emphasises the critical need to leverage more private and commercial investments to close emerging financial gaps.
Relevance
GS Paper-1: Urbanization and Related issues, Funding of Urban Infrastructure
Mains Question
What are the major challenges for urban city development in India? Also, propose solutions to these problems. (250 Words)
Current status of Urban Funding
- Currently, the central and state governments finance more than 75 percent of city infrastructure, while urban local bodies (ULB) finance 15 percent with their own surplus revenues.
- Currently, only 5% of Indian cities’ infrastructure needs are funded through private sources.
Estimated funding requirements
- By 2036, 600 million people in India will live in urban areas, accounting for 40% of the population.
- This is likely to put additional strain on India’s already overburdened urban infrastructure and services, with increased demand for clean drinking water, reliable power supply, efficient and safe road transport, among other things.
- According to the World Bank report, India will need to invest $840 billion in urban infrastructure over the next 15 years, or an average of $55 billion per year, if it is to effectively meet the needs of its rapidly growing urban population.
- Similarly, the 11th Plan proposes budgets of 1,29,337 crore for four basic services, 1,32,590 crore for urban transportation, and 1,32,590 crore for housing.
- According to a McKinsey report on urbanisation, the figure is $1.2 trillion, or 90 lakh crore.
Issues in Urban Development
- There is a significant funding gap in urban development.
- According to the World Bank report, India will need to invest $840 billion in urban infrastructure over the next 15 years, or $55 billion per year, whereas the government’s flagship programmes, such as the Smart City mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the Pradhan Mantri Awas Yojana (PMAY), and others, are not more than 2 lakh crore (that too for a period of five years).
- Cities face additional challenges in obtaining more private financing due to a weak regulatory environment and poor revenue collection.
- Between 2011 and 2018, urban property tax was 0.15 percent of GDP, compared to a low- and middle-income country average of 0.3-0.6 percent of GDP.
- Low service charges for municipal services undermine their financial viability and attractiveness to private investment.
- Cities are primarily run by parastatals, and city governments have little influence over how well these parastatals function.
Way Forward
- The report recommends that city agencies expand their capacity to deliver large-scale infrastructure projects.
- Currently, the ten largest ULBs have spent only two-thirds of their total capital budget over the last three fiscal years.
- Cities must establish a robust revenue base and be able to recover the costs of providing services.
- In the medium term, the report recommends a series of structural reforms, including those in taxation policy and the fiscal transfer system, that will allow cities to leverage more private financing.
- In the short term, it identifies a group of large high-potential cities capable of raising larger amounts of private financing.
- Cities should hold regular elections, and there should be empowerment through the transfer of the three Fs: finances, functions, and functionaries.
- Many suggestions were made by the national task force that reviewed the 74th Constitutional Amendment, chaired by K.C. Sivaramakrishnan, such as: o Empowering the people o Transferring subjects to city governments
- Proposing that cities receive 10% of the income tax collected, with the corpus fund used solely for infrastructure development.
Conclusion
The World Bank report is a reminder of the tragedy which Indian urbanisation is witnessing — “policy paralysis from the top”.
