Exhibit W

Two-thirds of the emissions can be abated at a low or negative cost (<10 $/tCO2).

Cost curve displays the cumulative abated emissions wrt LoS scenario

Sequestration Waste Transport Power Industry Buildings Agriculture

Abatement cost, $/tCO2

>500
450
400
350
300
250
200
150
100
50
0
-50
-100
-150
-200
-250
-300
-350
-400
-450
<-500
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76
Total cumulative abatement, GtCO2

20

15

10

-5

-10

-15

-20

-25
14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52
Total cumulative abatement, GtCO2

Decarbonising India: Charting a pathway for sustainable growth 31

Ten urgent actions This report proposes ten actions 3. Enabling banks to support the
could accelerate India’s needed today within the context transition, catalysed by a green
decarbonisation and ensure highlighted to accelerate India’s transition bank. Banks could
it is orderly decarbonisation: be asked to come up with their
From our analysis, it appears that investment glide paths within a
1. Lay out a detailed, medium-term
benefits to India could outweigh the year or two and build the necessary
(5 - 15 - 25-year) decarbonisation
downsides of a well-planned, orderly, capability for assessing risks in
plan with sector-specific priorities
accelerated transition given its growth these new spaces. The regulator
and policy frameworks that
outlook. But it requires that India take could assist with the necessary
provides demand signals and guides
action within this decade to set things taxonomy, disclosure guidelines,
corporates to invest. The plan will
up. If it does so, India can use its growth actions to reduce risks. A green
need to be implemented through
momentum to build itself right in the transition bank with a clearly
an accountable nodal agency
decades thereafter. defined set of green financing
so as to ensure coordination
norms can act as the catalyst
It is vital for all stakeholders — across ministries and external
for change.
government, corporates, consumers, stakeholders in delivering
civil society — to come together and net-zero. The governance
4. Accelerate renewable adoption
act now and in concert to accelerate mechanism employed must
in the power sector to scale up
India’s decarbonisation and ensure it include compensating mechanisms
capacity addition 4X, and to deepen
is orderly. The government can provide to address socioeconomic impact.
market reforms with a 30-year
policy and regulatory support to make Delays in doing this or quality gaps
outlook in a manner that ensures
projects across sectors economically (e.g., inconsistent policies across
a stable grid fed predominantly
viable. These could include but are sectors, too many changes) would
by infirm power. These market
not limited to incentivising the usage lead to the wrong investment
reforms can reduce the investment
of EVs and fuel cell electric vehicles decisions worth several hundreds
requirements by $150–200 billion
(FCEVs) by balancing taxation schemes, of billions of dollars, or reduced
by 2050.
simplifying regulations for authorising investment, thus leading to a less
and installing new power and grid than ideal transition. 5. Empower a nodal authority to
installations, creating demand signals define a national land use plan,
2. Accelerate implementation of
for higher-cost green materials like lay clear land-use guidelines and
a compliance carbon market
steel and generating support for mandates for optimised use across
(within three years). This would
localising electrolyser manufacturing. urbanisation, industrial needs,
also require the creation of
Support would also be required to carbon sinks, agriculture and
demand signals to accelerate
ensure a just transition that minimises renewables.
decarbonisation, especially in
impact on low-income households. the hard-to-abate sectors, and
These actions would need to work incentivise investments in the newer
together and happen in the right technologies like CCUS. Policy
sequence otherwise they would result makers could take a strategic (as
in shortages, price rise and will be at opposed to a compliance-oriented)
risk of disorderliness. view of this and work across
Achieving the necessary technological ministries. Getting this right, fast,
breakthroughs to reduce emissions can enable both domestic and
in hard-to-abate sectors, and foreign investment.
accelerating their progress to market,
would require consistent public and
private investment. It would also require
greater willingness among business
leaders and policy makers to adopt
new technologies. These would include
longer duration storage technologies
to capture the seasonality of renewable
sources, advancement in fuel cell
technology, improvements in recycling
technologies.

32 Decarbonising India: Charting a pathway for sustainable growth

 9. Enhance the National These actions would need to be
6. Create a resilient indigenous
Hydrogen Mission, where supported wholeheartedly by
manufacturing capability and
consumers such that we see a
increase investment in cleantech government could play a key role
behavioural shift in their approach.
R&D. Efforts would be needed in accelerating demand through
blending mandates, boosting The government has announced the
to develop local raw material
cost competitiveness via capital Accelerate Lifestyle for Environment
resources (e.g., rare earths), secure
subsidies and R&D investments and (LiFE) mission at CoP26. This would
materials from elsewhere in the
enabling export opportunities via be a crucial component for India’s
world and produce equipment
international trade agreements. transition.
locally through mechanisms like
the PLI. This would need to be In closing, India needs thoughtful
10. Companies can aim to play
supported by a green innovation action now for setting itself up for an
on the front foot, evaluating
mission which increases the accelerated and orderly transition.
investment opportunities that
investments in R&D across a Looking beyond the short term
this green trend would unlock,
number of the technologies that will and laying the foundation for this
aligned with India’s national plans
drive decarbonisation. transformation within this next decade
or opportunities opened up by
is absolutely imperative.
7. Evaluate five CCS hubs in Gujarat decarbonisation of other countries
(Jamnagar), Odisha (Paradeep), (e.g., green hydrogen derivative
Rajasthan (Barmer), Maharashtra exports). Heavy emitters could
(Pune) and Andhra Pradesh immediately set five- to-ten-
(Vizag) potentially in public-private year decarbonisation targets,
partnership for utilisation and and use these to mobilise their
storage of captured carbon. organisations, looking for the
value-creating opportunities,
8. Create a national circularity
in addition to investing right for
mission with recycling hubs in the
the future.
top 20 Indian cities (contributing
35 percent of municipal solid
waste), mandated targets on
recycling rates, recycled raw
material use (e.g., blending norms)
and landfill levies.

Decarbonising India: Charting a pathway for sustainable growth 33

1. The current state
of India’s emissions
and our suggested
approach to abatement
Context networks to promote environmentally
India is the third-largest emitter of GHG friendly lifestyles; and the Energy
after China and the US with 2.9 GtCO₂e Conservation bill introduced in Lok
of net emissions per year;31 yet its per Sabha that mandates buildings with a
capita emissions of 1.96 tCO₂e are less minimum connected load of 100 KW to
than a third of the global average of use renewable sources, empowers the
6.55 tCO₂e (9 percent of global GHG government to specify a carbon-credit
emissions with a 17 percent share of the trading scheme and a minimum share
global population). Therefore, despite of energy consumption from non-fossil
its low per capita emissions, India would sources for designated consumers.
need to play an outsized role in the There is no better time than now
battle for decarbonisation if the world for India to push for an accelerated
needs to win the war on climate change. decarbonisation trajectory. Much of
India is already seeing the impact the India of 2050 is yet to be built,
of climate change – in 2019, about with India’s GDP estimated to grow four
12 million people were affected by times37 over this period. If India builds
intense rainfall and floods with the it right, it has the unique opportunity
damage done estimated at $10 billion. 32 to decarbonise without slowing
The country also faced eight tropical the economy down. This can also
cyclones that year with six being serve as an inspiration to other high
categorised as ‘very severe’. 33 At this growth economies.
rate, by 2050, India could experience
a fourfold increase in people exposed Situation today
to severe hazards under a two-degree India’s current net GHG emissions
Celsius warming scenario. are 2.9 GtCO₂e every year (after
accounting for 0.3 GtCO₂e negative
In 2021, at COP-26, India announced
emissions). The bulk of these emissions
its ambition to achieve net-zero
(70 percent) are driven by five sectors
emissions by 2070 and presented the
– power, steel, automotive, cement
Panchamrit plan which included NDC
and agriculture (Exhibit 1). India has
targets such as 50 percent cumulative
reduced its emission intensity at
electric power capacity to be non-fossil
1.3 percent per annum over the last
fuel-based by 2030 and 45 percent
decade (Exhibit 2) and has successfully
reduction in the emission intensity
decoupled emissions from GDP growth.
of GDP by 2030 (over 2005 levels). 34
As a result, there was a 24 percent
This has come on the back of a series
decline in economic emissions in
of steps taken by India over the past
2016 versus its 2005 levels (excluding
few years toward decarbonisation.
agricultural emissions). 38
Over the past two decades, India has
announced policies like FAME, ACC
PLI35 , the Green Hydrogen Mission,
a vehicle scrappage policy and
single-use plastic ban. Additionally, it
established the Perform, Achieve and
Trade (PAT) mechanism to improve
industrial energy efficiency, saving
60 MtCO₂ between 2016 and 2019;36
the LIFE mission plans to use social

31
CAIT data from Climate watch; about 14 percent of gross emissions are methane, based on 2016 UNFCCC data
32
Global climate risk index, Germanwatch
33
The weather channel, IBM
34
India’s NDC
35
FAME – Faster Adoption and Manufacturing of Electric Vehicles Scheme, ACC PLI – Production Linked Incentive (PLI) Scheme ‘National Programme on Advanced
Chemistry Cell (ACC) Battery Storage’
36
India’s third biennial update report to the UNFCCC
37
Based on Economist Intelligence Unit projections of $12.12 trillion by 2050 (Real GDP - USD at 2010 prices); This GDP forecast represents a more conservative
estimate compared to other estimates - we have considered the lower range of growth in our analyses to build a more robust decarbonisation pathway.
38
UNFCCC, Climate action tracker, EIU, India’s biennial update report 3

36 Decarbonising India: Charting a pathway for sustainable growth

Exhibit 1

India's current carbon emission mix.

Baseline emissions, MtCO2e1, 2019

Emissions 3274 Carbon sink
MtCO2e2 345 MtCO2e

1,120 928 585 292 202 147 (345)

Iron & steel

Dairy Forest
loss
Trucks

Cement Waste-
water
Rice cultivation treat-
Coal ment
2 and 3
Lime wheelers
Residential
Passenger Total
Mining
cars Forest 2,929
sink
Cows and buffalos Aviation
MtCO2e
Refinery

Synthetic fertilisers
Buses
Others3
Other animals
Gas and oil based generation

Farming equipment Domestic Solid Commercial

maritime waste
Power Industry Agriculture Transport Water & Buildings LULUCF/NCS
waste

2019- % of gross
emissions
34% 28% 17.8% 9% 6.2% 4.5%

1. Converting GHGs into CO2e assuming GWP-100 and AR5 methodology with India’s BUR-3 reported emissions for 2016 as baseline.
2. Gross and net emissions for 2019 based on Climate Action Tracker overall emissions for India.
3. Others include: other industry oil & coal use, ammonia, aluminium, F-gases and ethylene.

Source: McKinsey India Decarbonisation Scenario Explorer

Decarbonising India: Charting a pathway for sustainable growth 37

Exhibit 2

Economic emissions intensity reduction for India.

India’s GHG economic emissions intensity

kg CO2e/$ per annum1

3.6

3.2
3.0

2.4
-54%
Reducing
1.8 emissions intensity
1.5 (-1.3% p.a., as in
2010-19)

1.2

0.6 0.8

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070

1. Including LULUCF emissions and offset.

2. Economic emission intensity from annexed and non-annexed countries in UNFCCC.

Source: UNFCCC, climate action tracker, McKinsey India DSE, EIU , India’s biennial update report 3

India’s current energy system depends on fossil fuels to meet approximately 75 percent of its energy demand (Exhibit 3).
Power relies mostly on coal; transport consumes mostly oil; biomass is used predominantly in the buildings segment mainly for
cooking (besides the power consumption required for building) and industry uses a mix of fossil fuels (Exhibit 4).

38 Decarbonising India: Charting a pathway for sustainable growth

Exhibit 3

India’s current energy mix.

45% 4% 20%

Coal Renewable and Nuclear Biofuels and waste

6% 25%

Natural gas Oil

Source: IEA World Energy Balances https://www.iea.org/data-and-statistics/data-product/world-energy-statistics-and-balances

Decarbonising India: Charting a pathway for sustainable growth 39

Exhibit 4

Primary energy demand by sector as of 2019.1

In Mtoe
Coal Oil Natural gas Nuclear Hydro Bioenergy Other renewables Electricity Other fuels

355 225 108 216

13

38
99
3

278

102
31
120

21

33
3
15
10
15
41 42
24 1 2
10 3
Power Industry Transport Buildings

1. Only for power, transport, building and other industries. Agriculture excluded.

Source: IEA

Over the past 20 years, India’s total only four percent of India’s energy mix Accordingly, surface transport
primary energy demand has been versus 20 percent in the EU and eight is responsible for the bulk of the
growing at four percent per annum, percent in Japan (Exhibit 5). emissions (over 70–75 percent) and
compared to an annual GDP growth a large part of that comes from the
India’s transport sector has a big
of six and a half percent because commercial vehicles used for goods
carbon footprint across multiple
of energy efficiency improvements transportation (190 MtCO₂e per year for
modes – road, rail, air, water – and
and growth in the services’ share of FY21, comprising about 75 percent of
spans passenger and goods transport.
the economy. 39 total tailpipe emissions) (Exhibit 7).
While passenger transport is split
India’s energy mix and hence emissions more or less equally between intra-city
are different from the global mix and inter-city, the long-haul inter-city
(e.g., the EU and Japan) as nuclear segments dominate goods transport
and renewable energy currently form (Exhibit 6).

39
McKinsey analysis based on data from EIU and IEA.

40 Decarbonising India: Charting a pathway for sustainable growth

Exhibit 5

Comparison of the current energy mix across Europe, Japan and India for 2019.

Percentage contribution of total energy demand

MTOE
Coal Oil Natural gas Biofuels and waste Nuclear Hydro Wind, solar, etc.

4%
Europe 14% 32% 26% 9% 12% 1,948
3%

4% 2%
Japan 28% 38% 22% 4% 415
2%

1%1%
India 45% 25% 6% 20% 938
2%

Source: IEA World Energy Balances https://www.iea.org/data-and-statistics/data-product/world-energy-statistics-and-balances

Exhibit 6

Transportation mix in India: varied for passengers and goods.

Passenger transport mix in India, FY21e Goods transport mix in India, FY21e
Billion-passenger km Billion-ton km

23,289 3,540
Water 7% Urban Water Suburban,
Air Air 17%
Urban
Rail Rail
Suburban, Urban
36%
agglomerations

Road 85-90%
Intercity,
83%
Long Haul
Road 71%
Intercity,
57%
Long Haul

Modal mix Geographic Modal mix Geographic

mix mix

Source: MORTH, Niti Aayog, Ministry of Ports, Shipping, and Waterways, Ministry of Railways, World Bank, IBEF, TERI, Rocky Mountain, Technical University of Denmark,
Statista, McKinsey Analysis

Decarbonising India: Charting a pathway for sustainable growth 41

Exhibit 7

Road transportation is responsible for a majority of the carbon emissions.

Carbon emissions by mode for 2021e Road Rail Air Water

Millions of tons of CO2

Passenger >75% 79

Goods >85% 204

Total 249 283

Source: McKinsey Analysis

Automotive tailpipe emissions Actions taken by India so far under various stages of development. 43
account for seven to eight percent The latest Energy Conservation
India has already taken many positive
of India’s total GHG emissions. (Amendment) Bill, 2022, also specifies
steps towards decarbonisation. As per
Hence the road-mobility segment obligations for designated consumers 44
the updated NDCs to the United
has been discussed in detail in this to use non-fossil sources of energy,
Nations Framework Convention
report. In addition, we explore the hard- which is expected to spur on demand
on Climate Change (UNFCCC) in
to-abate aviation sector. Aviation is for renewable energy.
August 2022, India has committed to
a significant contributor to India’s
reducing the emissions intensity of its Transport: India’s 2030 vision of
emissions, accounting for 5 percent
GDP by 45 percent by 2030, from its e-mobility sets EV sales penetration
of total emissions from the transport
2005 levels. In comparison, the 2015 targets of 70 percent for commercial
sector, with rapid growth expected
NDC committed to a 33–35 percent cars, 30 percent for private cars,
going forward. Also, emissions from the
reduction target by 2030. 41 40 percent for buses and 80 percent
aviation sector have a two to four times
for two-wheelers and three-wheelers
greater impact on the environment than Renewable energy: India has
by 2030. 45 This translates to 102 million
road transport due to the additional committed to achieving about
EVs on-road. In keeping with these
non-CO₂ pollutants directly released 50 percent cumulative electric power
targets, multiple fiscal and funding
into the atmosphere. 40 installed capacity from non-fossil fuel-
measures have been announced for
based resources by 2030.41 Earlier, a
In addition to the power and mobility the promotion of EVs, such as the
target of 175 GW of installed electricity
sectors, this report takes an in-depth reduction of GST on EVs from 12 to five
capacity from renewables by 2022,
look at three other high-emitting percent and from 18 to five percent for
and 500 GW by 2030 had been set. 42
sectors: steel, cement and agriculture. EV chargers. The FAME scheme was
By June 2022, India’s renewable
also extended until 2022 with an outlay
energy capacity (excluding large hydro)
of INR 10,000 crores to incentivise
stood at 114 GW, with 60 GW of projects
EV uptake. 46

40
World Economic Forum’s Clean Skies for Tomorrow; Transport & Environment.
41
India’s NDC; UNFCCC.
42
Press information bureau.
43
SAUR energy international.
44
Designated consumers include: (i) industries such as mining, steel, cement, textile, chemicals and petrochemicals; (ii) transport sector including Railways; and (iii)
commercial buildings.
45
CEEW.
46
Ministry of heavy industries.

42 Decarbonising India: Charting a pathway for sustainable growth

Energy efficiency: The National signals for use of scrap steel, the new While these are encouraging steps,
Mission for Enhanced Energy Efficiency vehicle scrappage policy is targeted at there is still a long way to go for India to
(NMEEE) specifies energy consumption recovery of old vehicles with the intent achieve the announced net-zero goal
reduction in large, energy-consuming of material recovery and reducing the and a significant effort will be needed
industries, with a system for companies number of high-emission vehicles from all stakeholders.
to trade energy-savings certificates. on-road as well as further enabling the
The adoption of energy efficiency transition to EVs. 50 The road ahead
schemes led to overall energy savings
Carbon markets: The recent Energy Across various estimates 55 , India’s
of 24 Mtoe for the year 2018–19. 47
Conservation (Amendment) Bill also real GDP is expected to grow at
The PAT scheme for improved energy
empowers the central government about five percent annually till 2050
efficiency in industry under the NMEEE
to specify a carbon-credit trading (Table 1). This would mean fourfold
saved 31 MtCO₂ of emissions in PAT-I
scheme. According to the provisions, GDP growth for India over the next
(2012–15) and 61 MtCO₂ of emissions in
the central government or any 30 years. With this, demand growth
PAT-II (2016–19). 48
authorised agency may issue carbon- across all sectors could multiply:
Agriculture: The Pradhan Mantri Krishi credit certificates to entities compliant power (quadruple), steel (quadruple),
Sinchayee Yojana (Prime Minister’s with the scheme. Any other person cement (triple), automotive (triple) and
Agricultural Irrigation Scheme) aimed may also purchase a carbon-credit agricultural food production (double)
at convergence of investments in certificate on a voluntary basis. 51 (Exhibit 8). Based on the reduction
irrigation at field level, expansion of in carbon intensity of GDP seen over
Hydrogen: The Green Hydrogen Policy
cultivable area and improvement of the last decade, India’s annual GHG
2022 puts in place several measures
water use efficiency, resulted in an emissions will likely grow substantially
aimed at promoting a smooth transition
emissions reduction of 12 MtCO₂ from from their current 2.9 GtCO₂e to
to green hydrogen and green ammonia,
the period 2017–18 to 2018–19. 49 Other 11.8 GtCO₂e by 2070. 56 With 75 percent
both as energy carriers and chemical
schemes in crop production, such as of India yet to be developed by 2050,
feedstock. This includes waiving
crop diversification from paddy, direct we are uniquely positioned among our
interstate transmission charges for
seeding of rice and systems of rice global peers to build more sustainably
green hydrogen producers, providing
intensification, and other agricultural (Exhibit 9). 57 From our analysis, it
land for renewable energy parks and
sectors such as livestock, horticulture appears that benefits to India of a well-
setting up manufacturing zones. 52
and fisheries also contributed to the planned, orderly, accelerated transition
lowering of emissions. Biofuels: India has also taken steps would outweigh the downsides given
to promote biofuels and biomass. India’s growth outlook. This would need
Material circularity: Extended
The renewable energy capacity target that India take action within this decade
producer responsibility (EPR)
of 175 GW by 2022, for instance, to set things up. If it does so, India can
regulations with the intent to drive
mandates 10 GW from bio-power. 53 use its growth momentum and build
circularity and improve waste
Further, the National Policy on Biofuels India right in the decades thereafter.
management have been in place for
2018 allows for the use of more
e-waste since 2016. In 2022, guidelines Annual real GDP58
feedstock in biofuel production and
for an EPR programme for plastics and Year growth rate
advances an ethanol blending target
tyres were also added to these. The
of 20 percent in petrol to Ethanol 2020–2030 5.8%
EPR guidelines also include targets
Supply Year (ESY) 2025–26 from 2030
on use of recycled content in plastic 2030–2040 5.1%
compared to the current blending
packaging. Efforts to drive circularity
rates of 10.2 percent blending in 2040–2050 4.7%
have also been taken in the automotive
ESY 2021–22. 54
and steel sectors. While the ministry of 2050–2060 3%
steel has indicated clear demand
2060–2070 3%

47
Impact of energy efficiency measures, Bureau of energy efficiency.
48
Brief note on PAT scheme, Bureau of energy efficiency.
49
https://www.forests.tn.gov.in/app/webroot/img/document/gov-india-publication/18India_3_Bur-20.pdf
50
CPCB, Press search.
51
Press information bureau, Ministry of Power.
52
Niti Aayog – Harnessing green hydrogen – Opportunities for deep decarbonisation in India@.
53
Press information bureau.
54
National policy on biofuels, Ministry of new and renewable energy; press information bureau.
55
OECD, IHS markit and EIU.
56
UNFCCC, climate action tracker, India’s biennial update report 3.
57
Analysis based on GDP data from EIU.
58
Gross domestic product (GDP) at constant market prices, rebased to 2010 constant prices and translated into US$ using the LCU:$ exchange rate in 2010 – from
The Economist Intelligence Unit for 2020–50. Assumed 3% annual real GDP growth from 2050–70.

Decarbonising India: Charting a pathway for sustainable growth 43

Exhibit 8

As a majority of India is yet to be built, demand is expected to rise multifold

and so are the emissions.

Power Consumption, 8x India’s power generation is expected to grow

TWh over 9,000 TWh by 2070
4x

1,275

Steel Demand, 8x Steel is in use in the form of buildings, cars,

Mt appliances, pipelines and industrial plants likely
to rise 8x driven by high urbanisation and
4x industrial expansion

100

Cement Demand, 2.5x 3x Cement demand grows marginally ahead of GDP

Mt until 2035 post which it decouples from GDP and
follows population growth rates to a per capita
consumption of 350-370 kg/year
289

Automotive Total vehicle PARC, 3x Medium and heavy truck sales at over 2% CAGR
2.7x
Millions until 2070. Passenger vehicles at
1-1.5% CAGR

266

Agriculture Rice production, 2x While rice production nearly doubles, area under
Mt 1.8x rice cultivation decreases at a CAGR of 0.03%
due to increased mechanisation and thereby
178 yield/hectare

Source: McKinsey India Decarbonisation model

44 Decarbonising India: Charting a pathway for sustainable growth

Exhibit 9

India's emissions could triple over the next 50 years even at the current pace of emission
intensity reduction.
India’s GHG emissions Historical Reducing emissions intensity (-1.3% p.a., as in 2010-19)
Gt CO2e per annum1
11.8
12

10

+306%
6

+190%
4
2.9

0
1990 95 2000 05 10 15 20 25 30 35 40 45 50 55 60 65 2070

1. Including LULUCF emissions and offset.

Source: UNFCCC, Climate Action Tracker, McKinsey India DSE, India’s biennial update report 3

Our Methodology: what this — Identifying optimal production considers a phased adoption of
report is and what it is not and technology mix: We leveraged decarbonisation levers, implementation
This report is a synthesis of a year- McKinsey’s decarbonisation lever of current policy announcements and
long effort that included bottom-up repository and the Decarbonisation predicted reduction of technology
modelling across six sectors (power, Scenario Explorer (DSE) tool to costs. Our Accelerated scenario
automotive, aviation, cement, steel identify and model technological considers faster adoption of
and agriculture) and four cross-cutting levers for production. Assumptions decarbonisation levers and quicker
enablers. We took a four-step approach were modified for India based on reduction in technology costs.
for each sector: inputs from industry experts as well More importantly, it considers new
as secondary sources. regulations (like carbon price through
— Creating the baseline: 2019 was an emission-trading scheme) and faster
taken as the baseline year. We — Defining enablers and estimating
maturing of new technologies (e.g.,
modelled emissions bottom-up implications of decarbonisation,
CCS). Both these scenarios consider
based on India’s activity levels including potential costs and
that India’s growth can happen along
across sectors and corresponding benefits through bottom-up
with progress on broader development
emission intensities. Our findings modelling for the six sectors
imperatives while pursuing actions for
were refined and syndicated to using local and industry data.
emission abatement. Further, these
align with India’s submission to the Assumptions were tested through
scenarios have largely been estimated
UNFCCC. 50+ Indian and global expert
with currently feasible technologies. It
interviews. The data points
— Granular forecasting of demand: is to be expected that India could get
mentioned in the report are based
We used sector-specific sources to its net-zero-by-2070 commitment
on McKinsey’s Sustainability
and expert inputs to arrive at through the upcoming technology
modelling framework unless
demand projections for each of the developments over the next decades
mentioned otherwise.
six sectors. Forecasts were aligned (e.g., direct air capture). More detailed
with expected GDP and population In this report, we have assumed two assumptions made in each scenario are
outlooks up to 2070. potential pathway scenarios – LoS elaborated on next:
and Accelerated. The LoS scenario

Decarbonising India: Charting a pathway for sustainable growth 45

The LoS scenario assumes continued — Policies: Current policies, targets Green hydrogen uptake is also
demand and economic growth, and planned policies are assumed accelerated, leading to faster
with penetration of low-carbon to continue in this scenario. adoption of green hydrogen-based
technologies continuing at presently Existing policies on renewable steel-making technology and
predicted rates. We consider a phased energy capacity additions, coal FCEVs in commercial vehicles by
adoption of abatement levers in phase-out targets and so on are 2050. This Accelerated scenario
line with India’s net-zero 2070 goal, assumed. Current EV policies and also assumes the adoption of
current policy announcements and funding schemes such as FAME are future technologies that are not yet
currently estimated technology cost incorporated. Government actions commercially viable, for example,
outlooks. The major assumptions in this on sustainable farming, such as CCS in industry.
scenario include: incentives on nano-fertilisers and
— Policies: In addition to current and
forest conservation efforts are also
— Demand: Industrial production and planned policies, the Accelerated
expected to continue at historical
consumer demand increase in line scenario also assumes certain big
rates. This scenario does not
with GDP (five percent per annum policy moves that enable faster
have any structural interventions
from 2020–2050 and three percent adoption of decarbonisation
aimed at creating green demand
per annum from 2050–2070) and technologies including demand
signals. For example, carbon
population (0.5-one percent per side signals such as extension of
pricing or premiums, domestic
annum) until 2070. 59 Sustainable GST benefits and FAME subsidies
carbon markets, further blending
alternatives are adopted as per for EVs until 2030, prioritisation of
or recycling mandates are not
current policies and market outlook, carbon neutral biomass as industrial
assumed in the LoS scenario.
e.g., continued uptake of renewable fuel (e.g., for use in cement kilns),
energy, steady increase in demand The Accelerated scenario assumes and mandated recycling and
for EVs. The LoS scenario does adoption of decarbonisation levers at blending rates (50 percent recycled
not assume any externalities or a much faster pace. It also takes into plastics in packaging, 100 percent
interventions that shift or disrupt account the adoption of newer low- use of bio-decomposer in paddy-
expected demand. carbon technologies across sectors straw residue and 20 percent
and cross-cutting themes, investments recycled concrete used as clinker
— Technologies: Only currently
in nascent technologies (e.g., CCUS) substitute in cement). This scenario
available and feasible green
and new policy interventions aimed at also assumes a carbon pricing of
interventions and technologies
accelerating decarbonisation $50 / tCO₂ by 2030 in industries
are assumed in this scenario.
(e.g., carbon markets). such as steel, which progressively
This includes renewable energy
increases. The establishment
sources such as solar and onshore — Demand: Economy and population
of a domestic carbon market
wind, battery electric vehicles grow at the same rates as LoS. In
is also assumed to enable the
(BEVs) for transport, and organic this scenario, however, there are
financing of green technologies
and nano-fertilisers in agriculture. also shifts in expected demand
and development of NCS that can
Green fuels are used partially in to decarbonised alternatives.
generate carbon credits.
industries like cement. A majority 20 percent of demand for cement,
of steel production is assumed for example, is expected to shift to
to continue with blast furnaces alternative construction materials
in the near future, with electric by 2070.60 Likewise, consumption
arc furnaces being adopted in of rice is assumed to decline by
line with scrap availability. Next- 30–40 percent and instead shift to
horizon or less-economically-viable alternative coarse cereals.
technologies like CCUS are not
— Technologies: Currently available
incorporated into this scenario.
technologies are assumed to be
Other currently less feasible
adopted at a much faster pace.
technologies, such as hydrogen
Penetration of EVs, for example,
in steelmaking or technologies to
reaches 95–100 percent by
improve productivity in livestock,
2050 instead of 2070 as in
are assumed to be delayed and
the LoS pathway. Renewable
come into play only when they
energy contributes to 95 percent
become economic.
of power generation by 2050.

59
GDP data from EIU and population data from UN
60
GCCA - concrete future roadmap - efficiency in design and construction

46 Decarbonising India: Charting a pathway for sustainable growth

Resources leveraged from — The report focuses only on — Finally, this report does not consider
McKinsey’s sectors and solutions emissions generated within the any non-economic benefits of
teams domestic borders of India. It does reducing carbon emissions, such as
not look at indirect emissions from improvements in society’s overall
50+ McKinsey global leaders, industry
imports, or the emissions from health and social life due to reduced
experts and sustainability experts
international shipping and aviation. pollution and better quality of
were consulted for their expertise and
environment.
inputs. This report also leveraged 10+ — It also covers briefly but does not
proprietary tools for various analyses carry out a detailed analysis on Nonetheless, we hope that our
and modelling. This includes sector- the potential impact of transition scenario-based analysis will help
and theme-specific tools such as the and demand shifts on jobs and readers gain an understanding of the
Global Energy Perspective model, employment. Likewise, it covers scale of response needed to achieve
McKinsey Power model, Battery the costs of the green transition sustainable growth over the next few
Insights, Nature Analytics, Hydrogen on the poor at a high level only. decades. Furthermore, we hope that
Insights, Chemical Insights (CI), CI The report does not provide this report assists public and private
Circular and Carbon Capture, Utilisation any policy recommendations or sector leaders in setting and meeting
and Storage model. microeconomic analyses on these their carbon emission reduction goals.
important issues.
McKinsey’s specialised teams including How to read this report
McKinsey Global Institute (MGI), Vivid — This report does not address
The overall summary of our pathway
Economics, Sustainability Insights, physical risks and adaptation
modelling, from the primary abatement
Energy Insights, Chemical Insights, topics. It also does not take into
measures to the required redesign of
Basic Materials Insights and Power consideration the societal and
the energy system, are discussed in this
Solutions have been fully leveraged. economic impact of the COVID-19
chapter (Chapter 1).
Experts from various sectors and pandemic in its analysis. Long-term
functions (e.g., Advanced Industries, energy consumption trends and Each sector has a different starting
Basic Materials, Chemicals & challenges that government and point and faces unique challenges in its
Agriculture, Electric Power & Natural businesses face in getting to net decarbonisation journey. We present
Gas, Oil & Gas, Banking, Sustainability zero have been assumed to be the the cost-optimal pathways for each
and Strategy & Corporate Finance) have same as pre-pandemic. Further, sector in sector deep dives in Chapter
driven the work directly. the war in Ukraine is changing the 2, and discuss the roles of hydrogen,
energy landscape and while it may CCUS, NCS and material circularity as
Limitations
make a clean-energy transition cross-sector enablers in Chapter 3.
While this report includes a thorough more complicated in the short Accelerated decarbonisation by 2050
bottom-up analysis of key sectors and term, this report doesn’t include would have significant socio-economic
cross-cutting themes, it does have the any impact of this conflict on India’s implications such as shifting land use,
following limitations: decarbonisation pathways. changes in energy mix, reskilling of
— The different sectoral and topic- — The pathways assumed in this the workforce, stranded assets and
wise analyses do not take into report are scenarios and not a inflation impact on the poor. We discuss
account future technological projection or forecast of what these implications in Chapter 4.
breakthroughs (e.g., Direct Air is to come. We have also not Financing the transition is a challenge
Capture) or structural shifts (e.g., assessed the impact of transition for countries around the world and India
complete overhaul of food systems on individual companies or major is no different. We discuss the short-
to vertical farming) that are not stakeholders. The decisions that and long-term financing challenges
currently foreseen to be in the individual stakeholders may take and implications in Financing India’s
conversation. in the absence of any changes in decarbonisation in Chapter 5 and
— The modelling assumes tax regulations and incentive structures conclude with a proposed list of ten
structures, tariffs, subsidies may differ owing to a number of actions in Chapter 6. Finally, the
as they are currently (e.g., on factors such as the differing costs appendix carries more details on our
transportation fuels). It does not of capital and payback expectations modelling approach, lists references
account for positive or negative they may apply to investment and includes a glossary of terms.
social impact, transaction costs decisions.
associated with switching to new
technology, communication costs
and administrative costs. All the
analyses have been done in real
dollars and rupees.

Decarbonising India: Charting a pathway for sustainable growth 47

2. Sector deepdives
2.1 Power sector

50 Decarbonising India: Charting a pathway for sustainable growth