Navigant Research Blog

Driving Green in India

Lisa Jerram — December 31, 2015

Beijing’s infamous smog attracts more media attention, but there’s another city that holds the title in terms of pollution. The World Health Organization (WHO) dubbed Delhi the world’s most polluted city based on data from 1,600 cities collected between 2008 and 2013. How bad is the city’s air pollution problem? The WHO found that levels of PM2.5 (particulate matter under 2.5 microns) in Delhi were 15 times the maximum advised level. Delhi is not alone; Indian cities scored 13 spots in the WHO’s assessment of the 20 most polluted cities in the world.

So why does Beijing attract more attention? It’s partly due to China’s economic power, and partly due to its emergence as a global power and its leaders’ evident interest in expanding the country’s influence in global affairs. China declared its first ever red alert warnings in Beijing in early December, right in the middle of the Paris climate change talks, where China played a central role in the agreement negotiations. The pressures on India are somewhat different, as India has not taken quite the same high profile approach to global economic, environmental, or diplomatic debates. China has also been ahead of India in monitoring its pollutants. However, Indian political leaders are increasingly feeling the need to address the problem, especially as outside agencies such as the WHO catalog the issue.

Sources of Pollution

Vehicle emissions are a major contributor to India’s pollution problem, but the country’s vehicle emissions regulations lag behind those in Europe and North America, and it has seen little adoption of cleaner fuel vehicles. We are now seeing Delhi embracing brute-force mechanisms to control vehicle emissions, including vehicle bans and driving limitations. From January 1 to 15, drivers in Delhi will only be allowed to drive on alternate days. Given the number of exceptions, the policy may have limited impact.

India is also ending its recent—and relatively short-lived—love affair with diesel. India’s favorable taxation rates for diesel meant it was cheaper than gasoline, and the country saw diesel vehicles reach 50% or higher of new passenger car sales in the past 5 years. Diesel fuel is now back closer to parity with gasoline, so gasoline vehicle sales are rising. India was also touched by the Volkswagen (VW) diesel emissions scandal. VW will have to recall over 300,000 diesel vehicles that were found to be emitting more than is allowed under Indian regulations—regulations that were already much less stringent than European and U.S. standards. This spells trouble for diesel in India, with the capital region already declaring bans or restrictions on various types of diesel vehicles.

India is going to have look increasingly to alternative fuels to help reduce vehicle emissions. In Delhi, taxis and ridehailing services like Uber must switch to natural gas. India is also looking to spark adoption of hybrid and electric vehicles.  The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) program provides subsidies for hybrid and plug-in cars, buses, scooters, and rickshaws through 2020. The government’s goal is to have around 6 million electric or hybrid vehicles on the road by 2020. While only the goal for passenger cars is just 8% of the 6 million, given the anemic sales of hybrid and electric cars to date, even that will be challenging. Navigant Research estimates that sales of hybrid and electric cars make up less than one-fifth of 1% of the current passenger car market in India. India will have to significantly ramp up domestic manufacturing of hybrid and electric vehicles and offer additional incentives to be able to reach this goal.

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