Green Energy Can Accelerate Sustainable Growth Across South Asia

Energy—along with the innovations, investments, and growth it makes possible across economies—is at the heart of development, and in South Asia,  the decarbonization of the energy sector is key to the region’s sustainable growth. The energy sector is the region’s largest greenhouse gas emitter, contributing to air pollution, imposing a high burden of disease, and possibly stunting economic growth. Especially with the growing demand for energy and a high dependency on fossil fuel imports (South Asia imports approximately two-thirds of its energy need) at a time when global energy prices are skyrocketing with the war in Ukraine, decarbonizing South Asia is even more critical.

Renewables are key in this transition to green, secure, and affordable energy, as they can help countries build resilience to volatile prices, lower energy costs, and mitigate climate change.  While South Asia has a huge renewable energy potential, Bhutan and Nepal are the only countries that rely on renewable sources as their primary energy source, although the latter still relies heavily on imported petroleum products for its transportation sector. Others continue to use fossil fuels, although India’s solar and wind market is rapidly developing.

Shifting the overall energy mix from fossil fuels to renewables would require a financing and policy framework that includes phasing out coal-fired power plants, reforming energy subsidies, and implementing carbon pricing. Using several sources, the World Bank’s latest South Asia Economic Focus (SAEF) assesses the challenges presented by South Asia’s transition to renewable energy sources and also weighs in on the labor market opportunities presented by this transition.

A Haven for Green Energy

South Asia’s potential for renewable energy is wide ranging. Bhutan and Nepal produce vast quantities of hydroelectric energy and their capacity is increasing. India, Maldives, and Sri Lanka can harness wind and solar, Bangladesh and Pakistan also have solar potential, creating opportunities to replace existing coal-fired capacity with renewables. These clean energy sources present exciting opportunities for the South Asian labor market:

• Create green jobs: South Asia’s energy and mining sectors have incorporated more green skills since 2015 (See figure 2.18 in the SAEF).  Green skills in the energy sector have steadily increased from 0.4% to 1.2% in 2021. There is a 60% increase in the hiring of green talent relative to 2016 due to heightened environmental awareness post-COVID.
• Enhance job quality: As energy importers, the share of workers in the energy sector is low in India and Pakistan, but green jobs in the sector are higher quality. The labor force surveys show that workers with “green” jobs in the sector generally earn more and are engaged in high-skilled occupations. This is good news as higher wages attract more workers and can ease the labor market friction during the transition.

Challenges of Energy Transition

South Asia’s transition from fossil fuels to green energy, however, would require cooperation between the public and private sectors, and firms and workers need to adapt:

• Shift away from coal: India is the second largest coal producer and consumer globally. The Indian coal mine sector employs about 1 million workers, coal provides about half of India’s commercial primary energy supply, and it contributes substantially to central and local economies. However, the Indian Railways—one of the largest electricity consumers in the country and the world’s fourth largest railway network in terms of size—announced its plan to become a net zero emitter of carbon by 2030. India itself has committed to net zero by 2070. However, in transitioning from coal production, issues like stranded assets and revenue losses must be addressed.

• Job migration: The location of jobs in the non-renewable and renewable energy sectors may necessitate workers to migrate to fill green jobs, creating huge challenges for families.  For example, green energy firms with green jobs are in areas with renewable potential. Rooftop solar, the most labor-intensive form of renewable energy, is concentrated in urban areas.
• Job disparity: The green transition would produce winners and losers. Workers engaged in non-green jobs in the energy sector are less educated, more likely to be in low-skilled occupations, and earn less than those with green jobs. Already disadvantaged, they may even risk losing their jobs. The transition can potentially harm economic growth and people’s livelihoods in regions dominated by fossil fuel production.

Enabling Its Green Ambitions

Nevertheless, South Asian countries have made mitigation commitments to transition to a low-carbon economy and green, resilient, and inclusive development (GRID), and incorporating these policies may help their transitions:

• Regulatory and fiscal interventions: Policies that align incentives to increase private sector involvement and reforms such as repurposing current subsidies would make renewable energy expansion at scale financially attractive in South Asian countries. For example, public-private partnerships (PPPs) can continue investing in energy-efficient technology to build the necessary infrastructure for the transition, like a PPP in India that is improving energy efficiency and business and public safety.
• Compensate affected workers: Policymakers should consider the distributional impact of the energy transition by ensuring those adversely affected are adequately compensated. Specifically, coal-dependent areas, non-renewable energy production firms, and their workers are likely to be adversely affected by the green transition. Resources to help affected firms diversify their production, create new jobs, and provide necessary job training to support low-skilled workers will ease the transition.
• Establish adequate social protection: Social protection programs should protect workers and households adversely affected by the transition. For example, the revenue from carbon pricing can be used for social protection; compensation for affected workers; training those who lose their existing jobs; and employment search assistance or relocation grants. Even with mobility transfers, migration may be challenging. 
• Training for the future: Education and training should focus on meeting future labor demand. For example, Nepal is applying the GRID approach to build human capital, enhance built capital, and sustain natural capital.

Undoubtedly, it’ll be a tough balancing act to green South Asian economies while meeting the region’s soaring energy needs and protecting those adversely affected. However, South Asia should seize the moment to strengthen its green energy financing and policies to accelerate its economic recovery post COVID-19, close energy access gaps, and ensure a just transition for the region.