In September, India signed and exchanged the first-of-its-kind agreement focused on a clean economy under the Indo-Pacific Economic Framework (IPEF) for prosperity, together with the fair economy agreement, and an IPEF overarching arrangement as well. The clean economy pillar is one of the three pillars of IPEF that India has agreed to join (out of a total of four pillars under IPEF). What are the benefits that may accrue under the clean economy agreement? What more could be done to augment this pillar domestically?
The significance of the IPEF clean economy agreement to India stems from the fact that the IPEF may serve as a mechanism to attract investment into India from the IPEF partner nations. Here, as part of the First Investor Forum under the IPEF clean economy pillar, which is meant to catalyse investment into green technologies, a summit was held in Singapore in June. This investor forum materialised into an MoU among companies from India, Singapore, and Japan, following which Singapore-based Sembcorp will be investing ₹36,238 crore for a state-of-the-art green ammonia plant in Thoothukudi, Tamil Nadu.
Furthermore, while not explicitly stated in the IPEF clean economy agreement, the IPEF could also serve as a conduit for India and other partner IPEF nations to coordinate their actions across the green and critical mineral supply chains. On the former, to date, eight cooperative work programmes (CWP), which is a provision under the IPEF clean economy agreement, have been established. The purpose of these CWPs is to supposedly help stoke the production of certain critical minerals. India too, has a proposal here for e-waste urban mining.
However, besides the provisions of this agreement, what more could be done to promote the agenda of the IPEF clean economy pillar? Here are three suggestions.
One, map the critical minerals supply chain across all IPEF nations. Currently, in the provision on “information sharing” under the clean economy agreement, partner nations only have to “share regular updates to the IPEF Clean Economy Committee on the implementation” of the agreement.
Furthermore, other provisions seek to promote “exchanging information and best practices on regulations, frameworks, safety standards, and measures” when it comes to clean energy technology development. However, the IPEF partner nations could also have a dedicated database where they can provide data on production volumes, trade data, and market trends on critical minerals. This might lead to transparency and enable an accurate assessment of the vulnerability in the supply chains when it comes to critical minerals.
India should develop a framework for keeping track of the demand for critical minerals originating domestically. It is possible that the government may not have the requisite visibility into certain supply chains due to the demand for critical minerals being spread across other downstream users, and even government agencies. Such data on the overall demand should be pooled together to present an accurate picture of the current project’s future demand for critical minerals.
Two, the critical minerals list should be designated and updated periodically. There is a lot of sense in benchmarking the list of critical minerals to those historically seen as being in scarce and having applications across national security, public health, job creation, and technology development such as electric vehicles. However, this list should be updated to reflect other trends such as refining capacity for certain minerals (because resource deposits are not the same thing as their availability), nature of ownership for certain critical minerals, and forecasted demand and supply mismatches for certain minerals.
Three, the focus on non-traditional green technologies and critical minerals. Here, the IPEF could serve as an ideation mechanism to consider not just contesting the concentration of supply chains in particular geographies by recreating similar supply chains, but possibly on “accelerating leapfrog technologies capable of circumventing present supply vulnerabilities and drive cost-competitive alternatives in less saturated sectors”. This was the suggestion made in a recent Carnegie Endowment for International Peace Working Paper by Milo McBride that focuses on US policy for green supply chains. However, this suggestion may well be invaluable for the larger IPEF grouping as well.
India has now signed three pillars under the IPEF. If the IPEF leads to promising outcomes for India under the three pillars, it may encourage policymakers to consider entering into other similar agreements, such as Critical Minerals Agreement with the US, that also seeks to promote resilient green supply chains. This could be a win-win for both the US, which is looking to increasingly “friendshore” such supply chains, and for India too, which is trying to emerge as an alternative to geographically concentrated supply chains in certain regions.
Konark Bhandari is fellow, Carnegie India.The views expressed are personal
