India committed to achieving net-zero emissions by 2070 at COP26 in Glasgow. Decarbonising the transport sector is crucial in accomplishing this target. Road transport accounted for 12% of India’s energy-related emissions in 2022. These emissions are projected to increase in the future because of a rise in population and urbanisation. Transport sector decarbonisation policies in India revolve around two key interventions: ethanol blending with petrol and electrification of vehicles. In 2021, the NITI Aayog released the Roadmap for Ethanol Blending in India 2020-2025, which set a target to achieve 20% ethanol blending with petrol by 2025 (advanced from the earlier 2030 target year set by the National Biofuels Policy, 2018). This supply-side intervention is aimed at reducing emissions from on-road fuel use, improving the financial health of sugar mills, improving energy security by reducing dependence on imported crude oil, and reducing sugarcane arrears.
On the demand side, the Ministry of Heavy Industries provides subsidies to reduce the upfront cost of purchasing electric vehicles (EVs) through the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) scheme. In addition, there are other types of policy support such as production-linked incentive schemes for domestic vehicle manufacturing and battery cell production, tax breaks on EV chargers and charging stations, and capital subsidies to oil manufacturing companies for setting up public EV charging infrastructure. However, there is a large price disparity between EV and conventional internal combustion engine vehicles (ICEVs). These policies and strategies are aimed at developing ethanol and
EV value chains in India, which could have positive environmental and climate impacts. The value chains link input markets, trade, and final demand both domestically and internationally. Therefore, apart from environmental impacts, investment in these value chains has a strong multiplier effect on the economy.
A study by the Center for Study of Science, Technology and Policy (CSTEP) titled Decarbonising India’s Transport Sector: Navigating Trade-offs of Biofuel Use and Electrification considered both economic and environmental factors. The study used a social accounting matrix–based multiplier model to simulate changes in EV consumption and increased ethanol blending to assess macroeconomic impacts.
