ECONOMY OF TOMORROW India and the global Green
ECONOMY OF TOMORROW India and the global Green Energy Transformation Contact: Marc Saxer, marc. saxer@fesindia. org
Contact: marc. saxer@fesindia. org With labour intensive industries moving out if China… … India hopes to attract manufacturing investment to create millions of jobs
However, there is a second trend in global investment flows… South to North 1 trillion USD since July 2014 North to South 2 trillion USD from 2009 -2014 … manufacturing is moving back to the old industrial centers Contact: marc. saxer@fesindia. org
Digital automation reduces labor cost, making old industrial centers competitive again… … while creating less jobs than hoped for in emerging economies. Contact: marc. saxer@fesindia. org
Manufacturing cost in emerging countries reach the level of the United States… … undermining their comparative advantage. Contact: marc. saxer@fesindia. org
The window for export driven industrialization is closing… ECONOMY OF TOMORROW Shrink ing m anufa cturin g cost under cut co mpeti tive a dvant age Development High bor a l r e ivity t c u rod ess l s e t crea e ent m y o mpl p …turning development into a gigantic race against time. Contact: marc. saxer@fesindia. org
If labour cost advantages are levelled, other factors become more important… • Long transport distances • Supply chains • Rule of Law • Skilled workforce • Quality …not at least the cost of ENERGY. Contact: marc. saxer@fesindia. org • Political Stability
In the old industrial centers, the cost of energy starts to surpass the cost of labour … Labour Energy & Raw Materials Other … as the biggest cost factor in manufacturing. Contact: marc. saxer@fesindia. org Germany Manufacturing Cost
The energy transformation is driven by interests beyond climate change… Capital: Carbon Bubble Civil Society: Climate Change Security Sector: Geopolitical Risk Contact: marc. saxer@fesindia. org Industry: Competitiveness … but is a strategic project to restore the competitiveness of the old industrial centers
Contact: marc. saxer@fesindia. org TECHNOLOGY The green energy revolution is made possible by technological breakthroughs… … reducing the cost of solar power as well as new solutions for storage and distribution
MARKET While in the short run, the energy transformation drives up energy cost… Source: Fraunhofer ISE … in the long run, higher energy efficiency and lower cost for solar energy will significantly reduce the cost of energy Contact: marc. saxer@fesindia. org Historical price development of photovoltaic modules
Contact: marc. saxer@fesindia. org GEOPOLITICS Renewables are a way to improve energy security… … by reducing dependency on geopolitical hotspots
LEGISLATION European governments have started to legislate the exit from the carbon economy… National Targets for Energy from Renewables, as codified in national energy laws: Sweden Finland Italy 2025: 45 % 2035: 55 -60% 2020 - 50% 2050 – 100% 2020 – 38% 2020 – 17% … calling into question trillions of subsidies for fossil fuels. Contact: marc. saxer@fesindia. org Germany
CAPITAL The Bank of England warned institutional investors against a USD 28 trillion “carbon bubble”… Pension funds, required by Law to invest only in assets rated secure, need to hedge their exposure to “carbon risk”. . . …. Major utilities corporations (Eon, Enel) have started to sell off their entire conventional power plant fleet…. Contact: marc. saxer@fesindia. org …. „Peak Oil“ may have already happened in financial terms. … if resources in the books of fossil assets cannot be produced due to climate change legislation.
If India wants to win the race for development. . . With the comparative advantage of cheap labour eroding…. …. and energy cost slowly becoming a disadvantage. . . … India will find it increasingly difficult to attract manufacturing. … or will the biggest infrastructure build-up in history lead into a technological dead end? … it must not miss the bus of green growth Contact: marc. saxer@fesindia. org Will India become a world leader in renewable energy (PM Modi, February 2015)….
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