Subject: Global Groupings and Conventions

To bolster investments in solar power projects, the International Solar Alliance (ISA), in its General Assembly approved the ‘Solar Facility’, a payment guarantee mechanism.

What is Solar Facility?

• It is expected to stimulate investments into solar projects through two financial components:

1. Solar Payment Guarantee Fund and
2. Solar Insurance Fund

• The thrust of the facility is to attract private capital to flow into “underserved markets” in Africa.
• The ISA would aim to crowdsource investments from various donors across the globe and proposed projects in Africa would be able to purchase payment guarantees or partial insurance premium from these funds.

Why such move?

• ISA’s mission is to unlock US $1 trillion (₹80 lakh crore) of investments in solar power by 2030 while reducing cost of the technology and its financing.

What is International Solar Alliance (ISA)?

• The ISA is an alliance of more than 121 countries, most of them being sunshine countries, which lie either completely or partly between the Tropic of Cancer and the Tropic of Capricorn.
• It is headquartered in Gurugram, India.
• The primary objective of the alliance is to work for efficient exploitation of solar energy to reduce dependence on fossil fuels.
• The alliance is a treaty-based inter-governmental organization.
• The initiative was launched by PM Modi at the India Africa Summit and a meeting of member countries ahead of the 2015 United Nations Climate Change Conference in Paris in November 2015.

Objectives of the ISA

• To mobilize investments of more than USD 1000 billion by 2030
• To take coordinated action for better harmonization, aggregation of demand, risk and resources, for promoting solar finance, solar technologies, innovation, R&D, capacity building etc.
• Reduce the cost of finance to increase investments in solar energy in member countries
• Scale up applications of solar technologies in member countries
• Facilitate collaborative research and development (R&D) activities in solar energy technologies among member countries
• Promote a common cyber platform for networking, cooperation and exchange of ideas among member countries

What does ISA formation signify?

• Climate action commitment: It symbolizes about the sincerity of the developing nations towards their concern about climate change and to switch to a low-carbon growth path.
• Clean energy: India’s pledge to the Paris summit offered to bring 40% of its electricity generation capacity from non-fossil sources (renewable, large hydro, and nuclear) by 2030.
• Global electrification: India has pledged to let solar energy reach to the most unconnected villages and communities and also towards creating a clean planet.
• Global cooperation: It is based on world cooperation irrespective of global boundaries.
• India’s Soft power: For India, possible additional benefits from the alliance can be a strengthening of ties with the major African countries and increasing goodwill for India among them.

Key initiatives

[A] Global Solar Atlas

• ISA alliance has partnered with World Bank to launch Global Solar Atlas at an ISA event at the World Future Energy Summit in Abu Dhabi.
• Global Solar Atlas is a free online tool that displays annual average solar power potential at any location in the world and thus identify potential sites for solar power generation.

[B] OSOWOG Initiative

• Under the ISA project, India envisaged having an interconnected power transmission grid across nations for the supply of clean energy.
• The vision behind the OSOWOG mantra is ‘The Sun Never Sets’ and is a constant at some geographical location, globally, at any given point of time.
• With India at the fulcrum, the solar spectrum can easily be divided into two broad zones viz. far East which would include countries like Myanmar, Vietnam, Thailand, Lao, Cambodia etc. and far West which would cover the Middle East and the Africa Region.

Implementation

• The OSOWOG would have three phases.

1. Phase I: Middle East, South Asia and South-East Asia would be interconnected
2. Phase II: Solar and other renewable energy resources rich regions would be interconnected
3. Phase III: Global interconnection of the power transmission grid to achieve the One Sun One World One Grid vision

Benefits of the project

• Attracting investment: An interconnected grid would help all the participating entities in attracting investments in renewable energy sources as well as utilizing skills, technology and finances.
• Poverty alleviation: Resulting economic benefits would positively impact poverty alleviation and support in mitigating water, sanitation, food and other socio-economic challenges.
• Reduced project cost: The proposed integration would lead to reduced project costs, higher efficiencies and increased asset utilization for all the participating entities.

Various challenges

• Lack of Funding: Providing the money for promoting solar electricity among the members is a challenge. The Alliance has very little money of its own.
• Expensive implementation: The cost of power has two components. The variable cost is the payment made for the numbers of units of electricity purchased. In addition, the buyer is required to pay a certain amount towards the fixed cost of solar supply.
• Battery-based Storage: Solar electricity is available only during the day when the sun shines. Thus, the storage of electricity is a difficult task.
• Cross-border transmission: Solar electricity has to overcome the roadblocks of transmission.  Cross-border transmission of electricity requires the establishment of transmission lines from the producer to the consumer country.
• Peak hour load:  The demand for electricity, however, is more during the morning and evening which are called “peak hours”. But it can be produced when the sun is shining.
• Climate change: Sudden overcast and rainfall in many parts of the tropics has been a major issues these days. Such weather hampers solar energy production
• Desired global consensus: It is hindered with the issues of intricate geopolitics, unfavourable economics, unwarranted globalisation and undue centralization that act against the concept.
• Highly ambitious: In a nation like India, it took us this long to connect all the regions of the country through a national grid and we are talking about ‘one world, one grid’.

Way forward

• ISA should focus on its core goals such as- aggregating demand, tariff, technical collaborations, and financial assistance for achieving its target.
• It further needs to ensure that solar benefits are clear and tangible to users beyond its cost ambitions.
• ISA should demonstrate business models that are viable for users, suppliers and financiers.
• Further, the alliance should support member countries in implementing policies to expedite these business models.
• Geo-politically, this is being touted as a clever strategy however financially and technology-wise, this has to make sense.

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The G4 nations have said that the Intergovernmental Negotiations on UN Security Council reform are constrained by a lack of openness and transparency.

Who are the G4 Countries?

• The G4 nations, comprising Brazil, Germany, India, and Japan are four countries which support each other’s bids for permanent seats on the United Nations Security Council.
• Their primary aim is the permanent member seats on the Security Council.
• Each of these four countries have figured among the elected non-permanent members of the council since the UN’s establishment.
• Their economic and political influence has grown significantly in the last decades, reaching a scope comparable to the permanent members (P5).

Deterrent in their cause

• The UK and France have backed the G4’s bid for permanent seats.
• All the permanent members of P5 have supported India’s bids for permanent seat.
• However, China has previously implied that it is only ready to support India if it does not associate its bid with Japan.
• The US has sent strong indications to Brazil that it is willing to support its membership; albeit, without a veto.

What holds them back?

• There has been discontent among the present permanent members regarding the inclusion of controversial nations or countries not supported by them.
• For instance, Japan’s bid is heavily opposed by China, North Korea, Russia and South Korea who think that Japan needs to make sincere reparations for war crimes committed during World War II.
• Under the leadership of Italy, countries that strongly oppose the G4 countries’ bids have formed the Uniting for Consensus movement, also called as Coffee Club.
• In Asia, Pakistan opposes India’s bid.

Why India deserves a permanent seat?

• India has been part of UN since inception.
• It has the world’s second-largest population and is the world’s largest democracy suited to represent South Asia.
• It has contributed maximum peacekeepers to UN so far.

Why reform UNSC?

• Non-representative nature: UNSC in current form is not representative of developing world and global needs, with primacy of policy being political tool in hands of P5, is well recognised globally.
• Contention over Veto and Technical Holds: Veto power with P5 enables any one of them to prevent the adoption of any “substantive” draft Council resolution, regardless of its level of international support.
• Divided institution: UNSC has become an organisation, which can pass strong resolutions against weak countries, weak resolutions against strong countries and no resolution against P5 countries.

Conclusion

• There is a possibility that if UN doesn’t reform itself, it may lose relevance and alternate global and regional groupings may assume greater importance.
• More global pressure from middle powers like G4 may force an expansion of UNSC as a possibility, but abolition of veto power in current set up is unlikely

Back2Basics: United Nations Security Council (UNSC)

• The UNSC is one of the six principal organs of the United Nations and is charged with the maintenance of international peace and security.
• Its powers include the establishment of peacekeeping operations, the establishment of international sanctions, and the authorization of military action through Security Council resolutions.
• It is the only UN body with the authority to issue binding resolutions to member states.
• The Security Council consists of fifteen members. Russia, the United Kingdom, France, China, and the United States—serve as the body’s five permanent members.
• These permanent members can veto any substantive Security Council resolution, including those on the admission of new member states or candidates for Secretary-General.
• The Security Council also has 10 non-permanent members, elected on a regional basis to serve two-year terms. The body’s presidency rotates monthly among its members.

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India stayed out of the joint declaration on the trade pillar of the US-led Indo-Pacific Economic Framework (IPEF) ministerial meet in Los Angeles, with Union Commerce Minister citing concerns over possible discrimination against developing economies.

Why did India opt out of the trade pillar?

• One of the reasons for staying out of the trade pillar was that the contours of the framework had not emerged yet.
• This is particularly about the kind of commitment each country would have to make on “environment, labour, digital trade and public procurement”.
• India’s decision also mirrors the decision to walk out after seven years of negotiations from the Regional Comprehensive Economic Partnership (RCEP).

What is IPEF?

• It is a US-led framework for participating countries to solidify their relationships and engage in crucial economic and trade matters that concern the region, such as building resilient supply chains battered by the pandemic.
• It is not a free trade agreement. No market access or tariff reductions have been outlined, although experts say it can pave the way to trade deals.

Members of IPEF

• The member nations include Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam.
• It includes seven out of 10 members of the Association of South East Asian Nations (ASEAN), all four Quad countries, and New Zealand.
• Together, these countries account for 40 per cent of the global GDP.

Four pillars of IPEF

1. Trade that will include digital economy and emerging technology, labor commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability, standards on cross-border data flow and data localisations;
2. Supply chain resilience to develop “a first-of-its-kind supply chain agreement” that would anticipate and prevent disruptions;
3. Clean energy and decarbonization that will include agreements on “high-ambition commitments” such as renewable energy targets, carbon removal purchasing commitments, energy efficiency standards, and new measures to combat methane emissions; and
4. Tax and anti-corruption, with commitments to enact and enforce “effective tax, anti-money laundering, anti-bribery schemes in line with [American] values”.

How do members participate?  

• Countries are free to join (or not join) initiatives under any of the stipulated pillars but are expected to adhere to all commitments once they enrol.
• Negotiations are meant to determine and list the provisions under each pillar and open the floor for countries to choose their ‘commitments’.
• The framework would be open to other countries willing to join in the future provided they are willing to adhere to the stipulated goals and other necessary obligations.

Reasons for the creation of IPEF

• US regaining lost credibility: IPEF is also seen as a means by which the US is trying to regain credibility in the region after Trump pulled out of the Trans Pacific Partnership TPP).
• Rising Chinese influence: Since then, there has been concern over the absence of a credible US economic and trade strategy to counter China’s economic influence in the region.
• Competing RCEP: It is also in the 14-member Regional Comprehensive Economic Partnership, of which the US is not a member (India withdrew from RCEP).
• “Pivot to Asia” strategy: US has intensified its engagement with the wider Asia-Pacific region to advance its economic and geopolitical interests.

India’s perception of IPEF

• PM Modi described the grouping as born from a collective desire to make the Indo-Pacific region an engine of global economic growth.
• India has called for common and creative solutions to tackle economic challenges in the Indo-Pacific region.

What does it have to do with China?  

• The US strategists believe the US lacks an economic and trade strategy to counter China’s increasing economic influence in the region since 2017.
• US companies are looking to move away from manufacturing in China.
• IPEF would therefore offer an advantage to participating countries, allowing them to bring those businesses into their territory.
• However, it officially excluded Taiwan despite its willingness and economic merit to join.
• This exhibits Washington’s geopolitical caution.

Reactions from the opponents

• Chinese Foreign Minister Wang Yi criticized the initiative as an attempt to further economic decoupling from China.
• He argued that the initiative, and the US Indo-Pacific strategy as a whole, created divisions and incited confrontation. It is destined to be ultimately be a failure.
• Taiwan was excluded in order to appease key “fence-sitter” countries such as Indonesia whose governments feared angering China.

Issues with IPEF framework

• IPEF would neither constitute a ‘free trade agreement,’ nor a forum to discuss tariff reductions or increasing market access.
• Unlike a traditional trade agreement, the US administration will not need congressional approval to act under the IPEF. Hence its legal status is questionable.
• This also raises doubts among potential participants about their reluctance to offer significant concessions under the agreement.
• The volatility of US domestic politics has raised concerns about IPEF’s durability.
• Unlike traditional FTAs, the IPEF does not subscribe to the single undertaking principle, where all items on the agenda are negotiated simultaneously.

Given the divisive nature of American politics, it is unclear whether the IPEF will survive past the Biden administration.

Way forward

• The IPEF’s launch in Tokyo was symbolic in nature; bringing the IPEF to fruition will involve significant domestic and international challenges.
• Without ratification by Congress, the IPEF’s fortunes will remain in limbo.
• Going forward, the US and the founding partners need to develop the process and criteria by which other countries from the region will be invited to join the negotiations on the IPEF.

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