Supranational Renewable Energy Alliances and South-Asian Countries

Punyashlok Dwibedy ( teaches at Indian Institute of Management, Indore.
13 January 2023

Realist, liberal, and idealist approaches have not been successful in resolving lingering issues between India and its neighbours. This paper presents a novel approach to addressing these problems. To produce goods and services based on renewable and clean energy, South Asian countries and China can come together to form a supranational entity, an idea I borrow from the European Customs Union and the subsequent economic integration of Europe. India and its neighbours can work together to establish a supranational body that will eventually render borders irrelevant and create an economically and technologically integrated region, which is crucial for the mitigation of issues related to climate change and fossil fuels.

The recent floods and droughts that have engulfed India as well as countries around India such as Pakistan and China have brought to the forefront the impact of climate change, which does not respect any geographical boundaries whatsoever. These natural disasters have affected countries like China and Pakistan. However, it is also a fact that the governments of India and the countries that border it do not have a relationship that is friendly enough to enable them to collaborate on projects to lessen the negative effects of the rapidly shifting environmental patterns. In this context, the role that businesses and the private sector play consequently becomes important along with the governments of these countries. The authors David Mowery, Joanne Oxley, and Brian Silverman wrote in their article entitled "Strategic Alliances and Interfirm Knowledge Transfer," that joint ventures were formed primarily for the “exploitation of natural resources" (Mowery, Oxley, and Silverman 1996:78). They also write in the same paper that recent alliances have more to do with spreading out costs of innovation because they had become too high. This was mentioned in the context of the same paper. In international contexts, the formation of alliances between different companies is not a new phenomenon. On the other hand, the formation of alliances between businesses in the nations surrounding India by businesses from India itself through the sharing of common goals is something that is novel in my formulation. This could model itself after the European Coal and Steel Community (ECSC), which was a supranational coal and steel union established in six European nations on the basis of an international agreement (EUR-LEX 2018). In addition to this, it furnished the nations of Europe with a foundation upon which they could later move toward economic integration (Orlow 2000). A number of nations gave up their economic sovereignty by placing their trust in a supranational body, having a common currency, and having a common banking system in order to become members of the European Union, which was made possible by the customs union's role in facilitating a subsequent free trade agreement between the nations of Europe. This led to the establishment of the European Union. These benefits are a direct result of the early union on customs issues that existed between a select few European nations. In a similar vein, the countries of South Asia and China have the potential to collaborate in order to establish a union for renewable energy. This union, which could be a supranational body similar to the ECSC and be dubbed the South Asian Renewable Energy Union (SARENEU), could involve all of these countries.

Each nation will be better off as a result of this union. The literature on comparative advantage investigates the differences in resources and capabilities that exist not only between countries but also within countries and between firms (Bernard, Redding and Schott  2007; Hunt and Morgan 1995). Comparative advantage, according to other writings on the same topic, can promote "joint effects of technology and factor endowments," (Costinot, 2009: 1165) which may also lead to cooperative work between South Asian nations and the Chinese. There are businesses in India that are focused on renewable energy that have been successful on a national scale. One could use this as the foundation for a supranational organisation.


Why a Supranational entity?

The governments and states of South Asia and China have been unable to manage a significant number of the lingering problems for a number of reasons, including problems with the borders, involvement of the military, a crisis in governance, and the preponderant role that politics and diplomacy have played in the negotiations and deliberations. A lot of what the governments of South Asian countries, including India's, have done in the past is to look at either a realist framework of dealing with some neighbours and using the liberal framework to deal with others. This is because South Asian countries have similar institutional arrangements and are developing countries. The very nature of a business enterprise requires it to incorporate tenets drawn from both the realist and liberal philosophies. It is in many ways analogous to the customs union and, later, the European Union, in that it involves the pooling of economic resources in exchange for shared innovation in the production of goods that are powered by clean energy. In addition to serving as a model for economic integration, the European Union established a mechanism for a supranational juridical system in order to address the issues that arise from commercial and industrial interactions. This is a mechanism that can be followed by India and its neighbours, in which each nation has a say in the kind of laws and the juridical system that will take care of issues relating to this particular matter. Due to the role it plays in undermining the sovereignty, the supranational justice system could become a contentious issue. However, the model of the WTO's grievance redressal system could be incorporated into the system. In this model, the laws for this particular activity would remain at the supranational level, and the supranational body would retain all jurisdiction.

The ideas of power, dominance, and self-interest that bind realist theory are an active component of the affairs of a business organisation, and there is a case for Foucauldian power to be inherent within the context of international business considerations. Realist theory is a theory that binds together the concepts of power, dominance, and self-interest (Foucault 2000; Sayer 2012; Selby 2007). Due to this, such presumptions are present in businesses. What is fascinating is the environment in which South Asian businesses operate. Businesses in South Asian countries, including those in India and China, have been brought up in a socialist culture. In this culture, the role of a business, in addition to making profits, has been seen to be helpful to society (Appadorai 1968; Garde 2011). In South Asian business, there is also a presence of the ideals of liberalism, which are thought to be normatively superior to those of realism in terms of their assumptions of morality and working together (for example the recent decision to bring Cheetahs back to India from Africa was funded largely by Indian Oil Corporation). It is expected that rather than having a shareholder perspective, businesses in India, China and the broader South Asian region will have a stakeholder perspective on how they should be run. The recently implemented corporate social responsibility regulations in India make it obligatory for businesses that have been profitable for at least three years in a row to donate 2% of their annual profits to charitable causes (Atale and Helge 2014). It is assumed that South Asian businesses are concerned about society in addition to making a profit, these companies are excellent candidates for combining the assumptions of realism and liberalism in order to forge an international business alliance in each country. The continuity of one's sovereignty is another important factor to consider. A supranational body of renewable energy can help bridge the issues of sovereignty in those countries with fluid notions of sovereignty. This is because trade and the economy will provide development to those regions that are less developed.

These companies could potentially work together in the field of renewable energy. This is the case for two different reasons. The first reason has to do with the fact that renewable energy is widely considered to be the industry of the future, and that all governments have committed to increasing their use of renewable energy in order to meet their requirements. Both India and China are major contributors to global warming pollution, which has a significant negative impact on India's surrounding countries. In his article titled "Green Giant: Renewable Energy and Chinese Power," (2018) A.M. Jaffe makes the point that China is moving ahead in the use of and manufacturing of solar-related products as well as electric vehicles. According to statements made by India's power minister Piyush Goyal in August 2017, the country intends to sell only electric vehicles by the year 2030. India is both a major polluter and a victim of pollution (Jaffe 2018). India is already in the process of constructing solar parks different locations around the country. India is one of the co-founders of the International Solar Alliance, and India and France were the hosts of the organization's first summit in March of 2018. Both India and China are obviously shifting their attention toward the utilisation of renewable energy sources. The non-controversial and renewable nature of non-conventional energy is the second reason why I believe it will be simpler for businesses that focus on renewable energy to form international alliances. India and its neighbours are suffering from an energy crisis and have an urgent need for renewable energy. It has been exacerbated by the crisis in Ukraine and for Sri Lanka, the economic crisis has pushed energy insecurity to the brink. The majority of them do not have the necessary resources in terms of technology to establish such industries in their home countries. Both India and China have reached a higher level of technological sophistication, which has allowed them to create industries in the renewables sector, specifically in the solar and electric automotive industries. Hence, they can provide joint leadership to such an initiative in the region.

Aside from that, the focus on climate change at various multilateral conferences like SCO and BRICS provides businesses in India and China with an opportunity to enter this market. This is the kind of enterprise that possesses the potential to resolve a large number of ongoing as well as any potential residual issues and conflicts that exist between the countries. It is also worthwhile to imagine that some critics might believe this to be a simplistic argument to make, but what I am saying is that traditional alliances in business have been formed from developed markets to developing ones. In the case of South Asia, all of the countries are in the process of developing, and their approaches to culture, business, society, and institutions are very similar. The governments of India and China are working together to advocate for a new global order that prioritises the use of renewable energy. South Asia and China have the highest population densities of any regions on Earth. This is a market that is difficult to leave and has a lot of demand. Hence, it is not outlandish to think that a supranational renewable energy Union could become an important source to bind the countries together for both business as well as political reasons.

To what extent can the supranational entity thrive, and what does this mean for each nation individually?

The supranational entity will have characteristics similar to those of the European Coal and Steel Community. In addition to this, there is a practical reason for the countries and companies to work together. For example, Indian solar energy companies can take advantage of Chinese production of hardware, use their own technological and engineering capabilities, and make hay with the third country's labour force and institutional support. This is made possible by the abundance of sunlight that is available in almost all South Asian countries as well as the geographical location of China. Here, we make use of the literature on comparative advantage once more (Bernard et al. 2007; Costinot 2009) to make the point that, similar to how the nations of Europe came together on the basis of a common coal and steel union, the nations of South Asia and China can come together on the basis of the renewable energy needs of the countries. For Pakistan, this would mean making use of the country's labour force, leading to the creation of new jobs. For Nepal and Bhutan, this would mean valuable foreign reserves coming into the country as well as making use of the country's topography and labour in order to produce renewable power. It would also feed into Bhutan’s concept of Gross National Happiness which prioritizes environmental conservation. Sri Lanka, would benefit from the investment of China and India and help reduce its energy bills and safeguard precious foreign exchange. A supranational energy union would mean that companies in the two giants' countries of India and China could internationalise and use their advantages in technological superiority and manufacturing prowess to create not only an economic advantage but also a political advantage and a diplomatic advantage for their respective countries. This would be advantageous for all parties involved.

The concept of renewable energy will soon predominate as the driving force behind our shared destinies. As a result of the United States falling behind on its role as the leader of the free world in matters pertaining to climate change, it will be up to the governments, businesses, and public of South Asian nations, as well as the political offices of China, to work together. If this model is successful, there is an additional incentive for them, and that is the possibility of peace that will last. Climate change, energy security, and the availability of clean energy resources are all issues that have an impact on every single human being on the planet. Migration patterns, agricultural distress, and access to low-cost energy will bring people together like no other cause will be able to. When something as important as a person's life is at stake, it is simple to rally everyone around a common goal. The private sector needs to take the initiative here, and the government should support them from the side-lines. The field of clean energy presents the best opportunities for collaboration in any field. The common goal of India and its neighbours gaining access to renewable and green energy sources will supplant any remaining agenda items, given the stakes involved in our collective economic, health, and political security.

Punyashlok Dwibedy ( teaches at Indian Institute of Management, Indore.
13 January 2023