PROSPECTS AND POLICIES FOR LOW CARBON ECONOMIC GROWTH OF INDIA

1
PROSPECTS AND POLICIES FOR LOW CARBON ECONOMIC
GROWTH OF INDIA

• Ramprasad Sengupta
• Professor of Economics
• Jawaharlal Nehru University (JNU), New Delhi
• Paper for Presentation in the Round Table on
• Fiscal and Non Fiscal Instruments for Sustainable
  Development of India
• at the NIPFP, New Delhi.

2
Prospects and Policies for Low Carbon Economic
Growth of India

• Climate Change due to Global Warming one of the
  most important global policy issues and
  challenges that humanity today faces
• This is the case of greatest market failure
• The rise in temperature is related with the
  rising level of stock of Green House Gases (GHG)
  arising from the entropic process of Worlds
  resource use
• However, the stock of GHG is a state variable and
  not a control one
• The emission of GHG is a flow variable and a
  control one.
• However as most of the CO2 emission arises from
  use of energy, the control of emissions relating
  to energy use is the ultimate control variable

3

• Climate can stabilise if the level of stock of
  GHGs attains stationarity. i.e. when the
  emissions can be offset by the rate of their
  absorption or transformation.
• Current Emissions exceed substantially the
  earths capacity of GHG absorption per unit of
  time.
• The Global Summit at the Copenhagen to find
  ways among others of curtailing total volume of
  emissions and of how to share the responsibility
  of the curtailment among Nations.

4

• The developing nations need to grow until the
  poverty, hunger, malnutrition, disease and
  illiteracy of their people are removed.
• However, emission is linked with the growth of
  scale of the economy, its structure, technology
  and pattern of resource use. Such countries need
  ecological space for the absorption of their
  carbon emission.
• This would require curtailment of the absolute
  level of emission of the high income countries
  which significantly exceeds the level that per
  capita carrying capacity of the earth can permit.
  

5

• All the nations, developing and developed,
  however, need to find ways for the weakening of
  the relationship between the economic growth and
  the environmental degradation particularly in the
  form of GHG emission.
• A more comprehensive global policy required to
  moderate the rate of rise of entropy of the
  worlds resource system through scientific and
  technical progress.
• The environmental economists have tested the
  Environmental Kuznets curve hypothesis beyond
  a threshold level of per capita income the growth
  can be accompanied by the improvement of
  environmental quality.
• There has been work on CO2 emission in the
  context of testing such hypothesis - mostly
  econometric work and by and large inconclusive.

6

• In spite of no absolute reduction in volume of
  GHG emission, some countries have achieved the
  weakening of the economy-CO2 relationship, such
  that their CO2 intensity of GDP has been
  declining.
• The concept of low carbon growth here would be
  the attainment of such decline of CO2 intensity
  with convergence to a limit value, which when
  multiplied by economys GDP, would not exceed the
  allowable emission limit, as per the emission
  quota based on the per capita principle (or some
  other principle) of allocation of world-
  ecosystems carrying capacity.
• Our objective in the paper is modest and limited.
  
• Examine if India is being able to reduce her CO2
  intensity of GDP
• What level she can achieve over the horizon of
  2031.
• Project what share of global eco space in the
  terms of absolute CO2 emission would be required
  for sustaining Indias high economic growth.

7

• Review Indias performance in the weakening of
  the GDP - CO2 emission relationship both in
  pre-economic reform and post-economic reform
  periods using decomposition methods. (Have
  economic reforms made any real impact? )
• Future projections of Indias energy related CO2
  emission for
• - alternative growth rate, energy price and
  technology scenarios - using econometric models
  with macro-level aggregate as well as sectoral
  approaches
• - under alternative hypothesis about sectoral
  energy behaviour.
• Derive the implications of the analysis of past
  performance and future projections in respect of
  Indias achievability of low carbon growth and
  its policy implications.

8
Composition of GHG-Emissions- 2005(In CO2
equivalent units)

• Note In India, the share of Agriculture in
  Methane and NOx emissions is 65 and 93
  respectively.

9
(No Transcript)
10
Indias comparative position in the World
11
Review of Indias performance
12
Source Based on IEA Data on Energy balances of
Non-OECD countries, different volumes.
13
Source Based on IEA Data on Energy balances of
Non-OECD countries, different volumes.
14
Source Based on IEA Data on Energy balances of
Non-OECD countries, different volumes.
15
15
16
Sectoral Distribution of Final Commercial Energy
Use
Sectoral Distribution of Total Direct and
Indirect Primary Energy (including Traditional
Fuels) in 2005
16
17
(No Transcript)
18
Supplies of Total Primary and Final Commercial
Energy and CO2 Emissions.
Source Based on IEA Data on Energy balances of
Non-OECD countries, different volumes.
18
19
Primary Commercial Energy and CO2 intensity over
time
19
20
Annual Average Growth Rate in the Pre-reform and
Post-reform Periods ()
21
(No Transcript)
22
Decomposition Method

• Methodology
• C ? e m
• Thus
• And
• Total CO2 Scale Effect Structural Effect
  Energy Intensity Effect Fuel Composition Effect.

23
(No Transcript)
24
(No Transcript)
25
Models of Projection for the future

• Macro economic approach Demand based on
  income, energy prices
• 2. Sectoral approach Alternative Demand
  Behaviour
• (a) Sectoral Income, Real Energy Price and
  Technology Energy Intensity.
• (b) Sectoral Income, Share of Electricity in
  Final Energy, and Energy Intensity
• Alternative Growth Rates 8, 6
• Real Energy Prices
• (a) no change in prices since 2005
• (b) Real Energy prices increasing at 3 compound
  rate per annum.

26

• Sc1A Macro-economic reference approach Demand
  for Final Energy f( GDP, real enery prices),
  GDP growth of 8 per annum, real energy price
  held constant at 2005 level.
• Sc1B Sectoral Approach, Income price based
  regression model of demand for final energy for
  Ind and Trans and demand model based on growth
  cum technical change (change in energy intensity)
  for Agr, Oth Svs Res sector, GDP growth of 8
  and real energy price held constant at 2005
  level.
• Sc1C Sectoral Approach Growth and technical
  change (share of electricity in final energy or
  energy intensity) based projection of Demand for
  all sectors. GDP growth of 8
• Sc2A Same as 1A except that all the real energy
  prices rising at an annual compound rate of 3
  per annum.
• Sc2B Same as 1B except that the real energy
  prices rising at an annual compound rate of 3
  per annum.
• Sc3A Same as 1A except that the GDP growth rate
  is 6 per annum.
• Sc3B Same as 1B except that the GDP growth rate
  is 6 per annum.
• Sc3C Same as 1C except that the GDP growth rate
  is 6 per annum.

27
Comparative Trend Growth Rate of Energy-Intensity
of Sectoral or Overall GDP
28
(No Transcript)
29

• Explanation of Sectoral Elasticity and Intensity
  behaviour Special comments on Agriculture,
  Households and other services.
• Supply side assumptions for the energy industry
  (electricity and others) on efficiency in
  projections

30
(No Transcript)
31

• Future projections
• for 8 scenarios which capture
• -the integrated efficiency of energy use as
  well as energy supply,
• -projections of absolute levels of emissions,
• -implications regarding structural dynamics of
  the economy,
• -energy and CO2 emissions and their respective
  intensities and per capita levels,
• -sectoral shares as well as fuel composition.

32
(No Transcript)
33
(No Transcript)
34
(No Transcript)
35
(No Transcript)
36
(No Transcript)
37
(No Transcript)
38
(No Transcript)
39
Percentage of CO2 Emission Sc1B
40
CO2 Emission (Dir Indirect Sectoral Share- )
Sc 1B
41
Projection of CO2 Emissions (mt.)
42
Projection of Electricity Generation Requirement
(mtoe) Generation Gross Electricity at Plant
43
Projection of Primary Energy 2005-31 (mtoe)
44
(No Transcript)
45
(No Transcript)
46
(No Transcript)
47
(No Transcript)
48
(No Transcript)
49
(No Transcript)
50
Policy Implications

• Any reduction in the Growth Rate
• What should be done about pricing
• What about support for new Technologies
• Special comments on energy poverty and
  requirement of carbon space for the household
• What can India commit to the International
  Community

51
Concluding Remarks
52
The End
53
INCOME POVERTY AND ENERGY POVERTY
54
Poverty Definitions

• Foster et. al.
• Poverty line in energy units derived from energy
  consumption pattern of those around income
  poverty line.
• Pachauri et. al.
• Poverty line defined in energy units based on
  basic needs as combined with access to energy
  carriers.
• Reddy
• Poverty line based on amount of energy required
  to meet basic lifeline need for LPG for cooking
  and similar energy requirement for electricity
  for lighting.
• Energy Poverty
• Deprivation of access to modern efficient clean
  energy as principal source, i.e. electricity,
  petroleum products, etc.
• In case of households, non-poor for lighting are
  those who have access to electricity as the main
  fuel for lighting. Non-poor for cooking are those
  who have access to hydrocarbons (kerosene and
  LPG) as the main fuel for cooking.

55
Rural Poverty Ratio Logit-relationship with
Rural MPCE levels LOG RPOV/(100-RPOV)
1.101 - 0.0039RMPCE
(0.001) (0.000) Adj R2
0.44 N99 Urban Poverty Ratio
Logit-relationship with Urban MPCE levels LOG
UPOV/(100-UPOV) -0.413 - 0.0014UMPCE
(0.3342)
(0.0024) Adj R2 0.11 N99 Source Based
on National Sample Survey Organisation Reports,
NSS 1993/94 (50th Round), 1999/00 (55th Round)
and 2004/05 (61st Round) Govt. of India.
55
56
Table Poverty Ratio and Estimates of Monthly Per
Capita Consumption Expenditure (MPCE) and Time
Required for Poverty Reduction in India
Source Authors own estimates based on NSSO
Reports, different rounds, CSO, 2004 and
Population Reference Bureau, 2007.
57
Relationship between Primary Source of Energy and
MPCE Regression Results
57
HHs Households
58
Source Estimated using data from National Sample
Survey Organisation Reports, NSS 1993/94 (50th
Round), 1999/00 (55th Round) and 2004/05 (61st
Round) Govt. of India.
58
59
The estimated accessibility of modern
energy for lighting
Income - Poverty
Ratio Rural Sector poverty ratio 28.3
4 Proportion of
household With access to electricity
44 84 Urban Sector
poverty ratio 25.7
3 Proportion of household With access to
electricity 88
96
60
Table Projected Accessibility of different Fuels
for Income Poverty
Source Authors own estimates based on NSSO
Reports, different rounds.
61
AppendixEnergy Poverty
62
Energy Poverty
63
AppendixEnergy Poverty
64

• Thank You