CO2 Emission Reduction Strategies and Economic Development of India

N. Satyanarayana Murthy, Manoj Panda and Kirit Parikh
Additional contact information
N. Satyanarayana Murthy: N. Satyanarayana Murthy is with the Operation Planning Department, PSA Corporation Ltd, Singapore, e-mail: n.satya.murthy@gmail.com
Manoj Panda: Manoj Panda is Professor at the Indira Gandhi Institute of Development Research, Mumbai, e-mail: manoj@igidr.ac.in
Kirit Parikh: Kirit Parikh is a Member of the Planning Commission, Government of India, e-mail: kirit.parikh@nic.in

Margin: The Journal of Applied Economic Research, 2007, vol. 1, issue 1, 85-118

Abstract: This article examines the consequences of alternative CO 2 emission reduction strategies on economic development and, in particular, the implications for the poor by empirically implementing an economy-wide model for India over a 35-year time horizon. A multi-sectoral, inter-temporal model in the activity analysis framework is used for this purpose. The model with specific technological alternatives, endogenous income distribution and truly dynamic behaviour and that covers the whole economy is an integrated top-down–bottom-up model. The results show that CO 2 emission reduction imposes costs in terms of lower GDP and higher poverty. Cumulative emission reduction targets are, however, preferable to annual reduction targets and that a dynamically optimum strategy can help reduce the burden of emission reductions. The scenarios involving compensation for the loss in welfare are not very encouraging as they require large capital inflows. Contrasted with these, scenarios involving tradable emission quota give India an incentive to be carbon efficient. It becomes a net seller for the first 25 years, and because of reduction in carbon intensity it would demand less in later years when it becomes a net buyer. The results suggest that for India and other developing countries, the window of opportunity to sell carbon quotas is the next two decades or so.

Keywords: Carbon Dioxide; Emission Quota; Emission Trading; Economic Development; Activity Analysis; JEL Classification: O21; JEL Classification: Q52; JEL Classification: Q56; JEL Classification: Q58 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:mareco:v:1:y:2007:i:1:p:85-118

DOI: 10.1177/097380100600100104

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