Energy-GDP decoupling in a second best world--a case study on India

Céline Guivarch and Sandrine Mathy

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Abstract: Reference emission scenarios in the literature have been the target of criticisms that suggest they convey too optimistic views on spontaneous energy-GDP decoupling of emerging countries economies. This article focuses on the case of India. It explores the role of current suboptimalities of the Indian power sector (structural under-investment in the sector leading to capacity shortage, power cuts and low efficiency) on future energy-GDP decoupling. To do so, it uses a hybrid general equilibrium framework, in which these suboptimalities are explicitly introduced. The results highlight that whether the constraints on investments in the power sector persist or not leads to contrasted trends in energy-GDP decoupling and GHG emissions. Over the short-term, capital scarcity in the power sector constrains the development of energy-intensive activities and therefore leads to higher energy-GDP decoupling. But on the longer-term, constrains on the power sector capacity limits substitution from fossil fuels to electricity, which entails both a low energy-GDP decoupling and a constraint on GDP growth when oil prices are high. The alleviation of suboptimalities appears thus as an insurance policy towards future oil price increase.

Keywords: India; energy intensity; second-best world; power sector; reference scenario (search for similar items in EconPapers)
Date: 2012-01-25
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00724495v1
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Citations: View citations in EconPapers (9)

Published in Climatic Change, 2012, 113 (2), pp.339-356. ⟨10.1007/s10584-011-0354-8⟩

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Journal Article: Energy-GDP decoupling in a second best world—a case study on India (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00724495

DOI: 10.1007/s10584-011-0354-8

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