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Assessing the Consequences of India’s Shift Towards a New Climate

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By Ulrich von Lampe, Mercator Research Institute on Global Commons and Climate Change (MCC) gGmbH

The difference in incidence of total expenditures between the first and fifth quintiles, to eliminate the energy subsidy and the carbon price of US$40 per tonne of CO22. Negative values ​​correspond to regressive distributional effects. The size of the bubbles indicates the proportion of the state’s population that belongs to the first income quintile of India. Color indicates incidence due to subsidy removal and carbon taxation on the first quintile of the population (own detail). credit: energy policy (2023). DOI: 10.1016/j.enpol.2023.113621

India, with its 1.4 billion people, is the third largest emitter of greenhouse gases after China and the United States. The country is now taking the first steps toward a climate transition with scale goals to expand renewable energies, a modest shift in coal-fired power generation, and plans to price carbon in the form of emissions trading.

But the costs and benefits of climate protection are distributed unevenly across regions, so policy tools are urgently needed to compensate for this. This is the subject of a study by the Berlin Institute for Climate Research MCC (Mercator Research Institute on Global Commons and Climate Change).

The study has now been published in the journal energy policy. “This huge country of 29 federal states and seven union territories already has huge disparities in regional wealth,” explains José Ordóñez, who led the study as part of his PhD thesis at MCC and is currently working at the European Commission’s Joint Research Center in Seville. .

“We define an ambitious climate transformation scenario for individual geographic units, and examine the combined impact on income distribution, employment and industrial competitiveness. This yields an important conclusion for the central government: without compensating measures, the gap between poor and rich regions threatens to widen exponentially.”

To study its scenario, researchers use an input-output model fed empirical data to map direct distributional effects of policy measures.

They assume there will be an intensified effort toward climate protection, including a complete phase-out of coal, a massive expansion of solar and wind power generation, a $40-per-ton national carbon price for private homes and businesses, and the elimination of energy subsidies. The overall impact of this package on each individual region, on a qualitative scale from ‘extremely unfavorable’ to ‘extremely favorable’, is key.

The research reveals that the negative impacts are highly concentrated in the already poorer states in eastern India that are heavily involved in coal mining, most notably Jharkhand, West Bengal, Odisha and Bihar. Here, jobs will be lost, the burden on poor families will increase, and energy-intensive industries will come under pressure.

On the other hand, the relatively wealthier western Indian states of Mizoram, Delhi, Manipur and Nagaland will be the biggest winners from an ambitious climate policy. The model does not take into account the fact that negatively affected private households and businesses could adapt to the measures and thus improve their situation. But the researchers point out, among other things, that experience shows that short-term effects will be critical to the enforceability of energy and climate policy measures.

“From a political economic perspective, our work provides an important starting point for further development of climate change in India,” says Jan Steckle, Chair of the Working Group on Climate and Development at the Millennium Challenge Corporation and one of the co-authors.

“It helps us understand how the winners and losers in India’s climate policies are distributed. A strong regional focus of the losers in the short term can lead to major problems in the political process of implementing climate protection. This has already been shown, for example, in the struggle to eliminate Progressive out of coal in Germany”.

The researchers contend that climate transformation must be accompanied by new social and industrial policies to make it actionable in the struggle between competing interest groups, and in order to overcome regional resistance. This could be done, for example, using carbon price revenues, by carefully locating fossil-free energy production, or through compensation payments for phasing out coal.

It could also provide guidance for a possible fair energy transition partnership with western industrialized countries, i.e. phasing out coal in exchange for financial assistance, similar to South Africa, Indonesia and Vietnam.

more information:
Jose Antonio Ordonez et al., Just Energy Transition in India: Political Economy Challenges Across States and Regions, energy policy (2023). DOI: 10.1016/j.enpol.2023.113621

Provided by Mercator Research Institute on Global Commons and Climate Change (MCC) gGmbH

the quote: Calculating the Impacts of Climate Transition in India (2023, June 1) Retrieved June 1, 2023 from https://phys.org/news/2023-06-effects-climate-transition-india.html

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