Macroeconomic assessment of India’s development and mitigation pathways

Abstract

Although a rapidly growing economy, India faces many challenges, including in meeting the Sustainable Development Goals of the United Nations. Moreover, post-2020 climate actions outlined in India's Nationally Determined Contribution (NDC) under the Paris Agreement envision development along low-carbon emission pathways. With coal providing almost three-quarters of Indian electricity, achieving such targets will have wide-ranging implications for economic activity. Assessing such implications is the focus of our research. To do so, we use a hybrid modelling architecture that combines the strengths of the AIM/Enduse bottom-up model of energy systems and the IMACLIM top-down economy-wide model. This hybrid architecture rests upon an original dataset that brings together national accounting, energy balance and energy price data. We analyse four scenarios ranging to midcentury: business-as-usual (BAU), 2°C, sustainable 2°C and 1.5°C. Our 2°C pathway proves compatible with economic growth close to the 6% yearly rate of BAU from 2012 to 2050, at the cost of reduced household consumption but with significant positive impact on foreign debt accumulation. The latter impact stems from improvement of the trade balance, whose current large deficit is the primary cause of high fossil fuel imports. Further mitigation effort backing our 1.5°C scenario shows slightly higher annual GDP growth, thereby revealing potential synergies between deep environmental performance and economic growth. Structural change assumptions common to our scenarios significantly transform the activity shares of sectors. The envisioned transition will require appropriate policies, notably to manage the conflicting interests of entrenched players in traditional sectors like coal and oil, and the emerging players of the low-carbon economy. Key policy insights. Low carbon pathways are compatible with Indian growth despite their high investment costs. Moving away from fossil fuel-based energy systems would result in foreign exchange savings to the tune of $1 trillion from 2012 to 2050 for oil imports.. Achieving deep decarbonization in India requires higher mobilized capital in renewables and energy efficiency enhancements.. Phasing out fossil fuels would, however, require careful balancing of interests between conventional and emerging sector players through just transitions.

Developing new pathways for energy and environmental decision-making in India: a review

“…India's above 4 GtCO 2 scenarios, meanwhile, forecast an expansion of India's installed coal capacity (figure 3), although the percentage of coal in electricity generation decreases. Electricity demand growth is anticipated to be high enough to allow for India to meet its NDC low-emissions power goal while simultaneously increasing coal generation, especially if renewables growth does not keep up with the demand growth (Garg et al 2017, Gupta et al 2020b. Several of these scenarios estimate that coal capacity will increase to approximately 270-460 GW by 2030 (Byravan et al 2017, Chattopadhyay and Sharma 2017, Mathur and Shekhar 2020, Mukhopadhyay et al 2020; some expect it to increase as high as 550-740 GW (Shukla et al 2017, Mittal et al 2018 under high growth (8% annual GDP growth until 2030).…”

“…The total VRE generation share reported ranges from 52% to 100%. Gupta et al (2020b) demonstrates an alternative pathway where a high renewable share (50%) is supplemented by high gas generation to provide back-up peak-load.…”

“…In their narratives, the high-VRE scenarios highlight changes and investments needed to integrate a high share of intermittent renewable power in the power grid. This includes upgrading transmission and distribution networks, investing in battery storage and smart grid technologies, optimizing power systems operations, implementing demand response programs, and planning flexible back-up generation capacity that can ramp-up production when renewable dispatch drops (Lawrenz et al 2018, Gadre and Anandarajah 2019, Laha et al 2020, Gupta et al 2020b. The models used to develop these scenarios, however, are only capable of exploring a fraction of these issues 7 .…”

“…Limited scenarios (n = 4) have assessed the benefits of building envelope improvements and retrofits (Vishwanathan et al 2018, Yu et al 2018, Mathur and Shekhar 2020, Gupta et al 2020b. Envelope efficiency improvements in new buildings presents an enormous opportunity in reducing the energy demand.…”

Economic and social effectiveness of carbon pricing schemes to meet Brazilian NDC targets

“…MESSAGE and TIMES are both bottom-up, energy supply models that uses linear-programming to produce a least-cost energy system, optimized according to a number of user constraints, usually over medium to long-term time horizons.3 IMACLIM exists in a global multi-regional version(Crassous et al, 2006;Sassi et al, 2010) and in a growing number of country versions(Hourcade et al, 2010;Wills, 2013;Schers et al, 2015;Le Treut, 2017;De Lauretis, 2017;Gupta et al, 2019Gupta et al, , 2020Soummane et al, 2022;Le Treut et al, 2021). See http://www.centre-cired.fr/en/imaclim-network/imaclim-network-en/.…”