Achieving sustainable development in India along the low carbon pathways: macroeconomic assessment

Abstract

Achieving fast and inclusive economic growth concurrently with greenhouse gases (GHG) emission control could have wide-ranging implications for the Indian economy, predominantly fuelled by fossil energies. India faces high income inequality with the bottom 50% of its population owning only 2% of total national wealth. Other developmental challenges include 304 million people living in poverty, 269 million without access to electricity, 92 million without access to safe drinking water, and around 2 million homeless. Despite such challenges, India has committed to reduce the GHG emission intensity of its GDP 33–35% below its 2005 level by 2030, including via turning 40% of its power-generation capacity away from fossil sources. To explore the macroeconomic consequences of achieving development along low-carbon pathways, we use a hybrid modelling architecture that combines the strengths of the AIM/Enduse bottom-up model of Indian energy systems and the IMACLIM top-down economy-wide model of India. This hybrid architecture stands upon an original dataset that reconciles national accounting, energy balance and energy price statistics. With this tool, we demonstrate that low-carbon scenarios can accommodate yearly economic growth of 5.8% from 2013 to 2050 i.e. perform close to if not slightly higher than our business-as-usual scenario, despite high investment costs. This result partly stems from improvement of the Indian trade balance via substantial reduction of large fossil fuel imports. Additionally, it is the consequence of significant shifts of sectoral activity and household consumption towards low-carbon products and services of higher value-added. These transitions would require policies to reconcile the conflicting interests of entrenched businesses in retreating sectors like coal and oil, and the emerging low-carbon sectors and technologies such as renewables, smart grids, electric vehicles, modern biomass energy, solar cooking, carbon capture and storage, etc.