Skip to main content

Advertisement

Springer Nature Link
Log in

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

  • Published:
Climatic Change Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
$34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8
Fig. 9
Fig. 10
Fig. 11

Similar content being viewed by others

Explore related subjects

Discover the latest articles and news from researchers in related subjects, suggested using machine learning.

Notes

  1. These revisions upwards of future growth rates for emerging countries date from before the financial crisis. More recent studies either keep assuming high growth rates for emerging countries in the coming years (see for instance IEO 2009 in Table 1), or take into account a relative slowdown of economic growth (see for instance WEO 2009 in Table 1).

  2. Following the Copenhagen Accord, India pledged to reduce the emission intensity of its GDP by 20–25% in 2020 compared to 2005 level, and China to lower its carbon dioxide emissions per unit of GDP by 40–45% in 2020 compared to 2005 level.

  3. In IEO, energy demand growth drivers for India are not detailed.

  4. In this subsection, we often refer to WEO 2007, as this edition was dedicated to India and China.

  5. This number however corresponds to a relatively low equipment rate: around 200 vehicles for 1000 persons. It is around 800 vehicles for 1000 persons today in USA.

  6. Over the projection period, the efficiency of coal fired power generation is projected to improve considerably, as the new plants will be larger and more efficient, and more supercritical units will be built.

  7. These measures are not considered in the IEP reference scenario.

  8. The level of T&D losses is in fact uncertain. For instance, the value stated by the Indian Planning Commission was 22% in 1998 while the World Bank (1998) pointed out that it could actually be twice this official level. Moreover, as there is no metering of the electricity consumption it is difficult to distinguish technical from commercial losses.

  9. For further description of suboptimalities and of the institutional aspects of the Indian power sector, refer to Mathy and Guivarch (2010).

  10. Details concerning calibration and disaggregation are given in SOM.

  11. See SOM for details on these assumptions.

  12. Guivarch et al. (2011) analyze the impact of the real wages rigidities on the model results.

  13. Following (Corrado and Mattey 1997), we assume that this is generally caused by higher labour costs due to extra hours with lower productivity, costly night work and more maintenance works.

  14. See SOM for further details on the representation of the evolution of energy supply and demand, energy efficiency and induced technical change.

  15. Mean generation costs increase when capacity is overused due to the existence of static decreasing returns due to higher labour costs and because less efficient units are switched on last at the aggregate level. By default, following Corrado and Mattey (1997), in our model the increasing factor is attached to wages.

  16. There are alternative representation of shortages, in particular explicit restriction of demand growth in some sectors, which could have different economic effects.

  17. Oil prices in imaclim-r result from the endogenous interplay between the strategic behaviour of oil producers, constraints on supply (temporal constraints on capacity development and total reserves available) and demand dynamics. Assumptions concerning oil reserves amount to 2.200 Gbl of conventional oil and 1.200Gbl of non conventional oil (including extra-oil in Venezuela and tar sands in Canada). This is in line with estimates from the US Geological Survey.

References

  • Aglietta M, Borgy V, Château J, Juillard M, le Cacheux J, Le Garrec G, Touzé V (2006) World Growth and international capital flows in the XXIst century. Working Paper OFCE 2006–07, April. 41pp

  • Blanford GJ, Richels RG, Rutherford TF (2008) Revised emissions growth projections for China: why post-Kyoto climate policy must look east. Working Paper, September. 32pp

  • Corrado C, Mattey J (1997) Capacity utilization. J Econ Perspect 11(n°. 1):151–167

    Article  Google Scholar 

  • Dasgupta N (1999) Energy efficiency and environmental improvements in small-scale industries: present initiatives in India are not working. Energy Policy 27:789–800

    Article  Google Scholar 

  • Dorin B, Jullien T (2004) Agricultural incentives in India. Past trends and prospective paths towards sustainable development. Manohar, New Delhi, 334 pp

    Google Scholar 

  • EIA (2006) International Energy Outlook 2006. Office of Integrated Analysis and Forecasting, U.S. Department of Energy, Washington, DC. 192pp

  • EIA (2007) International Energy Outlook 2007. Office of Integrated Analysis and Forecasting, U.S. Department of Energy, Washington, DC. 220pp

  • EIA (2008) International Energy Outlook 2008. Office of Integrated Analysis and Forecasting, U.S. Department of Energy, Washington, DC. 260pp

  • EIA (2009) International Energy Outlook 2008. Office of Integrated Analysis and Forecasting, U.S. Department of Energy, Washington, DC. 274pp

  • Goldemberg J (1998) Leapfrogging energy technologies. Energy Policy 10:729–741

    Google Scholar 

  • Graus WHJ, Voogt M, Worell E (2007) International comparison of energy efficiency of fossil power generation. Energy Policy 35:3936–3951

    Article  Google Scholar 

  • Guivarch C, Crassous R, Sassi O, Hallegatte S (2011) The costs of climate policies in a second best world with labour market imperfections. Climate Policy 11:768–788

    Article  Google Scholar 

  • IEA (2006) World energy outlook. OCDE/IEA, Paris

    Google Scholar 

  • IEA (2007) World energy outlook. OCDE/IEA, Paris

    Google Scholar 

  • IEA (2008) World energy outlook. OCDE/IEA, Paris

    Google Scholar 

  • IEA (2009) World energy outlook. OCDE/IEA, Paris

    Google Scholar 

  • IPCC (2000) Special Report on Emissions Scenarios: a special report of Working Group III of the Intergovernmental Panel on Climate Change. I Cambridge University Press, New York

    Google Scholar 

  • Kim Y, Worrell E (2002) International comparison of CO2 emission trends in the iron and steel industry. Energy Policy 30:827–838

    Article  Google Scholar 

  • Kumar A, Kumar V (2008) Energy, industries and commerce, High-Level India-EU Seminar, Potsdam, 27–29 May 2008. Available at: http://www.climatecommunity.org/documents/Paper8-Energy-industries-commerce_001.pdf

  • Mathy S, Guivarch C (2010) Climate policies in a second-best world—a case study on India. Energy Policy 38(3):1519–1528

    Article  Google Scholar 

  • Mongia P, Schumacher K, Sathaye J (2001) Policy reforms and productivity growth in India’s energy intensive industries. Energy Policy 29:715–724

    Article  Google Scholar 

  • Parikh KS et al (2006) Integrated Energy Policy, Report of the Expert Committee. Planning Commission, Government of India

  • Pielke R, Wigley T, Green C (2008) Dangerous assumptions. Nature 452:531–532

    Article  Google Scholar 

  • Raupach MR, Marland G, Ciais P, Le Quéré C, Canadell JG, Klepper G, Field C (2008) Global and regional drivers of accelerating CO2 emissions. PNAS 104(24):10288–10293

    Article  Google Scholar 

  • Ruet J (2001) Investment profitability in bridging the power gap in India. Indian Econ J 49(n°2):17

    Google Scholar 

  • Sassi O, Crassous R, Hourcade JC, Gitz V, Waisman H, Guivarch C (2010) Imaclim-R: a modelling framework to simulate sustainable development pathways. Int J Global Environ Issues 10(1):5–24

    Article  Google Scholar 

  • Sheehan P (2008) The new global growth path: implication for climate change analysis and policy. Clim Chang 91:211–231

    Article  Google Scholar 

  • Shukla PR (1995) Greenhouse gas models and abatement costs for developing nations. A critical assessment. Energy Policy 23(8):677–688

    Article  Google Scholar 

  • Solow RM (1956) A contribution to the theory of economic growth. Q J Econ 65–94

  • Thakur T, Deshmukh SG, Kaushik SC (2006) Efficiency evaluation of the state owned electric utilities in India. Energy Policy 34:2788–2804

    Article  Google Scholar 

  • Urban F, Benders R, Moll H (2007) Energy Policy 35:3473–3482

    Article  Google Scholar 

  • Van Ruijven B, Urban F, Benders R, Moll H, Van der Sluijs J, De Vries B, Van Vuuren D (2008) Modeling energy and development: an evaluation of models and concepts. World Dev 36–12:2801–2821

    Article  Google Scholar 

  • WorldBank (1998) Power sector reform and the privatization of distribution in India. Internal working document prepared by H. Salgo et al

Download references

Author information

Authors and Affiliations

  1. Centre International de Recherche sur l’Environnement et le Développement, Nogent-sur-Marne, France

    Céline Guivarch & Sandrine Mathy

  2. CIRED, 45bis, Av. de la Belle Gabrielle, 94736, Nogent-sur-Marne, France

    Céline Guivarch

Authors
  1. Céline Guivarch
    View author publications

    Search author on:PubMed Google Scholar

  2. Sandrine Mathy
    View author publications

    Search author on:PubMed Google Scholar

Corresponding author

Correspondence to Céline Guivarch.

Electronic supplementary material

Below is the link to the electronic supplementary material.

ESM 1

(DOCX 37 kb)

Rights and permissions

Reprints and permissions

About this article

Cite this article

Guivarch, C., Mathy, S. Energy-GDP decoupling in a second best world—a case study on India. Climatic Change 113, 339–356 (2012). https://doi.org/10.1007/s10584-011-0354-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10584-011-0354-8

Keywords