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Climate Change Policy for India

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  • Warwick J. McKibbin

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Abstract

While the global environment waits for the world to reach some form of agreement on climate policy, developing countries such as India are entering a phase of higher economic growth. The decisions on investment in energy systems that will be made in India in coming years will have an important impact on global climate change over the coming century. This paper explores how action could be undertaken in India today, in a way that commits India to longer run goals for greenhouse emissions but does not raise the short run cost to the development process in India. The approach proposed is a modification of the McKibbin- Wilcoxen Blueprint for climate policy which relies on establishing property rights and markets in both short term and long term emission permits. The goal is to encourage long term investment decisions to move towards less carbon intensive activities. This approach could be unilaterally implemented in India. If successful it would not only reduce Indian carbon emissions but it would be an example for the entire developing world to follow and it might remove a key obstacle preventing the United States from implementing policies based on the argument that developing countries are not committed to taking action to reduce greenhouse emission. This paper outlines the recent history and prospects for carbon emissions in India. It also explores the various alternative economic instruments that might be used. The paper presents illustrative results for the consequences of a rise in the price for carbon in India based on a new version of the G-Cubed multi-country model that includes India. This simulation illustrates that an immediate increase in the price of carbon either through taxes or from entering a Kyoto style permit trading market could be very costly for India. Thus a credible commitment such as would be possible under the Blueprint is the best way to change investment incentives in India while at the same time give India time to develop before contributing to the cost of global greenhouse abatement.

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Bibliographic Info

Paper provided by The Australian National University, Australia South Asia Research Centre in its series ASARC Working Papers with number 2004-03.

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Length: 33
Date of creation: 30 Apr 2004
Date of revision:
Handle: RePEc:pas:asarcc:2004-03

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Keywords: India; Climate change; Kyoto Protocol; Gcubed; model; Blueprint;

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References

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  1. McKibbin, W.J. & Wilcoxen, P.J., 1995. "The Theoretical and Empirical Structure of the G-Cubed Model," Papers 118, Brookings Institution - Working Papers.
  2. Paul, Shyamal & Bhattacharya, Rabindra Nath, 2004. "CO2 emission from energy use in India: a decomposition analysis," Energy Policy, Elsevier, vol. 32(5), pages 585-593, March.
  3. Andreas Löschel & Zhong Zhang, 2002. "The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(4), pages 711-746, December.
  4. Warwick McKibbin & David Pearce & Alison Stegman, 2004. "Long Run Projections For Climate Change Scenarios," CAMA Working Papers 2004-01, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. Jorgenson, Dale W. & Wilcoxen, Peter J., 1992. "Global change, energy prices, and US economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 3(1), pages 135-154, June.
  6. Toman, Michael & Shogren, Jason, 2000. "Climate Change Policy," Discussion Papers dp-00-22, Resources For the Future.
  7. Fisher-Vanden, K. A. & Shukla, P. R. & Edmonds, J. A. & Kim, S. H. & Pitcher, H. M., 1997. "Carbon taxes and India," Energy Economics, Elsevier, vol. 19(3), pages 289-325, July.
  8. Warwick J. McKibbin & Peter J. Wilcoxen, 2002. "The Role of Economics in Climate Change Policy," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 107-129, Spring.
  9. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
  10. Pizer, William, 1997. "Prices vs. Quantities Revisited: The Case of Climate Change," Discussion Papers dp-98-02, Resources For the Future.
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Citations

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Cited by:
  1. Frank Jotzo, 2004. "Developing countries and the future of the Kyoto Protocol," Economics and Environment Network Working Papers 0406, Australian National University, Economics and Environment Network.
  2. Warwick J. McKibbin & Peter J. Wilcoxen, 2003. "Estimates of the Costs of Kyoto-Marrakesh versus the McKibbin-Wilcoxen Blueprint," Economics and Environment Network Working Papers 0305, Australian National University, Economics and Environment Network.
  3. Warwick J. McKibbin & Peter J. Wilcoxen, 2003. "Climate Policy and Uncertainty: The Roles of Adaptation versus Mitigation," Economics and Environment Network Working Papers 0306, Australian National University, Economics and Environment Network.
  4. Zhang, ZhongXiang, 2003. "Reconstructing climate policy: how best to engage China and other developing countries?," MPRA Paper 12830, University Library of Munich, Germany.
  5. Frank Jotzo & John C. V. Pezzey, 2006. "A better Kyoto: options for flexible commitments," Economics and Environment Network Working Papers 0610, Australian National University, Economics and Environment Network.
  6. Zhang, ZhongXiang, 2003. "Why Has China not Embraced a Global Cap-and-Trade Regime?," MPRA Paper 12783, University Library of Munich, Germany, revised Jul 2007.
  7. David A. Kendrick, 2006. "Teaching Computational Economics to Graduate Students," Computing in Economics and Finance 2006 36, Society for Computational Economics.

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