Challenges and Policy Implications for Low-Carbon Pathway for Kerala: An Integrated Assessment Modelling Approach

As India has embarked on the journey of fulfilling its net-zero emissions target by 2070, the states of India are steering up too to meet the target. The per capita emissions for Kerala are lower than the national average. The energy sector is the main contributor to GHG emissions in Kerala. A major share of 76 percent of electricity power is purchased from other states. When other states undergo an energy transition, the availability of imported electricity may be a challenge for Kerala. Hence, the State needs to harness its own potential for renewable energy sources and incorporate improved technologies leading to energy efficiencies in all sectors. Accordingly, this paper has undertaken integrated modelling (an approach with the primary objective of quantifying the gains and losses of low-carbon transitions and their financial implications). The integrated modelling approach involves soft linking of the macroeconomic top-down CGE model and bottom-up (Messageix) energy model. The integrated model is a recursive dynamic model with multiple periods of time. In this paper, we have undertaken a policy scenario in which (i) the imports of fossil-based electricity from other states of India are restricted to Kerala, (ii) 50 percent of the existing potential of renewable electricity by various modes is achieved in Kerala and the rest of India, and (iii) energy efficiency in all energy sectors is increased to the tune of 2.5 percent per annum along with 1 percent total productivity growth per annum in all sectors of the Kerala and India economies. Our results show that the reduced import of fossil fuel electricity without any policy intervention to strengthen the renewable energy sector would hamper growth. On the other hand, investment in renewable energy to facilitate a complete energy transition with self-reliance on energy for the state would expand the economy, increase the returns to the factors of production, and increase employment. The key message that comes out from our simulation is that the energy transition towards renewable energy will not take place without complementarity support polices towards this sector. Our observation is that energy transition may be a win‒win situation in the sense that growth and employment creation may be positive with suitable policy intervention. It must be mentioned that the paper focused only on the energy sector. The developed model may be used in the future to focus on the economic implications of other policies, such as carbon sequestration.