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Energy and emissions : local and global effects of the rise of China and India

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  • Shalizi, Zmarak
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    Abstract

    Part 1 of the paper reviews recent trends in fossil fuel use and associated externalities. It also argues that the recent run-up in international oil prices reflects growing concerns about supply constraints associated with declining spare capacity in OPEC, refining bottlenecks, and geopolitical uncertainties rather than growing incremental use of oil by China and India. Part 2 compares two business as usual scenarios with a set of alternate scenarios based on policy interventions on the demand for or supply of energy and different assumptions about rigidities in domestic and international energy markets. The results suggest that energy externalities are likely to worsen significantly if there is no shift in China's and India's energy strategies. High energy demand from China and India could constrain some developing countries'growth through higher prices on international energy markets, but for others the"growth retarding"effects of higher energy prices are partially or fully offset by the"growth stimulating"effects of the larger markets in China and India. Given that there are many inefficiencies in the energy system in both China and India, there is an opportunity to reduce energy growth without adversely affecting GDPgrowth. The cost of a decarbonizing energy strategy will be higher for China and India than a fossil fuel-based strategy, but the net present value of delaying the shift will be higher than acting now. The less fossil fuel dependent alternative strategies provide additional dividends in terms of energy security.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4209.

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    Date of creation: 01 Apr 2007
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    Handle: RePEc:wbk:wbrwps:4209

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    Keywords: Energy Production and Transportation; Environment and Energy Efficiency; Energy and Environment; Energy Demand; Transport Economics Policy&Planning;

    This paper has been announced in the following NEP Reports:

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    1. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
    2. Edmonds, Jae & Wise, Marshall & Barns, David W, 1995. "Carbon coalitions : The cost and effectiveness of energy agreements to alter trajectories of atmospheric carbon dioxide emissions," Energy Policy, Elsevier, vol. 23(4-5), pages 309-335.
    3. Robert S. Pindyck, 2001. "The Dynamics of Commodity Spot and Futures Markets: A Primer," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-30.
    4. Sinton, Jonathan E. & Fridley, David G., 2000. "What goes up: recent trends in China's energy consumption," Energy Policy, Elsevier, vol. 28(10), pages 671-687, August.
    5. Dasgupta, Susmita & Hua Wang & Wheeler, David, 1997. "Surviving success : policy reform and the future of industrial pollution in China," Policy Research Working Paper Series 1856, The World Bank.
    6. Antonio Merino & Alvaro Ortiz, 2005. "Explaining the so-called "price premium" in oil markets," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(2), pages 133-152, 06.
    7. Sinton, Jonathan E., 2001. "Accuracy and reliability of China's energy statistics," China Economic Review, Elsevier, vol. 12(4), pages 373-383.
    8. Gang Liu, 2004. "Estimating Energy Demand Elasticities for OECD Countries. A Dynamic Panel Data Approach," Discussion Papers 373, Research Department of Statistics Norway.
    9. 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.
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