EVALUATING INDIA’S CLIMATE TARGETS: THE IMPLICATIONS OF ECONOMY-WIDE AND SECTOR-SPECIFIC POLICIES

We employ a numerical economy-wide model of India with energy sector detail to evaluate the impact of achieving India’s commitments to the Paris Climate Agreement. We simulate targets for reducing CO2 emissions intensity of GDP via an economy-wide CO2 price and for increasing non-fossil electricity capacity via a Renewable Portfolio Standard. We find that compared with the no policy scenario in 2030, the average cost per unit of emissions reduced is lowest under a CO2 pricing regime. A pure RPS costs more than 10 times the cost of a CO2 pricing regime. Projected electricity demand in 2030 decreases by 8% under the CO2 price, while introducing an RPS further suppresses electricity demand. Importantly, a reduction in the costs of wind and solar power induced by favorable policies may result in cost convergence across instruments, paving the way for more aggressive decarbonization policies in the future.