Examining Sustainable Pathways for India’s Development Aspirations

Anuradha Venkatesh, Research Analyst

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A well-established consensus, both within and outside the scientific community, asserts that human-induced activities are the major contributors to global warming. Of these, the continuous burning of fossil fuels such as coal is the primary cause of increased greenhouse gas emissions, leading to imbalances in societies and natural phenomena.

Several studies emphasise that a majority of existing fossil-fuel reserves are essentially “unburnable” — they must remain in the ground if the world is to curb rapid rises in average global temperatures to not more than 3°C. The certitude of a range of such findings ushered in a collective climate policy vision in the form of the Paris Agreement on Climate Change, in which nearly all countries pledged to limit temperature rise to “well below” 2°C or 1.5°C compared to pre-industrial levels. Despite the inherent ambition of the Nationally Determined Contributions (NDCs) submitted by participant countries, recent analyses reveal that the enormity of the problem is yet to be perceived. For instance, a 2017 report by the United Nations Environment Programme (UNEP) finds that the current NDCs cover only a third of the needed emission reductions. It strongly urges an acceleration of mitigation efforts to prevent a “catastrophic climate gap” between actual reductions and the promised NDCs by 2030.

Devising Innovative Solutions

It is no small task to break away from the traditional notions of economic growth and development — a strong impetus is required to push countries to creatively restructure the status-quo. Climate change, arguably, occupies that distinct position of being an extremely influential global driver for change. As authors Jessica Wilson and Stephen Law astutely conclude in their book ‘A Brief Guide to Global Warming’, what the world requires is a “fundamental shift in our civilisation”. They articulate the heart of the problem, when they perceive that “global warming is like an alarm bell alerting us to some things that are very, very wrong with the world’s economy and how we interact with each other…solving global warming in the long term will require us to use our enormous creative energies; first to envisage a post fossil-fuel civilisation, and then to move decisively towards it”.

India, alongside other emerging economies, occupies a unique position in climate change negotiations. While bearing no historic responsibility for the problem of climate change, it is currently among the world’s top five emitters of greenhouse gases, in terms of absolute emissions. Although it could be argued that per capita emissions are low, India must still make concerted efforts, given the projected economic growth, in response to the substantial development needs of its population. India’s National Action Plan on Climate Change (NAPCC) is categorical in stating that India’s development path will need to be “ecologically sustainable” and in harmony with achieving goals like poverty eradication. Given the current stage of India’s development, this is an opportune moment for pursuing a growth pathway that places sustainable living at the heart of our policy aspirations. The overarching solution then boils down to devising appropriate policies to reconcile economic and environmental goals.

Aligning economic and social development along environmentally sustainable pathways is crucial towards achieving India’s climate change mitigation goals.

Need for an Integrated Framework

Climate change is intricately linked to all corners of the economy and therefore requires holistic solutions. With projections indicating that India will soon surpass China as the most populated country, perhaps as early as 2022, it is essential to understand future changes in demand, particularly energy and material needs. An important criterion in assessing India’s sustainable development pathways is understanding the structure of our economy and how it could transform in the future. A quick review of the provisional estimates for annual gross domestic product (GDP) in 2017–18 indicates, unsurprisingly, that the service sectors contributed to a large chunk of the economic growth in terms of gross value added (GVA) — 22% by finance, real estate and professional services, while the combination of trade, transport and communication services contributed to 19% of the total GVA. Meanwhile, manufacturing stood at 18% and construction at 8%.

Moving forward, do we expect India to continue as a service-driven economy or will policies like “Make in India” boost output and jobs in the manufacturing sector? Alternatively, it could be argued that policies should push for higher GVA from the agriculture sector, keeping in mind employability concerns and self-sufficiency in food production. From a clean energy perspective, one could anticipate that renewable energy sectors like solar and wind will continue to remain in the spotlight up to and beyond 2030. A close examination of the economic structures of Europe or the USA will prove valuable in informing India’s future choice of sectors, and help accelerate the process of leapfrogging to a sustainable economy.

Such studies are best done by an integrated analytical framework. A detailed economic model can identify crucial interlinkages among sectors. More importantly, socio-economic information like household consumption, incomes and jobs can be used to assess a range of policy questions. For instance, do households that earn higher incomes necessarily demand more cars? If so, what impacts would this have on the automobile sector? Will investments and jobs increase? Or, will households instead choose to spend their money in real estate? Ultimately, what impact would these demand patterns have on India’s emissions? It becomes obvious that if addressed in silos, these questions become extremely difficult to answer. And, any policy intervention will be incomplete because of its failure to address impacts on other parts of the system.

Our Work

In this context, energy-environment-economy models (commonly known as E3) are often used to explore greenhouse gas mitigation policies. One such class of models is the computable general equilibrium (CGE) model. The large-scale, comprehensive analytical framework is widely used to make long-term projections on issues related to growth, jobs, investments and emissions. More importantly, it can be used to assess the economy-wide consequences of changes in policies.

For instance, how would the Indian economy react if a carbon tax were imposed on the most polluting manufacturing sectors? Would these sectors be able to withstand higher production costs in the short run? Are carbon taxes the right market mechanisms for reining in emissions, or would we instead benefit from a cap-and-trade system?

It is important to keep in mind that any change in a single corner of the economy will have ripple effects across the entire socio-economic spectrum. Given the ability of the CGE model to analyse such questions, CSTEP is currently involved in building an India-specific model to quantitatively understand the linkages between long-term emission reduction and the resulting impacts on the economy.

An important aspect of our work includes analysing energy and material requirements for achieving a “desired quality of life” for India, based on specific aspects of the Sustainable Development Goals. With a time-horizon stretching till 2050, these studies seek to analyse the quantum of demand from implementing crucial development policies. Further, we aim to analyse supply-side responses and capture impacts on our greenhouse gas emissions, thereby recommending inclusive growth policies at particular points in time.

Center for Study of Science, Technology and Policy (CSTEP) is a multidisciplinary policy research organisation which enriches policymaking with innovative approaches using science and technology. CSTEP incorporates social and economic perspectives to a scientific solution to ensure that the research has a long-term impact and meaningful outcomes. CSTEP constantly aims at science and technology-enabled policy options for an inclusive and equitable economic growth.

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Developing innovative technology options for a sustainable, secure and inclusive society. cstep.in

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