Analysis of Energy Substitution vis-a-vis Security Policy Trade-off with the Emissions Embodied in Bilateral Trade: An Index Decomposition Approach

Abstract

The trade-off between climate protection and energy security is more striking for the developing countries those are having fewer resources to combat the risk of sudden supply disruptions of energy, however, its reflection in the literature is not found sufficient. This paper aims at exploring this trade-off by uniquely representing the India-UK bilateral trade and applies a spatial index-decomposition exercise of the emissions embodied in the net export. The calculated emission imbalance implied in India-UK bilateral trade is decomposed into the contributions from five important drivers. The study compares the policy trade-offs under three hypothetical scenarios where India is adopting prudent policy measures imitating the UK. Based on these scenario experiments, the study suggests a decision trick where India is adopting a lower energy intensity of input use by altering its energy consumption level keeping the employment of inputs unchanged.