Carbon Emissions from Energy Use in India: Decomposition Analysis

Abstract

To become the fastest-growing large economy in the world, India has set a target growth rate of 9%, reaching an economy of $5 trillion by 2024-25. It is an immense challenge to meet the growth target and keep the CO2 emissions under control. The present paper aims to discover the determinants for explaining CO2 emissions in India by conducting a complete decomposition analysis, where the residuals are fully distributed to the determinants for the country from 1990-2018. The analysis reveals that the biggest contributor to the rise in CO2 emissions in India is the expansion of the economy (scale effect). The intensity of CO2 and the change in the composition of the economy, which nearly move in tandem, also contribute to the rise in CO2 emissions, although more slowly. A declining energy intensity of the Indian economy is responsible for a considerable reduction in CO2 emissions. As a typical result for an upcoming economy, this paper did not find evidence for an environmental Kuznets curve. This implies that continued economic growth will lead to increased CO2 emissions.