Conjugation of border and domestic carbon adjustment and implications under production and consumption-based accounting of India's National Emission Inventory: A recursive dynamic CGE analysis

Abstract

India initiated prudent measures voluntarily in the last two decades to combat against excessive carbon emissions. Acknowledging these initiatives, the study conjoins the policy of ‘border carbon adjustment (BCA)’ by the developed countries on Indian export with the ‘domestic carbon adjustment (DCA)’ by India to evaluate its impact on emission reduction and the macroeconomy. The study also raises an inconsistency in this dual carbon adjustment under the production-based accounting (PBA) of the ‘national emission inventory (NEI)’ and conducts simulation experiments under the PBA and alternatively proposed consumption-based accounting (CBA) framework. The results reveal that the closer the rates of BCA and DCA the more effective the carbon adjustment schemes are. The dual carbon adjustment also found giving better outcome under the CBA than PBA. The result of carbon-revenue recycling schemes suggest direct compensation to the enterprises for making the economy recover from the carbon tax-distortions in the most effective way.