Energy Consumption Response to Climate Change: Policy Options for India

Abstract

In this article, the contributions of energy use to the climate variation debates are explored. Analyses based on secondary data depict that global fossil fuel use has increased and dominated world energy consumption and supply which is quite similar to the Indian case. This increase in the global energy use has resulted in higher emissions. To account for the changes in carbon dioxide (CO2) emission, this article follows an index decomposition analysis using data from PROWESS database of the Center for Monitoring Indian Economy (CMIE). Two factors are considered to account for the changes in emission intensity of Indian economy: (i) shift in output among three sectors of the India economy (Agriculture, Service and Manufacturing) and (ii) structural change due to change in aggregate output with respect to emissions change. Based on the estimates, we conclude that structural changes in the Indian economy from 1991 to 2007 played important major driving factor in reducing emissions compared to output shifts across sectors. Based on the findings and international experiences, few policy options for Indian economy, such as, energy pricing reforms, promoting investment in renewable energy technologies and creating public environmental awareness, are further suggested.