Study finds costs and benefits of climate transition in India are unevenly distributed

Researchers state that without compensatory measures, the gap between poor and wealthy regions threatens to widen significantly

Updated - June 02, 2023 01:07 pm IST

Published - June 02, 2023 12:53 pm IST - New Delhi

Women take shelter from the sun at a construction site in Ahmedabad, India, April 28, 2023.

Women take shelter from the sun at a construction site in Ahmedabad, India, April 28, 2023. | Photo Credit: Reuters

According to a study which calls for urgent policy instruments to compensate for this disparity, the estimated costs and benefits of climate transition in India are unevenly distributed across regions.

The researchers noted that India is taking the first steps towards a climate transition with volume targets for upscaling renewable energies, a modest turnaround in coal-fired power generation, and plans for carbon pricing in the form of emissions trading.

“This huge country with its 29 federal states and seven union territories already has large regional wealth disparities,” said Jose Ordonez, who led the study as part of his doctoral thesis at Mercator Research Institute on Global Commons and Climate Change (MCC) in Germany.

“We determine the scenario of an ambitious climate transition for the individual geographical units and examine the combined effect on income distribution, employment and industrial competitiveness,” said Mr. Ordonez, currently working at the EU Commission’s Joint Research Centre in Spain.

The researchers said this yields an essential finding for the Central Government: without compensatory measures, the gap between poor and wealthy regions threatens to widen significantly.

The study, published in the journal Energy Policy, used an input-output model fed with empirical data to map the direct distributional effects of policy measures.

The researchers assume there will be an extensive effort towards climate protection, including a complete coal phase-out, the massive expansion of power generation from solar and wind, a national carbon price of $40 per tonne for private households and companies, and the abolition of energy subsidies.

According to the researchers, the overall effect of this package on the individual regions, on a qualitative scale from “very disadvantageous” to “very favourable,” is key.

The study shows that the adverse effects are heavily concentrated in already poorer states in eastern India that are highly involved in coal mining, most notably Jharkhand, West Bengal, Odisha, and Bihar.

The researchers said that jobs would be lost, the burden on poorer households would increase, and energy-intensive industries would come under pressure in this region.

On the other hand, the comparatively more affluent states would be the biggest winners from an ambitious climate policy, they said.

The model does not consider that negatively affected private households and companies can adapt to measures and thus improve their situation.

However, the researchers noted, among other things, that experience shows short-term effects to be decisive for the enforceability of energy and climate policy measures. “From the political-economic perspective, our work provides an important starting point for the further development of climate transition in India,” said Jan Steckel, head of the MCC working group Climate and Development and one of the co-authors.

“It helps us understand how winners and losers of climate policies are distributed in India. A strong regional concentration of short-term losers can lead to major problems in the political process of implementing climate protection. For example, this has already been shown in the struggle to phase out coal in Germany,” Steckel said.

The researchers emphasise that the climate transition would have to be accompanied by new social and industrial policies to make it enforceable in the struggle between competing interest groups and overcome regional resistance.

This can be done, for example, using carbon price revenues, by careful siting of fossil-free energy production, or through compensation payments for the coal phase-out, they said.

The researchers added that it could also provide orientation for coal phase-out in return for financial aid from Western industrialised countries, following the example of South Africa, Indonesia, and Vietnam.

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