Costs And Benefits Of Climate Transition In India Are Unevenly Distributed

The predicted costs and benefits of climate change in India are unevenly distributed across areas, according to a study that argues for immediate policy instruments to compensate for this mismatch.

According to the researchers, India is taking the initial steps towards a climate transition, with volume targets for upscaling renewable energies, a minor turnaround in coal-fired power generation, and proposals 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 the 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 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 researchers utilised an input-output model fed with actual data to map the direct distributional consequences of policy actions in the journal Energy Policy.

The researchers anticipate a significant effort towards climate protection, including the complete phase-out of coal, massive expansion of solar and wind power generation, a national carbon price of $40 per tonne for private households and businesses, and the elimination of energy subsidies.

The total effect of this package on the separate regions, on a qualitative scale ranging from "very disadvantageous" to "very favourable," is critical, according to the researchers.

According to the report, the negative consequences are concentrated in already impoverished eastern Indian states that are significantly involved in coal mining, most notably Jharkhand, West Bengal, Odisha, and Bihar.

According to the experts, employment would be lost, the burden on poorer households would increase, and energy-intensive companies would have challenges in this region.

They claimed that an aggressive climate strategy would benefit the considerably more affluent states the most.

The model does not take into account the ability of negatively impacted private households and businesses to adjust to measures and so improve their condition.

The researchers did highlight, however, that past experience has shown that short-term consequences are critical for the enforceability of energy and climate policy initiatives. "From a political-economic perspective, our work provides an important starting point for the further development of climate transition in India," said Jan Steckel, director 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 underline that in order to be enforceable in the face of competing interest groups and overcome regional resistance, the climate transition must be supported by new social and industrial policies.

This can be accomplished, for example, by carbon pricing revenues, smart placement of fossil-free energy production, or compensation payments for coal phase-out, according to the authors.

The experts stated that it might also serve as a model for coal phase-out in exchange for financial assistance from Western industrialised countries, as South Africa, Indonesia, and Vietnam have done.