Costs and benefits of climate transition in India very unevenly distributed: Study

The estimated costs and benefits of climate transition in India are very unevenly distributed across regions, according to a study that calls for urgent policy instruments to compensate for this disparity.

The researchers noted that India is taking the first steps towards a climate transition with volume targets for the upscaling of 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 Ordonez, who is currently working at the EU Commission's Joint Research Centre in Spain.

This yields an important finding for central government: without compensatory measures, the gap between poor and wealthy regions threatens to widen significantly, the researchers said.

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 USD 40 per tonne for private households and companies, and the abolition of energy subsidies.

The overall effect of this package on the individual regions, on a qualitative scale from "very disadvantageous" to "very favourable," is key, according to the researchers.

The study shows that the negative 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.

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

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

The model does not take into account the fact 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. This has already been shown, for example, 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 in order to make it enforceable in the struggle between competing interest groups, and in order to 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.

It can 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, the researchers added.

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