Environmentally Extended Input-Output Analysis: Application to India

Abstract: As the world witnesses a record level of greenhouse gas emission and associated environmental crises in the form of global warming and climate change, it is the need of the hour for all countries to be diligent and innovative in their economic and environmental policy. Policy discourse in climate action is bound to take separate paths for developed and developing countries due to a difference in their economic expansion trajectory. India, a rapidly expanding economy faces critical challenge to strike a balance between its economic and environmental targets to provide for its vast population and its ever growing consumption demands. In this context, I analyse the structure of carbon emissions in India from a demand and supply multiplier perspective to draw insights on key emission multiplier sectors using 2011 data. Among other sectors in India, electricity sector has high supply and demand side multipliers. Concentrating on the supply side of electricity sector, it becomes imperative to analyse the highly electricity intensive agriculture sector. I analyse emission saving potential of hypothetical scenarios of electricity subsidy elimination first as a whole, and next from agriculture alone. I find about 12 million tons reduction in carbon emission following a subsidy elimination policy shock. I also find that about a sixth of this emission saving potential can alternately be achieved through subsidy elimination for electricity use in agriculture. Appropriate policy implications from these results are discussed.