Input-Output Analysis of Climate Change: Case Study of Efficiency Driven Policy Choice of Indian Response Strategy Joyashree Roy Jadavpur University, Kolkata, India with Jayant Sathaye Lawrence Berkeley National Laboratory Berkeley CA and Sarmistha Das, Raman Khaddaria Jadavpur University
Issues • Economics of Climate Change • Impact of climate variability on economic activities • Response analysis: Climate , Non-Climate Policies. • Technology policy, energy policies etc. with indirect climate mitigation potential. • National through regional to global scale. • Global scale models are facing challenges: high level of aggregation, lack of flexibility in scaling down • National level impact on sustainable development goals of mitigation policies ? • Mainstreaming of of climate policy ?
Goal and Motivation Goal • To estimate macro level impact on employment, output of Indian economy of an “increased efficiency” Motivation To address : • Shortage in electricity and capacity addition through Reduction of electricity intensity
Methodology • Efficiency-Employment Integrated Model (EEIM) for the Indian economy • Investment balance framework • Model that arithmetically matches annual capacity expansion plans and efficiency options • Multipliers from I-O model • Six energy efficiency measures • four target the productive industrial, commercial and agricultural sectors • efficient refrigerators and half of the compact fluorescent lamps (CFLs) target the residential or consumptive sectors.
Overview of electricity sector • Generation capacity (end 9th Plan): 103 GW • (Th=63%, Hy=21%,N=2%, NU=14%) • GDP increased 3.5 times (1970-1999) • Electricity Consumption increased 7 times (1970-1999) • Per capita Consumption is 360 kWh in 1998-99 • Consumption in 2000-01: • Domestic and agricultural – 52% • Industrial consumption – 31% • T&D loss 25% in 1998-99 • Shortfall in capacity addition 9th Plan: 53% (A=19015 MW T=40245 MW) • Tenth plan target is 41110 MW
Electricity Generation Increased Faster than GDP Until 1991 but has Increased at the Same Rate Since Then(About $0.75 GDP per kWh)
Increasing Efficiency in Electricity Use Tenth Plan Goal • improve efficiency in all segments—generation, transmission and distribution and also power consumption. • achieve through Implementation of Energy conservation act, 2001. • Determine minimum power consumption standard, • Label for identified appliances, • Introduce norms/ rules and regulations for power intensive industries, • Formulate energy consumption code, • Establish a energy conservation fund both at the state and the central level, • Establishment of Bureau of Energy Efficiency (BEE) in place of Energy Management Centre (EMC) • Declare a user or a class of user of energy as a designated consumer
10th Plan Employment Projections • Unemployment will grow from 9.2% at the beginning to 11% at the end of the plan period on the basis of base line scenario of 6.5% growth of GDP. • New employment opportunities are needed.
Investment scenario • At an average cost of US $ 900 /kW for 41,110 MW capacity 10th plan additions • Corresponding Total investment for the 10th Plan: Rs. 1,548 billion or US $ 36 billion
Capacity Addition Scenario Target: 41,110 MW Anticipated achievement based on 9th plan experience (actual/target): 22,552 MW Investment @ USD900/Kw : $ 20,297 million 10th plan capacity shortage : 13,159 MW Efficiency Scenario Goal Maintaining same investment in both scenarios Adopt available efficiency options Estimate MW gain due to efficiency Remaining demand to be met through capacity addition Alternative Investment Scenarios • Compare output and employment impact
Gain from Efficiency options:16, 701 MW Variable speed drives in industry = 3,440 MW Ag. Pump rectification = 3,039 MW Motor rewinding downsizing = 3,315 MW High efficiency agricultural pump sets = 3,315 MW Improved high efficiency refrigerators= 829 MW CFLs and Electronic Ballasts = 2,763 MW Total investment: US $ 3,112 million Ratio : million US $ 19/MW efficiency Assumptions: Electricity (kWh) demand – supply gap: 6% PLF : 66% Corresponding electricity savings: 52,347 GWh or US $ 10,156 million Total supply capacity added: 19,116 MW Efficiency Scenario: Investment Estimate • Compare output and employment impact
Output multipliers (million US $/final demand) Manufacturing 2.21 Construction 2.05 Electricity, Gas and Water Supply 2.24 Aggregate Economy 1.79 Employment: multiplier/coeff. (‘000 person years per million US $) Manufacturing 5.1 16 Construction 5.3 16.6 Electricity, Gas and Water Supply 3.4 10.5 Aggregate Economy 6.3 19.77 Estimated Macro parameters: multipliers and direct coefficients
Effect on gross output over 5 years (m.US $) Scenario I Capacity creation only through investment in construction sector multiplier effect would generate $ 41, 608 million. Scenario II Efficiency +capacity addition $ 42,147 (additional US $ 538 million) Effect on employment (person years) Scenario I 107.8 million Scenario II 107.3 million Impact on GDP and Employment
Additional economy wide gain from efficiency scenario Scenario I • Actual addition possible 22 GW. • Additional capacity demand 35 GW Scenario II • capacity creation 19 GW • Potential generation by efficiency gain 16 GW Outcome • Less spending by way of less capacity creation • Surplus generated by sectors adopting efficient technologies Makes up for less investment in capacity creation and Surplus generated if ploughed back into the economy can additional output and employment at the end of 10th Plan: • US $ 18,179 million • 64.3 million person years