Climate policies in a second-best world- a case study on India

Sandrine Mathy (1) , Céline Guivarch (1)

1 CIRED - centre international de recherche sur l'environnement et le développement

The aim of this article is to analyze the potential for synergies between climate policies and development in a case study on India focusing on the power sector sub-optimalities. To do so, we use IMACLIM-R, a dynamic recursive energy-economy model that represents a second best world with market imperfections and short-run adjustments constraints along a long-term growth path. The analysis suggests (i) global carbon pricing induces prohibitive macroeconomic costs for the Indian economy, even in the case of significant financial transfers associated with a global cap-and-trade system and a "Contraction and Convergence in 2100" allocation scheme; (ii) the most cost efficient climate policies are not uniform carbon pricing only. The implementation of domestic policies suited to the national context, for instance targeting sub-optimalities in the power sector for India, allows reducing significantly the macroeconomic costs induced by international mitigation policies.

Mots clés: India; second-best world; synergies between climate mitigation and development

Domaines: Economies et finances

Sandrine Mathy, Céline Guivarch. Climate policies in a second-best world- a case study on India. Energy Policy, 2010, 38 (3), pp.1519-1528. ⟨10.1016/j.enpol.2009.11.035⟩. ⟨halshs-00724498⟩