For emerging economies like India, effective climate policy must deliver on the twin objectives of reducing greenhouse gas (GHG) emissions while enabling the achievement of development-related goals. An integrated assessment of sectoral policy options over varying timeframes, along with their macroeconomic implications, can help in the design of effective policy packages that meet India’s medium- and long-term climate targets while also delivering economic growth, ensuring the efficient use of resources, and avoiding the lock-in of carbon-intensive behavior and technologies.

In this paper, we analyze two climate policy scenarios for India corresponding to differing medium- and long-term decarbonization objectives and their implications for the economy and resource-use, using the India EPS, an open-source, system dynamics model.

The NDC-SDG Linkages (NDC-SDG) scenario is a combination of sectoral decarbonization policy levers featured within the EPS that simultaneously align with goals within the country’s first Nationally Determined Contribution (NDC) and the targets within the 17 Sustainable Development Goals (SDGs) under the 2030 Agenda for Sustainable Development. Most policies in this scenario are implemented linearly, reaching full strength of implementation by 2030.

The Long-Term Decarbonization (LTD) scenario explores sectoral decarbonization policy levers that exhibit high potential for GHG abatement over the long term and sets ambitious targets for implementation by 2050. This scenario includes the use of currently nascent technologies, such as hydrogen, battery storage, and to a smaller extent, carbon capture and storage (CCS). The policies with proven technologies are phased in linearly from 2020 until 2050, while those relying on nascent technologies are phased in starting from 2025 through 2030.

Key Findings:

  • Judiciously designed policy packages can boost the ambition of climate commitments by delivering significant emission reductions. In the NDC-SDG scenario, GHG emissions are reduced by 24 percent by 2030 and 37 percent by 2050, compared to business-as-usual (BAU) levels. In the LTD scenario, the corresponding emissions reductions are 30 percent by 2030 and 65 percent by 2050.
  • A small subset of policies are responsible for most emissions reductions in the medium and long terms. In the NDC-SDG scenario, about 67 percent of the total GHG emissions reductions in 2030— equaling 690 million metric tons (Mt) of carbon dioxide equivalent (CO2e)—can be achieved by implementing just three key policies, i.e., an industrial carbon tax, industrial energy efficiency standards, and demand reduction for cement, steel, and wastewater through material efficiency, longevity, and re-use. Similarly, in the LTD scenario, nearly 47 percent of the total GHG emissions reductions in 2050 (equal to 2,200 MtCO2e) can be achieved through three policies i.e. industrial fuel switching from fossil fuels to electricity and hydrogen, hydrogen production via electrolysis (using carbon-free electricity), and early retirement of coal power plants.
  • In addition to GHG mitigation, both the NDC-SDG and LTD scenarios yield co-benefits in terms of cost savings, reduction in harmful air pollutants, and reduction in water usage. Relative to BAU projections, from 2020 to 2050, 5.7 million premature deaths from air pollution could be avoided in the NDC-SDG scenario and 9.4 million in the LTD scenario.
  • Both scenarios lead to net cost savings in the medium to long term and show a positive impact on employment and output, relative to BAU. Deep decarbonization in the economy is possible, while also boosting GDP and employment. A carbon tax is an essential policy lever in realizing these positive impacts.
  • Policies focused on long-term ambition deliver greater emissions reduction and co-benefits in both the medium and long terms, as compared to policies focused on medium-term ambition. However, there is greater uncertainty involved in translating long term policies into action.

The India EPS web interface, along with the policy scenarios discussed in this paper, can be accessed at https://india.energypolicy.solutions/.