India on Reducing Carbon Emissions – An Economic Development Perspective

According to the Copenhagen Climate Conference to be held from 7-Dec-09, India became the center stage for key negotiations between developed and developing its position on reducing carbon emissions. India has expressed concern for sacrificing their "goals of development and poverty eradication" on the “costs of reducing greenhouse gas emissions.” The main obstacle is India seen its cost of spending on reducing carbon emissions would have a significant negative impact on their development goals and poverty eradication.

In this article I have tried to analyze the concerns of India by evaluating the costs of reducing Carbon emissions and the costs of not reducing Carbon emissions, and base my conclusions on the differential costs between the two. To reiterate I am considering the following costs:

• Costs incurred for Not reducing Carbon emissions – CN
• Costs incurred for Reducing Carbon emissions till 350 ppm – CR
• Comparing the above two costs If CN > CR Then reducing Carbon emissions would have a negative impact on India’s Objectives of development and eradicating poverty
• Else If CN < CR Then reducing Carbon emissions will have a positive impact on India’s objectives and India should aim at reducing Carbon emissions.

1. Costs incurred for not reducing Carbon emissions – CN

According to a poll released by the group’s Economics of Climate Adaptation – CEA [Swiss Re, McKinsey & Company, the climate at work, the European Commission, the Rockefeller Foundation and Standard Chartered Bank is the ECA Working Group] under the scenarios climate change, climate-related disasters can cause 9-13 percent of the GDP loss in India in 2010 and lost 19% of India’s GDP in 2030. Therefore, the costs for failing to reduce carbon emissions by 2030, ie, CN is 19%. But it is possible that this loss to increase long-term effects of climate-related disasters are serious about the economy.

To examine how the loss of a natural disaster can cause, we will take a case study of the recent floods that hit northern Karnataka in October 2009, and consider losses as a result of disaster. That will give us a rough idea of the losses set out in the event of a natural disaster of similar gravity occurs because of climate change resulting from the failure to reduce carbon emissions that would otherwise have been avoided.
Following are some of the significant losses caused by the floods:

• 194 people died
• 10 million homeless. This means that the Govt had created 10 million poverty people at an instant by letting the disaster happen.
• Losses totaled to 18,000 crore, according to the State government estimates
• State govt sought 9,000 crore flood relief from the Central govt.
• State demanded for the release of 1.5 lakh metric tonne food grains under BPL rates for the affected people
• 25 lakh hectares of crop area affected. This amount of land would not be productive for a few months which is a Loss. The investments in terms of labor, resources, subsidy provided by the govt on fertilizers from citizen’s taxes are totally wasted, A  very big loss again.
• Supply chain disruption. Industries, Businesses, Prices, Markets in other areas which  were reliant on the flood hit area are affected. The standstill region wouldn’t be able to supply any goods or services which it was supposed to, to other businesses.
• Inflation figures during this period.
• Vegetable prices up 50%, potatoes up 81%, sugar up 44% and rice up 19%. Food prices were more broadly up by 16% compared to the previous year. Although floods weren’t the only reason, they were significant in contributing for rising Inflation.This is a serious impact. Higher inflation would reduce the buying power of people and would create more poverty
• The state’s machinery and resources are dedicated for flood relief works which would  have otherwise been dedicated for other Productive works
• Chances of spreading of epidemics are very high. More spending on health.
• Affects both the physical and mental health of the people in the flood affected region. The implications of this are very serious.
• Job losses
• The list runs

All the above effects which would be caused because of ignoring the climate change disasters have eventually resulted in hampering development and creating more poverty which would have been avoided otherwise.

2. Costs incurred with spending on Reducing Carbon emissions – CR

There will be some significant costs associated with spending (or rather investing) on reducing Carbon emissions. The following are the areas where the government has to chiefly spend if it makes a commitment for Carbon emission reduction.

1. Spending on newer energy resources
India should start spending (investing) in newer energy resources which are more energy efficient so as to reduce it’s over dependence on burning of fossil fuels like coal which is less energy efficient and results in more Carbon emission.

2. Spending on building more energy efficient products
This would apply to a wide range of products from almost every sector.India needs to build Energy efficient engines, Energy efficient commercial and residential buildings, Energy efficient transportation of all forms, Machines and Technologies that enable energy efficiency.

3. There would be costs incurred due to reduced economic development taking into consideration the reduced economic development taking into consideration the factors such as unemployment, Industries spending on equipments, technologies for reducing Carbon emissions, policies, administrative and legislative costs and more

So what would be the likely total cost for accomplishing all the above stated spending at reducing Carbon emission?

Unfortunately, today [5-December-2009] I have not found all the data published by the Indian Govt on the estimated costs to reduce its carbon emissions. I urge the Govt of India to release its estimate of the cost of reducing carbon emissions by a certain target.Had this published our work was easier. But this should not deter us from continuing beyond the estimated costs of reducing carbon emissions is available from many other sources. Various research groups and academics as the economy and for fairness in the network environment (E3), groups of European universities have attempted to estimate the costs of emission reductions of up to 350 ppm. One group assumes (realistically) high unemployment and finds that the long-term employment and economic growth would be focused on a program of public investment in green technology and reducing emissions that lead to 350 ppm.

The three other groups to adopt the common assumption that unemployment in the short term can be ignored in the long-term patterns. They generally believe that the necessary emission reductions would cost an average of 1-3 percent of global economic output in recent years. Studies of other groups such as Greenpeace, the Union of Concerned Scientists (UCS) has reached more optimistic estimates, where the fuel savings would be more in proportion to expenditure. They assume the high price of oil at $ 140 a barrel (Greenpeace). Now consider the McKinsey estimates (not conservative and pessimistic compared to the estimate of Greenpeace and UCS), it would cost 2.3% of GDP in India to halve carbon emissions growth by 2030. Therefore, the costs of reducing carbon emissions – CR would be 2.3% of GDP in India.

Comparison of the Costs between reducing and not reducing Carbon emissions

As already reasoned, the value of the AD 19% of GDP and the value of CR is 2.3% of GDP. different costs of CN and CR = 19 to 2.3 = 16.7% of GDP, India saves 16.7% of GDP on the reasons set out above, if it aims to reduce carbon emissions. These savings can potentially be used for economic development and poverty reduction. The causes of the former Indian govt to reduce carbon emissions would reduce the economic development and increasing poverty should be highly suspect.

According to information published in 2006 military CIA [CIA, U.S.], Indian military expenditure cost 2.5% of GDP per year. These military expenditures are in fact safety is to protect its citizens from death and losses.If climate changes are not permitted to reduce carbon Emissions, climate change, catastrophic events that eventually Would lead to more dead and homeless. This is very essential for the safety and physiological needs of the country. To mitigate the cost of this expenditure to reduce emissions of carbon dioxide [CR], which is 2.3% of GDP. Comparison of 2.5% GDP expenditure on military costs of 2.3% cost of GDP until 2030 for the security needs of similar meaning, because the cost of carbon emissions are very rare. Again, India will bear all costs [2.3%] to reduce carbon emissions. India can actually make a case for the contributions of other developed countries. India has begun to exploit the developed countries to contribute 0.5% of GDP to cover its costs.

Based on the reasons set out in this article, I believe that India should focus on reducing carbon dioxide emissions to meet the objectives of economic development and eradication of poverty.India should focus on building a newer energy sources and energy products efficient operation Towards a greener world. I hope that the positive towards India for this purpose the Climate Conference in Copenhagen.