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GTAP Resource #7275

"Distributional Effects of Climate Mitigation in India Under the Net-Zero Pathway"
by Kundu, Debadrita, Maksym Chepeliev and Dominique van der Mensbrugghe

We analyze the distributional impacts of climate mitigation policies consistent with India’s 2030 Nationally Determined Contribution and 2070 net-zero target, using a dynamic global computable general equilibrium model (ENVISAGE) with heterogeneous households. Several policy levers are considered in this study, including carbon pricing, enhanced coal consumption tax (or coal cess), and fossil subsidies phaseout. These are further combined with five alternative revenue recycling options. Our results suggest the potential welfare costs of such mitigation policies are rather moderate and do not exceed 0.5% over 2023-2050 period, not accounting for health and environmental co-benefits and damages avoided by successfully limiting global temperature rise to well below 2°C. However, health co-benefits from lower air pollution can potentially outweigh the mitigation costs. Combining carbon pricing and fossil subsidy removal is more efficient than carbon pricing alone, generating progressive medium-term welfare gains due to reduced market distortions. Raising coal cess rates is the least efficient policy. Inequality and distributional impacts vary significantly based on the chosen revenue recycling approach. Equal transfer of tax revenue across households proves to be the most efficient and equitable, followed by labor tax subsidies, leading to a Gini index and S20/S80 ratio reduction of 0.01%-1.7% and 0.1%-7%, respectively. Recycling revenues to stimulate green energy investments yields the least favorable distributional impacts and worsens inequality. Trade-offs exist between reducing inequality and fostering investment-driven economic growth when choosing revenue recycling options.

Resource Details (Export Citation) GTAP Keywords
Category: Other CGE Application
Status: Not published
Date: 2024
Created: Kundu, D. (4/15/2024)
Updated: Batta, G. (4/22/2024)
Visits: 108
- Climate change policy
- GTAP Data Base and extensions
- Economic analysis of poverty
- Economic development
- Economic growth
- Health
- Baseline development
- Model extension/development
- Partial and general equilibrium models
- Asia (South-Central)

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