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EXPERT NOTE
Macroeconomic Impacts of Long-Term Decarbonization in India: Implications for a Just Transition
India faces the dual challenge of advancing strong climate action while achieving its development goals. Moreover, the low-carbon transition will require a profound transformation of the Indian economy resulting in differing impacts on workers, regions, and communities.
Based on results from the India Energy Policy Simulator, this expert note by Deepthi Swamy and Varun Agarwal presents potential macroeconomic impacts — on economic growth, employment, and tax revenues — in a long-term decarbonization scenario, aligned to India’s 2070 net-zero emissions target, and analyzes the implications of these impacts for a just transition in India.
India’s long-term decarbonization efforts require significant structural changes in the economy as we step up renewable energy and move to a low-carbon development pathway. The current literature discusses the macroeconomic and sectoral but not the distributional impacts of climate action. Since large disparities exist among India’s socioeconomic groups, the low-carbon transition will affect income and social groups differently. To address this gap, this technical note describes a methodology for quantifying household-level impacts across different income groups in India.
It uses the Global Income Distribution Dynamics (GIDD) framework in connection with the macroeconomic Green Economy Model for India (GEM-India). The climate policies are implemented through the macro model, the GEM, and the microsimulation redistributes the effects of the changes at the macroeconomic level amongst income groups and gender in terms of wages, poverty, employment and so forth. This technical note lays out the methodology to link climate policy implementation to household-level income and employment impacts, but not its results.