Aligning climate change & development policies:
Scenarios, modeling and policy analysis from developing country perspective

P.R. Shukla
Indian Institute of Management, Ahmedabad, India

Presentation for theAIM Training Workshop
October 16-20, 2006, National Institute for Environment Studies, Tsukuba, Japan

Aligning climate change & development policies

Agenda•Developing Country Dynamics− Scenarios: Transitions of Goals, Institutions, Demographics, Incomes, Preferences− Modeling: Co-benefits, Lock-ins, Endogenous and exogenous environment− Policy analysis: Equity vs. Efficiency,•Some Illustrations (from India)− Aligning Energy Security and Technology Transitions with Climate Goals− Co-benefits from Aligning Energy-Water Markets in South-Asia− Sustainable Development and Adapting Long-life Assets to Climate Risks•Modeling Climate Stabilization Induced Development Paths•Conclusions

Aligning climate change & development policies

Developing Country Dynamics
1. What make developing countries different?
–Different stage of development: priorities and capabilities–Different economic dynamics than assumed in scenario assessments–

Need and opportunities to align climate and development agenda

2. Modeling vs. Model Developments

Aligning climate change & development policies

Understanding development• Dual Economy• Multiple Transitions• Informal Activities• Subsistence Production• Market Performance and Disequilibria• Non-commercial Fuels• Non-economic Concerns• Policy Distortions

Aligning climate change & development policies

Transitions
Socio-Economic

Demographic⎯
⎯
⎯
⎯



Population
Urban / Rural
Gender ratio
Migration

Development⎯⎯

Soft indicators: Income, Equity, Literacy, HealthHard indicators: Infrastructure, Housing, Vehicles, Appliances Political⎯⎯⎯

Institutions
Laws
Policies

Aligning climate change & development policies

Demographic Transitions in India: Age/Gender Profile
100+95- 99
90- 9585- 8980- 8475- 7970- 7465- 6960- 6455- 5950- 5445- 4940- 4435- 3930- 3425- 2920- 2415- 1910- 145- 90- 4

Population Pr ojec tion for 2010

F emaleMale5040

Age groupAge group

Population in 1970

30

20

100

1020

30

40

100+
95- 9990- 9585- 8980- 8475- 7970- 7465- 6960- 6455- 5950- 5445- 4940- 4435- 3930- 3425- 2920- 2415- 1910- 145- 90- 470

50

F emaleMale60504030

Age groupAge group

F emale

Ma le60

50

40

30

20

100

10

200102030

40

50

60

70

Population Pr ojec t ion for 2050

Population Pr ojec t io n f or 203 0

70

10Population ( million)

Population ( million)

100+
95- 9990- 9585- 8980- 8475- 7970- 7465- 6960- 6455- 5950- 5445- 4940- 4435- 3930- 3425- 2920- 2415- 1910- 14
5- 9
0- 4

20

30

40

50

60

70

Populat io n ( million)

Aligning climate change & development policies

100+
95- 9990- 9585- 8980- 8475- 7970- 7465- 6960- 6455- 5950- 5445- 4940- 4435- 3930- 3425- 2920- 24
15- 1910- 145- 90- 4F emale

Male

70

60

50

40

30

20

100

1020

Population ( million)

30

40

50

60

70

Demographic Transitions in India: Urban/RuralUrban & Rural population of India (Medium Variant)
Rural
90

Urban

80
70
60% Share

50
40
30
2010Year

Aligning climate change & development policies

2030

2025

2020

2015

2010

2005

2000

1995

1990

1985

1980

1975

1970

1965

1960

1955

1950

0

Demographic Transitions in India: Urban/RuralAge gr oup

Population Pr ojec tion for Ur ban and Rur al ar eas

2030
2025
2020
2015
2010
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950

Rur alUr ban

800

600

4002000200

Population ( million)

Aligning climate change & development policies

4006008001000

Composition of India's GDP by Sector

1950 - 51

Services
28%
Agriculture

1980 - 81

Services37%

2003 - 04

Agriculture
24%
Agriculture
41%

59%
Industry13%
Industry
22%

Services
51%

Industry
25%

22%

Data Source: CMIE and Economic Surveys of India

Aligning climate change & development policies

Past Energy transitions: Global & India
80%

Percentage of PEC

India
60%
No n-co mmercial
energy supply

40%

Co al &LIgnite
Oil

20%

100

Percentage of PEC

8070

NuclearGlobal90Gas

Traditio nal
renewables

Hydro

0%
1953-54

Co al

60
5040

Oil30

Co alGas

20
100
1850

Hydro
Nuclear

1900

1950

Aligning climate change & development policies

2000

1960-61

1970-71

1980-81

1990-91

2001-02

Energy Transitions: How they matte to Low Carbon Future?

Percentage of Primary Energy Consumption

80%

How to transit toModern Biomass?

60%

Food Security?

TraditionalBiomass
40%

Domestic Resource: +ve

Coal Direct Employment: +ve
Oil
20%
Fuel Supply?
Waste disposal? Nuclear
Safety?

0%
1952

1960

1970

1980

1990

Energy Security: -ve
Foreign Exchange: -ve

En. Security:+Ve

Geopolitical Risk: HighGas Foreign Exchange: -veHydro
2001

Regional water disputes?
Indirect Benefits

Aligning climate change & development policies

Energy transition evidences:
Electricity consumption by sectors
Traction 3%

Others 5%

Commercial
6%

Others4%

Traction
3%

Commercial
6%
Domestic
11%
Agri
6%

Domestic
22%

Commercial
6%

Traction
4%
Others5%

Industry
35%

Domestic
11%
Agri
17%

Industry
59%

Agri
29%

Industry
68%

1960
12 TWH1980
78 TWH2000
313 TWH
Data Source: CMIE

Aligning climate change & development policies

Energy transition evidencesChanging mix of Electricity Generation

GasT he rm a l
11%

N uc le a r
3%

O ilT he rm a l
3%

G a s T he rm a l
0 .0 4 %N uc le a r
4%

O il
T he rm a l
0 .0 2 %H ydro13 %C o a lT he rm a l
70%

C o alT he rm a l
5 1%

H ydro45%

1971
61 TWH

2001
558 TWH
Data Source: CMIE

Aligning climate change & development policies

Transitions
Demand-side Energy Efficient Appliances Substitutions (e.g. Information for transport) Advance Technologies-Fuel-cell-

Hydrogen economy-

Bio-engineering

Aligning climate change & development policies

Transition in Household Energy in India:
Fuel-wood to LPG
1.8

25

1.6Population

1.4
LPG consumption in India

15Index: 1981=1Index:1981=120

10

1.2
Fuel-wood

1production

580
70% Household LPG penetration in India

60%50Urban

40
30
20

Rural

Data Sources - Census 2001, NSS 1994, 2000

100
1981

1984

1987

1990

1993

1996

1999

Aligning climate change & development policies

2002

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1981

00Environmental Transitions
 Awareness- Pressure groups Income-effects- E.g. Kuznets phenomenon Laws and Regulations- Global agreements- National policies
 Technology- Zero-effluent Processes- Recycling

Aligning climate change & development policies

Consumption/Life-style Transitions
 Conservation- Substitutions- Recycling
 City Planning Architecture/ Building Codes Changing Preferences Income Effects

Aligning climate change & development policies

Backbone Technology Transitions
 Logistics- Pipelines
 Electricity T&D- Decentralized utilities Information- Wireless Nanotechnology
 New and Renewable Energy- Hydrogen

Aligning climate change & development policies

Hydrogen fuel production costs

US Cents/kwh

4.5
4.0
3.5
3.0
2.5
2.0
Coal
Coal
Natural gas Natural gas
w ithout CO2 w ith CO2 Gasification Gasification
w ithout CO2 w ith CO2
capturecapturecapturecaptureAligning climate change & development policies

Path Dependence• Elasticity of long-term paths to short-term influences• Lock-ins from current technology supply• SRES Scenarios and Technology paths• Development policies and path dependence

Aligning climate change & development policies

Path Dependence: Lock-ins vs. Innovations• Elasticity of long-term paths to short-term influences• Lock-ins from current technology supply• SRES Scenarios and Technology paths• Development policies and path dependence
Decarbonization of Primary Energy: History

IPCC SRES Emission Scenarios
30A225

China
India

1000

800
USA
Japan

CO2 (GtC)

kgC/toe

20

15

B2A1

10600

WRE550
B154001960

France
1970

1980

1990

Aligning climate change & development policies

01990

2010

2030

2050
Year

2070

2090

Emerging drivers of technological changeInternational Labor market•

Wage differential•

Income gaps•

Migration

Human Capital
Knowledge flows•

Diasporas and social networks•Shifting comparative advantage in knowledge services•

Role of local and contextual knowledge

Governance, risks and investment flows
Aligning climate change & development policies

Hazards of Disaggregated Scenarios• Shifting comparative advantage• Path dependence• Hazards of disaggregated scenarios• High error• Poor benchmark for negotiations

Aligning climate change & development policies

Modeling Developing Country Dynamics(Some illustrations from India)− Aligning Technology Transitions with Climate Goals− Conjoint Market for CO2 and SO2 Emissions− Co-benefits from Aligning Energy-Water Markets in South-Asia

Aligning climate change & development policies

Aligning Development and Climate Policies• Aligning endogenous and induced change• Co-benefits• Spillovers

Aligning climate change & development policies

Mainstreaming Climate Change in National Development
Aligning climate policies and actions with:• MDGs / National development targets• Agreed goals under extant international agreements• Developing resilience to Vulnerabilities and Adapting to changing Climate Parameters
MDG, India’s National Targets and Climate Change
MDG and global targets

India’s National plan targets

Interface with Climate Change

Goal 1: Eradicate extreme poverty andhunger• Double the per capita income by 2012

• Higher income enhances access toservices, food, fuel, information, anenhances mitigative and adaptive
capacity

Targets: Halve, between 1990 and 2015,
the proportion of people with income
below $1 a day and those who suffer fromhunger• Reduce poverty ratio by 15% by 2012
• Contain population growth to 16.2%
between 2001-2011

Goal 7: Ensure environmental
sustainability• Increase in forest cover to 25% by 2007 and33% by 2012 (from 23% in 2001)

Targets: Integrate SD principles in country
policies/ programs to reverse loss ofenvironmental resources• Sustained access to potable drinking waterto all villages by 2007

Target: Halve by 2015 the proportion ofpeople without sustainable access to safe
drinking water• Electrify 80,000 additional villages by 2012
via decentralized sources• Cleaning of all major polluted rivers by2007 and other notified stretches by 2012

Aligning climate change & development policies• Higher climate variability would
enhance risks to meet the goal
• Enhanced sink capacity, reduced
GHG and local emissions; lower
fossil imports; reduced pressure onland, resources and ecosystems• Higher adaptive capacity to fromenhanced supply of water, health &education in rural areasBio-energy: Climate and Development Goals
Jatropha Plantation in India• Rural Employment: (MDG1)
Large scale employment potential inplantation, seed collection and extraction• Farm Income (from waste lands): (MDG1)
Net income Rs. 12000/Ha/year• Energy Security (MDG1&7)
Imported fossil oil is replaced• Environment (MDG7)
Carbon neutral, Rehabilitates waste land

Rural Employment
Oil Extraction Plant

Aligning climate change & development policies

JatrophaCo-benefits of CO2 & SO2 Mitigation: India B2 Scenario
Carbon Emissions

SO2 Emissions

800

76Million Tonnes

Carbon (MT)600

4005432200

100
1995

2005

2015
Year2025

Aligning climate change & development policies

2035

1995

2005

2015
Year

2025

2035

Adaptation Challenge: Food/Water/Energy/Climate

Food
Agriculture uses
Ground Water for
Irrigation

Water

EnergyWater use depends oncrop pattern, cultivation
practices, electricity
supply, Climate

Energy use depends onpump efficiency, water
depth and Agriculture
practices

ClimateGHG emissions
depend on Energy/Technology Mix

Aligning climate change & development policies

Rainfall, Inflows and Hydro Electricity Generation
State of Andhra Pradesh

Rainfall and Water Inflows
1110004000

10800600

2400

400
Water Inflow

20080001990

01992

1994

1996

1998

2000

Aligning climate change & development policies

Rainfall (mm)Inflow (MTC)

3200

Hydro Electricity Generation (TWh)Rainfall in Catchments Area

1600

Hydro Electricity Generation

98
76543
1980

1984

1988

1992

1996

2000

South-Asia Energy-Water Cooperation: Co-benefits

Integrated South-Asia Energy-Water Market

Benefit (Saving) Cumulative$ Billion% GDP

from 2010 to 2030

Energy60 Exa Joule

3210.87

CO2 Equiv.

5.1 Billion Ton

280.08

SO250 Million Ton

100.03

Total3590.98

Spill-over Benefits / Co-Benefits• More Water for Food Production (MDG1)• 16 GW additional Hydropower (MDG1&7)• Flood control (MDG1&7)• Lower energy prices would enhancecompetitiveness of regional industries (MDG1)

Aligning climate change & development policies

Modeling Climate Stabilization
Induced Development Paths

Aligning climate change & development policies

Stabilization induced technological change• Depends on the underlying endogenous development path
• Stabilization would induce significant technological change• How to represent future technologies in models?
• Architecture of climate regime is the key driver
Addressing Questions from Negotiators¾

Allocations of Emissions Rights¾Taxes and Revenue Recycling¾

Who pays?

¾

Technology protocols

Aligning climate change & development policies

Indian Carbon Emissions Scenarios
Carbon Emissions
1800
1600

Indian Emissions Scenarios

CentralizationIA1Market Efficiency

Fragmented

IA2
Hybrid Economy(Reference)

1400
1200
1000

IA1: Market Efficiency
800
600

IB1: Sustainable Development
Decentralization

GovernanceIntegrated

CO2 Emissions (MT)Market integration

IA2: Reference ScenarioIB1IB2

SustainableDevelopment

Self Reliance
Closed Economy

400200
2000

2020

2040

2060

2080

India’s Total Carbon Emission in 21st Century(Billion Ton CO2)

Aligning climate change & development policies

Reference (IA2) Scenario: 363

Market Efficiency (IA1) Scenario: 286 (79% of IA2)

Sustainable Development (IB1) Scenario: 198 (55% of IA2)2100

Technologies in Low Carbon Scenarios: Medium-Term (2050)
Conventional Technology Path: Includes
significant endogenous technological change

Globalization/Market Efficiency Scenario
Synfuels, Next-Gen Nuclear (Thorium)
Fuel cell vehicles, Pipeline networks
Energy efficient appliances/ infrastructure

4500

IA2Frozen Technology

Advanced materials, Nanotechnology

3750
CO2 Emissions (Million Ton)

Coal liquid, IGCC, Hydrogen from gas

IA1
3000

Sustainable Development Scenario
2250

IB1Push for renewable energy & recycling
Renewablecar
Advanced
Energypooling,Technologies
Shared assets

1500

High speed trains, Swap of transport by IT
Dematerialization, Community institutions

750
2000

2010

2020

2030

2040

2050

Aligning climate change & development policies

Sustainable habitats, Reforestation

Indian Emission Scenarios and Stabilization
Carbon Emissions for Indian Scenarios
7IA26

India’s Total Carbon Emission in 21st Century(Billion Ton CO2)5

CO2 Emissions (Billion Ton)

IA1

Reference (IA2) Scenario: 363

Market Efficiency (IA1) Scenario: 286 (79% of IA2)

Sustainable Development (IB1) Scenario: 198 (55% of IA2)

550 PPMV Cost-effective Regime: 140 (39% IA2)

4

3

IB1
2

550 ppmv

1

2000

2020

2040

2060

2080

Aligning climate change & development policies

2100

Conclusions: Development Perspective in Scenarios/Modeling/Policy Analysis
Scenarios– Developing realistic and consistent scenarios for developing countries
within each global storyline (e.g. transitions, lock-ins, PPP)
– Linking level of geographic disaggregation with objectives of analysis– Mainstreaming climate actions with development actions throughendogenous representations/drivers

Modeling– Multi-purpose soft-linked modeling tools versus hard-linked single
model– Consistent and purposive linking of global and national databases– Extending modeling capacities to incorporate emerging drivers andpolicy questions

Policy Analysis– Aligning short-term actions with long-term vision and objectives– Linking global and national policy analysis– Using market and non-market policies to gain co-benefits

Aligning climate change & development policies

Thank you

Aligning climate change & development policies