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Carbon tax and energy resource in Indian power sector

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Abstract: Global warming is a universal problem nowadays. The recent United Nations Climate Change Conference in Copenhagen was partially successful because all participating countries realised the damages caused by greenhouse gas (GHG) emissions and promise to mitigate in the future course of time. India has also promised to reduce 20% to 25% of these emissions up to the year 2020. To implement this, there is a need of solid policy formulation and alternative methodologies. This paper presents the introduction of carbon tax in Indian power sector to mitigate the GHG emissions. Three scenarios with different carbon taxes and various energy saving cases have been developed using MARKAL energy system model. The simulation results show that full exploitation of energy conservation potential with 30% carbon tax lead to a sustainable development. About 72% CCK emission will be reduced in the year 2045 as compared to the base case scenario. Other scenarios also show significant reduction in atmospheric emission.

Keywords: power sector; India; MARKet ALIocation; MARKAL; C02 emissions; carbon tax; energy efficiency; electricity.

Introduction

In the last few years, global warming caused by the build up of greenhouse gases (GHGs), has been the issue of everyone's agenda. CO2 accounts for half of the human race's contribution to global warming. Carbon emissions have been rapidly increasing since the industrial revolution. In the year 2002 carbon equivalent emissions from human activity were about 6,500 million tonne per year; with the prediction that this would become double by 2050 (WEC, 2006). The supply of electricity is responsible for 16% of worldwide CO2 emissions (WEC, 2006). For the developed world this proportion is even greater. The global atmospheric CO2 concentration increases from the pre industrial level of 280 ppmv to 387 ppmv in 2008 (The Guardian, 2008) and may follow the increase in trend for future, in which the major contributors are power production, transport and industry sectors. In the most environmentally-ambitious interpretation of the Copenhagen Accord energy-related COT emissions reach 31.9 billion tonne in 2020 — a cumulative 17.50 billion tonne higher from 2008 to 2020 than in the trajectory estimated in IEA/WEO-2009, which assumed more intensive action earlier in the period (IEA/WEO, 2010). The projections show that the total energy-related COT emissions reach the figure of 35.40 billion tonne in the year 2035 (IEA/WEO, 2010). One of the studies of Ito et al. (2000) shows that for the business as usual case in the years 1990, 2050 and 2100 world CO2 emissions may grow up to a value of 21.63, 48.77 and 58.30 billion tonnes. The sensitivity analysis of control policies to the spatial resolution of the air quality model has been performed by Pisoni et al. (2010).

India has shared about 3% of the total global CO2 emission in year 1990 (Shukla, 1996). India is currently the fifth-largest carbon emitter in the world (behind the USA, China, Russia and Japan) and accounts 4.2% of the world's total fossil fuel-related CO2 emissions (IEA/WEO, 2007). CO2 emissions have increased about 60% within past decade, and is about nine times higher than they were 40 years ago (Goldstein and Greening, 2001). The rate of increase of COT emission is contributed mainly by utilisation of higher share of coal in power sector and reduction of hydropower generation in generation mix. In year 2005, power generation alone accounted for 47% of anthropogenic COT emissions in India (Purohit et al., 2010). The baseline scenario shows that 2,984 million tonne CO2 is emitted in year 2030. According to Integrated Energy Policy (Planning Commission, 2006a) annual CO2 emissions could rise from 1 billion tonne at present to 5.5 billion tonnes per year by 2031-2032 in the high coal use scenario and 3.9 billion tonnes in the low coal and renewable dominant scenario. In absolute terms, estimates of India's GHG emissions in 2031 vary from 4.0 billion tonnes to 7.3 billion tonnes of CChequu with four of the five studies estimating that even two decades from now, India's total GHG emissions will remain under 6 billion tonnes of C02equi (MoEF, 2009). The national energy map of India shows that 55% of the electricity generation in year 2031 by coal power plants (TERI, 2006) in business as usual scenario, i.e., a huge increase in CCK emissions. Emission reduction can be curtailed by an increased share of hydro, nuclear and renewable energy in energy mix, along with optimising demand side management. Forcefully use of renewable for power generation starts materialising from the year 2035 (Shukla et al., 2001). There is already a thrust to exploit large hydro in India along with energy saving measures. Introduction of nuclear is foreseen shortly and introduction of energy saving measures is already a well-developed programme.

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