The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model

This paper proposes to test the global hybrid computable general equilibrium model IMACLIM-R against macroeconomic data. To do so, it compares the modeled and observed responses of the Indian economy to the rise of oil price during the 2003- 2006 period. The objective is twofold: first, to disentangle the various mechanisms and policies at play in India's economy response to rising oil prices and, second, to validate our model as a tool capable of reproducing short-run statistical data. With default parameterization, the model predicts a significant decrease in the Indian growth rate that is not observed. However, this discrepancy is corrected if three additional mechanisms identified by the International Monetary Fund are introduced, namely the rise in exports of refined oil products, the imbalance of the trade balance allowed by large capital inflows, and the incomplete pass-through of the oil price increase to Indian customers. This work is a first step toward model validation, and provides interesting insights on the modeling methodology relevant to represent an economy's response to a shock, as well as on how short-term mechanisms – and policy action – can smooth the negative impacts of energy price shocks or climate policies. Running headline

Climate policies : what if emerging country baseline were not so optimistic? - a case study related to India

One of the current main objective of international negotiations on climate change aims at enlarging the coordination regime to developing countries (DCs), and particularly to emerging countries. The international coordination system built at the Kyoto Conference relies on a coordination system based on a purely climate centric approach which shows irreconcilable contradictions between climate and development issues. This article aims at evaluatingpossible pathways implementing synergies between climate policies and development policies in order to create an incentive towards DCs to take part in climate mitigation. We focus on an illustrative example on India.When most reference scenarios postulate rapid energy decoupling of the GDP and rapid decarbonisation of DCs economies in the future, this article elaborates, with the IMACLIM-R model, a baseline taking into account weaknesses and current disequilibria of the Indian technico-economic system such as the high dependency on imported energy, or the structural shortage in electricity. We show why a purely climate centric approach (quota allocation), adopted to commit with a world objective of tabilization to 550ppm, induce very high transition costs in spite of significant financial transfers. On the contrary, a strategy based on the research of synergies between the reduction of these disequilibria, and the mitigation of GHG emissions is investigated in the power sector, which presents the biggest potential of no-regret measures. This permits to drop down transition costs applied to the Indianeconomy by improving the overall energy efficiency. An economic and environmental evaluation of this alternative scenario is lead

Sectoral Targets for Developing Countries: Combining "Common but Differentiated Responsibilities" with "Meaningful participation"

Although a global cap-and-trade system is seen by many researchers as the most cost-efficient solution to reduce greenhouse gas emissions, developing countries governments refuse to enter into such a system in the short term. Hence, many scholars and stakeholders, including the European Commission, have proposed various types of commitments for developing countries that appear less stringent, such as sectoral approaches. In this paper, we assess such a sectoral approach for developing countries. More precisely, we simulate two policy scenarios in which developed countries continue with Kyoto-type absolute commitments, whereas developing countries adopt an emission trading system limited to electricity generation and linked to developed countries' cap-and-trade system. In a first scenario, CO2 allowances are auctioned by the government, which distributes the auctions receipts lump-sum to households. In a second scenario, the auction receipts are used to reduce taxes on, or to give subsidies to, electricity generation. Our quantitative analysis, led with a hybrid general equilibrium model, shows that such options provide almost as much emission reductions as a global cap-and-trade system. Moreover, in the second sectoral scenario, GDP losses in developing countries are much lower than with a global cap-and-trade system and so is the impact on the electricity price.Sectoral Approach, Sectoral Target

Les nouveaux scénarios socio-économiques pour la recherche sur le changement climatique

National audienceThe scientific community is developing a new generation of scenarios to inform the choices we have to make when it comes to responding to climate change. This new generation of scenarios integrates more fully the mechanisms that regulate climate and provides insights to spatial and temporal resolutions unexplored in previous exercises. In addition, it gives a framework for integrating explicit climate policies for mitigation and adaptation, which allows assessing the benefits and costs of climate policies in different socio-economic scenarios. Finally, it introduces a new way of working that strengthens the collaboration between different research communities on climate change.La communauté scientifique est en train d'élaborer une nouvelle génération de scénarios pour éclairer les choix que nous avons à faire face au changement climatique. Cette nouvelle génération de scénarios permet d'intégrer de manière plus complète les mécanismes qui régissent le climat et de donner des éclairages à des résolutions spatiales et temporelles inexplorées dans les exercices précédents. Par ailleurs, elle donne un cadre pour intégrer explicitement les politiques climatiques d'atténuation et d'adaptation, ce qui ouvre la possibilité d'évaluer les bénéfices et les coûts des politiques climatiques selon différents scénarios socio-économiques. Enfin, elle met en place une nouvelle façon de travailler qui renforce la collaboration entre les différentes communautés de recherche sur le changement climatique

2°C or Not 2°C?

International audiencePolitical attention has increasingly focused on limiting warming to 2°C. However, there is no consensus on both questions "Is the 2°C target achievable?" and "What should be done with this target that becomes increasingly difficult to achieve?". This paper aims at disentangling the points of deep uncertainty underlying this absence on consensus. It first gives simple visualizations of the challenge posed by the 2°C target and shows how key assumptions (on the points of deep uncertainty) influence the answer to the target achievability question. It then proposes an "uncertainties and decisions tree", linking different beliefs on climate change, the achievability of different policies, and current international policy dynamics to various options to move forward on climate change

Climate policies : what if emerging country baseline were not so optimistic? - a case study related to India

One of the current main objective of international negotiations on climate change aims at enlarging the coordination regime to developing countries (DCs), and particularly to emerging countries. The international coordination system built at the Kyoto Conference relies on a coordination system based on a purely climate centric approach which shows irreconcilable contradictions between climate and development issues. This article aims at evaluatingpossible pathways implementing synergies between climate policies and development policies in order to create an incentive towards DCs to take part in climate mitigation. We focus on an illustrative example on India.When most reference scenarios postulate rapid energy decoupling of the GDP and rapid decarbonisation of DCs economies in the future, this article elaborates, with the IMACLIM-R model, a baseline taking into account weaknesses and current disequilibria of the Indian technico-economic system such as the high dependency on imported energy, or the structural shortage in electricity. We show why a purely climate centric approach (quota allocation), adopted to commit with a world objective of tabilization to 550ppm, induce very high transition costs in spite of significant financial transfers. On the contrary, a strategy based on the research of synergies between the reduction of these disequilibria, and the mitigation of GHG emissions is investigated in the power sector, which presents the biggest potential of no-regret measures. This permits to drop down transition costs applied to the Indianeconomy by improving the overall energy efficiency. An economic and environmental evaluation of this alternative scenario is lead.India, domestic policies and measures, climate policies, long term scenarios, international egotiations, power sector, climate regime, policies and measures, energy efficiency, realistic baselines, peak-oil

The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model

International audienceThis paper proposes to test the global hybrid computable general equilibrium model IMACLIM-R against macroeconomic data. To do so, it compares the modeled and observed responses of the Indian economy to the rise of oil price during the 2003- 2006 period. The objective is twofold: first, to disentangle the various mechanisms and policies at play in India's economy response to rising oil prices and, second, to validate our model as a tool capable of reproducing short-run statistical data. With default parameterization, the model predicts a significant decrease in the Indian growth rate that is not observed. However, this discrepancy is corrected if three additional mechanisms identified by the International Monetary Fund are introduced, namely the rise in exports of refined oil products, the imbalance of the trade balance allowed by large capital inflows, and the incomplete pass-through of the oil price increase to Indian customers. This work is a first step toward model validation, and provides interesting insights on the modeling methodology relevant to represent an economy's response to a shock, as well as on how short-term mechanisms – and policy action – can smooth the negative impacts of energy price shocks or climate policies. Running headlin

The transportation sector and low-carbon growth pathways: modeling urban, infrastructure and spatial determinants of mobility

International audienceThere is still a controversy as to the effect of spatial organization on CO2 emissions. This paper contributes to this debate by investigating the potentials offered by infrastructure measures favoring lower mobility in the transition to a low-carbon economy. This is done by embarking a detailed description of passenger and freight transportation in an energy-economy-environment (E3) model. In addition to the standard representation of transport technologies, this framework considers explicitly the "behavioural" determinants of mobility that drive the demand for transport but are often disregarded in mitigation assessments: constrained mobility needs (essentially commuting) imposed by the spatial organization of residence and production, modal choices triggered by installed infrastructure and the freight transport intensity of production processes. This study demonstrates that the implementation of measures fostering a modal shift towards low-carbon modes and a decoupling of mobility needs from economic activity significantly modifies the sectoral distribution of mitigation efforts and reduces the carbon tax levels necessary to reach a given climate target relatively to a "carbon price only" policy. This result is robust to a wide range of assumptions about exogenous parameters

Quelles transformations pour l’atténuation du changement climatique ? Des trajectoires d’émissions mondiales à la trajectoire française

This article starts from the long-term objective of the Paris Agreement on climate change to hold the increase in the global average temperature to well below 2 $^\circ$C above pre-industrial levels, and the global emission pathways compatible with this objective. It shows how translating these global emission pathways into national mitigation targets raises equity issues. It then analyzes the trajectory towards net zero emissions in 2050 set out in the French National Low Carbon Strategy. Finally, recent trends are compared to the trajectory-objective, and highlight, in hollow, the levers to reduce emissions and the transformations required

Les cobénéfices des politiques climatiques : un concept opérant pour les négociations climat ?

International audienceThis paper analyzes the challenges related to the assessment of co-benefits of climate policies underpinned by the implementation of multi-objective policies which seek synergies between climate policies and other development objectives (poverty alleviation, employment, health etc.). The analysis highlights the increasing interest in co-benefits in the latest 5th IPCC report, in particular by integrated models. Nevertheless, the quantified evaluation of co-benefits is still confronted to several methodological limitations which reduce the scope of co-benefits, particularly at the global level. In a growing context of climate-development approaches in climate negotiations, this article insists on the need to also assess cobenefits of other policies which induce a significant part of GHG emissions. Considering climate policies focused only on Greehouse Gases emissions reduction limits the range of policy instruments to carbon taxation, tradable carbon emissions permits or dedicated mitigation and adaptation funds. This also hinders the integration of climate objectives in non-climate policies. Analyzing impacts of developmentpolicies on Green Gases emissions in the form of co-benefits requires to broaden the range of policy instruments and to take into account other drivers of emissions such as land dynamics. Including these mechanisms in integrated models therefore represents new scientific frontiers for integrated models in the coming years.Cet article 1 examine les enjeux sous-jacents à l'évaluation des cobénéfices des politiques climatiques dans le cadre de la mise en oeuvre de politiques multi-objectifs, au sein lesquelles des synergies sont recherchées entre la lutte contre le changement climatique et des objectifs de développement (emploi, santé, sortie de la pauvreté, etc.). L'analyse du cinquième rapport du groupe III du GIEC montre en effet un intérêt grandissant dans la littérature pour les évaluations quantifiées des cobénéfices, en particulier à l'aide de modèles numériques intégrés. Néanmoins, l'évaluation quantifiée à une échelle globale des cobénéfices est confrontée à des difficultés d'ordre méthodologique qui expliquent l'écart entre les pratiques des modélisateurs et la vision théorique des économistes qui repose sur l'analyse coûts-bénéfices. L'article revient enfin sur la nécessité d'élargir le champ d'investigation de l'évaluation des cobénéfices aux politiques non climatiques qui déterminent une part importante des émissions de GES, et constituent un des enjeux majeurs des approches intégrées climat-développement qui montent en puissance dans les négociations climat en cours. Abstract – Co-benefits of climate policies: a potential keystone of climate negotiations? This paper analyzes the challenges related to the assessment of co-benefits of climate policies underpinned by the implementation of multi-objective policies which seek synergies between climate policies and other development objectives (poverty alleviation, employment, health etc.). The analysis highlights the increasing interest in co-benefits in the latest 5th IPCC report, in particular by integrated models. Nevertheless, the quantified evaluation of co-benefits is still confronted to several methodological limitations which reduce the scope of co-benefits, particularly at the global level. In a growing context of climate-development approaches in climate negotiations, this article insists on the need to also assess co-benefits of other policies which induce a significant part of GHG emissions. Considering climate policies focused only on Greehouse Gases emissions reduction limits the range of policy instruments to carbon taxation, tradable carbon emissions permits or dedicated mitigation and adaptation funds. This also hinders the integration of climate objectives in non-climate policies. Analyzing impacts of development policies on Green Gases emissions in the form of co-benefits requires to broaden the range of policy instruments and to take into account other drivers of emissions such as land dynamics. Including these mechanisms in integrated models therefore represents new scientific frontiers for integrated models in the coming years