Combining Renewable Subsidies and Higher Coal Tariffs Could Lower India’s Emissions by One-third by 2030, Says IMF Study


A study by two economists from the International Monetary Fund (IMF) suggests that a combination of renewable subsidies and higher tariffs on coal could help India achieve nearly one-third lower emissions by 2030, as well as decreasing coal imports by 14% by the same year, reports PTI.


India has made significant progress towards meeting its emissions reduction targets under the Paris Agreement, but total greenhouse gas emissions could still increase by more than 40% by 2030 with current policies. While a modest increase in short-term emissions may be necessary for poverty reduction and energy security, a more rapid scaling up of current policies could help lower emissions significantly over the medium term and bring India closer to a path to net zero by 2070, according to the study.


The research shows an alternative emissions trajectory could be achieved by scaling up current policies. It includes a gradual increase in subsidies on the use of renewable energy coupled with higher taxes on emissions. The added benefit of early reduction in the reliance on imported fuels would help to ensure universal access to energy, and lessening the negative health effects of pollution. External climate financing and technology transfer would help mitigate costs and ensure sustainability.

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The policy proposed by the study’s authors would result in a modest reduction in the level of real gross domestic product as firms and consumers pay higher taxes. However, enough fiscal revenues would be raised to compensate the poorest citizens, and the small cost of this policy is less distortionary than other options. Lower emissions would have significant benefits. Increasing renewable energy usage and allowing coal to taper off in this policy scenario would lead to a 2.5% reduction in pollution, saving lives and leading to fewer missed school and workdays. It would also increase resilience to global changes in energy prices and improving energy security.


The study suggests that combining renewable subsidies and higher tariffs on coal could have positive environmental benefits and help India move towards achieving its emissions reduction targets.

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