Carbon taxes and India

Using the Indian module of the Second Generation Model (SGM), we explore a reference case and three scenarios in which greenhouse gas emissions were controlled. Two alternative policy instruments (carbon taxes and tradable permits) were analyzed to determine comparative costs of stabilizing emissions at (1) 1990 levels (the 1X case), (2) two times the 1990 levels (the 2X case), and (3) three times the 1990 levels (the 3X case). The analysis takes into account India's rapidly growing population and the abundance of coal and biomass relative to other fuels. We also explore the impacts of a global tradable permits market to stabilize global carbon emissions on the Indian economy under the following two emissions allowance allocation methods. 1. Grandfathered emissions: emissions allowances are allocated based on 1990 emissions. 2. Equal per capita emissions: emissions allowances are allocated based on share of global population. Tradable permits represent a lower-cost method to stabilize Indian emissions than carbon taxes, i.e. global action would benefit India more than independent actions.