Impact of Energy Subsidy Removal on Climate Change: A CGE Modelling Approach for India

Abstract

There is a negative relationship between prices of energyproducts and pollution content of export as well as the PollutionTerms of Trade (PTOT) in India. However the pollution contentof domestic consumption has a marginally stronger positive effectthan the negative effect on export. This indicates that, for instancewhen prices of energy products rise in India either due to removalof fuel subsidy or rise in international crude prices, some of the manufacturers who were previously exporting pollution intensivegoods lose their competitiveness in the international market dueto increase in fuel prices and start selling their product to the
domestic market. Thus clearly a rise/fall in prices of energy goodsdoes not significantly contribute to climate change in India.