Economic analysis of the hard-to-abate sectors in India

Abstract: We assess the contribution of India’s hard-to-abate sectors to the country’s current emissions and their likely future trajectory of development under different policy regimes. We employ an enhanced version of the MIT Economic Projection and Policy Analysis (EPPA) model to explicitly represent the following hard-to-abate sectors: iron and steel, non-ferrous metals (copper, aluminum, zinc, etc.), non-metallic minerals (cement, plaster, lime, etc.), and chemicals.

We find that, without additional policies, the Paris Agreement pledges made by India for the year 2030 still can lead to an increasing use of fossil fuels and corresponding greenhouse gas (GHG) emissions, with projected CO2 emissions from hard-to-abate sectors growing by about 2.6 times from 2020 to 2050. Scenarios with electrification, natural gas support, or increased resource efficiency lead to a decrease in emissions from these sectors by 15-20% in 2050, but without carbon pricing (or disruptive technology changes) emissions are not reduced relative to their current levels due to growth in output. Carbon pricing that makes carbon capture and storage (CCS) economically competitive is critical for achieving substantial emission reductions in hard-to-abate sectors, enabling emission reductions of 80% by 2050 relative the scenario without additional policies.

Without substantial government support, decarbonization of India’s hard-to-abate sectors will not be achievable.