labels: industry - general, economy - general, governance
ORF to develop India''s first tool to analyse economy-energy-environment policiesnews
Our Economy Bureau
07 May 2005

New Delhi: Observer Research Foundation, in collaboration with the Brookings Institution US, will develop India's first computational tool to analyse the country's economic, energy, and environment policies. Titled 'I-Cubed simulation model', the $400,000 (Rs1.74 crore) research project will be completed in the next 18 months.

Based on the well-known 'G-cubed model', the tool will provide future energy and environment profiles, technology penetrations, implications of alternative future scenarios, and a variety of policy assessments like ideal fuel mix and energy security, technology policies, implications of emission constraints, and energy taxation.

Vivek P Karandikar, head of the project, says, "Accelerated economic growth in India will lead to a sharp increase in the demand for energy in the coming years. Careful planning is essential to ensure that reliable and affordable supplies are available and the energy mix is compatible with the environment objectives. Economic policies outside the energy sector, such as taxation and fiscal incentives will also influence the energy sector development path. Therefore, an integrated analysis of all these issues is required in sound policy making."

Karandikar added that the I-Cubed simulation model project would fill key research gaps in India's economy-energy-environment framework.

According to RK Mishra, founding chairman, Observer Research Foundation, "Today in the knowledge age, India plays a leading role and the expectations of the global community from the country are immense. "As India's premier think tank to influence public policy formulation, ORF aims to provide informed and valuable inputs to the government, the civil society, and to the business community through in-depth research. We seek active cooperation from those who share this vision so that we can build partnerships for a global India."

The 18-month long project will be implemented in three phases of which the first 10 months would be devoted to the development of the I-cubed simulation model. The model will have two geographic regions - India and the rest of the world. These will be connected by international trade and financial flows. The economies of both regions will be divided into four broad segments - businesses, households, the financial sector, and the government. Businesses will be further sub-divided into 15-20 sectors; five of which will be energy industries, and the remainder will represent agriculture, manufacturing, and services. ORF and Brookings researchers will collaborate on tuning the model to represent the economy of India as closely as possible.

The next five months will focus on analysis of several major policy issues. Each analysis will include quantitative assessment of the effects of the policy on a variety of variables including energy consumption and production, exchange rates, international trade flows, international capital flows, and a range of macroeconomic variables such as employment, savings, investment and GDP.

The last three months will involve outreach activities designed to disseminate the project's results and engage decision-makers in India and US on energy and environment policy.
The project will produce two major reports- one for the technical and academic audiences and one for policy-makers, business leaders, and the general public.

Says professor Warwick J McKibbin, head of the research team at the Brookings Institution, and developer of the G-cubed, said, "India has embarked on an accelerated economic growth path and the implication of GDP growth on infrastructure needs in general and energy sector in particular are enormous. The energy sector has to be able to support this high economic growth."

Three key policies:

1. Energy sector implications of growth policies
Alternate economic growth strategies, for instance, manufacturing-led growth versus services-led growth, have vastly different implications for energy sector like changes in energy supplies, import dependency of various fuels, change in patterns of emissions and overall impacts on environment quality. Through the application of I-Cubed Simulation Model these will be systematically quantified.
2. Impacts of alternative energy taxes and subsidies
The second study will focus on the impacts of alternate energy tax and subsidy policies including changing tax rates on fossil fuels, providing incentives for renewable energy sources, and implementing a carbon tax or climate levy. A key aspect of this analysis will be to determine the effects of energy taxes and subsidies on government revenue.
3. Effects of alternative fuels for electricity generation
The project will study the economic, environmental, and energy security implications of increased government emphasis on the use of natural gas for electric power generation. In addition, study of alternate energy sources like hydro and other renewables, nuclear, coal bed methane, and underground coal gasification will also be taken up.

 


 search domain-b
  go
 
ORF to develop India''s first tool to analyse economy-energy-environment policies