Abstract:-

Our analysis using plant-level panel data of the Annual Survey of Industries for 2008-09 to 2015-16 reveals that an increase in energy price will reduce energy demand in energy-intensive manufacturing industries (EIMIs) in India, with an elasticity of 0.6 to 1.5. Based on data for 2018-19, we assess that with an operating carbon market for EIMIs and a carbon price of US$ 20 ($ 40) per ton of CO2, CO2 emissions will go down by 26 (30)%. Our theoretical analysis shows that regulations on the containment of carbon emissions need not always hurt growth, and under certain circumstances, a carbon market could be growth-promoting instead of growth-inhibiting.