Effects of international climate policy for India: Evidence from a national and global CGE model
In order to significantly reduce global carbon emissions, it is necessary to control CO2 emissions also in fast growing emerging economies such as India. The question is how the Indian economy would be affected by including the country into an international climate regime. In this analysis we soft-link a global and a single-country computable general equilibrium model to be able to capture distributional issues as well as international repercussions. We analyze different options of transferring revenues from domestic carbon taxes and international transfers to different household types and the effects of different assumptions on exchange rates on transfer payments. Our results show (i) that welfare effects can differ significantly for different household types which is generally ignored in analyses with global models and (ii) that these effects are significantly influenced by international price repercussions and by accounting for transfers from international permit sales which is generally ignored in single-country models.