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Outline. Introduction: What should China and India do? Current State of India Current State of China What is Carbon taxation? Why Carbon Taxation and not Cap and Trade? What we aim to do and why Results Conclusions. The Chinese Economy.

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Presentation Transcript
  • Introduction: What should China and India do?
  • Current State of India
  • Current State of China
  • What is Carbon taxation?
  • Why Carbon Taxation and not Cap and Trade?
  • What we aim to do and why
  • Results
  • Conclusions
the chinese economy
The Chinese Economy
  • Adjust economic structure in favor of less resource-intensive economic activities

Environmental degradation growing problem

demographics of china
Demographics of China

Largest population in the world: 1.31 billion people (2005)‏

  • Population density higher in coastal region than inland
current energy mix
Current Energy Mix

Coal is backbone of energy system

  • Meets about 60% of primary energy needs
  • Importance growing in recent years due to increasing demand for electricity
    • Electricity almost 80% coal-based
  • Most of the coal concentrated in a few inland provinces, while largest centers of demand in coastal provinces
current energy consumption
Current Energy Consumption

Total energy consumption increased by 9.3% over 2005.

  • Coal consumption increased by 9.6%
  • Crude oil consumption by 7.1%
  • Natural gas consumption by 19.9%
  • In first six months of 2007, net importer of coal
  • Imported natural gas in liquefied form from 2006
  • Net oil exporter until early 1990s
    • Now third-largest importer behind United States and Japan

CO2 emissions

  • Air pollution estimated to cost China 3%-7% of GDP each year
  • Contains 20 of the world’s 30 most polluted cities
renewable options

If all nuclear power stations that have been planned to date are completed, total installed capacity will exceed 10GW in 2010, and total approximately 32GW in 2020

Renewable Options
  • Hydropower
    • World’s largest hydropower potential
      • National Hydropower Resources Survey (2003) estimate technologically exploitable capacity of China's water resources is 540 GW
    • Rivers that will likely be dammed
      • Hongshui River, Yangtze River, Yellow River, Lancanjiang River, Wujiang River
  • Solar
    • 2/3rds of China's territory enjoys annual sunshine of over 2,200 hours and annual solar radiation of over 5,000 MJ/m2
    • Tibetan Plateau has the richest solar energy resources
  • Estimated that utilizable wind energy resources
    • inland area about 300 GW
    • combined with utilizable wind energy sources in near-shore areas, could reach about 1000 GW in total
  • China produces more wind turbines than any country in the world
    • 40 manufacturers of small-scale wind turbines
  • Wind power most successful in Inner Mongolia Autonomous Region (IMAR)‏
    • 1/3 of rural, remote herdsmen use wind electric generators
goals for the future
2020 plans (NDRC)‏


Target: 40GW by 2020


Target: 300 GW by 2020

Solar and Wind

Target: over 60GW by 2020

Goals for the Future

11th Five-Year Plan (2006-2010)‏

  • Growth of 7.5% per year between 2006-2010 planned to prevent overheating of economy
  • Cut energy use per unit of GDP by 20% and pollution by 10% by 2010 compared to 2005
  • Target shares of each major fuel in primary energy mix in 2010
    • 66.1% coal
    • 20.5% oil
    • 5.3% natural gas
    • 0.9% nuclear power
    • 6.8% hydropower
    • 0.4% other renewables
india s economy
India’s Economy
  • With 1.50 trillion in current $, it is twelfth in the world
  • Third largest world economy in terms if PPP
  • Starting 2005 India allows 100% foreign investments for most industry fields
  • FDI inflows into India reached a record US$ 19.5 billion in fiscal year 2006/07
  • (April-March) double that of USA
demographics of india
Demographics of India
  • Population 1.07 billion (second in the world)‏
  • Labour force by occupation agriculture: 60%, industry: 12%, services: 28% (2003)‏
  • Unemployment 7.8% (2006 est.)‏
  • India still has the world’s largest number of poor people in a single country. Of its nearly 1 billion inhabitants, an estimated 350-400 million are below the poverty line,
  • 75 per cent of the poor in the rural areas.
  • Main industries textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, services
prospect to grow



Coal (Mtoe)‏



Natural Gas (BCM)‏



Oil (MMT)‏



Nuclear (GW)‏



Hydro (GW)‏



Bio-mass (Mtoe/year)‏



Bio-fuels (Mtoe/year)‏



Solar (Mtoe/year)‏



Wind (MW)‏



Prospect to Grow

Various Ministries

future goals
Future Goals

India’s 2030 energy projections remain bellow world’s 2004 average

  • Five Year Plan

78,577 MW capacity addition (123,668 MW as of 2005-06) during the 11th Plan of 14,000 MW through renewables and another 12,000 MW from captive route.

  • 2030

Massive Investment Requirements:

To deliver sustained GDP growth of 8.0% till 2031-322, the requirements are:

- Growth in primary energy supply by 3-4 times over

current consumption

- Electricity Installed Capacity should increase by 6-7 times

- Annual coal requirement: Nearly 3 times over current


TERI, 2006

environmental concerns
Environmental Concerns
  • A one-meter rise in sea level could displace millions of people in India, a country with a coast line of several thousand miles.  
  • The ocean sequestration capacity is leveling off
  • Deforestation is another serious problem (large percent of energy comes form biomass)‏
  • According to research carried out at Oxford University, the total number of flood zone refugees in India alone could reach anywhere between 20 and 60 million. Sea level rises could also prompt an influx of millions of refugees from Bangladesh.
  • The Gangotri glacier, the source of the River Ganges, is retreating at a speed of about 30 meters a year, with warming temperatures likely to increase the rate of melting.
  • Kyoto will not be reinforced

Energy Policy

  • Advances:
  • ‘Energy for All’ by 2012
  • The power sector is 60 % centralized and peak shortages that were common in ’90 reduced
  • Numerous ministries, university institutes and to deal with R&D, modeling, energy distribution and policy issues
  • Admission of private and foreign investment to energy, mining and related sectors (except for nuclear)‏
  • Concerns:
  • Policy application in practice
  • Corrected for PP, Indians pay one of the highest energy prices in the world
  • Power sector loses ~ $6 billion per annum
  • Not everyone pays the electricity they use… (30%-40% network losses)‏
  • High pollution fuels adversely affect primarily the poor
integrated energy policy for india august 2007
Integrated Energy Policy for India (August 2007)‏

Eleven scenarios based on source availabilities

and technological development but not incentives

what is a carbon tax
What is a Carbon Tax?
  • A carbon tax is a tax on emissions of carbon dioxide and other greenhouse gases.
  • It helps compensate for the negative externalities of pollution caused by these emissions
  • The alternative to carbon taxation is cap and trade reforms which are when governments set a limit or cap on the amount of a pollutant that can be emitted
why not cap and trade
Why not “Cap and Trade?”
  • Environmental NGOs and movements argue that trading does little to solve pollution problems overall
    • Groups that do not pollute sell their conservation to the highest bidder
    • Overall reductions would need to come from a sufficient and challenging reduction of allowances available in the system
cap and trade criticisms cont d
“Cap and Trade” Criticisms (cont’d)‏
  • Other Criticisms
    • Many attribute accounting failures to the complexity of system
    • Cap and trade systems are seen to generate more corruption than a tax system
    • The administration and legal costs of cap and trade systems are higher than with a tax
  • Lack of credibility in the first phase of the EU Emissions Trading
    • In the first year, the number of permits topped the amount of pollution
    • The price of carbon fell to almost nothing
taxes are economically more efficient
Taxes are Economically More Efficient
  • Finally, carbon taxes appear to be more efficient than caps because the revenue can be used by the government
  • We would like to propose that the revenue be directed towards research and development of alternative energy sources
  • Yes, Steve Goldberg criticized this notion in regards to the US, however the governments that rule China and India are structured very differently-
we want a diversification of energy sources
We Want a Diversification of Energy Sources
  • Carbon atoms are present in every fossil fuel — coal, oil and gas
  • In contrast, non-combustion energy sources — wind, sunlight, hydropower, and nuclear — do not convert carbon to carbon dioxide.
  • Our goal it to investigate the cost associated with diversifying the power supply of China and India and a tax rate which would make this feasible

Representative Trajectory sampling various energy mixes.

Normalized Cost and CO2 output are the Cost and CO2 of a particular

mix divided by the Cost or CO2 of the initial Distribution

Initial Distribution based on IEA Alternative Reference Scneario

Simulation is observed to converge to a distribution with a stable minima

in the cost and in CO2 Emissions


Both countries are capable of meeting their Energy Demand in ways that significantly reduce negative environmental impact and externalities

These changes in Infrastructure can be made financially appealing if the

social cost of CO2 Emissions is internalized through a modest Carbon Tax in China,

particularly if Clean Coal is developed as an option

Due to current limitations in domestic resources and technology, it seems

that changing Infrastructures in India is more costly, and a larger Carbon Tax may

be necessary to effectively internalize the social costs and provide incentives to

change; however, their potential to grow seems promising and perhaps renewable

options will become less costly with time

Nuclear is the most cost competitive energy source and the most promising source to mitigate carbon emissions in the near future in both countries

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