Adoption of energy efficient technologies and carbon abatement: The electricity generating sector in India

A behavioral micro-economic framework was developed to analyze the impact of alternative mixes of policy reforms that eliminate existing regulatory distortions and a carbon emissions-tax on incentives to adopt energy efficient technologies and their implications for carbon emissions and output. An empirical application of this framework to the electricity-generating sector in India demonstrates that elimination of existing domestic and trade policy distortions has the potential to reduce carbon emissions even in the absence of an emissions-tax, by inducing the adoption of energy efficient technologies. In the presence of these policy reforms, an emissions-tax achieves a given level of abatement with higher output levels than in the absence of these reforms. This analysis indicates the potential for achieving a complementarity between the goals of reducing carbon emissions and increasing electricity generation by identifying the regulatory distortions that are hindering adoption of energy efficient technologies and tailoring policy reforms to specific distortions.