Minimization of damage from the rising trend of global warming would warrant
two kinds of action for a country like India: a) abatement of greenhouse gas emissions
and b) adaptation to climate change so as to reduce climate change related vulnerability
of the people. The target of low carbon economic growth of India in terms of declining
energy and carbon intensity of GDP assumes, therefore, a special significance in such
context. Of the different options for lowering carbon intensity of GDP, the option of energy
conservation through reduced energy intensity of output happens to be cheaper in most
cases than the carbon free energy supply technology options. As the industrial sector has
the largest sectoral share of final energy consumption in India this paper focuses on the
assessment of energy savings potential in seven highly energy consuming industries.
The paper estimates the energy savings potential for each of these industries using unit
level Annual Survey of Industries data for 2007-08. The paper further develops an
econometric model admitting substitutability among energy and other non-energy inputs
as well as that among fuels using translog cost function for the selected industries and
also for the manufacturing sector as a whole to study the behavioural response of the
industries to changes in factor prices or fuel prices. The model uses time series data at
the aggregate level of the concerned industry for the period 1991-92 to 2008-09. The
results of the model point mostly to the significant response of energy consumption to
own price increases and to the insignificance of the responsiveness of the corresponding
capital requirement to effect such energy conservation. Besides, a large part of the
growth of factor productivity as estimated by the model has been found to be induced by
energy price changes, the price neutral component of technical change being negligible.
All these have important policy significance in respect of the relevance and direction of
fiscal, monetary or other policy instruments for energy conservation in India for abating
global warming.