Can economies grow & advance human welfare, yet stay within the environmental bounds to sustain those improvements?
The Climate, Energy & Growth Initiative combines complementary research methods to give insights on advancing sustainable & equitable growth in lower-income countries.
EGC’s Climate, Energy & Growth Initiative brings together research from environmental and energy economics, economic development, and industrial organization to address the urgent environmental and energy challenges facing the world today. The initiative’s members are working on topics such as emissions trading systems, payments for ecosystem services, and adaptation to the effects of rising sea levels – and supporting evidence-based policymaking by working closely with policy partners on the ground.
The consequences of climate change disproportionately affect communities in lower-income countries. At the same time, many countries are newly industrializing, increasing energy demand. Understanding how to effectively and sustainably meet rising energy demands, control emissions, and mitigate climate risk is critical for enabling climate change adaptation and resilience while continuing to spur economic development.
The initiative focuses on four central topics in lower-income countries:
Energy consumption & groundwater supply
Distortionary subsidy schemes can encourage the overuse of natural resources. In climate-stressed areas, this can have detrimental effects on people’s capacity to adapt to climate change.
EGC affiliate Nicholas Ryan and project collaborator Anant Sudarshan (University of Warwick) are studying how policy geared towards the use of communal resources can balance economic growth with environmental protection. In Punjab and Andhra Pradesh, India, they are working with the state electricity distribution company to offer farmers rebates for energy saved in groundwater pumping. This model addresses distortionary subsidies and reduces both energy usage and groundwater depletion. In a previous study in Rajasthan, Ryan and Sudarshan found that simply rationing the amount of energy available for groundwater pumping per day leads to inefficient water allocation across farms and thus limits agricultural productivity overall.
Groundwater depletion in India: The figure shows the rate of groundwater exploitation by district, as classified by the Central Groundwater Board, Government of India.
Adaptation to climate risk
How do disaster-affected communities adapt to climate risk over time? Can forecasts and targeted information about future disasters help households take precautionary measures? Understanding how to facilitate effective adaptation can increase communities’ resilience and protect livelihoods and infrastructure in disaster-affected regions.
Last-mile service delivery can pose an obstacle to effective climate change adaptation. EGC Director Rohini Pande and Maulik Jagnani (Tufts University) are working on the first experimental evaluation of an early warning flood forecasting system in Bihar, one of India’s most flood-prone states. In collaboration with Google and a local NGO, researchers are disseminating highly accurate and reliable flood alerts to villages. With the help of recruited volunteers, these messages are being shared via WhatsApp, and also via non-digital means like loudspeakers. Early results suggest positive impacts of the alerting system: people in communities where volunteers amplified alerts were more likely to receive the warning, were better informed and prepared, and experienced improved health outcomes. Ongoing research further suggests that limited market access may hinder adaptation. Furthermore, research by EGC affiliate Mushfiq Mobarak and project collaborator Islamul Haque in coastal Bangladesh examines increasing water salinity and its consequences for migration, agriculture, and drinking water supplies.
Energy markets & the clean energy transition
Newly industrializing regions require an increasing amount of energy to sustain their growth, and renewable sources present a significant opportunity to limit the negative environmental impacts of energy generation. However, prices for solar and wind energy and hydropower are subject to large fluctuations that require dynamic approaches to pricing.
Using historical data from India’s energy trade, EGC affiliate Nicholas Ryan shows that congestion on the power grid exacerbates market power – meaning sellers in the electricity market can raise prices with little risk of being undersold. The study explores how infrastructure investments can increase competition on the grid. Findings have relevance for market design as India adopts further reforms to supply a growing population of consumers on the grid and increase energy access in rural areas. Particularly in areas with low electrification, falling off-grid solar prices and subsidized grid extension are revolutionizing choice for the millions of people without electricity. Ryan and initiative collaborators Robin Burgess, Michael Greenstone, and Anant Sudarshan use experimental price variation to estimate the demand for different sources of energy in Bihar, India. Their findings suggest that households – particularly as they grow wealthier – prefer subsidized grid access over off-grid solutions. Understanding electrification preferences may be critical in shaping energy policy and the strategies of energy distribution companies.
Environmental markets & regulation
Pollution is not only detrimental to environmental health but it has also been shown to decrease life expectancy and lower productivity. Policymakers have several tools for reducing harmful pollution from industry, such as command-and-control regimes in which strict limits are set on a firm’s total emissions, or market-based mechanisms in which firms trade emission permits below a certain cap. Each regulatory approach comes with unique benefits and drawbacks, and it is not always clear what the appropriate tool is for a given context.
In India, EGC Director Rohini Pande, EGC affiliate Nicholas Ryan, and initiative collaborators Michael Greenstone and Anant Sudarshan are evaluating the impact of the first emissions trading scheme for particulate matter on air quality, industry compliance costs, and industry profits. In partnership with state pollution control boards, the research team set up a trading platform and permits were issued to industrial plants. The project introduced continuous emission monitoring systems through which particulate matter emissions from all participating plants were closely observed. The program has been scaled up in the heavily industrialized cities of Surat and Ahmedabad, reaching nearly 11 million people living in their airsheds. Results from the Surat market demonstrate positive impacts: Industries trading in the market cut emissions by 20-30% without any increase in their regulatory costs. Further expansions are being planned in four other cities in the state of Gujarat and a sulfur dioxide market is being planned in Maharashtra.
Environmental regulation by itself may, however, be insufficient. Esther Duflo (MIT), Michael Greenstone , Rohini Pande, and Nicholas Ryan worked with the pollution control board in Gujarat, to understand information constraints faced by auditors of polluting firms, and increased auditor’s regulatory discretion. Results suggest that rather than through increased random inspections, high-polluting firms were found more often when regulators were given more discretion over where to direct inspections.
Environmental regulation by itself may, however, be insufficient. Esther Duflo (MIT), Michael Greenstone (University of Chicago), EGC Director Rohini Pande (Yale University), and EGC affiliate Nicholas Ryan (Yale University) worked with the pollution control board in Gujarat, India, to understand information constraints faced by auditors of polluting firms, and increased auditor’s regulatory discretion. Results suggest that rather than through increased random inspections, high-polluting firms were found more often when regulators were given more discretion over where to direct inspections.
