Impact of economic growth on climate Change: An Environmentally Extended Social Accounting Matrix (ESAM) based approach for India

This paper analyse the impact of growth in sectoral output and employment on green house gas emissions (GHG) in India. To analyse this we have used environmentally extended social accounting matrix (ESAM) based approach for India. The ESAM shows inter relationship between the economic activities as well as their impact on environment. The environmental impacts are captured through emission of GHGs, depletion of natural resources like land, coal and crude oil. India was an early leader in social accounting matrix (SAM) based analysis but this is the first ESAM for India. In this study we have constructed 35 sectors ESAM for India for the year 2006-07 with detail description of energy sectors. The pollution trade-off multiplier obtained from this ESAM helps us to analyse total (direct, and indirect-induced) impact of growth in sectoral output and employment on GHG emission in India. Here we have assumed public investment and foreign trade as exogenous variables. So the result shows that due to interdendency between the production sectors total increase in GHG emission is higher than their direct effects. Sometimes researchers rely on the direct relationship between the economic activity and GHG emissions but their indirect impact must be incorporated to see economy wide impact on GHG emission. The result of this study shows that the direct effect of paddy sector on GHG emission is substantially lower than their indirect-induced effect. The direct effect of paddy sector on GHG emission is around 6tons/Rs. lakh of output but its total effect on GHG emission is around 32 tons /Rs. lakh of output. Also this study shows that growth in service sector in India will not be the jobless growth and its total impact on GHG emission is not significant.