GHG mitigation policies for south Asia: Analysis using bottom-up energy-environment-economy model

South Asian region contributed to over 400 million ton carbon equivalent (MTCE) of GHG gases in 2000. Owing to high expected economic growth of this region, its GHG emissions are likely to grow over 1200 MTCE in 2030. Thus mitigation policies in this region will play an important role in addressing the global climate change problem. Energy-Environment-Economy systems in South Asian region have been modeled using Asia-Pacific Integrated Model/Enduse (AIM/Enduse). AIM/Enduse is a bottom-up optimization model that simulates detailed flows of energy and materials through distinct technology systems in various sectors of an economy. The model for two South Asian countries - India and Bangladesh - are explained for illustration. Two sets of policy measures have been analyzed for mitigating GHG emissions - (i) Country specific carbon taxes and GHG taxes (domestic market based intervention), and (ii) Inter-country energy trade in South Asia (regional market based intervention). Results indicate that while domestic carbon tax or GHG tax are likely to induce shift away from coal-intensive technologies and penetration of cleaner and/or efficient technologies, they will have high macroeconomic cost for most countries in terms of increased reliance on imported technologies and fuels. In contrast, a regional policy intervention like liberalization of energy trade among South Asian countries is likely to yield regionally and domestically optimal solutions for GHG mitigation. For instance, liberalization of energy trade will facilitate supply of natural gas to power and industry sectors in India, thus causing energy shift away from coal without requiring stringent environmental measures. Similarly, trade with India will facilitate penetration of efficient technologies in industrial and transport sectors of Bangladesh, causing efficiency-led emissions reduction.