Energy Savings Potential and Policy for Energy Conservation in Selected Indian Manufacturing Industries

Minimisation of damage from the rising trend of global warming would warrant two kinds of action for a country like India: (i) abatement of Green House Gas (GHG) emissions, (ii) adaptation to climate change to reduce climate change related vulnerability of the people. The target of low-carbon economic growth in terms of declining energy and carbon intensity of gross domestic product (GDP) assumes special significance in such context. Industrial sector being the largest consumer of energy in India, the article estimates energy savings potential of major energy consuming industries using unit-level data for 2007–08. It further develops an econometric model admitting substitutability among energy and non-energy inputs and between different fuels for selected industries to study their behavioural response to changes in input prices and suggest policy instruments for conserving energy using time series data for post economic reform period 1991–92 to 2008–09. The results point mostly to the significant response of energy consumption to own price increases and to the insignificance of the responsiveness of 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, price neutral component of technical change being negligible.