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El. knyga: Economics of Sustainable Development: The Case of India

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This book provides a look at the current status and future potential of sustainable development in India. Macroeconomic developments, regional disparity and poverty situation, the trend in natural resource depletion and environmental degradation, trajectory of economic development, and conventional wealth are discussed. A history of environmental regulations and the current state of the environment in India are provided along with the possible reasons for non-compliance of environmental standards in the country. This book studies many different aspects of industries in India from supply and demand sides and efficiency and productivity analyses are provided in detail. Before the liberalization of its economy began in 1991, India had been one of the most over-regulated and closed economies in the world. Market productivity is examined and tests whether the post-reform period shows any improvement in productivity and efficiency in comparison to the pre-reform period. Other subjects are discussed, including the economic value that the urban population of India places on improving the air quality, the cost of sustainable industrial development, industrial water use and analysis of the relationship between the price of oil and the macro economy as it applies to India.Technological change is central to maintaining standards of living in modern economies with finite resources and increasingly stringent environmental goals. Successful environmental policies can contribute to efficiency by encouraging, rather than inhibiting, technological innovation. However, little research to date has focused on the design and implementation of environmental regulations that encourage technological progress, or in insuring productivity improvements in the face of increasing stringency of environmental regulations, especially in developing countries. This study models and measures productivity change, with an application to India using Data Envelopment Analysis, which is critical because energy resources are central to sustaining an economy. The traditional issues of measuring productivity change were recast by recognizing that production activity implicitly embodies joint production of market and environmental outputs. Furthermore, the Porter Hypothesis, which states that well designed environmental regulations can potentially contribute to productive efficiency in the long run by encouraging innovation, is tested using the panel data of 92 water-polluting firms.
1 Introduction 1
1.1 The Emerging Giant
1
1.2 The Problems
2
1.3 What We Do
4
Part I Macroeconomic Development and the Environment
2 Economic Development and Environment
11
2.1 Introduction
11
2.2 Country Profile
12
2.2.1 Geographical Profile
12
2.2.2 Physiographic Conditions
12
2.2.3 Sociocultural Conditions
13
2.2.4 Indian Polity and Governance
13
2.3 Macroeconomic Growth
14
2.4 Poverty and Regional Disparities
18
2.5 Depletion of Natural Resources and Environmental Degradation
23
2.6 Sustainability of Growth
28
2.7 Conclusions
35
3 Environmental Regulations and Compliance in India
37
3.1 Introduction
37
3.2 Environmental Regulations in India
38
3.2.1 Formal Regulations
40
3.2.2 The Institutional Framework for Environmental Management: A Brief History
41
3.2.3 Environmental Laws
42
3.2.4 Fiscal Instruments for Pollution Control in India
43
3.2.5 Review of Some Recent Studies
45
3.2.6 Informal Regulation and People's Participation
47
3.3 Current State of India's Environment
50
3.3.1 Water Pollution
51
3.3.2 Water Pollution from Households
52
3.3.3 Water Pollution Loads from Industries
52
3.3.4 Water Pollution from Agriculture
52
3.3.5 Effects of Water Pollution
53
3.3.6 Air Pollution
54
3.3.7 Land and Forests
55
3.3.8 Valuation of Environmental Degradation in India
57
3.4 Causes of Poor Environmental Compliance
58
3.5 Concluding Remarks
60
Appendix 1: Key Environmental Legislation in India: An Illustrative List
61
Appendix 2: Major Polluting Industries
62
Appendix 3: Sector-wise Compliance Status of 17 Categories of Highly Pollutions Industries (June 2006)
63
4 Intergovernmental Fiscal Transfers and the Environment
65
4.1 Introduction
65
4.2 Theory of Fiscal Federalism and the Environment
67
4.2.1 Decentralization and the Environment
67
4.2.2 Designing Fiscal Transfers for Environmental Sustainability
69
4.3 Fiscal Federalism and the Environment in India
70
4.3.1 Fiscal Federalism in India
70
4.3.2 Fiscal Transfers and Provision of Environmental Services in India
72
4.4 Fiscal Options for Integration of Environmental Services into Fiscal Transfers
75
4.5 Integrating Ecological Indicators into Fiscal Transfers: An Illustration
76
4.6 Conclusions
80
Part II Industrial Development and Benefits and Costs of the Environmental Regulations
5 Total Factor Productivity of Indian Industry
85
5.1 Introduction
85
5.2 Measurement of Total Factor Productivity
87
5.3 Total Factor Productivity of Indian Industry
91
5.3.1 Technical Efficiency Estimates
93
5.3.2 Total Factor Productivity Estimates
94
5.3.3 Innovative States and Convergence
101
5.4 Conclusions
104
6 Valuing the Benefits of Air Pollution Abatement
107
6.1 Introduction
107
6.2 Panipat Thermal Power Station
109
6.3 Questionnaire and Survey Format
110
6.4 Application of Revealed Preference Method
112
6.4.1 The Model
112
6.4.2 Empirical Estimates of WTP
114
6.5 Application of Contingent Valuation Method
117
6.5.1 The Model
120
6.5.2 Results
121
6.6 Comparison Between WTP Obtained from CVM and Mitigation Behavior
123
6.7 Conclusions
124
7 Environmental Regulation and Production Efficiency
127
7.1 Introduction
127
7.2 Output Distance Function and Its Econometric Estimation
128
7.2.1 Econometric Output Distance Function
129
7.2.2 A Model for Determinants of Technical Inefficiency
130
7.3 Production Efficiency of Thermal-Power Sector in India
131
7.3.1 Data
131
7.3.2 Estimation Procedures and Results
132
7.3.3 Results
133
7.4 Conclusion
136
8 Cost of Environmentally Sustainable Industrial Development
139
8.1 Introduction
139
8.2 Measuring Cost of Sustainable Industrial Development
141
8.2.1 Output Distance Function
141
8.2.2 Derivation of Shadow Prices of Bad Outputs
142
8.2.3 Scale Economies
143
8.3 Estimation of Output Distance Function
143
8.3.1 Translog Output Distance Function and Data
143
8.3.2 Estimation of Output Distance Function: Programming Model
145
8.3.3 Stochastic Output Distance Function
146
8.4 Estimates of Shadow Prices, Scale Economies, and Technical Efficiency
150
8.4.1 Shadow Prices
150
8.4.2 Technical Efficiency
152
8.4.3 Scale Economies
153
8.5 Conclusion
154
Appendix: Estimates of Shadow Price of BOD and COD and Technical Efficiency and Economics of Scale
155
9 Win—Win Opportunities and Environmental Regulation: Test of the Porter Hypothesis
157
9.1 Introduction
157
9.2 Methodology for Testing Porter Hypothesis
159
9.2.1 Output Distance Function Approach
160
9.2.2 Econometric Estimation of Distance Functions
161
9.2.3 Relationship Between Technical Inefficiency and Environmental Regulation
162
9.3 Data and Translog Distance Function
162
9.4 Results
163
9.5 Conclusion
166
10 Industrial Water Demand and Shadow Price
167
10.1 Introduction
167
10.2 Economic Model
169
10.3 Estimation Model
172
10.4 Data and Estimation Results
173
10.4.1 Shadow Price of Water
175
10.4.2 Analysis of Derived Demand for Water
176
10.5 Conclusions
179
Part III Environmental Productivity, Oil Prices and Induced Innovations
11 Environmental Productivity and Kuznets Curve
185
11.1 Introduction
185
11.2 Environmental Policies in India
187
11.3 Models
188
11.3.1 Measurement of Productivity
188
11.3.2 Kuznets Curve Relationship: Environmental Productivity and Income Level
191
11.4 Results
193
11.4.1 Productivity Analysis
193
11.4.2 Market Productivity
194
11.4.3 Joint Output Productivity
194
11.4.4 Environmental Productivity
195
11.4.5 Environmental Kuznets Curve Test
196
11.5 Concluding Remarks
200
Appendix: TEP of SO2 of Indian States
200
12 A Global Analysis of Environmentally Sensitive Productivity Growth
203
12.1 Introduction
203
12.2 Measuring Environmentally Sensitive Productivity
205
12.2.1 Directional Distance Functions
207
12.2.2 Malmquist-Luenberger Productivity Index
207
12.2.3 Computation of Directional Distance Function
208
12.3 Data and Results
209
12.3.1 Conventional Measurement of Productivity
213
12.3.2 Environmentally Sensitive Measurement of Productivity
215
12.4 Conclusions
218
13 Macroeconomic Effects of Oil Price Shocks
221
13.1 Introduction
221
13.2 Oil Prices-Macroeconomy Relationship
222
13.2.1 Channels Through Which Oil Price Shocks May Affect the Macroeconomy
222
13.2.2 Oil Prices-Macroeconomy Relationship: Empirical Evidences
223
13.3 Oil Price Data
225
13.4 Measurement of Impact of Oil Prices on Macroeconomy
229
13.5 Empirical Results
232
13.5.1 Testing for Significance and Granger-Causality
233
13.5.2 Macroeconomic Impacts of Oil Price Shocks
234
13.6 Concluding Remarks
242
Appendix:
242
14 Energy Prices and Induced Technological Progress
245
14.1 Introduction
245
14.2 Measurement of Technological Change
247
14.3 The Econometric Estimation
251
14.4 Data
253
14.4.1 Long-Term Energy Prices
254
14.5 Results
254
14.5.1 Levels of Inefficiency in the Countries
256
14.5.2 Technological Diffusion and Exogenous and Energy Price Induced Innovations
257
14.6 Summary and Conclusions
261
Appendix: Average Annual Values of Luenberger Productivity Indicators
262
15 The Road Ahead
265
15.1 Findings
265
15.2 Climate Change Policy
270
15.3 What to Do?
273
Bibliography 275
Index 293
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