Group 3 Alok Kumar N.R. Sudheendra Pravin Agrawal S.S.

Hooda Santha mani

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Introduction Some Definition Methodology Literature Study Collection of Data Deciding Economic Theory and its assumptions Development of Model with E-view Checking of Auto correlation Checking of Multicolliniartity Development of Final Model Analysis of result Conclusion
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 While we already have one of the lowest emissions intensity of the

economy, we will do more. We are targeting a further emissions intensity decline of 20-25% by 2020 on 2005 levels.
J Ramesh Copenhagen (16 Dec 2009)

What is emission intensity What is the trend of emission intensity and how it

affects Co2 emission What are other factors that affects Co2 emission Can we afford to promise reduction in Co2 emission by 2020
This presentation is an attempt to answer some of these

questions using Econometric model

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 Carbon Credit: Carbon Credits are part of a tradable permit scheme. They provide a way to reduce greenhouse gas emissions by giving them

a monetary value. A credit gives the owner the right to emit one tonne of carbon dioxide . One carbon credit is equal to one ton of carbon dioxide, or in some markets, carbon dioxide equivalent gases. economy. It is calculated as units of energy per unit of GDP.

Energy Intensity: Energy intensity is a measure of the energy efficiency of a nation's

High energy intensities indicate a high price or cost of converting energy into

GDP. Low energy intensity indicates a lower price or cost of converting energy into GDP.

Carbon intensity : The carbon intensity, also called per capita annual emissions, is a

measure of how much carbon equivalents (CO2e) are emitted per capita of GDP. The inverse is the metric called carbon productivity which is the amount of GDP product per unit of carbon equivalent
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 After literature review possible economic theory is defined Based on the theory, series of Independent variables were

identified responsible for Co2 Emission of the country, which is considered as dependent variable Data collected for various identified Independent variables Data entered in E-view Software to identify relationships between dependent and independent variables Application of various checks like Auto correlation and Multicolliniarity Final Regression equation i.e Model obtained Analysis of Model
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 Speech of Jayaram Ramesh at Copenhagen: 16th Dec 2009 We are targeting a further emissions intensity decline of 20-

25% by 2020 on 2005 levels This statement set the tone of this presentation India's GHG Emissions Profile - Results of Climate Modelling Studies: MOEF Publication Help us to know the trend of Co2 emission Indicators of carbon emission intensity from commercial energy use in India: Barnali NagU, Jyoti Parikh Help us to know some of the factors that may be considered as independent variables

 Examining carbon emissions economic growth nexus for India: A

multivariate cointegration approach: Sajal Ghosh Help us to narrow down our variables to few variables India one of the least Carbon Intensive Countries in the World: McKinsey Reports: http://ecolocalizer.com/2009/05/24/indiaone-of-least-carbon-intensive-countries-in-the-world-mckinseyreports/#comments Help us to know in details about Energy Intensity and Indias approach World Bank Says India Right In Resisting Mandatory Emission Reductions: http://redgreenandblue.org/2009/05/09/worldbank-says-india-right-in-resisting-mandatory-emissionreductions Help us to analyze the findings with respect to India Climate Change Stand
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 After literature Review variables

identified are Dependent Variable:

Co2 Emission of the country

Independent Variables:

Population Real GDP Carbon Intensity Energy Intensity Industrial Development Index Agricultural Production Index
And so on

 For collection of data took maximum effort All data was not available at one place RBI website main source of data for following variables:
Real GDP Industrial Development Index Agricultural Production Index

Website of US Energy Information Administration; main

source for

Carbon Intensity Energy Intensity Population and Co2 Emission of the country

Data for all above variables available for 1980 to 2007 As such data obtained for this period only.
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 All above data then studied individually with regard to

its trend and interrelationship. It is observed that Industrial production index and agriculture production Index could not give any idea about Co2 emission. Hence both these variables dropped from study. It was assumed that there is linear relationship between dependent and Independent Variables. Only basic Econometrics tools applied in preparation of Model

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 Co2/GHG is being emitted in environment by various

means. In the present study Co2 /GHG emission considered is only for energy consumption. Co2 means Co2 equivalent of all GHG Basic economic theory for which Hypothesis testing done is that Co2 Emission is dependent on Population, Carbon Intensity, Real GDP and Energy Intensity. Proposed theoretical relation is

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 All the data collected is converted to Proper Unit (easy

to Understand) Final Excel sheet prepared This excel sheet is exported to Eview and first trial attempted This will be shown on Eview Software

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Dependent Variable: CO2EMI_MMT Method: Least Squares Date: 04/13/10 Time: 19:05 Sample (adjusted): 1 28 Included observations: 28 after adjustments

Variable

Coefficie nt

Std. Error

t-Statistic

Prob.

C CI_MT_CO2_PER_M_I NR EI_TOE_PER_M_INR GDP_RS_CRORE POPMIL

928.4931 40.46478 16.63005 0.000341 0.676503

89.30247 34.52117 121.3475 3.37E-05 0.158992

-10.39717 1.172173 0.137045 10.12545 4.254950

0.0000 0.2531 0.8922 0.0000 0.0003

Check for Autocorrelation Since this is a time series data, we can see from Durbin Watson statistics, i.e. 0.63 that shows there is positive auto correlation Check of Multicolliniarity test; A statistically significant Fvalue (0.00) while some of the t-values are statistically insignificant for EI and CI. Thus Model is not statistically significant Requires corrections Let us first address problem of Autocorrelation, by introducing error term Let us see on E-view
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R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat

0.997314 0.996847 17.45096 7004.327 117.0394 0.631479

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

755.3959 310.8044 8.717099 8.954992 2135.362 0.000000

Dependent Variable: CO2EMI_MMT Method: Least Squares Date: 04/13/10 Time: 19:09 Sample (adjusted): 2 28 Included observations: 27 after adjustments Convergence achieved after 10 iterations

Check for Autocorrelation Now, problem of autocorrelation has been taken care of. Check of Multicolliniarity test; A statistically significant F-value (0.00) while statistically insignificant t-values for EI, shows presence of Multicoliniarity Let us first address problem of Multicolliniarity step by step

Variable

Coefficient

Std. Error

t-Statistic

Prob.

C EI_TOE_PER_M_INR GDP_RS_CRORE POPMIL CI_MT_CO2_PER_M_INR AR(1)

-1063.088 -58.28308 0.000348 0.732708 71.10024 0.608627

117.2552 67.91927 2.65E-05 0.153092 19.42040 0.117353

-9.066449 -0.858123 13.14918 4.786049 3.661111 5.186272

0.0000 0.4005 0.0000 0.0001 0.0015 0.0000

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat

0.999008 0.998771 10.61989 2368.423 -98.71227 1.907018

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

772.5153 302.9736 7.756464 8.044428 4228.066 0.000000

Inverted AR Roots

.61

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Check for Multicolliniarity :

1.Test for group Correlation: (let us see on E view)

CI_MT_CO2_PER_M_INR EI_TOE_PER_M_INR POPMIL GDP_RS_CRORE

CI_MT_CO2_PER_M_INR EI_TOE_PER_M_INR POPMIL GDP_RS_CRORE

1.000000

0.995595
1.000000 -0.300249 -0.500036

0.995595
-0.301992 -0.499305

-0.301992 -0.300249 1.000000 0.964908

-0.499305 -0.500036 0.964908 1.000000

This shows strong relationship between EI and CI and also between GDP and Population

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2. Regress one Independent Variable with all other Independent Variables. Let us see on e view
Dependent Variable: CI_MT_CO2_PER_M_INR Method: Least Squares Date: 04/15/10 Time: 12:58 Sample (adjusted): 1 28 Included observations: 28 after adjustments

Adjusted R2 very high It shows that new dependent variable can be explained by other explanatory variables

Variable

Coefficient Std. Error t-Statistic Prob.

0.368426 9.31E-08 0.000935 3.460497 -5.029996 1.98E-07 -0.490800 0.126051 0.0000 0.469413 0.6280 27.45317

C -1.853183 GDP_RS_CRORE POPMIL -0.000459 EI_TOE_PER_M_INR

0.6430 0.0000

R-squared 0.991300 Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat

Mean dependent var 12.49618 0.990213 S.D. dependent var 0.103188 Akaike info criterion 0.255545 Schwarz criterion 26.02157 F-statistic 1.719049 Prob(F-statistic)

1.043029 -1.572969 -1.382655 911.5572 0.000000

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Dependent Variable: CO2EMI_MMT Method: Least Squares Date: 04/13/10 Time: 19:32 Sample (adjusted): 1 28 Included observations: 28 after adjustments

Check for Autocorrelation Since this is a time series data, we can see from Durbin Watson statistics, i.e. 0.81 that shows there is positive auto correlation
t-Statistic Prob.

Variable

Coefficient Std. Error

C EI_TOE_PER_M_INR GDP_RS_CRORE POPMIL

-1003.482 156.6583 0.000345 0.657925

62.79131 21.48300 3.38E-05 0.159428

-15.98122 7.292200 10.20494 4.126787

0.0000 0.0000 0.0000 0.0004

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat

0.997154 0.996798 17.58640 7422.756 -117.8517 0.812457

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

755.3959 310.8044 8.703693 8.894007 2803.013 0.000000

Check of Multicolliniarity test; Both F value and all t values are statistically significant, it appears that there is no multicolliniariry. However this can be confirmed only after removal of Autocorrelation Let us first address problem of Autocorrelation, by introducing error term Let us see on E-view
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Dependent Variable: CO2EMI_MMT Method: Least Squares Date: 04/13/10 Time: 19:46 Sample (adjusted): 2 28 Included observations: 27 after adjustments Convergence achieved after 11 iterations

Check for Autocorrelation Already removed by introducing error term

Variable

Coefficien t

Std. Error

t-Statistic

Prob.

C -1165.755 EI_TOE_PER_M_INR 183.3898 GDP_RS_CRORE 0.000351 POPMIL 0.697715 AR(1) 0.547958

125.1889 19.75295 3.14E-05 0.172131 0.152062

-9.311962 9.284173 11.15590 4.053393 3.603506

0.0000 0.0000 0.0000 0.0005 0.0016

Check of Multicolliniarity test; Both F value and all t values are statistically significant, it appears that there is no multicolliniariry.
This was ascertained by other tests as well High adjusted R2 value Very high f statistics and very High t statistics values indicates this Model is statistically significant.

R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat

0.998386 0.998093 13.23094 3851.272 -105.2757 2.228084

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

772.5153 302.9736 8.168569 8.408539 3402.828 0.000000

Inverted AR Roots

.55

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 Positive values of all coefficients of Explanatory variables:

It shows that there is positive relationship between all

explanatory variables and Co2 emission

India's Climate Change Stand:

India never agreed to any proposal for absolute reduction in

Co2/GHG emission Model shows that this can be possible only when either Population start decreasing or country stop moving on the path of development Both of these are distant possibilities. focus should be given on harnessing energy from clean sources to curb carbon emissions, which would not affect the countrys economic growth. Thus India's Stand is correct. World Bank in its report Says India Right In Resisting Mandatory Emission Reductions
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 This Model shows that

For every 1 million increase in population, there will be

0.6977 MMT co2 will be emitted for additional energy use by them. 351 MT Co2 will be emitted from the energy utilized in earning additional 1 Crore of Rupees provided population and Energy intensity remain constant If we could manage to reduce energy intensity by just 1%, we could able to save 1.83 MMT of energy for same GDP and population. This result into generation of about 1.83 million Carbon Credit; that can be sold in Carbon Market
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 Only way to reduce Co2 emission is by reducing

Energy Intensity. Data shows that since 1995, without any specific policy, Energy Intensity is decreasing over the years.
1995: 219 M TOE per Million $ 2007: 164 M TOE per Million $

Minister promised the same in Parliament to reduce

energy intensity by 25% by 2025 1.e. to bring it about 135 M TOE per Million $ Reducing Energy Intensity will help India financially by selling carbon credit in Carbon Market
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 Model also help in policy maker to decide carbon tax for

those industries which requires more Energy intensity than National Average. Industries, which are using advance low carbon technology, may get profit by selling carbon saved in Carbon Credit market. Model may also help policy makers to introduce carbon tax to fund low carbon technology research. Such Carbon Tax can be calculated by using Model as how much Co2 emitted for unit profit and some percentage of market cost of that ton of Co2 This shows that India has very big opportunity is such severe problem of Climate Change.
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Thanks

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