The Effect of Development on the Climate Sensitivity of Electricity Demand in India

The climate sensitivity of electricity demand in India is likely to be highly sensitive to growth in income. Thus, both intensive and extensive adjustments in cooling and heating will play an important role in determining future climate change impacts on electricity demand. This paper utilizes a national level panel dataset of 28 Indian states for the period 2005–2009. The preferred estimates indicate that climate change will increase electricity demand by 6.7% with 4% p.a. GDP growth and 8.5% with 6% p.a. GDP growth in 2030 over the reference scenario of no climate change. This reflects the fact that the estimated marginal effect of a hotter climate is greater when income is higher. Over 50% of the climate change impacts will be due to extensive adjustments as the current penetration of space conditioning equipment such as air conditioners is very low.