Input substitution in electricity generation and industrial production: Evidence from India

• 成果类型: Article
• 署名作者: Aggarwal, Raavi
• 署名单位: Indian Statistical Institute; Indian Statistical Institute Delhi
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/j.jdeveco.2025.103614
• 发表日期: 2026
• 关键词: Green industrial policy; energy transition; renewable energy; EMPLOYMENT; Indian economy

摘要

Carbon taxation is suggested as an efficient instrument for the clean energy transition. However, high resulting prices for coal and electricity could adversely impact industrial performance and employment by raising production costs. Integration of renewable energy in the electricity grid could stabilise electricity prices. We estimate the elasticity of substitution between labour and electricity among the formal and informal manufacturing sector in India. The results show labour and electricity are strong complements in manufacturing, with elasticities significantly below one, which suggests a carbon tax that raises electricity prices may reduce employment in firms. On the contrary, we find high substitutability between thermal (coal) and renewable energy-based electricity generation, with the elasticity of substitution estimated at 2.0-3.3. Our results suggest that electricity derived from renewable energy sources and supplied to industry at affordable prices could mitigate the adverse effects of a carbon tax in Indian industry.