Introduction

Energy systems in India are dominated by fossil fuels at present, and a major share, amounting to 48 per cent, of the total energy supply, is contributed through imports. Therefore, the dynamics of energy systems can have serious repercussions for the Indian economy. In this chapter, a methodology has been developed for providing a macroeconomic foundation for analysing development and mitigation pathways for India, which involves a two-sector KLEM (capital [K] and labour [L], energy [E], and non-energy goods [M]) model ‘soft-coupled’ with a bottom-up AIM)/Enduse. The insights from the analysis can further be used to set up a multi-sector economy-wide model.

Energy systems in India are hugely dependent on fossil fuel imports, with energy domestic production1 amounting to only 48 per cent of the total primary energy supply (IEA, 2019). Further, growing energy service demands are expected to cause a rapid rise in domestic energy consumption. Also, given the submission of NDCs, energy systems in India are in transition (MOEFCC, 2015). This scenario can lead to serious macroeconomic repercussions. Therefore, the economic set-up of energy systems is required to assess the development and mitigation pathways. This chapter aims to investigate the macroeconomic framing of energy systems under the BAU scenario, which is based on the current policy framework of the government. For this purpose, the method of ‘soft-coupling’ of the two-sector KLEM model and bottom-up AIM/Enduse model has been introduced.