Currently, India is the third highest largest emitter of CO2, after China and the USA. It emits 2.46 billion Mt of CO2 per annum, approximately 6.8 per cent of the global CO2 emission. The manufacturing sector contributes almost 533.8 million tons of aggregate emission in India. This sector is also the largest commercial energy-dependent sector (56 per cent), contributing significantly 17 per cent to GDP. Hence, emission control for sustainable development is an important issue. Energy policy reforms can foster manufacturing growth cost-effectively, contributing to the Paris goal. We carry out empirical analysis using the data of the Centre for Monitoring Indian Economy Prowess IQ and the Ministry of Environment, Forest, and Climate Change. We address three significant issues in this thesis: first, we related price instruments such as tax and technological capabilities of firms with energy intensity; second, we estimate the firm-level CO2 emission using a bottom-up approach and find an optimal trade-off between emission and carbon productivity; third, we construct a hybrid price mechanism, and see how price reforms in the Indian manufacturing sector can help to address firm-level emission and the Paris goal.

Keywords: Indian manufacturing sector. Energy efficiency. Carbon productivity. Hybrid pricing.