Indore News: Digital Reactions Shape Where Indian Travellers Go Next, Shows IIM Indore Research | Representative Image
Indore (Madhya Pradesh): As India pushes ahead with its ambitious climate commitments – including a net-zero emissions target by 2070 and rapid expansion of renewable energy and electric mobility – a new study from researchers at IIM Indore cautions against relying on policy extremes to drive the green transition.
The research, conducted by an international team including Prof Tanmoy Kundu and Prof Rohit Kapoor of IIM Indore and published in the Computers and Industrial Engineering journal, argues that the long-standing debate between using incentives or penalties to promote sustainability presents a false choice.
According to the study, India’s low-carbon transition is more likely to succeed through a carefully calibrated mix of both — applied at the right time, in the right measure, and in sectors where green alternatives are realistically viable.
India has increasingly leaned on subsidies, tax breaks, and production-linked incentives to make green technologies more attractive, while also debating carbon taxes, emission levies, and stricter regulations to curb pollution.
Critics often label subsidies as fiscally unsustainable and carbon taxes as harmful to industrial growth. The study notes that while both concerns have merit, they overlook a crucial factor: whether low-carbon alternatives can actually substitute conventional products at scale.
The ease of substitution varies sharply across sectors. Electric two-wheelers, for instance, are emerging as practical replacements for petrol scooters in urban areas, while electric trucks continue to face limitations in long-haul freight.
Similarly, green steel remains significantly more expensive than its conventional counterpart. The research finds that where substitution is difficult, aggressive penalties tend to fail, whereas incentives are far more effective in sectors where cleaner alternatives are already close to commercial viability.
The study highlights the importance of front-loaded incentives during the early stages of transition. Higher costs, limited infrastructure, and consumer uncertainty continue to challenge low-carbon technologies in India.
Initiatives such as Production Linked Incentive (PLI) schemes for batteries, solar modules, and electric vehicle components demonstrate how early policy support can help green technologies scale up, narrow cost gaps, and become competitive before consumers are compelled to switch.
However, the researchers emphasise that incentives alone are not a permanent solution. As green technologies mature and adoption widens, moderate and predictable carbon pricing becomes increasingly important. At that stage, subsidies lose efficiency, while carbon taxes can help prevent a return to polluting practices, signal long-term policy intent, and encourage firms to account for environmental costs. The real risk, the study warns, lies in introducing carbon taxes too early or too aggressively.
For a developing economy like India, sudden policy shocks can undermine affordability, employment, and industrial growth. The research stresses that forcing rapid and perfect substitution between high- and low-carbon products may reduce overall welfare. Instead, a managed and adaptive transition — one that allows for experimentation, pilot programmes, and policy recalibration — is more likely to deliver durable results.
The study concludes that India’s green transition is as much an industrial and social challenge as it is an environmental one. Incentives without penalties risk becoming fiscally inefficient, while penalties without incentives can damage competitiveness. When combined thoughtfully and deployed sequentially, the two can help steer India toward a greener, more resilient, and globally competitive manufacturing ecosystem.
