Tackling Climate
Change: Our Collective Way Forward
V ast
stretches of dead, barren farms, covered with dried-up, stunted cotton
and other crops lie abandoned even as jobless farmers and labourers
gather at village chaupals, doing nothing. Reason, they have done
their best. Some have sowed thrice; some did it even four times and have
stretched their capacities beyond limit. But with produce dwindling from
tonnes to kilos, they have turned into paupers, too numb to respond to
the calamity.
This is the situation in
Vidarbha and
Marathawada regions of Maharashtra, India where drought is becoming a
perennial and recurring feature. Nearly 10,000 villages are severely
affected. Almost 10 million people’s basic systems of livelihood are
shattered and they are desperately fighting odds to survive. Climate
change is already hitting people’s lives and hard.
The scenario is not going to be
any brighter in the near future. The latest reports from the
Intergovernmental Panel on Climate Change (IPCC) predict that climate
change will soon bring an additional 49 million people in Asia into the
folds of hunger and malnutrition, leave 94 million people at the mercy
of coastal floods and put 50% of Asia’s total biodiversity at risk (See
inset). When one looks at the predictions for the poor nations of Africa
and Latin America, the picture looks even more alarming. It is certainly
time that climate change is taken very very seriously.
The concerns expressed over
climate issues by NGOs and governments are already beginning to show up
in policy and business decisions. Aside from the Kyoto Treaty—which the
US and Australia, two of the biggest polluters, have not
signed—individual governments at the supranational, national, regional,
and state levels are coming up with their own regulations on carbon
emissions, the prime cause of climate change. The European Union’s
Emission Trading Scheme came into force in January 2005, and state and
regional governments in Australia, Canada, Japan, the United States and
elsewhere have also set up new rules.
The climate change phenomenon
has also made businesses feel the heat. Between 1980 and 2004, the
payouts by the Insurance industry due to weather-related losses have
quadrupled. Large institutional investors such as Calpers and the
pension funds of New York State are pushing companies to report their
carbon ‘footprint’—the total amount of carbon dioxide that they and
their suppliers emit—and to define their risk exposure to regulations
that limit emissions. As per a McKinsey Report, ‘This intensifying level
of scrutiny isn’t simply a call for environmental stewardship. Rather,
it is born of concern that over the next 5-15 years, the way a company
manages its carbon exposure could create or destroy its shareholder
value. The companies with the most to lose, at least initially, are
those whose production processes generate a lot of greenhouse gases.’
Rising input costs—for energy or transportation—will affect companies of
every stripe, including manufacturers, retailers, banking firms,
airlines and almost every other type. The investors will increasingly
hold them responsible for managing emissions. They might also find their
share prices discounted in capital markets. Contrastingly, companies
that have begun making smart investments in their emission reductions
are already reaping the benefits. For instance, British Petroleum saved
money in its emission reduction programme within its plants. Witness
John Brown, Chief executive of BP, who writes: ‘Counter intuitively, BP
found that it was able to reach its initial target of reducing emissions
by 10% below its 1990 levels at no extra cost. Indeed, the company added
around $650 million of shareholder value, because the bulk of the
reductions came from the elimination of leaks and waste.’
The Global Climate Policy
Climate being a global public
good, the strategy to deal with it also has to be global. This
understanding formed the basis of establishment of the UN Framework
Convention on Climate Change (UNFCCC) in 1990. Under the auspices of the
UNFCCC, two broad sets of activities to tackle the climate problem have
emerged. They are climate change mitigation (prevention of climate
change through GHG emission reductions) and adaptation (adjustment to
climatic changes).
Climate Change Mitigation
International efforts to curb
greenhouse gases have culminated in a legally binding treaty, famously
known as the Kyoto Protocol in 1997. The Protocol is based on the
principle of ‘common but differentiated responsibility’ of all nations
to take measures to stabilize GHG emissions in the atmosphere. It
requires 35 industrialized countries to reduce greenhouse gas emissions
to about 95% of their 1990 levels in the first commitment period
(2008-12).
In spite of being legally
binding, the Protocol has not turned out to be as effective as it was
intended to be. ‘From 2000 to 2005, the growth rate of carbon dioxide
emissions was more than 2.5% per year, whereas in the 1990s it was less
than 1% per year,’ noted Dr Mike Raupach, of the Australian government’s
research organization CSIRO, who co-chairs the Global Carbon Project.
As precedents, however, the
UNFCCC and Kyoto Protocol have been significant in providing a means to
solve a long-term international environmental problem. The Kyoto
Protocol’s most notable achievements are the stimulation of an array of
national policies and the creation of a functioning market for GHG
reductions. For this global mechanism to be more effective, the first
commitment period needs to be followed up by measures to achieve deeper
reductions (at least 60% from the 1990 levels) and the implementation of
policy instruments covering a higher share of global emissions.
Adaptation to Climate Change
Another issue of significance
in the climate arena is that of adaptation to climate change. In simple
terms, adaptation is the ability to make adjustments to infrastructure,
livelihoods and production systems in order to minimize the negative
impacts of climate change and benefit from any opportunities. The issue
of adaptation has increasingly become important since the developing
nations started facing loss of lives and livelihoods due to
climate-induced events. Nordhaus, whose work in this arena spans 3
decades, estimates that for a +2.5 oC
warming, one might expect to see global damage amounting to 1.5-1.9% of
world GNP. However, in Africa, that impact might be closer to 4% and in
India, 5%. The more politically moderated Third Assessment Report of the
IPCC reported that while developing countries are expected to experience
larger losses, global mean losses could be 1-5% GDP for 4° C of warming.
The recently released Fourth Assessment Report (FAR) of the IPCC notes
that ‘there are some impacts for which adaptation is the only available
and appropriate response’.
Issues in the Global Climate
Policy
The policy makers have late
been grappling with several issues as regards the climate policy.
Decisions on many of these issues could fundamentally affect the lives
of billions of people across the globe. We take a look here at some of
these issues:
Balance between Mitigation and
Adaptation
Science has now provided us
with compelling evidence that climate change is happening and some of
its adverse effects cannot be avoided even if all the GHG emissions are
stopped from now onwards. The issue, therefore, is no longer mitigation
versus adaptation, but it is of how much mitigation and how much
adaptation.
A
very convenient way of ascertaining this is to compute the ‘social cost
of carbon’ (SCC), i.e., the money value of the damage done to the world
as a whole from one extra tonne of carbon released now. The FAR provides
an average SCC value of US $ 43 per tonne of carbon for the year 2005.
To make correct judgments, however, the concept of SCC also needs to
incorporate the damage in reduction due to adaptation measures. The
optimum balance between mitigation and adaptation is to be achieved by
comparing the SCC (including adaptation) with the cost of controlling an
extra tonne of carbon emission (marginal cost of control). If the SCC
exceeds the marginal costs of control, then, prima facie, greater
focus has to be on more mitigation and vice versa.
The issue between mitigation
and adaptation is clearly one of balance. Most adaptation expenditures
would be local, while mitigation requires action on a global scale.
However, certain impacts in the near future necessitate that adaptation
is supported within the developing countries on a large scale. Although
adaptation has so far played a second fiddle to mitigation issues,
developing countries have now joined forces to bring it out much more
explicitly within the negotiations framework.
Balance Between Mitigation Now
or in the Future
The global policy decisions
also largely depend on the differential welfare impacts of the quantum
of mitigation efforts undertaken now or in the future. Economist
Nicholas Stern, in his famous report submitted to the British Government
says, ‘For every £1 invested now we can save £5, or possibly more, by
acting now.’ On the contrary, Nordhaus has argued the exact opposite,
suggesting that little should be done to reduce carbon emissions in the
near future. The idea behind this is to invest in physical and human
capital now so that the future generations, with more resources and
efficient technologies at their disposal, can tackle the climate threat
more cost effectively than the present one.
Choosing any one of the options
is not purely a matter of balancing costs and benefits but also a
question of how to distribute the benefits of energy consumption, land
use and favourable climate among generations. Action aimed at preventing
climate change today would place a burden on people now alive and would
probably leave the coming generations with a climate more similar to
today’s—but with somewhat less wealth—than they would have had
otherwise. In contrast, not acting would benefit people today and
probably yield somewhat more wealth in the future—but it might also
leave the world with a different and possibly worse climate for many
generations to come.
The next 3 years before the
expiry of the first commitment period will see detailed negotiations on
the reduction commitments by the world’s major emitters. There is now an
urgency to reach this agreement as soon as possible to give countries
time to ratify as well as prevent the collapse of the carbon market,
which is now creating a price signal for GHG reductions.
Who Should Undertake
Mitigation?
If an average American or
European citizen lived like an average Indian or Chinese, we would not
be worried about the climate problem. Only 25% of the global population
lives in developed countries, but they emit more than 70% of the global
CO 2
emissions (Parikh et al., 1991). In per capita terms, the
disparities are also large: an Indian citizen emits less than 0.88
tonnes of carbon per year, whereas a citizen of the USA, for example,
emits more than 20 tonnes.
It is this inequity among
nations that is the core of the intense discussions on ‘who should
reduce and by how much’. The reason for this is that it is not just an
environmental issue. In fact, the Chancellor of the Exchequer of the U.K
declared that ‘climate change is an issue for finance and economic
ministries as much as for energy and environmental ones’. The reason for
this is purely economic. More and more countries will need increasing
amounts of energy. Since 1986, the world’s demand for energy has been
growing at a rate of 1.7% a year. With the rapid growth of the BRIC
(Brazil, South Africa, India and China) economies, this demand is
expected to grow at the rate of 2.2% per year. The new energy scenarios
will be characterized by:
·
Shifting production bases of basic material (such as steel, copper) from
developed to developing countries, especially in Asia. (China, by 2015,
will have 30% of world’s steel-making capacity; Dubai is a already a
leading producer of aluminium).
·
Falling share of industry (as a result of a shift towards less energy
intensive service industries) and increasing share of consumers as users
of energy in developed countries. Sectors catering for consumer goods
account for 53% of global energy demand, while the residential sectors
account for 25% of the global demand.
·
Growing competition over access to energy sources, particularly among
countries and regions (China, India, Europe, and the United States) that
consume more energy than they produce. The likes of EU – Russia Energy
Alliance and the Indo-US Nuclear deal already reflect the growing
urgency.
The situation in the next 20-25
years will, therefore, be characterized by a complex mix of factors.
Developing countries will need more and more energy to develop their
economies and eliminate poverty; they will also be catering to
industrial and consumer needs of the developed countries and, therefore,
will contribute proportionately much more to the growth in the world’s
carbon emissions. However, on a per capita basis, the developed
countries’ emissions would still be 2-3 times higher than even India or
China, two of the biggest emitters amongst the developing countries.
The question, therefore, of who
should mitigate, is ethical. Developed countries (the US, Japan, and
European nations) argue that fast developing countries like India, China
are also significant contributors and should, therefore, also commit
themselves to reduce emissions. In contrast, the developing countries
emphasize that developed countries are responsible for the bulk of
historical emissions and that these countries should shoulder any
near-term burden of reducing emissions. This is well reflected in the
demand by the Chinese representative in the UN General Assembly’s
thematic debate on Climate Change, ‘The luxury emissions of rich
countries should be restricted, while the emissions of subsistence and
development emissions of poor countries be accommodated’.
How to Share Adaptation Costs?
Taking into account only the
costs required to ‘climate-proof’ investments (ODA, foreign direct
investments, and domestic investment), the World Bank recently estimated
that the annual adaptation costs in developing countries could range
between US $ 10 billion and $ 40 billion.
It is now generally accepted
that industrialized countries bear a certain responsibility for
adaptation to climate change in developing countries, and should bear
part of the costs. It is also in their self-interest to do so. A lack of
sufficient adaptation in developing countries is likely to affect
industrialized countries, for example, through a decrease in world
trade, increased spread of diseases and increased migration flows. Most
importantly, however, is the risk that there will be no global or
near-global climate regime without an effective global framework for
addressing adaptation, since increased support for adaptation is a
declared condition for developing country participation in any future
regime.
In the present framework, most
of the funding available for adaptation activities is the result of a
pledge from the EU and other industrialized countries made in 2001 when
developing country support was key to ‘Keep Kyoto Alive’. The resources
committed through this pledge are channeled through three funds under
the UNFCCC and the Kyoto Protocol: the Special Climate Change Fund (SCCF),
the Least Developed Countries Fund (LDCF), and the Adaptation Fund.
Once again, the primary debate
on the issue of sharing adaptation costs arises from the counter
arguments of the developed and the developing countries. The developing
countries feel that the contributions by developed countries to
adaptation funding to date have been voluntary, not directly tied to any
particular underlying rationale, metric of obligation, or indicator of
need and have, thus, been small in relation to the scale of the
challenge. They should, therefore, accept legally binding commitments on
adaptation as well, akin to mitigation targets. The developed countries
argue that there is a risk that adaptation becomes an endless demand for
funds for projects with little understanding of the effectiveness of
these funds at reducing the impacts of climate change since monitoring
and measuring the effectiveness of adaptation initiatives could prove to
be very challenging.
Conclusion
With climate change becoming
more certain and the signs of climate change becoming increasingly
evident, the issue is certainly on top of every policy makers’ agenda.
The global efforts,maker's under the auspices of the UNFCCC, have so far
yielded positive results, in terms of both the advancement in knowledge
as well as creating global mechanisms, like the carbon market. The
global climate policy framework is, however, increasingly getting mired
in ethical and political issues, as outlined above. All eyes will now be
on Bali, Indonesia, where the discussions on the future of the fight
against climate change will be held on December 2007.
Besides ongoing efforts, it may
be time for us to look at other similar processes (e.g., the WTO) and
learn from them. One such lesson may be to also look at bilateral or
regional arrangements, outside of the UNFCCC process. The G8 nations’
engagement of the 5 major countries is one such step. The Asia Pacific
Partnership for Clean Development and Climate, with the participation of
the US, India, China, Japan, Australia and New Zealand is another
example. As regards adaptation, it needs to be given much more emphasis
and space within the negotiations and innovative methods for financing
it, such as legally binding commitments on adaptation, internalizing
adaptation into the existing bilateral and multilateral Overseas
Development Assistance, putting a levy on JI (Joint Implementation)
projects similar to CDM projects, etc., may be analytically explored
further. All in all, the scientific and economic reports have told us
that climate change is not an insurmountable problem and a bulk of it
can be tackled with the technologies and resources available now. The 10
million people in Vidarbha and Marathawada and billions in other parts
of the world deserve it to be done quickly. q
Udit Mathur
umathur@devalt.org
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