|A publication of the Asian Development Bank||No. 1 June 2008|
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“Overall targets of 50% reductions in global emissions by 2050 (relative to 1990) are essential if we are to have a reasonable chance of avoiding very big temperature increases”
Lord Nicholas Stern, IG Patel Chair, London School of Economics andPolitical Science
Rich Countries Must Lead the Way
Global action to reduce greenhouse gas emissions must follow three basic principles: effectiveness, efficiency, and equity
Rich countries must bear the responsibility for their own past and present emissions
Photo by AFP
Climate change is a result of the greatest market failure the world has seen: those who emit greenhouse gases generally do not pay for the consequences that result. The evidence on the seriousness of the risks from inaction or delayed action is now overwhelming. The problem of climate change is global and the response must be global collaboration, but rich countries must lead the way in taking action, given their relative wealth, technology, and major responsibilities for past emissions and thus greenhouse gases in the atmosphere.
Climate change is a grave threat to the developing world and a major obstacle to continued poverty reduction. First, developing regions are at a geographic disadvantage: they are already warmer, on average, than developed regions, and they also suffer from high rainfall variability and are thus more vulnerable to the floods and droughts resulting from climate change. Further warming will bring poor countries high costs and few benefits. Second, developing countries—in particular the poorest—are heavily dependent on agriculture, the most climate-sensitive of all economic sectors, and suffer from inadequate health provision and low-quality public services. Third, their low incomes and vulnerabilities make adaptation to climate change particularly difficult.
Effectiveness, Efficiency, Equity
Asia is particularly vulnerable to the impacts of climate change. By the middle of the century, millions more people will be threatened by heavier floods, more intense droughts, and rising sea levels. There will be serious risks and increasing pressures for coastal protection in Southeast Asia, small islands in the Pacific, and large Asian coastal cities. Climate change will increase deaths from malnutrition and heat stress if vector-borne diseases such as malaria and dengue fever become more widespread. To give just one example, the glaciers and snows on the Himalayas are retreating rapidly, disrupting river flows and directly affecting the lives of millions. And this is as a result of global warming of 0.8OC relative to preindustrial levels. There is at least another 1OC or 1.5OC to come even if the world acts responsibly.
Global action to reduce greenhouse gas emissions must follow three basic principles: effectiveness, efficiency, and equity. To be effective, the scale of the response must be commensurate with the challenge, requiring a stability target (or its equivalent in terms of an emissions reduction path) that can keep the risks at acceptable levels. To be efficient, we must keep down the costs of emissions reduction, using prices or taxes wherever possible. To address the deep inequities that embody the problem of climate change, with the rich countries having caused the bulk of current stocks of greenhouse gases and the poor countries being hit earliest and hardest, rich countries must take the lead.
A Global Deal
Bali in December 2007 was a major step forward with all the countries agreeing to launch negotiations with a deadline of December 2009 in Copenhagen.
Progress on deforestation was made and there is a growing understanding on the necessary scale of action. However, there is much work to do to agree to an effective, efficient, and equitable global deal.
Overall targets of 50% reductions in global emissions by 2050 (relative to 1990) are essential if we are to have a reasonable chance of avoiding very big temperature increases. Even a minimal view of equity demands that the rich countries’ reductions (direct or purchased) should be at least 80%.
There should be substantial trade between countries in greenhouse gas emissions. This will promote efficiency—in other words, the cheapest ways of achieving cost reductions allowing greater reductions for a given overall cost. At the same time, and very importantly, the flow to poor countries will help them cover their costs of greenhouse gas reduction, thereby giving them an incentive to join a global deal.
Reforming the CDM
Major reform is needed in the Clean Development Mechanism (CDM), a Kyoto mechanism that allows developing countries to sell emission reductions, but does not penalize them for emissions themselves. The CDM is much too cumbersome for the scale of action that is required, omits key technologies, and raises problems in defining reductions.
There should be a coherent, integrated international program to combat deforestation, which contributes 15–20% of greenhouse gas emissions. For $10 billion–$15 billion per year, a program could be constructed that could stop up to half the deforestation.
Technologies to mitigate climate change impact must be developed and deployed at an accelerated pace. Carbon capture and storage for coal is particularly urgent since coal-fired electric power is currently the dominant technology around the world and emerging nations will be investing heavily in these technologies. Unless the rich world demonstrates, and quickly, that carbon capture and storage works, developing countries cannot be expected to commit to this technology.
Finally, rich countries should honor their commitments to 0.7% of GDP in aid by 2015, providing an additional $150 billion–$200 billion per year. The extra costs developing countries face as a result of climate change are likely to be upward of $80 billion per year and it is vital that extra resources are available for new initiatives.
At the Heart of Policy
Tackling climate change at both national and international levels requires leadership from the top levels of government. The risks and possible economic impacts of climate change, as well as appropriate public policy, affect all sectors. The challenge is to adapt across the economy and to manage the change to a low-carbon economy. This policy clearly goes beyond the remit of environment ministers. It should be at the heart of national economic policy and be a central part of international economic cooperation. Asian leaders must be ready for this challenge and recognize that they have an important role in shaping the international debate.
With wise policy and international collaboration, the world can find a way to low-carbon growth and development. This is not low growth but cleaner growth. Delayed or weak action will eventually be the antigrowth strategy.•
Lord Stern, former World Bank Chief Economist and UK Government adviser, is the author of The Stern Review on the Economics of Climate Change. Lord Stern is currently IG Patel Chair at the London School of Economics and Political Science
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