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Yoichi Kaya and Keiichi Yokobori
This volume contains the major discussions presented at the United Nations University's Tokyo Conference on "Global Environment, Energy, and Economic Development" held at its Headquarters from 25 to 27 October 1993. The presentations are grouped into six parts and the main issues and conclusions are summarized below.
Part I introduces the key issues to be addressed in the subsequent discussions. All three authors discuss the interrelations among the environment, economy, and energy (the three "Es"). Environmental problems are caused by intensifying use of natural resources, in particular fossil fuels (the major form of energy used and produced), which in turn results from growing human economic activities. At the same time, economic development can also promote the development and use of environmental protection technologies. Further, economic development, energy use and production, and environmental degradation are taking place on a global scale. Thus, their interrelations are discussed in this part both in theoretical terms and in practical terms.
Giuseppe Sfligiotti (chap. 2) presents a perspective on these matters based on his experience as an energy industry executive. He states that until the early 1980s the availability of energy, particularly oil, in sufficient quantities and at competitive prices constituted the main preoccupation of business and government leaders in the industrialized countries in order to ensure economic development. In contrast, environmental concerns, which had not much affected the actions and behaviour of businessmen, governments, or consumers in general, have become more apparent in recent years. While he recognizes the growing concerns about the environment as entirely justified, he regards the diminishing energy concerns as dangerously complacent in light of the inevitable increase in world energy consumption and the more acute imbalance between the geopolitical areas of production and supply, especially in the case of oil and gas. He argues "the problems related to energy, the environment, and economic development, in their growing global interdependence, cannot be coped with by adopting an ideological approach, be it based on the ideas of Karl Marx or on those of Adam Smith." He cites many cases where the "free market" has been conditioned by government. He contends that "a 'Sustainable Society' cannot be brought about without rational government intervention to complement and correct market forces." He recognizes both the need to "internalize" environmental costs and the difficulties inherent in this process. Despite such difficulties, he concludes that "it is essential to go ahead with all the necessary precautions, but with determination, before the present trend of irrational development makes it more difficult and painful to 'change course' towards sustainable development."
Sozaburo Okamatsu (chap. 3) provides the perspective of a government official responsible for industrial, technology, and trade policy on sustainability. At the outset, he underscores the importance of harmonizing the "three Es." Although he recognizes that expanding economic activities and growing world population damage the environment and deplete abundant natural resources, he focuses on global warming for its distinctive difference from other environmental issues. Its major cause, CO2, inevitably arises from the use of fossil fuels, on which depends world economic development. Economic growth not only increases the environmental burden but also provides the conditions necessary to protect the environment. He notes that the effectiveness of a variety of environmental countermeasures depends on the availability of appropriate technologies. He also argues that the reduction of atmospheric CO2 from the level accumulated over the past two centuries to the pre-Industrial Revolution level will not be made without the development of truly revolutionary technologies, which will take time. This concept of the "New Earth 21," a phased approach combining deployment of available technologies with development of new technologies, was presented at the White House Conference on Science and Economic Research Related to Global Change (17-18 April 1990). There were two subsequent developments. First, following the 1993 Tokyo Summit Economic Communiqué, the major industrialized countries and the secretariat of the International Energy Agency (IEA) and the OECD pursued the TREE (Technology Renaissance for Environment and Energy) concept to initiate international joint research projects. (This project was followed up by such meetings as the 1994 IEA/OECD High Level Meeting on Development and Deployment of Technologies to Respond to Global Climate Concerns.) Secondly, Okamatsu explains, Japan launched the Green Aid Plan to facilitate the transfer of existing environmental protection technologies to developing countries in a relatively short time. This plan consists of two steps: policy discussions between Japan and recipient countries with regard to energy and environmental policies, and the implementation of a comprehensive support plan. The second step is further composed of technical cooperation and demonstration projects. To facilitate the effective implementation of the Green Aid Plan, a Centre for Energy and Environmental Technologies was established in Bangkok. Okamatsu stresses the importance of dialogues with developing countries to support self-help. He concludes with a plea for cooperation by all humanity to respond to environmental challenges and indicates the possibility of expanding the Japan-USA bilateral cooperation framework to other countries.
Yoichi Kaya (chap. 4) also addresses the challenging issue of balancing the three "Es." He argues that the present environmental deg-radations result from violation of Herman Daly's three conditions for physical sustainability; i.e. consumption rates of renewable resources are higher than their recovery rates; consumption rates of non-renewable resources are higher than the rates of increase in the supply of renewable resources; and pollutant emissions are beyond nature's capacity to absorb them. Kaya also recognizes many barriers to the implementation of a strategy to recover sustainability, differing economic development being the most serious. He asks the developed and the developing countries to undertake different tasks. Developed countries should reduce their resource consumption through technological and social efforts substantially to improve energy- and resource-use efficiencies and through the introduction of clean resources such as solar energy. Developing countries should introduce energy- and resource-efficient technologies as long as they are economically viable for them as a "no regrets strategy." The feasibility of such a strategy depends very much on the future availability of technological measures with a large potential for improving energy efficiency, recycling resources, reducing pollution emissions, or producing biomass. He believes it is feasible and suggests serious feasibility studies of "heat cascading" and the production of recyclable products (such as automobiles and office equipment) as prime candidates. Kaya urges the developed countries to promote such innovative technologies both for their own sake and for developing countries, which would be enabled to buy energy and resources much more cheaply.
In summary, these three authors commonly underscore the needs for:
a resolve to act by politicians or decision makers;
an extended perspective
- to consider the needs of future generations, and
- to sustain efforts progressively to implement response actions and research for new initiatives, including technologies;
international cooperation and coordinated action, reflecting sectoral and regional differences; and
supplementation of the role of markets by government orientation of actions.
Part 2 discusses the energy-related climate change issue in the context of the global environment from two angles: first by looking at climate change from the scientific aspect; and secondly by examining deforestation and desertification in developing countries.
Tatsushi Tokioka (chap. 5) discusses the climate change predictions of climate models and their limitations, reflecting the assessment conducted by Working Group I of the Intergovernmental Panel on Climate Change (IPCC). The carbon dioxide and other greenhouse gases trap infra-red radiation from the earth to raise the earth's surface temperature by about 33K from 255K (-18°C) to 288K (15°C). Tokioka states that interactions among the earth's climate system components (the atmosphere, the ocean, the land surface, the cryosphere, and the biosphere) are complex and involve mutual dynamic, physical, chemical, and biospheric processes with differing time-scale patterns to reach a new equilibrium after being disturbed. The present understanding of those interactions is still limited.
Despite the divergence of modelling approaches, three-dimensional global atmosphere-ocean general circulation models (AOGCMs) serve the purpose of predicting transient, regional climate change. However, Tokioka points out the sensitivity of model predictions to the treatment of certain feedbacks. For example, different treatments of cloud feedbacks produce a spread of 1.9°-5.2°C in the average surface temperature increase under doubled CO2 concentration in the atmosphere.
Climate models also indicate the importance of oceanic circulations in determining transient response and local climate change. For example, Manabe and Stouffer (1993) show marked weakening in the thermohaline circulation and thus marked changes in the thermal and dynamic structure of the ocean in the quadrupled - CO2 climate, leading to a 7°C increase in the globally averaged surface temperature (William Cline also discusses this observation by Manabe and Stouffer in chap. 7). However, lack of observed data prevents full verification of such indications.
Tokioka notes that, despite the different predictions as regards the regional details of climate change, there is general agreement among model predictions on many larger-scale aspects, such as a warmer troposphere and cooler stratosphere, a spread of 1.5°-4.5°C in the average temperature increase under doubled CO2, the dominant temperature increases being in winter at high latitude, acceleration of the hydrological cycle, such as a 3-15 per cent increase in global average precipitation and evaporation, and likely soil moisture decreases in the summer at mid-latitudes. He calls for further studies on processes that are currently inadequately understood, thus leading to uncertainties in predicting possible future climate change: clouds and other elements of the atmospheric water budget, ocean influences on the timing and pattern of climate change, land surface processes and feedbacks, sources and sinks of greenhouse gases and aerosols and their atmospheric concentrations, and polar ice sheets.
Radjendra K. Pachauri and Rajashree S. Kanetkar (chap. 6) look at deforestation and desertification, two of the major terrestrial degradations affecting the planet. They point out the difficulty arising from the imprecise or broad terminology (deforestation is not limited to the quantitative loss of vegetation) and the lack of available statistics showing their wide scope of severity. Deforestation, both in many tropical developing countries and in many developed countries, results from many factors: human population growth, agricultural expansion, and resettlement, especially shifting agriculture in developing countries; grazing and ranching (e.g. livestock owners forced into forest areas by the spread of irrigated and cultivated land in India); exploitation of fuelwood and charcoal in tropical and subtropical woodlands; timber exploitation; plantation of tropical crop trees (rubber, oil palm, eucalyptus, etc.); atmospheric pollution, with a large volume of circumstantial evidence on the rain threat; and other human activities such as large dam constructions. Desertification too results from the human pressure of population increases in dry zones combined with a consequential growth in demand for natural resources for food, water, fuel, etc. that exceeds the carrying capacity of the land, and also from protracted drought in recent years, which has exacerbated the human pressure.
Pachauri and Kanetkar note that the environmental hazards of Desertification and deforestation provide mutual feedbacks and have similar implications, involving changes in microclimates and ecology, adverse effects on agricultural productivity, human and livestock health, and economic activities such as eco-tourism, as well as higher resource requirements to combat these adverse impacts. They describe citizen action to counter deforestation and Desertification such as the Chipko Movement in India. Recognizing the magnitude and complexity of desertification, they discuss the multiple benefits of forestry in the development of arid lands - for example, soil and water maintenance, livestock production, the provision of fuelwood, charcoal, and other forest products. They attribute the Indian deforestation to the progressive expansion of reserved forests and the emphasis on a few commercially valuable species such as Teak during British rule and under the institutions subsequently introduced after independence. They also discuss several Indian programmes to counter Desertification and deforestation and the achievement of the Tata Energy Research Institute's Joint Forest Management Programme in the State of Haryana. They review international undertakings and note the limited success of the Plan of Action to Combat Desertification (PACD) adopted by the United Nations Conference on Desertification in 1977. They describe various efforts by multinational development agencies and philanthropic foundations to encourage management by small groups and to give them responsibility for forests in good condition as well as for degraded land.
Pachauri and Kanetkar have qualified confidence in the possibility of damage prevention and the reversal of damage that has already occurred. Strategies would have to include a recognition of the true value of finite natural resources, institutional responsibility for forest management linked with a matching accountability for results, and better knowledge of the extent, quality, and potential of resources.
They conclude that the success of programmes to counter deforestation and desertification will depend on the institutional arrangements, the dissemination of information, the creation of awareness, the development of assessment methodology, and adaptive research. These programmes must be fully integrated into programmes of socioeconomic development, instead of being considered only as rehabilitation measures, and the affected populations will have to be fully involved in their planning and implementation.
Mohamed Kassas comments on the presentations by Tokioka and Pachauri and Kanetkar. Kassas first notes the interrelationship between climate change and land degradation. Apart from the role of deforestation in the global carbon cycle and its addition to the atmospheric load of carbon dioxide, land degradation impacts on climate will include: the effects of atmospheric dust from desert and desertified territories; the effects of impoverishment of plant cover on ground surface, energy budget, and the temperature of the near-surface air; reduced roughness of the surface as a result of reduced plant cover; reduced availability of organic particles in the atmosphere; and reduced rainfall. He urges the expansion of global sinks for carbon dioxide and related greenhouse gases through afforestation and revegetation and the reclamation of decertified areas. Kassas further points out the negative implications of the loss of biodiversity arising from both desertification and deforestation for the agricultural sector, medicines, and economic values. He differentiates "systemic" global environmental issues, whose causes may be local but whose effects are global, from "cumulative" issues, whose causes and effects are both global. He emphasizes the urgency of action on desertification, which is an actual threat, whereas the climate change issue is shrouded in uncertainties and its damaging impacts are likely to appear within 50-70 years.
In summary, the discussions in part 2 point to the uncertainties of analyses, involving a lack of data and complex interrelationships among the factors involved in environmental problems. As regards deforestation and desertification, it is their socio-economic factors and implications that are important.
Part 3 reviews several economic issues associated with the reduction of greenhouse gases, especially CO2. These include the cost of emission reduction measures (e.g. a rate of a carbon tax), the macroeconomic impacts of such reductions, and their sectoral or trade implications. The issues associated with the use of models in such analysis are also discussed.
William Cline (chap. 7) presents a cost-benefit analysis of greenhouse gas emissions using models and compares his findings with other studies. He first assesses the economic damage of climate change, then estimates the cost of reducing the emission of greenhouse gases and further examines the issue of the proper time discount rate. With the conventional doubling of the carbon dioxide concentration in relation to pre-industrial levels, for which the IPCC "best guess" estimate of equilibrium mean global warming was 2.5°C, he places damage to the US economy in a range of 1-2 per cent of GDP, of which 0.3 per cent results from damage to agriculture. He compares his estimates with those of Titus (much larger potential damage in forest loss of 0.8 per cent of GDP) and Frankhauser (a GDP loss of 1.3 per cent for the United States and an average of a modest 1.4 per cent globally). In the latter's case, a GDP-weighted measure masks the relatively higher damage in developing countries.
Cline argues that, without policy intervention, much higher atmospheric concentrations (threefold by 2100 and ninefold by 2300) of carbon dioxide could occur, resulting in greater global warming (for example, 10°C by 2300). Recent simulations of Princeton University's Geophysical Fluid Dynamics Laboratory (GFDL) general circulation model by Manabe and Stouffer tend to confirm Cline's very-long-term baseline. They examined the effects of a quadrupling of pre-industrial carbon dioxide equivalent by 140 years from now, to which Tokioka also referred. With a modest degree of non-linearity (an exponent of 1.3) for damage, Cline expects very-long-term damage with 10°C warming to cost between 6 and 12 per cent of GDP. He also notes that Manabe-Stouffer simulated a "catastrophe," namely, the shut-down of the ocean conveyer belt, of the flow of the Gulf Stream, and of the large reservoir function of the deep ocean as a sink for carbon dioxide, resulting from the complete cessation of the thermohaline circulation and from the deeper thermocline. However, these catastrophic cases are not included in the subsequent analyses.
Cline surveys economic models on the costs of reducing carbon dioxide emissions. Their central range of results indicates some 2-3 per cent of gross world product (GWP) as a cost of reducing emissions by 50 per cent from their business-as-usual baseline by 2050. The OECD investigation of standardized simulations of several carbon abatement models assumes, in an aggressive intervention scenario, an annual 2 per cent reduction from their business-as-usual time-path, such that by 2050 emissions would be at 70 per cent below baseline and by 2100 at 88 per cent below baseline. Costs range from 1.3 per cent of GDP (OECD's "GREEN" model) to about 2.6 per cent (Manne-Richels and Rutherford models). Despite the non-linearity of the costs of emission reductions, Cline argues, economic costs could be reduced by a two-phased approach, with more moderate action in the first decade pending further scientific confirmation and wider availability of technological alternatives, referring to studies of Manne-Richels and the US National Academy of Sciences. Economic costs could be also reduced by removing market failures, such as information costs and utility pricing distortions, and by using carbon tax revenues to correct distortions in fiscal structure.
Cline then examines the benefit-cost trade-off over time for an aggressive action programme to cut global carbon emissions by one-third and to hold them constant thereafter. He also distributes risk weights with 0.375, 0.125, and 0.5 for the high-damage, low-damage, and central cases, respectively, to capture risk aversion. He concludes his aggressive action programme justified despite higher net costs early in the time-horizon. He compares his analysis with Nordhaus's Dynamic Integrated Climate-Economy (DICE) model, which finds net social costs of 0.7 per cent of discounted future consumption resulting from freezing emissions at their current level. He attributes the major difference to the use of the time discount rate, which he sets to zero, whereas Nordhaus uses 3 per cent. Adjusting this and another difference in an elasticity of marginal utility, Cline gets a DICE estimate of about 50 per cent cutback from the baseline by 2100, much bigger than the 14 per cent cut identified by Nordhaus. The remaining gap between Cline and Nordhaus could arise from such factors as a higher marginal cost curve for carbon reduction in DICE, incorporation of the risk of higher-damage cases, and imposition of a backstop-technology ceiling in abatement costs. Cline uses DICE to identify the shadow price of carbon (optimal carbon tax), which rises from US$45 per tonne of carbon equivalent (tC) initially to US$84/tC by 2025, US$133 by 2055, and US$243 by 2105.
Considering the policy implications of these comparisons, Cline finds a convergence of the various analyses on action in the first decade, i.e. a cut-back of 10-15 per cent from baseline emissions and a carbon tax rate of US$20-25/tC. He recognizes, however, the sharper divergence in policy prescriptions beyond the first decade. Cline calls for intensive scientific research during this initial decade, to narrow discrepancies among general circulation models on cloud feedback, etc., and on the very-long-term prospects for warming and damage. He feels that economists' insistence on discount rates has discouraged scientists from looking at horizons beyond a century. He also advocates much more extensive analysis of the benefits and costs of greenhouse gas abatement for developing countries. Although it may be appropriate to concentrate abatement efforts in the industrialized countries in the first phase, in the long run the seriousness of global warming will require a ceiling on emissions in developing countries.
Akihiro Amano (chap. 8) presents, first, a comparison of various model simulations of the magnitudes of the macroeconomic costs of limiting carbon dioxide emissions, second, an examination of the side-effects of abatement measures, particularly the international implications, and, thirdly, estimates of the macroeconomic costs associated with optimal response approaches. He compares four models studied in the OECD comparative studies - the Manne-Richels model (MR), Rutherford's Carbon Rights Trade Model (CRTM), the Edmonds-Reilly model (ER), and OECD's GREEN model - together with six Japanese models (Goto, Ban, Mori, Yamaji, Ito, and Yamazaki). As Cline mentioned, the four models used in the OECD exercise produce carbon dioxide emission reductions of 2 per cent per annum from the baseline, using the same set of exogenous assumptions and the same methods of perturbing the system. Their results are fairly similar, especially for the developed countries, with two notable exceptions: larger impacts in the longer term in the ER model owing to a smaller role of backstop technologies; and smaller effects in CRTM owing to the effects of emission trading. They suggest, in general, a 0.02-0.05 per cent decrease in GDP for a 1 per cent reduction in carbon emissions in industrialized countries and corresponding carbon tax rates of some US$2-10/tC. Despite somewhat diverse results for non-OECD countries, relatively larger output effects are observed and fairly low carbon taxes are seen for the former USSR and China because of their subsidized low energy prices. Whereas two similarly constructed Japanese models (Goto and Ban) give comparable outcomes to those in the OECD study, other Japanese models, which differ in type from those in the OECD study, produce substantially larger estimates. Besides the difference in the nature of the models, temporary deviations from full employment caused by higher energy prices and a lack of tax revenue recycling in the short-run models could explain the difference.
Amano concedes that actual policy may not follow the suggestions of model simulations because of many side-effects. Among such side effects, Amano considers that appropriate policy instruments could accommodate domestic regressive distributional implications. He therefore focuses on the implications for international competitiveness. First, uneven internalization of external environmental costs may induce "trade-diversion effects." He notes a Hoeller and Wallin study showing fairly large differences in implicit carbon tax rates among major OECD countries and expects more efficient energy and carbon uses by eliminating these distortions. Secondly, he examines the issue of "carbon leakages": high carbon taxes introduced in some countries could depress world energy prices and increase energy consumption and carbon emissions in countries without carbon taxes. Whereas Rutherford estimates 100 per cent offsetting carbon emission increases from non-participating countries in response to a unilateral OECD 3 per cent reduction in CO2 emission increases, the OECD GREEN model postulates moderate leakage of 2.5 per cent and Manne shows overall results falling in between. Amano concludes that carbon leakages may be at most a medium-term issue. He also suggests that disaggregated analyses of industries could reveal the differential burden of adjustments among industries, and notes the almost negligible effects of tax exemption of energy-intensive industries in terms of leakage rates and of changes in sectoral output in an OECD GREEN study. Third, he refers to the possible impact of an international carbon tax scheme on terms of trade in favour of carbon-energy-importing countries. The OECD GREEN model has shown such effects on real incomes of non-negligible magnitudes.
Amano then examines the issue of the social costs of carbon dioxide emissions. He also compares the aforementioned analyses of Nordhaus and of Cline. With a discount rate of 0.5 per cent, Amano indicates that Nordhaus's estimate of the social costs of carbon emissions would come closer to Cline's estimate. He argues, however, that differing discount rates can explain only a part of their differences, owing to some cancelling effects, and that climate and damage parameters also affect the nature of the optimal paths. However, these would not justify optimal abatement paths of immediate emission stabilization at current levels. Some other social valuation functions incorporating much broader non-market values or taking a serious view of uncertain, catastrophic situations in the distant future will be needed.
John Ferriter (chap. 9) discusses possible energy market responses to carbon taxes, energy efficiency standards, and other measures, drawing on the results of the IEA's World Energy Outlook Model. His presentations focus on energy market impacts, including regional and sectoral ones. He also points out the historical energy use and price data constraints and further needs for energy market analyses, especially in the residential/commercial and transport sectors. Ferriter compares four scenarios: a reference scenario, in which energy demand grows by 48 per cent from 1990 to 2010 in the world and by 28 per cent in the OECD region, and annual carbon emissions rise by 46 per cent in the world and by 28 per cent in the OECD region; two OECD-wide carbon tax cases with annual gradual increases to reach US$100 and US$300 per tonne of carbon emitted, respectively; and an accelerated energy efficiency improvement case.
The 2010 OECD level of carbon dioxide emissions compared with the 1990 level is higher by 17 per cent in the US$100 tax case, and slightly higher (by less than 10 per cent) in both the US$300 tax case and the efficiency-driven scenario (EDS). But the 2010 levels under the two tax cases are lower by 9 per cent and by 17 per cent than the reference case, respectively. Regionally, Ferriter points out, primary coal and gas prices and the taxes on energy products are lower in North America than in other OECD regions so that a given level of carbon tax leads to larger percentage increases in end-use prices in the former. In all three sensitivity cases, over 50 per cent of the OECD emissions reductions occur in North America, about one-third in Europe, and the rest in the Pacific region. The EDS is more effective at reducing energy use than the US$300 carbon tax, although the US$300 case is slightly more effective than the EDS in achieving emissions reductions. Sectorally, the two tax cases give roughly the same proportions of emissions reductions: changes in power generation provide some 50 per cent of emissions reductions; final fuel use in industry some 25 per cent; the transport and residential/commercial sectors the rest. The EDS differs significantly in its sectoral effects from the tax cases. Changes in the electricity sector account for some 55 per cent; the transport and domestic sectors account for 40 per cent of the reduction in emissions from final energy use; and industry the rest. One of the reasons for the insensitivity of transport and domestic energy demand to high-level taxes is the relatively modest impact of the taxes on the actual prices paid by consumers.
Ferriter cautions against generalizing about the effects of CO2 reduction policies on energy commodity markets, which differ from other world commodity markets because of their specific characteristics and factors, such as the role of oil as the price leader, the importance of regional markets, and present and future prospects of government control and subsidies. On specific markets, he notes uncertainties in the coal market, including disproportionately greater demand reductions resulting from further fuel switching, lower pretax coal prices inducing coal demand and emission increases outside the OECD region, and possible offsetting policies by large coal-producing countries. He also notes uncertainties about oil-exporting countries' reactions, possible infrastructure constraints on greater gas use, the impacts of lower-priced spot cargoes on the Pacific LNG markets, the stability of hydrocarbon supplies from Russia and other newly independent states, and possible moves away from coal and nuclear in the former COMECON region.
Ferriter lists a series of areas for further study, including further elaboration of the IEA model to incorporate technical possibilities, the use of several different analytical approaches, linkages with other modelling efforts, and in-depth analyses of questions such as the distribution of the costs of carbon taxes among parties, possible OPEC reactions, the implications of historical relations between crude oil prices and oil product prices, and the effect of changing government interventions. He concludes that a US$300/tC tax might be able to reduce carbon dioxide emissions nearly to 1990 levels in 2010, although such high-level taxes have not been seriously discussed in any international forums; that institutional and transitional issues require careful consideration on a national and regional basis; that a mix of policies may be the most effective approach to reducing emissions; that a hedging strategy would contain a balance of measures to improve energy-use efficiency and a heavier emphasis on R&D to make renewable energy sources competitive earlier; that realistic and palatable policies are needed not only for the OECD but also for relations between the OECD and the rest of the world; and that much reform of local and regional energy policies is required within countries.
Lawrence R. Klein warns about the uncertainties associated with statistical model exercises on environmental issues. The models are based on meagre data samples, often with large measurement errors, so that the estimated confidence intervals are quite large. The main sources of error and uncertainty result from the estimation of the rate and volume of emissions from prevailing technologies; reactions of consumers and producers to price changes in energy use; a flawed global database; and effects of climate and other natural conditions that are not well understood. Klein calls for findings to be described in general terms with both point values and regions of uncertainty. This could be done, first, by maximum use of statistical methods for the estimation of standard errors of extrapolation or projection, and, second, by the calculation of stochastic simulations of the associated models. A minimal first or preliminary step should be to make a sensitivity analysis of the effect of assigning very different values, in a plausible range, to key parameters of the system. One-at-a-time estimates of different parameters should be avoided because of mutual correlations among many of them. However, use of the "error-cancellation" phenomenon can save efforts for the examination of deviations from baseline cases. This process will help to restrain the inherent degree of uncertainty. Klein, further, points out that the very long time taken by many environmental phenomena to reach serious magnitudes entails growing uncertainty and errors of extrapolation.
Warwick McKibbin comments on the papers by Cline, Amano, and Ferriter and also presents results of the analysis of a G-Cubed model jointly developed with Peter Wilcoxen. He agrees with Cline's arguments on the need for more aggressive action to combat carbon dioxide emissions, the failure of standard calculations of costs and benefits to recognize the potential for a major disaster, and his policy prescription for the next decade to introduce a carbon tax of US$20-25/tC along with more investment in scientific research. He disagrees with his estimate of the cost-effectiveness of planting trees to absorb CO2 and his criticism of a 3 per cent time discount rate. McKibbin attaches greater importance to the extent of baseline emissions, the existence of backstop technologies, and the mode of recycling tax revenues in analyses. He agrees with many points raised by Amano, including the sources of differences between short-run Japanese models and models in the OECD study, the relevance of tax revenue recycling and trade diversion, and the need for a model with disaggregated sectoral detail. However, he differs from Amano who infers that a 1 per cent reduction in CO2 requires a carbon tax of US$2-10/tC. McKibbin questions Ferriter's model results because of a lack of feedback from the change in energy prices after tax to aggregate GDP and then back to energy demand. He also finds a carbon tax of US$300/tC by 2010 as the stabilizing level for the United States to be higher than other model results. He suspects that the lack of feedback in the model causes a higher estimate for a tax. McKibbin then presents his G-Cubed model, a multi-sector (12 sectors) dynamic general equilibrium model with seven economic regions, and some results for the impact of a permanent US$15/tC tax. The simulations are made on the assumed introduction of a tax in 1993 through 2022 and on five alternative assumptions about tax revenue recycling (deficit reduction; a lump-sum rebate to households; an investment tax credit to all sectors except housing; a cut in the household income tax rate; and a cut in the corporate tax rate). GNP impacts are different: a lump-sum rebate will hold GNP below baseline well beyond 2022, whereas an investment tax credit will restore it to baseline by 1995. Each case reduces emissions effectively. McKibbin concludes that there need not be a linear relationship between carbon emissions and GNP because of sectoral substitution possibilities plus the differential impact across sectors of policies. On leakage, he finds that a unilateral US carbon tax reduces US emissions by about 15 per cent less than when all OECD countries impose a tax. He concludes that there is evidence of some offset from unilateral action but nowhere the complete offset suggested by Amano.
Kenji Yamaji makes three comments on the three presentations. His first comment is that the varying evaluations of the macroeconomic costs of a carbon tax depend on several factors, such as time-horizons, the type of model, and the treatment of tax revenues. His view is that the general equilibrium type model and a more explicit optimization model tend to produce a smaller economic cost than simulation models, judging from actual past performances. He also regards the higher marginal CO2 emission reduction costs as a factor influencing the higher cost estimate in his Japanese simulation. His second comment concerns the policy implications of integrated economic analysis. Although great uncertainties associated with climate change may make an optimal control path very close to the business-as-usual cases, the choice of discount rates and a longer time-horizon could make CO2 emission reductions more optimal. He also points out the possibility of a catastrophic positive feedback and of lower cost estimates arising from the inclusion of eventual technological development. His third point concerns interregional equity and the likely leakage effect in non-participating countries associated with unilateral emissions reductions by developed countries. He also notes that joint implementation has mostly been discussed in qualitative terms, not in quantitative terms. He hopes more analyses on the global perspective will reduce pessimistic views of abatement.
Part 3 also includes an appendix by Hung-yi Li, Peter Pauly, and Kenneth Ruffing examining the macroeconomic effects of CO2 emission reductions with the project LINK world econometric model. Li et al. find two problems in most simulations of the impact of carbon taxes using macroeconomic models and energy models. First, macroeconomic models treat the level of economic activity as an exogenous variable and energy models do so for energy demand. Second, many models assume a constant pattern of international trade and exogenous energy prices. These limit the models' ability to evaluate a carbon tax because they fail fully to capture the effects of a carbon tax on international trade and on the economic activity of countries with and without such a tax and the quantity of emissions abated by the carbon tax. The simulation using the world econometric model of Project LINK with the trace gas accounting system (TGAS) aims at endogenously generating these impacts of a carbon tax.
The LINK model is a multi-country model linking separate national econometric models by means of models of merchandise trade, exchange rates, and commodity prices. The LINK baseline projects an annual increase in overall CO2 emissions from the G7 countries of 3.3 per cent (cumulatively 30 per cent) from 1993 to 2000, with annual growth in their aggregate GNP of 2.7 per cent. With the introduction of a carbon tax, whose rate was initially US$30/tC to reach US$100/tC in 2000, the G7 emissions would be 8 per cent lower than the baseline in 2000 with a 2 per cent reduction in GNP. Among the G7 countries, the percentage reductions in emissions vary from 3 per cent in Japan to 1 I per cent in the United States. The estimated level of tax required to induce significant emission reductions appears higher than in other studies. Li et al. then present a simulation of a uniform US$40 carbon tax with an endogenous oil price response, where the oil price will be about US$3 per barrel (bbl) below the original scenario's by 2000 and the emission reductions are lower by 1.5-4.7 per cent. They conclude that a unilateral G7 carbon tax would reduce carbon dioxide emissions in these countries, with varying effects on non-OECD emissions ranging from a slight reduction to increases up to 15 per cent; that a tax induces a medium-term reduction in the real price of oil by some US$2/bbl; that reduced oil prices positively stimulate G7 economies, reducing their short- to medium-term GNP loss; that the trade balance improves in oil-importing G7 countries at the expense of G7 oil exporters and non-participating countries; and that the results are sensitive to assumptions about the strategic behaviour of energy producers, particularly of OPEC. They consider that the elimination or reduction of the negative activity effects of a carbon tax is possible through the recycling of revenues and parallel stabilizing policies.
The discussions in part 3 suggest the following common findings: uncertainties surrounding economic simulations of environmental impacts; different simulation results from differences in models and assumptions (e.g. social discount rates, technological progress, tax revenue recycling, energy-economy interactions); the need for more data collection and analytical work to reduce uncertainties; the desirability of phased approaches; policy ineffectiveness or "leakages" owing to market distortions, uneven internalization of externalities, and uncoordinated global policy actions.
Part 4 deals with technological potential options and perspective for preventing climate change.
Chihiro Watanabe (chap. 10) discusses the role of technologies in improving the interface between energy and economy, with reference to Japanese experience. He emphasizes the role of technology in replacing limited resources in order to achieve sustainable development and presents the New Sunshine Programme of Japan's Ministry of International Trade and Industry (MITI) from this perspective. He demonstrates the parallel movements of economic development and energy supply requirements from 1880 to the early 1970s, which is in contrast to their decoupling after the two oil crises of the 1970s. He also compares energy efficiency improvements with the rather stable materials intensity in the manufacturing sector. He attributes energy efficiency improvements largely to oil price increases and technology stocks rather than to autonomous energy efficiency improvements (AEEI). He sees the substitution of technology (an unconstrained factor) for energy (a constrained factor) as improving energy efficiency.
Watanabe states that the heavy concentration of material-intensive and energy-intensive industries and population in Japan's Pacific belt area resulted from the expansion of the heavy and chemical industries in the 1960s and caused serious environmental pollution problems. MITI's Vision for the 1970s proposed a shift toward a knowledge-intensive industrial structure by the substitution of technology for energy and materials. A concept of "Industry-Ecology" emerged in 1972 aimed at optimally balancing the ecosystem by creating an environmentally friendly energy system. The first oil crisis confirmed the need for a policy to solve basic energy problems through R&D on new and clean energy technology. The Sunshine Project was thus created in 1974, followed by the Moonlight Project for R&D on energy conservation technology in 1978. Later, the Global Environmental Technology Programme was initiated. However, declining oil prices and the upsurge of the Japanese economy (the "bubble economy") discouraged energy efficiency improvements and increased environmental stresses such as carbon dioxide emission increases, which were exacerbated by reduced R&D efforts, in particular for environmental protection and energy. Watanabe claims that this prompted MITI to integrate the three previous energy R&D programmes into a New Sunshine Programme, encouraging more efficient and effective use and mutual supplementation of technologies such as catalysts, hydrogen, high-temperature materials and sensors for technologies for new energy, energy conservation, and environmental protection. The new programme entails acceleration of R&D on innovative technologies, international collaboration on large-scale R&D projects, and cooperative R&D on appropriate technologies for technology transfer. Watanabe suggests that the Japanese experience and ongoing efforts would provide useful suggestions concerning the role of technology in the pursuit of a sustainable development path.
Thomas Johansson (chap. 11) discusses the potential role of renewable-energy sources in meeting future energy needs with reduced carbon dioxide emissions. He reviews the recent progress in renewable-energy technologies and systems, which have benefited from developments in electronics, biotechnology, materials sciences, and other energy areas such as gas turbine combustion advanced by jet engines. He also notes the advantages of the small size of most renewable-energy equipment in faster, easier, and less costly applications. Johansson then presents a renewable-intensive global energy scenario for the years 2025 and 2050, assuming the removal of market barriers by comprehensive national policies. The assumed energy demand levels for electricity and for solid, liquid, and gaseous fuels were the same as those in the IPCC's Working Group II's high economic growth and accelerated policy case. Further, the scenario was subject to conditions allowing sustainable biomass production, land-use restriction for wind power, limited penetration of intermittent power generation such as wind, solar-thermal, and photovoltaic power, and environmental and social constraints on hydro potential. Johansson postulates global renewable resources consumption equivalent to 318 exajoules (EJ) per year of fossil fuels by 2050, a comparable rate to total present world energy consumption. With this, he claims, the world could expect to have adequate supplies of fossil fuels well into the twenty-first century. He cautions, however, that the transition to renewables will not occur at this pace if existing market conditions remain unchanged. He calls for the removal of subsidies artificially reducing the price of fuels competing with renewables, policy instruments to ensure full-cost pricing, including environmental and other externalities, governmental R&D supports for renewable-energy technologies, etc. He stresses the need in the decades ahead to frame economic policies simultaneously satisfying both socioeconomic development and environmental challenges.
William Chandler, Marc Ledbetter, Igor Bashmakov, and Jessica Hamburger (chap. 12) discuss the energy-efficiency potential in Eastern Europe, the former Soviet Union, and China and possible policy measures to materialize such potential. They recognize that energy-efficiency technology transfer is a high priority in cooperation programmes for these countries, whose energy intensity ranks high by any standard. They emphasize the importance of market restructuring supplemented by such measures as market-pull programmes and integrated resource planning (IRP).
In reviewing the energy-efficiency prospects, they note that low energy efficiency constrains economic growth in Eastern Europe and that the countries of the region have had varying degrees of success in lowering energy intensity. Their energy-efficiency potential amounts to 15-25 per cent of current energy use, or 4 EJ. The former Soviet Union consumes three-quarters as much energy as the United States to produce only 30-50 per cent as much economic value. Its high energy intensity resulted from its reliance on heavy industry and energy-intensive materials as well as outdated technologies. Its potential energy saving could exceed 15 EJ with positive macroeconomic and environmental impacts (e.g. avoided investments up to 1.8 trillion roubles and 10 per cent reductions in atmospheric pollutant emissions). China, the world's third-largest energy consumer, is characterized by a dominance in industrial energy use, high energy intensity (twice the average level of other developing countries and three times that of Western Europe), and low per capita consumption. Even considering gains in energy efficiency and the initiation of energy-efficiency measures in addition to price reforms and ownership changes, the efficiency potential must be viewed in terms of a reduction in demand growth from a baseline and could amount to a cut in demand to 50 EJ from a projected level of 75 EJ in 2025. Chandler et al. note many energy-efficient technologies available to these countries, such as combined-cycle and gas-turbine system generation of electricity.
For policy options, Chandler et al. recommend Eastern Europe to give priority to such areas as the application of IRP, energy-efficiency loans to consumers, building domestic capability in the manufacture and installation of energy-efficient equipment and materials, energy-efficiency labelling of appliances, and more attractive public transportation. For the former Soviet Union, their suggestions include the promotion of competition through the regulation of monopolistic utilities, international financial assistance for energy-efficiency measures, and IRP in the utility sector. For China, facilitating joint ventures through business information exchange and demonstration projects would contribute to its economic development and environmental protection. Chandler et al. conclude that technology transfer to these countries requires significant new efforts in the energy sector, such as establishing market prices and freer markets for energy, adopting cost-effective energy-efficiency policies and programmes, satisfying new energy demand in the medium term with natural gas, and developing renewable energy supplies over the long term.
Nebojsa Nakicenovic (chap. 13) observes the long-term dynamic transformation and structural change of the energy system towards less carbon intensity and expects this trend to continue into the next century. Although global consumption of primary energy and energy-related emissions and other environmental effects have been growing during past decades, he notes declines in both CO2 emissions per unit of energy and energy intensity per unit of value added in most countries. Nakicenovic further examines the carbon intensity trends of primary energy, final energy, and energy conversion for selected countries. He observes declining trends in the carbon intensity of the first two factors and mixed trends in the last, i.e. increased intensity in the developing countries and decreasing intensity in the industrialized countries. He also notes some degree of decarbonization arising from lower energy intensities. However, to offset absolute increases in emissions, structural changes in energy systems towards carbon-free energy sources should complement decarbonization and lower energy intensity. Nakicenovic notes the role of natural gas as a bridge to a non-fossil-fuel energy future and as an element in a minimum-regret option.
In summary, part 4 shows that technology has a role to play in offering wider future energy options for sustainable development. Past history also demonstrates the potential for more efficient and cleaner energy use and for technology transfer. But these technological improvements also depend on non-technological factors such as energy prices, freer markets, and other institutional and policy elements.
Part 5 discusses the energy challenges faced by developing countries. Two of the presentations address the issues of rural energy, while the third paper looks at the implications of growing energy demand in the developing world.
Kunio Takase (chap. 14) discusses the crisis of rural energy, with a special emphasis on fuelwood, in developing countries on the basis of the ongoing four-year study of "Global Environment and Agricultural Resource Management" entrusted by the Japanese Ministry of Agriculture, Forestry, and Fisheries to the International Development Centre of Japan (IDCJ). The IDCJ believes technical innovation, financial resources, and implementing capacity, supported by political will and people's participation, to be minimum requirements to prevent environmental destruction and to maintain compatibility between development and environment. Takase reviews world forest resources and notes that in recent years forest areas have slightly increased in developed countries and have decreased in developing countries. The present rate of afforestation is judged inadequate. Whereas industrial wood use accounts for 80 per cent of harvesting in developed countries, fuelwood use accounts for the same ratio in developing countries. Despite local differences in fuelwood demand, the present forest areas in developing countries fall short of satisfying the demand of the growing population in developing countries. Takase examines the potential of more efficient use of fuelwood (e.g. by improved cooking stoves) and alternative energy sources (charcoal, renewables, fuelwood thermal power generation) and identifies their respective constraints. He also identifies basic problems for sustainable fuelwood management, which include lack of reliable information and data, conflict of interests among parties, and competing land-use demand. He calls for a comprehensive international collaborative research programme with a mix of short-term and long-term development strategies. He presents a scenario for narrowing the gap between rich and poor countries in GNP per capita by 2040, because poverty alleviation is the first step to solving environmental problems, including the crisis of rural energy in developing countries. In conclusion, he suggests the need for a new philosophy of a "strategically planned market economy."
Anthony Churchill (chap. 15) discusses the energy production and consumption patterns of the developing world and the resulting implications. He challenges the assumptions of the "consensus view," such as held in the World Energy Council's Commission's Report, Energy for Tomorrow's World. He argues that increased energy efficiency resulting from a more market-oriented pricing structure and other policies could increase rather than reduce energy demand, as the increased energy efficiency reduces the service price and could increase the quantity consumed. Further, as most empirical studies suggest, income elasticity of energy demand ranging from 1.5 to 3.0 is likely to apply in developing countries. Demand for energy-intensive services is likely to be income elastic at the stage of growing income in developing countries. Even assuming modest income and price elasticity and a conservative rate of growth, developing countries' energy demand could be much larger than contemplated in a high scenario in the "consensus view." Such high energy demand growth may not be constrained by either supply or financing constraints. The reserve base of coal and oil, cost reductions from the combination of improved efficiency and technology, and emerging substitutes would satisfy demand at prices not too different from today's price. The challenge in finance exists in mobilizing the resources that economic growth and appropriate policies will generate. A fundamental restructuring of institutions necessary to mobilize domestic resources is taking place. Churchill is optimistic about dealing with environmental pollution except for greenhouse gas emissions, for which there is no immediate solution. He argues that, if global warming proves to be a serious problem, it should be dealt with using tomorrow's technology, guided by the historical evidence of continuous technological changes. In most developing countries, however, the greatest benefits will come from using already tried and true technologies.
Jike Yang (chap. 16) deals with the challenge of Chinese rural energy development. First, he notes the energy consumption patterns of rural households, such as high biomass fuel consumption (one-third of total energy consumption in China), high energy intensity in terms of agricultural output (close to heavy industry's average), low heat conversion efficiency of biomass burning, and adverse economic and ecological effects of biomass burning. Corrective actions include the greater use of straw- and fuelwood-saving stoves and of biogas digesters, the development of fuelwood forestry, rotating use of plains land for crops, forestry, and forage grasses, and greater use of solar energy. He recognizes the following issues as being relevant to the implications of growing township enterprises for rural economies and environment: low energy consumption in agriculture, due to a high dependence on manual and animal labour and to low consumption of commercial fuels, higher energy intensity of township enterprises' consumption, the value of low-energy intensive household handicraft industry, and growing labour inflows from rural areas into cities, increasing energy supply shortages in city industry which would also keep rural energy demand unfilled, the value of emerging service industries in towns absorbing excess labour, the potential energy output of human and animal power, and the benefits of small-scale hydropower plants. Yang then describes the benefits of energy-efficiency improvements and the use of renewable sources: the reduced use of synthetic fertilizers, the maintenance of soil quality, increased rural incomes from backyard-farming, amelioration of the energy shortage, the development of rural agro-industry, the dispersion of culture and industry from urban centres, reduced energy intensity, and other socio-economic, environmental, and resource benefits. Yang concludes that, despite good starts in the development of renewable energies in rural areas, much more work has to be done on sustainable land development.
Yujiro Hayami, in commenting on Takase's presentation, stresses the importance of designing institutions that provide incentives to local people to conserve natural resources in developing countries and cites two examples of forest conservation programmes in South-East Asia. The first case is a programme to privatize forest land management in Viet Nam by transferring management from cooperatives to individual households. The positive effects so far observed indicate the system's potential for solving the difficult problem of how to achieve socially optimum conservation of forest resources while producing current income and employment for local people not only in Viet Nam but also in other developing economies. The opposite case of institutional design miscalculating local people's incentive mechanisms is a reforestation programme in the Philippines where the payment of a fee per seedling planted was used to mobilize local people. Despite initial speedy reforestation, the local people's fear about eventual unemployment drove them to destroy the seedlings. Hayami underscores the importance of a full understanding of human behaviour and incentive systems in local communities.
In summary, part 5 notes the increase in demand for energy, in particular in rural areas, which could exceed the present high estimates. Afforestation and biomass energy can play an important role alongside efficiency improvements. The need for institutions that properly motivate local initiatives is emphasized.
Part 6 addresses issues of long-term energy strategies in support of sustainable development. The papers are by prominent scholars and experts from developing countries.
José Goldemberg (chap. 17) discusses the possibility of developing countries' adopting leapfrogging strategies to delink environmental degradation, energy demand increases, and economic growth. He recognizes that the historically observed linkage of economic growth and energy consumption growth and pollution production has been broken in OECD countries through the saturation of consumer goods markets, shifts towards less energy-intensive materials and more efficient fuels, and the adoption of more energy-efficient technologies. Such delinking has important implications for developing countries whose economic growth has yet to occur. Goldemberg observes that energy intensity initially grew with economic growth, reached a peak, and then declined in many industrialized countries but also that the latecomers had lower peaks than their predecessors. Energy intensity in most developing countries is rising (although it is declining in China). The introduction of energy-efficient technologies earlier in the development process, or technological leapfrogging, would decouple energy growth from economic growth, thereby avoiding greater environmental stress in developing countries. Goldemberg notes mixed success in delinking GDP growth and pollution increases, e.g. successes in emissions of particulates, lead, and sulphur oxides, and failure in the case of nitrogen oxides. Greater progress in the future will require phased and progressive strategies such as those advocated earlier by Okamatsu and Watanabe.
Amulya Reddy (chap. 18) also proposes an energy strategy compatible with sustainable development. He suggests that the achievement of reduced pollutant emissions is compatible with economic and social development through a combination of energy efficiency and greater use of advanced biomass-based fuels. Reddy recognizes the present industrial countries' large contribution to greenhouse gas emissions and the rapidly increasing contribution of developing countries. He also points out the difference in the nature of the contribution to environmental degradation of the poor and the élites within developing countries. Despite the lack of precise data on the breakdown of emissions by income group, he suspects that the poor contribute marginally. He also supports a step-by-step environmental approach, starting with local problems, then gradually tackling wider regional, national, and global problems.
Reddy notes that energy systems in developing countries involve environmental, capital, and equity crises. These crises and the environment-development conflict stem from the conventional energy paradigm based on the energy-GDP correlation. Reddy argues that the new challenge to the energy systems of developing countries is to decouple GDP growth and energy consumption by identifying and implementing a least-cost mix of saving and generation options for increasing energy services, particularly for the poor. He proposes a development-focused end-use-oriented service-directed (DEFENDUS) approach. He illustrates this with three examples. First, he cites the Pura Community Biogas Plants system in India, which provided safer water and better illumination as well as economic and environmental benefits. He then describes a DEFENDUS scenario that led to the shelving of the Long-Range Planning of Power Projects (LRPPP) by the Karnataka State government for 1986-2000. The scenario was based on a mix of efficiency measures and decentralized electricity generation requiring a final installed capacity of 4,000 MW, an annual bill of US$618 million, and lower environmental impacts, compared with LRPPP projections of 9,400 MW and US$3.3 billion, respectively. Reddy's third illustration is a proposed strategy for reducing Indian oil consumption - which is a major source of India's balance-of-payments deficits - by a combination of more efficient use of oil products, shifting passenger traffic from private vehicles to public transportation, home electrification, the removal of subsidies on diesel and kerosene, and the replacement of oil with non-oil fuels, particularly those derived from biomass. Reddy underscores two crucial basic needs of poor households: efficient energy sources for lighting and for cooking. He concludes that the pursuit of development objectives via energy-efficient strategies is tantamount to addressing local and global environmental concerns.
Fengqi Zhou (chap. 19) describes the main challenges for China in balancing the needs for economic development and energy and protection of the environment. He refers to China's transition from a low-efficiency and highly centralized planned economy to a high-efficiency market economy to establish a socialistic market system with Chinese characteristics. Assuming GDP annual growth of 8-9 per cent and a reduction in energy-GDP elasticity from 0.56 in the 1980s to 0.45 in 2000, China's total primary energy consumption will grow from 987 Mtce (million tons of coal equivalent) in 1990 to 1,450 Mtce in 2000. Zhou considers that the main environmental problem in China is urban air pollution (particulates and SO2), largely caused by coal use, as well as soil erosion caused by biomass overconsumption. He regards energy-efficiency improvements as the best means of harmonizing the development of energy and protection of the environment and notes the continuous reduction in energy intensity, which needs to decline further by at least 35-40 per cent by 2000. Zhou expects the importance of coal as China's main energy source to continue and views the clean coal technologies as the best way to reduce pollutant emissions.
Hoesung Lee, in commenting on part 6, agrees with the energy-efficient growth path involving technological leapfrogging for developing countries, as suggested by Goldemberg and Reddy. His comments pertain to the practical barriers to achieving this strategy. In particular, he argues that subsidized energy costs lead to an energy-intensive industrial structure. Lee recognizes the difficulties of removing energy subsidies because they involve complex economic, social, and political interdependencies. On the basis of Korean experience, he calls for the supplementary role of greater competition and energy-efficiency regulations to encourage higher efficiency in a situation of low energy prices.
Part 6 thus presents the possibility that developing countries can avoid the bitter experience of the industrialized countries. Improved energy efficiency could be achieved through technology leapfrogging, but there would have to be the political determination to set prices that reflect market levels.
During the conference several issues were raised by many, if not all, speakers. These are listed below to serve as a summary of the main discussions:
Energy demand and the associated environmental burdens are likely to increase with the growing emergence of the present-day developing countries.
Carbon dioxide emissions will increase and the standard case of the doubling of CO2 concentrations is not likely to be the equilibrium situation. Concentrations could increase to a much higher level.
The introduction of high carbon taxes alone may not be effective in reducing carbon dioxide emissions to a desired level.
Many methodological questions remain to be addressed. The development of methodologies, including climate models and econometric models, is important, and the results of differing approaches should be carefully assessed. There remain many analytical issues that require further research.
Deforestation and desertification are also important global environmental issues, which are directly or indirectly associated with energy-related environmental issues.
On the other hand, technology options to contribute to environmental protection are available at present. The full technological potential is unlikely to be utilized in the real world. The differing countries and sectors will have differing technological options and capabilities. Technology leapfrogging opportunities exist for the developing countries in addressing their environmental and energy challenges.
There are differing potentials for alleviating environmental problems, for example depending on the type of environmental question (as illustrated by Professor Goldemberg).
Future technological developments and their market acceptance will be needed.
Obstacles to the achievement of full technical potential include:
- distorted energy and other prices;
- failure to internalize social and environmental concerns; and
- technological drawbacks and lack of information.
The removal of these barriers or obstacles will require political resolve or courage, although their specific forms will differ in some circumstances or be the same on other occasions.
The role of analysts will be to prepare the basic information to enable policy or decision makers to make sound decisions.
Manabe, S. and R. J. Stouffer. 1993. "Century-scale effects of increased atmospheric CO2 on the ocean-atmosphere system." Nature 364,15 July: 215-218.
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