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Part I Measuring responsibility

1 Introduction
2 The basics of greenhouse gas indices
3 Assessing emissions: five approaches compared
4 Who pays (to solve the problem and how much)?

1 Introduction

The greenhouse effect
What was decided at Rio?
Protocol negotiating difficulties
Key issues for climate change negotiations

Peter Hayes and Kirk R Smith

At the 1992 Earth Summit in Brazil, which was attended by more heads of state than any other meeting in human history, the UN Framework Convention on Climate Change (included as the Appendix to this volume) was opened for signature. By mid-October 1992,158 nations had signed it. To become law, it must be ratified by national legislatures of at least fifty countries, a process that may take two years.

Unfortunately, the Convention did not contain any specific provisions for funding its implementation. This lack is a major obstacle to its realization. The questions of how to decide who should pay and how much it might cost are the central topics of this book.

The participation of developing countries in a Climate Change Convention will determine whether the world responds prudently to the greenhouse effect. Even if the wealthy states radically reduce their greenhouse gas emissions, the poorer states will replace and eventually surpass them as major contributors to the greenhouse effect. Action by members of the Organization for Economic Co-operation and Development and other industrialized countries can significantly slow the rate and reduce the magnitude of global warming. But unless the developing countries also act, the threat remains to everyone. Based on current trends, big poor countries like China, Indonesia, India, and Brazil will become major carbon dioxide contributors. They are already big methane gas emitters even though their per capita output is small.

As is argued below, the Climate Change Convention itself is still mostly symbolic. Unresolved issues include the practical implementation of the Convention in protocols to the Convention on technology and resource transfer; obtaining commitments from parties to limit carbon emissions; and the design and implementation of abatement strategies. All this and much more remains to be settled in protocols to be negotiated now that the Convention itself has been signed.

In this book, we do not tackle all these important issues. Instead, we postulate that the major determinant of developing country participation will be the terms offered by the developed world. The need for the rich and poor nations to work together to respond to the greenhouse effect could create a new political-economic interdependence between them. Alternatively, as Norwegian analyst Anne Kristin Sydnes warns, it could portend 'another twenty years of fruitless North-South bargaining. The authors of this book examine the grounds for, the scale of, and possible conditions on possible resource transfer agreements from rich to poor states that will be central to any successful greenhouse management regime.

In this chapter, we undertake four tasks. First, we review the basic scientific understanding of the greenhouse gas effect that gave rise to the Climate Change Convention. Second, we describe the content of the Convention and note its limitations. Third, we review the novel negotiating difficulties that will arise in the course of developing effective protocols under the Convention. Fourth, we summarize the key issues for the ongoing negotiations under the rubric of the Convention as presented in this book. In the latter section, we also provide a synopsis of each chapter of the book.


The greenhouse effect

Planet Earth's capacities for dispersing, diluting, and degrading most humangenerated pollutants are large, but limited. As pollution rates increase, the natural processes that absorb and assimilate pollutants are eventually overwhelmed, leading to rising concentrations of pollutants in the environment. Depending on the pollutants, this overloading can create local disruptions in human health and ecosystem sustainability or, eventually, even global effects, such as climate change.

The authors of this book focus on the largest and oldest of all human pollutant releases, carbon into the atmosphere. Since their mastery of fire, human beings have disrupted the global carbon cycle by burning wood and other biomass at greater rates than occur naturally. Being about half carbon, biomass upon combustion releases carbon dioxide, methane, carbon monoxide, and other carbon-containing pollutants, which must be transported and broken down by natural processes.

Some of this release has been the direct result of using wood and other biomass forms such as crop residues as fuel. Another part is due to the clearing of biomass so that the land could be used for farming or other human purposes. Throughout most of human history, however, it is thought that human biomass combustion did not create large disturbances in the atmosphere. That is, natural processes such as regrowth replaced sufficient portions of the burned biomass to prevent significant build-up of these carboncontaining pollutants in the atmosphere.

The industrial revolution in what are now the economically developed countries increased the combustion of fossil fuels, which are mostly carbon. Today, fossil fuel combustion is the major source of atmospheric carbon releases although biomass burning has also probably increased. The rates of release became such that in the second half of the twentieth century, it became clear that atmospheric levels of important carbon-containing gases, particularly carbon dioxide and methane, were steadily increasing over their natural levels.

The atmospheric concentrations of these gases are far from those thought to be toxic or otherwise of much acute concern. Their impact is more subtle, for they act to blanket Earth, keeping in more of the sun's warmth than otherwise would be the case. This effect is indisputable because humans have observed the warming due to natural levels and variations of these same gases. Indeed, without the existence of these natural amounts of greenhouse gases', Earth would be too cold for life.

The higher-than-natural rates of greenhouse gas releases resulting from human fossil fuel and biomass combustion are boosting carbon dioxide and methane levels at greater rates than has occurred in recent Earth history. Earth's natural systems may not be able to cope with the extra heat being absorbed except by an overall increase in temperature, that is, global warming. This warming may in turn be associated with significant disruptions in local weather, such as patterns of precipitation and cloudiness. It may also have global impacts through thermal expansion of the oceans and melting of glaciers to cause sea-level rise. It may even disrupt ocean current patterns and marine and terrestrial ecosystems.

The nature and magnitude of global warming and associated climate change and sea-level rise resulting from greenhouse gases released by human activities are not known with certainty. The global atmospheric/ocean/climate systems are extremely complex, so much so that even the largest computers can only model a small portion of them at one time. Some natural processes seem to reduce the effect. Extra heat, for example, leads to more evaporation, which leads to more clouds, which leads to more sunlight being reflected, which leads to less heat. In contrast, other processes may enhance the effect. Extra heat, for example, leads to more snow melting, which leads to less sunlight reflection, which leads to more heat. Thus, contemporary estimates of the global effects are imprecise and so uncertain as to be not usable for predicting effects at any one place and time.

Nevertheless, a growing number of scientists believe that there is a significant chance that damaging levels of global warming will occur sometime before the middle of next century if existing trends of greenhouse gas emissions are continued. The most authoritative source for this view is the scientific report of the Intergovernmental Panel on Climate Change (IPCC)

The IPCC consists of scientists from many countries working together under the aegis of the World Meteorological Society and United Nations Environment Programme and who have reviewed and summarized the available knowledge and uncertainties about greenhouse gases and climate change. As part of its conclusion, the IPCC predicts that unless emissions patterns change, there will be: a rate of increase in global mean temperature during the next century of 0.3C per decade (with an uncertainty range of 0.2-0.5C per decade); this is greater than that seen over the past 10,000 years. This will result in a likely increase in global mean temperature of about 1C above the present value by 2025 and 3C before the end of the next century.

Its collective judgement is that:

Rapid change in climate will change the composition of ecosystems; some species will benefit while others will be unable to migrate or adapt fast enough . . . The effect of warming on biological processes . . . may increase the atmospheric concentrations of natural greenhouse gasses.

IPCC's impact report concluded that this warming could cause major and mostly negative local impacts on agriculture, forestry, water resources, natural ecosystems, air quality, and coastal zones among other sectors important to humanity

Recognizing that there are still significant uncertainties, particularly about the timing of impacts, and that some countries, notably the United States, have not yet officially acknowledged a need to take immediate steps, this book nevertheless starts with the premise that the world community decided when it signed the Climate Change Convention that a serious effort must be made to reduce the probability and magnitude of adverse impacts from global warming. According to the IPCC, a successful response strategy is likely to be one which recognizes that:

• 'Climate change is a global issue, effective responses . . . require a global effort',
• '[Effective responses] may have considerable impact on humankind and individual societies',
• 'Industrialized countries and developing countries have a common responsibility in dealing with problems arising from climate change.

Although the developed countries have emitted far more greenhouse gases to date, based on the current relationships between economic development and greenhouse-gas emissions, and on the sorely needed increases in economic welfare that are required, large poor countries such as China, India, Indonesia, Nigeria, and Brazil will also turn into major greenhouse-gas contributors. Whether developing countries are engaged adequately in the implementation of a Climate Change Convention will be a major determinant of how quickly and completely the world responds to the dangers presented by human-enhanced greenhouse warming. Action in the Organization for Economic Cooperation and Development (OECD) and other developed countries alone can slow the rate and magnitude of global warming in the short term, but unless action is also started in developing countries, significant threat remains. The b As discussed in some detail in Chapters 2-4, when making international comparisons it is important to distinguish carefully between cumulative past emissions and present emission rates as well as between emissions per nation and per capita. fact - often discussed in this book - that there are attractive greenhouse amelioration projects in developing countries, however, does not necessarily mean that developing countries should pay for them.

The challenge facing humanity, therefore, is to find ways that the many benefits accompanying economic development can be attained by the world's poor without simultaneously emitting the amounts of greenhouse gases that have accompanied such economic development in the past; and to reduce dramatically the emissions from rich countries at the same time.


What was decided at Rio?

The Climate Change Convention signed at Rio sought:

1 to stabilize 'greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system';
2 to do so quickly enough 'to allow ecosystems to adapt naturally to climate change',
3 'to ensure that food production is not threatened',
4 'to enable economic development to proceed in a sustainable manner'.

To paraphrase, the world's leaders committed themselves to work together in first slowing and then stopping the growth of greenhouse gases in the atmosphere at concentrations that would not be so greatly above natural levels as to significantly threaten human welfare and natural ecosystem balance. In this process, other important goals must not be sacrificed, including provision of adequate food supplies and eradication of poverty.

Abatement commitments

Developed countries committed themselves to a vaguely worded 'aim of returning individually or jointly to their 1990 levels [of] these anthropogenic emissions of carbon dioxide and other greenhouse gases not controlled by the Montreal Protocol.' Developing countries which signed the treaty undertook to provide an inventory of greenhouse gas emissions and sinks and a national climate change response strategy. They undertook no specific commitments to reduce their greenhouse gas emissions.

Indeed, developing countries asserted their right to increase their greenhouse gas emissions. As the preamble to the treaty states:

All countries, especially developing countries, need access to resources required to achieve sustainable social and economic development . . . In order for developing countries to progress towards that goal, their energy consumption will need to grow taking into account the possibilities for achieving greater energy efficiency and for controlling greenhouse gas emissions in general, including through the application of new technologies on terms which make such an application economically and socially beneficial.

In effect, parties from developing countries made any future possible abatement commitments on their part contingent upon the developed world demonstrating its intent to make available atmospheric space for future growth in emissions from the poor countries; and upon financing and technology transfer that would enable the poor countries to fulfil more stringent commitments in the future. This refusal to commit to reductions enabled the developed world to leave vague the exact scope and scale of their commitments to provide funds and technology.

The Climate Change Convention addressed four key issues that determine who will pay for the costs of incremental abatement in developing countries. These are the provision of financial resources, technology transfer, an interim financial mechanism, and the definition of incremental abatement cost. The following sections briefly outlines the agreement reached on each of these concerns.

New and additional financial resources

In Article 4 of the Convention, developed country parties committed themselves to 'provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties in complying with their obligations under Article 12.' They also pledged to 'provide such financial resources, including for the transfer of technology, needed by the developing country Parties to meet the agreed full incremental costs of implementing measures.' The flow of financial resources and technology, states the treaty, is to be accomplished at a level adequate to the task, and in a predictable fashion.

The Convention also declares that developing countries can claim extra assistance if they are particularly vulnerable to the adverse effects of climate change and related adaptation costs. In addition to small island, land-locked and transit states, countries are also eligible for extra help if they have: lowlying coastal areas; arid and semi-arid areas, forested areas and areas liable to forest decay; areas prone to natural disasters, drought and desertification; high urban atmospheric pollution; fragile ecosystems, including mountainous ecosystems; or are highly dependent on income generated from the production, processing and export, and/or on consumption of fossil fuels and associated energy-intensive products.

Technology transfer

The developed country parties also undertook to 'take all practical steps' to 'promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies and know-hong' to developing country parties, as well as to support the development of endogenous capacities and technologies within developing countries.

Not only did the developed countries recognize that the ability of developing countries to fulfil their commitments will depend on provision of financial resources and transfer of technology; but they also recognized that developing countries must develop at the same time. In effect, developed countries admitted the obvious: that emissions from developing countries must and will increase and that reductions in the rich countries must offset this inevitable increase in emissions by the poor.

Financing mechanism

In Article 11, the signatories to the Convention declared that they would create a mechanism whereby grants or concessional financing would be achieved. Moreover, they decided that this mechanism would be accountable to the conference of parties to the Convention. Thus, although it was agreed that the World Bank's Global Environment Facility (GEF) would be entrusted with this responsibility as an interim measure, ultimate control over the mechanism does not rest with the Bank but with the parties to the treaty. As the treaty states that the financial mechanism shall have en 'equitable and balanced representation of all Parties within a transparent system of governance', the signatories effectively defined a reform agenda for the governance of the GEF. GEF is given four years to work effectively, at which time the parties reserved their right to review and redefine the financial mechanism used to implement the Convention. To reinforce this point, Article 14 declares that the GEF must tee 'appropriately restructured and its membership made universal'.

Full incremental cost

The treaty did not define what constitutes the 'full incremental cost' of abatement in developing countries, except to refer to the costs of reporting on national emission sources and sinks and in conducting research on climate change, and for costs incurred on such activities as are agreed between developing countries with the international financial mechanism created under the Convention.

The latter step, however, implies that the international community will adopt guidelines as to what are admissible costs. The mandate of the new Working Group Ill of the Intergovernmental Panel on Climate Change covers these technical and economic issues. Almost certainly, the restrictive criteria adopted by the Global Environment Facility will be widened as it would not support many sound greenhouse abatement measures under its current guidelines.

In short, the signatories to the Convention did not define the specific levels of abatement nor the scale and content of the effort required to achieve the overarching goals of the treaty. While some found this disappointing, most analysts viewed it as inevitable that, as a 'framework,' the Convention would only outline a set of general principles and obligations in various areas. Subsequent negotiations are to produce specific targets and quantitative reductions which - if agreed to - will be added as protocols to the framework Convention.


Protocol negotiating difficulties

Protocols to the Convention that deal with carbon dioxide, methane and other greenhouse gases must address and resolve much more difficult and complex issues than the Vienna Convention that covers ozone depleting gases. Relative to ozone depleting gases, for example, these gases are far more integral to lifestyles. Take, for example, methane emitting rice paddies in Indonesia, carbon dioxide spewing automobiles in cities such as Melbourne, or slash and burn agriculture in the highlands of Papua New Guinea. Moreover, the number of producers and consumers of these greenhouse gases is far greater than was the case for ozone destroying gases which created a trading cartel devoted to eliminating its major product. In comparison, climate change presents many novel negotiating difficulties to the international community (see Table 1.1) which have not been overcome in the Convention.

First, free riding on a greenhouse gas reduction regime is likely and attractive at all levels of human society - international, regional, national, and local. Second, a successful agreement will be based on measures that are in national self-interest, are normatively self-policing or are economically selfregulating. Third, greenhouse polluters are separated in time (crossgenerationally) and space (due to global mixing rates relative to mean residence time of greenhouse gases) so that liability is difficult to determine. Fifth, responsibility is clouded further by uneven regional climate impacts. Sixth, institutional change within states to implement greenhouse reductions will also be major compared with those entailed by past environmental agreements.

Finally, the economic costs of reducing greenhouse gases may be large, concentrated on existing interests at the national or subnational level, and may involve restrictions on existing resources rather than the allocation of new resources as in the Law of the Seas negotiations. These costs are given a great deal of attention in this book due to their importance in determining who should pay what to whom in a global greenhouse regime (see Chapters 5-13).

Table 1.1 Greenhouse gas negotiating novelties

1 The atmosphere is a true global commons precluding appropriation
2 The dispersed users of the atmosphere and the huge number of dispersed sources of GHGs mean that:

• monitoring is difficult
• free riding is easy
• self-policing is based on selfinterest

3 Liability for damages is difficult to allocate
4 There are big costs now, potent blocking coalitions versus uncertain benefits later, weak promoting coalitions
5 There are unconventional negotiating axes
6 Discounting of GHG damage is controversial
7 Prudence may delay validation of models
8 There is uncertainty about the benefits of GHG abatement due to frequent' rapid, and unforseeable changes in scientific assessment of climate change
9 Treatment of sinks 10 GHG equivalencies are controversial; GHGs are largely non-substitutes
GHG: greenhouse gases

Admittedly, the economic benefits of curtailing greenhouse gases may be also large because damages from climate change may be immense. But the realization of the benefits of avoiding climate change is uncertain, will likely come later rather than sooner, and will be distributed diffusely. Moreover, the benefits of using current emissions are widespread; and stakeholders in the status quo are well organized and powerful.

As was evident in the negotiations leading up to the Climate Change Convention (see Chapter 14), the size and ranking of greenhouse gas polluters (depending on how emissions are measured) cut across virtually all prior axes of interstate negotiation on security, economic, or environmental grounds. Simple targets make little sense as the energy intensities of economies vary internationally by an order of magnitude. Other simple criteria such as population, per capita GDP, fuel mix, energy reserves, and industrial patterns greatly complicate emission reduction or energy efficiency targets.

Determining the net emissions of greenhouse gases is also more difficult than for ozone depleting gases. Ozone depleting gases come from a relatively small number of human sources, and the gases remain in the atmosphere for hundreds of years before they decompose. In contrast, the major greenhouse gases have large natural sources and sinks, and have much shorter lifetimes in the atmosphere. States may claim that nationally controlled sinks for greenhouse gases should be subtracted from national emissions of greenhouse gases in determining emission quotas. Others may object strongly on grounds of scientific uncertainty (nearly a quarter of the carbon sink is currently unexplained by scientific models) or to the allocation of sink property rights. The concept of sink itself is a shifting sand on which to base target emissions and allocations (see Chapter 2).

The IPCC has already produced an index of heating equivalence across greenhouse gases and normalized to carbon dioxide, as was done in the Montreal Protocol across ozone depleting gases. However, many of the ozone depleting gases were close technical substitutes. It may be more difficult to apply the scientific equivalencies that might be used to evaluate control activities within an overall weighted emission quota for greenhouse gases than it was in the Montreal Protocol. Either a CO2-only or a separated, gas-by-gas protocol is therefore more likely under the Convention than an integrated, multiple-gas protocol implied by the ozone precedent.

Faced with such vast uncertainty, many scientists suggest that a 'no regrets' policy should be implemented now by incurring short run costs of emission reduction in anticipation of uncertain, long-run benefits. Incontrovertible validation of scientific simulations of climate change may not be available until (if the models are right) massive climate change may be irreversible. By reducing climate change, prudent behaviour now may deny positive evidence that the scientific models were correct. Relatedly, frequent, rapid, and unforeseeable changes may occur in scientific assessments of climate change, making negotiations on protocols to the Convention crisis-ridden and fraught with uncertainty.

In this book, the authors explore the implications of a 'no regress' policy in which emissions-reduction measures are chosen along a 'least-cost' pathway. These measures consist of energy efficiency projects and other actions that will have many other benefits even if present climate change concerns should turn out to be unwarranted. This policy option entails radical reductions in carbon emissions to about 50-60 per cent less than those in 1990. This stringent reduction goal therefore poses an unambiguous and measurable challenge to today's decision makers that must be met if they are to fulfil their obligations to future generations.


Key issues for climate change negotiations

The major greenhouse gas emitters have not yet committed themselves to major emission reductions. Nor have the international donors backed up their words with money and action. The authors of this book explore a way that the greenhouse management contract between rich and poor states can be constructed in an open, efficient, and equitable manner.

These issues are not solely political and economic, however. They are also technical and scientific in nature, relating as they do to complex and poorly understood issues of climate and ecology. In Part 1, four authors explain these issues and produce a technical and scientific foundation for determining who is responsible for climate change.

In Chapter 2, Kirk Smith explains the science that underlies comparisons of different greenhouse gas emissions from different nations and time periods, that is, the indices that can be used. Implicitly or explicitly, an index of some sort must be used so that choices among options can be made. He concludes that there are some hidden value judgements in choosing indices and that the choice of index depends strongly on the particular policy question being asked.

In Chapter 3, Susan Subak compares the results of applying five different indices to the question of relative national contribution to global greenhouse gas emissions. These are:

1 cumulative carbon dioxide emissions from fossil fuel combustion only;
2 cumulative carbon dioxide from fossil fuel and land use changes;
3 current annual carbon dioxide emissions;
4 an expanded list of current emissions including methane from landfills and fossil fuel production;
5 a comprehensive range of current greenhouse gas emissions from energy, land use change, and agricultural sources.

When allocated on a per capita basis, each measure produces a different distribution of national responsibility for past and present contributions to climate change. Subak shows how the scientific and technical dimensions of building indices of responsibility have significant political and economic implications for different polluters. In short, depending on which index is chosen for the protocols that allocate responsibility, the Convention will impose differential burdens on states of widely varying characteristics. The outcome will be widely varying incentives and disincentives for future action under the Convention. It is incumbent on policy makers, therefore, to pay careful attention to these technical issues.

Drawing on these technical and scientific foundations, Dilip Ahuja, Kirk Smith and Joel Swisher present a simple, transparent method in Chapter 4 to determine who should pay the cost of creating a global greenhouse regime. A composite indice is proposed that includes both ability to pay on the one hand, and historical contribution to climate change on the other. The former index confronts the issues of equity and economic realism that will affect participation rates of the poor. The latter index embodies the polluter pays principle and reflects the practical politics that the poor, small polluters are not likely to constrain their behaviour unless the wealthy, big polluters recognize that they have occupied the available 'ecological space' and must compensate latecomers for this pre-emption.

Smith, Swisher and Ahuja's approach provides a powerful philosophical and practical underpinning for discussions of the distribution of cost associated with managing climate change. If accepted, it would influence the outlook of key parties even if they are unable to accept specific numbers based upon it in actual negotiations. Such indices can be recomputed to investigate alternative yardsticks of ability to pay and historic responsibility for climate change. Whatever the final numbers, what is crucial to creating an effective global greenhouse regime is that it rests on these twin principles of equity and polluter pays responsibility.

In Part II, Peter Hayes confronts directly the deceptively simple question: who should pay? In Chapter 5, he introduces a method to calculate the likely costs to developing countries of complying with a global convention of climate change. He calculates the incremental cost of abating carbon dioxide emissions from the use of fossil fuels by the following procedure.

He begins by estimating projected emissions and required reductions of carbon dioxide that meet stringent IPCC emission targets which would restrain the growth of realized temperature and sea level to 0.1C and 3 cm per decade respectively. To achieve this goal, the global permitted emission in 2025 is about 2.7 gigatonnes of carbon as carbon dioxide. This target is about 60 per cent of projected global emissions in that year, or about 50 per cent of emissions in 1990. Each country is required to reduce its emissions from projected 1995 levels so that it eventually reaches its fraction of this global permitted emission in 2025. This fraction is set to equal current national sink rights distributed to nations on the basis of current population and land area (although some other allocational criteria could and probably should be used to avoid problems associated with defining sinks, as noted in Chapter 4). High, medium and low marginal abatement cost curves are applied to these profiles of carbon abatement over time. In this way, the method generates a stream of annual incremental abatement costs for each country.

In Chapter 6, Hayes applies the quantitative allocational rules developed in Chapter 4 to the range of numerical estimates of the cost of carbon emission abatement and coastal protection from Chapter 5. He presents two rules that have been proposed to allocate the cost to various parties of meeting emission targets imposed by a climate change agreement. These rules are 'obligation to pay,' teased on each nation's historic emissions and ability to pay; and the UN scale of payments.

Under the UN scale, the OECD (North) pays about 77 per cent, the former Soviet Union and Eastern Europe (East) about 14 per cent, and the developing world (South) about 9 per cent of total UN cost. In the obligation to pay (OTP) index, the North's OTP is about 73 per cent; the East's about 20 per cent; and the South's about 7 per cent. Hayes argues that negotiations are likely to proceed therefore by countries making bids to vary their contribution relative to the UN scale until consensus is reached. The obligation to pay index provides a sound, transparent baseline against which to measure the fairness of departures from the UN scale.

In Chapter 6, Hayes treats the South's incremental cost, minus the South's obligation to pay, as the responsibility of the wealthy countries of the North and transfers it to the North's account. The annual transfer from North to South is estimated at $29-34 billion in the medium and high marginal abatement cost cases respectively. (There is no economic case based on incremental cost for transfer from the North to the South in the low cost case, although Hayes cites the need to finance front end costs of abatement measures and to increase scientific and technical capability in developing countries as reasons for providing funds in any case.) He concludes by examining how the substantial funds required might be collected and transferred by carbon taxes, or earned by the sale of traceable permits or abatement services that would also push countries toward equalizing their marginal abatement costs at a global level.

An alternative approach would have been to construct a global marginal abatement cost curve from national marginal abatement cost curves; and to apportion reduction activity to each country up to the marginal cost that delivers the desired total emission each year. The reduction activity would be paid for according to the relative obligation to pay for each country (as updated periodically). On this basis, no country would be asked to reduce emissions more than the then-current marginal cost level, and no nation would remain unpenalized for failing to undertake reductions found to be cheaper than the current marginal cost criterion. While attractive in principle, it remains difficult to put this approach into computational practice due to the lack of meaningful global and national marginal abatement cost curves as well as difficulties associated with allocating and quantifying emission rights over time.

The small island states most vulnerable to the impacts of climate change have been among the most vocal proponents of a strong Convention. In Chapter 7, Michael Wilford enumerates a proposal emanating from the Alliance of Small Island States that an insurance fund be established to cover the costs of adaptation to sea-level rise. Precedents exist for this approach in the oil and nuclear industries, but neither approaches the scale or scope of a fund that would cover losses implied by the greenhouse effect. The moral influence of these small states whose very existence is at stake is evident in the Convention article cited above which declares that vulnerable states are eligible for extra assistance.

A major difficulty that hampers calculations of the required funding by the rich countries of the incremental costs of developing countries is our ignorance as to the shape of the latters' emission abatement curves at various levels of required reduction. Part III contains the work of eleven authors who are deeply immersed in the empirical calculation of incremental costs associated with climate change and greenhouse gas abatement. These authors present abatement cost curves at the national or regional level in Asia, Africa, Australia, and Eastern Europe/Russia. All conclude that significant cost savings will likely accrue at the outset of carbon reduction programmes, although the absolute cost levels vary widely.

In India, (Chapter 8), Jayant Sathaye and Amulya Reddy show that while emissions are likely to grow, there are substantial opportunities to abate emissions or to fix additional carbon at low costs or a net saving. They demonstrate that India could largely offset its carbon emissions by fixing carbon in forestry reservoirs, thereby emphasizing the importance of the sink issue in determining responsibility for cost. However, they also identify public and private institutional and informational obstacles to the realization of this potential. They argue that a basic needs economic strategy will itself enhance development and reduce emissions. They conclude optimistically that for the first time ever, fundamental interests of the rich and poor countries are aligned in the climate change area - provided that these multiple barriers to abatement can be overcome.

In West Africa (Chapter 9), Ogunlade Davidson notes that although Africa contributes only a small fraction (about 3 per cent) of total global carbon emissions, its energy usage and greenhouse gas emissions will grow substantially. He estimates that emissions can be reduced in this region by between 13 and 36 per cent (depending on the country) by the year 2025, simply by introducing economically justified carbon conservation measures. As in other developing countries, he finds that a significant number of financial, institutional and technical obstacles exist which block the region from implementing these abatement options.

Because the generally poor management of energy and related institutions also hinders the effective implementation of these measures, he concludes that institutional reform is an essential ingredient of a carbon abatement strategy. He also finds that lack of investment finance is a major obstacle to energy development in the region. Weak capital markets and heavy indebtness require major economic reforms. These steps alone, however, will be inadequate to the task unless supplemented by external financing.

In Brazil (Chapter 10), Jose Moreira and Alan Poole present an aggregate cost curve for abating carbon emissions from Brazil's fossil fuel and biomass energy use which incorporates eighteen categories of abatement technology. Brazil is unusual in that a large fraction of its electricity is generated by hydropower and a large amount of alcohol from biomass is used in the transport sector. Moreover, the authors did not include steps related to re- or de-forestation in Amazonia in determining the potential for Brazil to abate or to offset its energy-related emissions. Nonetheless, they identified abatement potential that amounts to about 16 per cent of projected energy-related emissions, much of which can be obtained at negative cost (that is, at a savings).

In Thailand (Chapter 11), Peter du Pont, Somthawin Patanavanich, Mark Cherniack, and Michael Philips demonstrate that the most rapidly growing source of carbon emissions, the electric power sector, can be curbed significantly at a low or negative cost. They project that Thailand's carbon dioxide emissions from fuel combustion will double over the next decade, from 24 to nearly 50 million tonnes annually. They estimate that an aggressive demand side management effort in the power sector could reduce emissions by 2.5 million tonnes annually by the year 2001 at an average cost of conserved carbon of about US$1901tonne. While still nascent, Thailand's electric utility has an aggressive programme to tap this potential saving and may offer a good model for other countries to emulate.

In Central and Eastern Europe (Chapter 12), Stanislav Kolar produces aggregate cost curves based on detailed local research to demonstrate that carbon abatement can be achieved with major economic savings until high levels of carbon abatement are reached. Kolar points out that all the countries of the former Soviet Union are grossly energy inefficient. Equally, they also offer massive and relatively cheap carbon abatement. He concludes that energy efficiency is their most effective means of reducing carbon dioxide emissions and can achieve the twin goals of economic development and environmental protection. He concludes that these states have considerable flexibility as to which combination of price reforms and regulations would serve best to realize this potential.

Finally, in Australia (Chapter 13), Hugh Saddler examines estimates of the cost and scope of emission abatement measures and reviews estimates of the impact on the Australian economy of achieving various levels of abatement. Relative to a business-as-usual scenario, he reports that about 20 per cent of projected emissions can be abated with economically justified carbon abatement steps. He also notes that the local manufacturing-versus-import content of equipment needed to implement this strategy is a crucial determinant of the macroeconomic impact of carbon abatement - a variable that many developing countries may do well to examine carefully.

Generally, these studies indicate that abatement is possible at negative cost or a savings at the outset of the abatement strategy, but that costs will become positive fairly quickly. The studies also point to the obvious and urgent need for demonstration carbon abatement programmes and additional research into costs to obtain much better cost estimates necessary for the formulation of sound policy.

Politics will not end once robust analysis and widely accepted estimates of the cost are available. Part IV returns to these realpolitik considerations which will intrude into future negotiations over protocols to the Convention. For example, big wealthy countries anticipate a new wave of technological innovation associated with greenhouse gas abatement. As the major donors, they will seek to tie resource transfers to exports of their own equipment and services. For their part, recipient states will seek minimal ties on these funds. Aid flows justified on the grounds of greenhouse abatement will be no more or less susceptible to mismanagement, waste and corruption than existing development assistance.

In Chapter 14, Peter Hayes outlines some of the practical political issues that will arise in negotiations over resource transfers from the North to the South on the scale justified by the earlier chapters. Simply moving money across the North-South divide may only worsen existing development difficulties by creating an ongoing technological dependency. Studies of energy efficiency and related carbon abatement show that a wide range of scientific, technological and managerial capabilities must be created in developing countries to achieve effective carbon conservation. Financial shortages are a critical obstacle to the emergence of an endogenous technological capacity needed to reduce greenhouse gases - but they are only one of a range of issues that must be resolved before such programmes can be realized.

In Chapter 14, Hayes also analyses the potential for regional greenhouse initiatives in Pacific Asia as a precursor to a global climate change convention. He concludes that demonstration abatement projects in developing countries of Asia and the Pacific are needed urgently to demonstrate the viability of schemes such as traceable permits and trade in abatement services. He emphasizes that 'first in, first served' will dominate the emerging markets for greenhouse abatement markets and related technological competitiveness.

In summary, the authors of this book believe that signing the Climate Change Convention was only the first step on a long path to creating a greenhouse gas regime. It remains to be seen whether the parties to the Convention can muster the domestic political will needed to meet the commitments contained or implicit in the Convention.

In this respect, the 'review and pledge' procedure implied by Articles 4 and 10 of the Convention is particularly important. In Article 4, countries undertook to prepare and to communicate national greenhouse gas inventories using common methodologies and to implement mitigation measures on sources and sinks of emissions. In Article 10, they created an international body that will 'assess the overall aggregated effect of the steps taken by the Parties in the light of the latest scientific assessments concerning climate change.' Implementing these two commitments will create an iterative dynamic that will lead to stronger action under the Convention in the future.

Action, however, will require that resources be allocated to match the rhetoric of the Convention. The parties to the Convention must adopt a transparent method of calculating obligations and cost if the commitments on funding and technology transfer are to be fulfilled. The studies reported in this book illustrate the complex and difficult issues that must be addressed in such a method. At this stage, however, it is not the specific method nor its results that are important. Rather, what is vital is that negotiators of protocols to the Convention develop parallel ways of thinking that facilitate communication and agreement on these concerns. We hope that this book contributes to this task.

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