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Part II Resource transfers

5 North-South carbon abatement costs
6 North-South transfer
7 Insuring against sea level rise

5 North-South carbon abatement costs

Climate change convention
Method overview
Implications for the South
Notes and references

Peter Hayes

The signing of the Climate Change Convention in Rio de Janeiro in June 1992 was a momentous event. With hindsight, however, it will recede into a waypost on a much longer journey toward international cooperation on climate change. The hard work of achieving abatement still lies ahead. The signatories to the Convention must now negotiate subsidiary agreements or protocols which will determine how much abatement each country must achieve over time; and who should pay for the costs and who should reap the benefits that will flow from this activity. If successful, these protocols will provide substance to the Convention's rhetoric (see the Appendix to this book).

In this chapter, I estimate the cost of abating carbon dioxide from fossil fuel usage over a transition period to a 'sustainable' level of emissions. I do so by aggregating nations into three categories: rich, industrial nations (North), transitional nations (the former Soviet Union and Eastern Europe), and poor and modernizing nations (South)b. This approach makes it possible to determine the costs for the South to comply with the Climate Change Convention.

Greatly simplified, this calculation requires at least ten sequential steps plus many intermediate assumptions, explained below. Conservative estimates, combined with reasonable 'medium' assumptions in face of uncertainty, render this method capable of approximating the rate and magnitude of probable carbon abatement costs.

I begin by providing the reader with an overview of the method. Next, I outline the ten steps that must be taken to estimate abatement and other greenhouse-related costs. Finally, I estimate the overall incremental cost to the North, East, and the South for various abatement costs.

Before discussing abatement costs, however, I must first delineate the critical characteristics of the Climate Change Convention under which protocols must be developed to abate carbon emissions.


Climate change convention

The Climate Change Convention resembles an open ended 'General Agreement on Climate Change', rather like the GATT or General Agreement on Tariffs and Trade, while taking the symbolic form of a framework convention (see Appendix). The terms of the agreement have been left largely unspecified in the original text and will be negotiated in protocols over the coming years. Within that general framework, an enormous range of political and economic combinations is possible. This section therefore states a specific scenario that is used in the remainder of this chapter (see box).

In principle, such a scenario is susceptible to varying levels of scientific certainty and political response to climate change. In this chapter, however, I simply assume that states perceive climate change to be sufficiently problematic that they act upon their commitments under the Convention. I assume that the framework Convention adopted in 1992 comes into force in December 1993; that the first of a series of revision conferences to consider specific protocols occurs in early 1994; and that abatement actions commence in earnest in 1995.

The five specific elements of the Climate Change Convention are: (i) an assessment process; (ii) targets and timetables; (iii) national greenhouse strategies; (iv) funding; (v) a revision procedure. Two other elements: (vi) liability and enforcement, and (vii) carbon taxes and traceable emissions, are shown, but I assume that these items will not be addressed until the first revision conference of parties to the agreement.

Climate Change Convention protocols scenario


Easy start (consensual credit early starters, use soft law, transition periods)
Slow start, CO2 fossil fuel only (minimum adherence to protocols, ratchet up later)
Modest start (OECD, regional only, regional experiments)
Limited North-South linkage (common understandings)

Limited issue linkage biomass, sinks, biodiversity, and desertification addressed after carbon emissions from fossil fuel

1 Administrative and assessment process

Conference, elected bureau, permanent committees, strong secretariat
A centralized scientific assessment and updating process Protocol on monitoring and data sharing

2 Targets and timetables

Into force December 1993, revision December 1994
Overall goal adapted to stabilize or to not exceed natural carbon dioxide levels by more than 50 per cent in 2025

Sub-targets adopted during protocol negotiations
2.1 OECD stabilize CO2
2.2 Parties reduce GDP Energy Intensity each year
2.3 Parties stabilize Forest Cover

3 National strategies

Each country or regional grouping should prepare a national or regional strategy for addressing greenhouse warming, to be updated periodically.

4 Mechanism to collect and allocate funds for:
4.1 Technical assistance
4.2 Training/human resource development
4.3 Information
4.4 GHG abatement project funding and technology transfer issues is addressed after first review of national strategies in 1994.

5 Revision procedure: first revised in December 1994 and protocols adopted.

6 Verification, liability and enforcement - none at outset; later $100 million per year needed for verification of compliance

7 Taxes and traceable emission entitlements Test nationally and regionally first.

I assume that the specific elements of a 'winning formula' for effective protocols will combine a set of initial targets for fossil fuel carbon emission reductions with an assessment process, and a requirement that individual countries prepare national or regional strategies to address the problem. Industrial countries are committed to providing national reports and strategies within six months of the Convention coming into force. Developing countries have up to three years to meet this obligation. It is conceivable that the Clinton Administration will commit the United States to reduction targets. This shift would enhance the pace and magnitude of commitments from the OECD bloc as a whole. Meanwhile, the scenario shown here is consistent with positions advanced during the negotiations leading up to Rio, and the terms of initial or subsequent adherence by key developing countries as specified in the Convention itself and the Agenda 21 action plan of the Earth Summit.

If, as James Sebenius argues, the fundamental negotiating task in controlling climate change 'is to craft and sustain a meaningful "winning" coalition of countries backing such a regime,' then the two conditions for constructing this coalition needed to negotiate effective protocols are: (1) to provide enough gain for each member of the coalition to adhere at all to these protocols, relative to alternatives; and (2), to avoid, accommodate, or neutralize potential blocking coalitions of interest. Blocking coalitions will exploit scientific disagreement, economic interest, and ideology to oppose greenhouse gas reductions. The Convention contains five broad countervailing strategies that may head off potential blocking coalitions in the negotiations over protocols.

1 An easy start that prevents blocking coalitions by picking noncontroversial subjects for the first negotiations, credits early starters, and uses 'soft law' informal options and transition periods. This logic suggests that protocols should be directed at politically weak or morally suspect greenhouse contributors, especially those located in 'green' countries with strong antigreenhouse interests.)

2 A slow start that creates the institutional basis to ratchet controls upward later, possibly requiring adherents to the initial Convention to agree only to at least one protocol (as did the 1975 Barcelona Convention to protect the Mediterranean). As carbon emissions can be approximated from existing fuel use, these would be difficult to falsify and are easily monitored. Fossil fuel emissions are therefore the most feasible for controls under a protocol, followed by controls related to carbon from burning non-commercial wood fuels. Other uncontrolled greenhouse gases (excepting chlorofluorocarbons which are already controlled in a separate treaty) would be regulated by adding protocols.

3 A modest start that includes agreements by regional groupings such as the OECD which complement the universal Convention, thereby demonstrating the economic advantages of controls, testing (on a small or regional scale) schemes such as traceable emission permits, and setting floors for controls and standards.

4 A limited North-South and East-West linkage that defuses ideological blockages which stalled the New International Economic Order. The terms of the protocols that implement the Convention's strong statements as to financing and technology transfer will be crucial. Common understandings of the climate change issue will be extremely important in moderating ideological clashes driven by opposed interests. Dialogue and information dissemination are crucial in this regard, and include collaborative first-third world research, regional workshops, informal conferences, neutral non-governmental organizations, broad advisory groups, and cross-cutting coalitions of business and green advocates.

5 A limited issue linkage that offers limited reciprocity or ecological 'side payments' on climate and development related issues such as desertification and biodiversity but avoids anything that smacks of the rich countries imposing a 'New International Ecological Order' on developing countries.

These are the basic political building blocks of the abatement scenario used in the cost calculations that follow.

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