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Who Should Foot the Bill on Climate Change?

Debate heats up over whether developing or developed nations should bear the costs

By Scott Barrett | YaleGlobal Online | March 6, 2007

CREDIT: Victor Poblete (CC).

WASHINGTON: As the human influence in changing the global climate has become clearer, identifying who should take the lead with action has become murkier. While the rich countries are responsible for the historic buildup in the stock of greenhouse gases in the atmosphere, developing countries are increasingly responsible for the growth in emissions. They will also be the most affected by climate change. At the same time, these countries face a pressing need to raise their standard of living.

So, which countries should act, and how?

The so-called Berlin Mandate, agreed to in 1995 by parties to the UN Framework Convention on Climate Change, said that the developed countries should reduce their emissions first; developing countries should do so later. It is for this reason that the Kyoto Protocol imposes emission constraints on the EU and Japan, but not China and India.

The logic of the Berlin Mandate was that the developing countries should be allowed to "catch up" to the rich countries and then reduce emissions. The developed countries, by contrast, had a responsibility to lead in reducing their emissions, since they were largely responsible for the rise in atmospheric concentrations. Morally, this may make sense. From the perspective of reducing emissions, however, the Berlin Mandate got the order exactly wrong.

Another problem with the Kyoto Protocol is that it focuses on the short term. It asks just a small number of industrialized countries to reduce their emissions by a bit between 2008 and 2012. It does not ask for deeper reductions or require action after 2012.

It is more important to reduce emissions substantially in the longer term than to reduce them marginally in the short term. To reduce emissions substantially in the long run, however, requires fundamentally new technologies. These need to be invented, developed and then diffused globally.

The fast-growing developing countries should transition to new technologies as a priority; they should be given incentives not to develop as the industrialized countries have done. China brings a new coal-fired electricity plant on line every week, plants that last 40 years or more. If developing countries like China continue to develop as the rich countries have done, by relying on carbon-based fuels, then greenhouse-gas concentrations will continue to rise for many decades. The industrialized countries, by contrast, should embrace the new technologies gradually, as their installed base of carbon-intensive capital depreciates. This may not seem fair, but it is the cost-effective way to reduce global emissions—and emissions will have to be reduced cost-effectively if they are to be reduced substantially.

Fairness can be addressed another way. The industrialized countries can simply help pay for the costs of transitioning developing countries onto a new, low-carbon development path.

The climate conference held in Nairobi in November 2006 highlighted how developing countries are especially vulnerable to climate change. Most are located in the lower latitudes and are already "too warm." Agriculture as a share of national income is much higher in the poor countries than in the rich. Finally, poor countries tend to have weak institutions and are thus less able to adapt to climate change.

Adaptation is essential because no matter how much is done to reduce emissions, the climate is sure to change. The common view about adaptation is that it is a reactive policy: Dikes should be built higher as the seas rise; crops should be shifted as the temperatures rise or rainfall increases or decreases, and so on. But adaptation needs to be thought of more broadly. The focus in the near term should be on making developing countries resilient to climate change.

Climate change is expected to increase malaria prevalence in the future, mainly by expanding the range of the mosquito vector in higher elevations. Malaria prevalence might increase by 5 percent over the next century because of climate change. Mitigation could reduce this increase only a bit. By contrast, R&D to discover and develop a malaria vaccine can reduce malaria prevalence across-the-board. Such an investment would help poor countries today and not only a century from now, which is when substantial mitigation undertaken mid-century is most likely to have its effect.

The example of the malaria vaccine is best thought of as a metaphor for the kind of development that's needed. So is R&D to raise agricultural productivity in the poorest countries—a "green revolution" for Africa.

Of course, technologies such as these have been needed for a long time. The difference is the motivation for rich countries to help supply them. The motivation is not only compassion. Since the rich countries are responsible for the buildup in atmospheric concentrations of greenhouse gases, they bear an obligation to help poor countries to adapt.

How should society balance mitigation and adaptation? The Stern Review on the economics of climate change emphasizes the need for "strong early action" to reduce emissions. This recommendation follows from Sir Nicholas Stern's ethical perspective. He argues that climate-change damages avoided a century and more from now ought to count almost as if they could be avoided today.

This concern for the future is reflected in what economists call the "discount rate." A high value favors investments with a quicker pay back. A low value favors investments that pay back in the more distant future. Stern uses a low discount rate.

His main concern lies with the developing countries, which will be hardest hit by climate change. Expressing concern about equity, Stern argues that the rich countries ought to reduce global emissions substantially today to help today's poor countries in the future.

By Stern's own calculations, however, today's poor countries will have a higher standard of living in the future, when climate change hits, than they do today. He therefore advocates both that today's rich countries assist the poor in the future and that today's relatively poor generation help tomorrow's more prosperous generation.

A problem arises because in Stern's model—as in all economic models of climate change—the only way in which rich countries can assist the poor is by reducing their emissions, yet the effect takes decades to materialize. To justify a substantial level of assistance, Stern gives a higher weight to the future with a low discount rate.

To be sure, Stern is concerned with development in the near term and not only a century and beyond into the future. But in the report's postscript, he argues that these concerns can be met by pledges given by the rich countries to increase development assistance. Perhaps they can be. But these two aspects of the climate problem—mitigation and adaptation—cannot be separated from each other and need to be determined jointly.

The priorities in the short term should be both to enhance the resilience of the most vulnerable states to climate change and to undertake the necessary R&D to discover new technologies that will ultimately reduce atmospheric concentrations of greenhouse gases. Emissions should also be reduced in the short term, but a policy that focuses exclusively on near-term emission reductions will fail to address the major challenges posed by global climate change.

© 2007 Yale Center for the Study of Globalization. Republished with kind permission from YaleGlobal.

Read More: Agriculture, Development, Energy, Environment, Ethics, Health, Global

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