The Economics of Climate Change
Prof. M. K. Ghadoliya
Director, (Academic)
V.M.Open University,Kota
“Climate Change” is use to describe a change in the climate, measured in terms of its statistical properties, e.g., the global mean surface temperature (Wikipedia). In this context climate is taken to mean the average weather. Global Warming refers to change in the Earth’s temperature. Data reveal that between 1900 to 2005 temperature increased by 1.40 F or 0.780 C.
Climate change is a serious and immediate threat to development; Unmitigated climate change could cause warming of up to 50 C this century. The difference between today’s climate and the last ice age leading to a world much different from the one we live in. Even a 20 C warming, likely the best we can achieve will result in new weather patterns including increased variability and more frequent and intense extreme weather events. Dealing with this requires substantial adaptation efforts: There are two major approaches to deal with the problem: (i) Balancing Approach, and (ii) Imperative Approach. The balancing approach compares benefits and costs of reducing emissions and tries to reach at equilibrium. Reduce emissions up to the point where the marginal benefits of additional reduction equals the marginal cost of additional reduction. The imperative approach believes that there is a sharp threshold value where by marginal damage increases sharply once concentration passes a certain level. This approach lays emphasis on reduction of emissions so that concentration stays below this level. However, even at these levels some 100-400 million more people could be at risk of hunger and 1-2 billion more may suffer from water shortages. The E.U. is tending towards the imperative approach while the American economists are mostly favouring the balanced approach. This gives the entirely different view of discounting and different values for cost benefit analysis of reducing Green House Gases (GHGs).
Developing countries are the most vulnerable to changing climate, potentially bearing some 80 percent of the damages from climate change.
If we take a higher Discount Rate, the present value of future impact is less. Taking a lower Discount Rate, the present value will be more. The choice of a Discount Rate to apply to Climate Policy is in part an ethical judgment not purely a matter of economics. With regard to economics there are many who argue that the best way to fight climate change is to ensure rapid growth. They argue that the answer to climate change should be searched only in technological advancement, as the richer countries are more resilient to shocks and have better technology to adapt to climate change. Emissions do not only depend on the growth rate of the economy other factors such as structural change in the production system, technological change, urbanization and trade patterns influence.
The economics of climate change in European countries in tending towards the imperative approach while among the most American economists it is tending towards balancing approach. This reflects not only a different view of discounting but also, a fundamentally different assessment of underlying costs and benefits of reducing Green House Gases (GHGs). These gases have been linked with climate change. One very important thing to remember is that GHGs are stock pollutant and not flow pollutant. Scientists tell us that putting off mitigation for 10 years would likely make it impossible to keep worming from exceeding 2o C. The carbon dioxide emitted today will stay in the atmosphere for a century, and temperatures continue rising for a few centuries after green gas concentration in the atmosphere have stabilized.
The loss of welfare is calculated on Net Present Value (NPV) Approach that is highly sensitive towards the rate of interest taken for discounting. The choice of a climate discount rate to apply to climate policy is in part an ethical judgment not purely a matter of economics. With regard to economics there are two empirical assumptions taken in the conventional economic analysis that seem incorrect. Altering them would lower the value of the interest rate r. These assumptions are as follows: (i) Climate change does not directly affect people’s well-being; it affects only the production of market goods. (ii) The second assumption is that people’s preferences do not change as they become richer, they do not change their expectations to match their wealth. The difference is not just discounting: it involves assessment of future damages and assessment of costs of emission reduction. The key message is clear. The cost of strong and urgent action to avoid serious impacts from climate change is substantially less than the damages thereby avoided. Even with strong action to reduce green house gas emissions adaptation must be a crucial part of development strategy. Policy requires urgent and international action as adopting later is not an option.
Although developing countries emitted only one-third of the GHGs now in atmosphere these countries are now producing more than half the world’s annual emissions, and this share is rapidly increasing. Developing countries cannot simply follow the carbon intensive development path that high-income countries did. High-carbon growth in developing countries will exacerbate the climate problem delaying action by a decade or two could increase mitigation costs by as much as 2 to 5 times according to some models. Developing countries are growing fast and need massive expansion in energy, transportation, urban systems and agriculture. Therefore, while high-income countries must reduce their carbon footprints, tackling climate change also requires a new development paradigm that fulfils the expectations of developing countries.
Cost Benefit Analysis
Standard cost benefit analysis can be applied to the problem of climate change. This requires valuation of cost and benefits using the willingness to pay as a measure of value and a criterion for accepting or rejecting proposals.
The valuation of costs and benefits of climate change is difficult because some climate change impacts are difficult to value e.g. ecosystems and human health. It is also impossible to know the preferences of future generations, which affects the valuation of costs and benefits. The standard criterion is compensation principle. So long, benefits are more it is a gain in welfare. If there are no mechanisms allowing competition to be paid, then it is necessary to assign weights to particular individuals. One of the mechanisms for competition is impossible for this problem. Mitigation might benefit future generations at the expense of current generations, but there is no way that future generations can compensate current generation for the cost of mitigation (De Canio, 2007: p.4) on the other hand should future generations bear most of the cost of climate change, compensation to them would not be possible. Another transfer for compensation exists between region & population.
In Cost benefit analysis, an acceptable risk means that the benefits of climate policy outweigh the costs of the policy. The standard rule used by public and private decision makers is that a risk will be acceptable if the expected NPV is positive. The expected value is the mean of the distribution of expected outcomes. This criterion has been justified on the basis that a policy’s benefits and costs have known possibilities and risk can be insured. Climate change is difficult to calculate. In addition, some impacts, such as those on human health and biodiversity are difficult to value. Similarly, there are difficulties in risk management through insurance.
Adaptation to global warming may be done as a matter of course without the intervention of any government and it is called autonomous adaptation. On the other hand planned adaptation can be reactive or anticipatory i.e., undertaken before impacts are apparent. Some studies suggest that human systems have considerable capacity to adopt autonomously others point to constraints on autonomous adaptation, such as limited information and access to resources. The autonomous adaptation to climate change has a larger cost and it could be avoided through planned adaptation.
Climate Change & Scenario
(i) Unsustainable Consumption Patterns of the rich industrialized nations are responsible for the threat of climate change. Only 25 per cent of the global population lives in these countries but they emit more than 70 per cent of the total global co2 emissions and consume 75 to 80 per cent of many of the other resources of the world. (Parikh et.al.1991)
(ii) In per capita terms, the disparities are also large: an Indian citizen emits less than 0.25 tonnes carbon per year whereas a citizen of the USA, for example, emits more the 5.5 tonnes which is 22 times higher than Indian citizen. In such a situation, how can we ensure equitable and efficient solution and reach at an agreement that is acceptable to all.
(iii) Another issue of great concern to all of us is the reliability of researches. According to initial researches, developing countries were change with large emissions of methane from paddy fields. However, the Indian agricultural scientists later proved that these charges were exaggerated. Agrawal and Narain (1991) argue that emissions by poor are basic human right and should not be held responsible for climate issues.
(iv) Climate change in India may lower agricultural production. Indians should be concerned about climate change since this phenomenon might have substantial adverse impact on them in terms of lowering agricultural production. A United Nations Organization report states that CHG concentrations should be stabilized at levels where food production is not threatened. Although it is really very difficult to determine the tolerance level but Kumar and Parikh (2001 a & 2001b) took up a detailed study to examine the impact of climate change an agricultural crop yield and welfare. They estimated that with a temperature change of + 20 C and an accompanying precipitation change of + 7 per cent, farm level total net-revenue would fall by 9 per cent. whereas with temperature increase of + 3.50 C and precipitation change of + 15 per cent the fall in farm level net revenue would be nearly 25 per cent. Kumar and Parikh estimated that without considering the carbon dioxide fertilization effects temperature rise between 2.50 C to 4.90 C for India yield losses for rice and wheat vary between 32 and 40 per cent and 41 and 52 per cent respectively. This may cause a GDP drop by 1.8 per cent to 3.4 per cent. These are very large changes and may cause much human misery. From India’s point of view a 20 C increase would be intolerable.
(v) Risk of Sea Level Rise Another important impact of climate change is sea level rise leading to submergence of coastal areas that will displace population from coastal zone. This will create large number of environmental refugees especially from low-lying delta regions in poor countries. In Asian Development Bank report 1995 Mr. V. Asthana estimated in his article entitled climate change in Asia estimated that one meter rise in sea level would displace 7 million persons in India.
(vi) Risk of Extreme events increased occurrence of extreme events due to climate change will also affect the poor most. Green House Gas Emission on per capita basis in India are about 70 per cent below the world average.
Per Capita Carbon-dioxide emission (metric tons) Indian Scenario
Country
Per Capita Carbon-dioxide emission (metric tons)
USA
20.01
EU
9.40
Japan
9.87
China
3.60
Russia
11.71
India
1.02
World Average
4.25
Five India specific studies on GHG emission reach the conclusion that in 2030-31 per capita GHG emission in India would be 2.77 tonnes and 5 tonnes of Co2 e (Carbon dioxide equivalent) India GHG emission in 2031 vary from 4.0 billion tonnes to 7.3 billion tonnes of Co2e.
Thus-even in 2031 India’s per capita GHGs emission would stay under 4 tonnes of Core which is lower than the world average of 4.25 tonnes of Co2e in 2005.
India share in Global Co2 emission is only 5 per cent equivalent to Japan whose population is negligible when compared with India, US alone contributes 22 per cent where as Russian Federation Contributes 8 per cent. Thus, India’s contribution is much negligible. It is true that a global climate treaty in a urgent need. A failure in copenhagen is not the end and we should continue our serious efforts in cancun in 2010. Most countries see aggressive measures to reduce carbon emissions as a threat to their national economic development. The main point of disagreement is not on the reduction of emissions but it is on the point whether reduction measures should be uniform on all economies or not. Developed economics favour uniform norms and argue that if the reduction agreement is not universal developed economics will be at comparative disadvantage. However, it is also true that developing countries could not be denied to exercise their basic human rights in the name of global warming and climate change.
Trend: Global Future Scenario
While a global climate treaty is clearly desirable, a cost effective and energy efficient technology is also needed. It is good news that investment in emission free renewable energy is taking off anyway. In 2009 62 per cent of the newly installed power capacity in EU was renewable, as was more than half the new capacity deployed in the US, while China installed a huge 37 gw (giga watts) of renewable capacity the most of any country. (EJ- “Taming Climate Change by Joseph M Hogen 29.11.10 p. 11)
Kyoto protocol of 1997 on climate change is expiring is 2012 so cancun summit (Maxico) is our last chance to save the planet. From Bali in Indonesia (2007) to poznan in Poland (2008) and to Copenhagen in Denmark (2009) developed and developing countries have been struggling to fix the desired levels of carbon emissions cut that each other should adopt to ensure that the global average temperature does not rise beyond 20 C preferably (1.50 C) by 2050 that is essential to save the world from calamity and this can be achieved if we shift our energy production from fossil fuels to clean energy i.e. solar or wind energy. Parikh and Gokarn (1993) put in the first effort to identify India’s emissions profile by using an input-output model. They aggregated the 1979-80 table into 40 sectors. These input- output coefficients are updated by the Planning Commission at least every 10 years. Subsequently, the 1989-90 table was used by Murthy et al. (1997a, 1997b) to study the structure of CO2 emissions where one looks at the coal, oil, gas and electricity rows that cut across different sectoral columns with the level of activities. Parikh and Gokarn (1993) studied emissions from different sectors power, steel and transport and so on. By different income groups, rural urban low, middle and high income. For different purposes: different fuels (coal, oil, gas).
The results are as follows:
The power sector accounts for 48% of emissions, followed by road transport (10%) iron and steel (10%) and so on. This gives an idea which sector will be affected if, say a carbon tax was levied on them or which sectors offer possibilities for large reduction in emissions, if modernised.
Direct and indirect emissions in the final demand show that the construction sector was the highest contributor though the energy used for construction at the site was very small. This is because the energy intensive materials such as steel, aluminium, bricks, and cement glass lime and so on are used in construction. Study of tables shows the proportions of intermediate and final uses of energy from different sources. Almost all coal is used for intermediate purposes, which means that the fuel burden of a carbon tax will not fall on the consumers if rationalisations of production processes or efficiency improvements are cost effective. On the other hand, 30% of oil and 20% of electricity are used for direct consumption in carbon using sectors. A carbon tax or price changes could matter to the consumers directly either in terms of costs or adjustments. The study of per capita energy use (director indirect) 1989-90 shows consumption of coal, oil and gas by different rural urban income groups and their corresponding carbon emissions . It can be seen that the bottom 50% of rural people emitted in 1990 a mere 54 kg og carbon per person per year. The richest 10% of urban population emitted 12 times as much as 656 kg of carbon per person per year. When compared with the world average of 1.1 tonnes the figure seems to be very small for India. Even the projected emissions for 2020 show that the bottom 50% of rural population would emit a mere 60 kgC per person per year and top 10% in urban areas 795 kgC(Murthy et al., 1997).
Mitigating Climate Change:
India has for quite some time pursued GHG friendly policies in her own interest. These includes:
Emphasis on energy conservation.
Promotion of renewable energy sources.
Abatement of air pollution.
Afforestation and wasteland development.
Economic reforms, subsidy removal and joint ventures in capital goods.
Fuel substitution policies.
Some of these efforts are on-going for several decades and are institutionalised in a number of ways through policies, programmes and creation of specific institutions. In addition to government efforts there are a number of measures taken by people themselves. Some of because of resource minimising cultural traditions as well as good practices that exist in India due to poverty and deprivation. These ranges from lack of electricity connections lack of piped water lack of cooking fuels, lack of heat in devices lack of basic infrastructure such as schools, hospitals and roads that are essential elements for human development and cannot recommended to continue.
India’s development needs and its commitment for poverty eradication will result in an increased energy use. This may be considered as basic human right of the poor even if it increases india’s GHG emissions. There is always trade off between economic growth and from climate change. No scientific consensus exists on who should bear the burden of adaption and mitigation costs. People who bear emission reduction costs or benefits are often different from those who pay or benefit from adaption measures. Mitigation costs are estimated on the basis of the baseline data and the way costs are modelled assumptions about future policies. In cost benefit analysis, tradeoffs between climate change impacts, adaptations and mitigation are made explicit. It has its limitations. In spite of the criticisms the cost benefit analysis has several strengths. It offers internally consistent and global comprehensive analysis of impacts. As uncertainty is reduced, the integrated models used in cost benefit analysis might become more realistic and useful.
References
Banuri, T. et al. 9 1996), “Equity and Social Considerations.” In J.P. Bruce et al. Climate Change 1995 www.ipcc.ch/ipccreports/sar/wg/ipcc/III.pdf
Chichilnisky, G. and G. Heal (1994), “Who should abate carbon emissions?: An international viewpoint” Economic letters 44. http://chichilnisky.com/pdf/ papers/93.pdf.
De Canio, S.J. (2007) “Reflections on Climate Change, Economic Development and Global Equity”. www.stephendecanio.com. “Economic Development, Poverty Reduction and Carbon Emissions in India”, Energy Economics, vol. 19, No.3
Murthy, N. S. , Manoj Panda and Jyoti Prakesh (1997a) “Economic Development, Poverty Reduction and Carbon Emissions in India” , Energy Economics, vol. 19, No.3
Murthy, N. S. , Manoj Panda and Jyoti Prakesh (1997b) “ Economic Growth, Energy demand and Carbon Dioxide Emissions in India: 1990-2020 Environment and development Economics, vol.2, No. 2
Parikh and Gokarn (1993) Climate Change and India’s Policy Options Global Environmental Change Vol. 33 3,(3) 276-291
Rogner, H. H. et al (2007) International Governmental Panel on Climate Change by B. Metz, O. R. Davidson, P.R Bosch, R. Dave, L. A. Meyer (Ed.) Cambridge.
Toth, F. L. et al. (2001) Decision making Frameworks. In Climate Change 2001 Opcit. Cambridge.
Prof. M. K. Ghadoliya
Director, (Academic)
V.M.Open University,Kota
“Climate Change” is use to describe a change in the climate, measured in terms of its statistical properties, e.g., the global mean surface temperature (Wikipedia). In this context climate is taken to mean the average weather. Global Warming refers to change in the Earth’s temperature. Data reveal that between 1900 to 2005 temperature increased by 1.40 F or 0.780 C.
Climate change is a serious and immediate threat to development; Unmitigated climate change could cause warming of up to 50 C this century. The difference between today’s climate and the last ice age leading to a world much different from the one we live in. Even a 20 C warming, likely the best we can achieve will result in new weather patterns including increased variability and more frequent and intense extreme weather events. Dealing with this requires substantial adaptation efforts: There are two major approaches to deal with the problem: (i) Balancing Approach, and (ii) Imperative Approach. The balancing approach compares benefits and costs of reducing emissions and tries to reach at equilibrium. Reduce emissions up to the point where the marginal benefits of additional reduction equals the marginal cost of additional reduction. The imperative approach believes that there is a sharp threshold value where by marginal damage increases sharply once concentration passes a certain level. This approach lays emphasis on reduction of emissions so that concentration stays below this level. However, even at these levels some 100-400 million more people could be at risk of hunger and 1-2 billion more may suffer from water shortages. The E.U. is tending towards the imperative approach while the American economists are mostly favouring the balanced approach. This gives the entirely different view of discounting and different values for cost benefit analysis of reducing Green House Gases (GHGs).
Developing countries are the most vulnerable to changing climate, potentially bearing some 80 percent of the damages from climate change.
If we take a higher Discount Rate, the present value of future impact is less. Taking a lower Discount Rate, the present value will be more. The choice of a Discount Rate to apply to Climate Policy is in part an ethical judgment not purely a matter of economics. With regard to economics there are many who argue that the best way to fight climate change is to ensure rapid growth. They argue that the answer to climate change should be searched only in technological advancement, as the richer countries are more resilient to shocks and have better technology to adapt to climate change. Emissions do not only depend on the growth rate of the economy other factors such as structural change in the production system, technological change, urbanization and trade patterns influence.
The economics of climate change in European countries in tending towards the imperative approach while among the most American economists it is tending towards balancing approach. This reflects not only a different view of discounting but also, a fundamentally different assessment of underlying costs and benefits of reducing Green House Gases (GHGs). These gases have been linked with climate change. One very important thing to remember is that GHGs are stock pollutant and not flow pollutant. Scientists tell us that putting off mitigation for 10 years would likely make it impossible to keep worming from exceeding 2o C. The carbon dioxide emitted today will stay in the atmosphere for a century, and temperatures continue rising for a few centuries after green gas concentration in the atmosphere have stabilized.
The loss of welfare is calculated on Net Present Value (NPV) Approach that is highly sensitive towards the rate of interest taken for discounting. The choice of a climate discount rate to apply to climate policy is in part an ethical judgment not purely a matter of economics. With regard to economics there are two empirical assumptions taken in the conventional economic analysis that seem incorrect. Altering them would lower the value of the interest rate r. These assumptions are as follows: (i) Climate change does not directly affect people’s well-being; it affects only the production of market goods. (ii) The second assumption is that people’s preferences do not change as they become richer, they do not change their expectations to match their wealth. The difference is not just discounting: it involves assessment of future damages and assessment of costs of emission reduction. The key message is clear. The cost of strong and urgent action to avoid serious impacts from climate change is substantially less than the damages thereby avoided. Even with strong action to reduce green house gas emissions adaptation must be a crucial part of development strategy. Policy requires urgent and international action as adopting later is not an option.
Although developing countries emitted only one-third of the GHGs now in atmosphere these countries are now producing more than half the world’s annual emissions, and this share is rapidly increasing. Developing countries cannot simply follow the carbon intensive development path that high-income countries did. High-carbon growth in developing countries will exacerbate the climate problem delaying action by a decade or two could increase mitigation costs by as much as 2 to 5 times according to some models. Developing countries are growing fast and need massive expansion in energy, transportation, urban systems and agriculture. Therefore, while high-income countries must reduce their carbon footprints, tackling climate change also requires a new development paradigm that fulfils the expectations of developing countries.
Cost Benefit Analysis
Standard cost benefit analysis can be applied to the problem of climate change. This requires valuation of cost and benefits using the willingness to pay as a measure of value and a criterion for accepting or rejecting proposals.
The valuation of costs and benefits of climate change is difficult because some climate change impacts are difficult to value e.g. ecosystems and human health. It is also impossible to know the preferences of future generations, which affects the valuation of costs and benefits. The standard criterion is compensation principle. So long, benefits are more it is a gain in welfare. If there are no mechanisms allowing competition to be paid, then it is necessary to assign weights to particular individuals. One of the mechanisms for competition is impossible for this problem. Mitigation might benefit future generations at the expense of current generations, but there is no way that future generations can compensate current generation for the cost of mitigation (De Canio, 2007: p.4) on the other hand should future generations bear most of the cost of climate change, compensation to them would not be possible. Another transfer for compensation exists between region & population.
In Cost benefit analysis, an acceptable risk means that the benefits of climate policy outweigh the costs of the policy. The standard rule used by public and private decision makers is that a risk will be acceptable if the expected NPV is positive. The expected value is the mean of the distribution of expected outcomes. This criterion has been justified on the basis that a policy’s benefits and costs have known possibilities and risk can be insured. Climate change is difficult to calculate. In addition, some impacts, such as those on human health and biodiversity are difficult to value. Similarly, there are difficulties in risk management through insurance.
Adaptation to global warming may be done as a matter of course without the intervention of any government and it is called autonomous adaptation. On the other hand planned adaptation can be reactive or anticipatory i.e., undertaken before impacts are apparent. Some studies suggest that human systems have considerable capacity to adopt autonomously others point to constraints on autonomous adaptation, such as limited information and access to resources. The autonomous adaptation to climate change has a larger cost and it could be avoided through planned adaptation.
Climate Change & Scenario
(i) Unsustainable Consumption Patterns of the rich industrialized nations are responsible for the threat of climate change. Only 25 per cent of the global population lives in these countries but they emit more than 70 per cent of the total global co2 emissions and consume 75 to 80 per cent of many of the other resources of the world. (Parikh et.al.1991)
(ii) In per capita terms, the disparities are also large: an Indian citizen emits less than 0.25 tonnes carbon per year whereas a citizen of the USA, for example, emits more the 5.5 tonnes which is 22 times higher than Indian citizen. In such a situation, how can we ensure equitable and efficient solution and reach at an agreement that is acceptable to all.
(iii) Another issue of great concern to all of us is the reliability of researches. According to initial researches, developing countries were change with large emissions of methane from paddy fields. However, the Indian agricultural scientists later proved that these charges were exaggerated. Agrawal and Narain (1991) argue that emissions by poor are basic human right and should not be held responsible for climate issues.
(iv) Climate change in India may lower agricultural production. Indians should be concerned about climate change since this phenomenon might have substantial adverse impact on them in terms of lowering agricultural production. A United Nations Organization report states that CHG concentrations should be stabilized at levels where food production is not threatened. Although it is really very difficult to determine the tolerance level but Kumar and Parikh (2001 a & 2001b) took up a detailed study to examine the impact of climate change an agricultural crop yield and welfare. They estimated that with a temperature change of + 20 C and an accompanying precipitation change of + 7 per cent, farm level total net-revenue would fall by 9 per cent. whereas with temperature increase of + 3.50 C and precipitation change of + 15 per cent the fall in farm level net revenue would be nearly 25 per cent. Kumar and Parikh estimated that without considering the carbon dioxide fertilization effects temperature rise between 2.50 C to 4.90 C for India yield losses for rice and wheat vary between 32 and 40 per cent and 41 and 52 per cent respectively. This may cause a GDP drop by 1.8 per cent to 3.4 per cent. These are very large changes and may cause much human misery. From India’s point of view a 20 C increase would be intolerable.
(v) Risk of Sea Level Rise Another important impact of climate change is sea level rise leading to submergence of coastal areas that will displace population from coastal zone. This will create large number of environmental refugees especially from low-lying delta regions in poor countries. In Asian Development Bank report 1995 Mr. V. Asthana estimated in his article entitled climate change in Asia estimated that one meter rise in sea level would displace 7 million persons in India.
(vi) Risk of Extreme events increased occurrence of extreme events due to climate change will also affect the poor most. Green House Gas Emission on per capita basis in India are about 70 per cent below the world average.
Per Capita Carbon-dioxide emission (metric tons) Indian Scenario
Country
Per Capita Carbon-dioxide emission (metric tons)
USA
20.01
EU
9.40
Japan
9.87
China
3.60
Russia
11.71
India
1.02
World Average
4.25
Five India specific studies on GHG emission reach the conclusion that in 2030-31 per capita GHG emission in India would be 2.77 tonnes and 5 tonnes of Co2 e (Carbon dioxide equivalent) India GHG emission in 2031 vary from 4.0 billion tonnes to 7.3 billion tonnes of Co2e.
Thus-even in 2031 India’s per capita GHGs emission would stay under 4 tonnes of Core which is lower than the world average of 4.25 tonnes of Co2e in 2005.
India share in Global Co2 emission is only 5 per cent equivalent to Japan whose population is negligible when compared with India, US alone contributes 22 per cent where as Russian Federation Contributes 8 per cent. Thus, India’s contribution is much negligible. It is true that a global climate treaty in a urgent need. A failure in copenhagen is not the end and we should continue our serious efforts in cancun in 2010. Most countries see aggressive measures to reduce carbon emissions as a threat to their national economic development. The main point of disagreement is not on the reduction of emissions but it is on the point whether reduction measures should be uniform on all economies or not. Developed economics favour uniform norms and argue that if the reduction agreement is not universal developed economics will be at comparative disadvantage. However, it is also true that developing countries could not be denied to exercise their basic human rights in the name of global warming and climate change.
Trend: Global Future Scenario
While a global climate treaty is clearly desirable, a cost effective and energy efficient technology is also needed. It is good news that investment in emission free renewable energy is taking off anyway. In 2009 62 per cent of the newly installed power capacity in EU was renewable, as was more than half the new capacity deployed in the US, while China installed a huge 37 gw (giga watts) of renewable capacity the most of any country. (EJ- “Taming Climate Change by Joseph M Hogen 29.11.10 p. 11)
Kyoto protocol of 1997 on climate change is expiring is 2012 so cancun summit (Maxico) is our last chance to save the planet. From Bali in Indonesia (2007) to poznan in Poland (2008) and to Copenhagen in Denmark (2009) developed and developing countries have been struggling to fix the desired levels of carbon emissions cut that each other should adopt to ensure that the global average temperature does not rise beyond 20 C preferably (1.50 C) by 2050 that is essential to save the world from calamity and this can be achieved if we shift our energy production from fossil fuels to clean energy i.e. solar or wind energy. Parikh and Gokarn (1993) put in the first effort to identify India’s emissions profile by using an input-output model. They aggregated the 1979-80 table into 40 sectors. These input- output coefficients are updated by the Planning Commission at least every 10 years. Subsequently, the 1989-90 table was used by Murthy et al. (1997a, 1997b) to study the structure of CO2 emissions where one looks at the coal, oil, gas and electricity rows that cut across different sectoral columns with the level of activities. Parikh and Gokarn (1993) studied emissions from different sectors power, steel and transport and so on. By different income groups, rural urban low, middle and high income. For different purposes: different fuels (coal, oil, gas).
The results are as follows:
The power sector accounts for 48% of emissions, followed by road transport (10%) iron and steel (10%) and so on. This gives an idea which sector will be affected if, say a carbon tax was levied on them or which sectors offer possibilities for large reduction in emissions, if modernised.
Direct and indirect emissions in the final demand show that the construction sector was the highest contributor though the energy used for construction at the site was very small. This is because the energy intensive materials such as steel, aluminium, bricks, and cement glass lime and so on are used in construction. Study of tables shows the proportions of intermediate and final uses of energy from different sources. Almost all coal is used for intermediate purposes, which means that the fuel burden of a carbon tax will not fall on the consumers if rationalisations of production processes or efficiency improvements are cost effective. On the other hand, 30% of oil and 20% of electricity are used for direct consumption in carbon using sectors. A carbon tax or price changes could matter to the consumers directly either in terms of costs or adjustments. The study of per capita energy use (director indirect) 1989-90 shows consumption of coal, oil and gas by different rural urban income groups and their corresponding carbon emissions . It can be seen that the bottom 50% of rural people emitted in 1990 a mere 54 kg og carbon per person per year. The richest 10% of urban population emitted 12 times as much as 656 kg of carbon per person per year. When compared with the world average of 1.1 tonnes the figure seems to be very small for India. Even the projected emissions for 2020 show that the bottom 50% of rural population would emit a mere 60 kgC per person per year and top 10% in urban areas 795 kgC(Murthy et al., 1997).
Mitigating Climate Change:
India has for quite some time pursued GHG friendly policies in her own interest. These includes:
Emphasis on energy conservation.
Promotion of renewable energy sources.
Abatement of air pollution.
Afforestation and wasteland development.
Economic reforms, subsidy removal and joint ventures in capital goods.
Fuel substitution policies.
Some of these efforts are on-going for several decades and are institutionalised in a number of ways through policies, programmes and creation of specific institutions. In addition to government efforts there are a number of measures taken by people themselves. Some of because of resource minimising cultural traditions as well as good practices that exist in India due to poverty and deprivation. These ranges from lack of electricity connections lack of piped water lack of cooking fuels, lack of heat in devices lack of basic infrastructure such as schools, hospitals and roads that are essential elements for human development and cannot recommended to continue.
India’s development needs and its commitment for poverty eradication will result in an increased energy use. This may be considered as basic human right of the poor even if it increases india’s GHG emissions. There is always trade off between economic growth and from climate change. No scientific consensus exists on who should bear the burden of adaption and mitigation costs. People who bear emission reduction costs or benefits are often different from those who pay or benefit from adaption measures. Mitigation costs are estimated on the basis of the baseline data and the way costs are modelled assumptions about future policies. In cost benefit analysis, tradeoffs between climate change impacts, adaptations and mitigation are made explicit. It has its limitations. In spite of the criticisms the cost benefit analysis has several strengths. It offers internally consistent and global comprehensive analysis of impacts. As uncertainty is reduced, the integrated models used in cost benefit analysis might become more realistic and useful.
References
Banuri, T. et al. 9 1996), “Equity and Social Considerations.” In J.P. Bruce et al. Climate Change 1995 www.ipcc.ch/ipccreports/sar/wg/ipcc/III.pdf
Chichilnisky, G. and G. Heal (1994), “Who should abate carbon emissions?: An international viewpoint” Economic letters 44. http://chichilnisky.com/pdf/ papers/93.pdf.
De Canio, S.J. (2007) “Reflections on Climate Change, Economic Development and Global Equity”. www.stephendecanio.com. “Economic Development, Poverty Reduction and Carbon Emissions in India”, Energy Economics, vol. 19, No.3
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