8. Equity and global distribution
Climate protection is a pure public good; emission reductions anywhere benefit people everywhere. What international arrangements are needed to coordinate reductions worldwide and overcome the free-rider problem? What is the appropriate standard of equity in allocating the costs of global policies to nations and individuals?
Equity weighting and the marginal damage costs of climate change
David Anthoff, Cameron Hepburn and Richard S. J. Tol
Ecological Economics (2009) 68(3): 836-849.
Climate change will give rise to different impacts in different countries, and different countries have different levels of development. Equity-weighted estimates of the (marginal) impact of greenhouse gas emissions reflect these differences. This paper analyses the impact of equity weighting on the marginal damage cost of carbon dioxide emissions, and reaches four main conclusions. First, equity-weighted estimates are substantially higher than estimates without equity-weights; equity-weights may even change the sign of the social cost estimates. Second, estimates differ by two orders of magnitude depending on the region to which the equity weights are normalised. Third, equity-weighted estimates are sensitive to the resolution of the impact estimates. Depending on the assumed intra-regional income distribution, estimates may be more than twice as high if national rather than regional impacts are aggregated. Fourth, variations in the assumed inequality aversion have different impacts in different scenarios, not only because different scenarios have different emissions and hence warming, but also because different scenarios have different income differences, different growth rates, and different vulnerabilities.
Equity in climate-economy scenarios: the importance of subnational income distribution
Paul Baer
Environmental Research Letters (2009) 4: 1-11.
It is widely accepted that climate change raises equity considerations on many levels. This paper looks in particular at the IPCC’s ‘Special Report on Emissions Scenarios’, in which equity is primarily quantified as the distribution of income between countries, and highlights the need for more explicit treatment of equity both within and across national borders. An existing method for modeling subnational income distributions shows that this affects the results of welfare calculations of the type used in economic analyses of climate policy. Additionally, the paper suggests ways in which this kind of equity analysis could be applied to broader questions of climate policy and development, such as burden sharing in the allocation of obligations, and concludes by framing the scenario development process in the context of ‘the contested storyline of the present’.
Climate change, social justice and development
Terry Barker, S. Serban Scrieciu and David Taylor
Development (2008) 51(3): 317-324.
This article discusses the implications of climate change for social justice and the prospects for more sustainable development pathways. The authors state that the analysis and discussions surrounding the climate change problem, particularly those drawing on the traditional economics literature, have relied on a crude economic utilitarianism that no moral philosopher would endorse. Such arguments have typically ignored the concept of justice itself and wider ethical considerations. The authors argue that climate change is inherently inequitable and inevitably raises ethical issues. Climate change policy should therefore be informed by moral philosophy relating to scientific findings with respect to climate change impacts, rather than just informed by economics in isolation. Climate stabilization policies should be designed by international negotiation to support development and they should not jeopardize the prospects for the well-being of the poor.
Who should abate carbon emissions?: An international viewpoint
Graciela Chichilnisky and Geoffrey Heal
Economics Letters (1994) 44(4): 443-449.
We review the optimal pattern of carbon emission abatements across countries in a simple multi-country world. We model explicitly (with the model in Chichilnisky, 1993b) the fact that the atmosphere is a public good. Within this framework we establish conditions for it to be necessary for optimality that the marginal cost of abatement be the same in all countries. These conditions are quite restrictive, and amount to either ignoring distributional issues between countries or operating within a framework within which lump-sum transfers can be made between countries. These results have implications for the use of tradeable emission permits, which as normally advocated will lead to the equalization of marginal abatement costs across countries. The observation that the atmosphere is a public good implies that we may need to look at a Lindahl equilibrium rather than a Walrasian equilibrium in tradeable permits
Greenhouse Development Rights: toward an equitable framework for global climate policy
Paul Baer, Glenn Fieldman, Tom Athanasiou and Sivan Kartha
Cambridge Review of International Affairs (2008) 21(4): 649-669.
The assignment of obligations to pay for mitigation of greenhouse gas emissions and for adaptation to unavoidable climate change is a critical and controversial component of international negotiations under the United Nations Framework Convention on Climate Change. In this article we present a new framework called 'Greenhouse Development Rights' (GDRs): a formula for the calculation of national obligations on the basis of quantified capacity (wealth) and responsibility (contribution to climate change). GDRs seek to preserve the 'right to development' by exempting from obligation any income and emissions under a 'development threshold'. By taking into account the distribution of income and emissions within countries, and calculating national obligations as if they were the aggregated obligations of individuals, the framework treats every global citizen identically, and allocates obligations even to poor countries that are proportional to their actual middle-class and wealthy populations. When coupled to a trajectory of rapid emissions reductions (for example, 80 percent reduction below 1990 levels by 2050), the framework results in larger reduction obligations for both rich and poor countries than they currently seem prepared to accept. However, the formula may be 'fair enough' to break the impasse that currently separates rich and poor countries in the negotiations.
The political economy of global carbon emissions reductions
Stephen J. DeCanio
Ecological Economics (2009) 68: 915-924.
The discussion about what reductions in greenhouse gas emissions are required and how the emissions rights might be distributed globally has fostered the belief that there is a fundamental conflict between the rich nations of the “North” and the poor but populous nations of the “South.” The argument is that grandfathering the rights will only reinforce existing global inequalities, while per capita distribution of rights would lead to such huge transfers of wealth to the South as to be unacceptable to the North. However, a simple general equilibrium model of the global economy shows that this perception is incorrect under a plausible interpretation of the goal of the United Nations Framework Convention on Climate Change to “avoid dangerous anthropogenic interference with the climate system.” Instead of using an economic damage function to determine the optimal level of emissions reductions, the model's utility functions are calibrated to reflect scientific understanding of what would be required to stabilize the atmosphere at safe concentrations of greenhouse gases. Among policy options that would accomplish this, the United States would have a preference for grandfathering the allocation of emissions rights over a per capita allocation, but this preference is not strong and could be offset by other geopolitical considerations.
Equity implications of two burden-sharing rules for stabilizing greenhouse-gas concentrations
Asami Miketa and Leo Schrattenholzer
Energy Policy (2006) 34(7): 877-891.
This paper focuses on the equity aspects of international burden sharing for global CO2 emission stabilization. It first summarizes and classifies equity principles proposed in the published literature of the field. Of these, the authors selected three major equity principles, i.e., egalitarian equity, horizontal equity, and proportional equality (often referred to also as sovereign equity) to carry out a detailed examination of two sets of quantitative emission entitlements, which are based on two burden-sharing rules, i.e., the equal emissions per capita approach and the carbon intensity approach. The two burden-sharing rules were chosen as not only particularly popular, but also because their application results in distinctly different burden sharing among countries. To make the two rules comparable, we used a global carbon-emission path until the year 2050 that leads to an atmospheric CO2 concentration of 550 ppm. We then used the two rules for allocating the global emissions described by that path to allocate carbon emission entitlements to 67 countries and 9 world regions. In general, developing countries receive relatively higher entitlements under the equal emissions per capita approach whereas industrialized countries are relatively better off under the carbon intensity approach. In some countries and regions, emission entitlements as calculated by any of the two burden-sharing rules are so low that it would be unrealistic to assume that actual emissions can be limited to the emission entitlements assigned to them without using flexibility mechanisms such as those defined in the Kyoto Protocol. In this sense, the calculated entitlements can be also interpreted as the initial allocation of tradable emission allowances of countries or regions. Nonetheless, we considered any numerical determination of resulting carbon trade flows to be outside the scope of our paper.
Allocation of CO2 emission permits — Economic incentives for emission reductions in developing countries
Tobias A. Persson, Christian Azar and Kristian Lindgren
Energy Policy (2006) 34(14): 1889-1899.
The economic impacts on developing regions following a global cap and trade system for carbon dioxide are assessed through the use of an energy-economy systems model. Both an equal per capita allocation and a contraction and convergence allocation with convergence of the per capita emissions by 2050 are shown to offer economic incentive for Africa, India and probably also Latin America to accept binding emissions commitments under a 450 ppm carbon dioxide stabilization scenario. The gain for Latin America is mainly a result of increased export revenues from sales of bio-fuels as a result of the climate policy. It is, on the other hand, unlikely that these allocation approaches would offer an economic incentive for China to join the regime because of its high economic growth, present higher per capita emissions than India and Africa, and more costly mitigation options than Latin America. A more stringent allocation for developing countries such as contraction with convergence of the per capita emissions by the end of this century is estimated to generate reduced net gains or increased net losses for the developing regions (though Africa is still expected to gain).
Who should abate carbon emissions? A note
Kristen A. Sheeran
Environmental and Resource Economics (2006) 35(2): 89-98.
Economists commonly believe that failure to equalize the marginal cost of carbon abatement across countries implies a loss of global efficiency. Chichilnisky and Heal (1994) first challenged this consensus more than a decade ago, demonstrating that, in general, efficiency does not require equalizing marginal abatement costs. This note revisits that important debate. It provides the missing intuition behind Chichilnisky and Heal’s surprising result, explains what critical assumption gives rise to their result, and clarifies the role a social welfare function plays in their model. The implications of Chichilnisky and Heal’s result are increasingly important, given international debate over the preferential role given to developing countries in the Kyoto Protocol and the role those countries will play in future climate negotiations.
Side payments or exemptions: The implications for equitable and efficient climate control
Kristen A. Sheeran
Eastern Economic Journal (2006) 32(2).
The predominant approach thus far to achieving equity in international climate control treaties has been to exempt developing countries from compulsory emissions reductions. Granting exemptions to developing countries, however, can compromise the efficiency of the treaty. Side payments in international treaties provide inducements for voluntary cooperation by countries for whom treaties would otherwise fail to yield welfare gains. This paper analyzes the conditions under which the side payments that are necessary to induce the participation of developing countries in an efficient climate control treaty can also satisfy prevailing notions of fairness in international climate control.