Financial Daily from THE HINDU group of publications
Friday, Mar 08, 2002
Global warming -- An empty chimera?
EVERY now and then, a doomsday prophecy catches International attention, resulting in a deluge of largely illusive literature. In the 1960s, it was the `Limits to growth' thesis sponsored by the Club of Rome, which foretold the world's end. Thanks to a few staunch optimists such as Julian Symons of Maryland University, the fallacies of the arguments were exposed and despite a repeat attempt by the MIT modellers, the whole concept fizzled out.
Economists, politicians, scientists, laymen and the universal public tend to overlook the basic fact that all estimates of horrendous damage to various economies developed and developing are all tentative and totally unproven, if not outright fiction.
The Framework Convention on Climate Change FCCC, signed by 152 nations at the 1992 UN Conference on Environment and Development, was the initial international response to global warming. The objective of the convention is to achieve ``stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system'', and this is to be achieved within a time-frame that allows ecosystems to adapt naturally to climate change. The objective is noteworthy as it does not specify a particular numerical target for either concentrations or temperature change, implicitly acknowledges that some climate change will take place, and includes all greenhouse gases, not just carbon dioxide.
The signing of the Kyoto Protocol in December 1997 was the culmination of a decade of protracted and oft-heated political negotiation, and over four decades of research on the subject of global climate change.
The principal success of the Kyoto Protocol was in establishing quantifiable commitments by the industrialised nations to limit and reduce their greenhouse gas (GHG) emissions. The aggregate aim of these commitments is to reduce emissions of a basket of six GHGs from the Annexe-I countries to at least 5 per cent below the base year level during the commitment period from 2008 to 2012.
The US was to reduce net greenhouse gas emissions by 7 per cent from 1990 levels by 2008-2012, with slightly larger reductions for the EU and slightly less from Japan. This implies a reduction for the US of about 30 per cent below projected baseline emissions by 2010.
Russia and other former communist countries, which have already dramatically reduced emissions through recession and restructuring, have 1990 levels as targets. Achieving targets in Europe will be assisted by the carbon-emissions reductions already accomplished through conversion of coal and natural gas in the UK utility sector and the closing of energy-inefficient industry in the former East Germany.
The EU is to be treated as a `bubble', with an overall reduction of 8 per cent from 1990 levels. There are no obligations for developing countries to limit emissions, making ratification by the US Congress problematic. In July 1997, the US Congress unanimously passed a resolution to the effect that it would not ratify any agreement unless developing countries also took on commitments to limit or reduce greenhouse gas emissions.
Six GHGs are covered and allowance is made for carbon sinks (credits or debits for aforesaid and deforestation since 1990). Ratification requires at least 55 parties, including Annexe-I countries that contributed 55 per cent or more of Annexe-I countries' emissions in 1990.
India and China have not signed the protocol on the grounds that their emission levels are much lower than the developed countries and they need to `catch up' on development. Hence, the extra burden should be borne by rich countries. Japan and the EU countries have signed the protocol.
Estimates of damage due to global warming vary widely.
Nordhaus estimated it to be 1 per cent of GNP, focussing on agriculture and sea-level rise. US estimates by different agencies range from 1 per cent of GDP to 1.1 per cent, depending on assumptions regarding the volume of trading. In India, the NCAER estimated the damage, if any, to be less than 0.5 per cent of GDP. OECD estimates also vary widely.
All the environmental degradation is largely manmade, the product of venal greed; this includes overfishing, destruction of forests which alters the rainfall, decimation of mangroves and aquifers, silting and soil erosion, air, water and land pollution and the like. These are the results of slack and often corrupt environmental management.
The international character of the problem has far-reaching implications, ranging from the need to negotiate, not impose, control regimes, to the selection of efficient regulatory instruments. Reaching an international agreement on objectives and implementing a global warming policy would be considerably easier if all countries were similar. They are not.
There are major relevant differences among countries with respect to (1) past, present and prospective emissions; (2) vulnerability to global warming; (3) the costs of emissions control; (4) income levels and, hence, discount rates, valuation of damages, and willingness and ability to pay for controls; and (5) institutional capacity to formulae, implement, and enforce controls.
Countries are also linked together through international trade and capital flows. Serious efforts to control global warming will have significant effects on the exchange rates, and the competitive position of individual industries and countries. Moreover, trade and investment can be the vehicles through which emissions controlled by one set of countries, are shunted or leaked to uncontrolled countries, reducing the effectiveness of the control regime.
One cannot directly compare emissions rates of various gases to climate change for two reasons. First, the atmospheric lifetime of gases varies from about 12 years for methane to 50-200 years for CO2. Second, greenhouse gases do not have the same radiative effects per unit mass emitted.
The Kyoto targets do not reflect a careful cost-benefit analysis of emission reductions or their timing. Developing countries would be well-advised to focus attention on pressing issues such as the WTO, rather than expend scarce time on vague non-issues.
(The author is a Chennai-based management consultant.)
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