Work Program on Climate Change in DECRG-RU

Transcription

1 Work Program on Climate Change in DECRG-RU June 2007 By Gershon Feder This Note reviews recently completed and on-going studies focusing on various aspects of the theme of Climate Change. Some of the newer studies are still at a launch phase. Each category will be discussed separately, although there are some overlaps and links. For studies that are already completed, the key conclusions are highlighted A. Concluded Studies A.1. Impact of, and adaptation to, climate change in agriculture in Africa and South America Studies in Africa 1 and South America 2 that have been concluded recently 1. They entail comprehensive data collection and analysis in 19 countries. Key highlights: Impact is substantial but heterogeneous. A continent-wide impact (both in Africa and South America) of various uniform scenarios of likely change in temperature and precipitation is quite substantial. It is estimated that by the year 2100, per hectare net income of farmers would be reduced by up to 25% in Africa and up to 66% in South America depending on the climate change scenario and Global Climate Model used. As can be expected, rainfed areas are much more vulnerable than irrigated areas. The impacts of warming, however, vary a great deal across the landscape. Some areas are especially hard hit and some areas may benefit, depending on the climate scenario, the existing land cover, production practices, and the present climate in each location. Small and large farms face different impacts in Africa, but very similar impacts in South America, due to differences in cropping patterns and technologies. Warming will cause relatively bigger losses in net income to large farmers compared with the loss to small farmers in Africa, but about the same percentage loss in land value and net income for both small and large farms in South America. 2 1 Initiated in ARD but concluded and published in DECRG-RU. 2 Big and small have different scales in South America and in Africa.

2 Farmers already adapt. Farmers make different choices in different climates. The studies found that farmers change whether they plant crops, grow livestock, or raise both crops and livestock, depending on the climate. Farmers in places that are temperate and wet tend to raise crops. Farmers in places that turn drier tend to raise livestock. Farmers in places that turn hotter tend to raise both crops and livestock. Another choice that depends on climate is irrigation. Farmers are more likely to choose and rely on irrigation, where water is available, if their farm is in a cool and dry location. The results provide strong evidence that farmers will make adjustments in how they grow crops and raise livestock in order to cope with global warming, depending on public policies that make such adjustments easier or difficult. A.2. Impact of sea-level rise on developing countries: A comparative analysis Scientific evidence suggests that growth of greenhouse gas emissions and associated global warming could well enhance sea level rise (SLR) of more than 1 meter this century. A rapid breakup of the Greenland and West Antarctic ice sheets might produce a 5 meters SLR, but the probability of this taking place within the current century is not high. A recent Study 3 assessed the consequences of continued SLR for 84 developing countries on land, population, agriculture, urban extent, wetlands, and GDP. Results indicate that tens of millions of people in the developing world may be displaced by SLR within this century; and accompanying economic and ecological damage will be severe for many. At country-level, results are extremely skewed, with severe impacts limited to a relatively small number of countries. For these countries (e.g., Vietnam, Bangladesh, Egypt, Bahamas), however, the consequences of SLR are potentially catastrophic. For many others, including some of the largest (e.g., China), the absolute magnitudes of potential impacts are very large. A.3. Will markets direct investments under the Kyoto Protocol? The Kyoto Protocol allows countries to meet treaty obligations by investing in projects that reduce or sequester greenhouse gases elsewhere. Prior to ratification, treaty participants agreed to launch country-based pilot projects, referred to collectively as Activities Implemented Jointly (AIJ), to test novel aspects of the project-related provisions. Relying on a ten-year history of jointly implemented projects, a recent study 4 investigated the determinants of AIJ 2

3 investment. Findings suggest that national political objectives and possibly deeper cultural ties influenced project selection. This characterization differs from the market-based assumptions that underlie well-known estimates of cost-savings related to the Protocol s flexibility mechanisms. It was estimated that if approaches developed under the AIJ programs to approve projects are retained, benefits from Kyoto s flexibility provisions will be less than those widely anticipated. A.4. Country stakes in climate change negotiations: Two dimensions of vulnerability A recent study 5 reports results from a broad survey of country stakes in the control of greenhouse emissions. Resource and impact vulnerability are identified as the major aspects of the issue. Subdimensions of resource vulnerability include renewable energy resources, potential for carbon sequestration, nonrenewable energy resources, and employment vulnerability. The sub-dimensions of impact vulnerability are sea-level rise and weather-related damage. Results indicate that even neighboring states in the same region can have very different orientation toward a global protocol, due to different combinations of resources and vulnerability. Even with good information and programs tailored to country conditions, the results suggest that, due to the varying resource-vulnerability conditions, many countries may resist a global protocol unless they are compensated for disadvantages associated with resource vulnerability. Although individual countries have very different stakes in climate change negotiations, the global resource-vulnerability conditions are much clearer and more positive. The assessment of renewable energy alternatives suggests that the world community can draw on clean energy sources to ease the transition to global sustainability. B. The current research agenda On-going and recently-initiated studies cover both mitigation and adaptation aspects of climate change in several sectors. We have been also trying to involve leading researchers from other institutions. The following are short descriptions of these programs/studies. B.1. Climate change and economic growth in developing countries 3

4 Climate change is a new constraint within which economic growth must take place. Actions to mitigate or adapt to climate change will also affect economic growth, for example by shifting investment from high carbon-intensity to low carbon-intensity sectors. The emergence of climate change thus raises a major policy issue for developing countries. Should they modify their development strategy as it relates to economic growth given the new climate-change related risks? If so, how? And if not, what are the risks they incur? To provide insights on whether, and if so how, developing countries need to modify their growth strategy with the emergence of climate change, two steps are required. First, one needs to understand the potential consequences of climate change both of the impacts of climate change and of the actions to either reduce emissions (mitigation) or adapt to a world with a different climate (adaptation) for economic growth in developing countries. This study address the question what are the channels through which climate change might affect economic growth in developing countries from an analytical point of view. It extends the literature on the cost-benefit analysis of climate mitigation policies through numerical models. It extends existing analyses by including climate change in development models, and includes policy interventions that address both adaptation and mitigation of activities that affect climate change. B. 2. Reducing vulnerability-adaptation to climate variability and change A research on mainstreaming climate adaptation into development assistance is undertaken in order to identify the institutions needed for donors to be effective in their climate change assistance. The study is applied in Mozambique where a supportive legislative environment and high awareness of climate risks among donors exist. However, mainstreaming initiatives are hampered by limited institutional, technical and financial capacities in several government agencies. The work seeks to identify barriers to and opportunities for integrating adaptation to climate impacts into development initiatives. B.3. Economics of urban development, energy consumption and pollution emission in large cities (tentatively Beijing, Mexico city, Rio de Janeiro) The large-scale movement of population from rural to urban areas raises several important questions regarding the patterns of urban development, the choice of alternative transportation infrastructure 4

5 networks and resulting energy consumption and spatial pattern of local air pollution. This research develops a tractable analytical and simulation-based dynamic general equilibrium model that captures the key features of urban development in large cities, such as Beijing, Mexico City or Rio de Janeiro. This will allow studying the effects of alternative paths of network infrastructure roads and rail on the pattern of urban development and, consequently energy consumption and air pollution. The framework will be used to evaluate the costeffectiveness of policies aimed at reducing carbon emissions from the transportation sector. Policies are grouped into: (a) demand side policies, such as taxes that alter both the purchase and operating costs of vehicles as well as subsidies to the ridership of rail; (b) infrastructure supply policies, which include investments over time in roads and public transit; (c) fuel related policies, such as mandates for cleaner fuels (e.g. ethanol, bio-diesel). B.4. Local actions for global impact-inference of the role of the flexible mechanisms in reducing GHGs Although the impacts of climate variability and change as well as the ability to adapt vary widely across regions of the globe, the global warming impact of greenhouse gases (GHG) is the same, irrespective of where they are emitted. This equivalence in impact is the basic principle for a global management scheme to mitigate GHG emissions. In this context, an entity seeking to reduce its GHG emissions for compliance purposes or on a voluntary basis may either opt for internal abatement measures or acquire credits to offset the excess emissions. Estimates of carbon emission reduction cost suggest a significantly lower cost in developing countries than in developed countries. This suggests meaningful participation of developing countries in the global carbon market, bringing real emissions reduction in return for (mostly private) additional capital. However, it appears that most of the CDM projects are concentrated in a handful of countries (China, India, Brazil and Mexico) and mostly focus on the reduction of industrial gases. Given the dual benefit from the CDM market cost effective GHG emission reduction and funding of activities leading to growth in developing countries it is a missed opportunity that the market is so concentrated rather distributed much more uniformly over the developing country continuum. This research is aimed at providing better assessment of the potential of the projectbased mechanisms and economic assessment of their likely future direction. In particular, this proposal makes use of a combined dataset of the Kyoto-eligible project transactions along with data on 5

6 previous and current pilots 3 that have occurred since It also expands that dataset by adding transactions funded by other existing mechanisms. B. 5. Intervention measures to increase energy efficiency in transportation systems in India. Efficient transportation technologies are typically the lowest cost means of reducing carbon emissions but are often not adopted. Reasons for non-adoption vary and could be different for supply companies and demanding passengers, but include, price, speed, reliability etc Once these factors are identified and quantified, intervention policies could be better designed to remove such barriers. The work will examine the role of price and other factors (speed, reliability) in the choice between road vs. rail transport for intercity freight and in the choice between public and private transport within cities. This will give an indication of the role that changes in price vs. improvements in service (e.g., faster travel times) could play in maintaining (or increasing) the share of rail in freight transport or the public transport share in urban passenger transport. In the case of fuel efficient vehicles the research will investigate the extent to which information regarding fuel efficiency alone is sufficient to induce people to purchase more fuel-efficient vehicles. B. 6. Barriers to expanding access to electricity in underserviced, poor (mostly rural) areas of Africa while reducing the carbon intensity of energy use. This requires assessment of the costs of provision of energy generated using different types of technology, of current and future energy demand, as well as perceptions regarding the reliability of supply. The work builds on a recently completed global study on country stakes in international climate negotiations that included a renewable energy component as well as on ongoing geographic analysis support for the Africa Infrastructure Diagnostic Study. The research will examine options for expanding electricity access to poor and remote rural areas in Africa, considering cost of provision, competitiveness of renewable energy options and reliability of supply (e.g., sustainability of hydropower under various climate change scenarios, and demand management options). 3 The most significant of these are a multi-country pilot, Activities Implemented Jointly, operated under UN auspices prior to the Kyoto Protocol and current pilots in the United States, and Australia, countries that have not ratified the Protocol. 6

7 B. 7. Long term sustainability of hydropower-based energy generation within changing climate scenarios. This study assesses hydropower generation arrangements between riparian states to transboundary rivers. The research assesses vulnerability of existing international institutional arrangements of joint hydropower generation in various basins that may affect the sustainability of electricity and water supply under certain climate change scenarios. Alternative institutional arrangements (such as formulas for sharing water flow for hydropower production; joint management of the hydropower facility; formulas for sharing gains) would than be assessed and compared. The research will examine the role of modified institutional arrangements in addressing possible vulnerability of existing hydropower generation and water supply arrangements in transboundary basins in light of climate change. B. 8. Measuring the impact of and adaptation to climate change by farm types using agro-ecological zones in Africa Policy interventions to address climate change in agriculture need to take in account the heterogeneity of farming systems. The physical conditions facing farmers in various locations and their (economic and institutional) ability to implement various adaptation measures are differ, and therefore blanket policies may ceate inequities and may not be efficient. Policy makers could greatly benefit from a tool that is tailored to provide both impact assessment and adaptation options in a quilt, rather than a blanket approach. The proposed quilt policy approach will allow much more flexibility and may prove to be both a socially preferred and cost effective policy. Because of the already severe climates, great diversity in agro-climatic conditions and level of economic and institutional ability of agriculture, Africa is the focus of this study. The work focuses on a well known delineation of agricultural production conditions the Agro-Ecological Zones (AEZ). The analysis takes advantage of existing information dividing the African continent into AEZs. The objectives of this study are to (1) provide a range of estimated climate impacts to various farm types across AEZ s in Africa and (2) estimate the benefits from and (if possible) the cost of policy interventions that would allow farmers to adapt to climate change. The study uses economic farm data from a recently completed GEF/World Bank study. 7

8 B. 9. Climate change and agriculture: an economic analysis of global impacts, adaptation, and distributional effects The World Bank has conducted several economic assessments of the impact of climate change on agriculture and how agriculture can adapt under a variety of conditions. The studies funded by the World Bank examined 22 countries across 4 continents and include both developed and developing economies. Despite its great importance, there are surprisingly few economic studies of the impact of climate on agriculture, especially in developing countries. Therefore, compiling the existing measurement methodologies and the evidence from around the world under one roof for use by analysts in other countries would benefit the scientific community. It will provide both a good analytical basis for additional work and solid results for policy debate concerning abatement, adaptation, and income transfer. C. Literature reviews In an attempt to assess the existing knowledge generated in previous work and available in the literature, we have commissioned several reviews. C. 1. Effects of government policies and monetary incentives on the adoption of energy efficient technologies. When looking for the lowest-cost means of reducing greenhouse emissions in developing countries, measures to increase energy efficiency are usually at the top of the list. Based on engineering cost estimates, these measures would often pay for themselves (i.e., they would have a zero or negative cost per ton of carbon removed), but they are often not adopted, for a variety of reasons, such as financing constraints, lack of information, and/or government policies that protect inefficient firms (especially small and medium sized enterprises). These measures, moreover, would be desirable even if reducing carbon emissions were not a priority. This study examines the literature on the adoption or the failure to adopt energy efficient technologies in developing countries by (a) documenting the efficiency of energy usage by households and firms (of various sectors); (b) examining the effect of government policies and monetary incentives on the adoption of (or failure to adopt) energy efficient technologies; (c) studying the penetration of energy efficient technologies in cases where they have successfully penetrated the market and also in cases where penetration has been unsuccessful. The objective in examining 8

9 the existing literature is to determine needs and opportunities for additional research on this topic. C. 2. Economic and policy aspects of bio-energy/biofuel production and use Work on biofuel has grown exponentially, addressing technical, economic and policy dimensions. The World Bank, embarking on economic work in the field of biofuel, is in need to know the state of the art work in this field. A comprehensive review of the literature sponsored by the ESMAP program 6 on economics of production, regulation, and trade in liquid biofuels provides a useful basis for understanding the state-of-the-art related to these aspects. Several additional key aspects, such as impact of biofuel production on land, water and environmental pollution, and the impact on food availability and affordability could be important in addressing policy interventions at country and global levels. Such aspects are the focus of a literature review commissioned by DECRG. C.3. Adaptation in developing countries: some perspectives Adaptation is also a key issue in the upcoming discussions on the second commitment period and the post-kyoto international climate regime. This is because for most Parties to the UNFCCC with comparatively low emissions, adaptation, much more than mitigation, is the critical challenge they face in developing policies to address climate change. The new emphasis on adaptation, however, also raises difficult questions. The review attempts to answer the following questions: (1) how does adaptation differ from regular development? (2) what is the role of the public sector in supporting adaptation? (3) given that funds need to also be set aside for mitigation, how should resources be balanced between mitigation and adaptation?, and (4) out of the funds set aside for adaptation, how best to allocate between ex ante and ex post expenditures? And (5) since the damages of climate change are likely to be sector and/or region-specific, how does one allocate resources in the presence of uncertainties? The review aims at addressing these questions from a qualitative and analytical point of view, and at drawing some implications as to what kind of research/data gathering is necessary to quantify and operationalize the model. 9

10 References 1 Kurukulasuriya P., R. Mendelsohn, R. Hassan, J. Benhin, T. Deressa, M. Diop, H. Mohamed Eid, K.Yerfi Fosu, G. Gbetibouo, S. Jain, A. Mahamadou, R. Mano, J. Kabubo-Mariara, S. El- Marsafawy, E. Molua, S. Ouda, M. Ouedraogo, I. Sène, D. Maddison, S. Niggol Seo, and Ariel Dinar, Will African Agriculture Survive Climate Change? World Bank Economic Revew, 20(3): , Mendelsohn Robert and Niggol Seo, Changing farm types and irrigation as an adaptation to climate change in Latin American agriculture. World Bank Policy Research Working Paper 4161, Seo, Niggol and Robert Mendelsohn, An analysis of crop choice: adapting to climate change in Latin American farms. World Bank Policy Research Working Paper 4162, Seo, Niggol and Robert Mendelsohn, A Ricardian analysis of the impact of climate change on Latin American farms. World Bank Policy Research Working Paper 4163, Seo, Niggol and Robert Mendelsohn, An analysis of livestock choice : adapting to climate change in Latin American farms. World Bank Policy Research Working Paper 4164, Dasgupta Susmita, Benoit Laplante, Craig Meisner, David Wheeler, Jianping Yan The Impact of Sea-Level Rise on Developing Countries: A Comparative Analysis. World Bank Policy Research Working Paper Larson Donald F. and Gunnar Breustedt Will Markets Direct Investments under the Kyoto Protocol? World Bank Policy Research Working Paper Buys, Piet, Uwe Deichmann, Craig Meisner, Thao Ton That, David Wheeler, Country Stakes in Climate Change Negotiations: Two Dimensions of Vulnerability. World Bank Mimeo. 6 Kojima, Masami, Donald Mitchell, and William Ward (May 2007) Considering Trade Policies for Liquid Fuels. ESMAP Report, World Bank 10