Professor Euston Quah Economics Department Nanyang Technological University GROWTH AND THE ENVIRONMENT: WHAT CAN ASEAN GOVERNMENTS DO?

Transcription

1 Professor Euston Quah Economics Department Nanyang Technological University GROWTH AND THE ENVIRONMENT: WHAT CAN ASEAN GOVERNMENTS DO?

2 INTRODUCTION ASEAN is one of the fastest growing regions in the world Period Average Annual Real GDP Growth (%) ASEAN-5 World * 4.49* *projected ASEAN-5: Indonesia, Malaysia, The Philippines, Thailand, Vietnam Source: IMF World Economic Outlook, 2011

3 INTRODUCTION However, ASEAN economies have yet to catch up with the developed world GDP per capita using PPP (2010) ASEAN-5 ASEAN-5 G7 G7 5, , Source: IMF World Economic Outlook, 2010

4 INTRODUCTION Also, ASEAN societies still have needs that can only be alleviated with continued growth HDI comparative map 2011: Darkest regions have highest HDI

5 INTRODUCTION 35 Poverty Headcount Ratio at National Poverty Line (% popn) Cambodia Malaysia Philippines Thailand Vietnam Laos Indonesia

6 SUMMARY OF SITUATION THUS FAR ASEAN needs to continue growing Growth has been fast BUT at relatively high environmental cost Failure to achieve sustainable growth Development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland Commission) Damage to environment compromises future generations standard of living

7 ASEAN must avoid situation of high current GDP growth but reduced future standard of living due to: Worsened health Reduced productivity Fewer green spaces Etc SUSTAINABLE DEVELOPMENT IS AN IMPERATIVE

8 SIX AREAS OF IMPROVEMENT Pricing green (non-market goods) Pricing externalities Extensive use of Cost-Benefit Analysis (CBA) Dealing with solid waste Not-in-my-backyard (NIMBY) issues Transboundary pollution

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10 FOREST FIRES The cause of haze throughout Southeast Asia Poor Visibility Haze in Singapore 10

11 GETTING PRICES RIGHT The true cost of production 11

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14 LANDFILLS An incomplete solution 14

15 NOT-IN-MY-BACK-YARD! Protests against proposed rare earths refinery in Malaysia 15

16 FOCUSING ON CLIMATE CHANGE ASEAN, 3.91% Rest of World, 96.09% Share of Global Carbon Emissions Source: UN database

17 CLIMATE CHANGE ASEAN is not the greatest contributor. But high vulnerability to climate change High reliance on agriculture Dense population Vulnerability of flooding Large coastal region Country Philippines 5 Myanmar 10 Vietnam 23 Indonesia 27 Thailand 37 Climate Change Vulnerability Ranking (Global) Source: Maplecroft Climate Change Vulnerability Index, 2011

18 ASEAN S VULNERABILITY TO CLIMATE CHANGE General vulnerability is high but damage is assymetric

19 WHAT CAN BE DONE? Adaptation (short-run) Anti-flooding infrastructure Subsidies for flood- /drought-resistant agriculture Inclusive growth Reduce poverty; increase peoples adaptive capability Mitigation (long-run): Moving to low-carbon economy Carbon pricing Tradable permits Carbon tax Green technology Optimal solution

20 MARKET SOLUTIONS FOR SUSTAINABLE DEVELOPMENT Australia successfully introduces a carbon tax 20

21 CARBON TAX ADVANTAGES CAP-AND-TRADE ADVANTAGES Less costs compared to a capand-trade regime. Taxation system already in place Legitimacy of setting a carbon price Potential revenue gains could fund cutting other distortive taxes Fewer opportunities for rentseeking behavior, financial finagling or corruption Control over total emission quantity Possibility of linking the country s market to other carbon markets More political support More robust and credible than a carbon tax regime No adjustment for inflation or growth COMPARISON OF CARBON TAXES AND CAP- AND-TRADE

22 CASE STUDIES: CARBON TAX Country/ Region Tax Scheme Sectors Target or Effectiveness Tax Rate Range Sweden CO 2 tax, in additional to environmental tax; Reform since early 1990s In favour of exported oriented, manufacturing sectors; exclude electricity production, biofuel and peat energy source; with compensation to some industries CO 2 emissions were about 15% lower than BAU in 1995, 20-25% lower than BAU in 2000 Per ton of CO 2 : $41 (1991), $12 (1993), $55 (1996). Canada Province of British Columbia Carbon tax, w.e.f. 1 st Jan, 2008 Applies to virtually all fossils fuels; revenue neutral. To reduce the province s carbon dioxide emissions by 33% of 2007 level by 2020 Per ton of carbon: CAD$10 in 2008, raises by CAD$5 a year for the next four years till CAD$30 in Japan A bill passed on 12th March, 2010, also includes CAT & promotion of nuclear energy; with CT starting from 2011 Not Available To cut greenhouse gases by 25% from 1990 level by 2020, and 80% from 1990 level by 2050 N.A. Korea: The Low-Carbon Green Growth Act is under legislation. China: A proposal with details of a carbon tax is under preparation. 22

23 CASE STUDIES: CAP-AND-TRADE Country/ Region Established Cap-and-trade Program Sectors Target Effective Periods Permit Price Range The European Union (EU) The European Union Emissions Trading Scheme (EU ETS) Power sector, specified industrial sectors, and the combustion facilities with large thermal inputs A reduction in EU GHGs emissions of at least 20% below 1990 levels; 20% of energy consumption; A 20% reduction in primary energy use compared with projected levels. Phase I: ; Phase II: ; Phase III: Phase I: 0-33/ton of CO 2 Phase II: 8-31/ton of CO 2 Northeast states of the U.S. Regional Greenhouse Gas Initiative (RGGI) Power plants with 25MW or greater generating capacity Accumulated 10% emissions reduction by 2018 Phase I: ; Phase II: Current: $1.86- $3.51/ton of CO 2 Future: $1.86- $3.05/ton of CO 2 Seven U.S. states and four Canadian provinces Western Climate Initiative (WCI) Electricity generation, combustion from industrial process, and consumption 15% GHGs emissions reduction below 2005 levels by N.A. State of California California Assembly Bill 32 Electricity generation, transportation fuels, natural gas and large industrial sources To reduce the state s GHG emissions below 1990 levels by 2020, which is approximately 30 % from BAU levels; and ultimately achieve 80% reduction by (Tentatively) N.A 23

24 GREEN TECHNOLOGY Differing rates of adoption in ASEAN Lack of funds Lack of IP protection How to encourage? Private-public partnerships Richer members can help poorer members (possible scope of convergence) Improve IP protection

25 GREEN TECHNOLOGY Green energy is but one area of pursuit 25

26 FURTHER CLIMATE CHANGE ISSUES Further issues ASEAN governments must consider: Uncertainty in magnitude of impacts Biased media reporting Long-run and short-run trade-offs Mis-attribution of weather phenomena Ultimately, success depends on current population s preference for environmental goods

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28 DEVELOPMENT, CLIMATE CHANGE, AND SOCIAL WELFARE Environmental Kuznets Curve (EKC) hypothesis Inverted U-shaped Applicability to pollutants may differ: Local pollutants vs. Global pollutants (Shafik & Bandyophadhyay, 1992; Cole, Rayner, & Bates, 1997; Fodha & Zaghdoud, 2010) Implication: Continued development natural mitigation of climate change

29 CONCLUSION As a whole, growth is necessary, but must be sustainable Specific to carbon emissions, must have a balance of adaptive policies and mitigation strategies Ultimately, success depends on priorities of populace and political will

30 SCALES OF RELATIVE IMPORTANCE OF PUBLIC GOODS TO LIFE SATISFACTION SINGAPORE 100 BANGKOK 100 Reduce carbon emissions (55.4) Increase waste recycled (49) Reduce waiting time (61.8) Reduce failure and dropout rates (49.7) Expand MRT network (48.3) Increase subject variety (57.6) Expand BTS network (49.6) Reduce carbon emissions (48.0) Reduce accidents (59.3) Increase waste recycled (48.5) Increase subject variety (35.8) Reduce students depression rate (37)

31 Can societies hold local, not global, industrial pollution within acceptable bounds while industry continues to grow? For this question, at least, the answers appears to be yes. -World Bank