There are eight distinct but related determinants of mitigative capacity (Yohe, 2001, in press). Cast here in the context of a single country trying to confront its climate change mitigation challenge, they are:

• range of viable technological options for reducing emissions;
• range of viable policy instruments with which the country might effect the adoption of these options;
• structure of critical institutions and the derivative allocation of decision-making authority;
• availability and distribution of resources required to underwrite their adoption and the associated, broadly defined opportunity cost of devoting those resources to mitigation;
• stock of human capital, including education and personal security;
• stock of social capital, including the definition of property rights;
• country’s access to risk-spreading processes (e.g., insurance, options and futures markets, etc.); and
• ability of decision makers to manage information, the processes by which these decision makers determine which information is credible, and the credibility of the decision makers themselves.

This section will use these determinants as organizing tools in its assessment of the degree to which current thinking, as evidenced by subsequent chapters, includes the first very preliminary steps toward a thorough integration of cost-effectiveness, equity, and sustainability on the mitigation side of the climate problem.

Mitigative capacity is the mitigation analogue of the concept of adaptive capacity introduced in Chapter 18 of the WGII report (IPCC, 2001). Indeed, adaptive capacity is offered there as a framework upon which to build systematic and comparable representations of communities’ and/or countries’ ability to ameliorate or exploit the impacts of the natural or social stresses that they might face. As such, adaptive capacity plays a similar organizational role for WGII in their assessment of impacts as mitigative capacity does herein. WGII authors built their assessments around the notion that a system’s vulnerability to climate change is determined both by its exposure to the impacts of climate change and by its adaptive capacity. Their analysis uncovered a list of determinants for adaptive capacity that is nearly identical to the list of determinants for mitigative capacity given above. Organization of their thoughts around those determinants enabled them to integrate cost-effectiveness, equity, and sustainability into their assessments of the relative vulnerabilities of different nations, regions, and sectors.

Many of the subsequent chapters presented here offer insight into the role of the first two determinants listed above in determining the ability of various nations to mitigate climate change. Section 1.5.1.1 offers a brief introduction to these insights. An equally brief assessment of some of the related literature from which the roles of the other determinants has been gleaned is given in Section 1.5.1.2. Its coverage is more suggestive of where climate researchers and policymakers should look for aid in formulating the next round of questions; it is less indicative of where past efforts and discussion have been concentrated.

1.5.1.1 Integrating Environmental, Social, and Economic Objectives in the Third Assessment Report

Chapters 3 and 4 herein discuss in detail the standard technological options to mitigate climate change. Some or all of these options might be available to any country as it decides to reduce or to slow its emissions of greenhouse cases. However, each technological option must be evaluated in terms of five factors:

• its technological potential in an uncertain environment;
• its economic potential given economic uncertainty and risk;
• existence of technical and economic constraints to its adoption;
• existence of social, cultural, and political constraints to its adoption; and
• ability of key decision makers to understand and to access its potential.

Chapter 5 underlines the significance of each of these characteristics. It points out that cost and performance specifications are critical; however, a technology could be expensive in one place and relatively inexpensive in another; or it may be inexpensive when denominated in one numeraire, but expensive when denominated in another (see Schneider, 1999). Chapter 5 also highlights social and economic constraints derived from high private discount rates, market failures, closed economies, uneven allocations of resources, uneven access to decision-making processes, and other characteristics of social and cultural structures. Finally, Chapter 5 focuses considerable attention on information. Decision makers must be able to understand a technology’s economic and technical potential in the context of their own countries, for which data and information may be scarce or, in cases where prices do not reflect social cost, misleading. Clearly, these observations extend the discussion beyond simply listing gadgets towards developing an understanding of how country-specific characteristics might enhance or impede decision makers’ abilities to adopt mitigative technologies.

This chapter also underlines the sensitivity of acceptable policy instruments to a similar list of critical parameters that extend efficiency discussions to include equity and sustainability. These include:

• opportunity cost of their implementation, measured broadly to include their development, equity, and sustainability implications;
• sensitivity of these costs to alternative designs;
• availability of credible information and the ability to monitor critical factors in the face of uncertainty;
• definition of a wide range of policy objectives and the degree to which they complement the objective of climate mitigation;
• credibility of the policies and legitimacy of the policymakers;
• social, cultural, political, and economic constraints to their implementation, and
• the structure of the decision-making process itself.

These characteristics clearly have enormous significance when they are cast in the context of development, equity, and sustainability. Later chapters in this report show how alternative policy designs can, on average, have widely different costs and implications even if they achieve comparable results. Chapters 6, 7 and 8 show, for example, that the cost of a policy does not depend on the specification of its targeted outcome only. It also depends on the specification of its timing, on the flexibility that it allows, and on the degree to which it is supported by the international co-ordination of similar efforts across the globe. Different policy designs for the same objective can also have different distributional impacts–different sets of winners and losers across space and time who all come to the table with different access to decision making. Moreover, the opportunity cost of any policy can be measured not only in terms of economic cost, but also in terms of non-economic metrics that measure progress or regression across a wide range of critical variables and against an equally large range of social, cultural, or political objectives (see Schneider, 1999). As a result, mitigation policies that have been successfully adopted in one country might be totally beyond the range of possibility in another.

Finally, differences in the flexibility of alternative policy designs can also mean differences in long-term sustainability from one country to another. Flexibility in response to one mitigation policy that adds efficiency and reduces costs in one place may threaten the very existence of critical systems in another. Ultimately, the goal of international agreements is to induce decision makers at various levels–national and municipal governments, corporate executives, rural communities, and individuals engaging in both production and consumption decisions–to undertake actions that lead to the mitigation of GHGs. There is, in short, a multitude of policy options and instruments available to decision makers at various levels.

Figure 1.7 illustrates this complexity in a diagrammatic form by taking the example of the Kyoto Protocol. The parties have agreed to a 5.2% reduction of Annex I emissions below 1990 levels by the first commitment period, 2008 to 2012. To realize these reductions, however, national governments in these countries have to undertake policy measures that induce corporate and other actors to modify their behaviour. As is shown presently, these policy decisions cover both regulatory and market instruments. Individual economic actors will respond to these incentives through internal changes as well as domestic and international decisions. International decisions cover the innovative Kyoto mechanisms (JI, IET, and the CDM) and are relevant to non-Annex I countries, which will need to take supportive policy decisions as well. These are specifically in the area of institutional development, capacity building, project approval, project monitoring and certification, and national reporting.

Uncertainty, vulnerability to shocks, and attitudes towards risk influence the perceived legitimacy of various decision options. At a global or national level, public opinion and therefore public policy is affected by the scientific uncertainty over the range and impact of climate change. At subnational levels, such uncertainty and vulnerability lies not only in the future, but also in the present circumstances of specific groups–the poor, the communities living in fragile or threatened areas, and the ecological refugees (Gadgil and Guha, 1995). It shapes the collective experience of such groups, determines their decision objectives, and affects their choices as well as susceptibility to policy-induced changes.

Finally, the incentive situation, the nature and strength of institutions for collective action, and the quality and type of information available to decision makers affect individual decisions. All three of these factors vary from one context to another and from one level of decision making to another. Next the nature of governmental policy intervention is discussed, and then the context within which such policies are used is analyzed.

1.5.1.2 Expanding the Scope of Integration

Decisions that lead to the emissions of GHGs that result in global warming are made under, and generally because of, the system of incentives and institutions in place, and are based on the information available to decision makers. Influencing such decisions requires policy intervention at global, national, or local levels. Conversely, the existence of institutions and legitimacy determines the effectiveness of the menu of potential governmental policies outlined above. There is significant heterogeneity within most countries in the types of climate change impacts that might be expected and in the likely impact of GHG mitigation policies. The ability to adapt to climate change depends on the level of income and technology, as well as the capacity of the system of governance and existing institutions to cope with change. The ability to mitigate GHG emissions depends on industrial structure (the mix of industrial activities), social structure (including, e.g., the distance people must travel to work or to engage in recreational activities), the nature of governance (especially the effectiveness of government policy), and the availability and cost of alternatives. In short, what is feasible at the national level depends significantly on what can be done at the subnational, local, and various sectoral levels. However, most studies assume that the national level is the most appropriate for assessing and reacting to the externalities that result from emissions of GHGs and for negotiating international climate change agreements.

The prospect of climate change is just one of many issues of concern to governments, and in most countries climate policy is debated within a broader framework. National policymakers, therefore, have to make trade-offs in implementing climate policies within a comprehensive national and international political economy framework. Many political parties and stakeholder groups oppose climate policy because of perceived conflicts with private sector interests. They also perceive conflicts with traditional macroeconomic goals, like full employment, price stability, and international competitiveness. They also sometimes fear competition with other traditional objectives for public attention and public expenditure (e.g., health care, national security, infrastructure, and education). Likewise, some people may resist mitigation policies (regardless of who pays for them) because of the perceived adverse impacts on economic growth and poverty eradication, even though others might suggest that the implementation of such policies could provide potential opportunities for sustainable development.

Also, many countries have more than one national policy-making authority. In some cases, this diversity may reflect a separation of the executive and legislative branches of government. In others, it may simply be that separate agencies are responsible for economic policy, environment, and international affairs. These agencies will have different views regarding both the needs for climate policy and its likely impact on other goals. The decision-making process invariably reflects the relative political influence of these groups, and involves political negotiations and compromises between them. As a result, O’Riordan et al., 1998) argue that issues considered by governments to be on the policy periphery, like climate change, are not easily factored into consideration of issues at the policy core (such as health care, education, national economic policy, or corporate manufacturing strategy). The issue networks and policy communities around environmental ministries in most countries are weak relative to those around economic and defence ministries. Climate change is sometimes invoked to boost support for existing policy agendas, such as industrial restructuring. Nonetheless, climate change has seldom, if ever, been perceived within the powerful ministries and their policy communities as sufficiently threatening to their departmental interests to fundamentally change those agendas (O’Riordan and Jäger, 1996; Beuerman and Jäger, 1996).

There is, as well, enormous variety in the range of institutional and other conditions in various countries at the subnational level. The political decision-making process in developed countries is affected to a certain degree by powerful non-governmental institutions–including corporations and issue-based non-governmental organizations (NGOs; March and Rhodes, 1992; Sabatier and Jenkins-Smith, 1993; Smith, 1993; Michaelowa, 1998; O’Riordan et al., 1998). These can be a source of resources and new ideas to address climate change as it occurs, but they can also impede the identification and response to changes because of vested interests in the current or some desired allocation of resources. In developing countries, a growing number of institutions have emerged to champion environmental agendas. These range from groups concerned with narrowly defined problems and opportunities (e.g., grassroots groups, wetlands protection groups) to broad-based rights groups (e.g. women’s groups) that address a range of common problems (see, e.g., Banuri et al., 1994). However, significant differences continue between the legitimacy and reach of such groups in the developed and developing regions.

The role of the informal sector can also differ between developed and developing countries (see, e.g., Cantor et al., 1992). Although the term is defined somewhat loosely in the literature–often referring to urban, small-scale, non-organized economic activities, and elsewhere to activities not covered in national tax nets–estimates suggest that the informal economy may cover as much as one-third of the economic activity of some developing countries. Given its relative imperviousness to analysis as well as policy influence (indeed, its very existence is credited by some writers to its ability to escape policy influence), it is difficult to project how this sector will react to impacts from climate change or mitigation policies.

The role of information depends critically on the legitimacy of institutions that provide it. The capacity for research, analysis, and policy development is generally weak in developing countries, and especially so in terms of climate change. More importantly, this limited capacity is focused exclusively at the national level. The result is often a credibility gap between the national and local levels. In general, it is difficult to convince local actors of the significance of climate change and the need for corrective action.

More importantly, the bulk of the research and analytical capacity at the global level is concentrated in the developed countries. This is true especially of climate modelling, but also in analyses of the relationship between climate change and sustainable development. Since the late 1980s, massive investment in climate change research has taken place in the developed countries. In contrast, there is a paucity of research institutions in developing countries, with a relatively small level of research effort and investment. This is adequate neither for policy development nor for reassuring policymakers and NGOs of the developing region that the research results are unbiased (Sagar, 1999).²⁸

Taken together, these insights suggest a need for investment in the research and analytical capacity of the developing countries, and for orienting the research effort in both developing and developed countries towards the local impacts of climate change and the capacity for climate change adaptation and mitigation. Section 1.5.2 indicates how approaching this complexity within the organizing concept of mitigative capacity can help to generate insights into interpreting and extending analytical exercises, integrating these exercises across multiple stresses, and using this integration to inform discussions and debates in the policy arena.

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