The establishment of long-term projections for GHG emissions is particularly complicated and uncertain for both developing countries and the EITs. These economies are often in a transition process in which important GHG emission sectors, such as the energy sector, industry, and transportation, are expected to play an increasing role. It is not possible, however, to project accurately the actual speed of this growth process and/or the GHG emission intensity of these future activities. Modelling tools and data are also very limited or even non-existent, and the only available information sources from which to generate GHG emission projections are often the official national development plans that cover a time horizon of 5–10 years only.

Changes in the structure of GDP have to be given careful consideration. One important aspect that could be integrated into the scenario development are the changes in economic structure and relative prices that emerge from structural adjustment programmes and other macroeconomic policies that many countries are currently undertaking. Another crucial issue, following that, will be the development of energy intensive and heavily polluting industrial activities, such as steel and aluminium production. As the recent shift of heavy industries from the developed towards the developing countries reaches its end, long-term economic output could come from services and other less energy-intensive activities. In EITs the issue is how fast and deep will the shift out of energy intensive industries be, and what will replace it.

The basic uncertainty of long-term GHG emission projections encourages analysts to use multiple baselines, each corresponding to a particular expectation of the future development pattern. Each development pattern may exhibit a unique emissions trajectory. A nation following development policies that emphasize greater investments in infrastructure, such as efficient rail transport, renewable energy technologies, and energy-efficiency improvements will exhibit a low emissions trajectory. However, a nation with substantial coal resources, scarce capital, and a low level of trade can be pushed towards a development path with high emissions.

The spatial distribution of the population and economic activities is still not settled in the developing countries. This raises the possibility of adopting urban and/or regional planning and industrial policies to strengthen small and medium cities and rural development, and thus reduce the extent of the rural exodus and the degree of demographic concentration in large cities. In the same way, technological choices can substantially decrease the energy demand and/or GDP elasticities. The preservation of a certain cultural diversity, as opposed to the trend towards a global uniformity of lifestyles, also favours less energy-intensive housing, transportation, leisure, and consumption patterns, at least in some cases. One example is related to development policies that avoid low urban population density coupled with long daily trips to work and large shopping centres by car.

It is a special challenge in costing studies to translate preferences for biological and cultural diversity into a useful value measure. The market does not price most of the services provided by biological or cultural diversity. Roughgarden (1995) argues that there is no need to quantify the benefits of these services, which are either so obvious or impossible to capture that measurement is unnecessary. Following this line of argument, “science” should dictate a target that could be used to establish a safe minimum standard–a level of preservation that guarantees survival of the species or culture in question (Ciriarcy-Wantrup, 1952). This minimum standard approach puts an infinite value on avoiding extinction. This view puts biological or cultural diversity beyond the reach of economic trade-offs, and the analyst attempts to find the least-cost solution to achieve some set standard.

However, Epstein (1995) argues that preservation without representation of benefits is unacceptable. It is suggested that hard evidence is needed to prove that the biological and cultural preservation benefits dominate those from development. It is then logical to compare the costs and benefits when resources are scarce, and an attempt should be made to balance the costs and benefits so that funds are allocated to their highest valued use.

Estimating the social value of biodiversity and culture is a major challenge. For biodiversity values there is no consensus as to the usefulness of the primary tool used to reveal the monetary value of these preferences–contingent valuation surveys. These public opinion surveys use a sequence of questions to put a monetary value on personal preferences. However, since people are responding to a survey rather than facing their own budget constraint and actually spending their own money, no market discipline exists to challenge their statements (Brown and Shogren, 1998).

The above possibilities of alternative development patterns highlight the technical feasibility of low carbon futures in the developing countries that are compatible with national objectives. However, the barriers to a more sustainable development in developing countries can hardly be underestimated, from financial constraints to cultural trends in both developed and developing countries, including the lack of appropriate institutional building. Any abatement-cost assessment relies on the implicit assumptions taken in the baseline or mitigation scenarios with regard to the probability of removing these barriers.

Since mitigation costs for different development patterns may vary substantially, one way to reflect this in mitigation cost analysis is to use a scenario-based range of mitigation costs rather than a single mitigation cost (see also Section 7.3.6).

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