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Executive Summary
Scope for and New Developments in Analyses for Climate Change Decisions
Climate change is profoundly different from most other environmental problems
with which humanity has grappled. A combination of several features gives the
climate problem its unique feature, which include:
- public good issues that arise from the concentration of greenhouse gases
(GHGs) in the atmosphere (and require collective global action);
- the multiplicity of decision makers (ranging from global decision-making
frameworks (DMFs) down to the micro-level of firms and individuals);
- the heterogeneity of emissions; and
- the consequences of emissions around the world.
Moreover, the long-term nature of climate change originates because it is the
concentration of GHGs that is important, rather than annual emissions; this
feature raises the thorny issues of intergenerational transfers of wealth and
environmental good and bad outcomes. Next, human activities associated with
climate change are so widespread that narrowly defined technological solutions
are impossible and the interactions of climate policy with other broad socioeconomic
policies are strong. Finally, large uncertainties or in some areas even ignorance
characterize many aspects of the problem and require a risk management approach
to be adopted in all DMFs that deal with climate change.
Experiments with cost–benefit models framed as a Bayesian decision-analysis
problem show that optimal near-term (next two decades) emission paths diverge
only modestly with perfect foresight and even with hedging for low-probability,
high-consequence scenarios. Cost-effectiveness analyses seek the lowest cost
that will achieve an environmental target by equalizing the marginal costs of
mitigation across space and time. Long-term cost-effectiveness studies estimate
the costs to stabilize atmospheric carbon dioxide (CO2) concentrations
at different levels. While there is a moderate increase in the costs when passing
from a 750 ppmv to a 550 ppmv concentration stabilization level, there is a
larger increase in costs passing from 550 ppmv to 450 ppmv unless the emissions
in the baseline scenario are very low. The total costs of stabilizing atmospheric
carbon concentrations are very dependent on the baseline scenario: for example,
for scenarios focusing on the local and regional aspects of sustainable development
costs are lower than for other scenarios. Rather than seeking a single optimal
path, the tolerable windows or safe landing approaches seek to delineate the
complete array of possible emission paths that satisfy externally defined climate
impact and emission cost constraints. Results indicate that a delay in near-term
effective emission reductions can drastically reduce the future range of options
for relatively tight climate change targets. Less tight targets offer more near-term
flexibility.
International Regimes and Policy Options
Different mitigation policy options include the timing of responses to climate
change, the choice between mitigation and adaptation responses, the role of
technological innovation and diffusion, the choice between domestic action and
the adoption of international mechanisms, the combination of climate change
mitigation with actions towards other environmental or socio-economic objectives,
and others. The costs and benefits of these crucially depend on the characteristics
of the international agreement on climate change that is adopted. In particular,
they depend upon two main features of the international regime: the number of
signatories, and the size of their quantitative commitment to control GHG emissions.
The number of signatories depends on how equitably the commitments of the participants
are shared. Cost-effectiveness (minimizing costs by maximizing participation)
and equity (the allocation of emissions limitation commitments) are therefore
strongly linked.
There is therefore a three-way relationship between the design of the international
regime, the cost-efficiency of climate policies, and the equity of the consequent
economic outcomes. Thus, it is crucial to design the international regime in
a way that increases both its efficiency and its equity. The literature presents
different strategies to optimize an international regime. For example, countries
can be encouraged to participate in an international group committed to specific
emissions limits and targets if the equity (and therefore efficiency) is increased
by a larger agreement. This may include measures like an appropriate distribution
of targets over time, the linkage of the climate debate with other issues (“issue
linkage“), the use of financial transfers to affected countries (“side
payments”), and technology transfer agreements.
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