Equity and efficiency considerations in the context of decision making that addresses global climate change are important for various reasons, including ethical concerns, effectiveness, sustainable development, and implementation of UNFCCC itself (Munasinghe, 1998; see also Chapter 1). Principles of justice and fairness⁴⁰ are important in themselves, in all types of human interactions, and play a major role in practically all modern international agreements, including the UN Charter; they emphasize the basic equality of all humans (Jepma and Munasinghe, 1998).

Some authors argue that equitable decisions generally carry greater legitimacy and encourage parties with differing interests to co-operate better in carrying out mutually agreed actions. One of the major obstacles to reaching a comprehensive agreement on global warming—setting GHG emission limitation targets for individual countries—involves parties that act as a “veto” because they regard particular arrangements as unfair or unjust. Decisions that are widely accepted as equitable are likely to be implemented with greater willingness than those enforced under conditions of mistrust (Rowlands, 1997). Others find little evidence that fairness matters much. Victor (1999) examines the relationships between fairness and the compliance with international environmental agreements through the lessons learned about implementation and effectiveness of numerous earlier treaties. His conclusion is that equity concerns matter little in the success of negotiating and implementing such agreements. Even for cases in which fairness seems to play some role, willingness to pay had a stronger role. Victor argues that if parties to an agreement take the trouble to deviate from the simplest across-the-board commitments, then many criteria need to be considered in negotiating commitments. Fairness might be one criterion, but is probably not the most important.

In a broader context, equity and fairness are important elements of the social dimension, while efficiency is a crucial factor in the economic dimension of sustainable development. The impetus of sustainable development provides a crucial reason for finding efficient and equitable solutions to the problem of global warming, especially with regard to future generations. The UNFCCC recognizes these two principles in Article 3.1.

Equity principles apply to both procedural and consequential issues (Banuri et al., 1996). Procedural issues concern the process of how decisions are made. The two aspects of procedural equity involve the effective participation in decision-making processes and the process itself, which should be the principle of equal treatment before the law. In this context, reference is made to Coase’s model of social cost (1960) in that he assumes a situation of equal bargaining power among participants and equal distribution of the costs of making the bargain with respect to the internalization of externalities. The philosophical notion of procedural equity is the “ideal speech situation” (Habermas, 1981), a situation in which dialogue and decision making are free from inappropriate constraints such as barriers to the acquisition of knowledge or financial resources. Transfer of these concepts to climate change negotiations requires consideration of the influence of scientific information, human resources, institutional capacities, and financial assets on the bargaining, and a redistribution of these among participants to create procedural equity.

Consequential equity deals with the outcome of decision making, and with the distribution of costs and benefits of preventing global warming (including future emission rights) and of coping with the climate change impacts and adaptation. The consequential decisions have implications for burden sharing among and within countries (intragenerational and spatial distribution) and between present and future generations (intergenerational and temporal distribution). While actions to mitigate climate change have to be paid for by the present generation, benefits in the sense of avoided losses will affect generations to come. This involves discounting future benefits to a net present value (Portney and Weyant, 1999). However, most of the potentially affected parties are not present to participate in the decision making, so that the current generation has to discuss equity issues within climate change.

In total, four kinds of questions frame the issue of justice in climate change (Shue, 1993), of which the third (procedural equity) provides the basis for a just process in determining the other three kinds of allocations.

1. What is a fair allocation of the costs of preventing the global warming that is still avoidable?
   
2. What is a fair allocation of the costs of coping with the social consequences of the global warming that will not be avoided?
   
3. What background allocation of wealth would allow international bargaining about issues like (1) and (2) to be a fair process?
   
4. What is a fair allocation of emissions of GHGs over the long term and during the transition to the long-term allocation?

To answer these questions scientists have developed typologies for the various distributional equity principles; these are understood to be general concepts of distributive justice and fairness, which often overlap. Associated burden-sharing rules, on the other hand, represent an operational function to generate a specific scheme to reduce GHG emissions or to bear the costs of climate change impacts. Table 10.9 gives an overview of general equity principles and accompanying operational rules (Thompson and Rayner, 1998).

Table 10.9: Equity principles and burden-sharing rules
Equity principle	Interpretation	General operational rule
Egalitarian	Every individual has an equal right to pollute or to be protected from pollution	Allow or reduce emissions in proportion to population
Sovereignty	All nations have an equal right to pollute or to be protected from pollution; current state of emissions constitutes a status quo (“grand-fathering”)	Proportional reduction of emissions to given or existing emission levels’ or equal percentage of emission reductions
Polluter pays	Welfare losses corresponding to gains by emissions	Share abatement costs across countries in proportion to (eventually including historical emissions) emission levels
Ability to pay	Mitigation costs vary directly with national economic well-being	Equalize abatement costs across nations (costs as proportion of GDP equal for each nation)
Horizontal	All countries with similar features have similar emissions rights and burden-sharing responsibilities	Equalize net welfare change across nations–net cost of abatement as a proportion of GDP
Vertical	Welfare losses vary positively with national economic well-being, welfare gains vary inversely with GDP	Progressively share net welfare change across nations, net gains inversely and net losses positively correlated with per capita GDP
Utilitarian	Achieving the greatest good (happiness) for the greatest number	Maximize net present value of the sum of individuals utility (maximize social welfare).
Compensation	No nation should be made worse off	Compensate net losing nations
Rawls’ maximin	The welfare of the worst-off nations should be maximized	Maximize the net benefit to the poorest nations
Market justice	Market justice	Allocate emissions permits to the highest bidder
Consensus equity	The negotiation process is fair	Seek a political solution to emissions reduction
Convergence	Equalize per capita emissions	Converge to an upper boundary of emissions
Environmental	The environment receives preferential treatment	Maximize environmental values and cut back emissions accordingly

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