IPCC Fourth Assessment Report: Climate Change 2007
Climate Change 2007: Working Group III: Mitigation of Climate Change

7.7 Sustainable Development (SD) implications of industrial GHG mitigation

Although there is no universally accepted, practical definition of SD, the concept has evolved as the integration of economic, social and environmental aims (IPCC, 2000a; Munasinghe, 2002). Companies worldwide adopted Triple Bottom Line (financial, environmental and social responsibility) reporting in the late 1990’s. The Global Reporting Initiative (GRI, n.d.), a multi-stakeholder process, has enabled business organizations to account for and better explain their contributions to sustainable development. Companies are also reporting under Sigma Guidelines (The Sigma Project, 2003a), and AA1000 (The Sigma Project, 2003b) and SA 8000 (SAI, 2001) procedures. Many companies are trying to demonstrate that their operations minimize water use and carbon emissions and produce zero solid waste (ITC, 2006). SD consequences can be observed or monitored through various indicators grouped under the three major categories. (See Section 12.1.1 and 12.1.3 for more detail).

However, the SD consequences of mitigation options are not automatic. GHG mitigation, per se, has little impact on four of the SD indicators: poverty reduction, empowerment/gender, water pollution and solid waste. The literature indicates that supplementing mitigation options with appropriate national macroeconomic policies, and with social and local waste reduction strategies at the company level (Tata Steel, Ltd., 2005; BEE, 2006), has achieved some sustainability goals. Economy-wide impact studies (Sathaye et al., 2005; Phadke et al., 2005) show that in developing countries, like India, adoption of efficient electricity technology can lead to higher employment and income generation. However, the lack of empirical studies leads to much uncertainty about the SD implications of many mitigation strategies, including use of renewables, fuel switching, feedstock and product changes, control of non-CO2 gases, and CCS. For example, fuel switching can have a positive effect on local air pollution and company profitability, but its impacts on employment are uncertain and will depend on inter-input substitution opportunities.

GHG emissions mitigation policies induce increased innovation that can reduce the energy and capital intensity of industry. However, this could come at the expense of other, even more valuable, productivity-enhancing investments or learning-by-doing efforts (Goulder and Schneider, 1999). If policies are successful in stimulating economic activity, they are also likely to stimulate increased energy use. GHG emissions would increase unless policies decreased the carbon-intensity of economic activity by more than the increase in activity. Due to energy efficiency improvements and fuel switching in OECD countries (Schipper et al., 2000; Liskas et al., 2000), as well as in developing countries like India (Dasgupta and Roy, 2001), China (Zhang, 2003), Korea (Choi and Ang, 2001; Chang, 2003), Bangladesh (Bain, 2005), and Mexico (Aguayo and Gallagher, 2005), energy and carbon intensity have decreased, for the industry sector in general and for energy-intensive industries in particular. In Mexico, deindustrialization also played a role. For OECD countries, structural change has also played an important role in emissions reduction. However, overall economic activity has increased more rapidly, resulting in higher total carbon emissions.

SMEs have played a part in advancing the SD agenda, for example as part of coordinated supply chain or industrial park initiatives, or by participating in research and innovation in sustainable goods and services (Dutta et al., 2004). US DOE’s Industrial Assessment Centers (IACs) are an example of how SMEs can be provided with financial and technical support to assess and identify energy and cost-saving opportunities and training to improve human capital (US DOE, 2003).