Working Group III: Mitigation

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7.4 Issues in Estimating Costs 7.4.1 Relationship between Mitigation Costs and Development, Equity, and Sustainability

A number of key concepts applied in cost assessment provide important insights about the DES aspects of mitigation policies without intending to be comprehensive in coverage. This section discusses a number of the important linkages between costing studies and DES approach.

Chapter 1 states that a system’s capacity for mitigation depends on a number of characteristics that must be considered in the context of its unique position and aspirations including:

  • a range of viable technical options;
  • a range of viable policy instruments;
  • resource availability and distribution; and
  • human and social capital.

Each of these characteristics is interrelated with DES issues, but also has major impacts on mitigation costs. Thus, the interaction between DES aspects and mitigation costs is two-way. DES policies have, on the one hand, major implications for economic structure and viability of policy instruments, as well for man-made, natural, and social capital. Mitigation policies, on the other hand, have implications for the same DES issues. The focus of this section is on the second of these feedback mechanisms.

The DES implications of mitigation policies are different according to the geographical scale of the efforts. International as well as national large-scale mitigation efforts can potentially impose a large demand for exhaustible resources or can be thought to impose irreversible damages on environmental resources and these impacts should be reflected in mitigation studies. Mitigation policies also have long-term implications on future climate change and thereby on intergenerational equity. A number of issues related to how mitigation costing studies address intergenerational equity issues are discussed in Section

Climate change mitigation policies implemented at a national level will, in most cases, have implications for short-term economic and social development, local environmental quality, and intragenerational equity. Mitigation cost assessments that follow this line can address these impacts on the basis of a decision-making framework that includes a number of side-impacts to the GHG emissions reduction policy objective. The goal of such an assessment is to inform decision makers about how different policy objectives can be met efficiently, given priorities of equity and other policy constraints (natural resources, environmental objectives). A number of international studies have applied such a broad decision-making framework to the assessment of development implications of CDM projects (Austin et al., 2000).

The following sections highlight a number of key linkages between mitigation costing issues and broader development impacts of the policies, including macroeconomic impacts, employment creation, inflation, marginal costs of public funds, capital availability, spillovers, and trade. This leads to discussion of a number of issues involved in an economic assessment of intergenerational equity aspects.

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