10.4.5 Who Should Pay for the Response? Mitigation by Countries and Sectors:
Equity and Cost-effectiveness Considerations
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,
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 warmingsetting GHG emission limitation targets for
individual countriesinvolves 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 Coases
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.
- What is a fair allocation of the costs of preventing the global warming
that is still avoidable?
- What is a fair allocation of the costs of coping with the social consequences
of the global warming that will not be avoided?
- What background allocation of wealth would allow international bargaining
about issues like (1) and (2) to be a fair process?
- 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
||General operational rule
||Every individual has an equal right to pollute or to
be protected from pollution
||Allow or reduce emissions in proportion to population
||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
||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)
||All countries with similar features have similar emissions rights and
||Equalize net welfare change across nationsnet cost of abatement
as a proportion of GDP
||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
||Achieving the greatest good (happiness) for the greatest number
||Maximize net present value of the sum of individuals utility (maximize
||No nation should be made worse off
||Compensate net losing nations
||The welfare of the worst-off nations should be maximized
||Maximize the net benefit to the poorest nations
||Allocate emissions permits to the highest bidder
||The negotiation process is fair
||Seek a political solution to emissions reduction
||Equalize per capita emissions
||Converge to an upper boundary of emissions
||The environment receives preferential treatment
||Maximize environmental values and cut back emissions accordingly
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