1.2.5 Distributional Impacts and Equity Considerations
It is important to consider more than the aggregate (worldwide) benefits and
costs of such policies in examining and evaluating mitigation options. Considerations
of the national, intranational, industrial, and intergenerational distributions
of the benefits and burdens of mitigation policiesas well as considerations
of the historical contributions to the accumulation of GHGsare crucial
to develop equitable climate policies. The WGII report (IPCC, 2001) indicates
that the impacts of climate change vary substantially across regions of the
globe. Indeed, climate impacts can differ even on the scale of a few miles depending
on geography, terrain, and other natural conditions. The costs of the economic
impacts of climate policies are distributed unevenly as well, although the distribution
of these impacts depends on the types of mitigation policies introduced. It
is important to consider the distribution of cost impacts of different potential
policies across nations, socioeconomic groups, industrial sectors, and generations.
The distribution of the economic impacts of mitigation policies across economic
sectors is examined in Chapter 9. Policies such as
carbon taxes or carbon caps are designed to limit carbon use and are likely
to cause production, output, and employment to fall in the coal and oil extraction
industries. The impact on the natural gas industry is less clear. On the one
hand, a carbon tax raises the cost of supplying natural gas, which tends to
imply reduced demands, output, and employment in this industry. On the other
hand, this tax raises the price of coal by a larger percentage, inducing shifts
in demand from coal to natural gas. The impact of mitigation policies on renewable
energy sources is likely to vary by resource and region but are likely to lead
to larger markets for renewables. Mitigation policies are expected to lead to
structural changes in manufacturing, especially in the developed countries.
Sectors that supply energy-saving equipment and low-carbon technologies are
likely to benefit from these policies. Sectors that rely intensively on carbon-based
fuels are expected to suffer price increases and a loss of output.
Chapter 8 indicates results that concern the distribution
of impacts across household income groups. According to most studies, mitigation
policies that imply higher energy prices impose higher cost-burdens (relative
to income) on less affluent households than on richer households. This reflects
that the poor tend to spend a larger share of their income on energy. Equity
considerations suggest that mitigation policies can overcome these distributional
consequences by including provisions that reduce the costs they impose on the
For the most part, existing studies of the impacts across household groups
(or socioeconomic groups, more broadly) apply to developed nations. There is
a severe need for studies that consider the distributional impacts within developing
countries. In addition, nearly all the studies lack the detail necessary to
consider impacts in socioeconomic dimensions other than income. As a result,
important costs to various groups within the general population may be overlooked.
Important costs may also be hidden by aggregation. This is especially relevant
in studies of the impacts of climate change and mitigation activity in developing
countries, since existing studies may overlook major impacts to the most vulnerable
individuals. Section 1.3 discusses the issue of equity
in more detail and from a broader perspective.
1.2.6 Sustainability Considerations
Sustainability considerations are typically not the primary motivation for
studies carried out from the cost-effectiveness perspective. Besides
the distributional effects of climate policies, their implications for other
environmental concerns can also be calculated. For example, the implied impact
of climate policies on sulphur, particulate emissions, or land uses can be calculated.
Sulphur emissions in some scenarios may be so high that they have major health
impacts, and the land-use requirements for a global energy industry based on
a very large biomass could potentially crowd out agriculture, forestry, and
the recreational use of land.
As indicated in Chapter 2, the benefits and costs
from a given mitigation policy depend on the baseline circumstances to which
the policy is applied. The uncertainties as to what the baseline circumstances
might be are vast, in the light of which it is important to evaluate the impacts
of given policies relative to a range of baseline scenarios rather than to a
single baseline scenario.
Human welfare and the state of the environment (which may be a determinant
of human welfare, but one that is the focus of this assessment report) depend
both on the baseline path and on the policy-induced departures from the baseline.
A striking conclusion from Chapter 2 is that the differences
in human welfare across plausible baselines can be greater than the welfare
impacts of mitigation policies. That is, the nature of the baselinewhich
reflects a wide range of human decisions and policies outside of the climate-policy
arenacan be more important than the departures from that baseline caused
by climate policy. The lower the level of baseline GHG emissions, the smaller
is the effort required to achieve any specific emissions or concentration target.
This does not eliminate the importance of policy actions to mitigate climate
change, but it reveals the importance of developments that occur outside what
is typically regarded as climate policy.
It is not surprising that changes in the economy resulting from climate policy
may be small compared to changes that may occur in response to other trends
in the economy and to other policies. This is so because most the GHG emissions
occur in energy production, which forms a relatively low percentage of the economy
(no more than 5%10%). In principle, rearranging energy use as one element
of a mitigation strategy need not be a major shock to the economy if it is done
efficiently. Important also is that the costs of mitigation are likely to vary
substantially among nations because of both differences in baseline emissions
trends and differences in flexibility to accomplish the emissions reductions
required (see also Schneider (1998) on this subject).
Deciding what counts as climate policy is not always straightforward,
as discussed in Chapter 2. In many policy discussions,
climate-change mitigation policy is assumed to involve actions for which the
primary target is a reduction in GHG concentrations. These include efforts directly
aimed at reducing carbon emissions, at expanding carbon sinks, at reducing emissions
of other GHGs (like methane and nitrous oxide from agriculture), and at promoting
the development of new technologies and production processes that rely less
on carbon-based fuels (see Chapters 3 and 4).
If this is the domain of mitigation policy, then other (anticipated) actions
that do not fall in this category need to be regarded, by default, as part of
the baseline. However, other activities have important consequences for climate
change. For example, policies oriented towards local air pollutionsuch
as controls on hydrocarbon emissions from automobilesaffect levels of
emissions of CO2 as well as the formation of tropospheric ozone,
and thus have consequences for climate. Moreover, as discussed below, some policies,
such as poverty alleviation, may ultimately have significant implications for
the emissions of GHGs and are therefore extremely important to climate change.
The implications of different baseline assumptions about the future of the
world reflect, in part, different assumptions about the sustainability of economic,
biological, and social systems. Bringing them to bear on the analyses of mitigation
opens the possibility that climate policies can be assessed within alternative
worlds and that how climate policies might effect various measures of sustainability
can be examined explicitly. This kind of analysis can support, though, only
a limited treatment of sustainable development. A more in-depth treatment has
been attempted by researchers working from the perspective of envisioning
transitions to sustainability; their perspective is described in Section
In addition to the direct benefits of GHG mitigation represented in terms of
reductions in impacts resulting from climate change, the cost-effectiveness
perspective also considers benefits from reductions in other pollutants4
that may accompany the GHG emission reductions. Given the focus on climate change
mitigation as the primary objective the term used most often is ancillary
benefits (see also Chapter 8). The term co-benefits
is used for situations where climate change and other environmental or socioeconomic
objectives are equally important. That notion comes more naturally from the
sustainability perspective and reflects that most policies designed to address
GHG mitigation also have other, often at least equally important, rationales,
e.g. related to development, equity and sustainability.