53077 V2 world development repor: Q1Q Development and Climate Change Advance Overview Changing the Climate for Development Advance Press Edition, still subject to final changes (final Report due in late October) THE WORLD BANK Washington, DC ©2009 The International Bank for Reconstruction and Development I The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 34 12 11 10 09 This document summarizes the World Development Report 2010. It is a product of the staff of the International Bank for Reconstruction and Development I The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Cover design: Rock Creek Strategic Marketing Typesetting: Precision Graphics Contents of the World Development Report 2010 Foreword Acknowledgments Main Messages Overview Glossary 1 Climate Change and Development Are Inextricably Linked Focus A: The Science of Climate Change Part One 2 Reducing Human Vulnerability: Helping People Help Themselves Focus B: Biodiversity and Ecosystem Services in a Changing Climate 3 Managing Land and Water to Feed Nine Billion People, Protect Natural Systems, and Reduce the Effects of Climate Change 4 Energizing Development without Compromising the Climate Part Two 5 Integrating Development into a Global Climate Regime Focus C: Trade and Climate Change iii iv CONTENTS 6 Generating the Funding Needed for Mitigation and Adaptation 7 Accelerating the Innovation and Diffusion of Climate-Smart Systems 8 Climate-Smart Action: Overcoming the Behavioral, Organizational, and Political Forces of Institutional Inertia Bibliographical Note Glossary Selected Indicators Index Foreword Climate change is one of the most complex challenges of our young century. No country is immune. No country alone can take on the interconnected challenges posed by climate change, including controversia l political decisions, daunting technological change, and far- reaching globa l consequences. As the planet warms, rainfall patterns shift and extreme events such as droughts, floods, and forest fires become more frequent. Millions in densely populated coasta l areas and in island nations will lose their homes as the sea level rises. Poor people in Africa, Asia, and elsewhere face prospects of tragic crop failures; reduced agricultural productivity; and increased hunger, malnutrition, and disease. As a multilateral institution whose mission is inclusive and sustainable development, the World Bank Group has a responsibility to try to explain some of those interconnections across disciplines-development economics, science, energy, ecology, technology, finance, and effective internationa l regimes and governance. With 186 members, the World Bank Group faces the challenge, every day, of building cooperation among vastly different states, the private sector, and civil society to achieve common goods. This 32nd World Develop- m ent Report seeks to apply that experience, combined with research, to advance knowledge about Development and Climate Change. Developing countries will bear the brunt of the effects of climate change, even as they strive to overcome poverty and advance economic growth . For these countries, climate change threatens to deepen vulnerabilities, erode hard-won gains, and seriously undermine prospects for development. It becomes even harder to atta in the Millennium Development Goals-and ensure a safe and sustainable future beyond 2015. At the same time, many developing countries fear limits o n their critical call to develop energy or new rules that might stifle their many needs- from infrastructure to entrepreneurism. Tackling the immense and multidimensional challenge of climate change demands extraordinary ingenuity and cooperation. A "climate-smart" world is possible in our time- yet, as this Report argues, effecting such a transformation requires us to act now, act together, and act differently. We must act now, because what we do today determines both the climate of tomorrow and the choices that shape our future . Today, we are emitting greenhouse gases that trap heat in the at mosphere for decades or even centuries. We are building power plants, res- ervoirs, houses, transport systems, and cities that are likely to last 50 years or more. The innovative technologies and crop varieties that we pilot today can shape energy and food sources to meet the needs of 3 billion more people by 2050. We must act together, because climate change is a crisis of the commons. Climate change cannot be solved without coun tries cooperating on a global sca le to improve energy effi- ciencies, develop and deploy clean technologies, and expand natural "sinks" to grow green by absorbing gases. We need to protect hum an life and ecological resources. We must act together in a differentiated and equitable way. Developed countries have produced most of the emiss ions of the past and have high per capita emissions. These countries shou ld lead the way by significant ly reducing their carbon footprints and stimulating research into v vi FOREWORD green alternatives. Yet most of the world's future emissions will be generated in the devel- oping world. These countries will need adequate funds and technology transfer so they can pursue lower carbon paths-without jeopardizing their development prospects. And they need assistance to adapt to inevitable changes in climate. We must act differently, because we cannot plan for the future based on the climate of the past. Tomorrow's climate needs will require us to build infrastructure that can with- stand new conditions and support greater numbers of people; use limited land and water resources to supply sufficient food and biomass for fuel while preserving ecosystems; and reconfigure the world's energy systems. This will require adaptation measures that are based on new information about changing patterns of temperature, precipitation, and spe- cies. Changes of this magnitude will require substantia l additiona l finance for adaptation and mitigation , and for strategically intensified research to sca le up promising approaches and exp lore bold new ideas. We need a new momentum. It is crucia l that cou ntries reach a climate agreement in December in Copenhagen that integrates development needs with climate actions. The World Bank Group has developed several financing initiatives to help countries cope with climate change, as outlined in our Strategic Framework for Development and Climate Change. These include our carbon funds and facilities, which continue to grow as financing for energy efficiency and new renewable energy increases substantially. We are trying to develop practical experience about how developing countries can benefit from and support a climate change regime- ranging from workable mechanisms to provide incentives for avoided deforestation, to lower carbon growth models and initiatives that combine adap tation and mitigation. In these ways, we can support the UNFCCC process and the countries devising new international in centives and disincentives. Much more is needed. Looking forward, the Bank Group is reshaping our energy and envi- ronment strategies for the future , and helping countries to strengthen their risk management practices and expand their safety nets to cope with risks that cannot be fully mitigated. T he 2010 World Development Report calls for action on climate issues. If we act now, act together, and act differently, there are real opportunities to shape our climate future for an inclusive and sustainable globalization. Robert B. Zoellick President The World Bank Group Acknowledgments This Report has been prepared by a core team led by Rosina Bierbaum and Marianne Fay and comprising Julia Bucknall, Samuel Fankhauser, Ricardo Fuentes, Kirk Hamilton, Andreas Kopp, Andrea Liverani, Alexander Lotsch, Ian Noble, Jean-Louis Racine, Mark Rosegrant, Xiaodong Wang, Xueman Wang, and Michael Ian Westphal. Major contributions were made by Arun Agrawal, Philippe Ambrosi, Elliot Di ringer, Calestous Ju ma , Jean-Charles Hourcade, Kseniya Lvovsky, Muthukumara Mani, Alan Miller, and Michael Toman. The team was assisted by Rachel Block, Doina Cebotari, Nicola Cenacchi, Sandy Chang, Nate Engle, Hilary Gopnik, and Hrishikesh Patel. Additional contributions were made by Lidvard Gronnevet and Jon Strand. Bruce Ross-Larson was the principal editor. The World Bank's Map Design Unit created the maps under the direction of JeffLecksell. The Office of the Publisher provided editorial, design, composition, and printing services under the supervision of Mary Fisk, Stephen McGroarty, and Andres Meneses. The World Development Report 2010 was co-sponsored by Development Economics (DEC) and the Sustainable Development Network (SDN). The work was conducted under the general guidance of Justin Yifu Lin in DEC and Katherine Sierra in SDN. Warren Evans and Alan H. Gelb also provided valuable guidance. A Panel of Advisers comprised of Neil Adger, Zhou Dadi, Rashid Hassan, Geoffrey Heal , John Holdren (until December 2008), Jean-Charles Hourcade, Saleemul Huq, Calestous Ju ma , Nebojfa Nakicenovic, Carlos Nobre, John Schellnhuber, Robert Watson, and John Weyant provided extensive and excellent advice at all stages of the Report. World Bank President Robert B. Zoellick provided comments and guidance. Many others inside and outside the World Bank contributed with comments and inputs. The Development Data Group contributed to the data appendix and was responsible for the Selected World Development Indicators. The team benefited greatly from a wide range of cons ultatio ns. Meetings and regional work- shops were held locally or through videoconferencing (using the World Bank's Global Develop- ment Learning Network) in: Argentina, Bangladesh, Belgium, Benin, Botswana, Burkina Faso, China, Costa Rica, Cote d'Ivoire, Denmark, Dominica n Republic, Ethiopia, Finland, France, Germany, Ghana, India, Indonesia, Kenya, Kuwait, Mexico, Mozambique, the Netherlands, Nicaragua, Norway, Peru, the Philippines, Poland, Senegal, South Africa, Sweden, Tanzania, Thailand, Togo, Tunisia, Uganda, the United Arab Em irates, and the United Kingdom. The team wishes to thank participants in these workshops and videoconferences, which included academics, policy researchers, government officials, and staff of nongovernmental , civil society, and private sector organizations. Finally, the team would like to acknowledge the generous support of the Government of Norway, the UK Department for International Development, the Government of Denmark, the Government of Germany through Deutsche Gesellschaft for technische Zusammenarbeit, the Swedish Government through Biodiversity Centre/Swedish International Biodiversity Pro- gramme (SwedBio), the Trust Fund for Environmentally & Socially Sustainable Development (TFESSD), the multi-donor programmatic trust fund, and the Knowledge for Change Program (KCP). Rebecca Sugui served as senior executive assistant to the team, Sonia Joseph and Jason Victor as program assistants, and Bertha Medina as team assistant. Evangeline Santo Domingo served as resource management assistant. vii Main Messages: World Development Report 2010 Poverty reduction and sustainable development remain core global priorities. A quar- ter of humanity sti ll lives on less than $1.25 a day. One billion people lack clean drinking water; 1.6 billion, electricity; and 3 billion, adequate sanitation. A quarter of all developing country chi ldren are malnourished. Addressing these needs must remain the priorities both of developing countries and of development aid- recognizing that development will get harder, not easier, with climate change. Yet climate change must urgently be addressed. Climate change threatens all countries, with developing countries the most vulnerable. Estimates are that they would bear some 75 to 80 percent of the costs of damages caused by the changing climate. Even 2°C warming above preindustrial temperatures-the minimum the world is likely to experience-could result in permanent reductions in GDP of 4 to 5 percent for Africa and South Asia. Most developing countries lack sufficient financial and technical capacities to manage increas- ing climate risk. They also depend more directly on climate-sensitive natural resources for income and well-being. And most are in tropical and subtropical regions already subject to highly variable climate. Economic growth alone is unlikely to be fast or equitable enough to counter threats from climate change, particularly if it remains carbon intensive and accelerates global warming. So climate policy cannot be framed as a choice between growth and climate change. In fact, climate-smart policies are those that enhance development, reduce vulnerability, and finance the transition to low-ca rbon g rowth paths. A climate-smart world is within our reach if we act now, act together, and act differently than we have in the past: • Acting now is essential, or else options disappear and costs increase as the world com- mits itself to high-carbon pathways and largely irreversible warming trajectories. Climate change is already compromising efforts to improve standards of living and to achieve the Millennium Development Goals. Staying close to 2°C above preindustrial levels- likely the best that can be done- requires a veritable energy revolution with the immediate deployment of energy efficiency and available low-carbon technologies, accompanied by massive investments in the next generation of technologies without which low-carbon growth cannot be achieved. Immediate actions are also needed to cope with the changing climate and minimize the costs to people, infrastructure and ecosystems today as well as to prepare for the greater changes in store. • Acting together is key to keeping the costs down and effectively tackling both adapta- tion and mitigation. It has to start with high-income countries taking aggressive action to reduce their own emissions. That would free some "pollution space" for developing countries, but more importantly, it would stimulate innovation and the demand for new technologies so they can be rapidly scaled up. It would also help create a sufficiently large and stable carbon market. Both these effects are critical to enable developing countries to move to a lower carbon trajectory while rapidly gaining access to the energy services needed for development, although they will need to be supplemented with financial viii support. But acting together is also critical to advance development in a harsher envi- Main Messages: World Development Report 2010 ix ronment-increasing climate risks will exceed communities' capacity to adapt. National and international support will be essential to protect the most vu lnerable through social assistance programs, to develop international risk-sharing arrangements, and to pro- mote the exchange of knowledge, technology, and information. • Acting differently is required to enable a sustainable future in a changing world. In the next few decades, the world's energy systems must be transformed so that global em issions drop 50 to 80 percent. Infrastructure must be built to withstand new extremes. To feed 3 billion more people without further threatening already stressed ecosystems, agricul- tural productivity and efficiency of water use must improve. Only long-term , large-scale integrated management and flexible planning can satisfy increased demands on natu- ral resources for food, bioenergy, hydropower, and ecosystem services while conserving biodiversity and maintaining carbon stocks in land and forests. Robust economic and social strategies will be those that take into account increased uncertainty and enhance adaptation to a variety of climate futures-not just "optimally" cope with the climate of the past. Effective policy will entail jointly evaluating development, adaptation, and mitigation actions, all of which draw on the same finite resources (human, financial, and natural). An equitable and effective global climate deal is needed. Such a deal would recognize the varying needs and constraints of developing countries, assist them with the finance and technology to meet the increased cha llenges to development, ensure they are not locked into a permanently low share of the globa l commons, and establish mechanisms that decouple where mitigation happens from who pays for it. Most emissions growth will occur in developing nations, whose current carbon footpr int is disproportionately low and whose economies must grow rapidly to reduce poverty. High-income countries must provide financial and technical assistance for both adaptation and low-carbon growth in developing countries. Current financing for adaptation and mitigation is less than 5 percent of what may be needed annually by 2030, but the shortfalls can be met through innovative financing mechanisms. Success hinges on changing behavior and shifting public opinion. Individuals, as citi- zens and consumers, will determine the planet's future. Although an increasing number of people know about climate change and believe action is needed, too few make it a priority, and too many fail to act when they have the opportunity. So the greatest challenge lies with changing behaviors and in stitutions, particularly in high-income cou ntries. Public policy changes- local, regional, national, and international- are necessary to make private and civic action easier and more attractive. x MAIN MESSAGES: WORLD DEVELOPMENT REPORT 2010 Chapter I: Development goals are threatened by climate change, with the heaviest impacts on poor countries and poor people, and climate change cannot be con- trolled unless growth in both rich and poor countries becomes less greenhouse- gas-intensive. We must act now: country development decisions lock the world into a particular carbon intensity and determine future warming. Business-as-usual could lead to temperature increases of 5°C or more this century. And we must act together: postponing mitigation in developing countries could double mitigation costs, and that could well happen unless substantial financing is mobilized. But if we act now and act together, the incremental costs of keeping warming around 2°C are small and can be justified given the likely dangers of greater climate change. Chapter 2: Further climate change is unavoidable. It will stress people physically and economically, particularly in poor countries. Adapting requires robust deci- sion making-planning over a long time horizon and considering a broad range of climate and socioeconomic scenarios. Countries can reduce physical and financial risks associated with variable and extreme weather. They can also protect the most vulnerable. Some established practices will have to be expanded-such as insur- ance and social protection-and others will have to be done differently-such as urban and infrastructure planning. These adaptation actions would have benefits even without climate change. Promising initiatives are emerging, but applying them on the necessary scale will require money, effort, ingenuity, and information. Chapter 3: Climate change will make it harder to produce enough food for the world's growing population, and will alter the timing, availability, and quality of water resources. To avoid encroaching into already-stressed ecosystems, societies will have to almost double the existing rate of agricultural productivity growth while minimizing the associated environmental damage. This requires dedicated efforts to deploy known but neglected practices, identify crop varieties able to with- stand climate shocks, diversify rural livelihoods, improve management of forests and fisheries, and invest in information systems. Countries will need to cooperate to manage shared water resources and to improve food trade. Getting basic poli- cies right matters, but new technologies and practices are also emerging. Financial incentives will help. Some countries are redirecting their agricultural subsidies to support environmental actions, and future credits for carbon stored in trees and soils could benefit emission reductions and conservation goals. Chapter 4: Solving the climate change problem requires immediate action in all countries and a fundamental transformation of energy systems-significant improvement in energy efficiency, a dramatic shift toward renewable energy and possibly nuclear power, and widespread use of advanced technologies to capture and store carbon emissions. Developed countries must lead the way and drastically cut their own emissions by as much as 80 percent by 2050, bring new technolo- gies to market, and help finance developing countries' transition onto clean energy paths. But it is also in developing countries' interests to act now to avoid locking into high-carbon infrastructure. Many changes-such as removing distortionary price signals and increasing energy efficiency-are good both for development and the environment. Main Messages: World Developm ent Report 2010 xi Chapter 5: A global problem on the scale of climate change requires international coordination. Nevertheless, impelementation depends on actions within countries. Therefore, an effective international climate regime must integrate development concerns, breaking free of the environment-versus-equity dichotomy. A multi track framework for climate action, with different goals or policies for developed coun- tries and developing countries, may be one way to move forward; this framework would need to consider the process for defining and measuring success. The inter- national climate regime will also need to support the integration of adaptation into development. Chapter 6: Climate finance provides the means to reconcile equity with effective- ness and efficiency in actions to reduce emissions and adapt to climate change. But current levels fall far short of estimated needs-total climate finance for develop- ing countries is $10 billion a year today, compared with projected requirements of $75 billion for adaptation and $400 billion for mitigation annually by 2030. Fill- ing the gap requires reforming existing carbon markets and tapping new sources, including carbon taxes. Pricing carbon will transform national climate finance, but international financial transfers and trading of emission rights will be needed if growth and poverty reduction in developing countries are not to be impeded in a carbon-constrained world. Chapter 7: Meeting climate change and development goals requires significa ntly stepping up international efforts to diffuse existing technologies and develop and deploy new ones. Public and private investment-now in the tens of billions of dol- lars per year-need to be steeply ramped up to several hundreds of billions of dol- lars annually. "Technology-push " policies based on increasing public investments in R&D will not be sufficient. They need to be matched with "market-pull" policies that create public and private sector incentives for entrepreneurship, for collabora- tion, and to find innovative solutions in unlikely places. Diffusing climate-smart technology requires much more than shippin g ready-to-use equipment to develop- ing countries: it requires building absorpt ive capacity and enhancing the abi lity of the public and private sectors to identify, adopt, adapt, improve, and employ the most appropriate technologies. Chapter 8: Achieving results in tackling the climate challenge requires going beyond the international mobilization of finance and technology, by addressing the psychological, organizational, and political barriers to climate action. These barriers stem from the way people perceive and think about the climate problem, the way bureaucracies work, and the interests shaping government action. Policy change requires shifting political incentives and even organizational responsibili- ties. And it requires the active marketing of climate policies, tapping into social norms and behaviors, in order to translate the public's concern into understanding and understanding into action-starting at home. Overview Changing the Climate for Development T hirty years ago, half the devel- High-income countries can and must oping world lived in extre me reduce their carbon footprints . T hey cannot poverty- today, a quarter. 1 Now, co ntinue to fill up an unfair and unsustain- a much smaller share of chil- able share of the atmospheric commons. But dren are malnourished and at risk of early developing countries-whose average per death. And access to modern infrastructure capita emissions are a third those of high- is much more widespread. Critical to the income countries (figure 1) -need massive progress: rapid economic growth driven by ex pa nsions in energy, transport, urban sys- technological innovation and institutional tems, and agricultural production. If pursued reform, particul ar ly in today's middle- using traditional technologies and carbon income countries, where per capita incomes intensities, these much-needed expansions have doubled . Yet the needs remain enor- will produce more greenhouse gases and, mous, with the number of hun gry people hence, more climate change. The question, having passed the billion mark this year for then , is not just how to make development the first time in history. 2 With so many still more resilient to climate change. [tis how to in poverty and hunger, growth and poverty pursue growth and prosperity without caus- alleviation remain the overarching priority ing " dangerous" climate change. 3 for developing countries. Climate change policy is not a simple Climate change only makes the challenge choice between a high-growth, high-carbon more complicated. First, the impa cts of a world and a low-growth, low-carbon changing climate are already being felt , with wo rld- a simple question of whether to more droughts, more flo ods , more strong grow or to preserve the planet. Plenty of storms, and more heat waves- taxing indi- inefficiencies drive today's high-carbon viduals, firms, and governments, drawing intensity. 4 For example, existing technolo- resources away from develo pment. Second, gies and best practices could reduce energy continuing climate change, at current rates, consumption in industry and the power will pose increasingly severe challenges to sector by 20-30 percent, shrinking carbon development. By century's end, it could lead footprints without sacrificing growth. 5 to warming of 5°C or more compared with Many m1t1gation actions-meaning preindustrial times and to a vastly differ- changes to reduce emissions of greenhouse ent world from today, with more extreme gases-have significant co-benefits in pub- weather events, many fewer species, and lic health, energy security, environmental whole island nations submerged. Even our sustainability, and financial savings . In best efforts are unlikely to stabilize tem- Africa, for example, mitigation opportuni- peratures at anything less than 2°C above ties are linked to more sustainable land and preindustrial temperatures, warming that forest management, to cleaner energy (such will require substantial adaptation . as geothermal or hydro power), and to the 2 WORLD DEVELOPMENT REPORT 2010 Figure 1 Unequal footprints: Emissions per capita in low-, middle-, and high-income (8 percent) or pharmaceuticals (15 percent) countries, 2005 invest in RD&D.10 C0 2e per capita (tonsl A switch to a low-carbon world through 16 technological innovation and complemen- • Emissions tram tary institutional reforms has to start with 14 land-use change immediate and aggressive action by high- 12 • All other income countries to shrink their unsus- emissions tainable carbon footprints. That would 10 free some space in the atmospheric com- 8 mons (figure 2). More important, a credible Developing country averages: commitment by high-income countries to 6 - - --i-----t- - - - - - - - w i t h land-use change drastically reduce their emissions would 4 - - - - - - - - - w i t h o u t land-use change stimulate the needed RD&D of new tech- nologies and processes in energy, transport, industry, and agricu ltu re . And large and 0 predictable demand for alternative tech- High-income Middle-income Low-income nologies will reduce their price and help countries countries countries make them competitive with fossil fuels. Sources:World Bank 2008c ; WRI 2008 augmented with land-use change emissions from Houghton 2009. Only with new technologies at competi- Note: Greenhouse gas emissions include C0 2, methane (CH,), nitrous oxide (N 20), and high-global-warming- potential gases (F-gases) . So that they can be aggregated, they are all expressed in terms of C0 2 equivalent tive prices can climate change be curtailed (C0 2e), which measures quantities of all gases in terms of the quantity of C0 2 that would cause the same without sacrificing growth. amount of warming . Per capita averages in low- and middle-income countries are calculated both with and without emissions from land-use change. In 2005 emissions from land-use change in high income countries There is scope for developing countries were negligible. to shift to lower-carbon trajectories without compromising development, but this var- creation of sustainable urban transport ies across countries and will depend on the systems. So the mitigation agenda in Africa extent of financial and technical assistance is likely to be compatible with furthering from high-income countries. Such assis- development. 6 This is also the case for Latin tance would be equitable (and in line with America .7 the 1992 United ations Framework Con- or do greater wealth and prosperity vention on Climate Change, or UNFCCC ): inherently produce more greenhouse gases, high-income countries, with one-sixth of even if they have gone hand in hand in the world 's population, are responsible for the past. Particular patterns of consump- nearly two-thirds of the greenhouse gases tion and production do. Even excluding oil in the atmosphere (figure 3). It would producers, per capita emissions in high- also be efficient: the savings from helping income countries vary by a factor of four, to finance early mitigation in developing from 7 tons of carbon dioxide equivalent countries-for example, through infra- (C0 2e) 8 per capita in Switzerland to 27 in structure and housing construction over Australia and Luxembourg. 9 the next decades-are so large that they And dependence on fossil fuel can hardly produce clear economic benefits for all. 11 be considered unavoidable given the inad- But designing, let alone implementing, an equacy of the efforts to find alternatives. international agreement that involves sub- While global subsidies to petroleum prod- stantial, stable , and predictable resource ucts amount to some $150 billion annua lly, transfers is no trivial matter. public spending on energy research, develop- Developing countries, particularly the ment, and deployment (RD&D) has hovered poorest and most exposed, will also need around $10 billion for decades, apart from a assistance in adapting to the changing cli- brief spike following the oil crisis. That rep- mate. They already suffer the most from resents 4 percent of overall public RD&D. extreme weather events (see chapter 2). And Private spending on energy RD&D, at even relatively modest additional warm- $40 billion to $60 billion a year, amounts to ing will require big adjustments to the way 0.5 percent of private revenues- a fraction of development policy is designed and imple- what innovative industries such as telecom mented, to the way people live and make a Overview: Changing the Climate for Development 3 living, and to the dangers and the opportu- Figure 2 Rebalancing act Switching from SUVs to fuel-efficient passenger cars in the U.S. alone would nearly offset the emissions generated in providing electricity to 1.6 billion more people nities they face. The current financial crisis cannot be an Emissions (million tons of C0 2) excuse to put climate on the back burner. 350 On average, a financial crisis lasts less than two years and results in a 3 percent loss in 300 gross domestic product (GDP) that is later offset by more than 20 percent growth over 250 eight years of recovery and prosperity. 12 So for all the harm they cause, financial crises come and go. Not so with the growing threat 200 imposed by a chang ing cl imate. Why? Because time is not on our side. The 150 impacts of green house gases released into the atmosphere will be felt for decades, even mi llennia, 13 making the return to a "safe" 100 level very difficult. This inertia in the cli- mate system severely limits the possibil- 50 ity of making up for modest efforts today with accelerated mitigation in the future. 14 0 Delays also increase the costs as impacts Emission reductions by switch ing Emission increase by providing worsen, and cheap mitigation options dis- fleet of American SUVs to cars with basic electricity to 1.6 billion people appear as eco nomies become locked into EU fuel economy standards . without access to electricity. high-carbon infrastructure and lifestyles- Source: WDR team calculations based on BTS 2008. more inertia. Note: Estimates are based on 40 million SUVs (sports utility vehicles) in the United States traveling a total of 480 billion miles (assuming 12,000 miles a car) a year. With average fuel efficiency of 18 miles a gallon, the Immediate action is needed to keep SUV fleet consumes 27 billion gallons of gasoline annually with emissions of 2,421 grams of carbon a gallon. warming as close as possible to 2°C. That Switching to fuel-efficient cars with the average fuel efficiency of new passenger cars sold in the European Union (45 miles a gallon; see ICCT 2007) results in a reduction of 142 million tons of C0 1 (39 million tons of car- amount of warming is not desirable, but it bon) annually. Electricity consumption of poor households in developing countries is estimated at 170 kilowatt- is likely to be the best we can do. There isn't hours a person-year and electricity is assumed to be provided at the current world average carbon intensity of 160 grams of carbon a kilowatt-hour. equivalent to 160 million tons of C0 1 (44 million tons of carbon). The size a consensus in the economic profession that of the electricity symbol in the global map corresponds to the number of people without access to electricity. this is the economic optimum. There is, Figure 3 High-income countries have historically contributed a disproportionate share of however, a growing consensus in policy and global emissions and still do scientific circles that aim ing for 2°C warm - ing is the responsible thi ng to do . 15 This Sha re of global em issions, historic and 2005 Report endorses such a position . From t he Greenhouse gas emissions perspective of development, warming much Cumulative C0 2 emissions C0 2 emissions in 2005: All sectors, including since 1850: Energy in 2005: Energy land-use change above 2°C is simply unacceptable. But sta- bilizing at 2°C will require major shifts in 2% 3% 6% lifestyle, a veritable energy revolution, and a transformation in how we manage land and 38% forests. And substantial adaptation would 47% 50% still be needed. Coping with climate change 64% 56% will require all the innovation and ingenu- ity that the hu man race is capable of. Inertia, equity, and ingenuity are three • Low-income co untries (1.2 bil lion people) Middle-inco me countries 14.2 billio n people) themes that pe rmeate th is Report. Inertia • High-income countries 11billion people) ~ Ov eruse relative to pop ulation share is the defining characteristic of the climate Sources. DOE 2009; World Bank 2008c; WRI 2008 augmented with land-use change emissions from Houghton 2009. challenge-the reason we need to act now. Note: The data cover over 200 countries for more recent years. Data are not available for all countries in Equity is the key to an effective global deal, the 19th century, but all major emitters of the era are included. Carbon dioxide (C0 1) emissions from energy include all fossil-fuel burning, gas flaring, and cement production. Greenhouse gas emissions include C0 1, to the trust needed to find an efficient reso- methane (CH,). nitrous oxide IN 10), and high-global-warming-potential gases (F-gases). Sectors include lution to this tragedy of the commons-the energy and industrial processes, agriculture, land-use change (from Houghton 20091. and waste . Overuse of the atmospheric commons relative to population share is based on deviations from equal per capita emissions; reason we need to act together. And ingenuity in 2005 high-income countries constituted 16 percent of global population; since 1850, on average, today's is the only possible answer to a problem that high-income countries constituted about 20 percent of global population . 4 WORLD DEVELOPMENT REPORT 2010 is politically and scientifically complex-the million (ppm) for 800,000 years, but shot quality that could enable us to act differ- up to about 387 ppm over the past 150 years ently than we have in the past. Act now, act (figure 4), mainly because of the burning of together, act differently- those are the steps fossil fuels and, to a lesser extent, agriculture that can put a climate-smart world within and changing land use. A decade after the our reach. But first it requires believing there Kyoto Protocol set limits on international is a case for action . carbon emissions, as developed countries enter the first period of rigorous accounting The case for action of their emissions, greenhouse gases in the The average temperature on Earth has atmosphere are still increasing. Worse, they already warmed by close to I°C since the are increasing at an accelerating rate.1 7 beginning of the industrial period. In the The effects of climate change are already words of the Fourth Assessment Report of visible in higher average air and ocean tem- the Intergovernmental Panel on Climate peratures, widespread melting of snow and Change (IPCC), a consensus document ice, and rising sea levels. Cold days, cold produced by over 2,000 scientists represent- nights, and frosts have become less fre- ing every country in the United Nations: quent while heat waves are more common. "Warming of the climate system is unequiv- Globally, precipitation has increa sed even ocal."16 Global atmospheric concentrations as Australia , Centra l Asia, the Mediterra- of C0 2 , the most important greenhouse nean basin, the Sahel, the western United gas, ranged between 200 and 300 parts per States, and many other regions have seen more frequent and more intense droughts. Heavy rainfall and floods have become Figure 4 Off the charts with C0 2 more common , and the damage from - and probably the intensity of-storms and Carbon dioxide concentration (ppm) tropical cyclones have increased. 1,000 Climate change threatens all, but Higher emissions scenario for 2100 particularly developing countries 800 Unmitigated climate change poses grave threats to all. The more than 5°C warm- ing it could cause this century 18 amounts to the difference between today's climate 600 and the last ice age, when glaciers reached Lower emissions scenario for 2100 centra l Europe and the doorstep of New York City. That change occurred over mil- 400 lennia; human-induced climate change is Ob served in 2007 occurring on a one-century time sca le giv- ing societies and ecosystems littl_e time to adapt to the rapid pace. Such a drastic tem- 200 perature shift would cause la rge disloca- tions in ecosystems fundamental to human societies and economies-such as the pos- 0 sible dieback of the Amazon rain forest, 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 complete loss of glaciers in the Andes and Number of years ago the Himalayas, and rapid ocean acidifica- tion leading to disruption of marine eco- Source: Luthi and othe rs 2008. systems and death of coral reefs. The speed Nate-. Analysis of air bubbles tra pped in an Antarctic ice core extending back 800,000 years documents the Earth's changing C0 2 concentration . Over this long period. natural factors have caused the atmospheric C0 2 and magnitude of change could wipe out conce ntration to vary within a range of about 170 to 300 parts per million !ppm). Temperature-related data more than 50 percent of species. Sea lev- make clear that these variations have played a centra l role in determining the global climate . As a result of human activities, the prese nt C0 2 concentration of about 387 ppm is about 30 percent above its high est level els could rise by one meter this century, 1 9 over at least the last 800,000 years. In the absence of strong control measures, emissions projected for this threatening 60 million people and more century wou ld resu lt in a C0 2 concentration roughly two to three times the highest level experienced in the past 800,000 or more years, as depicted in the two projected emissions scenarios for 2100. than $200 billion in assets in developing Overview: Changing the Climate for Development 5 countries alone. 20 Agricultural productivity consequences will fall disproportionately would likely decline throughout the world, on deve loping countries. Warming of 2°C particularly in the tropics, even with dra- cou ld result in a 4 to 5 percent permanent matic changes in farming practices. And reduction in annual per capita consump- 24 over 3 million additional people cou ld die tion in Africa and South Asia, as opposed from malnutrition each year. 21 to minimal losses in high-income countries Even 2°C warming above preindustrial and an average reduction in world con- temperatures would result in new weather sumption equiva lent to about 1 percent of patterns with global consequences. Increased global GDP. 25 These losses would be driven weather variability, more frequent and by impacts in agriculture, a sector impor- intense extreme events, and greater exposure tant to the economies of both Africa and to coastal storm surges would lead to a much South Asia (map 1). higher risk of catastrophic and irreversible It is estimated that developing coun- impacts. Between 100 million and 400 mil- tries will bear most of the costs of the lion more people could be at risk ofhunger. 22 damages- some 75-80 percent. 26 Several And 1 billion to 2 billion more people may factors explain this (box 1). Developing no longer have enough water to meet their countries are particularly reliant on ecosys- consumption, hygiene, and food needs. 23 tem services and natural capita l for produc- tion in climate -se nsitive sectors. Much of Developing countries are more exposed and their population lives in physically exposed less resilient to climate hazards. These locations and eco nom ica lly precarious MAP BEING REVISED Map 1 Climate change will depress agricultural yields in most countries in 2050, given current agricultural practices and crop varieties C=:J No data -55 ·20 20 50 100 Sources. Muller and others 2009; World Bank 2008c . Note: Th e figure shows the projected percentage change in yields of 11 major crops (wheat, rice, maize, millet, field pea, sugar beet, sweet potato, soybean, groundnut, sunflower, and rape seed) from 2046 to 2055, compared with 1996-2005. The values are the mean of three emission sce narios across five global climate models, assuming no C0 1 fertilization (a possible boost-of uncertain magnitude-to plant growth and water-use efficiency from higher ambient C0 1 conce ntrations). Large negative yield impacts are projected in many areas that are highly dependent on agriculture . 6 WORLD DEVE L OPMENT REPORT 2 0 10 Box 1 All developing regions are vulnerable to the impacts of climate change-for different reasons The problems common to developing Southeast Asia alone- which are already dieback of the Amazon rain forest and countries-limited human and financial stressed by industrial pollution, coastal a conversion of large areas to savannah, resources, weak institutions- are critical development, overfishing, and runoff of with severe consequences for the region's drivers of their vulnerability. But other agricultural pesticides and nutrients. climate-and possibly the world 's. factors, attributable to their geography Vulnerability to climate change in East- Water is the major vulnerability in the and history, are also significant. ern Europe and Central Asia is driven by a Middle East and North Africa, the world 's Sub-Saharan Africa suffers from natural lingering Soviet legacy of environmental driest region, where per capita water I fragility (two-thirds of its surface area is mismanagement and the poor state availability is predicted to halve by 2050 desert or dry land) and high exposure to of much of the region's infrastructure. even without the effects of climate droughts and floods, which are forecast An example: rising temperatures and change. The region has few attractive to increase with further climate change. reduced precipitation in Central Asia will options for increasing water storage, The region's economies are highly exacerbate the environmental catastro- since close to 90 percent of its freshwater dependent on natural resources. Biomass phe of the disappearing Southern Aral resources are already stored in reservoirs . provides 80 percent of the domestic pri- Sea (caused by the diversion of water to The increased water scarcity combined mary energy supply. Rainfed agriculture grow cotton in a desert climate) while with greater variability will threaten contributes some 30 percent of GDP sand and salt from the dried-up seabed agriculture, which accounts for some 85 and employs about 70 percent of the are blowing onto Central Asia's glaciers, percent of the region's water use. Vulner- population. Inadequate infrastructure accelerating the melting caused by higher ability is compounded by a heavy con- could hamper adaptation efforts, with temperature. Poorly constructed, badly centration of population and economic limited water storage despite abundant maintained, and aging infrastructure and activity in flood-prone coastal zones \ resources. Malaria, already the biggest housing- a legacy of both the Soviet era and by social and political tensions that killer in the region, is spreading to higher, and the transition years- are ill suited to resource scarcity could heighten. previously safe, altitudes. withstand storms, heat waves, or floods. South Asia suffers from an already In East Asia and the Pacific one major Latin America and the Caribbean 's most stressed and largely degraded natural driver of vulnerability is the large num- critical ecosystems are under threat. resource base resulting from geography ber of people living along the coast and First, the tropical glaciers of the Andes coupled with high levels of poverty and on low-lying islands-over 130 million are expected to disappear, changing the population density. Water resources are people in China, and roughly 40 million, timing and intensity of water available to likely to be affected by climate change, or more than half the entire population, several countries, resulting in water stress through its effect on the monsoon, which in Vietnam. A second driver is the con- for at least 77 million people as early as provides 70 percent of annual precipita- tinued reliance, particularly among the 2020 and threatening hydropower, the tion in a four-month period, and on the poorer countries, on agriculture. As pres- source of more than half the electricity in melting of Himalayan glaciers. Rising sea sures on land, water, and forest resources many South American countries. Second, levels are a dire concern in the region, increase- as a result of population warming and acidifying oceans will result which has long and densely populated growth, urbanization, and environmental in more frequent bleaching and possible coastlines, agricultural plains threatened degradation caused by rapid industrial- diebacks of coral reefs in the Caribbean, by saltwater intrusion, and many low- ization- greater variability and extremes which host nurseries for an estimated 65 lying islands. In more severe climate- will complicate their management. In percent of all fish species in the basin, change scenarios, rising seas would the Mekong River basin, for example, the provide a natural protection against submerge much of the Maldives and rainy season will see more intense pre- storm surge, and are a critical tourism inundate 18 percent of Bangladesh's land. cipitation, while the dry season lengthens asset. Third, damage to the Gulf of Mex- by two months. A third driver is that the ico's wetlands will make the coast more Sources: de la Torre, Fajnzylber, and Nash region 's economies are highly depen- vulnerable to more intense and more 2008; Fay, Block, and Ebinger 2009; World dent on marine resources-the value of frequent hurricanes. Fourth, the most Bank 2007a; World Bank 2007c; World Bank well-managed coral reefs is $13 billion in disastrous impact could be a dramatic 2008b; World Bank 2009b. conditions. And their finan cial and institu- in wea lthi er countries since they account tiona l capacity to ad apt is limited . Already for 16 perce nt of world population but policy makers in some developing countries would b ea r 20 -25 perce nt of the globa l note that m ore of th eir development bud- impact co st s. But th eir mu ch greater get is diverted to cope with weather-related wea lth m a kes th em better able to cope • 27 emergencies. w ith such imp ac ts. Climate ch ange will Hi gh-in co me co untri es w ill a lso be w reak h avoc everywhere-but it will affec ted by moder ate wa rmin g. Indeed , increase the gulf betwee n developed and d a m ages per capita are likely to be higher develo pin g countries. Overview: Changing the Climate f or Development 7 Growth is necessary for greater resilience, but is not sufficient. Econo mic grow th sox 2 Economic growth: Necessary, but not sufficient is necessary to reduce poverty a nd is at the heart of inc reas in g resi lience to cli mate Richer countries have more resources community-based early warning sys- change in poo r coun tries. Bu t growt h alo ne to cope with climate impacts, and tem for cyclones and a flood forecast- better educated and healthier popu - ing and response program drawing is not the answe r to a cha nging cl im ate. lations are inherently more resilient. on local and international expertise. Growt h is unlikely to be fas t eno ugh to help But the process of growth may But the scope of possible adaptation the poo rer countri es , and it ca n increase exacerbate vulnerability to climate is limited by resources- its annual the vulnerability to clim ate haza rds (box change, as in the ever-increasing per capita income is $450. Mean- 2) . Nor is growth usually equ ita ble enough extraction of water for farming , while, the Netherlands government to ensure protec tio n for the poorest a nd industry, and consumption in the is planning investments amounting most vulnerable. It does not guara ntee that drought-prone provinces around Bei- to $100 for every Dutch citizen every jing, and as in Indonesia, Madagascar, year for the next century. And even key institutions will fun ction well. And if Thailand, and U.S. Gulf Coast, where the Netherlands, w ith a per capita it is ca rbo n intensive, it will cause furth er protective mangroves have been income 100 times that of Bangladesh, warming. cleared for tourism and shrimp farms . has begun a program of selective But there is no reason to think that a Growth is not likely to be fast relocation away from low-lying areas low- carbo n path mu st necess arily slow enough for low-income cou ntr ies because continuing protection every- eco nom ic g rowth: m a ny enviro nm ental to afford the kind of protection that where is unaffordable. reg ul at ions were preced ed by wa rnings o f the rich can afford. Bangladesh and the Netherlands are among the Sources: WDR team based on Guan m assive job losses and indust ry coll apse, few and Hubacek (2008); Shalizi (2006); Xia countries most exposed to rising sea of wh_ich m ateri ali zed. 28 Clea rly, however, and others (2007); FAO (2007); Barbier ; levels. Bangladesh is already doing a and Sathirathai (2004); Deltacommis- the transition costs are substantial, notably lot to reduce the vulnerability of its sie (2008); Government of Bangladesh in developing low-carbon technologies and population, with a highly effective (2008); and Karim and Mimura (2008). infras tructure for energy, transport, hous- ing, u rba ni za tio n, and rural develop ment. Two argu me nts o ften hea rd are th at t hese thresholds or ti pping po ints beyond wh ich tran sit ion costs a re un acce pta ble given catas t ro phi c impac ts occ ur (see Sc ie nce t he urge nt need fo r other mo re imm edi - foc us) . T he compa ri son is also complicated ate investm ents in poo r count ries, and that by distributiona l issues across time (m it iga- ca re sho uld be ta ken no t to sacr ifice the t io n incurred by o ne ge neratio n produces welfare of poo r individu a ls tod ay fo r th e be nefi ts for m a ny ge ne ratio ns to co me) sake of fut u re, possibly richer, generations. a nd space (some areas are mo re vulnerable T here is va lidity to these concern s. Bu t the th an o thers, hence mo re likely to suppo rt point rem a ins that a strong economic argu- agg ressive global mit iga tion effo rts). And ment ca n be m ade for ambit ious actio n on it is fu rt her complicated by the q uestion of climate change. how to va lue the loss of life, live lihood s, and non m arket se rvices such as biod iversity and The economics of climate change: ecosystem services. Reducing climate risk is affordable Econo mi sts have typ ica lly tried to ide n- Clim ate change is cos tl y, wh ateve r the ti fy the o ptim a l cl im ate policy using cost- policy chosen . Sp ending less o n mi t iga- benefit a nalys is. But as box 3 illustrates , tion w ill mean spending mo re on ad apta- th e resul ts a re sen sit ive to the particular tio n and accepting greater damages: the ass umptio ns abo ut t he rem a inin g un ce r- cost o f action mu st be compared with the tainties, and to the norm ative cho ices m ade cost of in ac tion . But, as discussed in chap- rega rding distributional and m easurement ter 1, t he compari son is co mplex because issues . (A technology optim ist, who expec ts o f the considerable uncertainty about the the impac t o f clim ate change to be relatively techno logies th at will be available in the modest and occurring gradu ally ove r time, foture (and their cost), the ability of soc i- a nd who heav ily d iscounts wh at happens etie s a nd ecosystems to adapt (and at what in the future, w ill fa vo r modest act ion now. price), the extent o f d am ages th at higher And vice ve rsa for a technology pessimist. ) gree nhouse gas conce ntratio ns will cause, So econo mists co ntinue to d isagree on the a nd the temperatu res that might constitute econo mica lly o r soc ia ll y o pt im a l ca rbo n 8 WORLD DEVELOPMENT REPORT 2010 trajectory. But there are so me emerg ing continuing increases in temperatures much agreements. above 2°C. They conclude that the optimal In the major models, the benefits of sta- target-the one that will produce the low- bilization exceed the costs at 2.5°C warm- est total cost (mea ning the sum of impact, ing (though not necessarily at 2°C) .29 And mitigation, a nd adaptation costs)-could all co nclude that business as usual (mean- be we ll above 3°C. 30 But they do note that ing no mitigation efforts whatsoever) would the incremental cost of keeping warming be disastrous. Advocates of a more grad- arou nd 2°C would be modest, less than ual reduction in em issions would accept half a percent of GDP (see box 3). In other sox 3 The cost of "climate insurance" Hof, den Elzen, and van Vuuren examine with no climate change). A key point evi- reduce the risk of catastrophic outcomes the sensitivity of the optimal climate dent in the figure is the relative flatness linked to global warming. From th is per- target to assumptions about the time of the consumption loss curves over wide spective, the cost of moving from a high horizon, climate sensitivity (the amount ranges of peak C0 2e concentrations. As target for peak C0 2 e concentrations to a of warming associated with a doubling a consequence, moving from 750 ppm lower target can be viewed as the cost of of carbon dioxide concentrations from to 550 ppm results in a relatively small climate insurance-the amount of wel - preindustrial levels), mitigation costs, loss in consumption (0.3 percent) for the fare the world would sacrifice to reduce likely damages, and discount rates. To do Nordhaus settings. The results therefore the risk of catastrophe. The analysis of so, they run their integrated assessment suggest that the cost of precautionary Hof, den Elzen, and van Vuuren suggests model (FAIR). varying the model's settings along the range found in the literature, mitigation to 550 ppm is small. In the Stern settings, a 550 ppm target results in that the cost of climate insurance is mod- est under a very wide range of assump- ' notably those associated with two well - a gain in present value of consumption of tions about the climate system and the known economists: Nicholas Stern, who about 0.5 percent relative to the 750 ppm cost of mitigating climate change. advocates early and ambitious action; target. and William Nordhaus, who supports a A strong motivation for choosing a Source: Hof, den Elzen, and van Vuuren gradual approach to climate mitigation. lower peak concentration target is to 2008. Not surprisingly, their model results in completely different optimal targets depending on which settings are used. Looking at tradeoffs: The loss in consumption relative to a world without warming for different (The optimal target is defined as the con - peak C0 2e concentrations centration that would result in the lowest reduction in the present value of global Reduction in net present value of consumption(%) consumption.) The "Stern settings" (which 4 include relatively high climate sensitivity - Stern settings and climate damages, and a long time - Nordhaus settings 3 • Optimum for settings horizon combined with low discount rates and mitigation costs) produce an optimum peak C0 2e concentration of 540 parts per million (ppm). The "Nordhaus 2 ~ settings" (which assume lower climate sensitivity and damages, a shorter time horizon, and a higher discount rate) pro- -----------~~------ duce an optimum of 750 ppm. In both cases, adaptation costs are included implicitly in the climate damage function. 0 500 550 600 650 700 750 800 The figure plots the least cost of stabi- C0 2e concentration peak level (ppm) lizing atmospheric concentrations in the range of 500 to 800 ppm for the Stern and Source: Adapted from Hof, den Elzen, and van Vuuren 2008, figure 3. Nordhaus settings (reported as the differ- Note: The curves show the percentage loss in the present value of consumption, relative to what it would be with a constant climate, as a function of the target for peak C0 2e concentrations. The "Stern settings" and "Nordhaus ence between the modeled present value settings" refer to choices about the value of key parameters of the model as explained in the text The dot shows of consumption and the present value of the optimum for each setting, where the optimum is defined as the greenhouse gas concentration that would consumption that the world would enjoy minimize the global consumption loss resulting from the sum of mitigation costs and impact damages. Overview: Changing the Climate for Development 9 words, the total cost of the opt imal solu t io n Table 1 M itigat ion investments needed to stay close to 2°C is not much less than the total costs implied Present value of total by the much mo re ambitiou s option of 2°C Mitigation investments in 2030 mitigation investments to 2100 ($billions) (percent of GDP) warming. Why? Partly beca use th e sav ings Integrated from less mitigation are large ly offset by the assessment models World Developing World Developing additio nal costs of more seve re impacts or Energy only higher ada ptat ion spending. 31 And partly MESSAGE 310 137 0.3 0.5 because the real difference between ambi- IEA ETP 900 600 tious a nd modest climate action lies with costs that occur in the future, which grad u- REMIND 375 0.4 alists heavi ly discount. Mini CAM 257 168 0.7 1.2 The la rge uncerta inties abo ut the poten- All sectors tial losses associated with climate change PAGE 0.4 0.9 and the poss ibi lity of catastrophi c risks FAIR "'low se tting s" 0.6 m ay well justify ea rlier and more aggressive action than a simple cost-benefit a nalys is DICE 0.7 wou ld suggest. This in crementa l amount Mc Kinsey 1,215 675 could be thought of as the insurance pre- Average 611 395 0.5 0.9 mium to keep climate change within what Median 375 384 0.5 0.9 scientists consider a safer ba nd .32 Spending Sources MESSAGE: llASA 2009; IEA ET P: IEA 2008c; REMIND: Knopf and others. forthcoming; MiniCAM: less th an half a percent of GDP as "climate Edmonds and oth ers 2008 and personal communications; PAGE: Hope 2009 and personal communication s; I insurance" could well be a socia lly acce pt- FAIR: Hof, den Elzen, and van Vuuren 2008; DICE: Nordha us 2008 (estimated from table 5.3 and figure 5.3); McKinsey: Mc Kinsey Global Institute 2009 and personal communi ca tions. able proposition : the world spends 3 percent Note: DICE, FAIR, MESSAGE, MiniCAM, PAGE, and REMIND are peer-reviewed models. IEA ETP is the model of globa l GDP on in suran ce today. 33 developed by the International Energy Agen cy, and Mc Kin sey is the proprietary methodolo gy developed by the McKinsey Global Institute . Estimate s are for stabi lization of greenhouse ga ses at 450 ppm C0 1e, whi ch would But beyond th e question of "cl imate provide a 40-50 percent chance of stayi ng below 2°C warming by 2100 (Schaeffe r and others 2008a; Hare and insurance" is the qu es tion of what might Meinshause n 2006). MiniCAM includes both ope rational and investment ex penditures; all other models inc lude on ly investment expe nditures. The FAIR model result rep orts abatement costs usi ng the low setting s (see be the required mitigation and adaptation tabl e 3 in Hof. den Elzen. and van Vuuren 2008). Deve loping cou ntries are defined using the 2009 World Bank invest ments-a nd the assoc iated financ- classi fi ca tion . ing need s. In the medium term the mitiga- tion tab is signifi ca nt but not prohibitive, with a nnual global mitigation investments offse t by th e value of co-benefits (s uch as ranging from $260 billion to $1.2 trillion by sav in gs from energy efficiency gai n s) so 2030 (table 1), with the med ia n at $375 bil- the net cost to the world economy is there- lion . T hat is equivalent to 0.2 perce nt of fore likely to be much lower. McKinse y, proj ected world GDP in 2030, o r 3 percent for exa mple, est im ates that the net miti - of today's global investment spending. In gat io n cost would be only $225 billion a other words, kee ping warming around 2°C yea r in 2030, because many of the invest- could entail a 3 perce nt increase in global ments identified pay for them selves . Still investme nts. 34 Again, significant but not fi nanc in g will be a cha llen ge, particu - prohibitive. la rl y beca use additional resources will be Wh at about the longer term? Needed needed for ad aptatio n and for co ping with mitigation investments will increase over the res idu al losses. time to cope with grow ing popul ation T here are far fewer esti mates of needed a nd energy needs-but so wil l income. adaptation investments, and those that exist As a resu lt, the present va lue of mitigation are not readily comparable. Some look only investments to 2100 is expected to remain at the cost of climate-proofing foreign aid well below 1 percent of GDP, with estimates projects. Others include on ly certain sec- ranging between 0.3 percent and 0.7 per- tors . Very few try to look at overall country cent of GDP (se~ table 1). needs (see chapter 6). A recent World Bank These investments should be considered study that attempts to tackle these issues in relation to averted damages or redu ced suggests that the investments needed could risk (as they are in a cost-benefit frame- be upward of $80 billion annually in devel- work). In addition, the y would be partly oping countries alone. 35 10 WORLD DEVELOPMENT REPORT 2 0 LO A climate-smart world is within hypothesis of th is Report is that they can be reach if we act now, act together, tackled through climate-smart policies that and act differently entail acting now, acting together (or glob- all y), and acting differently. Acting now, Even if the incremental cost of reducing cli- because of the tremendous inertia in both mate risk is small and the investment needs climate and socioeconomic systems. Acting far from prohibitive, stabilizing warming together, to keep costs down and protect around 2°C above preindustrial tempera- the most vulnerable. And acting diffe rently, tures is extremely ambitious. By 2050 em is- because a climate-smart world requires a sions would need to be 50 percent below transformation of our energy, food produc- 1990 levels and be zero or negative by 2100 tion, and risk management systems. (figure 5). This would require immediate and Herculean efforts: within the next 20 Act now: In ertia means that years global emissions would have to fall, today's actions will determ ine compared to a bus iness-as-usual pat h, by tom orrow's options a n amount equivalent to total emissions The climate system exhibits substantial iner- from high-income countries today. In addi- tia (figure 6). Concentrations lag em ission tion, even 2°C warm ing wou ld also req u ire reductions: C0 2 remains in the atmosphere costly adaptation-changing the kinds of for decades to centuries, so a decline in emis- risks people prepare for; where they live; sions takes time to affect concentrations. what they eat; and the way they design, Temperatures lag concentrations: tempera- develop, and manage agroecological and tures will continue increasing for a few cen- urban systems. 36 turies after concentrations have stabilized. So both the mitigation and the adap- And sea levels lag temperature reductions: tation chal lenges are substantial. But the the thermal expansion of the ocean from an increase in temperature will last 1,000 years Figure 5 What does the way forward look like? Two options among many: business as usual or more while the sea-level rise from melting or aggressive mitigation ice could last severa l millennia.37 Projected annual total global em issions (GtC0 2e) The dynamics of the climate system 160 therefore limit how much future mitiga- tion can be substituted for efforts today. For 140 • Business as usual (-5°C) example, stabilizing the climate near 2°C 120 100 • 2°C trajectory (a round 450 ppm of C0 2e) would require global emissions to begin declining immedi- BO ately by about 1.5 percent a year. A five-year delay would have to be offset by faster emis- 60 sion declines. And even longer delays simply 40 could not be offset: a ten-year delay in miti- 20 gation would most likely make it impossible to keep warming from exceeding 2°C. 38 0 Inertia is also prese nt in the built envi- -20 ronment, limiting flexibility in reducing -40 greenhouse gases or designing adaptation 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 responses. Infrastructure investments are Year lumpy, concentrated in time rather than Source: Results of multiple models from different institutions were provided by the Energy Modeling Forum. evenly distributed. 39 They are also long- Clarke and others forthcoming . lived: 15-40 yea rs for factories and power Note: The top band shows the range·of estimates across models (GTEM, IMAGE , MESSAGE , MiniCAM) for emis· sions unde r a business-as-usual scenario. The lower ba nd shows a trajectory that could yield a concentration plants, 40-75 years for road, rail, and power of 450 ppm of C0 2e (with a 50 percent chance of limiting wa rming to less than 2°C). Greenhouse gas emissions distribution networks. Decisions on land use include C0 2, CH., and N20. Negative emissions (eventually required by the 2°C path) imply that the annual rate of · emissions is lower than the rate of uptake and storage of carbon through natural processes (for example , plant and urban form-the structure and density growth) and engineered processes (for example, growing biofuels and when burning them, sequestering the C0 2 of cities-have impacts lasting more than a unde rground). GTEM, IMAGE , MESSAGE, and MiniCAM are the integrated assessment models of the Australian Bureau of Agricultural and Resource Economics, the Netherlands Environmental Assessment Agency, Interna- century. And long-lived infrastructure trig- tional Institute of Applied Systems Analysis, and Pacific Northwest National Laboratory. gers investments in associated capital (cars Overview: Changing the Climate for Development 11 for low-density cities ; gas-fired heat and Figure 6 Climate impacts are long -lived: rising temperatures and sea levels associated with higher concentrations of C0 2 power generation capacity in response to gas pipelines), locking economies into lifestyles Annual C0 2 emissions Time to reach and energy consumption patterns. equilibrium '------- The inertia in physical capital is nowhere close to that in the climate system and is more likely to affect the cost rather than C0 1 emissions peak: the feasibility of achiev in g a particular 0 to 100 years emission goal-but it is substantial. The opportunities to shift from high-carbon to low-carbon capital stocks are not evenly t C0 2 concentration ° distributed in time. 4 Ch in a is expected C0 1 stabilization: 100 to 300 yea rs to double its building stock between 2000 and 2015. And the coa l-fired power plants proposed around the world over the next 25 years are so num erou s that their life- time C0 2 emission s would equal those of Temperature t a ll coal-burning activities since the begin- ~----------- Temperature ning of the industrial era. 41 Only some of stabilization: those curre ntly being built could be ret- a few centuries rofitted for carbon capture and storage (if and when that technology becomes com- mercially available: see chapters 4 and 7). Retiring these plants before the end of their Sea-level rise useful life-if changes in the climate force Sea-level rise due such action-would be extremely costly. to ice melting: Inertia is also a factor in research and several millennia development {R&D) and in the deployment Sea-level rise due of new technologies. New energy sources to thermal expansion : have historically taken about 50 years to centuries to millennia reach half their potential. 42 Substantial investments in R&D are needed now to ensure that new technologies are available and rapidly penetrating the marketplace in the near future. This could require an additional $100 billion to $700 billion annually. 43 Innovation is also needed in Today 100 1,000 transport, building, water management, years years urban design , and many other sectors Source: WDR team based on IPCC 2001 . that affect climate change and are in turn Note: Stylized figures; the magnitudes in each panel are intended for illustrative purposes . affected by climate change- so innovation is a critical issue for adaptation as well. Inertia is also present in the behavior areas, and infrastructure continues to of individua ls and organizat ion s. Despite be designed for the climate of the past. 44 greater public concern, behaviors have not Changing behaviors and organizational changed much. Available energy-efficient goa ls and standards is difficult and usu- technologies that are effective and pay for ally slow, but it h as been done before (see themselves are not adopted. R&D in renew- chapter 8) . ables is underfunded. Farmers face incen- tives to over-irrigate their crops, which in Act together: For equity and efficiency turn affects energy use, because energy is Collective action is needed to effectively a major input in water provision and treat- tack le climate change and reduce the ment. Building continues in hazard-prone costs of mitigation. 45 It is also essential to 12 WORLD DEVELOPMENT REPORT 20 I 0 facilitate adaptation, notably through bet- losses implied by such delays are so large ter risk management and safety nets to pro- that there are clear economic benefits for tect the most vulnerable. high-income countries committed to lim- iting dangerous climate change to finance To keep costs down and fairly distributed. early action in developing countries. 50 More Affordability hinges on mitigation being generally, the total cost of mitigation could done cost effectively. When estimating the be greatly reduced through well-performing mitigation costs discussed earlier, model- carbon-finance mechanisms, financial trans- ers assume that greenhouse gas emission fers , and price signals that help approximate reductions occur wherever and whenever the outcome produced by the whenever, they are cheapest. Wherever means pur- wherever assumption. suing greater energy efficiency and other low-cost options to mitigate in whatever To manage risk better and protect the poor- country or sector the opportunity arises. est. In many places previously uncom- Whenever entails timing investments in mon risks are becoming more widespread. new equipment, infrastructure, or farm- Consider floods, once rare but now increas- ing and forestry projects to minimize costs ingly common, in Africa and the first hur- and keep economies from getting locked ricane ever recorded in the South Atlantic, into high-carbon conditions that would be which hit Brazil in 2004. 51 Reducing disas- expensive to alter later. Relaxing the wher- ter risk-through community-based early ever, whenever rule-as would necessarily warning systems, climate monitoring, happen in the real world, especially in the safer infrastructure, and strengthened and absence of a global carbon price-dramat- enforced zoning and building codes, along ically increases the cost of mitigation. with other measures-becomes more The implication is that there are enor- important in a changing climate. Finan- mous gains to global participation in miti- cial and institutional innovations can also gation efforts- on this point, analysts are limit risks to health and livelihoods. This unanimous. If any country or group of requires domestic action-but domestic countries does not mitigate, others must action will be greatly enhanced if it is sup- reach into higher-cost mitigation options to ported by international finance and sharing achieve a given global target. For example, of best-practice. by one estimate, the nonparticipation of But as discussed in chapter 2, actively the United States, which is responsible for reducing risk will never be enough because 20 percent of world emissions , in the Kyoto there will always be a residual risk that Protocol increases the cost of achieving the must also be managed through better original target by about 60 percent. 46 preparedness and response mechanisms. Both equity and efficiency argue for The implication is that development may developing financial instruments that sep- need to be done differently, with much arate who finances mitigation from where greater emphasis on climate and weather it happens. Otherwise, the substantial risk. l nternational cooperation can help, mitigation potential in developing coun- for example, through pooling efforts to tries (65-70 percent of emission reduc- improve the production of climate infor- tions, adding up to 45-70 percent of global mation and its broad availability (see chap- mitigation investments in 2030) 47 will not ter 7) and through sharing best practices to be fully tapped, substantially increasing cope with the changing and more variable the cost of achieving a given target. Tak- climate. 52 ing it to the extreme, a lack of financing Insurance is another instrument to that results in fully postponing mitiga- manage the residual risk, but it has its limi- tion in developing countries to 2020 could tations. Climate risk is increasing along a more than double the cost of stabilizing trend and tends to affect entire regions around 2°C. 48 With mitigation invest- or large groups of people simultaneously, ments estimated to add up to $4 trillion to making it difficult to insure. And even $25 trillion 49 over the next century, the with insurance , losses associated with Overview : Changing the Climate for Developm en t 13 catas t rop hic eve nts (such as w id esp read fl oodin g or severe d ro ugh ts) ca nn ot be sax 4Safety nets: From supporting incomes to reducing fu lly abso rbed by in d ivid ua ls, co m m u ni- ties, a nd the p riva te sector. In a mo re vola- vulnerability to climate change tile cli m ate, governments will in creas ingly Bangladesh has had a long history of The new employment guarantee become in surers of las t reso rt and have an cyclones and floods, and these could program provides those with no implicit res po nsibilit y to su pport d isas ter become more frequent or intense. The other means of income (including recovery and reconstruction. T his requires government has safety nets that can access to other safety nets) with be tailored fairly easily to respond to employment for up to 100 days at that gove rnments protect their own liqu id- the effects of climate change. The best wages linked to the low-season ity in times of crisis, particula rly poorer o r examples are the vulnerable-group agricultural wage. The guarantee sma ller countries th at a re fin a ncially vul- feeding program, the food-for-work element ensures that those who nerable to the imp ac ts of clim ate cha nge: program, and the new employment need help get it. If work cannot be Hurrica ne Iva n caused da mages equivalent guarantee program. provided, the individual is entitled to to 200 perce nt of G renad a's GDP. 53 Having The vulnerable-group feeding 40 days of wages at the full rate and imm edi ate funds ava ilable to jump-sta rt program runs at all times and usually then 60 days at half the rate. covers more than 2 million house- Bangladesh's programs, and others t he re hab ili ta tion a nd re covery process holds. But it is designed to be ramped in India and elsewhere, suggest some reduces the derailing effect o f di sasters o n up in response to a crisis: following lessons. Rapid response requires rapid I development. the cyclone in 2008, the program access to funding, targeting rules to Multico untry facilities and rein surance was expanded to close to 10 million identify people in need-chronic ca n help. T he Ca ribbea n Catas troph e Risk households. Targeting, done by the poor or those temporarily in need- In surance Fac ility sp read s risk am ong 16 lowest level of local government and and procedures agreed on well before Ca ribbea n countries, harness ing the rein - monitored by the lowest administra - a shock hits. A portfolio of "shovel- tive level, is considered fairly good. ready" projects can be preidentilied sura nce marke t to prov id e liquidity to The food-for-work program, which as particularly relevant to increasing governm ents quickl y foll owing des tru cti ve normally operates during the low agri- resilience (water storage, irrigation hu r rica nes a nd ea rthqu a kes .s4 Such fac ili- culture season, is ramped up during systems, reforestation, and embank- ties m ay need help from the intern atio nal emergencies. It too is run in collabo- ments, which can double as roads in co m muni ty. Mo re ge nera lly, high-income ration with local governments, but low-lying areas). Experience from India coun tr ies have a criti ca l role in ensur- program management has been sub- and Bangladesh also suggests the in g t hat developing countri es have tim ely contracted to nongovernmental orga - need for professional guidance (engi- nizations in many parts of the country. neers) in the selection, design, and access to the needed resources when shocks Workers who show up at the work site implementation of the public works hit, whether by suppor ti ng such fac il ities o r are generally given work, but there is ·and for equipment and supplies. th ro ugh the di rect prov ision of emerge ncy usually not enough to go around, so fu nd ing. the work is ration ed through rotation . Source: Contributed by Qaiser Khan . Bu t ins ura nce and emerge ncy fund- ing a re o nly o ne pa rt of a broa der ri sk- m a nage me nt fra m ework . Soc ia l po licies successful models of soc ial safety nets a nd w ill beco me m o re im po rt a n t in helpi ng ta ilor them to the need s created by the people co pe wi th mo re fre quent a nd pe r- ch anging clim ate. sisten t th reats to their li ve liho od s. Soc ia l po lici'es reduce eco no m ic a nd soc ial vul- To ensure adequate food and water for all nerability a nd increase resilience to clim ate countries. Intern atio nal ac tio n is cr it ica l chan ge . A hea lthy, well -educated popul a- to ma nage the wate r and food secu rity chal- tio n with access to soc ia l protection ca n lenge s posed by the combination o f clim ate better cope with clim ate shocks and clim ate cha nge and popul atio n press ures- even change . Social protectio n policies will need with improved ag ricultural produ ctiv ity to be strengthened where they exist, devel- and wate r-use effi ciency. One fi fth o f the oped where they are lacking, and designed world 's freshwater renewable resources are so that they can be expa nded quickly after sha red between count r ies .s6 T hat includes a sho ck. ss Crea ting soc ial safe ty nets in 26 1 tra nsboundary ri ve r basin s, ho me to coun tries th at do not yet have them is criti- 40 perce nt of the wo rld 's people a nd gov- ca l, a nd Banglade sh shows how it ca n be erned by ove r 150 internatio nal treaties that done even in ve ry poor count ries (box 4). do not always include all riparian states .S? Develop me nt age ncies could help sprea d If count r ies are to m anage these resources 14 WORLD DEVELOPMENT REPORT 2010 more intensively, they will have to sca le up and providing better information on both cooperation on internat ional water bodies climate and market indexes can make food through new international treati.es or the trade more efficient and prevent large price revision of ex is ting ones. The system of shifts. Price spikes can also be prevented water allocation will need to be reworked by invest ing in strategic stockpiles of key due to the increased variability, and coop- grains and foodstuffs and in risk-hedging eration can be effective only when all ripar- i nstru men ts. 60 ian countries are involved and responsible for managing the watercourse. Act differently: To transform energy, Similarly, increasing arid condit io ns in food production, and decision-making countries that already import a large share systems of their food, along with more frequent Achieving the needed em ission reductions extreme events and growth in income and will require a transformation both of our population, will in crease the need for food ene rgy system and of the way we manage imports. 58 But globa l food markets are agric ulture, land use, and forests (figure 7). thin-relatively few countries export food But these transformations must also incor- crops. 59 So small changes in either supply or porate the needed adaptations to a chang- demand can have big effects on prices. And ing climate. Whether they involve deciding small countries with little market power which crop to plant or how much hydro- can find it d ifficult to secure reliable food electric power to develop, management and imports. investment decisions must factor in chang- To en sure adequate water and nutrition ing hydrolog ical conditions and tempera- for a ll, the world will have to rely on an tures: rather than being optimally adapted improved trade system less prone to large to the climate of the past, decisions will price shifts. Facilitating access to markets have to be robust to the variety of climate for developing countries by reducing trade outcomes we could face in the future . barriers, weatherproofing transport (for example, by increasing access to year-round To ignite a veritable energy revolution. If road s), improving procurement methods, financing is available, can emissions be cut sufficient ly deeply or quickly without sac ri- ficing growth? Most models suggest that they Figure 1 Global C0 2 e emissions by secto r: Energy, but also agriculture and forestry, are major sources can, although none find it easy (see chapter 4). Dramatically higher energy efficiency, Waste and stronger management of energy demand, wastewater 3% and large-scale deploymen t of existing low-COre mitting electricity sources cou ld produ ce about half the emission reductions needed to put the world on a path toward 2°C (figu re 8). Many have substantial co- benefits but are hampered by institutional Agri culture a nd financial constraints that have proven 14% hard to overcome. So known technologies and practices Residential and can buy time-if they can be scaled up. For commercial buildings that to happen, appropriate energy pricing 8% is absolutely essential. Cutting subsidies Source: IPCC 2007a, figure 2.1. a nd increasing fu el taxes are politically dif- Note Share of anthropogenic (human-caused) greenhouse ficult , but the recent spike and fall in oil gas emissions in 2004 in co,e (see figure 1 for the definition of C0 1e). Emissions associated with land use and land-use and gas prices make the time opportune for change, such as agricultural fertilizers, livestock, deforesta· doing so. Indeed, European countries used tion, and burning, account for about 30 percent of total green- house gas emissions . And uptakes of carbon into forests and the 1974 oil crisis to introduce h igh fuel other vegetation and soils constitute an important carbon taxes. As a result, fuel demand is about half sink, so improved land-use management is essential in efforts to reduce greenhouse gases in the atmosphere . what it likely would have been had prices Overview: Changing th e Climate for Development 15 61 been close to those in the United States. programs cost about 1.5 cents a kilowatt- Similarly, electricity prices are twice as high hour, much less than any electricity supply in Europe as they are in the United States options, 65 while industrial energy perfor- and electricity consumption per capita is mance targets spur innovation and increase half. 62 Prices help explain why European competitiveness. 66 And because utilities are emissions per capita (10 tons of C0 2e) are potentially effective delivery channels for less than half those in the United States making homes, commercial buildings, and (23 tons ) .63 Global energy subsidies in industry more energy efficient, incentives developing countries were estimated at have to be created for utilities to conserve $310 billion in 2007, 64 disproportionately energy. This can be done by decoupling a benefiting higher-income populations. utility's profits from its gross sales , with Rationalizing energy subsidies to target the profits instead increasing with energy con- poor and encourage sustainable energy and servation successes . Such an approach is transport could reduce global C0 2 emis- behind California's remarkable energy con - sions and provide a host of other benefits. servation program; its adoption has become But pricing is only one tool for advanc- a condition for any U.S. state to receive fed- ing the energy-efficiency agenda, which eral energy-efficiency grants from the 2009 suffers from market failures, high trans- fiscal stimulus. action costs , and financing constraints. For renewable energy, long-term power- Norms, regulatory reform, and financial purchase agreements within a regulatory incentives are also needed-and are cost- framework that ensures fair and open grid effective. Efficiency standards and labeling access for independent power producers will Figure 8 The full portfolio of ex isting measures and advanced technolog ies, not a silver bullet. will be needed to get the world onto a 2° C path C0 2e (in gi gatons) 70 ---- ------------ -------- -- -- -- -- ----------- ~ 60 • Demand reduction Renewables • (hydro, solar, wind, 50 bioenergy) Nuc lear 40 • Fossil CCS 30 • Forest sinks Other greenhouse gases (CH 4, N2D, F-gases) 20 • Fossil fue l switch (coal to gas) 10 0 --.... 2000 2010 2020 2030 2040 2050 2060 2070 2080 Year Source: WOR team with data from llASA 2009. 16 WORLD DEVELOPMENT REPORT 2010 attract investors . This can be done through current generation of biofuels would dis- mandatory purchases of renewable energy at place large areas of natural forests and grass- a fixed price (known as a feed-in tariff) as in lands and compete with the production of 70 Germany and Spain; or through renewable food . Second-generation biofuels that rely portfolio standards that require a minimum on nonfood crops may reduce competition share of power to come from renewables, as with agriculture by using more marginal in many U.S. states. 67 Importantly, predict- lands. But they could still lead to the loss of ably higher demand is likely to reduce the pasture land and grassland ecosystems and costs of renewables, with benefits for all compete for water resources.7 1 countries. In fact, experience shows that Breakthroughs in climate-smart tech- expected demand can have an even higher nologies will require substantially more impact than technological innovation in spending for research, development, dem- driving down prices (figure 9). onstration, and deployment. As mentioned But new technologies will be indispens- earlier, global public and private spending able: every energy model reviewed for this on energy RD&D is modest, both relative Report concludes that it is impossible to get to estimated needs and in comparison with onto the 2°C trajectory with only energy what innovative industries invest. 72 The efficiency and the diffusion of existing modest spending means slow progress, with technologies. New or emerging technolo- renewable energy still accounting for only gies, such as carbon capture and storage, 0.4 percent of all patents. 73 Moreover, devel- second-generation biofuels, and solar pho- oping countries will need access to these tovoltaics, are also critical. technologies, which will require boosting Few of the needed new technologies domestic capacity to identify and adapt are available off the shelf. Ongoing car- new technologies as well as strengthening bon capture and storage demonstration international mechanisms for technology projects currently store only about 4 mil- transfer (see chapter 7) . lion tons of C0 2 annually. 68 Fully proving the viability of this technology in different To transform land and water managemen ' regions and settings will require abo,ut 30 and manage competing demands. By 205 1 I full-size plants at a total cost of $75 billion the world will need to feed 3 billion more to $100 billion .69 Storage capacity of 1 bil- people and cope with the changing dietary lion tons a year of C0 2 is necessary by 2020 demands of a richer population (richer peo- to stay within 2°C warming. ple eat more meat, a resource-intensive way Investments in biofuels research are also to obtain proteins). This must be done in a needed. Expanded production using the harsher climate with more storms, droughts, and floods. And it has to incorporate agri- cu lture in the mitigation agenda- because Figure 9 High expected demand drove cost red uct ions in solar photovoltaics by allowing fo r larger-scale producti on agriculture drives about half the deforesta- tion every year and directly contributes 14 Cost reduction by factor ($/watt) percent to overall emissions. And ecosys - l $25.30 tems, already weakened by pollution, pop - $25 ulation pressure, and overuse, are further $20 Expected demand effect threatened by climate change. Producing $15 43% ll}R&D more and protecting better in a harsher cli- $10 $5 0 1979 price Plant size Source: Adapted from Nemet 2006. 30% Efficiency • 22% Other - 5% Unexplained - $3.68 2001 price mate while reducing greenhouse gas emis- sions is a tall order. It will require managing the competing demands for land and water from agriculture, forests and other ecosys- tems, cities, and energy. Note: Bars show the portion of the reduction in the cost of solar photovoltaic power, from 1979 to 2001, So agriculture will have to become more accounted for by different factors such as plant size !which is determined by expected demandl and improved productive, getting more crop per drop and efficiency !which is driven by innovation from R&D) . The "other" category includes reductions in the price of the key input silicon 112 percent) and a number of much smaller factors (including reduced quantities of silicon per hectare-but-without the increase in needed for a given energy output, and lower rates of discarded products due to manufacturing error). environmental costs currently associated Overview: Changing the Climate for Development 17 with intensive agricu lture. And societies will m a intai n ing b iodi ve rsi ty, because spec ies have to put much more effort into protecting ra nges are li kely to shi ft outside the bou nd- ecosystems. To avoid pu lling more land into aries of such areas. In stead ecoag ri cul tural cultivation and spreading into "unmanaged " la ndscapes, where fa rm ers create mosaics land and fo rests, ag ricu ltural produ ctivity of cult ivated a nd nat ural habitats, could will have to increase, perhaps by as much as faci litate t he m igratio n of spec ies. W hile 1.8 percent a year com pared to 1 percent a be nefiti ng biodiversity, ecoagr icu ltu re prac- yea r without cl im ate change. 74 Most of that tices also increase agr iculture's res ilience to increase wi ll have to occur in developing clim ate cha nge alo ng with fa rm productiv- countries because ag ricultu re in high-income ity a nd incomes. In Central America far ms coun tries is already close to maximum fea - using these pract ices su ffe red half or less of sible yields. Fortunately, new technologies the d a m age inflicted o n others by H ur ri- and practices are emergi ng (box 5). Some ca ne Mitch. 75 Imp roved fa llow prac tices in improve productivity and resilience as they Za mbi a, including t he use of leguminous sequester carbo n in the soil and reduce the trees76 a nd cover crops, increased so il fer- nutrient runoff that dam ages aquatic ecosys- tility and reduced erosion- thereby almost tems. But more research is needed to unde r- triplin g annual net fa rm incomes. 77 stand how to sca le them up. Be tter m anageme nt of water is esse nti al Increased e ffo rts to cons er ve species fo r ag riculture to adapt to clim ate change. and ecosystem s wi ll need to be reco nci led River bas in s will be losi ng nat u ra l wate r with foo d produ ct ion (whether ag ricu l- storage in ice a nd snow a nd in reduced tu re or fis heries). Protected areas-a lready aq ui fe r recharge, just as wa rmer tem pera- 12 percen t of the ea rth 's land but o nl y a tures increase eva po ratio n. Wate r ca n be tiny po rtio n of the ocea n and fresh wa ter used m ore effi ciently through a combi- sys tem-ca nnot be the o nly solu tio n to natio n of new and exis ting techn olog ies, sox s Promising approaches that are good for farmers and good for the environment Prom ising practices minimum necessary fertilizer and water the Amazon rain forest could sequester Cultivation practices such as zero-tillage could help the intensive, high-input farms carbon on a huge scale while improv- (which involves injecting seeds directly of high-income countries, As ia, and Latin ing soil productivity. Burning wet crop into the soil instead of sowing on America to reduce emissions and nutrient residues or manure (biomass) at low ploughed fie lds) combined with residue runoff, and increase water-use efficiency. temperatu res in the almost complete management and proper fertilizer use can New technologies that limit emissions absence of oxygen produces biochar, help to preserve soil moisture, maximize of gaseous nitrogen include controlled- a charcoal-type solid with a very high water infiltration, increase carbon storage, release nitrogen through the deep place- carbon content. Biochar is highly stable minim ize nutrient runoff, and raise yields. ment of supergranules of fertilizer or in soil, locking in the carbon that would Now being used on about 2 percent of the addition of biological inhibitors to otherwise be released by simply burning global arabl e la nd, this practice is likely fertilizers . Remote sensing technologies the biomass or allowing it to decom- to expand. Zero tillage has been largely for communicating precise information pose. In industrial settings this process adopted in high-income countries, but about soil moisture and irrigation needs transforms half the carbon into biofuel is expanding rapidly in count ries such as can el iminate unnecessary application and the other half into biochar. Recent India. In 2005, in the rice-wheat farming of water. Some of these technolog ies analysis suggests biochar may be able to system of the lndo-Ganget ic plain, farm- may remain too expensive for most store carbon for centuries, possibly mil- ers adopted zero-ti llage on 1.6 mi llion developing -country farmers (and could lennia, and more studies are underw ay hectares; by 2008, 20-25 percent of the require payment schemes for soil carbon to verify this property. wheat in two Indian states (Haryana and conservation or changes in water pricing). Punjab) was cultivated using minimum But others such as biological inhibitors tillage. And in Brazil, about 45 percent of require no extra labor while improving cropland is farmed using these practices. productivity. Sources: de la Torre, Fajnzylber, and Nash 2008; Derpsch and Friedrich 2009; Eren - Promising technologies Learn ing from the past stein 2009; Erenstein and Laxmi 2008; Leh - Precision agriculture techniques for tar- Another approach building on a tech - mann 2007; Wardle, Nilsson, and Zackrisson geted, optimally timed application of the nology used by indigenous peoples in 2008. 18 WORLD DEVELOPMENT REPORT 2010 better information, and more sensible use. idea that natural systems fluctuate within And that can be done even in poor coun- an unchanging envelope of variability and tries and among small farmers: in Andhra that has been at the heart of infrastructure Pradesh, India, a simp le scheme, in which design and planning, insurance pricing, and farmers monitor their rain and groundwa- numerous private decisions-from plant- ter and learn new farming and irrigation ing and harvesting dates to siting factories techniques, has caused l million farmers to and designing buildings. 79 Decision makers voluntarily reduce groundwater consump- now have to contend with the changing cli- tion to sustainable levels. 78 mate compounding the uncertainties they Efforts to increase water resources already faced . More decisions now have to include dams, but dams can be only a part be made in a context of changing trends of the solution, and they will need to be and greater variability, not to mention pos- designed flexibly to deal with more variable sible ca rbon constraints. rainfall. Investments to store more water The approaches being developed and underground and replenish aquifers are applied by public and private agencies, cities, popular in water-stressed developing coun- and countries around the world from Aus- tries, notably India and in the Middle East. tralia to the United Kingdom are showing They include check dams (small structures that it is possible to increase resilience even that slow the flow of water in ditches or in the absence of expensive and sophisticated drainage ca nals), storage ponds, and other modeling of future climate. 80 Of course bet- approaches that directly inject stormwater ter projections and less uncertainty help, and treated wastewater into aquifers. Other but these new approaches tend to focus on approaches include using recycled water strategies that are "robust" across a range of and desalination, which, while costly, can possible future outcomes, not just optimal be worthwhile for high-value use in coastal for a particular set of expectations (box 6). 81 areas, especially if powered by renewable Robust strategies can be as simple as pick- energy (see chapter 3). ing seed varieties that do well in a range of But changing practices and technolo- climates. gies can be a challenge, particularly in poor, Robust strategies typically build flex- rural, and isolated settings, where introduc- ibility, diversification, and redundancy in ing new ways of doing things requires work- response capacities (see chapter 2) . They ing with a large number of very risk-averse favor "no-regrets" actions that provide ben- actors located off the beaten track and fac- efits (such as water and energy efficiency) ing different constraints and incentives. even without climate change. They also Extension agencies usually have limited favor reversible a nd flexible options to keep resources to support farmers and are staffed the cost of wrong decisions as low as possible with engineers and agronomists rather than (restrictive urban planning for coastal areas trained communicators. Taking advantage can easily be relaxed while forced retreats of emerging technologies will also require or increased protection can be difficult bringing higher technical education to rural and costly). They include safety margins to communities . New models of entrepre- increase resilience (paying the marginal costs neurial education, such as the one adopted of building a higher bridge or one that can be by EARTH University in Costa Rica, one flooded , or extending safety nets to groups of the world 's first sustainable develop- on the brink). And they rely on long-term ment universities, can bring the benefits of planning based on scenario analysis and an technical education to farming communi- assessment of strategies under a wide range ties and tailor scientific knowledge to local of possible futures. 82 Participatory design circumstances. and implementation is critical, because it permits the use of local knowledge about To transform decision-making processes: existing vulnerability and fosters ownership Adaptive policy making to tackle a riskier of the strategy by its beneficiaries. and more complex environment. Climate Policy making for adaptation also needs change has largely killed stationarity, the to be adaptive itself, with periodic reviews Overview: Changing the Clima te for Development 19 sox 6 Ingenuity needed: Adaptation requires new tools and new knowledge Regardless of mitigation efforts, human - migration corridors, may be needed to Human health ity will need to adapt to substantial facilitate species movements to keep up Many adaptations of health system s changes in the climate - everywhere, and with the change in cl imate. to climate change will initially involve in many different fields. practical options that bu ild on existing Physical capital Natural capital knowledge. But others will require new Climate change is likely to affect infra- A diversity of natural assets will be skill s. Advances in genomics are making structure in ways not easily predictable it possible to design new diagnostic tools needed to cope with climate change and and varying greatly with geography. ensure productive agriculture, forestry, For example, infrastructure in low-lying that can detect new infectious diseases. These tools, combined with advances in and fisheries. For example, crop variet- areas is threatened by flooding rivers and ies are needed that perform well under communications technologies, can detect rising seas whether in Tangier Bay, New drought, heat, and enhanced C0 2 • But the emerging trends in health and provide York City, or Shanghai. Heat waves soften private-sector- and farmer-led process asphalt and can require road closures; health workers with early opportunities of choosing crops favors homogeneity to intervene. Innovations in a range of they affect the capacity of electricity adapted to past or current conditions, transmission lines and warm the water technologies are already transforming not varieties capable of producing con- medicine. For example, the advent of needed to cool thermal and nuclear sistently higli yields in warmer, wetter, or hand-held diagnostic devices and video- power plants just as they increase elec- drier conditions. Accelerated breeding mediated consultations are expanding tricity demand . Uncertainties are likely to programs are needed to conserve a wider influence not only investment decisions the prospects for telemedicine and making it easier for isolated communi- pool of genetic resources of existing but the design of infrastructure that will crops, breeds, and their wild relatives . need to be robust to the future climate. ties to connect to the global health infrastructure. Relatively intact ecosystems, such as Similar uncertainty about the reliability of forested catchments, mangroves, and water supply is leading to both integrated wetlands, can buffer the impacts of cli- management strategies and improved mate change. Under a changing climate water-related technologies as hedges Sources: Burke, Lobell, and Guarino forth - coming; Ebi and Burton 2008; Falloon and these ecosystems are themselves at ri sk, against climate change. Greater technical Betts forthcoming; Guthrie, Ju ma, and Sil - and management approaches will need knowledge and engineering capabilities lem 2008; Keim 2008; Koetse and Rietveld to be more proactive and adaptive. Con- will be needed to design future infra- 2009; National Academy of Engineering nections between natural areas, such as structure in the light of climate change. 2008; Snoussi and others 2009. based on the collec tion a nd monitor ing of sustainab le agr icultural prac tices, remove in fo rm atio n, som ething in creas ingly fea- perve rse subsidies. But these have prove n sible at low cost tha nks to bette r tec hnolo- elu sive in th e past, raising the quest io n of gies. Fo r exa mple, a key problem in water wh at mi ght ma ke the needed refor m s a nd manage ment is the lack of knowled ge abo ut be havior cha nges poss ible. T he a nswer lies undergro und water, o r abo ut wh o co n- in a co m bi nat io n of new p ressures, new sumes what. New rem ote-se nsing techn ol- inst rumen ts, and new resources. ogy makes it possible to infer groundwa ter New pressures are coming from a grow- co nsum ptio n, ident ify which far mers have in g awa reness of cl im ate cha nge a nd its low wate r p roductiv ity, and specify when to cu r rent a nd fut u re cos ts. But aware ness in crease o r decrease wa ter ap pli cat ions to does not always lea d to action : to suc- maxi mize produ ctivi ty witho u t affectin g ceed , clim ate-s m a rt d eve lopm ent policy crop yield s (see ch apter 3). mu st tac kle the inertia in the behav ior o f individu a ls a nd o rga nizat ion s. Do m es- Making it happen: tic perce ptio n of clim ate change will a lso New pressures, new instruments, determine the success o f a global dea l- its and new resources adoptio n but also its implementatio n. And The previous pages describe the m a ny steps while m a ny o f the an swers to the climate needed to m anage the clim ate change chal- and development problem w ill be national lenge. Ma ny read like the sta nd a rd fa re of or even loca l, a global dea l is needed to gen- a development or env iro nment al science erate new instruments and new resources tex tbook: improve water resource manage- fo r ac tio n (see chapter 5). So while new ment, in crea se energy effic iency, promote pressures must start at home with changi ng 20 WORLD DEVELOPMENT REPORT 2010 behaviors and shifting public opinion, Addressing the climate challenge will action must be enabled by an efficient and also require changes in the way govern- effective international agreement, one that ments operate. Climate policy touches on factors in development realities. the mandate of many government agencies, yet belongs to none. For both mitigation and New pressures: Success hinges adaptation, many needed actions require a on changing behavior and shifting long-term perspective that goes well beyond public opinion those of any elected administration. Brazil, International regimes influence national China, India, Mexico, and the United King- policies but are themselves a product of dom have created lead agencies for climate domestic factors. Political norms, gover- change, set up high-level coordination bod- nance structures, and vested interests drive ies, and improved the use of scientific infor- the translation of international law into mation in policy making (see chapter 8) . domestic policy, while shaping the inter- Cities, provinces, and regions provide national regime. 83 And in the absence of a political and administrative space closer to global enforcement mechanism, the incen- the sources of emissions and the impacts of tives for meeting global commitments are climate change. In addition to implement- domestic. ing and articulating national policies and To succeed, climate-smart development regulations, they perform policy-making, policy has to factor in these local determi- regulatory, and planning functions in sec- nants. The mitigation policies that a country tors key to mitigation (transportation, con- will follow depend on domestic factors such struction, public services, local advocacy) as the energy mix, the current and potential and adaptation .(social protection, disaster energy sources, and the preference for state risk reduction, natural resource manage- or market-driven policies. The pursuit of ment). Because they are closer to citizens, ancillary local benefits-such as cleaner air, these governments can raise public aware- technology transfers, and energy security- ness and mobilize private actors. 84 And at is crucial to generating sufficient support. the intersection of the government and the Climate-smart policies also have to public, they become the space where gov- tackle the inertia in the behavior of indi- viduals and organizations. Pricing is only ernment accountability for appropriate responses is played out. That is why many .. part of the problem. The way problems local governments have preceded national are seen matters as well. Weaning modern governments in climate action (box 7). economies from fossil fuels and increasing resilience to climate change will require New instruments and new resources: attitudinal shifts by consumers, business The role of a global agreement leaders, and decision makers. The chal- Immediate and comprehensive action is lenges in changing ingrained behaviors call not feasible without global cooperation, for a special emphasis on nonmarket poli- which requires a deal perceived as equita- cies and interventions. ble by all parties-high-income countries, Throughout the world disaster risk man- which need to make the most immedi- agement programs are focused on changing ate and stringent efforts; middle-income community perceptions of risk. The City of countries, where substantial mitigation London has made targeted communica- and adaptation need to happen; and low- tion and education programs a centerpiece income countries, where the priority is of its "London Warming" Action Plan. technical and financial assistance to cope And utilities across the United States have with vulnerab_ility to today's conditions, begun using social norms and peer com- let alone unfolding changes in the climate. munity pressure to encourage lower energy The deal must also be effective in achieving demand: simply showing households how climate goals, incorporating lessons from they are faring relative to others, and sig- other international agreements and from naling approval of lower than average con- past successes and failures with large inter- sumption is enough to encourage lower national transfers of resources. Finally, it energy use (see chapter 8). has to be efficient, which requires adequate Overview : Changing the Climate fo r Development 21 sox 1 Cities reducing their carbon footprints The movement toward ca rb on-neutral by ph otovoltaic sol ar cells . In total the More than 100 cities and local govern - cities shows how local governments are city has over 500,000 square meters of ments around the world are participating taking action even in th e absence of solar water heating panel s, the equiva - in a "Cities for Climate Protection Cam- intern ational commitments or stringent lent of about 0.5 megawa t ts of electric paign" to adopt policies and implement nationa l policies. In th e United States, water heaters. As a result of these efforts, quantifiable measures to reduce local wh ich has not ratified the_ Kyoto Protocol, energy use has fallen by nearly a third and greenhouse gas emissions (http://www close to a thousand cities have agreed to C0 1 emission s by half. .iclei.org). Together with other local gov- meet the Kyoto Protocol target under the Examples of movements to carbon- ernment associations, such as the C40 Mayors' Cl imate Protection agreement. In neutral cities are mushrooming well Cities Climate Leadership Group and the Rizhao, a city of 3 million people in north- beyond China . In 2008 Sydney became World Mayors Council on Climate Change, ern China, the municipal government the first city in Australia to b ecome carbon they have embarked on a process that combined incentives and legislative tools neutral, through energy efficiency, renew- seeks empowerment and inclusion of cit ies to encourage the large-sca le efficient able energy, and carbon offsets. Copenha- and local governments in the UN Frame- use of renewable energy. Skyscrapers are gen is planning to cut its carbon emissions work Convention on Cl imate Change. built to use solar power, and 99 percent to zero by 2025. The plan includes invest- of Rizhao's households use solar-power ments in wind energy and encouraging Sources: Bai 2006; World Bank 2009d; C40 heaters. Almost all traffic signals, street the use of electric and hydrogen-powered Cities Climate Leadership Group, http://www lights, and park illuminations are powered cars with free parking and recharging . .c40cities.org (accessed August 1, 2009). funding a nd fi nancia l ins trume n ts that ca n d rive to in tegrate climate and develop ment sepa rate where mi t iga tio n hap pe ns fro m co uld sh ift respo nsibili ty fo r mi t igati o n who fu nds it-thereby ac h iev in g mi t iga- o nto the developing wo rld . tio n at least cost. Enshrinin g a prin ciple of equ ity in a global dea l wo uld do muc h to dispel such A n equitable deal. Globa l cooperation conce rn s and gene rate tru st. A lo ng-ter m at the scale needed to dea l with climate goa l of pe r cap ita emissions co nverging to a cha nge can happen only if it is based on a band cou ld ensure that no country is locked globa l agreemen t that add resses the needs in to an u nequa l sha re of t he atm osp heri c and const r aints of deve lopi ng cou ntries, commons. Ind ia has rece ntly stated that it o nl y if it ca n separate where mitigation wo uld never exceed the average per cap ita happe ns from who bea rs the bu rden of em issions of high-incom e coun t r ies. 86 So th is effort, a nd only if it creates fi na ncia l drast ic act io n by h igh-i ncome coun tr ies to instru m en ts to encou rage and fac ili tate reduce their own carbon footprint to sus- mit igatio n, eve n in countr ies t hat are rich tai nable levels is essen tial. T his wou ld show in coa l and poor in income o r th at have leadershi p, sp u r innovation, and m ake it contr ibuted little or nothi ng hi storica lly to feasible for a ll to sw itc h to a low-carbon cl im ate change. W het her t hese co un tr ies growth path. seize the op port u n ity to embark on a more Ano the r majo r concern of d eve lo pi ng susta inable develop ment path will be heav- coun tries is tec hnology access . Innovat io n ily infl uenced by the fi nancia l and techn i- in clim ate-re lated tec hno logies re m ai ns ca l su pport that higher- inco me coun t ries co nce n t rated in high-in com e countries, ca n muster. Otherwi se the tra nsitio n costs alt hough developing countries are increas- could be prohibitive. ing their prese nce (Ch ina was seventh in Global cooperatio n w ill req u ire m o re ove rall renewable energy patents, 87 and an th a n fin a nci al co ntr ib ut ion s, however. Indi an firm is now the leader in o n-road Behaviora l economics and soc ial psychol- elect r ic ca rs88 ). In addition , deve lop in g ogy show that people tend to reject dea ls coun t ries-a t least t he sm a lle r o r poo rer they perceive as un fa ir toward them, even o nes- m ay nee d ass ist an ce to p rodu ce if t hey sta nd to benefit. 85 So the fac t th at new tech nology or tai lor it to their circu m- it is in everyone's interes t to collaborate is stances. T his is particu la rly problem at ic for no guarantee of success. T here are rea l con- ad ap tation, where technologies ca n be ve ry ce rn s amo ng deve lopi ng coun tr ies t hat a locatio n specific. WORLD DEVELOPMENT REPORT 2010 International transfers of clean technol- lessons of aid effectiveness and interna- ogies have so far been modest. They have tional agreements. Cl im ate finan ce is not occurred in at best one-third of the projects a id finance, but the aid experience does funded through the Clean Development offer critical les sons . In particular, it has Mechanism (CDM ), the main chan nel for become clear that commitments are sel- financing investments in low-carbon tech- dom respected unless they correspond to nologies in developing countries. 89 The a country's objectives-the co nditional - Global Environmental Facility, which has ity versus ownership debate. So funding historically allocated about $160 million for adaptation and mitigation should be a year to climate mitigation programs, 90 organized around a process that encour- is supporting technology needs assess- ages recipient-country development and ments in 130 countries. About $5 billion ownership of a low-carbon deve lopment has recently been pledged under the new age nda. The aid experience also shows that Clean Technology Fund to assist develop- a multiplicity of funding sources imposes ing countries by supporting large , risky huge transaction costs on recipient coun- investments involving clean technologies, tries and reduces effectiveness. And while but there are disputes over what constitutes the sources of funding might be separate, clean technology. the spending of adaptation and mitigation Building technology agreements into a resources must be fully integrated into global climate deal could boost technology development efforts. innovation and ensure developing-country International agreements also show that access. International collaboration is criti- tiered approaches can be an appropriate way cal for producing and sharing climate- of bringing hugely different partners into a smart technologies. On the production side, single deal. Look at the World Trade Orga- cost-sharing agreements are needed for nization: special and differential treatment large-scale and high-risk technologies such for developing countries has been a defining as carbon capture and storage (see chapter feature of the multilateral trading system for 7). International agreements on standards most of the postwar period. Proposals are . create markets for innovation. And inter- emerging in the climate negotiations around national support for technology transfer the multitrack framework put forward in the ca n take the form of joint production a nd UNFCCC's Bali Action Plan .91 These pro- technology sharing- or financial support posals would have developed countries com- for the incremental cost of adopting new mit to output targets, where the "output" is cleaner technology (as was done through greenhouse gas emissions, and developing the Multilateral Fund for the Implementa- countries comm it to policy changes rather tion of the Montreal Protocol on Substances than emission targets. that Deplete the Ozone Layer). This approach is appealing for three rea- A global deal will also have to be accept- sons. First, it can advance mitigation oppor~ able to high -income countries. They worry tunities that carry development co-benefits. about the financial demands that could be Second, it is well suited to developing coun- placed on them and want to ensure that tries, where fast population and economic financial transfers deliver the desired adap- growth is driving the rapid expansion of the tation and mitigation results. They also are ca pital stock (with opportunities for good concerned that a tiered approach allowing or bad lock-in) and increases the urgency developing countries to delay actions might of moving energy, urban, and t ransport affect their own competitiveness with lead- systems toward a lower-carbon path. A ing middle-income countries. policy-based track can also offer a good framework for countries with a high share An effective deal: Lessons from aid of hard-to-measure emissions from land effectiveness and international agree- use , land-use change, and forestry. Third, it ments. An effective climate deal will is less likely to require monitoring of com- achieve agreed targets for mitigation and plex flows-a challenge for many countries. adaptation. Its design can build on the Nevertheless, some overall monitoring and , Overview: Changing the Climate for Development 23 evaluation of these approaches is crit ical, if of funds into a more limited number is only to understand their effect iveness. 92 clearly warranted. Looking forward, pricing carbon (whether An efficient deal: The role of through a tax or through a cap and trade climate finance scheme ) is the optimal way of both generat- Climate finance can reconcile equity and ing carbon-finance resources and directing efficiency by separating where climate those resources to efficient opportunities. In action takes place from who pays for it. the near future, however, the CDM and other Sufficient finance flowing to developing performance-based mechanisms for carbon countries-combined with capacity build- offsets are likely to remain the key market- ing and access to technology-can sup- based instruments for mitigation finance in port low-carbon growth and development. developing countries and are therefore criti- If mitigation finance is directed to where cal in supplementing direct transfers from mitigation costs are lowest, effic iency will high-income countries. increase. lf adaptation finance is directed The CDM has in many ways exceeded to where the needs are greatest, undue suf- expectations, growing rapidly, stimulating fering and loss can be avoided. Climate finance offers the means to reconcile equity, Figure 10 The gap is large: Estimated annual climate funding required for a 2°C trajectory efficiency, and effectiveness in dealing with compared with current resources climate change. $, billions But current levels of climate finance fall far short of foreseeable needs. Mitigation Mitigation: 700 $140--$675 billion finance needed in developing countr ies could be around $400 billion a year by 2030 (using the median of the estimates in table 600 1). Current flows of mitigation finance aver- aging some $8 billion a year to 2012 pale in comparison. And the estimated $75 billion that could be needed annually for adaptation 500 in developing countries dwarfs the less than $1 billion a year now available (figure 10). Compounding the shortfalls in climate 400 Median: $400 billion - - - finance are significant inefficiencies in how funds are generated and deployed. Key problems include fragmented sources of finance; high costs of implementing market 300 mechanisms such as the Clean Development Mechanism; and insufficient, distortionary instruments for raising adaptation finance . 200 Chapter 6 identifies nearly 20 different bilateral and multilateral funds for climate Adaptation: change currently proposed or in operation. This fragmentation has a cost identified in the Paris Declaration on Aid Effectiveness: 100 Funding for adaptation and mitigation H $30--$90 billion Median: $75 billion each fund has its own governance, raising $10 billion transaction costs for developing countries; and alignment with country development 2008--2012 2030 objectives may suffer if sources of finance Sources. For mitigation: UNFCCC 2008; llASA 2009; IEA 2008c ; are narrow. Other tenets of the Paris Mc Kinsey Global Institute 2009a; additional data communica- tion from McKinsey for 2030, using a dollar-to-Euro exchange Declaration, including ownership, donor rate of $1.50 to € 1.00; Edmonds and others 2008; and additional harmonization, and mutual accountabil- data provided by Jae Edmonds. For adaptation: Agrawala and Fankhauser 2008; World Bank 2009c; and Project Catalyst 2009. ity, also suffer when financing is highly Note-. Shaded bars represent range of estimates of adaptation fragmented. An eventual consolidation and mitigation needs in 2030. as well as the median. 24 WORLD DEVELOPMENT REPORT 2010 learning, raising awareness of mitigation review and administrative functions. A key options, and building capacity. But it also second set of proposals focuses on allow- has many limitations, including low devel- ing the CDM to support changes in policies opment co-benefits, questionable addition- and programs rather than limit it to proj- ality (because the CDM generates carbon ects. "Sector no-lose targets" are an exam- credits for emission reductions relative to a ple of a performance-based scheme, where baseline, the choice of baseline can always demonstrable reductions in sectoral carbon be questioned), weak governance, inefficient emissions below an agreed baseline could operation, limited scope (key sectors such be compensated through the sale of carbon as transport are not covered), and concerns credits, with no penalty if the reductions about market continuity beyond 2012. 93 are not achieved. For the effectiveness of climate actions it Forestry is another area where climate is also important to understand that CDM finance can reduce emissions (box 8). Addi- transactions do not reduce global carbon tional mechanisms for pricing forest car- emissions-they simply change where they bon are likely to emerge from the current occur (in developing rather than developed climate negotiations. Already several ini- countries) and lower the cost of mitigation tiatives, including the World Bank's Forest (thereby increasing efficiency). Carbon Partnership Facility, are exploring The Adaptation Fund under the Kyoto how financial incentives can reduce defores- Protocol employs a novel financing instru- tation in developing countries and thereby ment in the form of a 2 percent tax oncer- reduce carbon emissions. The major chal- tified emission reductions (units of carbon lenges include developing a national strat- offset generated by the CDM). This clearly egy and implementation framework for raises finance that is additional to other reducing emissions from deforestation and sources, but as pointed out in chapter 6, degradation; a reference scenario for emis- this approach has several undesirable char- sions; and a system for monitoring, report- acteristics. The instrument is taxing a good ing, and verification. (mitigation finance) rather than a bad (car- Efforts to reduce emissions o f soil car- bon emissions) and like any tax, there are bon (through incentives to change till- inevitable inefficiencies (deadweight losses) . ing practices, for example) could also be Analysis of the CDM market suggests that a target of financial incentives-a nd are most of the lost gains from trade as a result essential to ensure natural areas are not of the tax would fall on developing-country converted to food and biofuel production. suppliers of carbon credits. 94 Adaptation But the methodology is less mature than for finance will also require an allocation forest carbon, and major monitoring issues mechanism that ideally would embrace would need to be resolved (see box 8). Pilot the principles of transparency, efficiency, programs must be developed rapidly to and equity-efficient approaches would encourage more resilient and sustainable direct finance to the most vulnerable coun- agriculture and to bring more resources tries and those with the greatest capacity and innovation to a sector that has lacked to manage adaptation, while equity would both in recent decades. 95 require that particular weight be given to Within countries the role of the public the poorest countries. sector will be critical in creating incen- Strengthening and expanding the cli- tives for climate action (through subsi - mate finance regime will require reform- dies, taxes, caps, or regulations) , providing ing existing instruments and developing information and education, and eliminat- new sources of climate finance (see chap- ing market failures that inhibit action. But ter 6). Reform of the CDM is particularly much of the finance will come from the important in view of its role in generating private sector, particularly for adaptation. carbon finance for projects in develop- For private infrastructure service provid- ing countries. One set of proposals aims ers the flexibility of the regulatory regime at reducing costs through streamlining will be crucial in providing the right incen- projec t approval, including upgrading the tives for climate-proofing investments and Overview: Changing the Climate for Develop m en t 25 aox s The role of land use, agriculture, and forestry in managing climate change Land use, agriculture, and forestry have a earn $400 million to $2 billion a year. First, the carbon monitoring shou ld fol - substantial mitigation potential but have As for soil carbon, even in Africa, where low an "activity-based" approach, where been contentious in the climate negotia - relatively carbon -poor lands cover close emission reductions are estimated based tions. Could emissions and uptakes be to half the continent, the potential for on the activities carried out by the farmer measured with sufficient accuracy? What soil carbon sequestration is 100 million rather than on much more expensive can be done about natural fluctuations to 400 million tons of C0 2e a year. At $10 soil analyses. Specific and conservative in growth and losses from fires associ - a ton, this would be on par with current emission reduction factors can be applied ated with variations in the global climate? official development assistance to Africa. for different agroecological and climatic Should countries get credits for actions Largely through the efforts of a group zones. This is simpler, cheaper, and more taken decades or centuries before the of developing countries that formed predictable for the farmer, who knows up climate negotiations? Would credits from the Coalition for Rainforests, land use, front what the payments, and possible land-based activities swamp the carbon land-use change, and forestry account- penalties, are for any given activity. market and drive down the carbon price, ing were reintroduced into the UNFCCC Second, transaction costs can be reducing incentives for further mitiga- agenda. Those countries seek opportuni- reduced by "aggregators," who combine tion? Progress has been made on many of ties to contribute to reducing emissions activities over many smallholder farms, as these issues, and the Intergovernmental under their common but differentiated in the Kenya pilot project. By working with Panel on Climate Change has developed responsibility and to raise carbon finance many farms, aggregators can build up a guidelines for measuring land-related to better manage their forested systems. permanent buffer and average out occa- greenhouse gases. Negotiations over what has become sional reversals in sequestration. Pooling Net global deforestation averaged known as REDD (Reduced Emissions from over a portfolio of projects with conserva- 7.3 million hectares a year from 2000 to Deforestation and Forest Degradation) tive estimates of permanence can make 2005, contributing about 5.0 gigatons of continue, but most expect some ele- soil carbon sequestration fully equivalent C0 2 a year in emissions, or about a quar- ments of REDD to be part of an agree- to C0 2 reduction in other sectors. ter of the emission reduction needed . ment in Copenhagen . Third, logistical help, especially for poor Another 0.9 gigaton reduction could Initiatives on soil carbon are not so farmers who need help to finance up- come from reforestation and better forest advanced. While carbon sequestration in front costs, must include strengthened management in developing countries. agriculture would be an inexpensive, tech- extension services. They are key to dis- But improved forest management and nically simple, and efficient response to seminating knowledge about sequestra- reduced deforestation in developing climate change, developing a market for tion practices and finance opportunities. countries are currently not part of the it is no easy feat. A pilot project in Kenya (see chapter 3) and soil carbon offsets on Sources: Canadell and others 2007; Eliasch international Clean Development Mecha- 2008; FAO 2005; Smith and others 2008; nism of the UNFCCC. the Chicago Climate Exchange point to Smith and others 2009; Tschakert 2004; There is also interest in creating a opportunities. Three steps can help move UNEP 1990; Voluntary Carbon Standard mechanism for payments for improved soil carbon sequestration forward. 2007; World Bank 2008c. management of soil carbon and other greenhouse gases produced by agri- It's not just about energy: At high carbon prices the combined mitigation potential of agriculture and forestry is greater than that of other individual sectors of the economy culture. Technically about 6.0 gigatons of C0 2e in emissions could be reduced Potential emission reduction (GtC0 2e/yr) through less tillage of soil s, better wetland 7 Non-OECD/ EIT and rice paddy management, and bet- 6 EIT ter livestock and manure management. DECO About 1.5 gigatons' of emission reductions 5 • World total a year could be achieved in agriculture for 4 a carbon price of $20 a ton of C0 2e (figure). Forestry and agricultural mitigation 3 would produce many co-benefits. The 2 maintenance of forests keeps open a wider diversity of livelihood options, protects biodiversity, and buffers against 0 extreme events such as floods and land- ~~ [... [... i><;::,<;::, ~ i> ~ [... <§> ~~ <;::,<;::, [... [... i> ~nc;::, c;: ,c;: , [... [... i> ~nc;::, c;: ,c;: , [... [... i> ~nc;::, c;: ,c;: , u [... L- i> slides. Reduced tillage and better fertilizer Energy Transport Buildings Industry Agri culture Forestry management can improve productivity. supply And the resources generated could be Carbon price ($/tCOie) substantial-at least for countries with Source: Barker and others 2007b, figure TS .27. large forests: if the forest carbon markets Note: EIT =economies in transition . The ranges for global economic potentials as assessed in each sector are meet their full potential, Indonesia could shown by black vertical lines. 26 WORLD DEVELOPMENT REPORT 2010 operations. While it will be possible to Yet a number of countries have adopted leverage private finance for specific adapta- fiscal recovery packages to green the econ- tion investments (such as flood defenses) omy while restoring growth , for a global experience to date with public-private total of more than $400 billion over the partnerships on infrastructure in develop- next few years in the hope of stimulating ing countries suggests that the scope will be the economy and creating jobs. 96 Invest- modest. ments in energy efficiency can produce a Generating additional fi na nee for triple dividend of greater energy savings, adaptation is a key priority, and innova- fewer emissions, and more jobs-because tive schemes such as auctioning assigned low-carbon technologies are often more amount units (AAUs, the binding caps that labor intensive than high-carbon ones. countries accept under the UNFCCC), tax- The current climate negotiations, to cul- ing international transport emissions, and a minate in Copenhagen in December 2009, global carbon tax have the potential to raise have -been making slow progress-inertia tens of billions of dollars of new finance in the political sphere. For all the reasons each year. For mitigation it is clear that hav- highlighted in this Report-inertia in the ing an efficient price for carbon, through climate system, inertia in infrastructure, either a tax or cap-and-trade, will be trans- inertia in socioeconomic systems-a cli- formational. Once this is achieved, the pri- mate deal is urgently needed. But it must be vate sector will provide much of the needed a smart deal, one that creates the incentives finance as investors and consumers factor for efficient solutions, for flows of finance in the price of carbon. But national carbon and the development of new technologies . taxes or carbon markets will not neces- And it must be an equitable deal, one that sarily provide the needed flows of finance meets the needs and aspirations of develop- to developing countries. If the solution to ing countries. Only this can create the right the climate problem is to be equitable, a climate for development. reformed CDM and other performance- based schemes, the linking of national carbon markets, the allocation and sale of Notes AAUs, and fiscal transfers will all provide 1. Extreme poverty is defined as living on finance to developing countries. $1.25 a day or less. Chen and Ravallion 2008. As this Report goes to press, countries 2. FAO 2009b. are engaged in negotiations on a global cli- 3. Article 2 of the United Nations Framework mate agreement under the auspices of the Convention on Climate Change (UNFCCC) calls for stabilizing greenhouse gas concentrations UNFCCC. Many of these same countries in the atmosphere at a level that "would prevent are also in the throes of one of the most dangerous anthropogenic [human-caused] inter- severe financial crises of recent decades. ference with the climate system." http://unfccc Fiscal difficulties and urgent needs could .int/resource/docs/convkp/conveng.pdf (accessed make it difficult to get legislatures to agree August l, 2009). to spend resources on what is incorrectly 4. Defined as carbon emitted per dollar of perceived as solely a longer-term threat. GDP. Many people are taking action to protect our environment. I think that only by working as a team will we succeed in making a difference. Even children can join together to help because we are the next generation and we should treasure our own natural environment. - Adrian Lau Tsun Yin, China, age 8 Anoushka Shari, Kenya, age 8 Overview: Changing the Climate for Development 27 5. On a g.lobal scale, this would reduce C0 2 2009; Smith and others 2009. The organizers of emissions by 4-6 gigatons a year given the cur- the 2009 International Scientific Co ngress on rent energy mix in the power sector and industry Climate Change concluded that "there is increas- (IEA 2008e). Similar reductions would be pos- ing agreement that warming above 2°C would sible in the building sector in high -income coun - be very difficult for contemporary societies and tries. See, for example, Mills 2009, http://cx.lb!. ecosystems to cope with." http://climatecongress gov/ do cu men ts /2009-assess men t/ LB N L-Cx- .ku.dk/ (accessed August I, 2009). Other calls Cost- Benefit-Pres. pdf (accessed July 24, 2009). for not allowing warming to exceed 2°C include 6. World Bank 2009b. European Commission 2007; SEG 2007; and 7. de la Torre, Fajnzylber, and Nash 2008. International Scientific Steering Committee 8. Greenhouse gases each have different 2005. The leaders of Australia, Brazil, Canada, heat-trapping potential. The carbon dioxide Ch ina, the European Union, France, Germany, equivalent (C0 2e) concentration ca n be used to India, Indonesia, Italy, Japan, the Republic of describe the composite global warm ing effect of Korea, Mexico, the Russian Federation, South these gases in terms of the amount of C0 2 that Africa, the United Kingdom, and the United would have the same heat-trapping potential States-meeting at the Major Economies Forum over a specified period of time. on Energy and Climate in July 2009-recognized 9. Authors' calculations, based on data from "the scientific view that the increase in global Climate Analysis Indicators Tool (WRI 2008). average temperature above pre-industrial levels The range is much greater if small island states ought not to exceed 2°C." http://usclimatenetwork such as Barbados (4.6 tons of C0 2e per capita) .org/resource-database/MEF _Declarationl-0.pdf and oi l producers such as Qatar (55 tons of C0 2e (accessed August l, 2009). per capita) or the United Arab Emirates (39 tons 16. IPCC 2007c. of C0 2e per capita) are included. 17. Raupach and others 2007. 10. !EA 2008c. 18. Lawrence and others 2008; Matthews 11. Edmonds and others 2008; Hamilton 2009. and Keith 2007; Parry and others 2008; Scheffer, Blanford, Rich els, and Rutherford (2008) also show Brovkin, and Cox 2006; Torn and Harte 2006; substantial savings from countries announcing in Walter and others 2006. advance the date when they will engage in mitiga- 19. Horton and others 2008. tion, because that allows those investing in long- 20. This estimate does not take into account lived assets to factor in the likely change in future the increase of damages from storm surges, and regulatory regimes and carbon prices and there- it uses current population and economic activi- fore minimizes the number of stranded assets. ties. So in the absence of large-scale adaptation, 12. Financial crises that are highly synchro- it is likely to be a significant underestimate. Das- nized across countries are associated with similar gupta and others 2009. durations and are followed by similar recover- 21. Stern 2007. ies, although the losses tend to be more severe 22. Easterling and others 2007, table 5.6, p 299. (5 percent of GDP on average). IMF 2009, table 23 . Parry and others 2007, table TS.3, p 66. 3.1. Even the Great Depression in the United 24. Nordhaus and Boyer 2000. Stern (2007) also States lasted only three and a half years, from finds that losses associated with climate change August 1929 to March 1933. National Bureau of would be much greater in India and Southeast Asia Economic Research Business Cycle Expansion than the world average. and Contraction database, http://www. nber.org/ 25. Nordhaus 2008; Stern 2007; Yohe and cycles.html (accessed August 1, 2009) . others 2007, figure 20.3 . 13. Matthews and Caldeira 2008. 26. The PAGE model, used for the Stern 14. Schaeffer and others 2008. Review of Climate Change, estimates that 80 per- 15. While the question of what constitutes dan- cent of the costs of damages would be borne by gerous climate change requires value judgments, developing countries; Hope (2009), with further summaries of recent research by the Intergovern- data breakdowns communicated by the author. mental Panel on Climate Change (IPCC) suggest The RICE model (No rdhaus and Boyer 2000), as that wa rming by more than 2°C above preindus- expanded to include adaptation in de Bruin, Del- trial levels sharply increases risks, so that "signifi- link, and Agrawala (2009), suggests that about cant benefits result from constraining tempera- three-quarters of the costs of damages would be tures to not more than l .6°C-2.6°C." Fisher and borne by developing countries. See also Smith others 2007; IPCC 2007b; IPCC 2007c; Parry and and others (2009) ; Toi (2008). Note that this may others 2007. Recent scientific publications further well be an underestimate, since it does not take support the notion that warming should be con- into account the value of lost ecosystem services. strained to remain as close as possible to 2°C above See chapter 1 for a d iscussion of the limitation of preindustrial temperatures. Science focus; Mann models' ability to capture costs of impacts. 28 WORLD DEVELOPMENT REPORT 20 10 27. Noted during consultations with East countries, it is estimated at 44-67 percent for a African and Latin American countries. 4SO ppm C0 2e concentration (see table 1: 44 per- 28. Barbera and McConnell 1990; Barrett cent, MESSAGE; S6 percent, McKinsey; 66 per- 2003; Burtraw and others 200S; Jaffe and others cent, MiniCAM; 67 percent, !EA ETP). Over the l 99S; Meyer l 99S. course of the century (us ing present value of 29. Hope 2009; Nordhaus 2008. all investments to 2 LOO), the estimated share of 30. Nordhaus 2008. developing countries is somewhat high er, with 31. Few models incorporate adaptation costs. ran ges between 66 percent (Edmonds and others See de Bruin, Dellink, and Agrawala (2009) for a 2008) and 71 percent (Hope 2009). discussion. 48. Edmonds and others 2008 . J 32. Nordhaus 2008, p. 86, figure S.3. Nordhaus 49. For a 425-4SO ppm C0 2e, or 2°C, stabili- finds the additional cost of stabilizing warming at za tion scenario, !!ASA (2009) estimates the cost 2°C rather than his optimal target of 3.5°C to be at $4 trillion; Knopf and others (forthcoming) at 0.3 percent of GDP annually. The additonal cost $6 trillion; Edmonds and others (2008) at $9 tril- of 2.S°C rather than 3.5°C is less than 0.1 percent lion; Nordhaus (2008) at $II trillion; and Hope of GDP annually. (2009) at $2S trillion. These are present value, 33. The developing-country average is LS and the large differences among them are largely percent of GDP; it includes hea lth insurance and driven by the different discount rate used. A.LI fol- excludes life insurance. Swiss Re 2007. low a first-best scenario where mitigation takes 34. Based on Maddison's projected GDP for place wherever and whenever most cost-effective. 2030, http://www.ggdc.net/maddison/ (accessed SO. Hamilton 2009. May 6, 2009) rebased to 200S international dol - SL The Nameless Hurricane, http://science. lars using World Bank defl ators. nasa.gov/headlines/y2004/02apr_hurrica ne.htm 3S. To be updated for the final release based (accessed March 12, 2009). on World Bank 2009c. S2. Rogers 2009; Westermeyer 2009. 36. Adger and others 2009. S3. OECS 2004. 37. IPCC 2001. S4. World Bank 2008a. 38. Mignone and others 2008. This is true in SS. Kanbur 2009. the absence of effective and acceptable geoengi- S6. FAO 2009a. neering technology (see chapter 7). S7. Worldwatch Institute, "State of the World 39. This can result from economies of scale 200S Trends and Facts: Water Conflict and Security in technology provision (as was the case for the Cooperation;' http://www.worldwatch.org/node/69 French nuclear program and appears to be an (accessed July 1, 2009); Wolf and others 1999. iss ue for concentrated solar power); network 58. Easterling and others 2007; Fisher and effects (for a highway or rail co nstru ction pro- others 2007. gram); or demographi c or eco nomic shocks. S9. FAO 2008. This and the rest of the paragraph are based on 60. von Braun and others 2008; World Bank Shalizi and Lecocq 2009. 2009a. 40. Shalizi and Lecocq 2009. 61. Sterner 2007. The average fuel price in the 41. Folger 2006; Levin and others 2007 . Euro area in 2007 was more than twice what it was 42. Anderer and others 1981, as cited in Ha- in the United States ($ 1.S4 a liter as opposed to 63 Duong, Grubb, and Hourcade 1997. cents a liter). Variations in emissions not driven 43. Davis and Owens 2003; !EA 2008b; Nemet by income can be captured by the residuals of a and Kammen 2007; SEG 2007; Stern 2007. regression of emissions per capita on income. 44. Repetto 2008. When these residuals are regressed on gasoline 4S. Stern 2007, part VI. prices, the elasticity is estimated at -0.5, meaning 46. Based on the formula used in Nordhaus that a doubling of fuel prices would halve emis- 2008. sions, holding income per capita constant. 47. These are rounded values based on the 62. Based on average electricity prices for following. The IPCC estimates that at carbon households in 2006-07from the U.S. Energy Infor- prices up to $SO a ton C0 2e, about 6S percent of mation Agency, http://www.eia.doe.gov/emeu/ emission reduction would take place in develop- intemational/elecprih.html (acces.5ed August 1, 2009). ing countries in 2030 (Barker and others 2007a, 63. Emission data is from WRl (2008). table 11.3 ). McKinsey Global Institute (2009b) 64. !EA 2008d; UNEP 2008. A 2004 report estimates this share at 68 percent for a 4SO ppm by the European Environment Agency (EEA scenario if done using a least-cost allocation. 2004) estimated European subsidies to energy at As to the least-cost share of global mitigation €30 billion in 2001, two -thirds for fossil fuels, the investments in 2030 taking place in developing rest for nuclear and renewables. Overview: Changing the Climate for Development 29 65. http://www.eia.doe.gov/emeu/intemational/ ertheless, monitoring and evaluation would still elecprih .html (accessed July 2009). be important to learn what works. 66. Price and Worrell 2006. 93. Olsen 2007; Sutter and Parreno 2007; Olsen 67. ESMAP 2006. and Fenhann 2008; Nussbaumer 2009; Michael- 68. http://co2captureandstorage.info/index.htm owa and Pallav 2007; Schneider 2007. (accessed August l, 2009). 94. Fankhauser, Martin, and Prichard 2009. 69. Calvin and others forthcpming; IEA 95. World Bank 2007d. 2008a. 96. Stimulus packages around the world 70. 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Cambridge, UK: Cambridge University Press. Glossary • Adaptation: Adjustment in natural or to supply energy leads to anthropogenic human systems in response to actual or greenhouse gas (GHG ) emissions, whereas expected climatic stimuli or their effects, natural decay of vegetation leads to non- which moderates harm or exploits benefi- anthropogenic emissions. cial opportunities. Various types of adap- Assigned amount units (AAUs): The total tation can be distinguished, including volume greenhouse gases- measured in anticipatory and reactive, autonomous and tons C0 2e-that each developed country is planned, public and private. allowed to emit during the first phase of the Adaptation Fund: The Adaptation Fund Kyoto Protocol. was established to finance concrete adapta- Bali Action Plan: The two-year plan tion projects and programs in developing launched at the 2007 United Nations Cli- countries that are Parties to the Kyoto Pro- mate Change Conference in Bali, Indo- tocol. The Fund is financed with a share of nesia, to negotiate long-term cooperative proceeds from clean development mecha- action on climate change beyond 2010, nism (CDM) project activities and receive and to reach an agreed outcome in Den- funds from other sources. mark in late 2009. The plan has four pil- Adaptive capacity: The ability of a system to lars: mitigation, adaptation, finance, and adjust to climate change (including climate technology. variability and extremes) to moderate poten- Biodiversity: The variety of all forms of tial damages, to take advantage of opportu- life, including genes, populations, species, nities, or to cope with the consequences. and ecosystems. t Additionality: In the CDM context this Biofuel: A fuel produced from organic mat- refers to whether the carbon offsets gener- ter or combustible oils produced by plants. ated by a project are backed up by emission Examples of biofuel include alcohol, black reductions additional to those that other- liquor from the paper-manufacturing wise would occur without the financial and process , wood , and soybean oil. Second- technical incentive of the CDM mecha- generation biofuels: Products such as ethanol nism. An activity's emissions as they would and biodiesel derived from woody material have been in the absence of the CDM proj- by chemical or biological processes. ect constitute the baseline against which additionality is measured. The creation and Cap and trade: An approach to controlling sale of offsets from a CDM project lacking pollution emissions that combines market additionality may lead to an increase in and regulation. An overall emissions limit emissions to the atmosphere, relative to (cap) is set for a specific time period and the emissions released if the potential pur- individual parties receive permits (either chaser of the offset instead directly reduced through grant or auction ) giving them the their own emissions at home. legal right to emit pollution up to the quan- tity of permits they hold. Parties are free to Anthropogenic: Directly caused by human trade emission permits, and there will be actions. For example, burning fossil fuels gains from trade if different parties have 37 38 G LOS SARY different marginal pollution abatement Carbon intensity: Typically, the amount ,, costs. of economywide emissions of carbon or C0 2 per unit of GDP. May refer to the Carbon Capture and Storage (CCS): A carbon emitted per unit of act ivity, for process consisting of separation of C0 2 example, gross production or value added from industrial and energy-related sources, in a given enterprise. Also used to describe transport to a storage location , and long- the amount of carbon emitted per unit of term isolation from the atmosphere. energy or fuels consumed. Carbon dioxide (C0 2 ): A naturally occur- Carbon lock-in: Actions that perpetuate a ring gas, also a byproduct of burning fossil given level of carbon emissions. Fo r exam- fuels from fossil carbon deposits, such as ple, expansion of roads and highways will o il , gas, and coal, of burning biomass and tend to lock in carbon emissions from fossil of land use changes and other industrial fuels for decades unless there are counter- processes. It is the principal anthropogenic vailing policies to limit fuel use or control GHG that affects the Earth's radiative bal- vehicle use. ance. It is the reference gas against which other GHGs are measured and therefore Carbon sink: Any process, activity, or mech- has a Global Warming Potential of 1. anism that removes carbon dioxide from the atmosphere. Forests and other vegetation are Carbon dioxide equivalent (C0 2 e): A way considered sinks because they remove car- of expressing the quantity of a mixture of bon dioxide through photosynthesis. different greenhouse gases. Equal amounts of the different greenhouse gases produce Clean Development Mechanism (CDM): different contributions to global warming; A mechanism under the Kyoto Proto- for example, an emission of methane to the col through which developed countr ies atmosphere has about 20 times the warm- may finance GHG emission reduction or ing effect as the same emission of carbon removal projects in developing countries, dioxide. C0 2e expresses the quant ity of a and thereby receive credits for doing so that mixture of greenhouse gases in terms of they may apply toward meeting mandatory the quantity of C0 2 that would produce limits on their own emissions. The CDM the same amount of warming as would the allows GHG emission reduction projects mixture of gases. Both emissions (flows ) to take place in countries that are signato- and concentrations (stocks) of greenhouse ries but have no emission targets under the gases can be expressed in C0 2e. A quantity Kyoto Protocol. I of greenhou se gases can also be expressed in Deadweight loss: A cost that generates no terms of its carbon equivalent, by multiply- benefit. ing the quantity of C0 2e by 12/44. Discount rate: The rate at which individu- Carbon fertilization: The enhancement of als or enterprises trade off present versus the growth of plants as a result of increased future consumption or wellbeing, usually atmospheric carbon dioxide (C0 2 ) concen- expressed as a percentage. tration . Depending on their mechanism of photosynthesis, certain types of plants are Early warning system: A mech anism to more sensitive to changes in atmospheric generate and disseminate timely and mean- C0 2 concentration. ingfu l warning information to enable indi- vidua ls, comm un ities, and organizations Carbon footprint: The amount of carbon threatened by a hazard to prepare and to emissions assoc iated with a particular act appropr iate ly and in su fficien t time to activity. The carbon footprint may include reduce the possibility of harm or loss. indirect em issions generated in the produc- tion of inputs into the activity. A carbon Ecosystem services: The ecosystem pro- footprint can be measured in many dif- cesses or functions that have value to ferent ways and may include the indirect individuals or society such as provision of emissions generated in the whole chain of food, water purification, and recreational production of inputs into the activity. opportunities. Glossary 39 Geoengineering: The deliberate modifi- human-induced land use, land-u se change, cation of Earth systems to counteract the and forestry activities that lead to emissions effects of globa l warming. Geoengineering and removals of green house gases from the includes large scale interventions to change atmosphere. A category used in reporting the global energy budget or to take up and greenhouse gas inventories. store greenhouse gases. Mitigation: A human intervention to Greenhouse gas (GHG): Any of the atmo- reduce the sources or enhance the sinks of spheric gases that cause climate change GHGs. by trapping heat from the sun in Earth's No-regrets policy: In the climate change atmosphere-producing the greenhouse context, a project that would ge nerate net effect. The most common greenhouse gases socia l and/or economic benefits irrespective are carbon dioxide (C0 2 ), methane (CH 4 ), of whether the project affects the climate or nitrous oxide (N 20), ozone (0 3 ) , and water whether the climate affects the project. vapor (H 20). Public good/bad: A public good is a benefit Innovation: The production, assim ila- whose provision is non-exclusive (so that it tion, or exploitation of a new or signifi- is impossible to prevent anyone from enjoy- cant ly improved good or service, process, ing the benefit) and non-rival (so that the or method. enjoyment of the benefit by one individual Institutions: Structures and mechanisms does not diminish the quantity of benefits of social order and cooperation governing avai lable to others). Climate change is an the behavior of a set of individuals. example of a public bad. Integrated assessment: A method of ana ly- Reduced Emissions from Deforestation sis that combines results and models from and forest Degradation (REDD): REDD the physical, biological, econom ic, and refers to a suite of actions ai med at reduc- social sciences, and the interactions among ing green house gas em ission s from forested these components, in a consistent frame- land . Financial incentives for REDD are work, to project the consequences of cli- potentially a part of the policy response to mate change and the policy responses to it. climate change. Intergovernmental Panel on Climate Reforestation: Planting of forests on lands ) Change (IPCC): Established in 1988 by the that were previously forested but that have World Meteorological Organization and been converted to another use. the United Nations Environment Program, Reinsurance: The transfer of a portion of the IPCC surveys world-wide scientific and primary insurance ri sks to a secondary tier technical literature and publishes assess- of insu rers (reinsurers); essentially "insur- ment reports that are widely recognized ance for insurers." as the most credible existing sources of information on climate change. The IPCC Resilience: The ability of a socia l or eco- also prepares methodologies and responds logical system to absorb disturbances while to specific requests from the Convention's retaining the same basic structure and ways subsidiary bodies. The IPCC is indepen- of functioning, the capacity for se lf-organi- dent of the Convention. zation, and the capacity to adapt to stress and change. Kyoto Protocol: An agreement under the United Nations Framework Convention Robust decision making: In the face of on Cl im ate Change (UNFCCC) that was uncertainty, choosing not the measure or adopted in 1997 in Kyoto, Japan , by the policy that would be optimal under the parties to the UNFCCC. It contains legally most likely future world, but the one that binding commitments to reduce GHG would be acceptable across a range of pos- em issions by developed countries. sible futures. The process involves evalu- ating options for robustness acro ss the Land use, land-use change, and forestry alternative models, assumptions, and loss (LULUCF): A set of activities including 40 GLOSSARY functions- that is, their expected regret is Technology transfer: The process of shar- never large compared to the alternatives. ing of skills, knowledge, technologies, and methods of manufacture to ensure that sci- Safety net: Mechanisms that aim to protect entific and technological developments are people from the impact of shocks such as accessible to a wider range of users . flood , drought, unemployment, illness, or the death of a breadwinner. Threshold: The level at which sudden or rapid change occurs. Sensitivity: The degree to which a system is I affected, either adversely or beneficially, by Transaction costs: Costs associated with climate variability or change. the exchange of goods or services. Sequestration: In the climate context, the Uncertainty: An expression of the degree process of removing carbon from the atmo- to which a value (such as the future state sphere and storing it in reservoirs such as of the climate system) is unknown. Uncer- new forests, soil carbon or underground tainty can result from lack of information or storage. Biological sequestration: The from disagreement about what is known or removal of C0 2 from the atmosphere and even knowable. It may have many types of storing it in organic matter through land- sources, from quantifiable errors in the data use change, afforestation, reforestation, to uncertain projections of human behavior. carbon storage in landfills and practices Uncertainty can therefore be represented by that enhance soil carbon in agriculture. quantitative measures, for example, a range of values calculated by various models, or by Social norms: Implicit or explicit values, qualitative statements, for example, reflect- beliefs, and rules adopted by a group to self ing expert judgment. However, in economics, regulate behavior through peer pressure; uncertainty refers to Knightian uncertainty, the yardstick individuals use to assess what which is immeasurable. This is in contrast to is acceptable or unacceptable behavior. risk, wherein the occurrence of certain events Social protection: The set of public inter- is associated with a knowable probability ventions aimed at supporting the poorer distribution. and more vulnerable members of society, United Nations Framework Convention as well as helping individuals, families, and on Climate Change (UNFCCC): A Con- communities to manage risk-for exam- vention adopted in May 1992 with the ple, unemployment insurance programs , ultimate objective of the "stabil ization of ) income support, and social services. I greenhouse gas concentrations in the atmo- Stationarity: The idea that natural systems sphere at a level that would prevent danger- fluctuate within an unchanging envelope ous anthropogenic interference with the of variability, delimted by the range of past climate system." experiences. \ Four easy ways to order Phone: Mail: Online: Fax: P.O. 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