Peer reviewed analysis from world leading experts

Addressing the climate and development nexus

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In Brief

'There is no plan B for the planet’ remarked Gordon Brown in his recent statement at the Major Economies Forum’s meeting. But while the science on climate change remains unambiguous, a combination of a legacy of mistrust, political inertia, procrastination, and the use of a framework that is designed to polarize and divide countries and people, prevents effective climate solutions. The fundamental problem is that the global discussions on climate change continue to treat climate and development separately, notwithstanding the piecemeal ad hoc and incremental actions linking the two. Any realistic plan must be all about making this marriage work.

There is enough scientific evidence that even a temperature increase of 2 degrees above pre-industrial levels –a convergent threshold in discussions now - is not safe, particularly for some regions and ecosystems, and efforts need to be made to remain sufficiently below this.


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This corresponds to a target greenhouse gas concentration (in terms of carbon dioxide equivalents (CO2e)) of between 350 and 450 parts per million (ppm) and to global emission reductions of the order of 50-80 per cent over 1990 levels, by 2050. At 450ppm, there is at best a 50 per cent chance of remaining under 2 degrees, so substantive efforts are needed.

This requires aggressive action by advanced countries and active participation of developing countries – such participation can only occur, if economic growth and development is allowed to proceed, and in a sustained manner. In accordance with principles of common but differentiated responsibilities, different climate policies in developed and developing countries will be required. For the former, a larger role for carbon-markets, taxes and regulations will have to figure more prominently; for the latter a much greater role for public investment and effective industrial policy is needed. Moreover, without significant financial transfers from wealthy countries, any expectation that poorer countries will move onto a low-emissions growth path is almost certain to be disappointed.

These targets cannot be met without a transformation in the way energy is produced and consumed, as argued in the recent United Nations Publication, Promoting Development, Saving the Planet. The energy sector, broadly defined, accounts for 60 per cent of global emissions and a stable climate will require reduction in the rate of energy intensity and improvement in carbon intensity by a factor of 2 to 3 with respect to their historical levels. As the bulk of modern energy services are based on fossil fuel use, which are the largest contributors to greenhouse gas emissions, the climate challenge cannot be addressed without deep cuts in fossil fuel-generated greenhouse gas emissions. The deeper the emissions reductions that are needed, the greater will have to be the share to be contributed by fossil fuels.

Energy is the pivotal issue at the interface of climate and development and plays a central role in industrialization, economic growth and human development achievements. The provision of clean water fundamental to the lowering of infant mortality and raising of life expectancy requires adequate energy availability. In most of the developing world access to energy services is far below what is needed to achieve human development. About 2 billion people, a third of the world population, are without access to modern energy and about 1.6 billion are without access to electricity – the very symbol of affluence and modernity – while still about 2.4 billion cook with traditional forms of biomass. Affordable access to modern energy services has a significant role to play in meeting development goals. However, modern energy services in the majority of developing countries are characterised by inequitable access, notably between the poor and affluent, as well as between rural and urban areas. At the national level, this is demonstrated by the low levels of modern energy in the primary energy supply mix, low electrification levels, and low electricity consumption levels.

Globally, approximately 31 million tons of oil equivalent are consumed in the form of primary energy every day, equivalent to 55 kilowatt hours (kWh) per person per day, with rich countries on average consuming more than twice that figure. Most countries from Africa, and all South Asian countries, consume well under 20KWh per capita per day, China is still well below the global average and even most emerging markets consume less than a third than in advanced economies. Raising income levels in poorer countries will require closing these energy gaps. Most OECD countries use over 120kWh per capita per day (the United States uses 246 kWh per capita per day), while the vast majority of developing countries are under 15 kWh per capita per day.

In India it is a little under 15, while China uses 45 kWh per person per day. Half of China’s energy consumption is for industrial production (as opposed to a quarter in most countries). The figure below provides a sample of developing and developed countries and their per capita primary energy consumption – it displays the sort of large variance between the two groups of countries.

Divergence of Energy Consumption

Source: United Nations, World Economic and Social Survey 2009: Promoting Development, Saving the Planet

Given current patterns of energy use and infrastructure availability, 100kWh per capita per day can be used as the dividing line between energy affluence and energy sufficiency. Up to this level there is a very strong correlation between energy consumption and human development. Increases in energy efficiency, including through infrastructure investment (such as mass transit, spatial planning and layout, and buildings improvements) can bring down these numbers. Such levels of energy consumption will, however, be out of reach of most poor countries unless the price of energy services is significantly below current levels. Even populations with incomes of $10 per day would not be able to spend more than, say, $1-$2 every day on energy-related expenditures (electricity, cooking, heating, transport). If energy costs 10 cents per kWh, then US$10 per day would be needed to consume the requisite levels of energy services. This is not just a problem for the bottom two billion; spending $10 per day on energy services would exhaust the per capita income of countries such as Angola, Ecuador and Macedonia.

Economic development in poorer countries will require not only closing the gap in energy consumption but also ensuring that consumption becomes more sustainable as part of a broader, integrated and inclusive development strategy to meet economic and human development goals. The bulk of energy infrastructure in developing countries has yet to be built, leaving energy services under-supplied and expensive in several parts of the developing world, where many still rely primarily on traditional fuels, like, wood, crop wastes and animal dung. Under these circumstances, it may be cheaper and easier to switch to a renewable pathway than to retool existing infrastructure. Cost and technical improvements in a wide range of small-scale, decentralised technologies based on renewable forms of energy now offer, in many situations, a cost-effective and sustainable approach to rural electrification.

Market-based solutions, such as cap and trade and carbon taxes, under discussion in climate circles, will likely work against development objectives because they are largely focused on the gap between costs of renewable and non-renewable energy, and seek to enhance the competitiveness of the former by raising the prices of the latter. Developing countries, in contrast, seek to lower the price of modern energy services in general, and, for climate reasons, that of renewable energy in particular. Raising a price can be done through various forms of taxes or quantity constraints (such as a cap and trade mechanism), but lowering prices will require, not taxes, but subsidies (though mercifully only in the short run) and investment (which will make future subsidies unnecessary).

Building the low-carbon infrastructure, notably for energy supply and distribution and for transport, will depend on an active public sector. But such an infrastructure will be critical to ‘crowding in’ private low-carbon investments. The big policy challenge lies in ensuring these investments trigger virtuous growth circles and initiate cumulative technological changes in dynamic growth sectors and job creation. Carbon markets can at best play a supporting role in this initial phase of the transition, though their importance may grow over time once the infrastructure’s in place and private investment flows accelerate. Lasting success will involve enormous adjustments in the local and global economies. This will require truly integrated policy responses.

Imran Habib Ahmad, Tariq Banuri and Richard Kozul-Wright are from the United Nations Department of Economic and Social Affairs.

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