No. 6 December 1994

The second IPCC assessment

Economic and social issues related to climate change

by Kirsten Halsnęs, UNEP Centre

The Intergovernmental Panel on Climate Change (IPCC) is currently reviewing the state of scientific information on climate change and the greenhouse effect, and expanding and updating this information where necessary in order to establish a comprehensive and operational knowledge base on the subject for policymakers and non- specialists. This is particularly important as we enter the next, implementation phase of the FCCC following the first Conference of Parties in 1995. A second assessment report is being prepared for government approval in September 1995.

In addition to the issues examined in the first assessment, the second IPCC assessment will include a comprehensive evaluation of economic and social issues. These issues are covered by Working Groups II and III and are expected to provide important new information on global economic and equity aspects related to the FCCC. This includes consideration of the costs and benefits of climate change, and of the costs of adaptation and mitigation strategies.

Assessment of mitigation options

Working Group II addresses the methods for assessment of mitigation options. This includes an outline of a framework comprising a common analytical structure and methodology for mitigation studies. The second assessment will include a report on these issues, on the basis of extensive review by experts in the field. As part of the review activity, UCCEE hosted a workshop in Copenhagen on 6 June 1994 where a group of experts from developing countries and OECD countries participated. John Christensen from UCCEE is one of the lead authors of the sub-chapter.

Developing countries and climate change The economic and social issues involve many potentially controversial questions. For example, developing countries are likely to bear a disproportionate burden of the potential impacts of global warming and therefore also the costs of adaptation. This is evident in the case of climatically related natural disasters such as tropical storms and flooding, and in the effects on agriculture, water resources and tourism. On the other hand the ability to pay the cost of these impacts and measures in developing countries is severely limited.

Present greenhouse gas emissions are dominated by CO2 emissions from the fossil fuel combustion in industrialised countries. Through time however the developing countries will increase their energy consumption and become more important contributors to global GHG emissions. This means that any greenhouse gas mitigation strategy must include efforts from both industrialised and developing countries.

The FCCC states that developing country parties should be compensated for incremental costs of mitigating climate change. The assessment of "incremental cost" is a complex issue because it involves definitions of what would happen if no climate mitigation objective existed. The development of mitigation strategies for developing countries must therefore address a broad menu of technical, economic and social development issues. The activities undertaken by IPCC Working Group III will contribute central information that can make the concept of incremental cost more operational.

Until now assessment of the economic and social aspects of climate change has been largely dominated by industrialised countries. This dominance has been evident in the choice of research issues, methodologies and models. Consequently many studies have assessed the cost and benefits of coping with climate change in terms of potential losses and gains for USA, Europe or for the OECD countries as a group. Such assessments may provide a reasonable background for the choice of strategy in these parts of the world, but it leaves the rest of the world poorly covered.

Working Group III has recognised this imbalance and has given high priority to supporting the participation of experts from developing countries in the assessment process. Similarly, the present draft of the assessment report (IPCC WGIII 1994) includes an attempt to address the issues from a developing country point of view. This applies particularly to the assessment of the social impact of climate change and the discussion of mitigation costing studies. The report will also include a discussion of equity and social considerations connected with the more controversial issues behind the international distribution of the "burden" of dealing with climate change.

The development of methodologies and models for mitigation assessment seen from the developing country point of view is still at an early stage. This is an unavoidable consequence of the focus of research that has been undertaken until now.

UCCEE participates in the writing process of Working Group III, with Kirsten Halsnaes as lead author on the chapters on mitigation cost assessment, methodologies and study results. This work has concentrated particularly on a review of methodologies and studies for developing countries.

The need for further work

Future international research on the economics of climate change should give higher priority to the development of methodologies, models and studies for developing countries. Important issues are :

One of the important observations made by the lead authors from developing countries is that the social and economic issues facing different developing countries are more diverse than is the case for OECD countries. Countries may face different issues as a consequence of their general development situation, because of the greater vulnerability of many developing countries to climate-change effects, and due to the consequences of implementing mitigation measures. If this observation is confirmed then there is a good case for improving understanding in these areas, and this will require further studies on methodologies and options for developing countries and regions.

The UNEP GHG Abatement Costing Study has been instrumental in expanding the coverage of mitigation assessment studies to developing countries, both in terms of developing the methodology, and in building local capacity. The methodological guidelines and the country study results are now being utilised in the new IPCC assessment.

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