Bridging the Modelling GapsGHG Mitigation Analysis for Developing Countries and Transition Economies:
UNDERSTANDING DEVELOPMENTWhat Distinguishes DCs from ICsTechnological Backwardness?Institutional Deficiencies?Or something different?Development: A Chicken and Egg EnigmaIs Market Development and Development identical?Will development PRECEDE efficiency (market) or Vice a versa?Are we asking the right questions?Cost EstimationWhy Estimate Costs?What are we estimating?The No Regret ParadoxPlethora of Energy Inefficient Technologies!Paradox of Existence: Do No Regret Options Exist?Explanations: Barriers TO MARKET Multiple Discount Rates etc.
SOCIO-ECONOMIC DYNAMICS OF DEVELOPING COUNTRIES Dual Economy and Transition ProcessInformal ActivitiesLand Relations and Land UseMarket Performance and DisequillibriumNon-commercial FuelsNon-economic ConcernsPolicy Distortions
SIZE OF INFORMAL ECONOMY Some Examples Latin America Share of urban labor force - 30 to 57% (employed 30 million persons in the late 1980s)KenyaUrban informal - 30%, Rural Non - Farm - 13% (of all employment outside Agriculture)Informal Credit (as fraction of total credit)Bangladesh: 1/3 to 2/3India: 2/5Nepal, Pakistan, Thailand: over 2/3Interest Rates (per year)India (30 - 200%)Malawi (5000%)Can risk and transaction cost explain this?
ISSUES IN ESTIMATING IMPACTS COSTS Development and Adaptation Successful adaptation to climate change impact depends upon technological advances, institutional arrangements, availability of financing and information exchangeValuation of Non- Market Impacts Sustainability with MoneyMeasurabilityLow Value of Life or No Regret Situations? Bangladesh Cyclone (1991): 200, 000 deaths (SAR, WG II)Recent Bangladesh Cyclone (1997): Relatively Low DamageSuccessive Cyclones : Late 1996 (South Indian Coast)Many lives saved at little expense in Second CycloneShould this imply low value of life? or No regret Situation Macro - Economic Costs of Damage High aggregationMiss non market costs Dual Bias Low Damages in Developing CountriesHigh Cost of Mitigation Measures in Industrialized Countries
COST ESTIMATES FOR DEVELOPMENT COUNTRY: AGENDA Refining Model Structure And AssumptionsCome closer to DC RealityTransparencyDiversityDatabase IssuesUnavailability DisparityInconsistencyIncompatibilityUnsuitabilityDiversity
Multiple BaselinesTechnological ProgressPath DependenceLeapfroggingTechnology transferNational Priorities and PoliciesTransaction CostsNon-market CostMultiple criteria for assessment(Comprehensive Index of Welfare: e.g. HDI)Secondary Benefitse.g. Air quality/ Food securityCOST ESTIMATES (Continued)
Extent Models Adequately Reflect Socio-Economic Structures in Developing Countries I)Market Based, Efficiency Oriented, Equilibrium Model Versus Developing Nations Actual Socioeconomic StructuresII) Business As Usual (BAU) ScenariosVersus Developing Countries Structural ChangesIII)Market Based, Efficiency Oriented, Equilibrium ModelVersus Developing Nations Actual Socioeconomic Structures
Assessment of Same Policy Instruments for Developed and Developing NationsI) Developed Countries Policy Instruments VersusDeveloping Countries InstrumentsII) Climate Policy In Developed CountriesVersusDeveloping Countries Policy Linkages
Extent Regional Characteristics are Represented within IAMs I) Developed Countries Damage FunctionsVersusDeveloping Countries Damage Systems II) Assessment Of Western LifestylesVersusDeveloping Nations Social Parameters
Accuracy of Climate Change Impacts Assessment in Developing Countries I) Assessment In Developed Countries VersusAssessment In Developing Countries II)Policy Responses In Developed CountriesVersus Policy Responses In Developing Countries III) Very Ambitious Models Versus Limited Data In Developing Countries
Extent IAMs Produce Policy Options Acceptable for Developing and Developed CountriesI) Dynamic Optimization VersusSouth-North Equity II) Uncertainty Versus Developing Countries Benefit/ Cost III) Developed Countries Optimal Paths Versus Developing Countries Incentives to be in the Game
Indian Institute of Management, Ahmedabad