Bridging the Modelling GapsBridging the Modelling GapsGHG Mitigation Analysis for Developing

Countries and Transition Economies:

P.R. Shukla

UNDERSTANDING “DEVELOPMENT”

What Distinguishes DC’s from IC’s Technological Backwardness? Institutional Deficiencies? Or something different?

Development: A ‘Chicken and Egg’ Enigma Is Market Development and ‘Development’ identical? Will development PRECEDE efficiency (market) or Vice a versa? Are we asking the right questions?

Cost Estimation Why Estimate Costs? What are we estimating?

The ‘No Regret’ Paradox Plethora 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 Process 

Informal Activities 

Land Relations and Land Use 

Market Performance and Disequillibrium 

Non-commercial Fuels 

Non-economic Concerns 

Policy Distortions

SIZE OF INFORMAL ECONOMY

Some Examples Latin America

Share of urban labor force - 30 to 57% (employed 30 million persons in the late 1980’s) 

Kenya Urban informal - 30%, Rural Non - Farm - 13% (of all employment outside Agriculture) 

Informal Credit (as fraction of total credit) Bangladesh: 1/3 to 2/3 India: 2/5 Nepal, Pakistan, Thailand: over 2/3 

Interest Rates (per year) India (30 - 200%) Malawi (5000%) Can risk and transaction cost explain this?

ISSUES IN ESTIMATING IMPACTS COSTS 1. Development and Adaptation

Successful adaptation to climate change impact ‘depends upon technological advances, institutional arrangements, availability of financing and information exchange’

2. Valuation of Non- Market Impacts Sustainability with MoneyMeasurability

3. Low 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 Cyclone Should this imply low value of life? or ‘No regret’ Situation

4. Macro - Economic Costs of Damage High aggregationMiss non market costs

5. 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 RealityTransparencyDiversity

 

Database IssuesUnavailability DisparityInconsistencyIncompatibilityUnsuitabilityDiversity

 

Multiple BaselinesTechnological ProgressPath DependenceLeapfroggingTechnology transfer 

National Priorities and Policies Transaction Costs 

Non-market CostMultiple criteria for assessment(Comprehensive Index of Welfare: e.g. HDI) 

Secondary Benefitse.g. Air quality/ Food security

 

COST ESTIMATES (Continued…)

Extent Models Adequately Reflect Socio-Economic Structures in Developing Countries

I) Market Based, Efficiency Oriented, Equilibrium Model Versus

Developing Nations’ Actual Socioeconomic Structures

II) Business As Usual (BAU) ScenariosVersus

Developing Countries’ Structural Changes

III) Market Based, Efficiency Oriented, Equilibrium Model

Versus Developing Nations’ Actual Socioeconomic Structures

Assessment of Same Policy Instruments for Developed and Developing Nations

I) Developed Countries’ Policy Instruments

Versus

Developing Countries’ Instruments

II) Climate Policy In Developed Countries

 Versus

Developing Countries’ Policy Linkages

Extent Regional Characteristics are Represented within IAMs

I) Developed Countries’ Damage Functions

Versus

Developing Countries Damage Systems

II) Assessment Of Western Lifestyles

 Versus

Developing Nations’ Social Parameters

Accuracy of Climate Change Impacts Assessment in Developing Countries

I) Assessment In Developed Countries

 Versus

Assessment In Developing Countries

II) Policy Responses In Developed Countries

 Versus

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 Countries

I) Dynamic Optimization

 Versus

South-North Equity

II) Uncertainty

 Versus

Developing Countries’ Benefit/ Cost

III) Developed Countries’ Optimal Paths

 Versus

Developing Countries’ Incentives to be in the Game