The complexity of the climate change problem arises from three important attributes: its long time horizon, its global scope, and the fact that universal participation is necessary to address it. The progress in regime building to date has been slow and fragmented. However, robust foundations of a long-term and universally inclusive regime can be built (see Toman & Burtraw, 1991; Kverndokk, 1995, Rayner & Malone, 1997) on the pillars of equity and efficiency. This chapter is based on the premise that, while efficiency concerns are eminently represented in climate negotiations, equity has received meager attention. This error in misplaced priorities is making the climate regime both inequitable and inefficient. Giving priority to equity would support efficiency goals, too, since fair dealings reduce transaction costs, the fundamental condition for economic efficiency.

This chapter has focused primarily on the mitigation aspect of the climate regime. Its central claim is that the key issue is not "where or when'' mitigation actions should occur, but, rather, how the mitigation burden could be distributed fairly among the nations. This is a justice issue that is not well appreciated in current climate negotiations. The unfavorable bargaining position of developing countries, refusal of developed nations to take leadership, and high stakes have heightened apprehensions, hampered cooperation, and increased risks and transaction costs.

Founding new institutions to take on the responsibility of climate change mitigation requires accepting fair principles and associated gains and losses. Studies show that stakes in climate mitigation are very high: several trillion dollars over a century (IPCC, 2001c). The gains or losses associated with accepting alternative entitlement schemes are very high for any nation. For instance, in the case of India, "grandfathered" or ''equal per capita'' entitlement schemes would lead to substantial losses or gains, respectively, amounting to several percent of India's GDP (see Shukla, 1996; Fisher-Vanden, Shukla, Edmonds, Kim, & Pitcher et al., 1997). Equity is, thus, potentially very costly, and is not a trivial achievement.

Justice, as the first virtue of social institutions (Rawls, 1971), should be the primary concern driving climate negotiations. Equity, again, is necessary for efficiency. This is the fundamental difference between developing countries' perception of the climate change debate, on the one hand, and the neoclassical vision of equity and efficiency as disjoint spheres, on the other. The profound observation of Rawls (1971) warns against the dangers of constructing the climate regime on an incorrect neoclassical theory and an unjust political order; as he puts it, ''A theory however elegant and economical must be rejected or revised if it is untrue; likewise laws and institutions no matter how efficient and well-arranged must be reformed or abolished if they are unjust.''

The rapid rise in developing country emissions is driven by development imperatives - in particular, the need for energy and economic growth - and is encouraged by the movement of investment and technology that supports conventional paths of development. By advocating the development and climate paradigm, this chapter suggests that future climate strategies must explicitly address fundamental needs on the part of developing countries if they are to be constructively and seriously engaged in common efforts toward climate protection. These observations point to a vital nexus between development and climate change. Conventionally, vulnerability assessments and searches for adaptation solutions have been confined to climate change science and policy. Development concerns are then viewed as exogenous to the assessment, at best offering some ancillary benefits. In contrast, this chapter supports the synergizing of climate strategies with development actions, which are the key contributors to the capacity to mitigate and adapt to climate change.

There is strong evidence that strategies driven by core development priorities can produce climate benefits. For instance, China's rapid improvements in energy efficiency, while motivated principally by economic goals, have significantly slowed down the growth of its GHG emissions. Recent analyses identify similar experiences and opportunities in major developing countries. However, to the extent that developing nations regard climate concerns as no more than potential barriers to their ability to reduce poverty and increase income levels, climate issues will not command the attention of core political actors. Since constraining economic growth is not an option for these policy makers, the only politically viable approach to climate mitigation is to devise development strategies that can produce climate benefits ancillary to sustained economic expansion. A principal aim of climate policy must be to build the capacities of developing nations to recognize and meet this challenge. This strategy requires shifting the frontier that binds the climate actions and economic growth (Fig. 3), through innovations and transfers of technology and investments to developing countries.

In the context of continued uncertainty about the future of the Kyoto Protocol and the prospect of new climate negotiations starting in 2005,

Fig. 3. Innovation and Expansion of Development and Climate Frontier.

Climate Change Mitigation

Fig. 3. Innovation and Expansion of Development and Climate Frontier.

experts, stakeholders, and governments have begun to assess a range of options for advancing the international climate change effort beyond 2012. If future mitigation efforts are to succeed, I have argued, they must align with the development priorities of developing countries, and must provide incentives for and mechanisms to redirect investment and technology flows from conventional to more climate-friendly pathways. Put simply, effective climate action must be "mainstreamed" to re-orient development paths toward those that are most climate friendly. Solutions to complex questions often do not lie where they could be obviously found. Climate negotiations would do well to shift from climate-centric to development-oriented solutions.

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