Efficiency In The Climate Context

Efficiency in the context of climate change means minimizing the extent of the climate change burden and is synonymous with cost-effectiveness. The climate change burden has two dimensions: first, the cost of mitigating emissions to reach the desired GHG concentration stabilization target and second, the cost of adaptation to and impacts of climate change. Costs and benefits of climate actions vary across nations and activities. For instance, sizable emissions reductions could be feasible in developing countries (that is, countries with a comparatively low material standard of living) at relatively lower costs compared to reductions carried out in industrialized nations. Thus, the global cost-effectiveness would mandate sizable mitigation in the developing world. Efficiency alone would thus transfer the mitigation burden to developing countries. The mitigation analysts, whose models are structured on neoclassical economics (which assumes that market outcomes are shaped by the rational and well-informed decisions of households and businesses), most often only go this far. The sharing of mitigation cost is left out as a separate problem, merely a secondary side-payment issue. Similarly, cost of adaptation and impacts are also low in developing countries. The impacts analysts, using a similar economic paradigm, also arrive at the conclusion that most cost-minimizing actions need to be carried out in developing countries.

However, I hold that GHG emissions are global public goods with negative external effects. Their mitigation produces global benefits. This entails that the adoption of efficiency or cost-effectiveness as a stand-alone criterion would have the rich nations "free riding'' on efforts whose costs are borne by poor countries. This claim is based on the notion that climate impacts most often incur local and private costs. Adaptation actions, on this line of reasoning, would produce local benefits. The costs of adaptation, however, arise from unmitigated emissions. Even the most cost-effective adaptation actions are externally imposed by emitters, who are historically and currently the richest nations. Under the exclusive cost-effectiveness criterion, these nations would, I argue, "free ride'' by imposing costs on poor nations.

An efficient regime could be quite inequitable. Yet, paradoxically, this kind of regime requires universal participation - both for the good of others in emissions mitigation and for the good of those nations when they adapt to the harmful effects of others' actions. In the case of climate change, the irony is stark since the poor would bear the consequences of the actions or inactions of the rich. A global regime cannot be constructed on such a weak foundation. "Justice," as Rawls (1971) has pointed out, "is the first virtue of social institutions." A robust climate change regime can be built only on the foundation of fair and equitable burden-sharing arrangements. Here, justice would be not only its virtue, but also the engine for ensuring universal cooperation - the necessary condition for efficiency.

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