Climate Change 2001: Working Group III: Mitigation

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7.5 Specific Development Stages and Mitigation Costs (Including Economies in Transition)

Developing countries and EITs exhibit a number of special characteristics that should be reflected in mitigation cost studies. There is a need for further development of the methodologies and approaches that reflect these issues; this section introduces a number of distinct features for such economies and concludes with a number of suggestions for the expansion of studies and methodology development.

7.5.1 Why Developing Countries Have Special Problems in Their Mitigation Strategies

The term “developing countries” covers a wide variety of countries with distinct differences in their economic, political, social, and technological levels. The group of countries termed “least developing countries” have very little basic infrastructure, the “newly industrialized countries” have a structure closer to that of the developed countries, and others lie between these two extremes. Almost all developing countries have a relatively low level of GHG emissions per capita at present, but large countries like India, China, and Brazil will soon become very important in terms of their contribution to total global emissions. It is therefore important to understand how these countries might participate in globally cost-effective policies.

Mitigation costs in a country depend critically on the underlying technological and socioeconomic conditions. Studies that assess these costs make assumptions about current and future socioeconomic development patterns and the potential to implement climate change mitigation policies. Developing countries exhibit a number of specific complexities that are of major importance to costing studies. Data are limited, exchange processes are constrained, markets are incomplete, and a number of broader social development issues are potentially important for future GHG emissions, such as living conditions of the poor, gender issues, and institutional capacity needs. Some of these difficulties arise particularly in relation to land-use sectors, but can also be important in relation to the energy sector and transportation.

To sum up, a number of special issues related to technology use should be considered for developing countries as the critical determinants for their climate change mitigation potential and related costs. These include current technological development levels, technology transfer issues, capacity for innovation and diffusion, barriers to efficient technology use, institutional structure, human capacity aspects, and foreign exchange earnings.

The methodology of most current mitigation cost studies was developed on the basis of approaches originally designed for the market-based economies of developed countries. The application of these methodologies in a developing countries context typically poses special problems relating to data, sectoral coverage, activity projections, and assumptions about markets, behaviours, and policy instruments. A simplified application of these methodologies in developing countries can lead to a number of inaccuracies in mitigation studies:

• Major GHG emission sources and drivers for future emission can be overlooked. This is especially relevant for the land-use sectors.
  
• Mitigation studies may focus on specific technical options that are not consistent with national macroeconomic policy contexts and broader social and environmental policy priorities.
  
• The technical potential of specific options, for example electricity saving options, may be overestimated because consumer behaviour and power market failures are not captured.
  
• The impacts of using different policy instruments cannot be assessed because the studies do not include any information on national institutional structure, taxes, and other regulation policies and various technology promotion programmes.
  
• Implementation issues, including institutional and human capacity aspects and local market development, are not represented.

7.5.2 Why Economies in Transition (EIT) Have Special Problems in Their Mitigation Strategies

Estimating the costs of mitigation for EITs presents its own challenges, which can be described as past, present, and future. In the recent past, prices were not the rationing mechanism of choice. The listed prices (where there were any) did not necessarily reflect the actual level of scarcity, since they were not set by supply and demand. As such, data based on listed prices from which to construct marginal abatement cost curves is sketchy at best, and completely missing at worst.

Today, problems still exist in the construction of such curves, in that each transition economy has its own unique mix of fee markets and state control. The newer sources of data reflect a mix of price and quantity rationing that needs to be better understood on a country-by-country basis.

Finally, using this data to estimate mitigation costs into the near or distant future depends on critical assumptions about how the political, legal, and economic institutions will evolve in these economies. Any estimates of mitigation costs into the twenty-first century made under the assumption that current institutions will be held constant are almost certainly not going to be correct. Hence, it is essential to devote a good deal of effort to develop scenarios of evolution for these institutions and their implications for economic development.