PrintJuly 23--India and China will be hit harder by emission reduction targets than the European Union (EU) or Japan, but it's other developing countries that should be compensated for their greenhouse commitments, says a new Germanreport on the economic and environmental effects of the recently signed Copenhagen Accord on climate change.
"The larger reductions (of gross domestic product, or GDP) occur for China and India, because their industrial sectors are more energy and CO2-intensive than most other regions, so increases in the cost of CO2 (carbon dioxide) emissions leads to larger reductions in the output of their energy-intensive sectors," the report says.
"In contrast, because these same sectors in the EU and Japan are relatively less energy- and CO2-intensive than most other regions, a higher cost of CO2 emissions will have less effect on the prices and make EU and Japanese companies more competitive, leading to increases in output," it adds.
Still, the report says China and India will see a gain in welfare by 2020 due to strong terms-of-trade effects, sale of carbon credits, and better efficiency for energy commodities, and so the burden-sharing criteria or funding betargeted towards the developing countries with welfare losses.
This goes against China and India's negotiating stance that they be compensated for international emission commitments.
The report, conducted for the German Federal Environment Agency, surmises that even if developed and large developing countries such as India and China take more ambitious pledges to reduce emissions, the average temperature increase will exceed 2 degree Celsius.
The Copenhagen Accord strives to limit the global increase in temperature to 2 degree Celsius above pre-industrial levels and lists steps for nations to cut greenhouse emissions by 2020. But according to the Intergovernmental Panel on Climate Change (IPCC), current commitments are nowhere near the required reductions.
Though the cap has been decided, there is no consensus on how the burden will be shared under the accord.
"There is no progress towards any kind of equity formulation under the Accord...India has argued that it doesn't matter at what degrees the cap is at, it has to be on basis of equal per capita emissions," said Prodipto Ghosh, a former environment secretary and negotiator and now climate expert at the Federation of Indian Chambers of Commerce and Industry (Ficci).
The German report explains that the average reduction in GDP relative to baseline GDP in developing countries with emission targets are much higher in all scenarios than the average reduction in developed countries.
But it adds a caveat that GDP growth rates in large developing countries are significantly higher than for developed countries, leading to a doubling of average real GDP between 2004 and 2020.
Economic costs in terms of reduced GDP compared with baseline GDP in 2020 for industrialized and developing countries are, on average, no higher than 0.25%, assuming that these countries are allowed to trade emission certificates without restrictions. Point to point GDP growth for industrialized countries remains at 27% (between 2004 and 2020), while for developing countries with commitments, it decreases by 2 percentage points.
For the most ambitious commitment scenario, point to point GDP growth remains unchanged for industrialized countries at 27% (between 2004 and 2020) and decreases to 98% from 102% for large developing countries, according to the report.
An earlier preliminary estimate by the World Bank had said India will have to increase its capital expenditure by 14% if it has to reduce its carbon intensity by 30% by 2020.
One of the consequences mentioned in the new study is that energy and trade-intensive sectors in India and China will lose market share to regions where production is less energy intensive.
"The main question still remains that when we unilaterally agreed to (a) 25-30% cut, how does that feed into the accord? How will it feed into any operationalization in the accord?" questioned Ghosh.
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