The UN Development Programme (UNDP) for the first time in its human development report has analysed the impact of climate change. The Human Development Report 2007-08 – Fighting climate change : Human solidarity in a divided world is released at a time when the climate change agenda is slowly gaining its entry in the WTO negotiations and the discussions on the review of the work under Kyoto Protocol is slated to take place in Bali in Indonesia in December, this year.
The report documented the impact of climate change across the world also projected the likely scenario for the future. Making out a case for alternative sources of energy and fuels like bio-fuels, the UNDP report said that global trade has a major role to play. It said : "International trade could play a much larger role in the expanding markets for alternative fuels. Brazil is more efficient than either the European Union or the United States in producing ethanol, Moreover, sugar-based ethanol is more efficient in cutting carbon emissions. The problem is that imports of Brazilian ethanol are restricted by high import tariffs. Removing these tariffs would generate gains not just for Brazil, but for climate change mitigation."
However, the report brought to the light, the concerns of deforestation for growing oil crops. It said : "In Indonesia, every $ one generated, through deforestation to grow palm oil (oil palm crop) would translate into a $ 50-100 loss if the reduced carbon capacity could be traded on the European Union's Emissions Trading Scheme (ETS). Beyond these market failures, the loss of rainforests represents the erosion of a resource that plays a vital role in the lives of the poor, in the provision of the ecosystem services and in sustaining biodiversity." It advocated the potential of carbon markets in the creation of incentives to avoid deforestation.
Again dealing with the trade angle, the report said that the rising prices for oil and natural gas was one of the reason why coal figured prominently in the present planned energy mix of major emitters like China, India and US. In this context, it advocated the carbon capture and storage (CCS) technology which "holds out the promise of coal-fired power generation with near-zero emissions."
The report noted that commitments under the Kyoto Protocol are slated to expire in 2012. It said that global mitigation efforts would be dramatically enhanced if a post-2012 Kyoto framework incorporates mechanisms for finance and technology transfers.
Energy related carbon dioxide emissions have increased sharply since 1990, the reference years for reductions agreed under the Kyoto Protocol, it said and added that not all developed countries ratified the Protocol's targets, which would have reduced their average emissions by around 5%. "Most of those that did are off track for achieving their commitments," it said.
The UNDP report noted that Kyoto Protocol did not place any quantitative restrictions on emissions from developing countries. "If the next 15 years of emissions follows the linear trend of the past 15 years, dangerous climate change will be unavoidable," it said.
"Negotiations on emissions limits for the post-2012 Kyoto Protocol commitment period can – and must – frame the global carbon budget." Saying so it noted most developed countries like Canada fell short of the targets. Though the European Union and UK have both embraced their targets, they are likely to fall far short of the goals set unless they move rapidly to put climate mitigation at the center of energy policy reform. Two major OECD countries like US and Australia are not bound by Kyoto Protocol.
The report suggested two ways to mitigate climate change, one is to directly tax carbon dioxide emission and the other is cap-and-trade. Under cap-and-trade system, the government sets an overall emissions cap and issues tradable allowances that grant business the right to emit a set amount. Those who can reduce emissions more cheaply are able to sell allowances. One potential disadvantage of cap-and-trade is energy price instability while the potential advantage is environmental certainty, it noted.
While the transition to climate protecting energy and life styles will have short-term costs, there may be economic benefits beyond what what is to be achieved by stabilizing temperatures. These benefits are likely to be realized through Keynesian and Schumpeterian mechanisms with new incentives for massive investment stimulating overall demand and creative destruction leading to innovation and productivity jumps in a wide array of sectors, the foreward to the report said.
"While government leadership is going to be essential in correcting the huge externality that is climate change, markets and prices will have to be put to work so that private sector decisions can lead more naturally to optimal investment and production decisions," it said.
The report contains wise sayings of Mahatma Gandhi who once reflected on how many planets might be needed if India were to follow Britain's pattern of industrialization. It also contains words of the Brazilian environmentalist, Chio Mendes. However the report failed to define the responsibilities of climate mitigation by countries by basing on the per capita consumption of carbon dioxide.
The report also advocated adaptation as a process, which amounts to opening up for a technology bazaar with tags of IPR regime.