Transcript Modelling Developing Country Economy Bridging the Gaps

Bridging the Modelling Gaps
GHG Mitigation Analysis for Developing
Countries and Transition Economies:
P.R. Shukla
UNDERSTANDING “DEVELOPMENT”

What Distinguishes DC’s from IC’s
 Technological Backwardness?
 Institutional Deficiencies?
 Or something different?

Development: A ‘Chicken and Egg’ Enigma
 Is Market Development and ‘Development’ identical?
 Will development PRECEDE efficiency (market) or Vice a versa?
 Are we asking the right questions?

Cost Estimation
 Why Estimate Costs?
 What are we estimating?

The ‘No Regret’ Paradox
 Plethora of Energy ‘Inefficient’ Technologies!
 Paradox of Existence: Do ‘No Regret’ Options Exist?
 Explanations: Barriers TO MARKET Multiple Discount Rates etc.
SOCIO-ECONOMIC DYNAMICS OF
DEVELOPING COUNTRIES

Dual Economy and Transition Process

Informal Activities

Land Relations and Land Use

Market Performance and Disequillibrium

Non-commercial Fuels

Non-economic Concerns

Policy Distortions
SIZE OF INFORMAL ECONOMY
Some Examples

Latin America


Share of urban labor force - 30 to 57%
(employed 30 million persons in the late 1980’s)
Kenya
 Urban informal - 30%, Rural Non - Farm - 13%
(of all employment outside Agriculture)

Informal Credit (as fraction of total credit)
 Bangladesh: 1/3 to 2/3
 India: 2/5
 Nepal, Pakistan, Thailand: over 2/3

Interest Rates (per year)
 India (30 - 200%)
 Malawi (5000%)
 Can risk and transaction cost explain this?
ISSUES IN ESTIMATING IMPACTS COSTS
1.
2.
3.
Development and Adaptation
Successful adaptation to climate change impact ‘depends upon
technological advances, institutional arrangements, availability of
financing and information exchange’
Valuation of Non- Market Impacts
Sustainability with Money
Measurability
Low Value of Life or ‘ No Regret’ Situations?
Bangladesh Cyclone (1991): 200, 000 deaths (SAR, WG II)
Recent Bangladesh Cyclone (1997): Relatively Low Damage
Successive Cyclones : Late 1996 (South Indian Coast)
Many lives saved at little expense in Second Cyclone
Should this imply low value of life? or ‘No regret’ Situation
4.
Macro - Economic Costs of Damage
High aggregation
Miss non market costs
5.
Dual Bias
Low Damages in Developing Countries
High Cost of Mitigation Measures in Industrialized Countries
COST ESTIMATES FOR DEVELOPMENT
COUNTRY: AGENDA
Refining Model Structure And Assumptions
Come closer to DC Reality
Transparency
Diversity
Database Issues
Unavailability
Disparity
Inconsistency
Incompatibility
Unsuitability
Diversity
COST ESTIMATES (Continued…)
Multiple Baselines
Technological Progress
Path Dependence
Leapfrogging
Technology transfer
National Priorities and Policies
Transaction Costs
Non-market Cost
Multiple criteria for assessment
(Comprehensive Index of Welfare: e.g. HDI)
Secondary Benefits
e.g. Air quality/ Food security
Extent Models Adequately Reflect Socio-Economic
Structures in Developing Countries
I)
II)
Market Based, Efficiency Oriented, Equilibrium Model
Versus
Developing Nations’ Actual Socioeconomic Structures
Business As Usual (BAU) Scenarios
Versus
Developing Countries’ Structural Changes
III) Market Based, Efficiency Oriented, Equilibrium Model
Versus
Developing Nations’ Actual Socioeconomic Structures
Assessment of Same Policy Instruments for
Developed and Developing Nations
I)
Developed Countries’ Policy Instruments
Versus
Developing Countries’ Instruments
II)
Climate Policy In Developed Countries
Versus
Developing Countries’ Policy Linkages
Extent Regional Characteristics are Represented
within IAMs
I)
Developed Countries’ Damage Functions
Versus
Developing Countries Damage Systems
II)
Assessment Of Western Lifestyles
Versus
Developing Nations’ Social Parameters
Accuracy of Climate Change Impacts Assessment
in Developing Countries
I)
Assessment In Developed Countries
Versus
Assessment In Developing Countries
II)
Policy Responses In Developed Countries
Versus
Policy Responses In Developing Countries
III)
Very Ambitious Models
Versus
Limited Data In Developing Countries
Extent IAMs Produce Policy Options Acceptable
for Developing and Developed Countries
I)
Dynamic Optimization
Versus
South-North Equity
II)
Uncertainty
Versus
Developing Countries’ Benefit/ Cost
III)
Developed Countries’ Optimal Paths
Versus
Developing Countries’ Incentives to be in the Game