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Knowledge in Development Note: Climate Change

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Climate Change (2009)
What we know
Current research agenda

There is now solid evidence that the rising concentration of greenhouse gases (GHGs) in the atmosphere is the result of human activities—especially fossil fuel burning and deforestation—and that further increases in the concentration will pose growing hazards for human society as well as natural systems. The direct impacts of climate change will include higher average temperatures, especially in lower latitudes; changes in the rate and timing of rain, snow and ice, including increased prevalence of dry days in some places as well as intensification in extreme precipitation events; increases in the intensity or frequency of extreme weather; and a rising sea level. The hazards threatened by these changes include reduced productivity in agriculture and forestry; increased water scarcity in dry areas, but inundation of low-lying coastal areas; damages to land and infrastructure from storms; stress on natural habitats and biodiversity; and greater threats to human health and life from wider-ranging diseases as well as extreme weather events.[1

Responses to these threats include mitigation of GHG emissions to arrest the long-term change in the climate, and adaptation to ongoing climate change that already is unavoidable. While adaptation at the individual level (e.g. farmers, builders, households) will occur naturally over time as the hazards become more threatening, it will also depend on the actions of governments (e.g., infrastructure siting and design, coastal zone management, public health delivery). Thus adaptation has an important public good characteristic, which complicates its provision. Mitigation of emissions is an even more complex global public good, since the effects on the climate system and thus the damages are invariant to the location of the emissions. Significant international cooperation thus is needed for emissions mitigation. It also is costly to make the very deep cuts in emissions needed to stabilize the climate, though there are many cost-effective opportunities at present and prospects for future technical advance in low-carbon energy resources.

While climate change is clearly a global problem—all countries will be affected—the poorest countries and populations are the most vulnerable and have the least capacity for adaptation, even though they have contributed the least to the problem. On the other hand, because of rapid emissions growth in larger middle-income countries, the bulk of emissions soon will occur outside the current group of advanced industrial countries. Therefore, it is particularly important to increase knowledge and improve capacities to (1) assess key vulnerabilities to climate change in developing countries, and options for more effective adaptation; (2) develop and apply national policies to mitigate emissions from various sectors and sources; and (3) promote mechanisms for different forms of international cooperation to address climate change risks and mitigation opportunities.[2]

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What we know

Agriculture is an especially vulnerable sector—though adaptation by farmers will occur to the extent that conditions allow

A large volume of research at the Bank and elsewhere indicates that the likely impact of changes in temperature and precipitation on a continent-wide scale will be quite substantial—though some areas stand to benefit at least from moderate warming. Potential impacts are particularly troubling for Africa; one Bank study estimated that by 2100, per hectare net income of farmers there could be reduced by up to 25 percent.[3] Worldwide, rainfed areas are more vulnerable than irrigated areas, though the latter will be stressed by reduced availability of water.

Farmers have several options for adaptation to climate change including choices of crops and/or livestock to produce, as well as investments in irrigation. Research provides strong evidence that farmers will make adjustments to cope with global warming. However, the efficacy of these adjustments depends on the extent to which public policies are supportive, as well as access to technology such as new crop varieties.

Sea-level rise (SLR) and storm surges are likely to affect a large number of people and could impose major economic losses

Scientific evidence suggests that an increase in greenhouse gas emissions and associated global warming could raise sea level by more than 1 meter in this century. A rapid breakup of the Greenland and West Antarctic ice sheets might even produce a 5 meter rise, but the probability of this taking place within the current century is negligible.

A recent study assessed the consequences of continued SLR on land, population, agriculture, urban extent, wetlands, and GDP for 84 developing countries.[4] Results indicate that tens of millions of people in the developing world may be displaced by SLR within this century; and that the accompanying economic dislocation and ecological damage may be severe for many.

At the country-level, results are extremely skewed, with severe impacts limited to a handful of countries (e.g., Vietnam, Bangladesh, Egypt, and the Bahamas). For these countries, the consequences of SLR are potentially catastrophic. For others, including some of the largest (e.g., China), the absolute magnitude of potential impacts is very large.

There also is growing concern that the increase in sea surface temperature now observed all over the world will intensify cyclone activity and heighten storm surges. An analysis of the vulnerability of coastlines—based on Geographic Information System data for land area, population density, cropland, wetlands, extent of urban areas and major cities—identified a small number of countries and a cluster of large cities at the lower end of the global income distribution that appear especially vulnerable. The indicators suggest Djibouti, El Salvador, Mozambique, Togo, and Yemen are at risk for the most severe impacts. Cities most vulnerable to coastal damage are located in Bangladesh, Morocco, Mozambique, the Philippines, and Vietnam. Knowing where significant coastal damage may occur will help countries and the international community target efforts to soften the blow of increased future storm-related losses.[5

Markets can direct GHG-reducing investments under the Kyoto Protocol, but a variety of factors explain country participation

The Kyoto Protocol allows countries with treaty obligations to meet them in part by investing in projects that reduce or sequester greenhouse gases elsewhere. Prior to ratification, treaty participants agreed to launch country-based pilot projects, referred to collectively as Activities Implemented Jointly (AIJ), to test novel aspects of project-related provisions. Examination of a 10-year history of AIJ projects suggests that both a general willingness to cooperate internationally (measured indirectly by foreign direct investment) and other national political objectives influence project selection.[6] This characterization differs from the market-based assumptions that underlie the Protocol’s flexibility mechanisms.

The Clean Development Mechanism is a provision of the Kyoto Protocol that allows developed countries to pursue GHG emission reduction opportunities in developing countries by investing in projects that go beyond “business as usual,” in exchange for emission reduction credits. Prior to its implementation, significant research went into identifying sectors and places with low-cost mitigation potential. Additional research, drawing in part on data for current CDM projects, describes the markets and institutions that have grown up around project markets, what motivates investment now that the program is underway, and how investment patterns have differed from those initially anticipated.[7

Addressing rising GHG emissions and growing congestion from urban transportation requires a combination of pricing and investment measures

The movement of population from rural to urban areas raises several important questions regarding patterns of urban development, the choice of alternative transportation infrastructure networks, and policies for addressing traffic congestion and GHG emissions from increased energy consumption. Analysis of these issues needs to consider overall transportation demand, cost of different modes and choices among them, how they contribute to congestion and emissions, and the potential opportunities and constraints for expanding mass transit. Research on these issues in the context of México City and Beijing confirms that a congestion charge is more effective for reducing traffic congestion, while a fuel tax is more effective for reducing greenhouse gas (GHG) reduction. Nevertheless, a fuel tax can also induce significant reductions in congestion. To be most effective, however, a large and politically sensitive increase in fuel prices would be needed. The research also highlights the importance of investment to improve public transit services in city cores, rather than to expand peripheral road capacity, in order to achieve citywide reductions in fuel consumption and GHG emissions.[8

Renewable energy resources for electricity have made considerable technical progress, but they are not yet cost-competitive for major expansion

Renewable energy resources, such as solar and wind, have enormous technical potential and their installed capacities have increased globally by more than 10-fold over the last decade. Yet, these sources still contribute less than one percent of global energy supply. Research shows that large scale deployment of renewable energy has been limited by fundamental technological and economic constraints, as well as market and institutional barriers. Although many countries have developed policy instruments to reduce these barriers, they have not led to significant penetration of renewable energy into the national energy supply mix. To significantly scale up the contribution of renewable energy in global energy supply mix given current technological options, additional and costly policy interventions would be needed.[9

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Current research agenda

A great many knowledge gaps remain in addressing the particular problems of developing countries with respect to climate change. These include both additional adaptation challenges, and more macro-scale questions on how more robust economic growth and global GHG limitations can be reconciled.

Continued investigation of climate change impacts on agriculture

There is substantial evidence that rising atmospheric greenhouse gas concentrations are likely to increase temperature and precipitation extremes in the future, with some studies indicating that such changes to climate volatility are already occurring. Agriculture is particularly sensitive to climate volatility, and as the frequency and intensity of climate extremes increase, crop production damages from such events will change. Recent studies highlight the significant impact that extreme climate events may have on agricultural output in the tropics and subtropics, and thus on food security in developing countries.

Related research is examining the poverty impact of climate volatility in southern and eastern Africa, as well as various adaptation policies. In Tanzania, where only 2 percent of arable land is irrigated and where rain-fed agriculture is sensitive to years with low precipitation, dynamic modeling will be used to estimate the costs and benefits of alternative irrigation programs. At a regional level, trade policies in East Africa will be examined as a mechanism to reduce the food price volatility that may be induced by the supply-side effects of climate change on agriculture.

Additional ongoing research considers the poverty and distributional consequences of climate change in India, a country whose agriculture is thought to be particularly vulnerable to global warming and which sustains a substantial fraction of the world’s poor. Micro-level estimates, taking adaptation into account, are showing that declines in agricultural productivity due to rising temperatures will indeed lead to a significant uptick in rural poverty, but there may be surprising implications for rural income distribution more generally.

Food security and climate change impacts of biofuels

Recent concerns over climate change, rising energy price volatility and energy security motivated substantial increases in public and private support internationally for the biofuels industry. However, support for biofuels based on food crops has waned as they became associated with the 2007/2008 grain price spike and their climate change mitigation potential came into question. Countries now are facing dilemmas as to whether they should introduce additional policies to support recent or scaled-up quantities of biofuels production. Countries which have already announced targets for use of biofuels are in a quandary as to enforcement of the targets.

One ongoing study analyzes the short and long-term impacts of biofuels on land use, food prices, energy markets, climate change mitigation and poverty at the national, regional and global levels using a global, computable, general equilibrium model. Included in this body of work is analysis of land availability for biofuels, and the technology and economics of second generation biofuels. A second study is being initiated to provide a more detailed investigation of the potential impacts of expanded biofuels for selected countries. The study will be focused on feedstocks, particularly jatropha, that do not directly compete with the food supply.

Long term sustainability of hydropower-based energy generation within changing climate scenarios

Research is examining hydropower generation arrangements between countries sharing trans-boundary rivers, in order to assess the vulnerability of existing international arrangements for joint hydropower generation that may affect the sustainability of electricity and water supply under various climate change scenarios. Specifically, it looks at how alternative institutional arrangements (e.g., formulas for sharing water flow for hydropower production, joint management of the hydropower facility, and formulas for sharing gains) may be affected. In addition it looks at ways to modify institutional arrangements to address vulnerabilities of existing hydropower generation and water supply arrangements in trans-boundary basins in light of climate change.

International responses to the threat of future climate change “mega-catastrophes”

Mega-catastrophes from future climate change are severe and long-lived global damages resulting from what are today seen as extremely unlikely occurrences. As such they are a challenge for policy makers, because evaluating the priority to be accorded risk-mitigating responses goes well beyond the scope of conventional cost-benefit analysis, and international coordination is needed to have the best effects. This research offers ideas for evaluating potential responses for mitigating climate catastrophe risks, and applies these ideas to three types of possible responses: drastic and rapid global GHG mitigation; development of ready-to-use capacity for climate-change-arresting geo-engineering; and large-scale global adaptation efforts that anticipate catastrophe risks and seek to reduce their consequences—for example through initiation of mass population relocations and expansion of ecological protection zones. Each of these options has strengths and weaknesses, and at this stage a portfolio encompassing technological and policy research on all three options is highly warranted.

Infrastructure investment, inertia, and “green stimulus”

One of the most challenging problems facing decision makers is the timing of policies addressing GHG mitigation. More gradual, accelerating approaches can reduce the long-term cost of transition; but these approaches also create risks by “locking in” more GHG-intensive technology (coal power plants, petroleum-based transport), thus raising the cost of more aggressive measures later to combat more serious and irreversible climate change impacts. One project is examining how to more reliably assess this tradeoff and to value the retention of various options for future action in the face of uncertainties. A second project tackles the more immediate question of “green stimulus” programs for combating recession with environmental co-benefits. One set of conclusions from the latter project is that opportunities for both near-term stimulus and longer-term environmental protection are somewhat limited; and much could be done to enhance environmental protection by tackling the challenging problem of reforming energy and other subsidies in the economy, over and above any direct government-supported investment in specific infrastructure. 

Increasing transportation energy efficiency in India

As a result of India’s economic boom, demand for passenger vehicles has grown steadily and swiftly over the last decade. With such rapid growth and change, many in India are advocating strong legislative action to reduce the many economic and environmental concerns that inevitably accompany the expanded use of motorized transportation. Much of the Indian debate has been centered on potential imposition of fuel economy standards. Aside from environmental arguments for reducing fuel use, one possible economic justification for fuel economy regulation is consumer myopia, which leads consumers to under-value future fuel cost savings.

This research tests for this possibility using extensive data on Indian vehicle purchases and their characteristics, as well as vehicle prices and fuel costs. Analysis carried out so far suggests that the Indian new passenger vehicle market is successfully balancing vehicle and fuel costs. The implicit cost of additional fuel economy in terms of changes in other vehicle characteristics is made up for in saved fuel expenditure in less than 5 years. These findings do not make a strong case for market intervention through fuel economy standards. Justification for such regulation on economic grounds would have to consider the costs and benefits of environmental improvements obtained through fuel economy standards or other policy instruments.

Expanding access to electricity in Africa: grid and non-grid renewable options

Accelerating development in Sub-Saharan Africa will require massive expansion of access to energy—currently reaching only about one-third of households. This research asks whether the primary objective of development can be reconciled with the urgent need to keep carbon emissions in check. The primary question is whether the great success of decentralized mobile phone systems on the continent (compared to fixed land lines) could be duplicated in the energy sector: are stand-alone, renewable power generation systems, using solar, wind or biofuels, a cost effective alternative to centralized grid supply that has been woefully inadequate in most countries? The study uses a geographically explicit framework, spatial modeling, and cost estimates from recent engineering studies to generate cost surfaces that delineate the lowest cost options.

Initial results suggest that decentralized renewable energy options will be the lowest cost option for a relatively small share of households in Africa, even when likely cost reductions over the next 20 years are considered. They are competitive mostly in remote and rural areas, while grid connected supply dominates denser areas where the majority of households reside. Decentralized renewable technologies will be important, and this research project also reviews the institutional mechanism that can speed up their adoption. But these findings also reinforce the need to de-carbonize the fuel mix used for centralized power generation in Africa, a topic of ongoing research.

Energy substitution, technical innovation, and “low-carbon growth” possibilities

The success of developing countries in curbing their greenhouse gas emissions (GHG) is crucial for dealing with long-term global climate change. A strategy of low carbon economic growth would focus for the time being on “win-win” and other low-cost options for GHG mitigation that would not unduly impede economic growth and poverty reduction. However, it remains uncertain what degree of GHG mitigation can be achieved without slowing down economic progress, relative to long-term goals for controlling global emissions. Also uncertain are the distributional impacts of low carbon growth scenarios, and their inter-sectoral and trade implications. This project will address these issues in selected countries using a computational generational equilibrium model, combined with additional detail on potential cost-reducing innovation in the energy sector as well as opportunities to substitute other inputs for energy. The project will provide knowledge that can help the World Bank Group and client countries better understand potential opportunities and trade-offs with respect to economic growth and GHG mitigation.

Contact: Mike Toman, mtoman@worldbank.org, 202-458-0277

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Notes

Most World Bank research documents cited in this summary are available through the World Bank’s research archives at http://econ.worldbank.org/docsearch or the Bankwide archives at http://www-wds.worldbank.org/.

1. Intergovernmental Panel on Climate Change (IPCC). 2007. Climate Change 2007: The Physical Science Basis, Summary for Policymakers. Cambridge University Press.
http://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1-spm.pdf (accessed 23.09.2009).

IPCC. 2007. Climate Change 2007: Impacts, Adaptation and Vulnerability, Summary for Policymakers. Cambridge University Press.
http://www.ipcc.ch/pdf/assessment-report/ar4/wg2/ar4-wg2-spm.pdf (accessed 23.09.2009).

2. See World Development Report 2010: Development and Climate Change. Washington, DC: World Bank.

3. P. Kurukulasuriya, R. Mendelsohn, R. Hassan, J. Benhin, T. Deressa, M. Diop, H. Mohamed Eid, K.Yerfi Fosu, G. Gbetibouo, S. Jain, A. Mahamadou, R. Mano, J. Kabubo-Mariara, S. El-Marsafawy, E. Molua, S. Ouda, M. Ouedraogo, I. Sène, D. Maddison, S. Niggol Seo, and Ariel Dinar. 2006. “Will African Agriculture Survive Climate Change?” World Bank Economic Review 20(3): 367–88.

4. S. Dasgupta, B. Laplante, C. Meisner, D. Wheeler, and J. Yan. 2007. “The Impact of Sea-Level Rise on Developing Countries: A Comparative Analysis.” Policy Research Working Paper 4136, World Bank, Washington, DC.

5. S. Dasgupta, B. Laplante, S. Murray, and D. Wheeler. 2009. “Sea-Level Rise and Storm Surges: A Comparative Analysis of Impacts in Developing Countries.” Policy Research Working Paper 4901, World Bank, Washington, DC.

6. D.F. Larson and G. Breustedt. 2007. “Will Markets Direct Investments under the Kyoto Protocol?” Policy Research Working Paper 4131, World Bank, Washington, DC.

7. T.J. Considine, and D.F. Larson. 2009. “Substitution and Technological Change under Carbon Cap and Trade: Lessons from Europe.” Policy Research Working Paper 4957, World Bank, Washington, DC.

A. Dinar, S. Mahfuzur Rahman, D.F.  Larson, and P. Ambrosi. 2008. “Factors Affecting Levels of International Cooperation in Carbon Abatement Projects.”  Policy Research Working Paper 4786, World Bank, Washington, DC.

D. F. Larson, P. Ambrosi, A. Dinar, S. Mahfuzur Rahman, and R. Entler. 2008. “Carbon Markets, Institutions, Policies, and Research.” Policy Research Working Paper 4761, World Bank, Washington, DC.

8.  A. Alex, and G.R. Timilsina, 2009. “Lock-in Effects of Road Expansion on CO2 Emissions: Results from a Core-Periphery Model of Beijing.” Policy Research Working Paper 5017, World Bank, Washington, DC.

I. Parry and G.R. Timilsina. 2009. “Pricing Externalities from Passenger Transportation in Mexico City.” Policy Research Working Paper 5071, World Bank, Washington, DC.

9. G. Cornelis van Kooten and G.R. Timilsina. 2009. “Wind Power Development: Economics and Policies.” Policy Research Working Paper 4868, World Bank, Washington, DC.

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Last updated: 2010-01-21




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