Climate Change and India: Implications and Policy Options

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Climate Change and India Implications and Policy
Options

• Arvind Panagariya
• Columbia University, New York
• India Policy Forum
• NCAER, New Delhi
• July 14-15 2009

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Prologue

• Action on Climate Change must enhance, not
  diminish the prospects for development. It must
  not sharpen the division of the world between an
  affluent North and an impoverished South, and
  justify this with a green label. What we require
  is a collaborative spirit which acknowledges the
  pervasive threat of Climate Change to humanity
  and seeks to find answers that enhance, not
  diminish the prospects of development,
  particularly of developing countries. All members
  of our common global family should have equal
  entitlement to the fruits of prosperity.
• The Road to Copenhagen, Government of India,
  February 27, 2009

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Outline

• Introduction
• Climate Change in India During the Past Century
• Predicted Changes, Vulnerabilities and Adaptation
  
• Mitigation Efficiency
• Mitigation The Distributional Issue
• Policy Action The Current State of the Play
• Indias Options
• Concluding Remarks

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1. Introduction

• Global warming is real
• But there is considerable uncertainty on the
  specifics
• How much average temperature increase
• In 2030, 2050, 2080 etc.?
• In Kashmir? In Karnataka?
• How will a given average temperature increase
  take place?
• Rise in maximum, minimum or the entire
  distribution of temperature?
• More hot days, less cold days?
• More severe summer, less severe winter?
• Same questions on rainfall, which may rise or
  fall
• Impact uncertainties
• More hot days will be bad in Rajasthan but not in
  Kashmir
• More rain will be good in Rajasthan but bad in
  Meghalaya
• For many crops, heat is bad but CO2 emissions are
  good

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2. Changes in the 20th Century 2.1 Temperatures

• Average temperature increase
• World Bank (2009) none
• Government of India (2004) 0.4oC
• Inter-governmental Panel on Climate Change (IPCC
  2007) 0.68oC
• GOI (2004) further state
• Warming mainly in the post-monsoon and winter
  seasons.
• Warming predominantly due to increased maximum
  temperatures
• A significant warming trend along the west coast,
  in central India, the interior peninsula and over
  north-east India,
• A cooling trend in north-west India and a pocket
  in southern India.

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Average temperatures in India 1880-2000 Source
Lal (2003)
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2. Changes in the 20th Century 2.2 Rains

• GOI (2004)
• The monsoon rainfall at the all-India level does
  not show any trend and seems mainly random in
  nature over a long period of time
• Pockets of significant long-term changes in
  rainfall have been recorded
• Areas of increasing trend in the monsoon seasonal
  rainfall are found along the west coast, north
  Andhra Pradesh and north-west India (10 to 12
  per cent of normal/100 years)
• Areas of decreasing trend are found over east
  Madhya Pradesh and adjoining areas, north-east
  India and parts of Gujarat and Kerala (-6 to -8
  per cent of normal/100 years).

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2. Changes in the 20th Century 2.3 Glaciers

• Glacier National Park in North America Down to
  37 glaciers from 140 of them 150 years ago
• Gangotri Glacier
• Receding since 1870 when data gathering began
• 1,147 meters melted away during the 61 years
  between 1936 and 1996 (19 meters per year)
• Receded 850 meters during the 25 years between
  1975 and 1999 (34 meters per year)
• Over one percent of water in the Ganges and Indus
  Basins is currently due to runoff from wasting of
  permanent ice from glaciers

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Gangotri Glacier Source NASA
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2. Changes in the 20th Century 2.4 Sea Level

• rising at 1mm per year on the average
• The rise is the highest along the Gulf of Kutchh
  in Gujarat and the coast of West Bengal
• Along the Karnataka coast, there is a relative
  decrease in the sea level
• Much of the rise in the sea levels has been due
  to warming of seawater that increases its volume

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2. Changes in the 20th Century 2.5 Extreme
Weather Events

• Heat waves, droughts, floods, cyclones and tidal
  waves
• Heat waves Declined in Uttar Pradesh, Madhya
  Pradesh, and Gujarat during 1978-99 relative to
  1911-67 but rose in Rajasthan, West Bengal and
  Maharashtra between the two time periods
• GOI (2004) Instrumental records over the past
  130 years do not indicate any marked long-term
  trend in the frequencies of large-scale droughts
  or floods in the summer monsoon season. The only
  slow change discernible is the alternating
  sequence of multi-decadal periods of more
  frequent droughts, followed by periods of less
  frequent droughts. This feature is part of the
  well-known epochal behavior of the summer
  monsoon.
• GOI (2004) The annual number of severe cyclonic
  storms with hurricane force winds averages to
  about 1.3 over the period 1891-1990. During the
  recent period 1965-1990, the number was 2.3.
  Whether this is real, or a product of recently
  enhanced monitoring technology is, however, not
  clear.

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3. Predictions, Vulnerabilities Adaptation 3.1
Temperatures and Rainfall
Baseline 1961-90
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3. Predictions, Vulnerabilities Adaptation 3.2
Water Availability

• The impact of climate change includes
• Increased rains would add to the availability of
  surface water
• More rapid melting of glaciers would do the same
  initially but the opposite eventually
• Warming would lead to increased evaporation and
  transpiration
• The Government of India (2004, Table 3.2)
  predicts the net effect to be positive for some
  rivers and negative for others
• Policy Response (more intense pursuit of what
  India must do in any case)
• Prudent utilization of surface and ground water
  through proper pricing as well as training
• Harvesting of rainwater
• Building of dams
• Development of distribution networks
• Re-forestation to help replenish ground water

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3. Predictions, Vulnerabilities Adaptation 3.3
Agriculture

• Increased droughts and floods can lead to partial
  destruction of crops with greater frequency
• Compression of the monsoon season and increased
  intensity of rains may also impact agricultural
  productivity
• Increased sea levels can reduce the availability
  of arable land
• Rising maximum temperatures in drought prone
  areas lead to reduced productivity while those in
  cooler areas raise productivity.
• Increased carbon dioxide levels in the air lead
  to increased productivity C3 crops (rice, wheat,
  soybeans, fine grains, legumes, and most trees)
  benefit significantly and C4 crops (maize,
  millet, sorghum, and sugarcane) modestly.
• Predictions of effects on productivity, which
  abound, are as good as astrological predictions!

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3. Predictions, Vulnerabilities Adaptation 3.4
Health

• If heat waves rise in frequency, length or
  intensity, incidence of stroke and related
  diseases would rise
• Warmer climate makes air pollution more harmful
  and contributes to airborne diseases with greater
  potency
• Increased dampness and water pollution
  accompanying floods are likely to increase the
  risk of spread of diseases such as Malaria
• Water contamination that may accompany floods
  and draughts may also lead to increased incidence
  of intestinal diseases such as diarrhea
• warming in colder regions, during winter season
  and in minimum temperatures may reduce health
  risks associated with cold waves.
• Increased rains in currently dry regions may also
  reduce the risk of heat waves.

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3. Predictions, Vulnerabilities Adaptation 3.5
Migration

• Diverse rates of growth across states and between
  urban and rural areas would accelerate internal
  migration
• Demographic changes would dot he same four
  southern states (Andhra Pradesh, Kerala, Tamil
  Nadu and Karnataka) have reached the replacement
  levels of fertility rates, many of the poorer
  states in the north such as Bihar, Uttar Pradesh,
  Madhya Pradesh and Rajasthan have high population
  growth rates
• Climate change can further add to complications
  in migration patterns.
• Rising sea levels may displace a part of the
  population currently living in the coastal zones.
  
• More frequent cyclones, droughts and floods may
  also lead to increased migration.
• It is commonly suggested that climate related
  events would lead to massive migration from
  Bangladesh into India.
• These sources of migration will interact with the
  ongoing process of urbanization and inter-state
  migration.

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3. Predictions, Vulnerabilities Adaptation 3.6
Poverty

• The incidence of poverty may rise though it is
  not inevitable
• The poor are likely to suffer more from the
  vagaries of climate change
• Policy response Scarce resources lead to the
  issue of priorities. According priority to
  climate change versus
• The provision of education and health
• Helping sustain a high rate of growth
• Attending to localized environmental concerns
  ranging from pollution of river waters to indoor
  air pollution associated with cooking with solid
  fuels such as dung, wood, crop waste or coal.

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3. Predictions, Vulnerabilities Adaptation The
Bottom Line

• Joshi and Patel argue
• India is more vulnerable to climate change than
  the US, China, Russia and indeed most other parts
  of the world (apart from Africa). The losses
  would be particularly severe, possibly
  calamitous, if contingencies such as drying up of
  North Indian rivers and disruption of Monsoon
  rains came to pass. Consequently, India has a
  strong national interest in helping to secure a
  climate deal.
• I disagree assuming the efforts to secure a
  deal would imply immediate mitigation
  commitments by India
• Large uncertainty associated with the predictions
• Existing predictions of the impact of global
  warming on rains, evaporation and transpiration
  for India are not consistent with calamitous
  losses
• Sustaining and accelerating the current rapid
  growth will better prepare the country including
  the poor to adapt

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4. Mitigation Efficiency

• Who should mitigate and who should pay for
  mitigation are two separate questions. The
  former is about efficiency and the latter about
  distribution
• A simple model
• Emission works as an input in production.
  Conversely, mitigation results in the loss of
  output
• But emission also imposes a cost that is borne by
  all humanity

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4. Mitigation Efficiency

• A simple Two-country (A and B) Model
• (1)               X F(K, L, Z), x f(k, l, z)
• (2)               W U(X, ?), w u(x, ?)
• (3)               ? ?0 Z z
• Upper-case letters denote country A variables and
  lower-case letter country B variables. X is
  output K and L capital and labor W welfare Z
  emission F(.) the production function and U(.)
  the social welfare function. Country B variables
  are similarly defined. ?0 is the inherited stock
  of emissions and ? is the total global pollution
• This can be neatly reduced to a simple diagram.

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4. Mitigation Efficiency
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4. Mitigation Efficiency

• The optimal solution is Zz. This solution can
  be implemented by either the imposition of a
  pollution tax at rate P or through
  internationally traded permits. In the latter
  case, the implementing authority would issue
  permits for Zz tons of emission and
  competitively auction them.
• Whether the instrument is a tax or pollution
  permits, a revenue in the amount (Zz).P will
  be collected. Who should get this revenue? This
  is the distribution question.

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4. Mitigation Efficiency

• This is a highly simplified analysis. In
  particular,
• The framework is entirely static. A dynamic model
  will yield a time dependent optimal tax with the
  discount rate playing an important role
• No account is taken of the uncertainty associated
  with both costs and benefits of
  mitigationallowing for it is likely to make
  permits a superior instrument
• No allowance for political economyallowing for
  it is likely to make the pollution tax a superior
  instrument

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5. Mitigation Distributional Issue

• Two aspects of the issue
• Is there a case for developed countries having to
  pay for the damage their past emissions have done
  (Stock problem)
• How should the costs of additional, future
  emissions be divided among countries (Flow
  problem)

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5. Mitigation Distributional Issue 5.1 Stock
Problem

• The distribution of stock of emissions between
  1850 and 2000 is
• USA 30 percent
• EU-25 27 percent (Germany 7 percent, U.K. 6
  percent, France 3 percent, and each of Poland and
  Italy 2 percent)
• Russia 8 percent
• China 7 percent
• Japan 4 percent
• Ukraine, Canada and India 2 percent each
• Therefore, approximately 71 percent of the
  emissions from 1850 to 2000 were accounted for by
  the United States, EU, Russia, Japan and Canada.

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5. Mitigation Distributional Issue 5.1 Stock
Problem

• Cooper (2008) argues against compensation
• past polluters were ignorant that they were doing
  any harm and are long gone
• Optimal decisions require forgetting the past
  (spilled milk)
• focusing on the past wrongdoing will lead to
  inaction
• Taking land use into account, rich countries are
  responsible for only 55 percent of the past
  damage since 1890

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5. Mitigation Distributional Issue 5.1 Stock
Problem

• Each argument is problematic
• Those participating in slavery did not know they
  were damaging the future generations of African
  Americans and are long gone but we do have the
  affirmative action program to right the past
  wrong
• Achieving optimal solutions usually requires
  punishment for the past wrongdoing (creation of
  the Superfund to make the firms responsible for
  toxic waste dumps in the 1970s pay for the
  cleanup offers a near-exact parallel to the CO2
  emissions)
• Past offenders could speed up action by offering
  compensation on the other hand, non-compensation
  will lead to greater delays
• Why should we correct missions for land use and
  not population?

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5. Mitigation Distributional Issue 5.1 Stock
Problem

• What form might compensation take?
• Bhagwati (2006) suggests creating a substantial
  global warming superfund to which developed
  countries contribute for no less than 25 years.
  While there is no toxic waste to be cleaned up in
  this case, the funds can still be made available
  to the developing countries such as India and
  China to promote clean technologies including
  wind and solar energy. Given developed country
  companies are likely to develop a significant
  part of these technologies, the fund would also
  benefit the developed countries.

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5. Mitigation Distributional Issue 5.2 Flow
Problem

• The pollution tax or the auction of pollution
  permits gives rise to revenues. The flow
  distribution problem concerns the distribution of
  these revenues among various countries
• In the case of permits, free international
  tradability leads to a single world price for
  them. Therefore, the revenue distribution in any
  one year is equivalent to the distribution of
  permits. A country receiving 10 percent of the
  permits receives 10 percent of the revenues.
• Emissions are not equal to the permits allocated.
  A country could buy additional permits on the
  market and emit more than its initial allocation
  of permits or it could sell some permits and emit
  less. The actual emission is independent of
  initial allocation. The former is determined by
  efficiency considerations and the latter by
  distributional considerations.

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5. Mitigation Distributional Issue 5.2 Flow
Problem

• Many alternative criteria for the distribution of
  permits (or revenues) have been suggested
• In proportion to the emissions in a base year
• Equal to actual emissions
• In proportion to the countrys population
• In inverse proportion to per-capita income
• Equal to actual emissions under business as usual
  to the developing countries until they reach a
  threshold per-capita income and in proportion to
  the actual use to developed countries. In
  proportion to the actual use to the developing
  countries as well after they reach the threshold
  per-capita income.

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5. Mitigation Distributional Issue 5.3
Simulations by Jacoby et al.
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6. Policy Action State of the Play

• At the International Level
• United Nations Framework Convention on Climate
  Change (UNFCCC) of which Kyoto Protocol is a part
• Gleneagles Dialogue kicked off by the 2005 G8
  plus five meeting
• Asia pacific Partnership (AP6) consisting of
  Australia, China, India, Japan, South Korea and
  the United States
• The United States Major Economies Meeting (MES)
• At the national level
• National carbon tax or cap and trade
  legislationsWaxman-Markey Bill in the U.S.

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6. Policy Action State of the Play 6.1
International

• UNFCC came into force in 1994
• Objective To stabilize GHG concentrations to
  avoid "dangerous anthropogenic interference" with
  the climate system
• No enforceable limits on GHG emissions in the
  original treaty but provision for updates called
  protocols setting such limits as in the Kyoto
  Protocol
• Annex I countries consisting of developed
  countries to reduce their GHG emissions to levels
  to be negotiated within the UNFCCC framework
• Developing countries are not expected to limit
  their GHG emissions unless developed countries
  (excluding transition economies) supply enough
  funding and technology.

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6. Policy Action State of the Play 6.1
International

• Kyoto Protocol
• Signatories countries to undertake emission
  reductions between 2008 and 2012.
• Commitments Relative to 1990 levels
• 5.2 percent lower overall for Annex I countries
• EU15 8 percent lower
• United States 7 percent lower
• Japan 6 percent lower
• Russia 0 percent lower
• Australia 8 percent higher
• Iceland 10 percent higher
• Implementation mechanism
• Emission trading
• Clean development mechanism
• Joint implementation

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6. Policy Action State of the Play 6.1
International

• Current status of Kyoto Protocol
• U.S. Not ratified
• Canada Has stated it will miss
• France, Germany will meet the targets
• EU15 Will lower the emissions by 11 percent by
  2010 if they implement all planned measures
• Current status of UNFCCC
• Bali Roadmap has paved the way for post
  negotiations for a post-Kyoto regime at
  Copenhagen Conference of Parties in December 2009
• Obamas commitment to action on climate change
  has reinvigorated the advocates of action at
  Copenhagen
• The U.S. Congress insists, however, that China
  and India must undertake mitigation commitments.
  These countries are opposed. So a confrontation
  at Copenhagen is inevitable

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6. Policy Action State of the Play 6.2 National

• EU 202020 (GHG mitigation, increased renewable
  energy share and energy consumption curb)
• China and India national plans
• USA Waxman-Markey Cap and trade legislation
• Proposes to cut CO2 emissions to 97 of 2005
  levels by 2012, 80 by 2020, 58 by 2030, and 17
  by 2050
• 85 percent of the permits to be given to firms
  free of charge and auction 15 percent of them
  competitively with the former share declining
  gradually and reaching 0 by 2030
• Import tariffs on countries lacking similar
  mitigation programs beginning in 2020

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6. Policy Action State of the Play 6.2 National

• Are import-tariffs under Waxman-Markey WTO legal?
  Two possible avenues to justification under GATT
• GATT Article III (as border tax adjustment, BTA)
• Will require justification based on process and
  production method (PPM) and likely thrown out by
  the DSB
• If upheld, China and India will be legally able
  to retaliate since the U.S. has relatively low
  energy taxes
• With the EU emission reduction programs going
  farther, they too could take action against the
  U.S.
• GATT Article XX The U.S. will need to show that
  without import tariffs significant leakage would
  occur AND that the discriminatory tax would plug
  it.
• Even EPA has estimated the leakages to be tiny
• The tax would not plug the leakage due to
  reshuffling India would export to EU and EU to
  USA
• China and India can retaliate under Article XX.

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7. Indias Options

• Three questions
• What is in Indias best interest?
• Is there justification for the position in
  climate change negotiations that these interests
  dictate?
• Does India have the leverage necessary to defend
  this position?

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7. Indias OptionsWhat will Serve Its Best
Interests?

• Worth taking voluntary mitigating actions that
  are costless or reduce costs
• Binding commitments in a post-Kyoto agreement are
  not in Indias interest
• With 300 million people living in abject poverty,
  growth cannot be compromised
• With 40 percent of the households without ANY
  electricity, India needs to tap all possible
  sources of energy
• The cost in terms of adaptation forgone will be
  large
• Given the existing stock of emissions and large
  emissions by the rich countries, Indias own
  mitigation will have virtually no impact on
  global warmingIndia could eliminate all GHG
  emissions and still will do nothing to global
  warming

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7. Indias Options Is No Mitigation Justified?

• India ranks 137th among emitters on per-capita
  basis. Freezing its emissions at current levels
  or less would deprive India of any chance of
  eradicating poverty. Almost any social justice
  criterion would come out against developing
  countries being denied room to grow sufficiently
  that they can eradicate abject poverty in order
  to allow developed countries to more or less
  maintain their ultra-high living standards.
• The exemption to the developing countries from
  mitigation commitments is enshrined in the UNFCC
  which explicitly recognizes that the largest
  share of historical and current global emissions
  of greenhouse gases has originated in developed
  countries, that per capita emissions in
  developing countries are still relatively low and
  that the share of global emissions originating in
  developing countries will grow to meet their
  social and development needs.
• while virtually all analysts club China and India
  together in climate change discussions, their
  emission profiles and magnitudes are vastly
  different. India is simply not a big league
  emitter.

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Total CO2 Emissions from the Consumption and
Flaring of Fossil Fuels, 1980-2006
42
Per-capita Emissions of CO2, 1980-2006
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7. Indias Options Is No Mitigation Feasible

• WTO rules and the possibility of retaliation
  allow India to combat pressures from
  Waxman-Markey type of unilateral actions
• UNFCCC cover can be effectively used to delay
  commitments
• India must undertake research studies that can
  persuasively make the case that by 2040 it can
  eradicate poverty and build up adaptation
  capabilities that will allow it to undertake
  mitigation subsequently
• India must also produce research studies to argue
  the position that mitigation by developed
  countries alone is possible without the fear of
  leakage.