DOC

The state of the environment is a major worldwide concern today

By Janet Greene,2014-05-14 18:09
14 views 0
The state of the environment is a major worldwide concern today

    DEVELOPMENT, EQUITY AND SUSTAINABILITY (DES)

     IN THE CONTEXT OF CLIMATE CHANGE

    Annex 1: Some Questions on Development, Sustainability and Equity to be Addressed in WG2 and WG3

    (Prepared By Rob Swart)

    1A. WG2 Chapters

    PART I. SETTING THE STAGE FOR IMPACTS, ADAPTATION AND VULNERABILITY: CHAP. 1-3

    ? What is the diversity of views on development, sustainability and equity that forms the backdrop for the

    assessment of impacts, adaptation and vulnerability?

    ? How do the WGII policy-relevant scientific questions relate to the context of development, sustainability and

    equity?

    ? How do various methods for assessing impacts, adaptation and vulnerability relate to the economic, social and

    environmental aspects of development, e.g. durable and optimal approaches, weak and strong sustainability

    methods?

    ? What do alternative methods of incorporating uncertainty in the assessment imply for decision making in the

    perspective of development, sustainability and equity?

    ? What are appropriate economic, social and environmental indicators for assessing impacts, adaptation and

    vulnerability?

    ? What are the development, sustainability and equity implications of the impact and adaptation aspects of the

    various scenarios that have been assessed

    PART II. SECTORS AND SYSTEMS - IMPACTS, ADAPTATION AND VULNERABILITY: CHAP. 4-9

    ? General: what do potential impacts and adaptation options imply for human welfare, durability of biogeophysical

    and socio-economic systems, and stocks of capital?

    ? What do the potential impacts or vulnerabilities imply for development opportunities in the associated societal

    sectors?

    ? What do the potential impacts or vulnerabilities imply for environmental sustainability, e.g. local pollution,

    resilience of ecosystems in view of gradual and/or irreversible or non-linear environmental changes? ? What are the economic, social and environmental implications of adaptation options in the various sectors and

    systems?

    ? Which adaptation options are also useful for economic, social or environmental reasons other than climate change? ? What are key uncertainties and how sensitive are the findings for different key assumptions, such as discount rates?

    PART III. REGIONAL ANALYSIS - IMPACTS, ADAPTATION AND VULNERABILITY: CHAP. 10-17

    Taking into account the specific regional priorities, perspectives and circumstances:

    ? What do the potential impacts or vulnerabilities imply for economic and social development opportunities, e.g.

    size and distribution of income?

    ? What do the potential impacts or vulnerabilities imply for environmental sustainability, e.g. local pollution,

    resilience of ecosystems in view of gradual and/or irreversible or non-linear environmental changes? ? What are the economic, social and environmental implications of adaptation options, for example in terms of

    equitable burden sharing amongst sub-regions and major sectors/actors?

    ? What are key uncertainties and how sensitive are the findings for key assumptions, such as discount rates?

    1

    PART IV. GLOBAL ISSUES AND SYNTHESIS: CHAP. 18-19

? What kind of generic conclusions can be drawn with respect to

    ? The implications of adaptation options in the context of development, sustainability and equity ? The vitality of vulnerable social, cultural and environmental systems?

    ? The role of adaptation options in an overall development strategy that takes into account economic, social and

    environmental sustainability?

    ? What kind of generic conclusions can be drawn for decision making processes dealing with vulnerability, impacts

    and adaptation, including

    ? Procedural and consequential issues related to equity, e.g. as referred to in UNFCCC Articles 3 and 10? ? Equitable and participatory decision making processes?

    ? Interregional, intraregional, and intergenerational equity?

    ? The evaluation of “dangerous interference of the climate system” including the environmental, social and

    economic dimensions of UNFCCC Article 2?

    1B. WG3 Chapters

    SCOPING AND SCENARIOS: CHAPTERS 1-2

    ? What is the diversity of views on alternative development pathways, sustainability, equity and the role of different

    actors, that forms the backdrop for the assessment of climate change mitigation?

    ? How do the WGIII policy-relevant scientific questions relate to the context of development, sustainability and

    equity?

    ? How do various methods for assessing mitigation options relate to the economic, social and environmental aspects

    of development, e.g. durable and optimal approaches, weak and strong sustainability, inter- and intraregional and

    intergenerational equity?

    ? What are appropriate economic, social and environmental indicators for climate change mitigation? ? What are the development, sustainability and equity implications of the mitigation aspects of the various scenarios

    that have been assessed, including burden sharing in scenarios that lead to stabilisation of GHG concentrations?

    OPTIONS, BARRIERS AND OPPORTUNITIES, POLICIES AND MEASURES: CHAP. 3-6

    ? What are economic, social and environmental implications of possible GHG mitigation options at different levels

    of scale (projects, systems)?

    ? What are key economic, social and environmental barriers and opportunities from the different perspectives on

    development, sustainability and equity mentioned in chapters 1-2?

    ? how can policies, instruments, and measures be evaluated from these different viewpoints on development,

    sustainability and equity?

    ? For different (combinations of) options, opportunities, policies and measures, what are (“win-win”) synergies for

    more than one - or all - aspects of development, sustainability and equity?

    COSTS AND ANCILLARY BENEFITS OF MITIGATION: CHAP. 7-9

    ? How do different costing methodologies relate to different views on development, sustainability and equity (e.g.

    durability versus optimality)?

    ? What are the economic, social and environmental costs and ancillary benefits of the various options discussed in

    the chapters 3-7 at various geographic levels and for different sectors/actors?

    ? How may (combinations of) options affect the common but differentiated responsibilities of countries over time,

    including a fair sharing of the burden?

    ? How equitable do (combinations of) options affect different societal sectors?

    ? How do different perspectives on development, sustainability, and equity lead to different assessment of costs and

    ancillary benefits of climate change mitigation?

    2

    ? What are the considerations to apply particular discount rates in assessing costs of mitigation options in view of

    development, sustainability and equity issues?

    ? How do measures in some countries affect the development, sustainability and equity perspectives in other

    countries?

    DECISION MAKING FRAMEWORKS: CHAPTER 10

    ? How do different decision principles, decision making frameworks and decision analytical frameworks relate to

    the economic, social and environmental aspects of development, sustainability and equity, e.g. from a durability or

    optimality viewpoint?

    ? How can the mitigation-related policy-relevant scientific questions be addressed in this context? ? What kind of generic conclusions can be drawn for decision making processes dealing with climate change

    mitigation, including

    ? Procedural and consequential issues related to equity, e.g. as referred to in UNFCCC Articles 3 and 10? ? Equitable and participatory decision making processes?

    ? Interregional, intraregional, and intergenerational equity?

    ? The environmental, social and economic dimensions of UNFCCC Article 2?

    ? What do alternative methods of incorporating uncertainty in the mitigation assessment imply for decision making

    in the perspective of development, sustainability and equity?

    ? What are synergies and trade-offs in the assessment of climate change mitigation in the context of development,

    sustainability and equity?

    3

Annex 2. Spatial and Temporal Aspects of Sustainability

     Meters planetary 9 10ecosystem

     Unsustainable Systems society/large (Premature 6 10 ecosystem death/collapse)

     local population 3 10group Forecasting

    limit

     organism 1 O Human Brittle Systems (Unable to adapt/evolve) -3 10 cell

     -610

     Years -2246810 1 10 10 10 10

An operationally useful concept of sustainability must refer to the persistence, viability and resilience of organic

    or biological systems, over their “normal” life span. In this ecological context, sustainability is linked with both

    spatial and temporal scales, as shown in the figure. The X axis indicates lifetime in years and the Y axis shows

    linear size (both in logarithmic scale). The central O represents an individual human being -- having a longevity

    and size of the order of 100 years and 1 meter, respectively. The diagonal band shows the expected or “normal”

    range of lifespans for a nested hierarchy of living systems starting with single cells and culminating in the

    planetary ecosystem. The bandwidth accommodates the variability in organisms as well as longevity.

Environmental changes that reduce lifespans below the normal range imply that external conditions have made the

    systems under consideration, unsustainable. In short, the regime above and to the left of the normal range

    denotes premature death or collapse. At the same time, it is unrealistic to expect any system to last forever.

    Indeed, each sub-system of a larger super-system (such as single cells within a multi-cellular organism) generally

    has a shorter life span than the super-system itself. If subsystem lifespans increase too much, the encompassing

    super-system is likely to lose its plasticity and become “brittle” -- as indicated by the region below and to the right

    of the normal range (Holling 1992). In other words, it is the timely death and replacement of subsystems that facilitates successful adaptation, resilience and evolution of larger systems. Holling (1973) defined resilience in

    terms of the ability of an ecosystem to persist despite external shocks, while Petersen et al. (1998) argued further

    that the resilience of a given ecosystem depends on the continuity of ecological processes at both larger and

    smaller scales.

    4

    We may summarize the foregoing by arguing that sustainability requires biological systems to be able to enjoy a normal life span and function normally, within the range indicated in the figure. Thus, leftward movements would be especially undesirable. For example, the horizontal arrow might represent a case of infant death -- indicating an unacceptable deterioration in human health and living conditions. In this context, extended longevity involving a greater than normal life-span would not be a matter for particular concern. On the practical side, forecasting up to a time scale of even several hundred years is rather imprecise. Thus, it is important to improve the accuracy of scientific models and data, in order to make very long-term predictions of sustainability (or its absence) more convincing -- especially in the context of persuading decisionmakers to spend large sums of money to reduce unsustainability. One way of dealing with uncertainty, especially if the potential risk is large, relies on a precautionary approach -- i.e., avoiding unsustainable behavior using low cost measures, while studying the issue more carefully.

    5

Annex 3. Equity Issues

    Equity in the context of a social decision requires a fair and just outcome. It is an important element of the collective decisionmaking framework needed to respond to global climate change (see Box 3.1 for details).

    Box 3.1 Why is Equity Important?

    Equity considerations are important in addressing global climate change for a number of reasons, including: (a) moral and ethical concerns; (b) facilitating effectiveness; (c) sustainable development; and (d) the UNFCCC itself.

    First, the principles of justice and fair play are important in themselves, in all types of human interactions. In particular, practically most modern international agreements, including the UN Charter, enshrine moral and ethical concerns relating to the basic equality of all human beings and the existence of inalienable and fundamental human rights. Equity is also embodied explicitly or implicitly, in many of the decisionmaking criteria used by policymakers.

    Second, equitable decisions generally carry greater legitimacy and encourage parties with differing interests to cooperate better in carrying out mutually agreed actions. The successful implementation of a collective human response to the problem of global climate change will require the sustained collaboration of all sovereign nation states and many billions of human beings over long periods of time. While penalties and safeguards will play a role, decisions that are widely accepted as equitable are likely to be implemented with greater willingness and goodwill than those enforced under conditions of mistrust or coercion. In brief, co-operative and effective outcomes are more likely when all parties to the decision feel that it is fair.

    Third, as explained earlier, equity and fairness are extremely important elements of the social dimension of sustainable development. Thus the impetus for sustainable development provides another crucial reason for finding equitable solutions to the problem of global warming.

    Fourth, the UNFCCC has several specific references to equity in its substantive provisions. To begin with, Article 3.1 states that "The Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities. Accordingly, the developed country Parties should take the lead in combating climate change and the adverse effects thereof." Other equity-related principles emphasised in Article 3 include: (a) the right to promote sustainable development; (b) the need to take into account the specific needs and special circumstances of developing country and vulnerable parties; (c) the commitment to promote a supportive and open international economic system; and (d) the precautionary principle (to protect the rights of future generations).

    According to Article 4.2(a), all developed country parties, including those with economies in transition, are required to take the lead in mitigating climate change. Furthermore they are required to transfer technology and financial resources to developing country parties that are particularly vulnerable to the adverse effects of climate change in meeting the costs of adaptation (Article 4.4). Another reference to equity in Article 4.2 (a) requires developed country parties to commit themselves to: "adopt national policies and take corresponding measures on the mitigation of climate change.... These policies and measures will demonstrate that developed countries are taking the lead in modifying longer-term trends in anthropogenic emissions consistent with the objective of the Convention...taking into account the difference in the Parties" starting points and approaches, economic structures, available technologies and other individual circumstances, as well as the need for equitable and appropriate contributions by each of the Parties to the global effort regarding that objective." Finally, Article 11.2 requires the Convention's financial mechanism to "have an equitable and balanced representation of all Parties within a transparent system of governance."

    The foregoing provisions of the UNFCCC provide important guidance on how equity considerations should influence or modify the achievement of the Convention's objectives. While protecting the climate system is

    6

    considered to be a "common concern of humankind", the developed countries (and transition economies) are expected to take a lead in initiating actions and assume a greater share of the burden. Furthermore, in burden sharing emphasis is placed on applying equity considerations among developed countries as well. The responsibilities of the present generation with respect to those of future generations are also referred to. Finally, equity is mentioned in the context of governance, to emphasise the importance of including procedural elements which guarantee distributive outcomes that are perceived to be equitable.

PROCEDURAL AND CONSEQUENTIAL EQUITY

    The requirements of the UNFCCC indicate that equity principles must apply to: (a) procedural issues -- how decisions are made; and (b) consequential issues -- the outcomes of those decisions. Both aspects are important because equitable procedures need not guarantee equitable decisions, and conversely, equitable outcomes could well arise from quite inequitable decisionmaking processes. Support for the convention and acceptance of it's recommended course of action will depend largely on widespread participation by the global community and on how equitable it is perceived to be, by all participants.

    Procedural equity itself has two components. First, pertaining to participation, equity implies that those who are affected by decisions should have some say in the making of these decisions either through direct participation or representation. Second, relating to the process, equity must ensure equal treatment before the law -- similar cases must be dealt with in a similar manner, and exceptions must be made on a principled basis

    Consequential equity also has two elements, relating to the distribution of the costs and benefits of: (a) impacts and adaptation to climate change; and (b) mitigating measures (including the allocation of future emissions rights). Both the elements (a) and (b) have implications for burden sharing among and within countries (intragenerational and spatial distribution); and between present and future generations (intergenerational and temporal distribution). The equity of any specific outcome may be assessed in terms of a number of generic approaches, including parity, proportionality, priority, classical utilitarianism, and Rawlsian distributive justice. Societies normally seek to achieve equity by balancing and combining several of these criteria. Self interest also influences the selection of criteria and the determination of equitable decisions. Consequential equity as applied in the international arena is derived largely from these principles which were developed originally in the context of human interactions within specific societies.

    A human response to climate change requires the application of equity at an even more elevated (global) level, where there is far less practical experience. Cultural and societal norms and views about ethics, the environment, and development complicate efforts to achieve a worldwide consensus on matters of both procedural and consequential equity. Even the urgency of a response to climate change is subject to dispute. Given the different meanings, philosophical interpretations, and policy approaches associated with equity, judgement plays an important role in resolving potential conflicts. Ultimately, any global response strategy will be a compromise between different world views, each of which is also influenced by self interest and attempts to shift the compromise in ones own favour. As an example, the practical difficulties of allocating future emissions rights among nations are explored in Box 3.2 (Munasinghe 1998a)

    Box 3.2 How Might GHG Emissions Rights be Allocated Fairly?

    Suppose that the analysis of climate change yielded a target level of desirable world-wide GHG emissions in the future (e.g., see the section on the global optimisation process). To illustrate the issue more clearly, we will take a single constant level of emissions that will achieve some desired stabilization case (e.g., S550 or stabilisation of atmospheric GHG concentrations at 550 ppm of CO2 equivalent before year 2150). The principles of allocation discussed below would apply in exactly the same way to any other case involving an alternative emissions profile such as IS92c (see IPCC 1996a). One method of allocating constant emissions might be based on ethics and basic

    human rights -- i.e., equal per capita (EPC) emission rights for all human beings. The total national "right to emit" would then be the product of the population and the basic per capita emissions quota.

    7

    Figure B.3.1 illustrates the dynamics of this allocation issue in simplified form. The line EPC indicates the constant level of per capita emissions, if the total global emissions target were allocated equally to all human beings during the decisionmaking time horizon. If we assume a total permissible accumulation of 800 GtC during the 100 year period 2000-2100 corresponding to the S550 case (see IPCC 1996a), shared equally among

    the global population of about 6 billion persons (in 2000), then the constant average per capita emission right would amount to 1.33 tonnes of carbon (TC) per year, up to 2100 -- as shown by the solid line EPC in the figure. A more precise calculation might seek to aggregate both past and future emissions (using discounting techniques), to yield the grand total over any given period of time.

    The points IC and DC represent the average current per capita GHG emissions of the industrialised (i.e., OECD nations, Eastern Europe and former Soviet Union), and developing countries, respectively. Although the figure is not exactly to scale, IC (about 3.5 TC per capita per year) is both above EPC and considerably larger than DC (about 0.5 TC per capita). Thus, the industrialised countries would need to cut back GHG emissions significantly if they were to meet the EPC criterion -- which would entail economic costs (depending on the severity of the curtailment in each country). On the other hand, the developing countries have considerable room to increase their per capita emissions, as incomes and energy consumption grow.

    An alternative allocation rule is based on equi-proportional reductions (EPR) of emissions. In this case, all countries would reduce emissions by the same percentage amount relative to some pre-agreed baseline year, to achieve the desired global emissions target. Assuming a global average emission rate of about 1.47 TC per capita per year in 2000 (indicated by the broken line E2000 in the figure), implies that all countries would need to curtail carbon emissions by about 10% to meet the EPR criterion (as shown by the broken lines ICEPR and DCEPT in the figure). Clearly, given the primary impetus provided by energy to economic development, such a solution would severely restrict growth prospects in the developing world -- where per capita energy consumption is low, initially.

    Thus the EPC and EPR approaches would result in some hardship and inequity to the developed and developing countries, respectively. Another related equity issues is whether past emissions should be considered also or ignored in deciding the current and future quotas. Suppose we assume that the future global atmospheric concentration of CO2 must be stabilised at 550 ppmv. Over 80% of carbon accumulated up to 1990 have resulted from fossil fuel use in the industrialized world. Clearly the industrialized countries have used up a significant share of the "global carbon space" available to humanity while driving up atmospheric CO2 concentrations from the pre-industrial norm of 280 ppmv to the current level of about 360 ppmv. Therefore, the developing countries argue that responsibility for past emissions should be considered when future rights are allocated. Correspondingly, it would be in the industrialized countries interest to use a fixed base year population (e.g., in the year 2000) as the multiplier of the per capita emissions right (e.g., EPC) in determining total national emission quotas. This would penalise those countries which had high population growth rates, since their allowed national quota (determined by the base year population) would have to be divided up among more people in the future.

    In practice, it is possible that some intermediate requirement which falls between EPC and EPR might emerge eventually from the collective decisionmaking process. For example, EPC may be set as a long term goal. In the shorter run, pragmatic considerations suggest that both the industrialised and transition countries be given a period of time to adjust to the lower GHG emissions level, in order to avoid undue economic disruptions and hardship -- especially to poorer groups within those countries (see transition emissions paths ICTR and DCTR in the figure). Even if some industrialised nations might argue that the goal of EPC emissions rights for all individuals is too idealistic or impractical, the directions of adjustment are clear. Net CO2 emissions per capita in industrialised countries should trend downwards, while such emissions in developing countries will increase with time. This result emerges even if the objective is a more equitable distribution of per capita emissions, rather than absolute equality of per capita emissions.

    Another adjustment option might be the facilitation of an emissions trading system. For example, once national emissions quotas have been assigned, a particular developing country may find that it is unable to fully utilize its allocation in a given year. At the same time, an industrialised country might find it cheaper to buy such 'excess'

    8

    emissions rights from the developing nation, rather than undertake a much higher cost abatement program to cut back emissions and meet its own target. More generally, the emissions trading system would permit emissions quotas to be bought and sold freely on the international market, thereby establishing an efficient current price and even a futures market for GHG emissions (burden reallocation is also possible through activities implemented jointly).

    Note: Numerical values in this box have been chosen for illustrative purposes only.

Source: Munasinghe (1998a).

    Nevertheless, from a pragmatic viewpoint significant progress towards a global consensus would be made if the decisionmaking framework could harness enlightened self-interest to support equitable or ethical goals. For example, developed countries are likely to have a self-interest in taking the lead and shouldering the major burdens of addressing climate change issues because their own citizens have shown greater willingness to pay to solve environmental problems, Similarly, developed nations would enjoy greater opportunities for trade and export if developing country markets grew without being disrupted by climate change, and the former could also avoid the significant negative spillover impacts of world-wide instability arising from disasters associated with climate change. At the same time, the higher risks and vulnerability faced by developing countries provides them an incentive to seek common solutions to the climate change problem.

EQUITY AND ECONOMIC EFFICIENCY

    While the previous section reviewed some arguments for reconciling equity and economic self interest, among nations, conflicts between economic efficiency and equity may arise due to assumptions about the definition, comparison and aggregation of the welfare of different individuals or nations. For example, efficiency often implies maximisation of output subject to resource constraints. This approach can potentially result in an inequitable income distribution. Overall welfare could drop depending on how welfare is defined in relation to the distribution of income. Conversely, total welfare might increase if appropriate institutions can ensure appropriate resource transfers -- usually from the rich to the poor.

    In the same context, aggregating and comparing welfare across different countries is a disputable issue. Gross National Product (GNP) is simply a measure of the total measurable economic output of a country, and does not represent welfare directly. Aggregating GNP across nations is not necessarily a valid measure of global welfare. However national economic policies frequently focus more on the growth of GNP rather than it's distribution, indirectly implying that additional wealth is equally valuable to rich and poor alike, or that there are mechanisms to redistribute wealth in a way that satisfies equity goals. Attempts have been made to incorporate equity considerations within a purely economic framework, by the weighting of costs and benefits so as to give preference to the poor. Although systematic procedures exist for determining such weights, often the element of arbitrariness in assigning weights has caused many practical problems. At the same time, it should be recognised that all decisionmaking procedures do assign weights (arbitrarily or otherwise). For example, approaches based on economic efficiency which seek to maximize net benefits assigns the same weight of unity to all monetary costs and benefits -- irrespective of income levels. More pragmatically, in most countries the tension between economic efficiency and equity is resolved by keeping the two approaches separate, e.g., by maintaining a balance between maximising GNP, and establishing institutions and processes charged with redistribution, social protection, and provision of various social goods to meet basic needs.

    The lack of proper institutions to carry out such a redistributive role on an international scale, raises concerns over how -- if at all -- national welfare levels can be compared internationally. The extreme viewpoints are that: (a) welfare levels should be compared as though all countries value each others' welfare equally (i.e., equivalent welfare functions exist across countries, and equal weights might be assigned to each); and (b) that each country is concerned primarily with its own welfare and bears no responsibility for the welfare of any other (i.e., welfare cannot be aggregated and compared across countries). Since climate change constitutes situations where the

    9

    activities of one country affect others. a convention on climate change must arrive at some compromise between these two extremes.

INTRAGENERATIONAL (SPATIAL) EQUITY

    While equity is not synonymous with equality, differences between countries clearly affect issues of international equity. International response strategies will eventually translate into actions adopted at the national level, and therefore should reflect equity concerns within countries as well. Several categories of differences between countries that are relevant to the question of equity, are discussed next.

Wealth and Consumption: Wealth is perhaps the most obvious and prevalent difference between (and within)

    countries. Measured in terms of GNP, the World Bank's 1994 World Development Report (World Bank 1994)

    states that more than half the world's population (58.7 percent) live in countries classified as "low income". These countries have an average per capita GNP of $390. In contrast, 15.2 percent of the world's population live in 'high income economies' which have an average per capita GNP of $22,160. The remaining 26.1 percent of the population live in the "middle income economies" which have an average per capita GNP of $2,490. Such wide variations in per capita income between countries imply that simply comparing this measure of welfare may 1be inappropriate (as explained in the previous section).

    These differences have direct implications for the way climate change is addressed. For instance, activities in developing countries that produce greenhouse gases are generally related to fulfilling "basic needs". They may result from generating energy for cooking or keeping tolerably warm, engaging in agricultural practices, consuming energy to provide barely adequate lighting, and occasionally for travel by public transport. In contrast emission of greenhouse gases in developed countries is likely to result from activities such as operating personal vehicles and central heating or cooling, and energy embodied in a wide variety of manufactured goods and the use of such goods. Therefore, the level of personal wealth is directly related to the welfare impacts of reducing greenhouse gas emissions (WCED, 1987). Furthermore, wealth has a direct bearing on the

    vulnerability to the impacts of climate change. By virtue of being richer, some countries will be able to adapt more effectively to climate change. A similar relationship between the poor and the rich also prevails within countries.

    Poorer countries may be less prepared, to adopt mitigation and adaptation strategies due to several reasons. First, poverty has implications for urgency of other national priorities and of time scales used in policy planning. Wealth has a direct correlation to personal discount rates (i.e., discount rates decline with rising wealth). The more affluent have a greater share of disposable wealth to invest in the future, and therefore are able to conceptualize longer planning time horizons. The poor are forced to focus on shorter term objectives such as basic survival necessities.

    A similar phenomenon applies to national level economic and political systems as well. Consequently, interest rates are higher in poorer countries, capital is more scarce, and the emphasis of policy planning is on the short term needs, such as poverty alleviation, and employment generation. The focus of government may be to keep up with infrastructure needs due to rapidly rising demands. They may not have the luxury to consider optimal development strategies as some richer countries may be able to. Thus national wealth affects both actual investment decisions as well as broader public policy planning capability.

    The IPCC Special Report on Developing Countries addresses this concern by stating that, "the priority for the

     1 One method of comparing incomes across countries is to use purchasing power parities (PPPs) instead of market exchange rates. PPPs are used to adjust exchange rates, such that the monetary value of a standard basket of commodities (typically including food, clothing and shelter) is equalized across all countries. Such a correction tends to provide a better assessment of the ultimate welfare provided by income levels in different nations. However even when incomes are adjusted based on purchasing power parities, wide differences in real per capita income are still evident among countries.

    10

Report this document

For any questions or suggestions please email
cust-service@docsford.com