climate change in asia: issues and policy options

Natu ra l Resources

FORUM I’ERGAMON Natural Resources Forum 24 (2000) 39-48

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Climate change in Asia: issues and policy options

Abstract

This urticle provides N h i c f re\~iew of sonie qf the po1ic.y issues,facing the Asian region with respect to climate change und its economic co~isec~irei~ces. The eiivircriinieiital consequences of Asia ’s economic rise threaten the future growth of the region. Despite recent ecorioinic expansion, Asia will be one of the areas of the world inost vulnerable to climate change. While Asia crrrrentl~ coiitrihutes niorlerutel.y to greenhouse gus emissions, the potential for increases in emissions is sign+cunt. National u i i d regionul policy options, iriclirding uhuteinent arid adaptation, are examined as strutegies for tuckling the likely effects qf cliiirute churige. This strtcly recoininends that iiutionul initiatives that have no ‘regrets ’ properties be a priority area for,further resenrclr s o that they cuii be implenieiitecl US soon as possible. It is envisaged that in the short to mediuiii term, ident$uhle no regrets policies cmi be N useful tool f o r reducing emissions and vuhierubility to climate change in developing regions such as Asiu. 0 2000. Pirblished hy Elsevier Science Ltd. All rights resewed.

K c y i w d y : Asi:i: Climate change vulnerability: Greenhouse gas emissions

1. Introduction

The environmental problems associated with climate change present a unique policy challenge to every nation on earth. The challenge for the countries of Asia exists in the policy balance between the pursuit of economic growth and the implementation of abatement and adaptation policies. An accurate assessment of the likely magnitude of the impacts of climate change upon Asia is yet to be deter- mined, but i t is known which regions of the world and sectors of individual economies will likely be most vulnerable. This paper explores various climate change issues that directly affect Asia. These issues include the policy options available and the likelihood of policy implementation whether to reduce the magnitude of the effects of climate change or to reduce vulnerability to climate change.

This discussion concludes that Asia is in a unique position with respect to the types of emissions produced, their growth, size and distribution. The abatement and adaptation options at the national level that are available for Asia are then examined, as well as the range of co-operative regional options that could be used to implement such policies. When referring to emissions of greenhouse gas, this article focuses primarily on COz. The authors conclude that in the short to medium term, climate change policy in Asia should be focused on local policy options that have joint environmen- ral. social or economic benefits. This conclusion arises from

factors such as: the relatively high vulnerability of the region; the unlikelihood of meaningful regional policy action for some time; the lack of interest in climate change issues by domestic governments; and substantial scope for no regrets policy actions.

2. Asian greenhouse emissions

Currently very few Asian nations have detailed abatement or adaptation plans and, of those that do, only one (Japan) has signed the Kyoto agreement (to reduce emissions to 94% of 1990 levels by the period 2008-2012). Therefore, most countries in Asia have not committed them- selves to any binding agreements on climate change emissions. All other countries in the region fall outside the Annex I umbrella. Of those countries, China and India have received and exerted the most diplomatic pressure to reduce emissions as a result of their size, economic growth performance and prospects and potential for future emissions. Otherwise, climate change is not seen as a priority issue in this region. This is due in part to several factors: an information vacuum where there is a lack of a substantial local scientific community committed to climate change issues; public apathy; and mistrust of external assessments. The economic and environmental structure of Asia calls for unique policy options for the abatement of greenhouse gases (GHG). Mabey et al. (1997) illustrate that, in India unless

01~5-0203/00/$20.00 0 2000. Puhlished by Elsevier Science Ltd. All rights reserved PII: so I6.5-0203(9Y)O0039-2

40 J . Sanderson S.M.N. Islcriii / Nmrrrcrl Kesorrrces Forirnr 24 (2000) 39-48

Table I Sectors where dual environmental benefits are possible

Domestic benefits Climate change benefits ~~ ~~

Forestry Biodiversity Sequestered C 0 2 Existence value

Energy iise Health Reduced emissions Energy conservation Reduced air pollution

Existence value Tourism Mangrove protection

Disrrsrer relief Lives saved Reduced vulnerability Property saved

Ag ricult ii re Increased volume Reduced vulnerability Decreased variability

Populntion Reduced stress on Reduced emissions resources and infrastructure

Corr.stcrl protectioti Biodiversity Reduced vulnerability

climate change is linked with domestic environmental prio- rities, there will be limited support for the problem. In other words, for abatement to be successful in the developing countries of Asia, priority must be given to those policies that have domestic benefits apart from reducing climate change. Table I illustrates in a simple form some of the possible domestic environmental issues that can be addressed that will have ancillary climate change benefits.

2. I . Asia’s place in the global greenhouse

It is estimated that Asia as a region will have the highest total C 0 2 emissions in the world by the year 2025, fore- casted at 3.97 gigatons of carbon (GtC) per year, an increase from 1.12 GtC per year in 1985 (IPIECNUNEP, 1991).

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However, on a per capita basis the region fares well, compared to the rest of the world, and i t is expected that emissions per capita will still be among the lowest in the world for some considerable time. Asia has well over 50% of the global population, yet only 27% of total global eniissions (Sharma, 1994). This means that Asia is in the position where it is the most responsible for future GHG emissions and one of the least responsible for past emissions. Fig. I indicates that per capita emissions have been rising steadily over the past 40 years in many Asian countries. The effect of economic development on per capita emissions can clearly be seen from the dramatic rise i n countries such as the Republic of Korea and Japan compared to the low and slowly rising per capita emissions of China and India. Data in this paper show that per capita emissions in the developed world have stabilised over the last 20 years. In addition, growth in the emission of fossil fuel C 0 2 in the region has increased at an annual rate of 3.9% over the period between 1975 and 1987, whereas emissions in industrialised countries increased by only 0.6% per annum (NISTEP, 1991). Asia is becoming one of the most powerful economic regions on the planet. By the year 2010 it is expected that East Asia alone will account for about 35% of world GDP (Drysdale and Huang, 1995), indicating that Asia’s place in the global greenhouse will become increasingly important.

3. Regional abatement options

Climate change is the latest in a long line of global commons problems that nations have had to work through in a co-operative manner. International agreements, compe- tition, property rights allocations and joint management practices have all been used as solutions to global commons problems such as ocean territory, fishing rights, navigational

*Indonesia

China

-m-Korea DPR Hong Kong

- - *India

*Japan

+Philippines

+Thailand

Year

Fig. I, Annual per capita C 0 2 emissions for selected Asian nations 1950-1995. Source: Mnrland and Boden (1996); and UN Demographic Yearbook (various).

T:lhlc 2 Multil:iter:il environmentol organisations in Asia

MCIiIl i l~~~i l l l~ .~~l~~iJ l l .S

United Nations Economic and Social Commission for Asia and the

Gloh:il I3ivironmental Facility World Bank Asian Dcvclopiiienl B:mk

.Sithsirlirri:\. Or,qciiiiscrtiorr.s Sout1ic:ist Asinn Nations Environnieiital Prograinme South Asia Co-operalive Environmental Programme South Pacilic Regional Environment Programme Mckong River Commission Intern;itional Centre for Integrated Mountain Development Regional Network of Research and Training Centres on

Forestry Research Support Porgramme for Asia and the Pncilic Asi;i I~;isl-Cost Greenhouse Gas Ahntement Strategy Constnl nnd Marine Environment Mnnagement Information System North West Pacific Action Plan

P:icilic (ESCAP)

Descnilication Control i n Asia

passages. deep sea bed mining. Antarctica resources and outer space rights. The economics of global commons are intercsting as the issues of property rights, game theory, optimal taxation and other issues all have some contribution to make. Not to be forgotten is the important influence of political issues such as international diplomacy, domestic policy preferences and territory disputes. Very few international issues have ever involved more than a handful of countries. There is often a lack o f a common ground through which nations can begin formulating policy actions together. Often the technological, cultural and economic platforms of nations are vastly different, further complicat- ing matters. The other major source of policy that can take place is at the regional and global level. Over the last decade rcgionol policy options for climate change have been driven primarily through the Conferences of the Parties (COP).

Global warming as a global commons problem is one of the first true fully global policy problems. A clear divide exists in the international climate change debate between the North (developed) and South (developing) countries. The North is in a position where they are likely to be al‘lected the least by climate change, but up to this stage have contributed the most towards the problem. On the othcr hand. the South is likely to be the most vulnerable to the effects of climate change, but as yet has contributed little to overall emissions. The North will find i t easier to rcduce emissions; data reveal that per capita emissions are nlrcady stcadying or declining in some countries. However, thc South will find i t more difficult to reduce emissions, and emissions growth is expected to increase rapidly in coming dccrides as a result of forecast development and population growth. The different situations of the North and South seem to suggest that some type of joint effort between the two would prove beneficial. However. the incentives on each side may mean this is difficult to achieve. Another problem at this stage is the lack of consensus as to the likely impact

of future climate change. As time goes by, and climate change forecasts improve, international abatement agreements will be grounded on a firmer scientific basis, and therefore are more likely to be successful.

The formation of environmental institutions in Asia has expanded dramatically since the 1992 United Nations Conference on Environment and Development at Rio (Earth summit). Table 2, while not being comprehensive, provides an illustration of the extent of multilateral environmental organisations throughout Asia. As a result of the relatively recent formation of most of the institutions, their policy formulations and effectiveness are yet to be quanti- fied. The large number of institutions has lead to duplication of resources and efforts, which has been described as ‘over- whelming’ by some (Rogers, 1993). In order to overcome the possible duplication of resources, the Interagency Committee on Environment and Development in Asia and the Pacific (ICEDAP) was established in 1991. ICEDAP’s goal is to ensure that there is a common voice among governments and agencies in the region; i t aims to prioritize problems, implement programmes and avoid duplication between institutions (Jalal, 1993).

An example of a multilateral effort is the Asia Least Cost Greenhouse Gas Abatement (ALGAS) project, where twelve countries including the Republic of Korea, China, India and Thailand have focused on research into GHG emission statistics, methods for abatement, and the most cost-effective alternatives available to achieve abatement within the region. Authors such as Amadore et al. (1996), Jalal (1993), and many others agree on the general principle that the nations of Asia should participate in effective multilateral co-operation on climate change policies. Others such as Drysdale and Huang ( 1 995) argue that there could be difficulties with regional co-operation, because countries in the region are at different stages of development. Co-operation is important in order to share knowledge and skills, and to have negotiating power with the industrialised countries. It is apparent from the multitude of institutions and the possibilities for duplication that the creation of any new multilateral environmental institution in Asia is not warranted in the near future.

3. I . Current policy starice of Asicin ticitions

I t has been reported by Kandlikar and Sagar (1997) that climate change issues in India have generated less interest than other environmental issues, such as biodiversity, and the Montreal Protocol. The Indian government and developing countries in general have been largely occupied with economic and social matters. I t is also apparent that formal and informal linkages between the government and research institutions are less institutionalised than in developed countries. The domestic focus on climate change issues is also hampered by the fact that only a relatively small group of researchers specialise in the area. All of

42 J . Sriridersori, S.M. N. Isluni / Nciturril Resources Forrrrii 24 (2000) 39-48

the above make i t difficult for climate change issues to gain any attention in the developing countries of Asia.

If we assume that the current climate change policy goes ahead as planned, we may see little policy action from the developing world unt i l at least 2008-2012 when commit- ment of the Annex 1 (industrialised) countries towards abatement will be apparent. In the 1997 Kyoto negotiations there was widespread disagreement between the Annex I countries and the eventual signing of differentiated abatement targets. The developing world must be aware that, although substantial progress has been made in the past decade, the international abatement policy process is not guaranteed to be successful.

3. I . I . Clean development mechanism Article I2 of the Kyoto Protocol provides an opportunity

for Annex I countries (primarily developed countries) to undertake projects with developing countries; the objective would be to reduce emissions in the developing country and have the reduction count towards the target set for the Annex 1 country. This mechanism is called the Clean Development Mechanism (CDM) and was introduced late in the Kyoto negotiations as an improved version of the Joint Implementation ( J I ) strategy which has had mixed effectiveness. The timeframe for the implementation of CDM has been established to begin as early as the year 2000.

Several factors need to be addressed, however, before CDM can become a generally viable policy option. Firstly, the aim of GHG abatement must be a real one. If targets are not legally binding with real consequences for the failure to reach them, then no incentive structure will be present. Secondly, the crediting system must be established so that all parties are satisfied that emission credits will be allocated fairly after CDM initiatives have been implemented. Before a crediting arrangement can be set up, the process of the collection of emission measurements must be established. Thirdly, the calculation of baselines for emissions should occur on a top-down basis rather than a project by project basis; because the Annex I country’s emission levels are already monitored, i t would be more efficient to carry on with established procedures. Governments will be moti- vated to set accurate baselines in order not to risk over- selling emission credits. A further relevant question and a possible stumbling block to implementation is: if a CDM project does not succeed, who then is responsible for the failure?

Most developing countries of Asia are cautious about many aspects of CDM and are participating actively in the development process. However, CDM is potentially the most viable and effective regional policy option for Asia as long as the above issues related to its implementation mechanism are resolved to reflect regional interests and development perspectives.

3.1.2. Emissions trading Under Article 6 of the Kyoto Protocol, reference is made

to the provision for emissions trading. However, i t is worded in such a way that the intended outcome is vague. The abatement policy option of a tradable carbon emission permit scheme has been examined by many experts in recent years. The proposed policy consists of the creation of a fixed level of carbon permits that allow the holders to emit a predetermined amount of carbon. These permits should be made tradable to allow the most efficient allocation of carbon emissions among the trading parties. The policy should be successful as long as the marginal cost of reducing C 0 2 emissions is different among trading partners. If this is the case, the permit holders have an incentive to trade permits where those parties with the higher marginal abatement costs are prepared to buy permits from those with lower abatement costs. The process would continue until marginal abatement costs are equalised across parties and hence a cost-efficient distribution of C 0 2 emissions would be achieved. The bulk of emission cutbacks are distributed to those parties most able to afford abatement.

A number of considerations would have to be addressed before such a policy would be viable on a regional or global scale, however. Factors such as the measurement of emissions, initial setting of emission limits, and initial allocation of permits, are a few among many obstacles facing the implementation of a tradable carbon eniissions policy. As yet, no steps have been taken by Asian governments towards implementing such a policy. The developing countries are also wary that the Annex I countries would use the process as a way to avoid cutting domestic emissions by buying cheap credits. The administrative costs of implemcnting such a scheme may be so large, moreover, and marginal costs distorted to such an extent, that trading is impractical in some or all cases. In addition, the domestic scientific community in several nations disagrees with the emission assessments conducted by the international scientific community. Kandlikar and Sagar (1997) give the example of methane emissions in India, where very large dis- crepancies exist (a factor of 8) between the estimates for rice paddy methane emissions between the United States Environmental Protection Agency and the Indian Methane Campaign. Kandlikar and Sagar (1997) claim that these findings (which take into account local agricultural methods and soil conditions) have been largely ignored in the international literature, and that scientists from the developed countries may be disconnected from the par- ticular needs, realities and interests of the developing countries.

4. National policy options

4. I . Policy options for forestry in Asiri

Asia has experienced some of the highest rates of deforestation in the world over the last few decades.

J . Sariderson, S.M.N. Islam /Natural Resources Forum 24 (2000) 39-48 43

Deforestation has a high profile at the community and government level as an environmental issue in Asia. The high profile of deforestation can be used to advantage to combat the problem of deforestation and to contribute posi- tively to the reduction of climatic change.

Asia is home to a diverse range of forest types, from the dense tropical forests of South East Asia to the boreal forests of Northern China. Deforestation is a major contributor to GHG emissions in Asia, accounting for approximately 20% of total C 0 2 emissions (Rogers, 1993). Within the region deforestation is currently perceived as the most important environmental problem for Thailand, Indonesia, Malaysia and the Philippines. A recent greenhouse gas emissions inventory for Indonesia revealed that deforestation and land use changes account for 78% of their total C 0 2 emissions (Qureshi and Hobbie, 1994). Fig. 2 clearly illustrates that Asia is also a major contributor to global emissions resulting from land use change, with only South America contributing more. Demand pressures have been increasing substantially for several contributing factors of deforestation. These include domestic demand for agricultural and residential land, domestic use of timber for construction and fuel and international demands for timber from resource depleted regions. An example of the severity of deforestation outcomes is illustrated by the fact that the Philippines originally contained 16.5 million hectares of forest. This has been reduced to only 5 million hectares (Cameron, 1996). The forests are also threatened from the substantial use of biomass as fuel by a significant percentage of the population in Asia. Overall, deforestation is a major contributor to Asia’s climate change emissions and a more important factor relative to world standards.

The most important policy for forestry management (or policy makers) in Asia is to increase the level of rent capture by governments. If an appropriate level is achieved, then

Oceania Nomg

1% Central America

6%

Fig. 2. Shares of total carbon dioxide emissions resulting from land use changcs (‘000 metric tomes) I99 I. Source: World Resource Institute (I 997).

logging rates could be reduced to sustainable levels. Rent capture requires the establishment of a suitable mixture of land taxes, royalties, licenses fees and export taxes. The high level of unregulated trade in timber that exists in Asia would make this a difficult policy to implement. Currently Indonesia captures only about 30% of the rent accruing from logging. It has been estimated that if forestry fees were raised and export restrictions removed, up to US$2.6 billion in additional revenue could be created. If higher fees were placed on the value of the standing timber rather than the processed wood, it would internalise the environmental costs of deforestation and would encourage more efficient logging practices (Brandon and Ramankutty, 1993). Another factor that dictates the achievement of sustainable levels of deforestation, is the implementation of best practice behaviour in forest management. In India the National Forestry Action plan aims to establish sustainable management of forests. Massive afforestation projects are currently underway in village commons and wastelands. As an incentive, if local people contribute to the afforestation programmes in conjunction with the Forestry Depart- ment, they will get employment and also a share of the future harvest. In Malaysia, there is a 25-year project underway between a logging concession holder and the Forest Absorbing Carbon Dioxide Emissions Foundation to reha- bilitate 25 000 ha of degraded logged forest to sequester 5 Mt of carbon at a total cost of US$14 million. This roughly equates the cost to around US$3 per ton of carbon (IPCC, 1996).

The levels of emission savings which are possible from reduced deforestation in Asia are currently being studied. The cost curves for India, China and Thailand indicate that the unit cost of sequestering carbon on 80% of the tech- nically available area would be less than $US I O/tC. Estimates for potential amounts of sequestered carbon by changed forest management practices between 1995 and 2050 have been estimated. Emissions from land use each year from Asia currently total 1.28 Gt/y. Possible sequestration estimates to the year 2050 range from 0.23 to 0.44 Gt/y (IPCC, 1996). Therefore, this represents potential emission savings of 20-40% for the forestry sector in Asia. This sector provides the most potential for climate change benefits due to several factors: the high institutional and public profile of deforestation as an environmental problem; the relatively high contribution of deforestation to emissions in Asia; and existing implementation mechanisms and policies that can be expanded when climate change benefits are taken into account.

4.2. Policy options for the energy sector

The energy sector is potentially the most important source for the abatement of greenhouse gas emissions. The demand for energy in Asia is doubling every 12 years. This is much faster than the world average of 28 years (Brandon and Ramankutty, 1993). Asia’s energy profile is unique among

44 J. Soncier..rso~i. S. M.N. lslcini / Nciturd Resources Forum 24 (2000) 39-48

the regions of the world and therefore some of the abatement options available will require unique solutions.

The role of the energy sector in Asia, as a contributor to climate change, is becoming increasingly important. Before the economic crisis of 1997, Asia had experienced the highest growth in demand for energy of any region in recent decades (5.4% per annum growth between 1973 and the early 1990s, compared to 2% world growth, Sharma, 1994). The future growth of emissions of C 0 2 from Asia is expected to increase by more than 250% between 1985 and 2025 (IPIECANNEP, 1991). Strong demand, combined with an abundance of coal, indicates that the energy sector is likely to be a major contributor to C02 emissions for some time to come. The structural composi- tion of the energy sector in Asia is unusual in that it relies on the burning of coal as the primary source of energy. Asia's reliance on coal as an energy source is an important regional consideration. Coal, when burnt, is one of the highest emit- ters of COz (one of the main GHG) per unit of energy generated.

Asia has 63% of the proven worldwide recoverable reserves of coal (Malik, 1994). I t is an abundant and easily accessible fuel source and therefore should dominate the Asian energy market for at least the short to medium term. An indication of the dominance of coal as an energy source in the region is illustrated by the fact that coal accounted for 47% of energy consumption in the region, compared to only 25% for OECD countries in 1988 (Sharma, 1994). Also, C02 emissions per unit of GNP in developing Asian countries are significantly higher than in industrialised nations. There is widespread inefficiency in the energy sector in Asia, because of outdated methods and ageing capital in coal-based energy production. Therefore, there is a large potential for improvement in energy efficiency. All of these factors indicate that the energy sector in Asia is going to be much more important to policy plans than for other regions. Policy options for the energy sector will be discussed later.

While a very high growth in demand for energy may be detrimental for the emissions of GHG in one sense, it has a positive side in that high growth in this sector provides opportunities for increasing efficiency (due to the more rapid turnover of technology). The rapid growth in demand for energy will provide opportunities for leapfrogging technological change by investing in leading edge technologies. Energy policy is predominantly supply-driven in India and in many parts of developing Asia, where energy pricing is based on social and political principles. Government subsidies to ensure the supply of electricity to as many residents as possible do not encourage energy efficiency. I t must be noted, however, that infrastructure is being established in many developing countries and the focus of government policy is simply upon providing services to as many of the population as possible.

Improvements in energy efficiency on both the supply side and demand side would be an effective form of

reducing greenhouse gas emissions. There are several ways in which efficiency gains may be achieved. The following outline provides an overview of suggestions by Sharma (1994). The transmission and distribution costs for power suppliers are very high in developing countries in Asia. These were estimated at 22% loss in the Philippines, 25% in Pakistan, 26% in India and 38% in Bangladesh in the early 1990s (Brandon and Ramankutty, I993), compared to a 5-10% range of losses for developed countries. I t has been estimated that by updating to current technology, the major- ity of industrial plants in Asia could reduce energy consumption by up to 30%. Also, by shifting the fuel mix, or switching as much energy use as possible from coal to natural gas, many countries in Asia could reduce emissions. Natural gas is a much cleaner fuel that produces two thirds less C 0 2 than coal; known reserves have been found in Bangladesh, China, India, Indonesia, Malaysia and Thailand. The use of alternative energy sources, such as solar and wind generation systems, is another option, but these are unlikely to contribute to a substantial proportion of the energy supply within Asia in the near future.

While many efficiency gains are economically viable, they may not be implemented. Decision-makers with the power to implement such policies may not be fully informed as to their potential benefits. There are several existing barriers to the achievement of an efficient energy sector in Asia, as explained by Malik (1994). These barriers are technical (lack of skills and equipment), institutional (lack of a co-ordinated energy conservation programmes) and economic (pricing polices act as a disincentive for plants to invest in energy efficient technologies). Hence, the most likely way that emission reductions could be achieved in the near term throughout Asia is to couple climate change considerations with other environmental aspects when considering energy sector policies that are likely to be implemented. An emphasis on the dual benefits of some policy actions will result in higher implementation rates.

4.2.1. Ccirbon t m Proposals for a carbon tax have existed for quite some

time, and many studies have attempted to calculate the level of tax that would be required to stabilise greenhouse gas concentrations. Many economists advocate the introduction of a carbon tax, as i t has the capacity to internalise the environmental and economic externalities rcsulting from excessive fossil fuel use.

A carbon tax faces practical difficulties, however, such as the method of implementation, the measurement of emissions and the setting of the tax rate. Moreover, pressure from lobbyists makes it difficult for government to introduce. If carbon taxes are set at high levels, they may not be viable as they could produce significant constraints upon economic development. Other issues arise such as: Who receives the revenue? What should the revenue be used for'? How are emissions to be measured and what emissions should bc included? Another problem presented by a carbon tax is

.I. Scrrrc1c~rsorr. S. M. N . lsl(irir / Nritirrril Resources Forum 24 (2000) 39-48

a - E

45

. . . . . . . . . . . . . . . . ...................................................................................

4

Year

Fig. 3 . Annual Per Capita C02 Emissions 1950-1995 (tons). Sorrrcc~: Mnrland and Boden ( 1996); and U N Demographic yearbook (various)

that i t might create an incentive for fossil fuel intensive industries to migrate to countries that have no carbon taxation system. The potential size of this problem is uncertain (estimates have varied widely).

It has been claimed in recent years that some environmental taxes could yield a double dividend. The double dividcnd ariscs when governments can use the revenues from taxes that are already benefiting the environment to decrease other taxes. For example, a pollution tax can be introduced to protect waterways, and the revenues gained can be uscd to reduce income tax. This results in decreased pollution and increased incentives to work. Therefore, the tax is creating a cleaner environment and also a less distorted tax system.

Thc carbon tax would need to be set at the marginal damage costs of C02 emissions. Setting this tax rate is hampered by uncertainties in the knowledge of energy elas- ticitics and substitutes. One solution to this problem is to initially set a low carbon tax and regularly raise i t by small increments. This allows some revenue collection and abatement to take place, while not initially being at the most efficient Icvel. As the tax is gradually raised, better data will be collected and more knowledgeable estimates made of the required carbon tax rate for certain levels of C02 abatemcnt. Only Japan has indicated that i t may be serious about implementing ii carbon tax. For most of Asia this policy is not likely to be implemented in the short to mcdium term. In summary, while the potential gains from encrgy efficiency improvements in Asia are substantial, implemcntation may be quite difficult to achieve in the short tcrm.

4.3. Sociologiccil riiethocls qf eriiissiori rcite reductiori

One option that has received little attention has been the emission savings possible from domestic population control

policies. The emission growth rate is related to the population growth rate. In Asia both population and emissions have been growing strongly. Population forecasts suggest that Asia will experience sustained population growth for quite some time. Therefore, even if per capita emissions do not rise, the overall level of emissions in Asia will continue to rise at approximately the same rate as the population growth. If the combined effects of population growth and economic growth result in an increase in per capita emissions, the result will be a rapid growth of emissions. Asia has experienced both of these effects in recent decades and the result has been the highest rate of emission growth of any region in the world. The potential for further emissions growth is staggering. Assuming annual per capita C02 emissions from Asia rise to 1.5 tons by 2025 and the regional population follows this trend of growth and reaches 4.5 billion, then total emissions would have risen four-fold from 1989 levels. Such a scenario would be disastrous in the broader context of reducing global atmospheric CO2 concentrations.

As can be see from Fig. 3, per capita C02 emissions for the OECD countries have stagnated since the initial oil shock in 1973 (after being on a steady rise since 1950). However, per capita emissions have doubled for Asia in the same time period. For the developed world, the two oil shocks seem to have triggered the development of more efficient consumption and production (or the adoption of alternative sources) of energy andor transport. The increase in the price of oil made i t more profitable at the margin to invest in the development of energy substitutes to oil. While the oil crisis was seen as a cause of short to medium term reduction in per capita emissions, the per capita emissions have stabilised over the last 25 years. This is the result of improved energy and transportation efficiencies that remained even when the supply of oil returned.

46 J . Scitrclersotr. S.M.N. Islam / Ncrtrtrcil Re.soitrces Forriiii 24 (2000) 39-48

The important point is to make realistic estimates of potential per capita emissions for Asia. Coming off a low base, per capita emissions have shown no sign of slowing, even as a result of the oil crisis. The issue of the potential for per capita emissions levels resulting from further economic development is an interesting area that needs further research.

The social policy options associated with emission reductions include improved literacy, environmental education, reproductive health and family planning. The most obvious example of government population control is China’s one- child policy, which, if fully implemented over the coming decades, should result in a stable population for China by 2050. One proven way to reduce population growth is via economic development. Many of the highly industrialised countries have experienced a consistent reduction in fertility rates and consequently the population rate, as societies move from subsistence living to an industrial society. However, the dilemma is that economic growth up to a point causes much higher per capita emission rates. Urba- nisation is another demographic issue that has implications for climate change. Urban population growth is expected to be much higher than rural population growth in the developing countries. While urban households consume significantly less biomass fuel, the consumption of fossil fuels increases dramatically at a given income level. Therefore, urbanisation will, in itself, cause more rapid emission growth. Several studies have attempted to quantify the cost of one extra human in global warming terms. Cline ( 1992) calculated illustratively that an averted birth today will realise marginal benefits of between US$700 and US$3500, which would indicate that population restraint may be a viable and cost effective alternative for emissions reduction reasons alone. Other estimates cited by Wexler ( I 996) attribute potential benefits of US$S50 for developing countries and US$3000 for developed countries per birth averted. For industrialised countries, it is more costly to implement population control measures despite the benefits being higher, because in most cases fertility rates are at already low levels and in most cases are falling. Meanwhile developing countries would in general find it much easier to implement population controls, but have a much smaller potential benefit per birth. This issue may arise in future negotiations of the Framework Convention on Climate Change (FCCC) when developing countries join in abatement programme discussions, as countries such as China may ask for their past and future population control policy results to be included as emission abatement measures.

The potential gains from social methods of abatement are not known at this time. The likelihood of coupling climate change benefits with policies such as further education and family planning is small in the short term, due to the fact that very little is known about the potential abatement potential of such policies. Further research would also be useful in this area.

5. Adaptation policy options for Asia

In very general terms, adaptation to climate change includes any policy that attempts to reduce the impacts of climate change. Adaptation is more likely to be feasible for individual countries, rather than for regional or global policies because its benefits are experienced locally. I t is also a valid national policy option for the simple reason that some climate change will occur even if it were possible to completely halt all emissions now. In much of the relevant literature the concept of adaptation to climate change is not treated seriously as a policy option and therefore the analysis of the concept tends to be weak. The maintenance of the option to use adaptation as an effective policy instrument requires the formal definition and empirical investigation of its properties. As a regional climate change issue, adaptation is very important. The Asian Development Bank (ADB, 199 I ) describes the issue of adaptation as being critical for Asia. While the authors do not advocate that adaptation measures be treated as the main greenhouse policy, it is recommended that more attention be given to adaptation as a viable and realistic part of a total climate change solution.

The only form of international institutional support for adaptation has been provided through the Global Environ- mental Facility (GEF), which has given a three stage strategy for adaptation, as follows: ( I ) planning for the identification of particularly vulnerable areas and the possible measures that should be undertaken; (2) capacity building in relation to adaptation; and (3) actual adaptation measures. Initial funding for the first strategy has been provided by the GEF. If the results from stage one are satis- factory, then the Conference of the Parties (COP) will fund stages two and three. The voting rules for the GEF state that a group of countries that represent over 40% of total donated funds can veto any proposal. Therefore, the developed countries will have control over GEF initiated abatement and adaptation actions for at least the short to medium term. Generally, GEF funding is seen as insignificant in terms of its global impact, unless i t can be the catalyst for the development of energy efficient technologies (Mabey et al., 1997). The other major contributor to thc development of adaptation policies is the US Country Studies Program (USCSP), which is currently implementing vulnerability assessments and adaptation policy development studies for over 50 developing countries.

I t would seen1 that the most likely adaptation options available to Asia are ‘no regrets’ type actions. If we assume a well functioning market mechanism, all no regrets policies should be implemented in Asia. The market would be well informed and able to decide whether the benefits from an adaptation option outweigh the costs, givcn the missed opportunities from investments foregone. This is often not the case, as the main economic stumbling block for ‘no regrets’ policies are the uncertainty of costs and benefits. Factors such as lack of markets, free riding behaviour,

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uncertainty and information asymmetries will prevent the implementation of some no regrets actions.

The governments of Asia should reduce these distortion- ary factors as much as possible in order for the large potential for no-regrets adaptation to take place. This may be achieved in several ways, including the introduction of legislation to establish markets for environmental goods, and investment in further climate change research to reduce uncertainty. Because of unreconcilable market imperfec- tions, some no regrets policies will have to be implemented by national governments.

One of the sectors of the economy most vulnerable to climate change is agriculture. Some adaptation policy options for agriculture are: development of more drought and heat resistant varieties of crop species; moisture conserving tillage methods; improvements in irrigation efficiency. such as laser levelling, surge irrigation in furrows and low pressure sprinkler systems; improvements to agricultural management practices; and windbreaks to reduce evaporation. The most likely adaptive response to climate change by the agricultural sector will probably be to change planting dates. I t has been estimated that small changes of up to four weeks would be supportable for most areas of Asia (Iglesias et.al., 1996). However countries such a s China and the Philippines may experience large changes in seasonal agricultural activities that may not be supportable.

Irrigation offers a further adaptation option to the agricultural sector. Climate change may result in the need for significant increases in the availability of irrigation, in order to compensate for possible moisture loss due to increased evapotranspiration. The likely problems associated with this action, however, include limited availability of water resources, cost constraints and the potential for soil salini- zation and pollution. Genetic variability suggests that it may be relatively easy to adapt crop varieties to forecast changes in climate conditions (Iglesias et al., 1996). It is known that China is already approaching its estimated maximum area of irrigated farmland, which means that further installations will be restricted in the future, but the option of improving the efficiency of existing irrigation systems remains (Erda, 1996).

Another sector at high risk from climate change is the coastal zone and its associated activities. Coastal defence structures may encourage development too close to the shoreline. Thus coastal protection must be accompanied by sensible restrictive zoning laws for development. In India a programme was launched in 1985 to develop data- bases for the assessment and management of coastal zones. Bangladesh has implemented a policy to plant a green belt along the entire coastline. This measure is designed to reduce potential damage from storm surges and cyclones, by increasing surface resistance to incoming water. Similar actions are planned for other coastlines in Asia: to conserve and replenish mangrove forests, thereby providing habitat, protection and C 0 2 sequestration simultaneously. These

policies are examples of adaptation policies that have no regrets qualities, as they have benefits under today’s conditions.

The implementation of adaptation policies is dependent on the successful identification of the sectors that are most vulnerable to the effects of climate change. Currently the only source of this type of information is coming from the GEF, USCSP and a small group of academics specialized in science and economics. It is unlikely that specific adaptation policies for climate change will be implemented in the short term by the developing countries of Asia.

6. Conclusion

This paper provides a brief review of some of the policy issues facing Asia with respect to climate change and its economic consequences. The environmental consequences of Asia’s economic rise threaten the future growth of the region. Despite recent economic expansion, Asia will be one of the areas in the world most vulnerable to climate change. It was noted that Asia’s contribution to climate change is unique in two important aspects: the significance of deforestation; and the importance of coal as an energy source to overall greenhouse gas emissions. While Asia currently contributes moderately to greenhouse gas emissions, the potential for increases in emissions is significant. National and regional policy options, including abatement and adaptation, were reviewed as strategies for tackling the likely effects of climate change. This study recommends that at a national level, initiatives that have ‘no regrets’ properties should be an area for urgent research so that they can be implemented as soon as possible. The sector that offers the most potential for dual environmental type policy options was found to be the forestry sector, where policy measures to reduce deforestation provide the potential for substantial domestic and climate change benefits. It is envisaged that in the short to medium term, identifiable no regrets policies, such as those that apply to the forestry sector, can be useful for reducing emissions and vulnerability to climate change in developing regions such as Asia.

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