Climate Change and
developing countries
Denis Medvedev, Dominique van der Mensbrugghe, and Hans Timmer
The World Bank
Developing countries are taking center stage
Developing countries are taking center stage
• Growth in developing world is much faster than expected
during the 1990s and cheapest mitigation options are in developing countries, especially in China and India
• Climate impact has come earlier than expected and
Developing countries are taking center stage
• Growth in developing world is much faster than expected
during the 1990s and cheapest mitigation options are in developing countries, especially in China and India
• Climate impact has come earlier than expected and
developing countries are most vulnerable, with large impacts on India
Development strategies are central focus
• Developing countries have to become key players in climate change policies
ENVISAGE: Model features
• Standard dynamic global CGE, used for long‐term scenarios, trade and migration analysis, MDG studies, and linked to micro‐simulation tools.
• Flexible aggregation (regions and sectors) and time frame. • 2004 GTAP‐based base year including IEA‐based energy
demand and trade (MTOE) and estimates of CO2 emissions by sector and fuel.
• Integrated climate module with links from emissions to radiative forcing to temperature change to change in agricultural productivity.
• Flexible energy demand system
Energy demand nest
Energy bundle
Electric bundle
Existing and alternative technologies
Non‐electric bundle
Coal bundle Oil and gas bundle
Coal and alternative technologies
Oil bundle Gas bundle
Oil and alternative technologies
Key dynamic assumptions
Key dynamic assumptions
• UN population forecast—labor force growth equated to growth of working age population (15‐65).
• Rural to urban migration in developing countries.
• Savings rate driven by growth and youth and elderly dependency rates.
• Productivity in agriculture is exogenous (2.5% per annum). • Productivity in manufacturing is higher than in services (2%). • Productivity is calibrated through 2015 and then fixed.
• Autonomous energy efficiency improvement (AEEI) increases by 1% per annum (in all regions and sectors).
Four scenarios
First preliminary work Still lots of caveats
• Baseline, or business‐as‐usual, with climate change damages to agriculture (Cline, 2007)
• Baseline without climate change damages
• Global mitigation scenario—targeting 515 ppm carbon concentration by 2050 via a global uniform tax
Developing countries are taking center stage
Developing countries accelerated
0 2 4 6 8
1980 1985 1990 1995 2000 2005 2010
Source: World Bank
Developing countries
High-income countries
Source: Simulations with World Bank’s ENVISAGE model.
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
P
Developing, right‐axis
Developing growth rate, left‐axis
High‐income growth rate, left‐axis
Baseline GDP at constant prices
1.5
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
P
Source: Simulations with World Bank’s ENVISAGE model.
Developing, right‐axis
High‐income, right‐axis
World growth rate, left‐axis
0 50 100 150 200 250 300 350 400 450 500
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: Simulations with World Bank’s ENVISAGE model.
Developing
High‐income
World
Baseline emissions intensity
Country
‐
specific carbon taxes to reduce
emissions in 2050 by half
2050 tax per ton of carbon, in 2004US$
0 200 400 600 800 1000 1200 1400
India China Sub Saharan Africa Indonesia Rest of South Asia Europe and Central Asia Rest of developing East Asia United States Latin America and the Caribbean EU 27 and EFTA Middle East and North Africa Japan
Percent reduction in emissions
Percent reduction in CO2 emissions relative to baseline in 2050
‐80 ‐70 ‐60 ‐50 ‐40 ‐30 ‐20 ‐10 0
Middle East and North Africa EU 27 and EFTA
Rest of developing East Asia United States
Latin America and the Caribbean Rest of South Asia
Europe and Central Asia Indonesia
Sub Saharan Africa China
India
World total
Model comparison of carbon taxes
$2000/tC in 2050
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
GTEM
Note: Stabilization scenario intended to stabilize radiative forcing at 4.5 W/m2by 2150 relative to pre‐industrial. Percent reduction in CO2emissions next to bars.
Source: Weyant et al, The Energy Journal, Special Issue, Nov. 2006, pp. 1‐32.
Carbon tax revenues
Percent of GDP in 2050
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
China Europe and Central Asia Rest of South Asia Indonesia Rest of developing East Asia India Middle East and North Africa Sub Saharan Africa Latin America and the Caribbean High income countries World total
Country‐specific tax Uniform tax
Mitigation and energy
‐
intensive exports
Percent difference in nominal energy‐intensive manufacturing exports in 2050 between mitigation via country‐specific and uniform global carbon tax
‐20 ‐15 ‐10 ‐5 0 5 10 15 20
China India
Sub Saharan Africa Indonesia
EU 27 and EFTA United States
Europe and Central Asia
Latin America and the Caribbean Japan
Rest of developing East Asia Rest of South Asia
Impact of mitigation policies on output
Percent difference in real GDP in 2050 relative to baseline
‐4.5 ‐4.0 ‐3.5 ‐3.0 ‐2.5 ‐2.0 ‐1.5 ‐1.0 ‐0.5 0.0
Japan
EU 27 and EFTA
Middle East and North Africa Latin America and the Caribbean Sub Saharan Africa
United States
Rest of developing East Asia Indonesia
Rest of South Asia India
Europe and Central Asia Canada
China World total
Developing countries are taking center stage
• Growth in developing world is much faster than expected
during the 1990s and cheapest mitigation options are in developing countries, especially in China and India
• Climate impact has come earlier than expected and
Concentration, forcing and temperature
2005 2015 2025 2035 2045
C
Impacts of Climate Change
Real income, percent difference from baseline with no damages in 2050
‐6 ‐5 ‐4 ‐3 ‐2 ‐1 0 1
Canada United States EU 27 and EFTA
Europe and Central Asia Indonesia
Middle East and North Africa Latin America and the Caribbean Rest of developing East Asia Rest of South Asia
Sub Saharan Africa China
India
World total
Climate change damages and food imports
Percent difference in nominal agriculture imports in 2050 from baseline with no damages
‐50 0 50 100 150 200
India Rest of South Asia Latin America and the Caribbean Sub Saharan Africa Middle East and North Africa Indonesia Rest of developing East Asia Europe and Central Asia EU 27 and EFTA China Japan United States World total
Volume Price
Developing countries are taking center stage
• Growth in developing world is much faster than expected
during the 1990s and cheapest mitigation options are in developing countries, especially in China
• Climate impact has come earlier than expected and
developing countries are most vulnerable, with large impacts on India
Trends in the poverty headcount index
Developing countries8.79 8.95
8.05 8.66
74.75 Sub‐Saharan Africa
0.36 0.40
0.23 0.34
81.64 South Asia
6.61 9.00
5.96 6.54
22.20 Middle East and North Africa
6.22 6.43
6.05 6.13
23.43 Latin America and Caribbean
0.00 0.00
0.00 0.00
10.67 Eastern Europe and Central Asia
0.31 0.33
0.28 0.30
46.13 East Asia and Pacific
US$2 (PPP) per day poverty line
0.45 0.47
0.42 0.44
19.18 Developing countries
1.57 1.61
1.42 1.52
43.52 Sub‐Saharan Africa
0.01 0.01
0.00 0.01
35.14 South Asia
0.59 0.97
0.48 0.59
3.14 Middle East and North Africa
2.34 2.39
2.24 2.29
9.01 Latin America and Caribbean
0.00 0.00
0.00 0.00
0.94 Eastern Europe and Central Asia
0.02 0.02
0.02 0.02
13.35 East Asia and Pacific
US$1 (PPP) per day poverty line
GBLut, 2050 GBLct, 2050
BaUnd, 2050 BaU, 2050
‐4
‐2 0 2 4 6 8
0 10 20 30 40 50 60 70 80 90 100
No damages from climate change
Global mitigation via uniform tax
Source: Simulations with World Bank’s GIDD model.
Impact incidence of climate damages and mitigation
Climate change and agricultural prices
Producer price in agriculture, impact of damages in 2050 (percent)
0 5 10 15 20 25 30 35
Japan
EU 27 and EFTA China
United States
Europe and Central Asia Middle East and North Africa Indonesia
Rest of developing East Asia Latin America and the Caribbean Sub Saharan Africa
Rest of South Asia India
World total
2000
Agriculture
Non-agriculture
2050
The urbanization of poverty
Composition of the poorest 10 percent of the population in developing countries
Climate change and agricultural employment
$addtional employment in agriculture in 2050 as percent of total labor force
‐0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2
Take away messages
• Standard SRES ‘worse case’ baseline scenarios are too optimistic
• Cap‐and‐trade system could and should imply major resource transfers to developing countries
• Negative effects from climate change on agricultural output will be significant, impacting income, trade and poverty
