Aligning SD with LCS
RaeKwon Chung
Two key issues of Sustainable Development (SD) and Low-Carbon Society (LCS) are: (a) How
to make LCS compatible with growth, and (b) How to engage developing countries in post-Kyoto
climate regime?
A paradigm shift is required from quantity of growth towards quality of growth. Quality must
include measures of ecological and social quality, besides economic quality. Hence, not justmarket cost efficiency, but also ecological efficiency needs to be emphasized. Increasing
ecological efficiency implies maximizing resource efficiency and minimizing pollution impact byinternalization of ecological costs into market price.
The governments have an important role to play in effecting this shift. They must modify theprice structures so as to close the gap between market and ecological prices, and provide
ecologically efficient infrastructure like public transport and energy efficient buildings to support
ecologically efficient performance of economic activities. The concept of ecological efficiency
has to be applied in the designs of cities, public transport systems, and consumption andproduction patterns.
We have to replace the negative perception that mitigation is a burden on economy with thepositive view that mitigation is not a burden rather an opportunity to improve energy efficiency
and save energy costs tus improve economic efficiency and competitiveness. Climate actions
could even create new markets, employment and growth.
However, while the gains will mostly accrue in the long run, there may be certain costs to bear in
the short run. Hence policy options are required to minimize short-term burdens and maximize
long-term gains.
Following are the best ways to induce emission reduction in developing countries:
1. Internalize Ecological Costs into the market price of energy: Internalization of ecologicalcosts into market price of energy can be achieved by changing tax base from Income toCarbon. Ecological tax reform of reducing income tax while increasing carbon tax could
be an effective tool to move towards low carbon society by putting a price on carbon.
2. Market-Based Climate Regime and CER Discounting: CDM can be reformed to function
as a full-fledged market mechanism to provide incentives to developing countries toinitiate mitigation projects. Project scope of current CDM has to be further expanded byremoving project and fiancial additionality criteria. Mitigation costs per ton of CO2 ischeaper in developing countries. If developing countries could be allowed to turn their
mitigation into carbon credit and sell at a higher price than their actual costs, theninvestment for mitigation of GHG emission in developing countries will havecommercial viability. Net global recution is possible not only by imposing target on
developing countries but also introducing a rule of CER discounting scheme. The CERdiscounting scheme means that a part or all of CDM credits, i.e., CERs, made by
developing countries through unilateral CDM projects will be retired rather than sold todeveloped countries to increase their emissions. Then unsold protion of CER will be net
global reduction. Agreeing on the CERs Discounting Scheme will have a better politicalchance than agreeing on imposing emission reduction targets on developing countries.
3. Domestic Voluntary Efficiency Targets as Climate Action: Explicit recognition ofdomestic and voluntary targets and efforts towards improvement of economic efficiencyor energy efficiency as a part of climate action will provide further incentive andrecognition to those countries and governments. A case in point is China’s target of 20%
improvement in energy efficiency. Voluntary emission reduction efforts must be allowed
for carbon credits. As a lot of such voluntary actions are being taken by countries tofurther their own energy security and economic growth objectives, recognizing such
efforts as climate action will create win-win synergy between climate and economic goals.