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close this book Boiling Point No. 25 - August 1991
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Energy Policies and the Greenhouse Effect

From 'The Greenhouse Effect and Energy Policies in the Developing Countries'. Editorial summary of an article by Mohan Munasinghe in EPA Journal, March/April 1990.

Developing countries share the worldwide concern about environmental degradation; some have already started to bring management of their natural resources into line with the goal of sustaining their economic development. However, these countries also face urgent issues such as poverty, hunger and disease, as well as rapid population growth and high expectations.


The paucity of resources available to address all these problems reduces the ability of developing countries to contribute to the protection of the global environment. The crucial dilemma is how to reconcile development and the elimination of povertv which require increased use of energy and raw materials - with stewardship of the environment. The per-capita GNP of low income countries, which make up half the world's population, averaged $290, in 1987, or less than one sixtieth the US per-capita of GNP of $18,530. In the two largest developing countries, India and China, per-capita income was $300 and $290, respectively. Correspondingly, the US per-capita energy consumption of 7,265 kilograms of oil equivalent in 1987 was 35 and 15 times greater, respectively, than the same statistic in India and China.

Economic growth has already placed a heavy burden on humankind's natural resource base; carbon-dioxide (C02) accumulation in the atmosphere from fossil fuel is a good example. Developed countries accounted for more than 80% of this accumulation in the period 1950 to 1986. On a per capita basis, they emitted more than 11 times the cumulative CO2 of developing countries. The latter's share would be even smaller if emissions prior to 1950 were included. Clearly, any growth scenario for developing nations that followed the same material-intensive path as the industrialized world would result in unacceptably high levels of greenhouse-gas accumulation as well as a general depletion of natural resources.

Scientific analysis has provided only broad and rather uncertain predictions about the degree and timing of global warming. However, it is generally accepted that mankind would be prudent to buy an 'insurance policy' in the form of mitigatory actions to reduce greenhouse gas emissions.

Ironically, environmental degradation might affect developing countries more severely since they depend more on natural resources while at the same time lacking the economic strength to prevent or respond quickly to such problems as flooding, drought and soil erosion. From their viewpoint, an attractive insurance premium would be a set of inexpensive measures that would address a range of national and global environmental issues with out hampering development efforts. However, the adoption of mitigatory measures to reduce greenhouse warming that went beyond their own immediate economic interests would constitute crossing a definite 'pain threshold'.

In the area of policy reform, especially pricing, developing countries are showing a greater willingness to use market forces more effectively. Typically, by raising the subsidised price of a scarce resource like energy to reflect real economic costs, it is possible to signal to consumers that this resource is valuable and should be conserved. Further, governments could take steps to protect the environment in cases where market forces have not worked. One example is the over-use of a common resource, such as the excessive discharge of noxious gases into the air. Here, restructuring the marketing to make the polluter pay or limit the discharges is essential.

Improved natural resource management also requires laws that go beyond the short-term concerns of political leaders. Implementation of environmental regulations is a serious problem too, requiring cooperation among public and private organizations with multi-disciplinary teams. Finally, enlightening the public is necessary if citizens are to participate actively in making and implementing environmentally sound decisions.

Economic efficiency is critical in obtaining the maximum value from the scarce resources of a developing country's economy. When market incentives are brought to bear and the costs of growth-related environmental damage are considered, economic efficiency can help to protect the environment as well. Energy issues are especially illustrative, because energy is a primary cause of the current global ecological crisis and in most developing countries energy use is growing rapidly. In many, energy is wasted. For example, more than one-third of electricity generated is often lost before reaching consumers; an acceptable norm might be less than one-tenth. Devices ranging from sophisticated industrial boilers to simple woodstoves consume fuel inefficiently. Energy policies aimed at improving methods of supply, managing demand and encouraging end-use conservation could lead to simullaneous gains in efficiency, conservation and environmental protection.

Particularly in rural areas, which in developing countries contain more than 70 % of the population, per capita energy consumption is low and potentially profitable energy uses are constrained by lack of supply. In such cases it may be necessary to promote energy consumption in order to raise output and incomes. Other social goals complicate the decision-making process even further. For example, most countries want to satisfy the basic needs of their citizens, especially the low-income populations. In the energy sector, this may have to be achieved by providing a minimum of energy to all families at a price that is well below its economic cost.

Several proposals have been made for setting up a global environmental fund to help developing countries, and some industrialized countries have indicated their willingness to contribute.

In terms of global concern, the "fairness criterion" recognises that, historically, growth in the industrialised countries emphasized needs rather than resource limitations. Development of these societies exhausted a disproportionately high share of global resources, including physical resources consumed in productive activity, as well as the waste-absorbing capability of the global ecosystem. Indeed, this resource-intensive historical growth pattem suggests that developed countries owe an 'environmental debt' to the larger global community. Applying this criterion could help determine how remaining global resources might be shared equitably and used sustainably.

(Mohan Munasinghe is Chief of the World Bank's Environmental Policy and Research Division. Until recently he also served as Senior Advisor to the President of Sri Lanka).