Mohan Munasinghe A dry lake bed in Hubei Province, China.

G
lobal warming is already tak- The most vulnerable groups will be the
ing its toll. In Darfur, where sev- poor, the elderly, and children, including those
eral hundred thousand people living in rich countries. The most affected
have died in recent years from the regions will be the Arctic, sub-Saharan Africa,
internal conflict, climate change has exacer- small islands, and Asian megadeltas. High risks
bated water and land shortages (because of will be associated with low-lying coastal areas,
growing desertification), undermined agri- water resources in dry tropics and subtropics,
culture, and fueled conflict over these scarce agriculture in low-latitude regions, key ecosys-
resources among the poor. On the opposite tems (such as coral reefs), and human health Making
side of the globe, many Pacific islands (and
the Maldives) that are often only centimeters
in poor areas. Moreover, extreme weather
events will worsen, especially tropical cyclones
development
above sea level are threatened with inunda- and heat waves. The result is that prospects for more
tion by rising seas. In the distant north, melt-
ing of the sea ice is affecting polar wildlife and
achieving many of the eight 2015 Millennium
Development Goals—which include poverty
sustainable will
undermining the already precarious liveli- reduction, better health and education, gender help address
hoods of native peoples. equality, and saving the environment—will climate change
These grim harbingers of climate change become even more remote.
underline the need to better understand How can this destructive cycle be broken?
the phenomenon and address the con- The best hope lies in crafting strategies that
sequences. The latest report of the UN’s address climate change and sustainable devel-
Intergovernmental Panel on Climate Change opment simultaneously. This is because the
(IPCC) says that global warming is a real- two issues are highly interconnected: climate
ity and has almost certainly been caused by change affects development prospects and
recent human activities that have increased development paths determine the future cli-
greenhouse gas (GHG) emissions. It also mate. At the global level, countries need to
indicates that climate change (characterized act in a concerted fashion to reshape human
by temperature increase, sea level rise, and activities on an unprecedented scale although,
precipitation changes) will continue into the sadly, current trends are not at all promising
foreseeable future and intensify (see Box 1), (see Box 2). At the national level, however, the
with potentially disastrous consequences for outlook might be more hopeful, given that
the planet and its inhabitants. practical methods now exist for integrating

Finance & Development March 2008   37

climate change responses into sustainable development strate- cut (to 2–10 million) by marginally raising annual coastal
gies. Indeed, the existence of these tools should help to dispel protection spending to match GDP growth rates.
the concern of many policymakers that tackling climate change Mitigation responses. Current mitigation efforts—primarily,
might divert resources that are sorely needed to deal with more reducing the emission intensity of energy use and increasing
immediate development problems, such as growth, poverty, carbon dioxide absorption by planting forests—similarly need
food security, ill health, unemployment, and inflation. to improve. The result would be lower GHG concentrations,
along with other benefits, such as better health, lower energy
How humans can cope demand leading to greater energy security, and greater energy
The two specific ways that humans can respond to climate availability for poor and rural areas. At this point, we know the
change are through adaptation and mitigation. Adaptation
tries to reduce the vulnerability of human and natural sys-
tems to the stresses of climate change, whereas mitigation
“Although per capita emissions
aims to lower, or even remove, GHG emissions. will remain far lower in developing
Adaptation responses. Adaptation efforts need to be
stepped up, given that long-term, unmitigated climate change nations than in industrial countries
is likely to exceed the adaptive capacity of natural, managed
(agricultural), and human systems. Natural organisms and for the foreseeable future, total
ecosystems tend to adapt autonomously (for example, migra-
tion of animals as habitats change, and growth-cycle changes emissions in the more populous
in plants), but many may not survive if the rate of tempera-
ture rise is too rapid. Humans are capable of preplanned (or
countries will become increasingly
anticipatory) adaptation, although reactive measures are significant.”
often necessary. Proven adaptation methods exist—including
building dikes against sea level rise, developing temperature- technological and policy options that could stabilize GHG con-
or drought-resistant crops, and widening hazard insurance centrations in the range of 450–550 parts per million by volume
coverage—but they need to be disseminated more widely and (ppmv) within the next 100 years. The estimated median costs
implemented by governments, businesses, and civil society. of mitigation measures to achieve 550 ppmv might amount
Take coastal areas threatened by flooding and storms as tem- to about 1.3 percent of world GDP by 2050 (equivalent to an
peratures rise. With constant expenditures on coastal protec- annual reduction of GDP of less than 0.1 percent a year up to
tion, about 55–90 million people will be affected annually by 2050), although the cost of stabilization at the 450 ppmv level
a 2°C warming. However, these numbers may be drastically may exceed 3 percent of 2050 GDP.

Box 1
The scientific facts The IPCC predicts that in the absence of a serious effort to
For decades, the public debate over global warming boiled curb emissions, by 2100 carbon dioxide concentrations will
down to a little science and a lot of conjecture. But in recent be about twice the preindustrial level (550 ppmv), the average
years, the world’s scientists have found their voice, and in the global temperature will increase by about 3°C above current
2007 Fourth Assessment Report of the Intergovernmental Panel levels (the range being 1.1–6.4°C), and the mean sea level will
on Climate Change (IPCC)—which was founded 20 years ago rise 35–40 centimeters. Extremes of climate and precipitation
by the UN to provide an authoritative review of climate change will worsen, and the melting of ice will accelerate because of
information—many of the world’s leading scientists spoke the greater warming of polar regions. Even if emissions were
with one voice. Their message was a grim one. sharply curbed, the IPCC estimates that temperatures would
What we know. For more than 10,000 years, carbon diox- rise at least 1.5°C more by 2100.
ide concentrations in the atmosphere were stable at about What we don’t know. The IPCC is continuing to work on
280 parts per million by volume (ppmv), but, following the some important gaps in knowledge. For example, the level
industrial revolution, these concentrations rose rapidly and at which GHG concentrations are dangerous is not scientifi-
now exceed 380 ppmv. As a result—and with the help of other cally certain, although the European Union has made a value
minor greenhouse gases (GHGs), such as methane and nitrous judgment that 2°C (corresponding to 450–500 ppmv) is the
oxide—over the past 100 years, the planet’s surface has warmed tolerable risk threshold. One key parameter, to be determined
by an average of 0.75°C, and the rate is accelerating. Other evi- more accurately, is the sensitivity of climate to GHG con-
dence of global climate change includes a systematic rise in the centrations. The accuracy of the economic costs of impacts
mean sea level (about 16 centimeters during the past century), also needs to be increased, especially since many of them will
the melting of ice in polar areas and glaciers, increased dam- occur in the distant future. Because of time lags, often involv-
age caused by extreme weather events, less precipitation in dry ing decades or even centuries, catastrophic outcomes such as
areas and more precipitation in wet areas, and significant shifts the melting of polar ice or changes in oceanic circulation are
in ecological cycles and animal behavior. hard to predict.

38    Finance & Development March 2008

 How would this mitigation take place? A key way is Of course, these mitigation and adaptation efforts raise
through the flexibility mechanisms in the 1997 Kyoto Treaty tough questions about equity and burden sharing, which
to combat global warming—such as the Clean Development often dominate global debates. To date, the bulk of greenhouse
Mechanism, Joint Implementation, and Emissions Trading— gases—chiefly carbon dioxide from the burning of fossil fuels
which permit industrial countries to transfer part of their and deforestation—have been emitted by the rich countries (in
Kyoto emissions-reduction obligations to other nations 2004, average per capita GHG emissions in industrial countries
in exchange for payment. Consider a Clean Development were four times greater than those in developing countries).
Mechanism project implemented in a developing country, But as the years progress, developing countries will need
where the incremental cost of planting a forest to absorb car- to boost their energy use (often relying heavily on coal) to
bon would be only $10 a ton of carbon. The absorbed carbon alleviate poverty and promote development. Although per
would be credited to an industrial country and set off against capita emissions will remain far lower in developing nations
the industrial country’s mitigation obligations under the than in industrial countries for the foreseeable future, total
Kyoto Protocol—which might otherwise have involved retro- emissions in the more populous countries will become
fitting an existing power plant at a cost of $50 a ton of carbon. increasingly significant. The International Energy Agency
This process would be efficient because mitigation is done at estimates that by 2015, China will take over from the United
the lowest cost. Further, the money transfer from a rich to a States as the world’s top carbon dioxide emitter, and India
poor country would be equitable, provided the developing will move up from fifth to third place. And, further compli-
country received more than the minimum payment of $10 cating matters, the poor countries will be the ones hardest
a ton (to cover costs)—that is, it shared the $40 cost saving. hit by climate change. For now, developing countries should
Recent compensation levels have ranged from $5 to $10 a ton focus on adaptation, especially to protect their poor, whereas
in developing countries to about $50 in Europe. rich countries (which are better endowed financially and
technically) should lead the mitigation effort and also assist
poorer countries in both their adaptation and mitigation
Box 2
work. Meanwhile middle-income countries need to join the
A snapshot of global efforts mitigation effort over time as they become richer.
The 1992 UN Framework Convention on Climate Change
(UNFCCC), accepted by 190 countries, is the guiding docu- A framework for action
ment for international actions. It seeks “stabilization of green- What will it take for global warming to grab the attention of pol-
house gas concentrations in the atmosphere at a level that icymakers, who are invariably preoccupied with the problems of
would prevent dangerous anthropogenic interference with the
today? The answer lies in convincing them to integrate climate
climate system” . . . “on the basis of equity and in accordance
change policies into each country’s national sustainable develop-
with [nations’] common but differentiated responsibilities
ment strategy. And the good news is that many practical ways to
and respective capabilities.” It notes that developed coun-
tries “should take the lead in combating climate change” and
do just that have been developed and used over the past 15 years.
recognizes “the specific needs and special circumstances” of One promising framework—known as “sustainomics”—offers
developing countries. While accepting the “right to promote some initial practical steps to help make the transition from
sustainable development,” the UNFCCC invokes the precau- the risky business-as-usual scenario to a safer and more sus-
tionary principle that “where there are threats of serious or tainable future. It draws on three basic principles:
irreversible damage, lack of full scientific certainty should not •  First, the main goal must be to make development more
be used as a reason” for postponing measures to prevent cli- sustainable. This step-by-step approach is more practical and
mate change. permits us to address urgent priorities without delay, because
In an effort to implement the UNFCCC, participating many unsustainable activities are easier to recognize and imple-
countries agreed in late 1997 on the Kyoto Protocol, which ment (for example, conserving energy). Sustainable develop-
came into force in February 2005. It specifies that, by 2012, ment is defined here as a process (rather than an end point).
Annex I (industrial) countries will collectively reduce their • Second, the three elements (or vertices) of the sustain-
emissions by 5 percent relative to 1990 levels, and Non- able development triangle need to be given balanced treat-
Annex I (developing) countries are exempt from mandatory ment. That means weighing social (inclusion, empowerment,
emissions reductions. Currently, 174 countries have rati- and governance), economic (growth, efficiency, and stability),
fied this agreement, although the United States (the largest and environmental (biodiversity, natural resources, and pol-
greenhouse gas (GHG) emitter) has rejected it. lution) dimensions.
Nevertheless, global GHG emissions rose by more than • Third, deliberations should transcend traditional
70 percent from 1970 to 2004, with major increases since boundaries (involving academic disciplines, space, time, and
Kyoto. The road map agreed at the UNFCCC Bali meeting
stakeholders). Transdisciplinary analysis is essential, because
in December 2007 set out the agenda and timetable to craft a
issues and solutions cut across conventional disciplines.
post-Kyoto mitigation agreement—along with helping poor
Problems such as climate change also span the planet, play
countries adapt to climate change (with improved financial
and technical help)—but participants failed to agree on spe-
out over centuries, and concern every human being.
cific mitigation targets, mainly because of U.S. reluctance. These principles could help guide policymakers trying to
shape a long-term consensus on reconciling mitigation costs

Finance & Development March 2008   39

 Author: Munasinghe, 2/26/08
Proof

Ensuring food security

Tunneling through Among the various sustainomics tools, the Action Impact
Developing countries need to avoid the carbon-intensive path Matrix (AIM) excels in its ability to show how to integrate
of industrial countries. climate change and sustainable development—making it an
High extremely useful tool for decision making at the national, sec-
toral, and project levels. It identifies and prioritizes how the
C
Climate risk (per capita GHG1 emissions)

main national development policies and goals affect the key

Safe limit for emissions adaptation and mitigation options, and vice versa. It analyzes
“Tunnel” key economic-environmental-social interactions to identify
D E
potential barriers to making development more sustainable.
And it helps determine the key macro policies and strategies
B
that would facilitate the implementation of adaptation and
mitigation to overcome the effects of climate change.
Take the case of the 2006 AIM for Sri Lanka, as illustrated
A in Table 1. The cells with values of –3 and –2 indicate the
Low High more adverse effects and should have the greatest prior-
Development level (per capita income)
ity. Conversely, cells with values of 0 or –1 may effectively
Source: Munasinghe (2007).
1
Greenhouse gas. be ignored because the effects are small. Consider the row
marked “(S1) Status,” where the cell (S1, 6) has a value of
–3, indicating that climate change will have a severe negative
and development aspirations. As the chart shows, a country’s impact on future water resources. Looking down column
level of environmental risk (represented by GHG emissions (6), we note that cell (C6) also has a value of –3, showing
per capita) varies with its level of development (measured that this lack of water resources will severely affect food
by GNP per capita). A typical developing country might lie security. Similarly, looking down column (1), we see that cli-
along the curve AB, whereas an industrial nation might be mate change will also have highly negative effects on food
at C. Ideally, industrial countries (exceeding safe
limits for “dangerous” climate change) should Table 1
mitigate and follow the future growth path CE Identifying climate-development links in Sri Lanka
by restructuring their development patterns to
An Action Impact Matrix helps pinpoint impacts of key climate change
delink carbon emissions and economic growth.
vulnerabilities on major development goals and policies, determines “win-win”
Developing countries could adopt innovative pol-
policies, and resolves trade-offs.
icies to “tunnel” through (along BDE) by learning
Key vulnerabilities:  
from the experiences of the industrial world—
economic sectors and ecosystems
thus, the tunnel would lie below the safe limit.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
That way, they could simultaneously continue to
Notation:
Agricultural output

coast ecosystems

Poor communities
develop (and grow) more sustainably, follow a less
(flora and fauna)

Water resources

+ Beneficial

Industries and
Human health

Infrastructure
Wetlands and
Deforestation
Biodiversity 
Hydro power

carbon-intensive growth path, and reduce their – Harmful

3 High

tourism
climate vulnerability. 2 Moderate
The framework also provides policymakers 1 Low
0 No impact
with a variety of practical tools—both new and
conventional methods applied innovatively. At
the national level, tools include macro and sec- (S0) Status (natural variability) –1 0 –2 –1 –1 –2 –1 0 2 2
toral modeling, environmentally adjusted national Status (+climate change
(S1) impacts) –2 –1 –2 –2 –2 –3 –2 –1 –1 –1
income accounts, poverty analysis, and the Action
Impact Matrix. At the project level, they include Major development  
goals/policies
cost-benefit analysis, multicriteria analysis, and
environmental and social assessment. (A) Growth –1 –1 –1 –1 –1 –2 –2 –1 –1 –1

Useful policy instruments include pricing, taxes (B) Poverty alleviation –2 0 –1 –1 –1 –2 –2 –2 –1 –1

and charges, regulations and standards, quantity (C) Food security –3 0 –1 –1 –1 –3 –1 –1 0 0
controls, tradable permits, financial incentives,
(D) Employment –1 0 –1 0 –1 –2 –1 –2 –1 –2
voluntary agreements, information dissemina-
tion, and research and development. These tools Trade and  
(E) –2 –1 0 0 0 –1 –1 0 –2 –1
globalization
help to identify and implement the most desirable Budget deficit
“win-win” climate policies that simultaneously (F) –1 –1 0 0 0 0 0 –2 0 –1
reduction
yield economically, environmentally, and socially (G) Privatization 0 1 1 0 0 1 0 0 –1 –1
sustainable paths. They also help resolve trade-offs
Source: Munasinghe (2007).
among conflicting goals.

40    Finance & Development March 2008

security through the agriculture sector, as indicated by the anced manner—in large part, by quantifying and displaying
–3 in cell (C1). Each such cell is linked to a separate detailed trade-offs that had to be made between conflicting objectives
description—for example, the description for cell (C1) that are difficult to compare directly. The multicriteria analy-
describes outputs of all major crops in different parts of Sri sis thus provided useful additional information to supple-
Lanka, under different temperature and rainfall conditions. ment the economic data from a cost-benefit analysis.
In light of the very high AIM priority assigned to food As in all sustainable development studies, the indicators
security, agriculture, and water, a more detailed study of this chosen were crucial. In this case, the economic indicator was
issue was quickly undertaken. A Ricardian agriculture model cost, the social indicator was number of people resettled, and
was applied to identify how past output changes in important the environmental indicator was a biodiversity loss index.
crops such as rice, tea, rubber, and coconut had depended on All indicators were measured per ton of carbon mitigated at
natural variations in climate (mainly temperature and rain- each site (because fossil fuel use was displaced by the hydro-
fall). Then, a downscaled regional climate model was used electric energy generated).
to make detailed temperature and precipitation predictions Which hydropower projects ranked highest? It was those
specific to Sri Lanka. The combined results of both mod- that provided the most balanced path for integrating miti-
els showed that the impact on future rice cultivation would gation with national sustainable development objectives.
be negative and significant (almost 12 percent yield loss by Table 2 shows the top 10 sites (out of 22 examined) based
2050) and would affect poor farmers in the dry zone, where on their high score on a simple composite sustainability cri-
incomes are lowest. Meanwhile, some areas in the wet zone, terion, which gave equal weight to the economic, social, and
where tea is grown and incomes are higher, would experience environmental indicators. The best 2, Projects E and V, also
gains (+3.5 percent yield by 2050). scored highest on the economic indicator, but third-place
These findings raise several important policy issues. First, Project R managed to edge out Project H, even though the
given that rice is the staple food and a large portion of the latter scored higher on economic terms alone.
population depends on rice farming, adaptation measures
are essential to protect national food security, protect liveli- A higher profile
hoods, and reduce the vulnerabilities of the rural poor in the In recent months, three developments—the release of the
dry zone. Second, the different effects of climate change on IPCC Fourth Assessment Report, the awarding of the 2007
poor farmers and richer landowners have income distribu- Nobel Peace Prize to the IPCC and Al Gore, and the Decem-
tion and equity implications that also need to be addressed. ber 2007 Bali conference of the UN Framework Convention
And third, population movements from dry to wet zones are on Climate Change—have combined to raise the profile of
a potential risk that policymakers will need to deal with. climate change and helped to highlight the difficulties that
policymakers face in coming to grips with this important
Encouraging renewable energy challenge. Although there is a growing consensus worldwide
At the project level, another AIM was generated to study Sri on the need to take early action on climate change, impor-
Lanka’s links between mitigation and development goals. tant practical issues remain unresolved, including burden
Small hydropower was identified as a promising renewable sharing and equity.
energy option, and that, in turn, raised the question of which Nevertheless, one can conclude on an optimistic note.
small hydropower sites should be selected. In an effort to as- Although climate change and sustainable development
sess social, economic, and environmental indicators, a mul- are complex, interlinked problems that pose a challenge to
ticriteria analysis was undertaken. Its advantage was that it humanity, they could be solved together by integrating adap-
allowed policymakers to look at all of these spheres in a bal- tation and mitigation response measures into the broader
rubric of sustainable development strategies. We know
enough already to immediately take the first step toward
Table 2 making development more sustainable­—helping to usher in
Prioritizing small hydropower projects in Sri Lanka a safer and brighter future. n
A multicriteria analysis offers policymakers a way to pick the
best mitigation projects that make development more sustainable. Mohan Munasinghe is Vice Chair of the Geneva-based Inter-
Indicator Project rank governmental Panel on Climate Change, and Chairman of
1 2 3 4 5 6 7 8 9 10 the Sri Lanka–based Munasinghe Institute for Development
Sustainability1 E V R I P J U L H S
Social2 L O P Q R V M I C E
(MIND).
Environmental3 G R I O Q L E V S T
Economic4 E V H R I P J U L S References:
Source: Munasinghe (2007). Munasinghe, Mohan, 2007, Making Development More Sustainable:
Note: Individual letters stand for individual projects, which are ranked by social, environmental,
and economic impact. Sustainomics Framework and Practical Applications (Colombo,
1The sustainability index is a composite that gives equal weight to the social, economic, and
Sri Lanka: MIND Press, Munasinghe Institute for Development);
environmental indicators.
2Measured by number of people displaced. www.mindlanka.org
3Measured by a composite biodiversity loss index.
4Measured by cost. Intergovernmental Panel on Climate Change, 2007, Synthesis
Report—Fourth Assessment (Geneva); www.ipcc.ch

Finance & Development March 2008   41