GCI was contacted by the Chair of WG3 during the final lead authors meeting in Paris (22-24/3/95) to say that the PPP point raised here had been won as a result of this paper being submitted and would be assimilated (whatever that means. However, the equal versus unequal life evaluation controversy remained unresolved within the group.
The Intergovernmental Panel on Climate Change (IPCC) is due to publish its Second Assessment Report (SAR) later this year. IPCC Working Group Three (WG3) now deals with "Economic and other Cross-Cutting Issues". Its contribution to the Report is intended to assist policy formulation at the "Conference of the Parties" (COP) in Berlin 27/3/95 - 8/3/95.
The approach adopted by the economists in this Group has been conceived in terms of a Global Cost/Benefit Analysis (G-CBA). Using this approach, the Group estimates that annual global damage costs will be 1.5% - 2.5% of Gross World Product (GWP), if atmospheric CO2 concentrations go to twice pre-industrial levels.
The Group also estimates that the distribution of these damages between the Organisation for Economic Co-operation and Development (OECD) and the Rest of World (ROW) will be OECD 65% and ROW 35%.
At present, the total global damage assessment is as an aggregate of all individual country damage assessments converted to US$ at market exchange rates.
This is misleading and would only make sense if the OECD countries intend to pay for all damages, a liability not accepted by them. So in developing countries, the monetary significance of their damage costs to them (and proportionately in the global account for the purposes of international comparative assessment) is substantially under-represented because the amounts in question are devalued through the currency exchange rate system. The burden on the damage to non-OECD countries would be more realistically represented if the figures were revalued at PPP equivalence.
If the IPCC calculation is redone using PPP to evaluate all the damages (except the human deaths - see comments later), the distribution of the damage is shown to fall much more harshly on the ROW and the total amount of damage increased.
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IPCC recognises many people will die each year as a result of global climate changes. Most of these deaths will be in developing countries. Economists have to put a cash figure on these deaths in order to perform the G-CBA. They value people's lives around the world differently because of the disparate income levels of those directly affected. Consequently the lives of people in the poor countries are valued at one tenth the value of people in the wealthy countries. Deaths in the USA and the EU are costed at $1.5 million per head. In the poorer countries they are put at $150,000 per head.
This approach is controversial and may compromise the IPCC in general. So far, the poorer countries have no responsibility for causing global climate change. In fact many authorities argue that low-energy consuming countries are providing an environmental subsidy to energy-intensive ones. Yet it is in these low-energy consuming countries that the majority of deaths will occur.
If WG3's figures are recalculated using the US value of $1.5 million for all deaths, the results are show below.
So contentious is the question of unequal life-evaluation that a sign-on protest against it started last June. Many professional people North and South including some IPCC lead authors became co-signatories. This protest has already attracted considerable international media interest.
If changes for both equal life evaluation and PPP are made together, the overall level of damage costs of global warming rise substantially and the distribution of these are shown to fall very much more heavily on the Rest of World (ROW) than in the original IPCC estimate.
IPCC's total damages of 2% of GWP rise to 3.2% when these revaluations are performed.
It is entirely probable that policy-makers from developing countries will refuse the existing results of IPCC's Global Cost/Benefit Analysis (G-CBA). The margin of error is too great. Any policy measures conceived under the original formulation are bound to treated with suspicion and even hostility, and the IPCC's credibility could be impaired.