Analysing the Nexus of Sustainable Development and Climate Change: an Overview
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COM/ENV/EPOC/DCD/DAC(2002)2/FINAL ENVIRONMENT DIRECTORATE DEVELOPMENT CO-OPERATION DIRECTORATE Working Party on Global and Structural Policies Working Party on Development Co-operation and Environment ANALYSING THE NEXUS OF SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE: AN OVERVIEW by Mohan Munasinghe Munasinghe Institute for Development (MIND), Sri Lanka COM/ENV/EPOC/DCD/DAC(2002)2/FINAL Copyright OECD, 2003 Application for permission to reproduce or translate all or part of this material should be addressed to the Head of Publications Service, OECD, 2 rue André Pascal, 75775 Paris, Cedex 16, France. 2 COM/ENV/EPOC/DCD/DAC(2002)2/FINAL FOREWORD This document is an output from the OECD Development and Climate Change project, an activity being jointly overseen by the (Environment Policy Committee) Working Party on Global and Structural Policies (WPGSP), and the DAC (Development Assistance Committee) Working Party on Development Co-operation and Environment (WPENV). The overall objective of the project is to provide guidance on how to mainstream responses to climate change within economic development planning and assistance policies, with natural resource management as an overarching theme. Insights from the project will be shared with the development assistance community in OECD countries, and national and regional planners in developing countries. The paper served as a basis for discussions in an initial OECD expert meeting, held in March 2002, aimed at constructing a framework for future OECD work on development and climate change. It therefore outlines key concepts, relevant principles, and tools for analysis that could support OECD work on this theme. Partly drawing on this report, a subsequent Concept Paper (Agrawala and Berg 2002) outlined a more specific framework for launching and structuring case studies that are now being carried out under the project. These case studies are focusing on adaptation, to develop an understanding of how climate change adaptation policies in various natural resource management sectors (e.g. coastal zone, water resource and forestry management) can be mainstreamed into economic development planning and assistance policies. Although the case studies are principally addressing adaptation policies, they are also considering opportunities for combined adaptation-mitigation and development outcomes (for example, in the areas of land use and forest management). Mitigation is also recognised by the international community as a key connection between economic development and climate change policies. Future work in this project may wish to consider mitigation connections more specifically or, drawing on the results of the adaptation and natural resource management case studies, begin to assess the appropriate balance between investment in adaptation and mitigation options in different national contexts. Mitigation is, therefore, also discussed in this document, alongside vulnerability and adaptation issues. Ultimately, climate change solutions will need to identify and exploit synergies, as well as seek to balance possible trade-offs, among the multiple objectives of development, mitigation, and adaptation policies. The paper was prepared by Mohan Munasinghe (MIND, Sri Lanka). The author is grateful to all the participants in an OECD expert meeting held on March 13-14, 2002. The contributions of Cannon (2002), Huq (2002), Klein (2002), OECD (2002), Sari (2002), and Virdin (2002) are especially noteworthy. Thanks are also due especially to Jan Corfee-Morlot and other OECD staff (Martin Berg, Shardul Agrawala, Georg Caspary, David O’Connor and Nils-Axel Braathen) for their constructive comments, and to Nishanthi De Silva and Yvani Deraniyagala of MIND for help in preparing the final version. 3 COM/ENV/EPOC/DCD/DAC(2002)2/FINAL The views expressed in the paper are those of the author alone, and do not necessarily reflect the positions of either the OECD or its Member countries. The report is published under the responsibility of the Secretary-General. 4 COM/ENV/EPOC/DCD/DAC(2002)2/FINAL TABLE OF CONTENTS 1. INTRODUCTION ............................................................................................................................... 7 2. OVERVIEW OF KEY CONCEPTS ................................................................................................... 8 2.1 Sustainable development concepts................................................................................................... 8 2.2 Economic, environmental and social sustainability ......................................................................... 9 2.3 Poverty and equity.......................................................................................................................... 10 2.4 Integration of economic, social and environmental considerations ............................................... 10 2.5 Convergence between optimality and durability approaches......................................................... 11 2.6 Relevant principles for policy formulation .................................................................................... 11 3. NEXUS OF SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE ............................... 14 3.1 Circular relationship between climate change and sustainable development................................. 14 3.2 Economic, social and environmental risks arising from climate change ....................................... 15 3.3 Vulnerability, resilience, adaptation and adaptive capacity ........................................................... 16 3.4 Mitigation and mitigative capacity [to replace previous text with this heading............................. 16 4. TOOLS FOR ANALYSIS AND ASSESSMENT............................................................................. 18 4.1 Action impact matrix (AIM) .......................................................................................................... 18 4.2 Indicators........................................................................................................................................ 19 4.3 Cost-Benefit Analysis (CBA)......................................................................................................... 19 4.4 Multi-Criteria Analysis (MCA)...................................................................................................... 21 4.5 Sustainable Development Assessment (SDA)................................................................................ 21 5. ASSESSING THE SUSTAINABILITY OF CLIMATE CHANGE AND NATURAL RESOURCE MANAGEMENT DECISIONS.................................................................................................................... 22 5.1 Transnational scale: climate change policy objectives................................................................... 22 5.2 National-economy-wide scale: macroeconomic management ....................................................... 24 5.2.1 Scope of policies and range of impacts..................................................................................... 24 5.2.2 Screening and problem identification....................................................................................... 28 5.2.3 Analysis and remediation.......................................................................................................... 29 5.2.4 Using the AIM to reconcile development and climate change objectives................................ 30 5.3 Sub-national scale: energy sector planning and forest ecosystem management ............................ 31 5.3.1 Sustainable energy development framework............................................................................ 31 5.3.2 Methodology............................................................................................................................. 32 5.3.3 Main results of Example 3........................................................................................................ 33 5.3.4 Conclusions of Example 3 ........................................................................................................36 5.3.5 Local-project scale: Hydroelectric power................................................................................. 36 5.3.6 Environmental, social and economic indicators ....................................................................... 37 6. CONCLUDING REMARKS............................................................................................................. 40 ANNEX 1: TOOLS FOR ANALYSIS AND ASSESSMENT.................................................................... 42 A1.1 Indicators .................................................................................................................................. 42 A1.2 Cost-Benefit Analysis (CBA) ................................................................................................... 42 A1.3 Multi-Criteria Analysis (MCA) ................................................................................................ 43 A1.4 Linking sustainable development issues with conventional decision making.......................... 45 REFERENCES ............................................................................................................................................. 48 5 COM/ENV/EPOC/DCD/DAC(2002)2/FINAL 6 COM/ENV/EPOC/DCD/DAC(2002)2/FINAL 1. INTRODUCTION World decision makers are looking for new solutions to traditional development issues such as economic stagnation, persistent poverty, hunger,