The price we pay for the crimes of the rich

The impact of climate change induced by global warming knows no border. Particularly, the poor countries in general, and a flood-prone country like Bangladesh, in particular, do not have the resources to deal with the enormity of the impact of climate change on their lives. Yet these poor countries have very little to do with the consequences they are facing or about to face in the near future due to climate change, a problem exclusively created by the rich of our time -- the so-called developed economies who pride themselves on the functioning of market economy that is based on the basic premise outlined above. Then how does modern economics resolve this consequential problem? And most importantly, how do the developed economies, standing on the triumph of the modern economic theory, respond to the resolution offered by their own economics.

To resolve any externality in economics, an economist must resolve three issues simultaneously. Firstly, who is responsible for the action that has negative consequence on others; secondly, is the consequence on the third party significant enough to draw any resolution; and finally, what mechanism will be optimal to resolve this externality problem. I explore these three issues in the case of the impact of climate change on the developing economies, in general and Bangladesh, in particular.

Firstly, the crux of the resolution is to answer who is responsible for the climate change and what is the whole normative economics at the root of the problem. There are competing as well as controversial views on this first issue. The infidels of climate change argue that 98 percent of total global greenhouse gas emissions are natural (mostly water vapour); only 2 percent are from man-made sources. By most accounts, man-made emissions have had no more than a minuscule impact on the climate. Although the climate has warmed slightly in the last 100 years, 70 percent of that warming occurred prior to 1940, before the upsurge in greenhouse gas emissions from industrial processes. A Gallup survey indicated that only 17 percent of the members of the American Meteorological Society and the American Geophysical Society thought the warming of the 20th century was the result of an increase in greenhouse gas emissions.

On the contrary, the believers of climate change argue that in 2001 the 2500 scientists from around 100 countries, who make up the Intergovernmental Panel on Climate Change (IPCC), warned that unless greenhouse gas levels are stabilised, Earth's average surface temperature will rise by up to 5.8 degrees celsius by the end of the century. The developed countries, which contain a minority of the world's population, account for 72 percent of current fossil fuel carbon dioxide emissions and 84 percent of fossil fuel carbon dioxide accumulated since the onset of the Industrial Revolution. Even taking deforestation and land-use changes into account, developed countries account for 63 percent of current and 78 percent of cumulative carbon dioxide emissions from all sources and emission is still increasing.

While the developed countries, with their relatively small populations, have produced most of the carbon dioxide which produces global climate change, they also have benefited most from the production of carbon dioxide and have the resources to protect themselves from the consequences of climate change. The developing countries, on the other hand, with their large and rapidly growing populations, have less responsibility for causing global climate change, have received fewer benefits from the production of carbon dioxide, and have fewer resources to protect themselves from the consequences of the resulting climate change.

Secondly, how significant is the impact of climate change attributed to the developed country emission on the lives of the people in developing countries, in general and Bangladesh, in particular. The UN environment programme estimates that the extra economic costs of disasters attributable to climate change -- floods, storms, hurricanes, etc -- are running at more than $300 billion annually. The best guess of development groups is that climate change could cost developing countries up to £6.5 trillion over the next 20 years. At present, some 46 million people live in areas at risk of flooding due to storm surges. Scientists estimate that a 50cm rise in sea level would increase this number to 92 million and a one metre rise would put 118 million in peril. The figures are based on current population density and present levels of sea defense measures. If the global ocean level went up by one metre, Egypt would lose 1 per cent of its land area, the Netherlands would lose 6 per cent, Bangladesh would lose 17.5 per cent, and on the Majuro Atoll in the Pacific Marshall Islands some 80 per cent of the land would disappear under water.

Being a low-lying and densely populated country, Bangladesh would be worst hit by any rise in the sea level. Coastal areas will experience erosion and inundation due to intensification of tidal action. A rise in seawater will enable saline water to intrude further inland during high tides. Destruction of agricultural land and loss of sweet water fauna and flora could also occur. The shoreline will retreat inland, causing changes in the coastal boundary and coastal configuration. The process will also shrink the land area of Bangladesh.

Dr Feroze Ahmed of the Bangladesh University of Engineering and Technology warns that Bangladesh has already been experiencing catastrophic cyclones. The one that hit Bangladesh in 1991 claimed 150,000 lives and caused staggering losses to livestock and property. A warmer climate, by increasing the frequency of natural hazards such as floods and cyclones, will further aggravate such situations and negate the development efforts of the country.

Monirul Qader Mirza, a Bangladeshi water resources expert now at the Adaptation and Impacts Research Group at the University of Toronto argues that latest climate models indicate that flooding in Bangladesh will increase by up to 40 percent this century as global temperatures rise due to global warming. Each year, roughly a fifth of Bangladesh is flooded, and climate change is forecast to exacerbate the problem as sea levels rise, monsoons become wetter and more intense cyclones lead to higher tidal surges. To make things worse, heavier rainfall triggered by global warming will swamp Bangladesh's riverbanks, a previously unforeseen effect, flooding between 20 and 40 percent more land than today. Bangladesh is particularly flood-prone because it lies in the delta of three great rivers, the Ganges, Brahmaputra, and Meghna, which together drain 175 million hectares. People can grow crops on land regularly fertilised by nutrient-laden silt from the rivers. But extreme floods cause considerable hardship and loss of life: in 1988 and 1998 over two-thirds of the country was under water at some point.

Finally, given the negative externality imposed on the developing countries by the developed ones what is the optimal resolution mechanism to compensate the people in the developing countries, who did not get the benefit accrued by climate exploitation? Two complementing mechanism seems to emerge. Firstly, pressure seems to be building for developed countries to forgive developing countries' debt and to transfer environment friendly technologies. A new report by Christian Aid claims that the "carbon debt" by developed countries that is leading to global warming exceeds the financial debts of less developed countries. In fact, the report says, "heavily indebted poor countries" have credit of $612 billion when pollution is taken into account. Secondly, after Russia decided to sign on to Kyoto Protocol, it has raised hopes among the world's people that governments are now finally going to unite to take meaningful action to prevent this global environmental catastrophe by reducing emission while giving the developing countries necessary leeway to catch up in terms of economics progress.

However, the US and Australia, two major contributors to global warming, refuse to accept the mechanism by not ratifying the Kyoto treaty. To defend their position they bring in the simple yet powerful "opportunity cost principle" coupled with the inherent self-interest principle of modern economics. According to a report by the Department of Energy, stringent targets to reduce fossil-fuel emissions in the US will cause energy-intensive industries, including steel, iron, chemical, rubber and plastic, to flee from the developed countries to the developing countries, taking with them hundreds of thousands of jobs. Carbon taxes will cause relatively large income losses in the poorest one-fifth of the population. The poor, because they spend a greater proportion of their income on necessities, would have few ways to cut back to compensate for higher living costs. Stabilising emissions at 1990 levels by 2010 would reduce the growth of US per capita income by 5 percent per year. The burden would fall on many individuals and families and would be unfair in that it would be quite unrelated to income, wealth or ability to pay. Instead, the burden would be determined by energy use patterns and circumstances, such as distance from work, condition and energy efficiency of homes, automobiles, and appliances. Senior citizens on fixed incomes would find their energy costs escalating and their income dwindling. In short, opportunity cost is too high to accept the mechanism.

In summary, our economics and their economics, although the same economics give different resolution and perhaps precisely because of this someone once said: if there are two economists there are always three opinions. The world of modern economics through the window of opportunity cost and self-interest brings us back to square one without any optimal resolution mechanism to pay the poor of the world who are suffering from the environmental crimes of the rich. I, however, believe that there is another supreme mechanism that can resolve this consequential problem. That is the simple yet paramount principle of taking responsibility for our actions and taking responsibility for the future in the greater name of humanity. If we cannot leave a better future than what we have got for ourselves, our contribution to the future is zero, and nobody wants to leave this world empty-handed.

The author is a PhD Candidate in Financial Economics at the University of Toronto and a Selwyn Scholar.