Olav Hohmeyer

Linking Weak and Strong Sustainability Indicators: The Case of Global Warming

The aim of this paper is to describe and discuss the weak and strong sustainability approach of assessing climate change and to show reasonable applications, weaknesses, possible improvements and linkages of both approaches. Main features of “weak” and “strong” sustainability approaches are characterised. Damage cost studies of global warming representing weak sustainability indicators are discussed. Further, the examples of the “inverse scenario” approach of the German Advisory Council on Global Change (WBGU) and the environmental space concept of the Dutch Advisory Council for Research on Nature and Environment (RMNO) are described and discussed for illustrating advantages and weaknesses of strong sustainability indicators. Finally, the integration of damage cost modules into a broader methodological framework of strong sustainability is recommended.

Introduction: Economic Aspects of and Policy Options for Climate Protection

At the time of the workshop, upon which this volume is reporting, it was not clear how the international political process on global climate change would develop. Would there be an agreed target for greenhouse gas emission reductions for the so-called Annex I countries as a result of the international negotiating process or would there just be more political rhetoric? Would economic measures like emission trading schemes get a chance or would international climate policy resort to fixed national reduction targets and command-and-control policies making it impossible to achieve international targets through an efficient environmental policy based on market-oriented instruments?

Social Costs and Sustainability — an Overview

The 1995 conference on environmental externalities in Ladenburg, Germany has been the third of its kind: after Ladenburg in 1990 and Racine (Wisconsin) in 1992. Substantial research has been conducted on the valuation of external costs during the past few years and externalities have been used by both utilities and governments to a certain degree. Additionally, the growing understanding of environmental risks with a new temporal and spatial dimension, especially of global warming, has led to a search for new economic approaches responding to such threats. A central goal of the third conference on environmental externalities was to link the concept of social costs with the broader, more ecologically oriented approaches of sustainable development. The two areas contributing most to a non-sustainable development today are stationary energy conversion processes and the transportation sector. Hence, the goals of the 1995 conference in Ladenburg in 1995 have been: Presenting and discussing recent American and European valuation studies in the fields of energy and transportation, Reporting the progress made in the use of environmental and other external costs in national accounting systems, Discussing the suitability of measuring external costs and discounting future risks with regard to global environmental threats like global warming, Discussing the need of new economic paradigms to achieve sustainable development, and the question of how to measure sustainability, Informing energy utilities and governments about ways to internalize their externalities, e.g., by establishing carbon taxes and other pollution taxes and fees which take environmental costs into account, Analyzing examples of success and failure in implementing such instruments.

Introduction and some Conclusions from the Conference

The international conference on the social costs of energy, which is reflected in this volume, concentrated on the social costs of electricity production, although many aspects apply to other areas just as well. The relatively narrow focus of the conference reflects the mainstream of the empirical research conducted so far; it should not be misinterpreted as a value judgement on the relative importance of this specific instance of social costs in market economies.

Some Conclusions from the Workshop

Although the workshop reflects a rather early stage in the discussion of the external costs of energy and although it merely addressed the questions relating to the external environmental effects of electricity, the editors think that some first conclusions may be drawn from the papers presented and the discussions among the workshop participants following these presentations. We would like to summarize the results of the workshop in the following points.