SUSTAINABLE DEVELOPMENT INDICATORS for CDM Projects Climate Change Information Center Manila Observatory Ateneo de Manila University

CDM Project Achieves Sustainable Development objectives for the host developing country Reduces GHG Emissions

Contents I.What is meant by sustainable development II.How a CDM project can contribute to sustainable development III.Economic impacts IV.Environmental impacts V.Impacts on disadvantaged groups VI.Summary of CDM project impacts on sustainable development

I. What is meant by sustainable development

Bruntland Commission (World Commission on Environment and Development, 1987) “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Bruntland Commission (World Commission on Environment and Development, 1987) “It contains within it two key concepts: “the concept of ‘needs’, in particular of the world’s poor, to which overriding priority should be given, and “the idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs.”

Bruntland Commission (World Commission on Environment and Development, 1987) Sustainable development involves two obligations: Obligation to the future  Sustainability Obligation to the present  Poverty alleviation

Achieving Sustainable Development Sustainable development is about creating capacities for raising per capita well being, living standards, quality of life Capacities determined by the stocks of assets which can be converted to goods and services which contributes to “well being”

Assets Well Being Standard of Living Quality of Life Process of Development Goods & Services

Capital Assets K = K M + K H + K N + K S K → Total Capital K M → Manufactured Capital K N → Natural Capital K H → Human Capital K S → Social Capital

K M : Manufactured Capital Equipment, machinery, factories, technology, infrastructure More capital equipment will, typically, raise the productive capacity of the population and hence their real incomes

K N : Natural Capital Environmental assets such as clean water and air, soil, forests, etc. More environmental assets in the form of clean water, clean air, biomass resources and improved soil will help to reduce the incidence of disease, raise agricultural productivity and ensure fuel supplies.

K H : Human Capital Education, health The more education there is, the better are the prospects for raising living standards, including health

K S : Social Capital Set of social relationships that hold communities together The more socially cohesive are communities, the more likely they are to organize themselves for the collective good

Obligation to the Future Sustainability Sustainable development is about future well being Leave to future generations the capacity to be as well off as we are

Obligation to the Present Sustainable development is about well being now It is about poverty alleviation The poor cannot raise their own well being without better provision of assets and technology

II. How a CDM project can contribute to sustainable development

Types of CDM project impacts on sustainable development 1.Economic impacts 2.Environmental impacts 3.Impacts on disadvantaged groups

Economic impacts CDM project can contribute to sustainable development By providing gains to manufactured capital –i.e. transfer of technology or building infrastructure, improving efficiency By improving social and human capital –Through the creation of sustainable employment, the raising of living standards, the transfer of knowledge

Economic impacts Direct impacts of CDM project –Gains: introduces new technology, builds capacity –Loses: restricts economically productive activities Indirect impacts of CDM project –Gains: stimulates greater economic activity or greater efficiency in other areas of production –Loses: other areas dependent on activity restricted by project

Environmental impacts CDM project can contribute to sustainable development By improving on environmental assets –e.g., by preserving biodiversity, improving local air quality By minimizing negative impacts on the environment

Environmental impacts Aside from reduction of GHG emissions, a CDM project may have accompanying environmental impacts Because of the CDM project, environmental quality may improve or deteriorate These changes may result directly from the project or indirectly through the ramifications of the project elsewhere

Impacts on disadvantaged groups CDM project can be judged consistent with sustainable development If the gains from the project be distributed in a manner which does not disadvantage the poor If the project helps alleviate poverty

Impacts on disadvantaged groups Maximize the gains and minimize the loses experienced by the most disadvantaged groups (e.g., indigenous people, rural poor, landless farmers, etc) Impact on employment opportunities and incomes for the poor and disadvantaged Impact on traditional rights and social fabric of local communities

III. Categorization of Economic Impacts

Productivity gains Increase in productive efficiency –CDM projects, especially those involving technology transfer or capacity building, may increase the efficiency in which the flow of goods and services can be produced E.g., supply side energy efficiency projects Exploitation of new productive possibilities –CDM project introduces new productive possibilities E.g., waste-to-energy projects

Productivity loses Reduced productive efficiency (output forgone) –Productive processes may be changed or altered to reduce GHG emissions –Such changes may reduce the productive efficiency with which output is generated E.g., changes in type of fertilizer used Productive possibilities foregone –Project may displace or prohibit certain productive activities E.g., prohibition of certain land management practices

Positive spillovers Efficiency gains –Efficiencies demonstrated in the CDM project may encourage the adoption of the same new technologies and/or practices in similar activities E.g., end-use energy efficiency projects Complementary activities –CDM project may encourage the expansion of other complementary activities E.g., reforestation and eco-tourism

Negative spillovers When a CDM project involves the restriction or prohibition of a productive activity then other economic activities dependent on the complementary activity may be adversely affected –E.g., fuel switching from kerosene to solar technology may depress the demand for kerosene lamps

IV.Categorization of Environmental Impacts (Non-GHG)

Air pollution E.g., Fuel switching in transport sector –Increased use of natural gas will not only reduce CO 2 emissions but also reduce the emission of air pollutants including NO X, SO X, PM

Water pollution E.g., Fuel switching in rural areas –A project introducing renewable energy generation in rural households (e.g. solar electric technology) will displace the use of dry cell batteries to run electric appliances –Project may reduce the heavy metal water contamination associated with the improper disposal of such batteries

Soil conservation Restriction of production –A project which seeks to reduce artificial fertilizer production (a process resulting in CO 2 emissions) by encouraging the use of natural organic fertilizers should at the same time improve the properties of the soil being treated

Watershed protection E.g. reforestation –Projects that re-establish forests in upland areas will improve watershed integrity

Biodiversity conservation E.g. monocultural tree plantations –would be downgraded because of the potential damage to biodiversity

V. Categorization of impacts on disadvantaged groups

Increasing productive efficiency Through technology transfer, a CDM project may focus on increasing the efficiency of household processes and livelihoods. Projects that provide cheaper energy options or increase the agricultural output of households of disadvantaged groups E.g., fuel switching in rural areas

Improved employment opportunities or livelihood options New employment opportunities for local people and disadvantaged groups may arise as a result of CDM project activities –E.g., construction of new facilities, operation of new facilities in renewable energy generation New livelihood options for local people and disadvantaged groups –E.g., collection of biomass for conversion to energy

Reduced livelihood opportunities or livelihood options A CDM project may reduce the employment and livelihood opportunities to local people and disadvantaged groups –E.g., closed sanitary landfill for methane capture may restrict scavenging opportunities

Land and resource rights CDM projects may remove the legal and customary land and resource use rights of local communities –E.g. Afforestation projects may remove customary rights of indigenous peoples over forest land –E.g. Building of dams for generation of hydroelectric power may displace disadvantaged groups living in local communities

Environmental impacts A CDM project may have a number of environmental impacts (as outlined in Part IV) some of which may be specifically incurred by disadvantaged groups –E.g. Replacement of coal-fired boilers which cause considerable local air pollution with cleaner technology will reduce local air pollution

Positive spillovers A CDM project may have a demonstration effect that encourages similar enterprises in other areas that will themselves generate employment or livelihood opportunities for disadvantaged groups –E.g., introduction of pico hydro technology may provide training and technical assistance in the technology for certain individuals who can make the technology available to a much wider community

Positive spillovers Local multipliers: Local people and disadvantaged groups may benefit indirectly from the improvements in infrastructure and increased economic activity that results from a CDM project’s investments and activities –E.g. provision of reliable energy in a rural area could spur economic activity and generate employment and livelihood opportunities

Negative spillovers Local stagnation: CDM projects that prohibit or restrict some activities may be in danger of irrevocably undermining local communities. The employment and income provided by such activities may be fundamental to the functioning of the local community. –E.g., afforestation restricting slash-and-burn farming

Negative spillovers Income effects: CDM projects that increase the prices of goods that form a large part of the expenditure of disadvantaged groups will impact directly on their well-being –E.g. CDM project increases the price of energy (e.g., photovoltaics more expensive than kerosene) or food stuffs (e.g., organic more expensive than non-organic)

VI. Summary of CDM project impacts on sustainable development

Economic impacts Direct project impacts Productivity gains (+) –Increase in productive efficiency –Exploitation of new productive possibilities Productivity losses (opportunity costs) (-) –Reduced productive efficiency –Productive possibilities foregone Indirect impacts Positive spillovers (+) –Efficiency gains –Complementary activities Negative spillovers (-)

Environmental impacts (Non-GHG) Air pollution (+/-) Water pollution (+/-) Soil conservation (+/-) Watershed protection (+/-) Biodiversity conservation (+/-) Other environmental services (+/-) –E.g., Local climate regulation

Impacts for disadvantaged groups Direct project impacts Increasing productive efficiency (+) Improved employment opportunities or livelihood options (-) Reduced employment opportunities or livelihood options (+) Land and resource rights (-) Environmental impacts (+/-) Indirect impacts Positive spillovers (+) –Demonstration effect –Local Multipliers Negative spillovers (-) –Local stagnation –Income effects

Roberto C. Yap, S.J., Ph.D. Environmental Economist Climate Change Information Center Manila Observatory Ateneo de Manila University Tel Fax