Benito Müller and Lavan Mahadeva, under the auspices of the European Capacity Building Initiative, have released a very interesting proposal on operationalizing “respective capabilities.” The Summary for Policy Makers is here, and the Technical Report is here. Here’s the two-paragraph summary that Müller sent around:
“Whether or not the regime emerging from the current negotiations under the UN Framework Convention on Climate Change (UNFCCC) will be based on an explicit cost/burden sharing formula, the debate about (implied) costs/burdens will be central. Such a debate cannot be genuinely meaningful in the absence of an acceptable operationalisation of Article 3.1 in general, and of the concept of ‘respective capability’ in particular.
The Brief proposes a measure for national ‘differentiated economic capabilities (‘ability to pay’) as integral part of an operationalisation. The primary purpose of the measure is to define or assess climate change cost/burden sharing (schemes). To illustrate the potential use of this methodology the Brief considers two examples: assessing the fairness of a given cost distribution; and developing a (rule-based) ‘graduation scheme’ regarding obligations to pay.”
It’s encouraging to see serious work on this front, in the first instance because true success in the climate negotiations – the stabilization of the climate system before we cross irreversible tipping points– is more or less impossible to imagine without a broad turn towards an open and constructive discussion of Respective Capabilities (RC). This is because Capacity is fundamental to any coherent treatment of global climate justice. As noted long ago by Ringius, Torvanger and Underdal, Capacity is one of the three criteria of equity that are “frequently invoked and rarely disputed.” The others, classically, are Responsibility and Need, and to this list we would add Ambition itself.
There is also more recent, more official, evidence that Capacity will play a major role in the negotiations. Here, for example, are the ADP Co-chairs in their summary of the Doha discussions.
“Commitments should be defined and differentiated on the basis of equity, the principle of common but differentiated responsibilities and respective capacities, and historical responsibility”. . . “Countries with the greatest capacity should take on economy-wide quantified emission reduction targets, while other countries should contribute in accordance with their national circumstances and on the basis of equity” . . . “No Party should be forced to do something it is not capable of.”
So, what to say about the “Oxford approach” to Capacity?
First, the Oxford approach is implicitly – and explicitly – constructed as a reply to the Greenhouse Development Rights approach. In this regard, we must stress that we welcome it, and immediately note two similarities between the Oxford approach and GDRs.
First, the Oxford approach explicitly considers national development need when calculating its Capacity. Its approach to development need is, to be sure, extremely different from the GDR approach, which accounts for this need by excluding all income below a “threshold” from the calculation of national Capacity. The Oxford approach, in contrast, is to calculate a “gross capacity,” to scale that gross capacity in a globally progressive manner, and to subtract a “poverty adjustment” from that scaled gross capacity. The differences here make a big difference, as we will note below, but at the highest level the goal of the two approaches is the same. Let’s call it developmental justice in a climate constrained world.
Müller and Mahadeva introduce their view of the relevant differences between the two frameworks in a section of their SPM which they call “Prioritizing Poverty.” To wit:
“Probably the best known formulation of a capability measure – at least in the world of climate change negotiations – is the concept of ‘capable income’ introduced in the Greenhouse Development Rights (GDR) approaches in order to develop their ‘Capacity indicator’ (which serves the same function as our capability index). It measures a country’s capability in terms of the ‘surplus’ annual income of its ‘rich’ inhabitants over and above a US $9000 ‘development threshold’. Poverty, in other words, is taken into account by exempting the income of poor people from being counted as ‘capable’.
This, however, means that no matter how large a country’s poor population (and its poverty problem), under the GDR capability measure it is deemed to have some capability to pay for climate change, and expected to share the burden/cost of climate change. This failure to reflect the magnitude of ‘development needs’ of countries with poor populations is, we believe, not compatible with the idea that countries should have the option to prioritize spending on poverty eradication over climate change cost/burdens.”
A second notable similarity between the Oxford proposal and GDRs is that both are designed to be used in a variety of ways, and in the context of multiple frameworks and architectures. For example, in the context of a graduation system. Or directly as a way to allocate costs. Or as a core element of an “Equity Reference Framework” designed to focus and facilitate the larger policy debate.
To be clear, Müller and Mahadeva are not proposing “that equity in cost/burden sharing or graduation should only be measured in terms of respective capabilities.” Rather, their “focus on capabilities in this context is due to the desire to complement some earlier work . . . on measuring (historic) responsibilities, and on how to combine different indices.” In other words, they are developing a indicator that is designed to be used as part of a “basket” of equity indicators, much like the GDRs “Responsibility and Capacity Index” and, more generally, the “New Interpretation of CBDRRC” that has been proposed by the Climate Action Network.
Given these similarities between the Oxford approach and GDRs, it’s interesting to interrogate the differences, and in this comment we will focus on the most important one, which turns around the treatment of intranational inequality.
In a nutshell, the Oxford approach calculates national Capacity in a manner that is intended to yield a progressive “tax” that increases with average national income. (Parenthetically, as Americans, we might add that it is refreshing to see the unapologetic manner in which Müller and Mahadeva invoke the progressive-tax system analogy.) Importantly, it defines Capacity (more precisely, economic capacity) in terms of average national income, progressively scaled and net of an aggregate poverty adjuster which reflects the “poverty intensity of the national economy”. In this it is quite unlike GDRs, which leverages Gini coefficients to take national income distribution into explicit account, treating all income above the development threshold as Capacity.
The difference here is quite significant, and is what Müller and Mahadeva have in mind when they criticize GDRs for “failure to reflect the magnitude of ‘development needs.’” Which they say is “not compatible with the idea that countries should have the option to prioritize spending on poverty eradication over climate change cost / burdens.” This is very much not how we see it, though we do grant that Müller and Mahadeva have a point. In the GDRs framework, it is possible for two countries to have the same capacity, while one of them nevertheless has more development need. This is a problem, though we would argue that it could be easily fixed, for example by adding an explicit poverty adjustment to the national Capacity.
More fundamentally, the GDRs approach, with its explicit treatment of intranational income distribution, has important properties that the Oxford approach does not share. Specifically, it creates an incentive (albeit a very modest one) for national elites to focus on the alleviation of development needs within their countries, while the Oxford approach, with its reliance on national average incomes, sometimes allows national elites (albeit, only those in countries with very low per-capita incomes)to “hide” their Capacity. That is, while it allows LDC-class countries to prioritize poverty alleviation, it also allows them to not prioritize it, and to yet remain without climate obligations.
The issue here is that the “poverty capability adjustments” that, in the Oxford approach, ensure that LDCs are taken to have no capacity at all (relative to the global mitigation effort) have the side-effect of reducing the progressivity of the overall system, and increasing the relative capacity of developing countries that are above the poverty threshold. This result is distinctly problematic for the non-LDC developing countries, and appears to be a direct result of the Oxford approach’s determination to make “no reference” to “domestic income distribution or degrees of domestic inequity.” (See their Summary for Policy Makers, page 8)
Nor is this the only problem that results from this determination.
Consider two countries. The first we’ll call Fairland and the second we’ll call Unfairland. Both have the same population, and both have a modest per-capita (average) income of $9,000. The difference is that Fairland has a very flat income distribution and no poverty, as it has worked very hard to implement equitable growth policies. In fact, everyone in Fairland makes exactly $9,000. In both GDRs and the Oxford system, Fairland is judged to have a low Capacity. (In GDRs, assuming a $9000 development threshold, its Capacity is actually 0).
In Unfairland, things are more like real life – it has a rich minority and a poor majority, which is to say that some people make a lot more than $9,000, and some a lot less. Here’s a picture of Unfairland (as rendered by the Oxford authors) that illustrates the GDRs view of the situation.
This figure shows a development threshold of $9000, which is higher than our current estimate, but no matter. It also shows that, in the GDRs view, Unfairland is judged to have a significant Capacity (shown in red), even though it also has a significant development need (shown in yellow). In the Oxford view, in contrast, Unfairland has the same low Capacity as Fairland.
The point here bears repetition. Fairland expends fewer resources on luxury consumption than does Unfairland, and yet in the Oxford approach this does not affect its Capacity. Why not First, because it is designed to assert that the poor people of Unfairland have a claim to its national Capacity that overrides the climate-related claims of the international community, and second because it achieves this goal by using average national incomes as its ruling indicator, rather than leveraging the Gini coefficient.
At this point, we must say that we are not naïve. We fully understand that many intranational inequality is often judged by international actors to be politically out of bounds. Moreover, this trepidation is supported by current research. Branko Milanovic, for example, has shown that today’s global inequality is more a function of inequality between countries than it is of intranational economic division. But this does not by any means imply that inequality within nations is not important, and even critical. Nor does it imply that honesty on this point does not have its advantages, particularly from the point of view of an equity reference framework that is designed to facilitate an extremely challenging global transition. Also, and unsurprisingly, a quick comparison of the GDRs capacity calculations and the Oxford approach indicates that the GDRs distribution of obligation is significantly more progressive, in global terms, than the Oxford results. Focusing in on the Capacity of the elites, wherever they may be, by no means shifts obligation to the developing world; just the opposite. And this progressivity is achieved in a manner that will make considerable sense to the besieged citizens of the North.
Does the Oxford approach succeed in prioritizing development need more strongly than does GDRs? We do not think so. To be very clear here, we in no way contest the fact that the poor people of Unfairland have a “claim right” for their lot to be advanced (for their poverty to be reduced, if not eradicated), and that they have this claim right vis à vis their governments and their national elites. But we argue that the existence of this right in no way nullifies the international community’s claims – in terms of climate-related global burden sharing – vis à vis Unfairland’s Capacity.
Which approach is more appropriate for a international climate burden-sharing framework? This is inevitably a political judgment, and quite a difficult one. The difficulty is particularly obvious if you’ve reached the conclusion that the UNFCCC negotiations cannot succeed without at least an approximate global agreement on a shared Equity Reference Framework. In such a position, you might well conclude that the use of the Gini coefficient should be avoided, at least when designing indictors that are intended for international use. Intra-national inequality, after all, is a difficult matter, and reasonable people can disagree about the wisdom of importing this difficulty into the international climate negotiations.
On the other hand, it is not obvious that the Oxford approach is a superior alternative, or even an acceptable one. Its strategy is to make do with GDP, population, and a measure of poverty. More to the point, its strategy is to prioritize national development need over global climate mitigation. It’s a good try, and it’s made in an excellent spirit, but the above comparison of Fairland and Unfairland seems to indicate that it does not altogether succeed.
What would succeed? This is a critical question, but it’s one that inevitably takes us beyond the bounds of this short comment. For while it’s clearly true that intranational inequity is a sensitive subject, particularly in the context of multilateral negotiations, it’s also true that no equity reference framework can really make sense if it takes no account of intranational equity. More generally, the problem of national Capacity is not one that can be cleanly separated from the problem of global development need. It may even be the case that, in the long run and perhaps even soon, we’ll find that we simply cannot stabilize the global climate system without, at the same time, taking the problem of poverty – the whole problem, everywhere – by the horns. We’ll find, that is, that the problem of national development need is actually a global problem.
In any case, we entirely agree with Müller and Mahadeva that, when it comes to Capacity indicators – and for that matter Responsibility indicators – the problem of poverty cannot be avoided. The disagreement here is only about taking the next step, and facing our real conditions of existence. Which is, of course, that we all live in Unfairland. Given this, capacity indicators – however they are constructed – should make relevant aspects of intranational inequity visible, and by so doing enable institutional designs and political movements that incentivize basic-needs development and poverty alleviation, within countries and globally.
In any case, nice paper!
– Tom Athanasiou, Sivan Kartha, Paul Baer
 See Ringius, Torvanger, and Underdal, “Burden Sharing and Fairness Principles in International Climate Policy,” International Environmental Agreements: Politics, Law and Economics 2: 1–22, 2002.
 The national Capacity could be adjusted down in a manner that explicitly accounts for development need. The adjustment could, for example, be in terms of the national income below the development threshold. Or it could be in terms of the Multidimensional Poverty Index that the Oxford team has already leveraged. See http://hdr.undp.org/en/statistics/mpi/
 See for example, Milanovic’s Global Inequality: From Class to Location, from Proletarians to Migrants, a September 2011 paper published by the World Banks’s Development Research Group Poverty and Inequality Team. http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2011/09/29/000158349_20110929082257/Rendered/PDF/WPS5820.pdf