‘The climate-change debate in rich countries strikes me as curious. The immediate catastrophe won’t happen in Manhattan but in Andhra, Africa, Latin America’

Watkins, a PhD in modern Indian history, is a senior visiting fellow with the economics governance programme at Oxford. In the 1960s he was a student of the Delhi School of Economics. He says India was different then, but held promise, as it still does. The discussion was moderated by Senior Editor Sonu Jain.

KEVIN WATKINS: The human development report is an annual report and has been coming out since 1990. The first author was M. Haq. It was created to draw attention to one of the great anomalies in development: there are big discrepancies between how many countries perform on economic indicators of development, like average income, and what is happening to their people in areas like education, nutrition etc. I think India is one step back.

The core idea of the report is what we understand by human development, about the realisation of human potential, how the richness and average income of a country matters in terms of framing opportunities.

There are many other things that determine the well-being of a country, like gender equity, people having a voice in governance, aspects of child survival, nutritional levels. Over the past few years, one of the things relevant in the context of India is that, if we look at India’s extraordinary progress in the last two decades or more, India has sustained opportunities for poverty reduction and improvement in human welfare. Yet one of the anomalies in India is that, on indicators such as child malnutrition, particularly in the girl child, and even the rate of poverty reduction, it has lagged far behind that what you would have expected given India’s growth rate. India, for example, has been overtaken by Bangladesh in terms of reducing child mortality. And Bangladesh is not a high-growth economy.

India’s growth rate is a good development story, but the fundamental question is why this high growth rate has not translated into rapid poverty reduction and improvement in nutritional status (and other welfare indicators) at a level that might have been anticipated.

The reason we have taken up climate change this year is because it is your starting point of understanding human development, which is about opportunities that people have. It is difficult to think of a bigger issue in terms of defining opportunities in the 21st century than climate change.

It always struck me as curious, the debate on climate change in rich countries, like the Al Gore film Day After Tomorrow. Actually the immediate catastrophe is not going to happen in Los Angeles or Manhattan. It is going to happen in Andhra Pradesh, southern Africa, parts of Latin America. In this year’s report, what we are doing is identify the big human development challenges thrown up by climate change.

We argue that there are essentially two challenges: that climate change will test the belief that the condition of the world’s poor in the next generation will be better than that in this generation; that the consequences of missions taken up today will be felt by people living 150 years from now. As we have mentioned in the report, we are drifting towards a state in which unprecedented and irreversible ecological problems will start to unfold.

In climate change, unlike other problems, there is no rapid rewind button. In terms of the message of the report, we identify the number of triggers or transmission mechanisms from climate change in terms of potential human development reversals.

One of them, especially in a country like India, is the impact on agriculture. We anticipate in the report very deep reductions in large areas of rain-fed agricultural activity in Africa and south Asia, including India. Irrigated agriculture in India and Pakistan also faces grave problems because of threats posed by glacier melting. This is clearly happening against the backdrop of what is already a very serious water crisis in parts of north India and south Asia — depletion of ground water and other related problems.

One of the central points we make in all of this is that to understand the threat posed by climate change we need to start from where we are. There is a tendency to overlook the realities of the world. We have 2.6 billion people in the world today who survive on less than two dollars a day. Many of them live in India. For people who are in that position, it does not take whole cities disappearing below the water level or catastrophic events to tip over the edge. It takes marginal delays in rainfall or marginally more intensive rainfall. The world’s poor do not have access to private insurance markets, live in the most exposed places and are most at risk.

What we have tried in this year’s report is to take climate science and what the story means to the world’s poor. We refer in the report to what we call low human development traps. The idea of these traps is to communicate the simple yet important message that if you take events like droughts or floods, these are not short-term shocks that happen in people’s lives. When droughts hit people, they have no choice but to sell off productive assets or to take their children out of school or to reduce the nutritional aspects. These are things that have life-long impacts.

In terms of the prescription and analysis of how we tackle a problem, what we suggest in the report is that if we are to avoid the most damaging impacts of climate change, the world needs to aim to keep the average increase in world temperature below two degrees Centigrade. We argue that this is a broad threshold that ought to constitute a target for international negotiations.

We also point out that in order for this to happen we need to get off the business-as-usual trajectory. The analysis from IPCC, which we have drawn on in the report, suggests that the world emission of greenhouse gases needs to be cut by at least half within 2050 in order to attain the threshold. By current trends, emissions will increase by 50 per cent by 2030. This is the course that we are on. We are heading to a world, which in the course of 21st century, will experience temperature increases in excess of five degrees Centigrade. This is unprecedented.

The core message of the report is that we need to get off this trajectory; we have to bend the emission curve downwards very quickly, starting with the world’s richest countries, to act now and provide leadership. We provide a prescription in the report to act as a yardstick against which that leadership can be measured. Carbon taxation is one of the keys in this. Raising the price of carbon emission, making carbon markets work to lower emissions, sending the right signal to investors in the power sector — these are critical.

• ESHA ROY: What are your views on the concept of carbon credits? Do you think it is a workable concept?

KEVIN WATKINS: We argue in the report that carbon markets can work. Carbon markets do constitute a vehicle for transferring resources and technology to countries like India and China. It is important, however, that carbon credits do not become the pretext for rich countries not providing leadership by cutting emissions. There is a danger that carbon credits can be used to transfer the adjustment to developing countries. We also argue that there is a need for a project-based approach to carbon credits, where you operate factory by factory towards large-scale financial and technological transfers from rich countries to poor countries. If we are getting onto lower global carbon trajectory, the emphasis needs to be on supporting programme-level interventions, for example, the entire energy sector strategy in India rather than individual plants in Rajasthan or Bihar.

• AMITABH SINHA: We have a fair idea how carbon trading works. But how are carbon credits calculated? How accurately? How is the cost decided?

KEVIN WATKINS: It’s a simple and complicated story. The primary carbon market is the European Union’s Emissions Trading Scheme and the price of carbon on that is a function of the terms on which firms trade with each other. And the price fluctuates widely. At one stage it was 30 dollars a tonne and at another it was under five dollars. And we now are just starting a second phase. If the market is to work, the limit on emissions has to be set on levels, which generates a price. One of the problems in the past is that the EU set the limit far too high and that is the reason the price collapsed during the first phase. In terms of how it is calculated, the arrangement is that some credits for emissions can be secured through investments in developing countries and the obligation is to prove that the emission reductions that happen through those investments would not have happened in the absence of the carbon credit scheme. That is actually a very difficult thing to prove in practice. We argue in the report that, in the last analysis, while this approach can clearly provide an important supportive role, the emphasis needs to be shifted to programme-level transfers of finance and technology.

• AMITABH SINHA: Is carbon trade leading to a speculative market? Is it speculation?

KEVIN WATKINS: I don’t think there’s any speculative activity, because it is geared towards a very clear objective. The firms in Europe are purchasing emission reduction commitments from plants in India, China and Mexico. But it is certainly the case that the costs in some cases are far lower than the value of credit and somebody is securing the margin and it would be safe to say that the margin is being secured in the banking and financing of rich countries and not in the energy financing of poor countries.

• MANU PUBBY: You said energy demands will increase by 50 per cent by 2030 and most of it will be coming from developing countries. What will the contribution of India and China be?

KEVIN WATKINS: Just to clarify, we say that the responsibility to tackle the problem lies with the rich countries. We are absolutely sure that developing countries, including China and India, should not be expected to make cuts inconsistent with their development needs. We are also clear that in a country like India, where over half of the population doesn’t have access to modern energy services, extending energy to poor people in India has to be a priority. And it is not up to the U.S. or E.U. to tell these countries to cut emissions when India has more people without electricity than the entire population of E.U. There has to be a commitment by rich countries to make financial and technological transfers. These are issues for negotiation between developing countries and developed countries.

• SONU JAIN: India has been saying that we cannot take on commitments because of our poverty figures. For you, keeping development indicators in mind, does not India’s stand sound flawed?

KEVIN WATKINS: Our argument in the report is that there is no inherent trade-off here. Just to give an example, if you take the average efficiency level of the electricity sector in India and the average efficiency level in the coal-fired power plants here, there is enough scope for raising efficiency. I think in the longer term, no one in their right mind would argue that a country like India can cut overall emission in the next decade. But I think if we look at the long term, towards 2050, with technological and financial transfers, India can get on the lower emission pathway in a way that will support development of the country as well as deliver international goods in terms of reduced emissions.

• COOMI KAPOOR: Why is it that international bodies tend to equate India with China? In fact India’s carbon emission rates are much lesser than China.

I personally don’t equate both the countries. India and China are different. Per capita emission rates in China are four times higher than in India. Energy coverage in China is higher than India. There are obvious similarities, but I don’t equate both the countries.

• AMITABH SINHA: One major criticism of the Kyoto framework has been that it lacks an enforcement mechanism. There is nothing to penalise countries exceeding their emissions. So post-Kyoto, whatever framework appears, are we looking at some sort of penalties?

KEVIN WATKINS: I think there are some problems with the current framework. One, the quantitative cuts that were required were insufficient to tackle the problem. Another problem is that two major countries are not party to the quantitative reductions, one being the largest emitter. Ensuring the agreement is universal in its coverage is important, and must be done with international agreements. If there is no enforcement mechanism, it does not really count much. And for the post-2012 Kyoto framework, the same should hold.

• SEEMA CHISHTI: How would you rate your success as somebody who is working on this? How successful have you been in influencing policy makers?

I do think it (our work) contributed to a more rounded and meaningful understanding of development. If you look at most of the major institutions of human development, they use the human development index. I think, at the same time, that if you look at many countries, what really motivates policy-makers is the condition of the stock exchange. Not really enough focus is put on what is happening in child nutrition or infant mortality.

• SONU JAIN: Most newspapers in India report the growth in the Sensex with unfailing regularity. But most of India’s problems don’t really get highlighted the same way. Do you think the rising Sensex will ultimately result in a trickle-down?

KEVIN WATKINS: I think there is a curios psychology attached to these things. In countries like the U.S. and the U.K., in evening news programmes, they often end with reference to the financial index. I think that the ultimate test is what happens to people. So the other development aspects should be highlighted. It is really sad that newspapers report about India’s booming stock exchange rather than highlight the increasing infant mortality rates.

• MANU PUBBY: How does nuclear energy fit into all this?

We look at the nuclear energy report and the broad consensus is that it accounts for something like 16 per cent of energy provision in rich countries. Clearly, if that were phased out and replaced by coal or natural gas, it would increase the greenhouse gas intensity. On the other hand, there is very little evidence that we are going to see a major expansion in nuclear energy over the next 20 years. So our assumption in the report is that the current figure is not going to change much. But if any country phases out nuclear energy and does not replace it with a zero-carbon alternative, that would have adverse implications.

• SMITA AGGARWAL: Is this debate becoming something like cleaner technology versus developing countries?

KEVIN WATKINS: This is why I made my earlier point about the importance of a multilateral framework to cover the incremental cost of moving to a lower- carbon trajectory. If you take the example of the coal sector, the average efficiency is around 30 per cent. In OECD countries, the top performing class record is 45 per cent. If it was possible for a country like India to accelerate the transition to higher performing coal plants, that would be a huge bonus in the fight against climate change. The costs obviously will be higher. It would be grossly inequitable for the rich world to assume that developing countries should finance domestically. I don’t see this happening at the moment. What we see happening now is a lot of rhetoric about the benefits of international cooperation on low carbon technologies.

• COOMI KAPOOR: You mentioned that India has one of the highest malnutrition rates in the world and has not been able to bring it down. India, however, has the world’s largest food programme for children in the world. What could possibly be the reason for this malnutrition?

KEVIN WATKINS: The number of inequalities here represent a huge barrier to convert sustained growth into human development. Some of the biggest barriers are gender-related. There are also statewise inequalities and also the rural-urban divide. These are rooted in social structures and power relationships, which policies are only partially dealing with.