Many years ago, in a desperately poor village in Rajasthan, people decided to plant trees on the land adjoining their pond so that its catchment would be protected. But this land belonged to the revenue department and people were fined for trespass. The issue hit national headlines. The stink made the local administration uncomfortable. They then came up with a brilliant game plan—they allotted the land to a group of equally poor people. In this way the poor ended up fighting the poor. The local government got away with the deliberate murder of a water body.

I recall this episode as I watch recent developments on climate change. At the recent Durban climate change conference small island nations—from the Maldives to Granada —believed, rightly so, that the world has not delivered on its promise to cut emissions and is jeopardising their future. But they do not have the power to fight the powerful. So, this coalition of climate victims turned against its partner developing countries, targeting India, for instance, for inaction. These nations pushed for India to take legal commitments to reduce emissions, dismissing its concerns of equity as inconsequential.

The divide is complete. According to Bangladeshi climate change researcher and old friend Saleemul Huq, the issue of equity—the setting of emission targets based on the contribution of each country to the stock of carbon dioxide in the atmosphere—is an old fashioned idea. He says it will not work in the new world where the dichotomy of the rich and poor countries has vanished; instead, there are equal and big polluters like China, India, South Africa and Brazil (BASIC). These, he says, are equally responsible and must take steps to cut emissions. He wants the notion of historical emissions junked. For him, countries like the Maldives and Bangladesh are victims. India is a polluter, a rich country whose government is hiding behind the poor to avoid cutting emissions.

But the fact is Maldives’ per capita emission is higher than India’s. So, should the Maldives take mandatory emission reductions? Is it a victim or a polluter? India also has a longer coastline than vulnerable Bangladesh. Is it a polluter? Or an equal victim? Sivan Kartha, a climate change researcher with the Stockholm Environment Institute, tears into this argument that is dividing the poor world and taking the focus away from countries that need to be told to take action fast. He compares India and Africa, countering the charge that Africa is being destroyed because of rich India’s reluctance to take emission reductions. “Actually, 1.1 per cent of Africans have made it to the top global wealth decile against 0.9 per cent Indians. As against this, 21 per cent Americans are in the top global wealth decile. Then, India’s total emissions are only two-thirds of what Africa emits.” As against this, US emissions are four times India’s. In this way, while the poor fight over crumbs, the cake is eaten by the rich.

My colleagues at the Centre for Science and Environment analysed income distribution and emissions data to see if rich Indians emitted more than their counterparts in rich countries. They found that the per capita emission of the richest 10 per cent of India’s population was the same or slightly less than the per capita emission of America’s poorest 10 per cent and it was less than one-tenth the per capita emission of America’s richest 10 per cent. In other words, the rich in India emitted less than even the poorest Americans. This is not to deny that Mukesh Ambani’s enormous house and electricity consumption—reportedly Rs 75 lakh a month—is distasteful. But energy and emission apartheid in the world remains unacceptable.

Simple plot. Sinister design. The poor have been divided to fight over who is more vulnerable. But one must realise that this divide is a deliberate creation. In 2009 at the Copenhagen Conference of Parties, two categories of countries were devised. One, vulnerable countries that would get fast track funds to adapt to climate change and two, emerging polluters grouped under the BASIC banner. The bribe and divide was blatant and successful. It was openly said in the conference plenary that polluting countries like India, who wanted an agreement based on equity, were blocking funds that would flow to Bangladesh and the Maldives. That penultimate night of the conference the poor fought the poor. Since then the divide has grown.

It’s time we stopped this kindergarten fight. Let us be clear the world has to cut emissions drastically and fast. There must be limits on each country based on its per capita emission and taking into account its historical contribution. China is the biggest current emitter. But in cumulative terms—taking into account the stock in the atmosphere accumulated over the years—it contributes 11 per cent against US share of 26 per cent. It must also be brought under limits, as must India. But these limits will have to be based on the principle of equity so that these countries will also have the right to development.

This is the most inconvenient of truths. But it is the truth.

This piece was originally published at CSE India.

Ecuador must be one of the most exciting places on Earth right now, in terms of working towards a new development paradigm. It shows how much can be achieved with political will, even in uncertain economic times.

Just 10 years ago, Ecuador was more or less a basket case, a quintessential “banana republic” (it happens to be the world’s largest exporter of bananas), characterised by political instability, inequality, a poorly-performing economy, and the ever-looming impact of the US on its domestic politics.

In 2000, in response to hyperinflation and balance of payments problems, the government dollarised the economy, replacing the sucre with the US currency as legal tender. This subdued inflation, but it did nothing to address the core economic problems, and further constrained the domestic policy space.

A major turning point came with the election of the economist Rafael Correa as president. After taking over in January 2007, his government ushered in a series of changes, based on a new constitution (the country’s 20th, approved in 2008) that was itself mandated by a popular referendum. A hallmark of the changes that have occurred since then is that major policies have first been put through the referendum process. This has given the government the political ability to take on major vested interests and powerful lobbies.

The government is now the most stable in recent times and will soon become the longest serving in Ecuador’s tumultuous history. The president’s approval ratings are well over 70%. All this is due to the reorientation of the government’s approach, made possible by a constitution remarkable for its recognition of human rights and the rights of nature, and its acceptance of plurality and cultural diversity.

Consider just some economic changes brought about in the past four years, beginning with the renegotiation of oil contracts with multinational companies. Ecuador is an oil exporter, but had benefited relatively little from this because of the high shares of oil sales that went to foreign oil companies. A new law in July 2010 dramatically changed the terms, increasing the government’s share from 13% to 87% of gross oil revenues.

Seven of the 16 foreign oil companies decided to pull out, and their fields were taken over by state-run companies. But the others stayed on and, as a result, state revenues increased by $870m (£563m) in 2011.

Second, and possibly even more impressively, the government managed a dramatic increase in direct tax receipts. In fact, this has been even more important in revenue terms than oil receipts. Direct taxes (mainly corporation taxes) increased from around 35% of total taxes in 2006 to more than 40% in 2011. This was largely because of better enforcement, since the nexus between big business and the public tax administration was broken.

Third, these increased government revenues were put to good use in infrastructure investment and social spending. Ecuador now has the highest proportion of public investment to GDP (10%) in Latin America and the Caribbean. In addition, social spending has doubled since 2006. This has enabled real progress towards the constitutional goals of free education at all levels, and access to free healthcare for all citizens. Significant increases in public housing have followed the constitution’s affirmation of the right of all citizens to dignified housing with proper amenities.

There are numerous other measures: expanding direct public employment; increasing minimum wages and legally enforcing social security provision for all workers; diversifying the economy to reduce dependence on oil exports, and diversifying trading partners to reduce dependence on the US; enlarging public banking operations to reach more small and medium entrepreneurs; auditing external debt to reduce debt service payments; and abandoning unfair bilateral investment agreements. Other efforts include reform of the justice system.

One exciting recent initiative is the Yasuní-ITT biosphere reserve, perhaps the world’s first attempt to avoid greenhouse emissions by leaving oil underground. This not only protects the extraordinary biodiversity of the area but also the habitats of its indigenous peoples. The scheme proposes to use ecotourism to make human activity compatible with nature.

All this may sound too good to be true, and certainly the process of transformation has only just begun. There are bound to be conflicts with those whose profits and power are threatened, as well as other hurdles along the way. But for those who believe that we are not condemned to the gloomy status quo, and that societies can do things differently, what is happening in Ecuador provides inspiration and even guidance. The rest of the world has much to learn from this ongoing radical experiment.

This piece was originally published by The Guardian.

The World Economics Association’s forum for the open review of proposed articles for the World Economics Journal and for Economic Thought is now open. 19 submissions have been posted so far. It is located at http://discussion.worldeconomicsassociation.org/.

The World Economics Association has been founded in spring 2011 and has so far attracted more than 7000 members from around 120 countries. The Journals of the association are committed to a policy of inclusiveness, openness and transparency. You are encouraged to read and comment on submitted papers that interest you. Editors will also make public comments to make their final decision making process transparent and to allow readers and authors to react and interact.

Papers submitted to the World Economics Journal include:

Microfinance and the Illusion of Development: from Hubris to Nemesis in Thirty Years, by Milford Bateman and Ha-Joon Chang

Incorporating the Rentier Sectors Into a Financial Model, by Michael Hudson

External Fragility or Deindustrialization: What is the Main Threat to Latin American Countries in the 2010s? by Roberto Frenkel and Martín Rapetti

Pension Liabilities: Fear Tactics and Serious Policy, by David Rosnick and Dean Baker

Grass Roots War On Poverty, by Alice H. Amsden

Papers submitted to Economic Thought include:

Mathematical Modelling and Ideology in the Economics Academy: competing explanations of the failings of the modern discipline?, by Tony Lawson

On the Limits of Rational Choice Theory, by Geoffrey M. Hodgson

An Evolutionary Efficiency Alternative To The Notion Of Pareto Efficiency, by Irene van Staveren

Norbert Häring is editor of the World Economics Journal.

Growth in China, it is said, is slowing. GDP growth has reportedly fallen from 9.7 per cent in the first quarter of 2011, to 9.5 per cent in the second quarter, 9.1 per cent in the third and 8.9 per cent in the fourth. Much is being made of these numbers, though the 9.2 per cent average over 2011 is still high and the government has itself attempted to slow the system to rein in inflation.

One can sense an element of schadenfreude here. For too long now China has been showing up the rest of the world with its high rates of growth. This is especially true of the United States, which imports much from China, depends on inflows of capital from that country to finance its deficits, and is always looking for the next country to challenge its global supremacy.

However, if China’s growth is indeed slowing, this is no cause for even the US government to celebrate. A poorly performing China can drag the US down as well. Not just because China, with its large geographical size and population, is the growth pole that prevents the multi-speed global economy from sinking into another crisis. But because China is too important a market for the large multinational corporations that symbolise US economic power.

This last fact has been driven home by the recently released estimates yielded by the 2009 edition of the five-yearly benchmark surveys of the operations of US multinational corporations conducted by the Bureau of Economic Analysis of the US Department of Commerce. According to those figures, growth in the value added by US multinational firms slowed by almost half from 4 per cent to 2.2 per cent between 1999-2004 and 2004-09. However, that deceleration was accompanied by a shift in the relative importance of parents and majority owned foreign affiliates (MOFAs) in the aggregate performance of US MNCs. In 1999 and 2004, parent firms accounted for a little more than three-quarters of valued added by US MNCs. But since then the share of parent firms in valued added by US MNCs has fallen by close to 10 percentage points to 68.3 per cent in 2009. In sum, while operations of parent companies still dominate the activities of US MNCs, there appears to have been a significant shift in US multinational operations away from parent firms at home to affiliates abroad.

Of relevance here is the fact that, of the countries that were locations contributing to the increment in the operations of US multinationals over 1999-2009, China was one. The Asia-Pacific region, which accounted for 18 per cent of the value added by majority-owned affiliates of US multinationals in 1999, contributed 26 per cent of the increment in their value added during the decade ending 2009. And within the Asia-Pacific, China, which accounted for less than 4 per cent of the value added by MOFAs in 1999, contributed close to 19 per cent of the increment in MOFA-value added in that region during the relevant decade. Manufacturing accounted for a dominant 61 per cent of MOFA value added in the China, as compared with a much lower 42 per cent in all global locations.

These facts are particularly significant because of the nature of US multinational operations in China. There is a perception that China, with its large reservoir of relatively cheap labour, is a target for relocative investments by international firms. These firms, including multinationals from the US, are seen as using China as a low-cost production base for global markets, including markets in their parent countries. And the Chinese government is seen as exploiting this opportunity by maintaining an undervalued exchange rate so as to enhance the country’s export competitiveness.

But what the BEA’s benchmark survey has revealed is that the large increases in the value added of US multinational affiliates in manufacturing in China “reflected expanded production to serve the large and growing local market.” About two-thirds of the total output of US MNC affiliates was sold to local customers in both 1999 and 2009. On the other hand, the share of their output sold to U.S. customers declined from 16.3 per cent in 1999 to 10.2 per cent in 2009.

So China’s growth matters, since it is an important market for US firms located there. And what is important is not to look to their return, but to ensure that profits from China are used to invest in jobs at home.

The Obama administration has launched a “21^st Century” trade negotiation with a number of pacific-rim nations referred to as the Trans-Pacific Partnership (TPP).  While the full details of the proposed treaty are yet to be made public, early estimates show that the economic benefits of the agreement will be relatively small and the regulatory costs could be significantly high—especially for the emerging market and developing countries engaged in the negotiations.

The gains of the agreement may be a mere $20 billion, or just over one percent of GDP on average for the nations involved.  To get those small gains nations will have to trade away the ability to use measures to prevent and mitigate financial crises, to develop a growth-based innovation system, to protect public health and the environment, and more.

That’s right, according to a study by the East-West Center, at best the agreement will bring a one-time boost in GDP to participating countries of just over one percent. The accompanying table to this note shows how these gains would be distributed.



Vietnam and Malaysia seem to stand to gain more than half the benefits of the treaty, but those two countries would likely have to bear the most in terms of regulatory cost.  Both of these nations are significant low-wage assembly manufacturers that would export more goods to the US and Australia, and also import more intermediate goods for final assembly from those and other TPP nations.

These gains should also be seen as gross over-estimates as well.  The models deployed by the authors have estimates not only for goods trade, but also for services trade, and for the amount of foreign direct investment flows to the region.  The methods for the latter two estimates have little traction in the economics profession and are often not reported in official reports by the World Bank and others. Indeed, work by myself and others show that such models should be viewed in a very critical manner.

These over-estimated but still small benefits need to be juxtaposed with the costs.  The provisions for investment and intellectual property will bring significantly high costs to these nations.  What is more, the treaty will divert trade that probably should occur among others worse off.

In terms of investment, the treaty would rob the ability of parties to deploy regulations on the flow of cross-border capital flows to prevent and mitigate financial crises.  Such regulations are a cornerstone of Vietnam’s exchange rate and export policy.   Malaysia’s regulation of capital outflows in the wake of the Asian financial crisis is credited with making Malaysia among the least worse off due to that crisis.  If these tools were used, the treaty’s “investor-state” dispute system that allows private firms to directly sue host country governments would kick in.

The agreement will also make it harder for nations to establish the appropriate innovation policies that are necessary to diversify the economy toward higher value added goods.  While nations like Brazil and China—with only commitments under the WTO and not a deal with the US—are free to learn from foreign firms and spur domestic industries, this will be much more difficult for nations under its deal with the US.

Finally, the agreement will make other area nations worse off.  The treaty will distort markets in the Asian region such that Indonesia, the Philippines, Thailand, Japan, China, and South Korea would all be worse off.

Prominent trade theorist Jagdish Bhagwati has said that if TPP nations accept this deal they will truly be “bamboozled.”  When looking at the potential gains and the real costs it is hard to come up with a rival conclusion.

For nearly a decade, Goldcorp’s Marlin gold and silver mine in the Guatemalan altiplano has been at the center of intense local conflict and international scrutiny. The conflict was ignited in 2005 when local Mayan communities overwhelmingly rejected mining in popular plebiscites called consultas. Chief among their concerns was the potential for water contamination in the agricultural areas.

Virtually every international human rights organization—from the ILO to the UN Special Rapporteur – has weighed in, urging Goldcorp and the Guatemalan government to suspend mine operations to ensure protection of the rights, health and livelihoods of the indigenous people. In mid-2010, the Inter-American Commission on Human Rights of the Organization of American States (IACHR) went one step further and issued precautionary measures ordering the Guatemalan government to suspend operations at the Marlin mine.

Through it all, the Marlin mine has continued to operate, raking in a bonanza for Goldcorp shareholders. Between 2006-2009, Marlin generated nearly $1 billion in revenues and almost $350 million in earnings, making it Goldcorp’s third best performing mine. According to the company’s annual report, 2010 was a banner year: Marlin generated a record $500 million in revenues and $268 million in earnings, nearly double over the previous year.

Costs of production at Marlin are the lowest of all of Goldcorp’s operations, generating what the company calls “tremendous cash flow”.  While production costs have stayed flat or even decreased since mine operations began in December 2005, the price of gold has increased by more than 300%. The forecast is for more of the same: analysts predict the average gold price in 2012 could hit as high as $2500 per ounce.

Crumbs off the table

Guatemala’s share of the bonanza can best be described as “crumbs off the table”. In a report published in October by the Global Development and Environment Institute, Leonardo Stanley and I show that between 2006-2009, royalties and taxes paid to the Guatemalan government averaged a paltry $13 million per year and amounted to only 5.8% of total mine revenues and 15% of total earnings.

Comparisons are tricky because mining royalties and taxes vary so much within and between countries. But as a ball park figure, a PWC report estimated that South Africa—the world’s second largest gold producer—charged mining companies an income tax of 28% in 2010, plus remittance taxes and royalties. Venezuela recently imposed a royalty rate of 13% on gold mining, compared to Guatemala’s all-minerals royalty rate of 1%.

Goldcorp, which calls itself a “responsible mining” company, claims that it brings substantial benefits to Guatemala through local jobs, local procurement, and social investment in sustainable development projects, including a clinic, schools, and deforestation projects. There is little doubt that the 2000 or so jobs at the mine—about half of which are held by locals—bring significant benefits in the very poor local Mayan communities. Indeed, the availability and competition for mining jobs has generated intense social conflict. However, these jobs will vanish when the mine closes and there is little evidence of any lasting development benefits.

We found no data to support Goldcorp’s claim that it spends $150 million annually procuring local goods and services.  Based on case studies in other countries, it is likely that a substantial portion is accounted for by goods and services purchased locally from importers.  Local economic benefits flow when companies buy goods and services produced by local companies.  When they are imported, economic benefits mostly flow out of the country.

As for social investment, Goldcorp claims it has invested $20 million in sustainable development and reforestation projects. Local communities also received about $8 million of the royalties, bringing their total “return” on the mine to date to $28 million. Between 2006-2010, Marlin earnings totaled about $863 million. That means that the share of local communities in the Marlin bonanza amounted to about 3% of the income it generated–crumbs indeed. Meanwhile, Goldcorp has generously contributed to Canadian universities, including $10 million to Simon Fraser and $25 million to the Teffler Business School at the University of Ottawa.

Environmental risk

Gold mining poses severe environmental risks stemming from the use of cyanide and the potential release of heavy metals into ground and surface water. While the economic benefits of the mine are flowing largely to far-away shareholders, the risks are borne by local communities. As we document in the GDAE report, four independent studies have found evidence of heavy metals contamination, including arsenic leaking into groundwater. Heavy metals are extremely toxic to humans and other living beings—and they can remain in the environment for generations.

Goldcorp claims that “credible third party investigations” have found no evidence to date of water contamination. The available government reports, however, are not based on independent environmental monitoring but simply review and accept reports provided by Goldcorp.  The other source Goldcorp points to, the Community Environmental Monitoring Association, is financially supported by the company.

Two other environmental risks afflict the Marlin mine. Despite its promise to do so, Goldcorp has not made public a mine closure report and provides a surety bond of only $1 million. A report published by the Catholic Peace and Ecology Commission in July of 2011 estimated the costs of reclamation and monitoring following closure at $49 million. In addition, the mine was built to specifications that did not take climate change into account. High-intensity floods could breach the tailings pond and increase the risk of cyanide and heavy metals contamination. The number of high-intensity floods in Guatemala between 1990-2009 was nearly 300% greater than between 1970-1989.

What’s next?

Last month, in the face of substantial pressure from the Guatemalan government, the IACHR lifted its suspension order of the Marlin mine. Ignoring independent studies, the Government argued that company reports had found no proof of imminent or probable harm. While lifting the order to close, the IACHR ordered the government to “implement effective measures to prevent environmental pollution” and ensure that local people have access to water fit for human consumption and agriculture.

The IACHR is coming under increasing pressure by Latin American countries to back off from intervening in large development projects. In April, the Commission ordered Brazil to immediately suspend operations at the Belo Monte Dam Complex and undertake a consultation process to gain the “free, prior and informed consent” of local indigenous people. The IACHR backed down after Brazil threatened to withdraw from the Commission.

But Goldcorp and other large mining companies will continue to face scrutiny and pressure. In 2011, Ernst and Young found that “resource nationalism”—the attempt by host governments to get a larger share of the returns from mining—was the number one business risk facing mining and metals companies. In Guatemala, bills to reform the Minerals Royalty Law have been introduced in the legislature.

Shareholders, including large pension funds, are increasingly scrutinizing the human rights and environmental practices of mining operations. In September, Goldcorp was de-listed from the Dow Jones North American Sustainability Index.

And local opposition to the mining projects continues to grow. Dozens of plebiscites have been held in the Mayan communities in the Guatemalan highlands, including one in Quetzaltenango last February in which all but 30 of 6,758 voters rejected seven exploration licenses granted to Goldcorp.

With independent environmental monitoring and a closure report still lacking, and the continued failure to gain consent from indigenous communities—and the lack of a fair share of benefits– there is a long way to go before “responsible mining” comes to Guatemala.

Download the full report in English or Spanish. Read the executive summary here. Watch two Real News Network interviews with Zarsky on the report, here and here.

The concept of competitiveness has attracted a lot of attention by scholars, policy makers and international economic institutions in recent decades. But it suffers from some misconception when applied to developing countries. In a forthcoming book, Competitiveness and Development: Myth and Realities (Anthem Press), I have explained that developed countries have been concerned with competitiveness at the high level of development by undertaking, inter alia, technological development and upgrading of their industrial and service activities. Yet, they have been imposing competitiveness at the low level of development on developing countries. They have been doing so, by advocating neo-liberal views, e.g. through Washington Consensus, and imposing across-the-board and universal trade liberalization on developing countries through International Financial Institutions (IFIs) and WTO, and regional and bilateral trade agreements.

To explain, there are two different approaches to competitiveness: static, advocated by neo-liberals and dynamic, which is the concern of ne-developments.  The static version is cost/price led, based on the theory of static comparative advantage, and the allocative function of the market forces. This theory relies on unrealistic assumptions-such as the prevalence of perfect completion, constant return to scale, and independence of present and future costs. Further, firms are assumed to be small and strategically passive; there are no barriers to entry, no externalities, no industry specific learning etc. Accordingly, economic policy should concentrate on macro-level issues e.g. wage cost and exchange rate-despite the fact that the empirical evidence shows that the level of exchange rate can be the result of competitiveness rather than its cause-a la Kaldor paradox.

In a world where production and international trade are characterized by economies of scale, barriers to entry, imperfect competition, and are influenced by the strategic behavior of large firms; being competitive in the static sense would involve production at low value added, and employment and the loss in terms of trade.

In reality, at the firm level, competition is a dynamic process of creative destruction, in its Schumpeterian sense; firms move from equilibrium to another rather than moving towards equilibrium. Each firm has different capabilities and gaining market share alone is not its objective. There are usually other objectives such as increasing profitability, productivity and real income. Innovation and upgrading of the production structure to demand dynamic and supply dynamic activities is essential for maintaining or improving competitiveness and increasing value added. The firm is a driving force in economic activities; it takes strategic actions, shapes the market and competes with other firms also on non-price factors. It acts as a coordinating agency and interacts with other firms, market, consumers, institutions and infrastructure and international environment. It is further influenced by government activities and strategies.

At the national level competitiveness is to be an element of development and the basis for nation’s standard of living; it should contribute to growth, value added, employment and high returns to factors of production.   Competitiveness at a high level of development cannot be achieved through specialization based on static cost comparative advantage. Such specialization will lock low-income countries in production of primary commodities, and at best assembly operation making them competing at a low level of development. It requires creating supply capacity in high value-added activities, making the developed capacity efficient and continuously upgrading the industrial structure. None of these can be achieved through the operation of market forces alone. It also requires proactive and conducive government policies and strategies.

The book explains the international context and conditions under which competition takes place; highlights deficiencies in the neoclassical theory of competitiveness; surveys alternative theories and develops on a framework of analysis outlined above by expanding on the principle of dynamic comparative advantage. In doing so in addition to applying the Schumpeterian approach to competitiveness, I have benefited from theories of productive power of F. List, competitive advantage of M. Porte and M. Best and, business organization of W. Lazonick. I have also benefited, inter alia, from the Kaleckian approach to the acceleration of supply capacity and the theory of Capability Building.

Possibilities for and constraints in achieving competitiveness at the high level of development by developing countries are examined. It is emphasized that in order to be able to enhance their policy space, developing countries should appreciate their need for dynamic and flexible trade and industrial policies. To be able to pursue such policies, changes are necessary at the international rules and regulations of WTO and IFIs and in practices of developed country donors in their bilateral and regional trade agreement with developing countries. The important role of government policies and practices is illustrated, in the book, by comparing contrasting experience of China and Mexico since early 1980s, and its implications for other developing countries.

Greenhouse gas emissions are a global problem. Regardless of who emits them, these gases impact everyone, everywhere around the world: raising average temperatures and sea levels, and changing historical weather patterns. But climate change will not affect everyone equally. The two dozen island nations of the Caribbean are a case in point. With 40 million people living on islands in a small geographic area, it would be easy – but incorrect – to expect that they will all face the same climate damages. In fact, according to new research from the Stockholm Environment Institute (SEI), Caribbean residents are not all “in the same boat” and should expect to face a very wide diversity of climate impacts.

Yes, each person living in the Caribbean will experience about the same change in climate – temperature increase and shift in weather patterns – and degree of sea-level rise as her neighbors over the next decades. And her children and grandchildren can expect about the same changes to weather and sea levels as their neighbors. But these changes in the physical world will not impact all Caribbean residents in the same way.

SEI’s new Climate Impact Equity Lens (SEI-CIEL, see www.sei-ciel.org for more information) examines the diverse impacts of climate change by zooming in on four important types of diversity that affect individuals’ expected impacts from climate change: family income; share of income from economic sectors that are especially vulnerable to damages from climate change; exposure to sea-level rise and storm surge; and present-day water availability.

Family income plays an important role in who will be vulnerable to damages and who can afford to adapt as the climate changes. The Caribbean islands include the countries with the highest and lowest average incomes in the greater Latin American and Caribbean region: in Haiti, the average person makes less than US$500 a year (but, of course, some people make a lot more than $500 and some people make a lot less); in the Cayman islands, the average income is $52,000. The Caribbean islands account for less than 1 percent of global population, but Caribbean incomes span the same diversity as world incomes: from the very poorest to the very richest. Families making a few hundred U.S. dollars each year can scarcely afford basic living expenses much less investments in air conditioning, sea walls, or imported water. The richest families, in contrast, can afford these investments and much more; it seems unlikely that the very rich will experience much real suffering from climate change.

The diversity of climate impacts is also affected by the source of income. For those that work in agriculture, fisheries, tourism, or other sectors or industries especially vulnerable to climate change, expected damages are much higher. Tourism, for example, contributes about half of all income in Aruba, Netherlands Antilles, Saint Lucia, and Turks and Caicos, and far more than half of all income for many households throughout the Caribbean.

Physical vulnerabilities like exposure to sea-level rise and water scarcity also vary throughout the region. Some families live close to the shoreline, at low elevations, or in floodplains, but many others – especially on the largest islands, Puerto Rico, Cuba, and Hispaniola (Haiti and the Dominican Republic) – are well protected from the first several meters of sea-level rise. On most Caribbean islands, fresh water is a scarce resource, but on a few islands water resources are more abundant. Climate change is expected to make many of the most arid areas around the world even drier; where present-day water scarcity is severe, families are more vulnerable to changing weather patterns.

The SEI-CIEL model finds that, if greenhouse gas emissions continue, climate damages for the average person in Latin America and the Caribbean would equal “savings” from not paying to reduce emissions through about 2100. (If emissions are not controlled, we all “save” by paying lower energy costs.) This average does not, however, represent the diversity of individual impacts from climate change expected in the Caribbean, where damages for many individuals will outstrip “savings” by 2050, and by 2100, most people experience net damages.

If policy makers pay attention only to the average regional result, their conclusions about the urgency of climate change would be very different than if they consider the diversity of individual impacts. Many people, in the Caribbean and around the world, will experience serious net damages from climate change by 2050. Those who care about the well-being of the most vulnerable will press climate policy makers to slow emissions as quickly as possible.

This piece was originally published by the Climate and Development Knowledge Network blog. Ramón Bueno is a staff scientist for the Climate Economics Group at the Stockholm Environment Institute.