Emissions Scenarios - IPCC

Scénario Driving Forces lis
Box 3-1: On Measures of Human and Economic Development
Writing 220 years ago in The Wealth of Nations, Adam Smith noted that: "whatever the soil, climate, or extent of territory of
any particular nation, the abundance or scantmess of its annual output fundamentally depends on its human resources - the skill,
dexterity, and judgement of its labour" (Smith, 1970). Although economists recognized the importance of land, labor, and
capital m explaining economic growth and national wealth, in the post-World War II period national well-being has usually been
measured by GDP or gross national product (GNP). GDP is defined as the monetary equivalent of all products and services
generated in a given economy in a given year. GNP equals GDP plus the net balance of mtemational payments to and from that
economy. Few questions were asked about the underlying resource base for GDP growth and whether or not it was sustainable.
Further, since GDP does not reflect all economic transactions it does not provide a full measure of human well-being.
Nevertheless, GDP is very widely used because it is universally accepted as the monetary indicator of all products and services
generated in a given economy within a given year.
Environmental and Social Modiñcations to GDP
More recently, several new approaches have been developed to address the inherent shortcomings of GDP measures. These
include "green" national accounts that incorporate the role of the stocks and flows of renewable and non-renewable resources,
and the related concept of genuine savings (UN, 1993). "Green" GDP is the informal name given to national income measures
that are adjusted for the depletion of natural resources and degradation of the environment. The types of adjustment made to
standard GDP include a measure of the user costs of exploiting natural resources and a value for the social costs of pollution
emissions. In terms of measuring the sustainability of development, the green accounting aggregate with the most policy
relevance is "genume savmg." This represents the value of the net change in assets that are important for development -
produced assets, natural resources, environmental quality, foreign assets, and human resources, which include rehjms to
education and raw labor and the strength and scope of social mstituiions. Human resources Шт out, not unexpectedly, to be the
dominant form of wealth in the majority of countries (World Bank, 1997a).
Purchasing Power Parities
A further problem arises in intemational comparisons, in which economic indicators are converted from local currencies into a
common currency, such as dollars. Traditionally, market exchange rates are used to make these conversions. In theory, exchange rates
adjust so that the local currency prices of a group of identical goods and services represent equivalent value in every nation. In
practice, such adjustments can lag far behind changing economic chcumstances. Policies, such as currency controls, may further
distort the accuracy of market-based rates. Moreover, many goods and services are not traded internationally so market-based
exchange rates may not reflect the relative values of such goods and services, even in theory. An alternative approach is based on
estimates of the purchasing power of different currencies. The Intemational Comparison Project compared prices for several hundred
goods and services in a large number of countries. On the basis of this comparison, the relative values of local currencies are adjusted
to reflect PPP (see UNDP, 1993). In effect, the PPP currency values reflect the number of units of a country's currency required to
buy the same quantity of comparable goods and services in the local market as one US dollar would buy in an "average" country.
The average coimtry is based on a composite of all participating countries. In 1996 the World Bank initiated the ranking of countries
by GDP converted at PPP rates; the effect was to reduce the income spread between the poorest and richest countries (WRI, 1997a).
UN Human Development Index
The UN has tried to address the shortcomings of GDP by developing The Human Development Index (UNDP, 1997). This index,
produced since 1990, combines three factors to measure overall development:
• Income as measured by real GDP per capita at PPP to represent command over resources to enjoy a decent standard of
living.
• Longevity as measured by life expectancy at birth.
• Educational attainment as measured by adult literacy and school emolment.
The UN has also developed other measures, such as the Gender-related Development Index (GDI) and the Gender
Empowerment Measure (GEM) to assess conditions such as gender equality.
The difficulty of incorporating these altemative measures into long-temi scenarios is that, with the exception of life expectancy,
underlymg data or base projections (e.g. on future PPPs, levels of educational attainment, etc.) needed to develop these altemative
indicators for future projections are not available. Therefore, this report largely focuses on traditional measures of economic
development like GDP. Projections of PPPs are calculated by one of the six SRES models and are presented in Chapter 4.