THE ROLE OF DEVELOPMENT AGENCIES IN FACILITATING EMISSION TRADING

1
THE ROLE OF DEVELOPMENT AGENCIES IN FACILITATING
EMISSION TRADING

• P. Abeygunawardena
• Principal Economist (Environment), ECID
• December 2002

2
Conditions for Point-Point Source Trading

• Established total maximum allowable loads
• Large differences in treatment cost
• Ability to identify the airshed or watershed
• Dominance and sufficiency of point sources
• Acceptance of trading program by regulatory
  agencies and facilities

3
Conditions for Point-Point Source Trading
(continued)

• Tradability of permits
• Accurate and sufficient data
• Concentration-or technology-based requirements
  met
• Sufficient and effective compliance incentives
  and enforcement mechanisms for trading

4
Conditions for International Trading

• CDM as a vehicle for international trading made
  workable
• Demonstration of additionality from Non Annex I
  countries
• Demand from Annex I countries due to large
  differences in treatment cost
• Effective monitoring
• A clearinghouse for available projects

5
Stakeholders in Emissions Trading

• Industry
• Government
• Civil Society
• Development Agency (technical assistance, loan
  projects, regional cooperation)

6
Role of Development AgenciesShort-Term

• Undertake studies on potential uses of emissions
  trading
• Expand awareness
• Build capacity for emissions trading and other
  MBIs
• Promote pilot-testing of emissions trading

7
Role of Development AgenciesShort-Term
(continued)

• Assist in expanding pilots into actual programs
• Assess the feasibility of incorporating emissions
  trading in investments
• Real investments/loans/projects/programs

8
ADB Activities Supporting Emissions Trading

• 1999 Study on Emissions Trading in the Energy
  Sector
• TAs on Market Based-Instruments for Environmental
  Management (e.g. PRC, THA)
• Special studies (e.g. PHI, INO)
• TA for Pilot-testing SO2 emission trading in
  Taiyuan city in Shanxi province piggy-backed TA
  to environmental improvement Loan
• CDM TA with Canadian support
• Environmental policy loans
• Environmental policy options in loans

9
Role of Development AgenciesMedium- to Long-Term

• Integration of emissions trading in actual
  investment, program and sector development
  projects
• Promoting expanded emissions trading in a
  selected area (e.g. Hongkong and Guangdong ??),
  with success prompting consideration of expanding
  trading to other areas/countries

10
Role of Development AgenciesMedium- to
Long-Term (continued)

• Study assessing potentials of CDM and the
  integration of CDM in projects (e.g. PRC
  Potential for CDM
• Facilitating CDM activities (e.g. PREGA TA, REACH
  activities, Dutch, Canadian and Danish support)
• Taking the role of an honest broker/facilitator

11
Role of Development AgenciesThe Way Forward

• Emissions trading falls under the broad objective
  of protecting the environment
• Active involvement in creating the market
• Development agencies have assisted in studies,
  policies, enabling framework, training, and
  pilot-testing of emissions trading
• Adapt to the dynamic process of emissions trading
  expansion

12
For More Information

• pabeygunawardena_at_adb.orgWeb site www.adb.org