Long Term Carbon

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COP-8 Side Event - Thursday 31
October Development Climate Change Issues
Opportunities in Asia IPIECA Workshop - Key
Messages and Learning's Kuala Lumpur,
Malaysia 25-26 September 2002
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Background to IPIECA
Founded in 1974 United Nations NGO Status
(ECOSOC II) Non-profit Global oil and gas
membership 25 national multinational
companies 13 national regional
associations Secretariat based in London Focus
on key global environmental issues Share
information, understanding good practice Does
not lobby on behalf of the industry
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Core IPIECA Activities
Strategic issues assessment oil spill
preparedness response urban air quality
management biodiversity health issues and
global climate change.
Climate Change Working Group established in 1988
Aim to provide members and external stakeholders
with reliable and timely information, issues
analysis, education and involvement in
international process related to global climate
change
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IPIECA Climate Change Activities

• 1/ Interaction with UNFCCC
• Inform members of developments in the
  negotiations
• Publications (e.g. Guides, Glossary of Terms)
• 2/ Contributing to the IPCC
• Industry expert Lead Authors and peer review
• Guide to IPCC processes, structure and functions
• 3/ Workshops and Symposia
• International and regional events
• Scientific, technical, socio-economic aspects of
  climate change
• Comprehensive series of reports and publications

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IPIECA Workshop (25-26 September)

• Workshop on Development Climate Change
• Issues Opportunities in Asia
• Hosted by PETRONAS in Kuala Lumpur, Malaysia
• Workshop goals
• 1/ assess future regional energy demand, GHG
  trends, options to meet climate change concerns
  and development priorities
• 2/ consider opportunities for effective
  technology transfer and capacity building
• 3/ explore the potential for market-based
  emission reduction approaches, particularly
  through CDM

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Development Trends in Asia

• Key priorities in Asia
• sustainable development and poverty alleviation
• technology transfer and capacity building
• Anticipated economic growth
• average 3-7 annual ? GDP
• considerable national and regional variation
• Affordable energy is a key factor to achieve
  economic social development
• Over 2 billion people globally without access to
  electricity

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Long-Term Energy Demand in Asia

• According to the IEA, demand for energy will
  increase twofold between 2000 and 2020
• increased consumption of coal, oil, and
  particularly natural gas
• Future fossil fuel resources
• adequate for many decades
• require technology developments investment
• Renewable energy sources (hydro, solar, wind,
  geothermal and biomass)
• expected to grow considerably
• remain a small of total energy mix

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Long-Term Emission Forecasts in Asia
(IEA, 2002)
Policy challenge to provide affordable energy for
development, whilst at the same time limiting
long term GHG emissions
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Examples of Technology Options

• Efficiency improvements
• - Buildings, energy supply and use,
  transport
• CO2 Capture and Storage
• - Biological sinks (create maintain
  stocks)
• - Geological sequestration
• Non Fossil Fuel Energy Supply
• - Nuclear, biomass, hydro, wind,
  solar...
• - Decades to implement additional new
  technologies

Effective technology solutions Must be efficient
and economic Short term Global deployment of
current technologies Long term Support research
and development of new technologies e.g.
biotechnology
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Technology Transfer
Barriers cost intellectual property rights
institutional structures personnel
Enabling frameworks rule of law open markets
foreign direct investment private / public
collaboration training market based mechanisms
CDM offers one new pathway to encourage
technology transfer
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CDM Common Priorities - Host Countries

• Projects that
• Promote sustainable development
• Reduce emissions
• Result in technology transfer
• Mobilize new investment (no diversion of ODA)
• Generating CERs of less importance
• Early focus on
• Energy efficiency
• Renewable energy
• Small scale projects

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CDM National Approaches

• Institutions and procedures under development
• Significant progress in most countries
• Wide variety of approaches that reflect differing
  national priorities structures
• Large potential for CDM projects
• emission reductions in Asia
• High growth, low abatement cost
• Japan major credit buyer
• Potential reductions gt 100 million ton of CO2
• Projects particularly in larger Asia countries

Need to - Establish local Operational Entities -
Develop capacity - Lower transaction costs -
Raise awareness
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Learnings from CDM Case Studies

• Learning by doing builds better understanding
  than analysis workshops
• Private-public partnerships foster understanding
• Needs expectations of government/business
• How to balance priorities of sustainable
  development with generation of CERs
• Project viability only affected by CERs at margin
  
• Projects must be economically sound
• Transaction costs remain high

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Large-scale CDM Projects

• Currently receive little attention
• Present significant technical challenges
  (baselines, additionality, only part of a
  project)
• Potential for time-consuming, confrontational
  debates over political acceptability
  (eligibility, approval process)
• Large scale projects have potential to
• reduce emissions significantly
• encourage substantial investment
• promote technology transfer
• contribute to sustainable development

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Private Sector Perspectives
Uncertainties at every step...

• Company emissions obligations in Annex 1
  countries
• extent to which CDM might contribute
• Economic basis for valuing CERs
• Rules for project eligibility, baselines,
  additionality
• Approval process, especially for large projects
• information requirements
• transaction costs
• time and process for decisions
• Contrasts between public/private sector approaches

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Key Messages
Development poverty alleviation key
priorities Need to consider climate change in
this context Access to affordable energy
essential for development Fossil fuel usage in
Asia set to double by 2020 Technology offers a
variety of opportunities CDM offers one new
pathway multiple objectives
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Key Messages (cont.)
Significant potential for CDM in Asia
identified Current focus on small scale projects
Large-scale projects (many benefits
challenges) Diversity of National approaches
being developed Lower transaction costs faster
approval needed Investment in CDM from a variety
of sources
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Key Messages (cont.)
Uncertainties Project (additionality, baselines,
eligibility) In most cases credits affect
viability at the margins Business (obligations,
demand, cost) Long-term issues International
framework post 2012 Technology developments gt
significant reductions Mechanisms to promote
technology transfer
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• For further details about IPIECA, and our joint
  Latin American workshop with ARPEL on
• 3-4 December 2002, please visit
• http//www.ipieca.org
• or contact
• info_at_ipieca.org