Long Term Carbon & Energy Management

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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
      Background to IPIECA

Founded in 1974
United Nations NGO Status (ECOSOC II)
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
      Core IPIECA Activities

Strategic issues assessment; oil spill preparedness
& response; urban air quality management;
biodiversity; health issues; and global climate

    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
        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
      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
  2/ consider opportunities for effective technology transfer
  and capacity building
  3/ explore the potential for market-based emission
  reduction approaches, particularly through CDM
       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
      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
                    Long-Term Emission Forecasts in Asia

miilion tons C eq

                    3000                                        Other Asia
                    2500                                        South Korea
                    2000                                        India
                    1500                                        China

                    1000                                        Australasia
                           1990 1998 1999 2005 2010 2015 2020   (IEA, 2002)

Policy challenge to provide affordable energy for
development, whilst at the same time limiting long
               term GHG emissions
     Examples of Technology Options

• Efficiency improvements                          Effective technology
  - Buildings, energy supply and use, transport
                                                  Must be efficient and
• CO2 Capture and Storage
                                                  Short term: Global
  - Biological sinks (create & maintain stocks)     deployment of
                                                    current technologies
  - Geological sequestration                      Long term: Support
                                                    research and
• Non Fossil Fuel Energy Supply                     development of new
                                                    technologies e.g.
  - Nuclear, biomass, hydro, wind, solar...         biotechnology

  - Decades to implement additional new technologies
        Technology Transfer

Barriers:                      Enabling frameworks:
cost                           rule of law
intellectual property rights   open markets
institutional structures       foreign direct investment
personnel                      private / public collaboration
                               market based mechanisms

       CDM offers one new pathway to encourage
                  technology transfer
       CDM: Common Priorities - Host Countries

• Projects that:
   – Promote sustainable development
   – Reduce emissions
   – Result in technology transfer
   – Mobilize new investment (no diversion of ODA)
• Generating CER’s of less importance
• Early focus on
   – Energy efficiency
   – Renewable energy
   – Small scale projects
      CDM: National Approaches

• Institutions and procedures under development
• Significant progress in most countries              Need to:
• Wide variety of approaches that reflect             - Establish local
  differing national priorities & structures              Operational
• Large potential for CDM projects &                  - Develop capacity
                                                      - Lower transaction
  emission reductions in Asia
   – High growth, low abatement cost                  - Raise awareness
   – Japan major credit buyer
   – Potential reductions > 100 million ton of CO2
   – Projects particularly in larger Asia countries
      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
       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
       Private Sector Perspectives

             Uncertainties at every step...
• Company emissions obligations in Annex 1
   – 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
       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
      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
       Key Messages (cont.)

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 > significant reductions
Mechanisms to promote technology transfer
For further details about IPIECA, and our joint
   Latin American workshop with ARPEL on
       3-4 December 2002, please visit:


                  or contact:


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