Climate Change Mitigation in Developing Countries

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					Climate Change Mitigation in
   Developing Countries

                     P.R. Shukla
   Indian Institute of Management, Ahmedabad




          International Energy Workshop
     IIASA, Laxenburg, Austria, 24-26 June, 2003


                                                   IIM, Ahmedabad, India
               Presentation Agenda

1.   How (and how much) developing countries have
     contributed to GHG mitigation?

2.   What should be key elements of post-Kyoto
     architecture? Or, How “Development” and “Climate”
     policies be reconciled in the post-Kyoto architecture?




                                                      IIM, Ahmedabad, India
Six Developing Countries Comparison
Country        Population   Primary Energy     CO2 per Capita,       CO2/GDP
                (Million)   per Capita, 2000    1998 (Tc/year)   Tc/1995$ Mil (PPP)
                               (GJ /year)

Brazil            170             44                 0.5                73

China            1262             27                 0.7                175

India            1016             13                 0.3                121

Mexico            98              56                 1.1                210

South Africa      43              106                2.3                233

Turkey            65              47                 0.9                137

World            6057             63                 1.1                155

OECD             1116             200                3                  128

USA               282             341                5.4                186




                                                                       IIM, Ahmedabad, India
         Primary Energy Use (2000)


100%

80%


60%

40%

20%


  0%
       Brazil   China   India   Mexico   South Africa Turkey

                Coal     Oil      Gas         Hydro




                                                               IIM, Ahmedabad, India
Energy Related CO2 Emissions (2000)


100%

80%

60%

40%

20%

  0%
       Brazil     China     India   Mexico   South Africa Turkey

            Residential   Commercial    Industry     Transport




                                                                   IIM, Ahmedabad, India
                    Mitigation Measures

                                        Brazil   China   India   Mexico   South       Turkey
                                                                          Africa

En. Efficiency         Demand-                                                    
side                                                                                    
                               T&D
Clean Fuel                   Gas                                                   
                         Renewable                      
Transport                  Ethanol                      
             Incentives for small car    
                              CNG                         
Structural Change in Energy Use                 
Forest (controlling deforestation)                                        
Energy Reforms       Tariff                                                     
Reform                                                                         
        Privatization/ Competition
Social Reforms     Population Policy              



                                                                                   IIM, Ahmedabad, India
             How much mitigation?
1.   The six countries have mitigated 300 Million ton of
     carbon per year by such measures, for reasons other than
     climate change, though several measures could be
     “additional” to the economic baseline


2.   For context, the total mitigation commitment of
     developed countries under Kyoto Protocol (including
     USA) would be 392 Million ton of Carbon in 2010


3.   Present emissions baseline of these six countries is 18%
     below what would been without such measures


                                                      IIM, Ahmedabad, India
Mitigation: The Case of India




                                IIM, Ahmedabad, India
                                   GDP, Energy, Electricity, Carbon

                                                                                                                         Intensity (per Rs. GDP)
                 6                                                                                   1.8
                                                                                                                                             Electricity
                                                    Electricity
                                                                                                     1.7
                 5




                                                                         Intenstity Index (1975=1)
                                                                                                     1.6
                                                      Carbon
                 4
Index (1975=1)




                                                                                                     1.5
                                                      Energy                                                                                   Carbon
                 3                                                                                   1.4
                                                      GDP
                                                                                                     1.3
                 2
                                                                                                                                                 Energy
                                                                                                     1.2
                 1
                                                                                                     1.1

                 0                                                                                   1.0
                     1975   1980     1985   1990   1995           2000                                     1975   1980        1985    1990        1995     2000




                                                                                                                                      IIM, Ahmedabad, India
      Decoupling Carbon and Energy:
                   Policy Measures


• Energy Efficiency and Conservation
• Renewable Energy
• Clean Transport Fuel
• Energy and Electricity Sector Reforms
• Forestry and Land Restoration



                                          IIM, Ahmedabad, India
  Technology Push in Energy
      Intensive Industry

   Sector        Units         Average         Best
                             Consumption    Technology

                            1991     1995      2000


Cement         Kwh/ ton     132     120.5       69

Paper          Mwh/ ton     1.255   1.003     0.985

Caustic Soda   Kwh/ ton     3351    3130       2196

Aluminum       Kwh/ ton     16763   16606     15217

Urea           Kwh/ ton     425.6    390        -

Steel          G. Cal/ton   11.27    8.93      7.48



                                                         IIM, Ahmedabad, India
                 Renewable Energy
                   (capacity on March 2002)
                Source/System                   Achievement

Rural Energy    Family size biogas plants       3.262 million
                Improved cooking stove          34.3 million
Biomass Power   Biomass power                   381 MW
                Biomass gasifier                50 MW
Solar Energy    Solar street lighting systems   41.4 thousand
                Home lighting systems           177 thousand
                Solar lanterns                  383 thousand
                SPV power plants                1172 kWp
                Solar water heating systems     590 thousand m2 collector area
                Box-type solar cookers          515 thousand
                Solar PV pumps                  4204
Wind            Wind power                      1526 MW
                Wind pumps                      793
Hydro           Small hydro power (< 25 MW)     1433 MW
Waste           Energy recovery from waste      17 MW
Transport       Battery operated vehicles       247
Awareness       Energy parks                    259


                                                                         IIM, Ahmedabad, India
          Carbon Mitigated - 2000
                 Technology Initiative                     Carbon Saved
                                                           (Million Ton)
Energy Conservation                                             2.60
(Supply-side)
                        Steel                                  0.86
Energy Conservation     Cement                                 0.34
(Demand-side)           Other industry                         0.78
                        Agriculture                            0.15
                        Transport                              0.10
                        Residential + Commercial               0.27
                        Wind                                   0.94
Renewable Power         Small Hydro                            0.15
                        Biomass                                0.19
Improved Stove                                                 4.96
Gas Flaring                                                    4.16
Biogas                                                         2.30
                                                   Total       17.80




                                                                       IIM, Ahmedabad, India
                         Carbon Mitigation
                                  (1900-200)
              20
              18
                                                       Renewable Power
              16
              14
                                                       Stove
Carbon (MT)




              12
              10
                                                      Biogas
              8
              6                                  Gas Flaring
              4
                                           Energy Con (Demand-side)
              2
                                            Energy Con (Supply)
              0
               1991 1992 1993 1994 1995 1996 1997 1998 1999 2000


                   111 Million ton Carbon Mitigation from 1990 - 2000

                                                                        IIM, Ahmedabad, India
    Beyond Kyoto:
Development and Climate




                          IIM, Ahmedabad, India
     Development and Climate: Premises

1.   Climate most viably approached through development
     strategies whose climate benefits are ancillary to sustained
     economic growth

2.   Rise in developing county emissions driven by
     development imperatives and supported by current
     resource and technology flows

3.   Both climate and development concern fundamental issues
     of energy, transport, land use and food security



                                                          IIM, Ahmedabad, India
            Current Climate Regime

1.   Regime architecture is climate-centric and flows from
     output to input

2.   CDM holds only limited prospect of increased or
     redirected flows


3.   No assurance of stable assistance from developed to
     developing countries




                                                       IIM, Ahmedabad, India
             Shifting Context – Transitions
1. Transition from state to market economies is a semi-permanent

2. Market reforms driven largely by need for new development capital

3. Patchwork of residual and “reformed” institutions and alliances

4. Private flows grew five-fold while ODA declined during 1990-2000

5. Shift in flows from bank lending to foreign direct investment

6. 10 countries receive 70 percent of FDI

7. Largest investments are in electricity, natural gas and telecom




                                                                     IIM, Ahmedabad, India
             Shifting Context - Partnerships
1.   “Hybrid” states present new risk profiles
2.   New Investment Strategies
3.   Conservative investors hedge by acquiring local partners – i.e.
     Brownfield investment
4.   Aggressive investors seek “market-making” alliances
5.   Changing Trends in Development Assistance
6.   Characterized by pledges at Monterrey and Johannesburg:
     •    Softer and more selective
     •    Conditioned on “governance” reforms
     •    Channeled through public-private partnerships



                                                            IIM, Ahmedabad, India
               Principles Going Forward
1. From Input to Output
      •   Policy must tilt development choices toward climate-friendly options
      •   Operate at a scale large enough to alter emission trajectories
      •   Rather than discrete projects, measured against business as usual, aim to
          fundamentally shift baselines

2. Aligning Interests
      •   Seek alliances of domestic firms/agencies, foreign investors, ODA providers

3. Targeting Assistance
      •   Adaptation
      •   Capacity for climate-favoring development

4. Creating Regional Models
      •   Accelerate technology diffusion by targeting regional leaders



                                                                          IIM, Ahmedabad, India
       Options for a Future Architecture

1.   Input-based goals
      •   Sectoral goals
      •   Intensity goals
      •   Policies and measures

2.   Programmatic climate cooperation
      •   GHG credits for broad policy shifts
      •   A climate bank?

3.   Early Signals
4.   Integrated Solutions



                                                IIM, Ahmedabad, India
Development and Climate:
   The Case of India




                           IIM, Ahmedabad, India
                    Future Carbon Emissions

              800
                                                735


              600
Carbon (MT)




              400



              200



               0
                1995     2005   2015     2025    2035
                                  Year


                                                      IIM, Ahmedabad, India
Energy, Electricity and Carbon Intensities
                             (Reference Scenario)

1.8

1.6

1.4
                                                                   Electricity
1.2
                                                       Carbon
                                     Energy
 1

0.8

0.6
               Past Trends                           Future Projections
0.4

0.2

 0
 1975   1980   1985   1990    1995     2000   2005   2010   2015    2020     2025     2030




                                                                                    IIM, Ahmedabad, India
            Carbon Mitigation via CDM
            (under different Post-Kyoto Signals)

                 Global         Carbon         Cumulative
              Carbon Price     Mitigation      Mitigation
Scenarios                                          %
                              (Million Ton)
750 ppmv        $5-8/ton          138              3%

650 ppmv        $5-10/ton         301              7%

550 ppmv        $5-14/ton         449              10%




                                                     IIM, Ahmedabad, India
South-Asian Energy Market Development




                                IIM, Ahmedabad, India
Environment Gains: South Asian Energy Market

                Emissions Reduction in India (2015)

                          10.5
                           9.0
          Reduction (%)
                           7.5
                           6.0
                           4.5
                           3.0
                           1.5
                           0.0
                                  Carbon
                                                 SOX
                                         Year
                      Grid Integration
                      Grid Integration + Regional Co-operation



                                                                 IIM, Ahmedabad, India
         Benefits of South-Asia Energy and
           Electricity Market Integration
                                                              (Cumulative for period 2010-30)
                                                                 $ Billion       % of Region's
Benefit (Saving)                                                                 GDP
                                  Energy (Direct Benefits)

Energy                 59 Exa Joule                                   180              0.48

Investment in Energy                                                  72               0.19
Supply Technologies
Investment in Energy                                                  69               0.18
Demand Technologies
                               Environment (Indirect Benefits)

Carbon Saved           1.4 Billion Ton                                28               0.08

SO2 Saved              50 Million Ton                                 10               0.03

                         Total Direct and Indirect Benefits           359              0.98
                                         Spillover Benefits

Water                  16 GW additional hydro capacity

Flood Control          From additional dams

Competitiveness        Reduced unit energy/electricity cost


                                                                                      IIM, Ahmedabad, India
              From CDM to “Development and Climate”
                                                           Strategy
                Project/ Program
                Retrofit Projects (e.g.)               · Promote technology transition in small/
                                                         medium industry
                   · Boiler retrofit
CDM




                                                       · Link with resource conservation programs
                   · Process improvements
                Green-field Projects (e.g.)            · Positive list
                                                       · Promote technical/ financial collaborations
                   · New Wind Farm
                                                       · Jump start technology transition/ hedging
                   · Gas Power Plant
                Infrastructure Projects (e.g.)         · Link with development
                                                       · Regional energy cooperation
Development




                   · Gas Pipeline
                                                       · High mitigation potential but difficult to
                   · Electricity T&D                     operate under CDM regime
                   · Road/Rail infrastructure
                Reform Programs         (e.g.)        · Strong link with economic reforms and
                                                        sustainable development
                   · Technology R&D/Dissemination
                                                      · High transaction costs but high co-benefits
                   · Electricity Distribution Reforms
                                                      · No way to operate under Kyoto regime
                   · Consumer Awareness


                                                                                         IIM, Ahmedabad, India
                              Indian Emission Scenarios

                        900
                                                                        Fragmented Market
                        800
                                                                        Regional Development
                        700                                             Market Reforms
Carbon Emissions (MT)




                        600
                                                                        Sustainable Development
                        500
                        400
                        300

                        200
                        100
                        0
                            2000   2005   2010    2015   2020   2025   2030
                                                 Years




                                                                                     IIM, Ahmedabad, India
            Global Emission Scenarios (SRES)
            30

                                                             A2

            25



            20
CO2 (GtC)




            15                                               B2
                                                             A1

            10

                                                             WRE550
             5                                               B1



             0
             1990   2010   2030      2050   2070   2090
                                  Year



                                                          IIM, Ahmedabad, India
Technological Change in India to
   Stabilize CO2 at 550 ppmv

         Non-Fossil Energy Contribution to GHG Mitigation
                                                                     2000


                                                                     1600


                                                                     1200


                                                                     800


                                 550 PPMV
                                                                     400




                                                            IIM, Ahmedabad, India
                          Conclusions
1. Non-climate policies and measures in developing countries have
   contributed significant mitigation
2. Climate cause would be better served if the regime is driven by
   inputs than output measures
3. Rising investment and technology flows provide significant
   opportunities for transition to low emissions pathways
4. Climate embedded within development policies would have
   lower climate costs and risks
5. Development pathway is key determinant of effective climate
   regime


                                                          IIM, Ahmedabad, India