Transcript 슬라이드 1

New Paradigm of Low
Carbon Development
Rae kwon Chung
Climate Change Ambassador
Republic of Korea
Story of Three Myths
Climate Action (CA): Bad for Economy
Target: only way for Emission Reduction
Not Enough Money/Technology for CA
Story of Low Carbon Parad
Climate Action: Good for Economy
E R: Possible without Target
Enough Money/Technology for CA
High Carbon Paradigm:
Energy, Growth, Climate Nexus
Cheap
Fossil
Fuel
Low
Energy
Efficien
Vul To
high oil
price
High
Fossil
Fuel
Depend
Vul to
Climate
Change
Economi
vulnerability
MDG in
danger
Ecologic Unsustainable
Growth
vulner
ability
Low Carbon Paradigm
• High Energy Efficiency  Saving Energy Costs 
Energy Security against High Oil Price  Improve
Industrial Performance  Sustain Economic
Growth
• Low Fossil Fuel Dependency  Reducing GHG
Emissions
 Reducing vulnerability to Climate Change 
Improving Ecological Sustainability
• Economic Growth + Ecological Sustainability
 Green Growth
• Turn Vicious Cycle to Virtuous Cycle
Paradigm Shift from High to
Low Carbon Paradigm
Climate Action = Energy Security
• Especially When Oil is 130 USD per Barrel
• Climate Action  Improving Energy Efficiency
 Improving Energy Security
• High Oil Price is making Climate Action not
only Ecological action but Economic Action
CA Bad for Economy ?
• Internalize Ecological Costs 
Improves Energy Efficiency 
Strengthen Competitiveness 
Encourage R&D, Create New Market,
Employment, Growth
• Countries with High Energy Price 
High Energy Efficiency
Then Why Resist ?
• Positive Results: Long-Term
• Afraid of Short-Term Burden/Costs
• Key: How to close Long-term/ShortTerm Gap ?
• Need Policy Support
 to Minimize Short-Term Burden
to Maximize Long-Term Gains
Because We do not know yet
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Whether decoupling could happen in DCs
Low Carbon Development: still vision,
Decoupling only happens in rich countries
Korea: 75-06, GDP increased 7.5 times
Energy Consumption 7.4 times
• We need Low Carbon Economics:
 that can make decoupling happen in DCs.
A/P Can not repeat
Quantity of
Growth
Market Cost Efficiency
Grow First,
Clean Up
Later
A/P 새로운 성장 패턴
Quality of
Growth
Eco-efficiency
Green
Growth
Asia & Pacific
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•
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High Growth
2/3 of world poor
1.5 times population density
34% of global GHG emission
Lowest ecological carrying capacity
Ecological Status of Global Economy
• Deepening Ecological Deficit
– Footprint is surpassing Biocapacity
Unmet basic needs… need for
further economic growth
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600 million without safe drinking water
1.9 without sanitation
800 million without electricity
Still need rapid economic growth
Asia-Pacific situation
Limited Carrying capacity
A/P has to change “Growth Pattern”
• To attain
• MDG 1 (poverty reduction)
• MDG 7 (environmental sustainability)
at the same time
Paradigm Shift from
• Quantity of GDP to
Quality of GDP
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•
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Ecological Quality
Economic Quality
Social Quality
Current Paradigm: MCE
• Market Cost Efficiency: market price
• Market Price < Ecological Price
• Market Cost Efficiency (MCE)
< Ecological Cost Efficiency (ECE)
• Gap between MCE & ECE has to
be closed
Need to shift from MCE to
Ecological Efficiency (EE)
• EE: Key Concept of
 Green Growth
• EE is
Internalize Ecological Cost
Maximize Resource Efficiency
Minimize Pollution Impact
EE of Economic Growth
• Different Pattern of Growth
• Japan> EU > US
• In Asia: Singapore
Different Patterns of Growth
(global hectares per capita, 2003)
Examples of Eco-Efficiency
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Japan: rail based transport system
Singapore: private car control
London: congestion charge
Norway: Road Pricing, ban shopping mall
Failure of EE: Traffic Congestion Costs
Japan 0.79%, US 0.65%,
UK 1.25%, Bangkok 6%,
Korea 3%
Basis for Eco-Efficiency
1. Price-structure: close gap between market
Price & Ecological Price
* Invisible Infra of society
2. Infra-structure: Frame of Economic
Performance
* Visible Infra of society
Policy Tool for Eco-Efficiency
• Eco-Tax Reform: Tax Base,
Income  Carbon
• Sustainable Infra: Transport
• Demand-side Management
• Green Business Promotion
• Climate Action
Eco-Tax Reform
Tax Base: Income Tax Base: Carbon
Income Tax
Income Tax
Carbon Tax
Carbon Tax
•
Changing Tax Base
Double Dividend
• 1 stone 2 birds
• Reducing GHG Emissions
• Promoting Growth
Demand-side Management
• As Income level rises,
consumption will place major
pressure on CO₂emission
• Deteriorating EE of Consumption
• Consumer Acceptance: Key
• Congestion charge, Road Pricing
Climate Change
• Market Failure (MF): Stern Review
Need invest 1-2% of Global GDP
If not, global GDP will be lower 5-20%
• From GG perspective: EE Failure
• GG  Ultimate answer to Climate Change
• Low Carbon Paradigm:
one of the tools for GG/EE
EE & Carbon Intensity
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Ecological Efficiency  GG
Low Carbon Intensity (LCI)  LC Dev.
EE: improving efficiency of Power plants
LCI: switching Coal-fired power station to
Gas-fired one
United Nations Economic and Social Commission for Asia and the Pacific
3 myths of Climate Regime
• Target is Good. No Target is Bad.
• “Binding” is better than “Voluntary”
• “Binding Target” is the only option
to reduce Global Emission.
- placing a far greater role on
Government over Market
(Finance, TT)
2 Cases of Target
• When BAU
(ANNEX 1)
• When BAU
(Non-Annex1)
Fixed/Absolute/Binding Target
• When BAU
: Feasible
• When BAU
: Not Feasible
- Uncertainty of Projection
- Difficulty of Agreement
• Hot Air / Growth Capping
Flexible/Relative/Voluntary
Target
• Target: Indicative Goal,
Political Will
• Driver of Short Term Action
• Pledge & Review: adjustable to
changing circumstances
When target has limited role?
• MRV (Measurable, Reportable
and Verifiable) actions of NA-1:
Need Incentives
• Market Mechanism could play
key role in providing Incentives.
In designing Post-2012
• Need Market and Private Sector Dynamism
• Improve Commercial Viability of Investment
• What is lacking is not money and technology
In fact we have too much money and enough
technology.
• Once we can design a mechanism which can
improve commercial viability of mitigation
investment  money & tech will flow
to Mitigation
DC: “Unilateral Actions”
• China & DCs: already taking
significant mitigation actions
• China: 20% energy efficiency target,
has to be recognized & incentivized
It is not fair to say that China does not
have a target. It already has.
• Nicklaus Stern: Key Elements for
Global Deal for CC, incentive for DCs
as Carbon Credit for mitigation
Unilateral Developing Country Act
ions Compared to US and EU
2582
2029
1687
MMTCO2e
1638
LiebermanWarner (2015)
EU 30%
target
E
U
3
China, Brazil,
& Mexico
LiebermanWarner (2020)
US Lieberman-Warner in 2015
EU-27 -30% Target in 2020
China, Brazil, and Mexico's Unilateral Actions
US Lieberman-Warner in 2020
• Reductions from BAU (CCAP)
Cost of 1 ton CO₂Reduction
• CO2 ER per ton (USD): 234 Japan, 153 USA,
198 Europe.
• a few dollars to 20 or 30 $ per ton in developi
ng countries (less than 20 $ in China) Asia-Pacific
Integrated Model (AIM), Japan
• Cost Differential: can make ER investment in
DC commercially viable: drive market
mechanism
Barrier for Market Mechanism
• Political Ideology: Supplementarity
Principle  Reduce in your country
 Is it necessary ? To what extent ???
• Additional Burden on Annex 1 ???
 it depends on design of Climate Regime
• If Supplementarity Principle is relaxed,
reduces burden on Annex1 &
enables Deeper Cut/Deeper Global Net
Reduction
Original CDM Design
• Annex 1 Compliance Mechanism
– Political (Not Market) Mechanism
– Supplementarity Principle:
– CDM: loophole of A-1 Compliance
 Restrict CDM As Much As Possible
 Impose Additionality Criteria:
Technical, Project, Financial Additionality
 CDM has to be redesigned as
market incentive mechanism
Evolution of CDM Design
• From Compliance to Market Mechanism
• Bilateral to Unilateral CDM:
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A-1: Investing in NA-1 to generate CER (B/CDM)
A-1: Buying CER from NA-1 (U/CDM)
Proposed in 2000 at COP 6, Approved in 2005
Strong opposition: G-77(China,India), EU
• U/CDM: incentive for investment in mitigation
projects in NA-1, about 70% U/CDM
Still Half Way:
• Original Bilateral CDM: Political
Mechanism
• U/CDM: Hybrid of Political / Market
Mechanism
– Still Same Additionality Criteria: restricting
project scope
• CDM: yet very limited incentive for
investment in mitigation in NA-1
– Need to remove project & financial
additionality criteria, but maintain Technical
Baseline strict
Key Issues for Post-2012
• For Developing Country: How to
design finance & technology
transfer mechanism?
– Current Debate focusing on the role
of Governments of Annex 1:
Not Realistic
• For Investor: How to improve
commercial viability of
investment for mitigation?
What is NAMA ?
• Nationally Appropriate Mitigation Actions
(NAMA)
by developing country parties, supported
and enabled by technology, financing and
capacity-building, in a MRV (Measurable,
Reportable, Verifiable) manner
- Bali Action Plan Decision 1/COP 13,
Para. 1.(b).(ii)
If Credit is awarded to NAMA
• Mitigation initiated even without Finance
& Technology (e.g. Unilateral CDM)
• Commercial Viability will be improved
 Fin & Tech flow will be scaled-up
• Global Mitigation Cost could be reduced
• Annex 1 could take deeper target
• Mitigation will be driven by market
dynamism/ Private Sector.
With credit for NAMA
• Global Carbon Market will function as Fin &
Tech Transfer Mechanism
• DCs can initiate mitigation while pursuing
Low Carbon Development (GG)
• Certain share of proceeds can be allocated
to Adaptation Fund,
then 4 key issues of Bali Roadmap
positively addressed
How to Operationalize NAMA?
• Demand Side: need buyer of credit
Annex 1: deeper target
• Supply Side: Wholesale approach for CDM,
programmatic and sectoral CDM
Can build on existing rules of CDM
Total cost of Global Mitigation: reduced
Carbon Intensity (CI)
• Can be applied sector by sector
 Power Sector, Transport Sector etc.
 Ex. Reduce CI by 20% in 3 years:
• NAMA: actions lowering CI
• CI: Key concept in calculating Carbon Credit
• Basis for Wholesale CDM: Nicklaus Stern
Related Issues
• Additional Deeper Cut: Additional
Financial burden?
Better than Fund or Bond
• Carbon Trade: only carbon offsetting?
No.
• How to balance supply and demand?
Needs study (price differentiation,
CER Discounting etc.)
How to negotiate NAMA?
• Agree on principle by 2009
Work out details after 2009 as
was CDM
• Scope and Extent of Credit &
Modality is open to negotiation
• Carbon Intensity of Sectors: can
be applied to sectoral approach
Another Idea of Market Mechanism
• Reform & Expand CDM Scope:
removing Project & Financial
Additionality but maintain
Technical Additionality
• Enhance and Wholesale CDM:
Lord Nicklaus Stern
• Multiply CER for Solar & Wind
Climate Regime after 2012
• A-1: Deeper Target
(more than potential
domestic reduction) to create demand for
carbon credit from NA-1,
Fin & Tech Transfer
• NA-1: Incentive Mechanism
through
Carbon Market Mechanism (NAMA Credit)
Mixed with Soft Target (Vol, Pldge
& Review)
Net Global Reduction ?
• CDM: Emission Shifting (Carbon Offset)
Mechanism Not Global Emission Reduction
Mechanism
• But if we Discount CER:
Then CDM can function as Mechanism for
Net Global Reduction Mechanism without
imposing target on NA-1
• CER Discount: CER price stabilization &
Net Global Reduction
UER/CER Discounting
Sold
Carbon
Credit
No
Reduction
Unsold
Carbon
Credit
Net Global
Reduction
How About Korea ?
• Early Mover/Bridging Role
• Set Mid-term Target for 2020:
to be announced by next year
• Pledge & Review: Adjustable/
/relative/ voluntary target
• Post-2012: Recognize vol target/
Incentive for Mitigation Action
• East Asia Climate Partnership:
East Asia Climate Partnership
• Vision: Low Carbon Development Strategy
Common Challenge of
Harmonizing Growth & Climate
• 200 Million USD for 5 years
• Policy Forum: launching early next year
• Technology & Finance Cooperation
• Pilot Projects
Climate Change
• Need “Beyond GDP Paradigm”
• “Low Carbon Paradigm” Need to
change the way we live/new value:
 Happiness/Quality of life/
Motainai (Japan)
Sufficiency Economy (Thailand)
Climate Change
• Not just an ecological issue
• Issue of changing lifestyle
• If we just try to maximize GDP, we
will end up with shrinking GDP
(Stern Review)
• If we focus on quality of GDP, then
actual GDP will be even bigger
Happiness Equation
West
Happiness
GDP
New Asian
Consumerism
Desire
New Western
Consumerism
=
East