CLEAR THINKING

One Hat Does Not Fit All

Climate Change Policies in the Asia Pacifi c Region

Grant Anderson and Fergus GreenAllens Arthur RobinsonNovember 2009

Tax

ContentsIntroduction 1Australia 5 Emissions trading 5 Renewable energy 7 Carbon capture and storage 8 Energy effi ciency 8 Voluntary carbon market 9Cambodia 11 Renewable energy and CDM projects 11 Forestry and land-use 11China 13 Carbon pricing 13 Energy effi ciency 13 Energy supply diversifi cation and supply-side effi ciency 15 Forestry and land-use change 15 Agriculture 16 Green infrastructure 16 Other measures 16Indonesia 19 Forestry and land-use 19 Renewable energy 19Japan 21 Carbon pricing and emissions trading 21 Renewable energy 22 Energy effi ciency 22 Forestry and land-use change 23Malaysia 25 Renewable energy 25 Energy effi ciency 26 Forestry and land-use change 26New Zealand 29 Emissions trading 29 Renewable energy 30 Energy effi ciency 30 Forestry and land-use change 31 Agriculture 31Papua New Guinea 33 Forestry and land-use change 33 Renewable energy 33Philippines 35 Renewable energy 35 Energy effi ciency 36South Korea 39 Carbon pricing 39 Renewable energy 39 Energy effi ciency 40Singapore 43 Energy effi ciency 43 Renewable energy and supply-side effi ciency 43Thailand 45 Renewable energy 45 Energy effi ciency 45Vietnam 47 Renewable energy 47 Energy effi ciency 47

2 1

IntroductionThe 15th Conference of the Parties to the United Nations Framework Convention

on Climate Change will be held in Copenhagen from 7 to 18 December 2009.

Nearly 200 countries will be represented at the conference, and their purpose

is to negotiate an international climate change agreement to succeed the Kyoto

Protocol, which expires in 2012. It seems extremely unlikely that a comprehensive

treaty, as opposed to a high-level political compact, will result from the Copenhagen

conference. The time is too short to bridge the considerable divisions not just

between the so-called developed and developing countries but also within those

country blocs, and the 180-page draft text is still riddled with around 2,000 square

brackets that indicate points of difference. In addition, one of the key voices at the

conference, the United States, is likely to be reluctant about committing to serious

greenhouse gas emission reduction targets in advance of Congress deciding the fate

of the Waxman-Markey and Kerry-Boxer bills to establish a US emissions trading

scheme. However, this should be no surprise. While it took two years to agree the

Kyoto Protocol, much of the necessary detail was only agreed four years later in

the Marrakesh Accords (2001), and even then the Protocol only came into force in

2005 when Russia agreed to ratify it.

One of the key issues at the Copenhagen conference is the nature and extent of

the commitments that countries should make to reduce (or, at least, moderate)

their greenhouse gas emissions. A number of developing countries have called

for developed countries to commit to reducing their greenhouse gas emissions

by around 40 per cent from 1990 levels by 2020. Conversely, while it is generally

recognised that developing countries (which are concerned that constraints on

their emissions will prejudice their economic development) should not be required

to commit to absolute binding emissions reductions, developed countries are

concerned to ensure that developing countries also contribute to the emissions

reduction task because most emissions growth will come from them in the

foreseeable future. This particular issue is also important at a domestic level. In

Australia, one of the most hotly debated topics is the degree of assistance (in the

form of free carbon permits) that should be given to Australia’s trade-exposed

emissions-intensive industries under the Federal Government’s proposed Carbon

Pollution Reduction Scheme so as to preserve their international competitiveness

while still providing them with an incentive to reduce their emissions. The carbon

policies of the large developing countries are very relevant to this debate, given

that a large proportion of Australia’s exports (such as aluminium, coal and LNG)

compete with exports from these developing countries.

It is against this background that we have prepared an overview of the climate

change-related policies that have been adopted, or are under serious consideration,

in a number of the countries in our region: Australia, Cambodia, China, Indonesia,

Japan, Malaysia, New Zealand, Papua New Guinea, the Philippines, Singapore,

One of the key issues at the Copenhagen conference is the

nature and extent of the commitments that countries should make to

reduce (or, at least, moderate) their greenhouse gas emissions.

Myth #1

We need to wait until after

Copenhagen to see what the rest of

the world is doing to tackle climate

change. While the international

negotiations may result in countries

accepting more ambitious

emissions reduction commitments,

countries in the Asia Pacifi c region

alone – from China to New Zealand,

from Singapore to South Korea

– are already taking unilateral

measures to reduce emissions, save

energy, plant forests and position

themselves to prosper in the green

global economy.

Grant Anderson

2 3

South Korea, Thailand, and Vietnam. While much of the debate in Australia

and New Zealand has focused on the development and implementation of their

respective domestic emissions trading schemes, this survey reveals a variety of

other measures that other countries in the region have adopted to promote ‘greener’

economies: targets and feed-in tariffs to support renewable energy generation,

tax incentives, government funding, building, vehicle and electrical appliance

standards, fuel price reforms, energy effi ciency programs and forestry projects. This

is instructive given the diversity of countries in the region, which range from the

developed countries of Australia, Japan and New Zealand, through to Singapore and

South Korea (which are not recognised as developed countries under the UNFCCC

and the Kyoto Protocol but which have the attributes of developed countries),

China (which has a much lower per capita GDP but is a relatively prosperous

developing country), and poorer developing countries (such as Cambodia, Vietnam

and Papua New Guinea). A key message that emerges from this survey is that,

understandably, countries adopt climate change initiatives that are compatible

with their economic development goals and their individual circumstances. For

example, avoided deforestation is a particular focus for Indonesia and Papua New

Guinea given their forest cover. Conversely, Vietnam (with its hydro capacity) and

the Philippines (with its substantial geothermal resources) are concentrating on

renewable energy, as is Cambodia. Some countries (such as Malaysia and Thailand)

are using their abundant biofuel sources to displace some of their reliance on fossil

fuels. And yet other countries, which have less scope for these kinds of initiatives

but are substantial energy consumers (eg Singapore, Japan and South Korea),

have introduced a raft of measures to encourage and mandate energy effi ciency.

Then there is China, which is the largest emitter of greenhouse gases in the world,

although it ranks 44th on a per capita basis (4.6tCO2-epa per capita). China

has implemented an ambitious set of programs designed to improve its energy

effi ciency/intensity, promote renewable energy, expand its forest sinks and develop

‘eco-cities’.

More than anything, this suggests that the current emphasis on national emissions

targets is too simplistic. As our Prime Minister has suggested, a more realistic

alternative might be to append to any international agreement a schedule detailing

the specifi c measures that countries agree to undertake to reduce or control their

greenhouse gas emissions. This would enable countries to adopt measures that are

more suited to their individual circumstances – measures that play to their strengths

and that are consistent with other priorities such as economic growth and energy

security. It would also make it easier to compare developing countries’ proposed

contributions for the purposes of the international negotiations and to monitor

compliance with these commitments, and would enable the more effective targeting

of the fi nancial (and other, eg institution building) assistance that developed

countries will need to provide to developing countries to assist them in their

mitigation efforts. While these existing measures will still be insuffi cient to achieve

the reductions necessary to hit a global 44GtCO2-e greenhouse gas emissions target

for 2020 (which has been suggested as being consistent with limiting the global

temperature increase to 2°C above pre-industrial levels), at least they provide a

reasonably solid and verifi able foundation to build on.

Equally signifi cantly, investors are increasingly factoring into their investment

decisions the policies that countries have on climate change. Such policies are

an important investment consideration, and not just because of the incentives for

investment such policies may provide. In a world which, whether voluntarily or

by force of circumstances, will need to become less carbon intensive, a country’s

approach to the carbon challenge will have a direct impact on its economic strength.

If you would like any further information on climate change policies and measures in

our region, please contact any of the people below.

Myth #2

China is doing nothing to restrain

the growth of its greenhouse gas

emissions. China’s economy and

greenhouse gas emissions are both

growing rapidly, but China is making

large investments in renewable

energy, taking serious steps to

become more energy effi cient, and

increasing taxes on higher-polluting

products and industries.

Myth #3

There is a “silver bullet” approach

to solving climate change. From

energy effi ciency in Japan and

Singapore to avoided deforestation

in Indonesia and PNG, our

survey shows that countries are

taking a wide variety of emissions

reduction measures that best suit

their economic circumstances

and that play to their comparative

advantages. All of these measures

will be necessary to solve the

problem of climate change.

Grant Anderson

Melbourne

T +61 3 9613 8928

Grant.Anderson@aar.com.au

John Greig

Brisbane

T +61 7 3334 3358

John.Greig@aar.com.au

Matthew Skinner

Sydney

T+61 2 9230 4038

Matthew.Skinner@aar.com.au

Darren Murphy

Perth

T +61 8 9488 3768

Darren.Murphy@aar.com.au

Campbell Davidson

Hong Kong

T +852 2840 1202

Campbell.Davidson@aar.com.au

David Holme

Jakarta

T +62 21 2995 1509

David.Holme@aar.com.au

Vaughan Mills

Port Moresby

T +675 320 4461

Vaughan.Mills@aar.com.au

Bill Magennis

Hanoi

T +84 4 3936 0990

Bill.Magennis@aar.com.au

Gavin MacLaren

Singapore

T +65 6535 6622

Gavin.MacLaren@aar.com.au

* If you wish to be provided with details of supporting references for this publication,

they can be provided on request.

4 5

AustraliaAs a country reliant on vast, cheap reserves of coal for electricity generation, with an export-oriented economy that includes a number of large, energy-intensive sectors, and with a sparsely located population wedded to the private car, Australia faces a number of challenges in reducing its emissions profi le.

Moreover, because of its federal system, Australia’s approach to climate change

policy has traditionally been fragmented across local, state and federal jurisdictions.

However, these policies are gradually being rationalised – for example, the NSW

Greenhouse Gas Abatement Scheme and the Victorian Renewable Energy Target

scheme will be phased out with the introduction of a Federal domestic emissions

trading scheme.

The Rudd Labor Government was elected on a platform that included a promise

to ratify the Kyoto Protocol, expand Australia’s production of renewable energy

and introduce an economy-wide emissions trading scheme. The fi rst of these was

relatively easy: the newly elected Government ratifi ed the Protocol in December

2007 (the ratifi cation taking effect on 11 March 2008), and was greeted with

rapturous applause at the Bali summit for having done so. The Government’s

renewable energy agenda was more diffi cult to implement, but a major breakthrough

came when Parliament passed a Bill to mandate a 2020 renewable energy target

of 20 per cent. The third goal of implementing a cap-and-trade scheme is proving

more problematic. The Government requires the support of the Federal Opposition

to pass the legislation necessary to establish the scheme and, when the legislation

was fi rst voted on in August 2009, the Opposition voted against it. However, the

Government and Opposition are currently negotiating potential amendments to the

scheme, and the Government is proposing to take the legislation to a second vote in

late November or early December 2009.

Emissions trading

The Rudd Labor Government is attempting to pass legislation through the Australian

Parliament that will establish a cap-and-trade scheme, beginning in July 2011,

to reduce Australia’s greenhouse gas emissions. The Carbon Pollution Reduction

Scheme (CPRS) will cap Australia’s emissions from sectors covered by the CPRS

through imposing annual emissions caps that will be set fi ve years in advance (a

further 10 years of gateways that set the minimum and maximum bounds between

which caps for those years can fall will be set on a fi ve-year rolling basis). The

legislation will also provide for tradeable emissions permits, known as Australian

Emissions Units (AEUs), which will need to be surrendered by liable entities to cover

their greenhouse gas emissions. By setting the caps at below business-as-usual level

emissions, the CPRS will create a market for AEUs that should see them allocated

to entities that generate the most value from continuing to emit greenhouse gases.

Initially, the majority of AEUs will be auctioned (the proceeds being used to fund

household and business assistance packages), with the remainder being allocated

6 7

under industry assistance programs (see below). The level of Australia’s annual emissions caps will be determined

based on the outcome of the Copenhagen conference – and, in particular, any 2020 emissions reduction target

that Australia might agree to. The Government has pledged to reduce Australia’s emissions by a minimum of 5 per

cent below 2000 levels by 2020, and by up to 25 per cent below 2000 levels by 2020 if there is a comprehensive

global agreement consistent with the stabilisation of atmospheric greenhouse gas concentrations at 450ppm.

The CPRS will cover all six greenhouse gases covered by the Kyoto Protocol and, from its inception, will cover

emissions from stationary energy, industrial processes, waste and transport, as well as fugitive methane emissions

from coal-mining (the Federal Opposition opposes the inclusion of such fugitive emissions in the CPRS). Broadly

speaking, liability will attach to the holding company of a facility operator that operates a facility which has

direct emissions of more than 25ktCO2-epa, and to the importers, manufacturers and suppliers of fossil fuels

and synthetic greenhouse gases (who will effectively be liable for the emissions that would be produced by

the downstream combustion or release of those fuels and gases). Forestry will be included in the CPRS on an

‘’opt-in’’ basis, whereby carbon right holders in respect of Kyoto-compliant forests will be able to generate AEUs

proportionate to the carbon stored in those forests, but will also be liable for any reduction in that stored carbon,

eg because of fi re or harvesting. The current proposal is that, while non-energy agriculture emissions (eg methane

emissions from livestock and fertiliser-related emissions) will be excluded from the CPRS initially, the Government

will decide in 2013 whether the CPRS will be extended to cover them from 2015 (or some later date). However,

the Federal Opposition wants the agriculture sector to be permanently exempt from any liability for non-energy

emissions under the CPRS, but wants farmers to be able to generate permits for carbon abatement from improved

soil management and grazing practices. Recent indications are that the Government will accede to at least the

fi rst of these demands.

For the fi rst year of the CPRS (2011/12), AEUs will be issued for a fi xed price of $10 per AEU. In the subsequent

four years (2012/13-2015/16), the price of AEUs will be capped at an indexed base amount of $40 per AEU.

Thereafter, there will be no upper limit on the price of AEUs. However, there are various ‘safety valves’ that will

moderate the price of AEUs – namely, AEUs will be able to be banked (ie earlier vintage AEUs can be used to

satisfy a liable entity’s CPRS obligations in future years), AEUs will be able to be borrowed in that a liable entity

will be able to satisfy 5 per cent of its CPRS obligations in one year by surrendering AEUs with a vintage of the

immediately succeeding year, and liable entities will be able to meet their CPRS obligations by surrendering Kyoto

Protocol units (such as non-forestry and non-nuclear CERs and ERUs) in place of AEUs.

Under the Government’s proposed emissions-intensive trade-exposed (EITE) assistance program, certain

companies that are exposed to international competition (as exporters or importers) will be eligible for assistance

in the form of annual allocations of free AEUs that are tied to production. In this regard, activities that emit more

than 2,000tCO2-e/$m revenue (or 6,000tCO2-e/$m value-added) will qualify for permits that initially cover 94.5

per cent of their industry-average emissions (including electricity consumption), and activities that emit more

than 1,000tCO2-e/$m revenue (or 3,000tCO2-e/$m value-added) but less than 2,000tCO2-e/$m revenue (or

6,000tCO2-e/$m value-added) will qualify for AEUs that initially cover 66 per cent of their industry-average

emissions (including electricity consumption). This assistance will decrease over time. An exception to this is

coal mining, which the Government has decided to exclude as an EITE activity and instead to allocate up to

$750 million in cash by way of adjustment assistance for the most gassy coal mines. The Federal Opposition is

seeking greater compensation for EITE activities. In particular, it wants to lower the threshold for EITE assistance

to 850tCO2-e/$m revenue and to extend that assistance to food processing industries. The Opposition also wants

the higher assistance rate (94.5 per cent, decreasing to 90 per cent in 2015/16) to extend to all activities meeting

this threshold and not to decrease below this level until 80 per cent of Australia’s competitors have implemented

carbon abatement measures.

Because of Australia’s high dependency on coal-fi red electricity generation, coal-fi red generators that exceed a

threshold emissions intensity will qualify for a once-off allocation of 130 million free AEUs (delivered in fi ve equal

annual instalments over the period 2011/12-2015/16). However, the Federal Opposition is pushing for a tripling

of this assistance, to be delivered over 15 years. It is also advocating that the number of AEUs that need to be

surrendered by coal-fi red electricity generators should be limited through only requiring generators that exceed

a specifi c emissions intensity threshold (largely brown coal-fi red generators) to surrender AEUs to cover their

emissions in excess of that threshold (generators below the threshold would be entitled to be allocated AEUs). The

Opposition sees this as a means of reducing increases in electricity prices.

The Australian legislation provides for the possibility that the CPRS will be linked with other countries’ emissions

trading schemes in the future, for example the EU ETS or the New Zealand ETS, if the Government deems such

linkages to be desirable and an appropriate bilateral agreement is negotiated.

The measurement of greenhouse gas emissions for the purposes of the CPRS is regulated by the National

Greenhouse and Energy Reporting legislation. This reporting scheme requires not just the measurement and

reporting of direct (scope 1) emissions (which are the focus of the CPRS), but also the measurement and

reporting of energy consumption, energy production and indirect (scope 2) emissions attributable to energy

consumption.

Renewable energy

Australia has considerable, but unrealised, potential to generate power from renewable energy sources. At

present, Australia generates less than 5 per cent of its energy from renewables, with the rest coming primarily

from coal and some gas. To provide a greater incentive to invest in renewable power sources, the Federal

Parliament recently passed legislation to expand the existing Mandatory Renewable Energy Target (MRET)

Scheme so that 20 per cent of Australia’s electricity must now be generated from renewable energy sources

by 2020. The Scheme establishes a market for ‘’renewable energy certifi cates’’, each of which represents the

equivalent of 1 megawatt-hour of electricity generated from eligible renewable energy sources (such as wind,

solar, hydro, wave, geothermal or wood waste), by requiring wholesale purchasers of electricity to surrender

certifi cates equivalent to a specifi ed proportion of their electricity acquisitions each year. Proponents of renewable

energy projects, including persons who install small-scale renewable generation units, can generate and sell

certifi cates, providing them with an incentive to invest in those projects. Following amendments to the scheme

negotiated with the Federal Opposition, existing waste coal mine gas generators will also be entitled to create

renewable energy certifi cates until 2020.

The Australian Centre for Renewable Energy will administer a range of programs to promote the development,

commercialisation and deployment of renewable energy and enabling technologies. These include programs

that provide funding for second generation biofuels research, the commercial demonstration of renewable

energy technologies, the drilling of geothermal wells, the development and demonstration of effi cient electricity

storage technologies, and the development and installation of software and systems for the effective forecasting

of wind energy generation in Australian power systems. The Renewable Energy Equity Fund provides venture

capital funding for small, innovative renewable energy companies, while the Solar Cities program is designed to

investigate the potential for solar energy, energy effi ciency and smart meters to reduce greenhouse gas emissions

in seven Australian cities.

Australia has considerable, but unrealised, potential to generate

power from renewable energy sources

8 9

The Federal Government has specifi cally targeted solar energy for further development in Australia, and is

providing a range of direct subsidies to proponents of solar projects. The Government’s $1.5 billion Solar Flagships

Program will support the construction and demonstration of large-scale solar power stations in Australia, with the

aim of establishing up to 1000 MW of grid-connected solar power generation capacity. At a more localised level,

the National Solar Schools Program provides grants of up to $50,000 to install solar and other renewable power

systems and energy effi ciency measures in Australian schools. The solar industry is also supported through the

Australian Solar Institute, which administers government grants and undertakes research into solar technologies.

An option that has yet to be seriously considered is nuclear power. At least if carbon capture and storage

(see below) proves unfeasible, then nuclear would seem to be the only other low-emissions technology that is

capable of sustaining Australia’s substantial energy requirements, at least in the medium term. However, there is

considerable political and community resistance that would need to be overcome before baseload nuclear power

generation could be established in Australia.

Carbon capture and storage

The importance of coal to Australia as a fuel for generating electricity, and as a major export commodity, means

that Australia has a signifi cant interest in the development of technologies that reduce the atmospheric emissions

of greenhouse gases from the combustion of coal, including carbon capture and storage (CCS) technologies.

The National Low-Emissions Coal Initiative provides funding for projects to accelerate the deployment of CCS

technologies and associated infrastructure. In addition, the CCS Flagships Program supports the construction and

demonstration of large-scale integrated carbon capture and storage projects in Australia, and it is expected that

2-4 industrial-scale projects will receive direct funding grants under this Program.

The Rudd Government has also established the Global Carbon Capture and Storage Institute, which includes

national governments and industry representatives from around the world, and whose role is to accelerate the

commercial deployment of CCS projects globally.

Energy effi ciency

Australia has a wide range of energy effi ciency programs targeted at businesses and industry. The National

Framework for Energy Effi ciency, currently in its second phase, provides a strategic framework for coordinating

energy effi ciency programs among Australia’s different levels of government.

Industrial effi ciency is primarily encouraged through the Energy Effi ciency Opportunities program. This program,

which is enshrined in legislation, requires businesses that are large users of energy (more than 500TJpa) to

identify, evaluate and report publicly on cost-effective energy savings opportunities, thereby encouraging them

to improve their energy effi ciency. The Clean Business Australia program gives support to small to medium-

sized businesses providing climate change services and technologies and to manufacturers to help them retool

to improve their carbon and environmental footprints. In addition, the Federal Government is establishing the

Australian Carbon Trust, modelled on its British namesake, which will work to promote energy effi ciency in

commercial buildings and business operations through $50 million worth of seed funding grants.

Energy effi ciency in buildings is also promoted through the specifi cation of mandatory minimum building

performance standards in the Building Code of Australia and through a range of measures to promote the

voluntary adoption of high energy effi ciency standards.

The effi ciency of appliances and technologies is regulated through a variety of policies and measures. The

Minimum Energy Performance Standards Regulations regulate mandatory performance standards for a range

of appliances. New standards for lighting effi ciency were also introduced under this regime consequent on the

Government’s decision to phase-out ineffi cient incandescent light globes. A number of other schemes require the

compulsory labeling of appliances with energy effi ciency product information.

The Department of Transport administers a suite of programs and rules relating to vehicle effi ciency. Vehicle

emissions are regulated according to the Australian Design Rules for vehicles, which specify maximum emissions

levels in certain categories. Fuel consumption labels that specify the fuel effi ciency and average CO2 emissions

must be displayed on all new light vehicles. The Government’s Green Vehicle Guide provides information about

the environmental performance of new light vehicles sold in Australia since mid-2004, allowing consumers

to compare performance across different vehicle makes and models. The Energy Grants Credits Scheme for

alternative fuels provides a fuel grant for businesses using certain alternative fuels for road transport – namely

biodiesel, ethanol, LPG, LNG and compressed natural gas – but expires at the end of 2009/10.

The Government is also providing direct assistance to car manufacturers to help them invest in projects to build

low-emissions and high-effi ciency vehicles through its Green Car Innovation Fund. Grants of $1 of government

funding are provided for every $3 of eligible expenditure contributed by the grantee. The Fund is a key component

of a broader ‘Green Car’ plan that provides large subsidies to Australia’s vehicle manufacturers to ensure their

competitiveness and encourage their transition to a ‘greener’ industry.

Voluntary carbon market

A range of voluntary carbon offsets (generated from forestry, energy effi ciency etc) are traded in Australia on a

bilateral basis. To date, this market has been relatively unregulated, although the Australian Competition and

Consumer Commission has been fairly vigilant in identifying and prosecuting entities that advertise the green

credentials of their products and carbon offsets in a way that is misleading or deceptive. Cognisant of the

variable integrity of these voluntary carbon offsets, the Federal Government has released a draft National Carbon

Offset Standard that specifi es the requirements that carbon offsets will need to comply with before they can be

advertised as accredited under the standard. While compliance with the standard is not mandatory, and offsets

can be accredited under other standards (eg Voluntary Carbon Standard 2007), it may be that the National

Carbon Offset Standard, once fi nalised, will become the standard of choice for carbon offset purchasers. The

introduction of the CPRS is likely to have an adverse effect on the voluntary carbon offset market as compliance

buyers concentrate on meeting their CPRS obligations using AEUs and eligible Kyoto Protocol units.

A range of voluntary carbon offsets ... are traded in Australia on a

bilateral basis ... [but] the introduction of the CPRS is likely to have an

adverse effect on the voluntary carbon offset market.

10 11

CambodiaA country that is both energy poor and vulnerable to climate change, Cambodia’s energy and climate concerns are of a different order to those of most countries in the region.

More than three-quarters of Cambodia’s population lives in rural areas and 70 per cent of the

rural population lacks access to electricity. A key economic priority is therefore to expand the

country’s electricity generation and network infrastructure, much of which was damaged during

the country’s long-running civil war. As a poor, predominantly agrarian society, Cambodia is also

particularly vulnerable to climate change, which is projected to have deleterious effects on the

country’s agricultural production. As a result, the country’s primary interest in relation to climate

change is to adapt to its effects, which it has begun to do with assistance from UN agencies and

other international donors.

Renewable energy and CDM projects

In its push to electrify the Cambodian countryside, the Government is looking to a combination

of large-scale generation, including fi ve hydroelectric plants, and small-scale rural generation,

including renewable sources such as solar PV cells. With assistance from the World Bank,

Cambodia drafted a Renewable Electricity Action Plan to encourage electricity generation from

renewable sources. The plan sets a medium-term goal of generating 6 MW of electrical supply

capacity from renewable energy sources to serve 100,000 households, installing 10,000 solar PV

home systems and establishing profi table, demand-driven renewable electricity markets. A donor-

assisted Rural Energy Fund has been approved to help fi nance rural electrifi cation projects, which

include these renewable energy initiatives.

Cambodia has also received international assistance in building the administrative capacity

to participate in the Kyoto Protocol’s Clean Development Mechanism and, in August 2006,

Cambodia’s fi rst CDM project was offi cially registered. The 1.5 MW Angkor biocogen rice husk

power project is a rice husk-powered cogeneration project designed to use locally available

agricultural residue to replace imported diesel for power generation and heat. It is expected that

the project will avoid greenhouse gas emissions of 280,000 tonnes of CO2-e over a seven-year

period. Cambodia has since obtained registration for three further projects, all of which generate

power from renewable or waste sources: a cogeneration power project that generates power from

the waste heat of a cement factory; a power generation plant that generates electricity using

methane from waste-water; and an industrial biogas heat project.

Forestry and land-use

Cambodia has one of the worst deforestation rates in the world, primarily as a result of illegal

logging. The Government has taken steps to reduce deforestation through forest regulation and

the establishment of protected areas, but its efforts have made little impact on the problem due

to weak enforcement. With growing international concern over the climate change impacts of

deforestation, Cambodia’s alarming record has attracted international attention. In June 2009,

for example, a deal was signed that aims to protect 60,000 hectares of forest by rewarding

local communities and forestry groups through the sale of carbon credits. Accredited under the

Voluntary Carbon Standard mechanism, the project aims to yield 8.5 million tonnes of carbon

offsets over 30 years. If the project is successful, it could become a model for further avoided

deforestation initiatives in the region. In this regard, international agreement on a mechanism to

generate carbon credits from avoided deforestation has the potential to greatly benefi t Cambodia.

12 13

ChinaChina’s sustained and rapid growth has been one of the great economic success stories of the past 30 years.

Fuelled as it has been, however, by plentiful supplies of coal and other relatively

cheap fossil fuels, China’s growth has also created a number of challenges,

including air pollution, environmental degradation and rapidly increasing

greenhouse gas emissions. Today’s policymakers are clearly cognisant of these

issues and are taking a number of steps to deal with them.

To date, China’s climate change policy has really been governed by its energy policy,

which is structured towards maximising economic growth and ensuring security of

supply. This policy orientation explains China’s focus on the energy intensity of its

economic growth – China is understandably not willing to sacrifi ce economic growth

in order to restrain its growing greenhouse gas emissions, but realises that using

lower emissions intensity technologies may be compatible with (and, indeed, may

actually enhance) its economic aspirations. Consistently with this, China is making

substantial efforts to reduce emissions from the country’s energy supply through

a mix of supply-side effi ciency improvements, investments in renewable energy

and mass afforestation campaigns. China’s focus on this area was emphasised in

President Hu’s speech to the UN in September 2009, when he promised that China

would reduce the emissions intensity of its economy by a ‘notable margin’.

Carbon pricing

Although China does not have (and is unlikely in the near future to have) an

economy-wide cap-and-trade scheme for greenhouse gases, it is experimenting in

a small number of provinces with market cap-and-trade mechanisms as a means of

controlling non-greenhouse gas environmental pollutants (such as SO2) and water

pollution.

The most common alternative to a cap-and-trade scheme, a carbon tax, is also

unlikely to be introduced in China in the near future. The Government is still

considering proposals for taxing other activities that harm the environment and

deplete natural resources, and such measures are likely to precede a tax that is

directly aimed at the production or consumption of carbon (see further below).

Energy effi ciency

After half a decade of considerable growth in energy intensity as a result of its

shift to heavy industrial production as a major source of economic growth, the

Chinese Government has focused on improving energy effi ciency in its 2006-2010

fi ve-year plan. The plan sets an ambitious target of reducing energy intensity 20

per cent below 2005 levels by 2010. To achieve this target, the Government has

implemented an Energy Conservation Law (2008), along with a range of energy

effi ciency policies.

14 15

Industrial effi ciency. The Top 1000 Energy-Consuming Enterprises Program aims to increase energy effi ciency

among China’s 1000 most energy-intensive companies through measures such as closing ineffi cient industrial

facilities and holding heads of state-owned enterprises and local offi cials accountable for energy effi ciency gains.

The Government has also closed many small, ineffi cient industrial facilities (eg steel and cement production) in

addition to those closed under this program.

Vehicle and fuel effi ciency. China has been steadily improving fuel effi ciency standards for motor vehicles since

2004. By 2008, the average Chinese vehicle was required to meet fuel economy standards that translate to

around 36 miles per gallon (signifi cantly higher than current and forthcoming US standards), and the Government

is planning to raise these standards even higher, to 42.2 miles per gallon in 2015. The Government has also

introduced fuel economy standards for light trucks, which took effect from February 2008, and is considering

introducing standards for heavy-duty commercial vehicles and agricultural vehicles. In addition, in 2006 and

again in 2008, China changed its tax structure on vehicles to encourage the purchase of smaller and more

fuel-effi cient vehicles and, in its November 2008 stimulus package, it included US$1.5 billion in subsidies over

the next three years for automakers to develop alternative-energy vehicles as part of a push towards the mass

production of electric cars for urban areas.

Fuel price reform. In a major step towards reducing the rate of growth in its energy use and greenhouse gas

emissions, China recently altered domestic fuel pricing arrangements to more closely refl ect global market prices,

taking effect from January 2009. Under these arrangements, China has steadily increased consumption taxes on

gasoline and diesel. In addition, domestic prices will be set based on a formula that more closely tracks global

market prices (prices are adjusted when the average of a basket of international crude-oil prices rises or falls by

a daily average of 4 per cent over a 22-day period), albeit only up to a ceiling of US$80 per barrel (above which

refi ners are required to constrain price rises). These reforms can be seen as part of a broader reform towards

environmental and energy pricing, and may foreshadow higher taxes on resource extraction, pollution and even

carbon, which are also believed to be under consideration by the central Government.

Building and electrical appliance effi ciency. Between 2006-2010, new buildings are required to meet design

standards resulting in 50 per cent energy effi ciency savings (65 per cent savings in major cities), and cities are

required to undertake renovations to improve effi ciency standards in a designated percentage of their existing

buildings, which varies depending on the size of the city. A permitting system to regulate the energy and

environmental performance of capital investment projects is being trialled in 10 Chinese provinces, municipalities

and autonomous regions. Since 2008, China has been subsidising the purchase of energy effi cient lightbulbs

by 30 per cent on wholesale purchases and 50 per cent on retail purchases and, since May 2009, has provided

subsidies to purchasers of energy-effi cient home appliances. It also has mandated energy effi ciency standards

and labels for electrical appliances such as lighting, air conditioners, washing machines and other home

appliances. In April 2009, the Government introduced green procurement rules for local governments, requiring

the purchase of more energy effi cient and eco-friendly goods across nine categories of offi ce equipment.

Energy supply diversifi cation and supply-side effi ciency

China is taking a range of supply-side measures to reduce the emissions intensity of its energy supply,

aggressively expanding its renewable and nuclear power sectors, implementing coal-seam methane projects and

improving the generation effi ciency of coal-fi red power generators.

Renewable and nuclear energy promotion. China’s Renewable Energy Law and its Medium and Long-Term

Renewable Energy Plan provide a framework for the development of China’s renewable energy sector. China’s

ambitious renewables targets include that 10 per cent of the country’s energy be derived from renewable sources

by 2010 and 15 per cent be derived from renewable sources by 2020. The Government has also set sector-

specifi c goals of installing 30 GW of wind, 300 GW of hydro, 30 GW of biomass and 1.8 GW of solar generation

capacity by 2020. Currently on track to exceed these goals, Government offi cials have mooted formally increasing

its goals for wind-generating capacity to 100 GW and for solar to up to 20 GW respectively by 2020. Achievement

of the Government’s renewable energy goals is promoted through a range of tax and duty concessions, subsidies,

priority grid access, power purchase contracts, and other incentives within the framework of the 2006 Renewable

Energy Law. China also aims to expand the use of bioethanol and biodiesel in transport and of solar hot water

heaters in households.

China does not count nuclear power as part of its renewable energy target. The country currently has around

9 GW of installed nuclear power, which it plans to increase. The Government is considering expanding the

proportion of nuclear power to 5 per cent of total installed capacity, or a total of 60-75 GW, by 2020.

Coal-seam methane industry expansion. One of China’s energy goals is to develop a coal-seam methane industry.

The Government currently has in place a number of incentives to promote growth in the industry, including

exemptions from utilisation fees attaching to mining exploration projects, ensuring coal-bed methane prices are

not below the price of natural gas that has an equivalent calorifi c value, encouraging industry participation in

Clean Development Mechanism projects, and applying other incentives as defi ned in the Renewable Energy Law.

Through these measures, China hopes to abate 200 Mt of CO2-e by 2010, though construction of China’s fi rst

coal-seam methane pipeline only began in 2008.

Supply-side power generation effi ciency. China is improving the effi ciency of power generation by

decommissioning older, smaller and less effi cient generators and improving generation effi ciency by building

larger plants equipped with more effi cient generation technology. The Government closed 34 GW of coal-fi red

power capacity from 2006-2008 and plans to have closed a further 31 GW by the end of 2011. It also plans

to accelerate the deployment of advanced power plant technology (eg supercritical and ultra-supercritical

combustion technology).

Forestry and land-use change

Since the early 1980s, China has been expanding its forest sinks in the forestry sector through afforestation,

reforestation, improved forest management and avoided deforestation, which it claims has accounted for the

total sequestration of more than 5 billion tonnes of CO2 between 1980 and 2005. It has achieved this primarily

through a public program of annual mass tree plantings. Over the past decade, it has also instituted a program,

backed by subsidies to farmers, to convert sloping croplands to forested land and grass land (with the primary

aim of reducing soil and water erosion that degrades China’s rivers), although aspects of the program’s design

and implementation have been criticised. China established the China Green Carbon Fund in 2007, into which

companies and individuals donate money that is applied towards tree-planting.

In a major step towards reducing the rate of growth in its energy use and

greenhouse gas emissions, China recently altered domestic fuel

pricing arrangements to more closely refl ect global market prices,

taking effect from January 2009.

16 17

China has a target to increase its forest coverage to 20 per cent by 2010 (it currently accounts for around 18

per cent) toward which it is investing around US$9 billion annually. Moreover, China plans to increase its forest

coverage by 40 million hectares and forest stock volume by 1.3 billion cubic meters from 2005 levels by 2020.

Agriculture

China is taking steps to reduce emissions from the agricultural sector and in rural areas. Farmers in 1200

counties across China are being given guidance on fertiliser usage to reduce nitrogen emissions according to

the results of soil-tests. The Government is also deploying distributed renewable energy generation systems (eg

household solar and small-scale wind turbines) and more effi cient stoves in rural areas to reduce emissions and

supply local electricity.

Green infrastructure

China is investing heavily to expand railway transportation, both between and within major cities, and plans to

spend more than US$1 trillion expanding its railway network to 120,000 km by 2020. The acceleration of rail

expansion projects formed a major component (~22 per cent) of China’s US$586 billion economic stimulus

package, as did spending on more fl exible and sophisticated grid infrastructure needed to enable greater use of

renewable energy sources (~25 per cent).

Other measures

The mass migration of rural Chinese to urban centres has prompted China to experiment with new projects

in urban design and development. There are more than 40 eco-city projects currently proposed or under

development in China. China is also fostering the growth of its clean technology sectors through the establishment

of low-carbon manufacturing zones, such as those in Baoding, Tianjin, and Jiangsu.

18 19

IndonesiaThe degradation and destruction of Indonesia’s tropical forests and carbon-rich peatlands accounts for about 80 per cent of the country’s 2.3 billion tonnes of CO2 emissions per year, according to a recent report by Indonesia’s National Council on Climate Change.

These sobering statistics mean that Indonesia, a relatively poor developing country, is now

the world’s third-largest emitter of CO2. If forest and land-use emissions remain unabated,

the report projects Indonesia’s emissions will rise 57 per cent to 3.6 billion tonnes by

2030. Indonesia’s climate change policies are, therefore, primarily directed towards

reducing emissions from deforestation and forest degradation.

Forestry and land-use

Recognising the seriousness of the country’s deforestation problem and its implications

for climate change, Indonesian President Yudhoyono announced in September 2009

that his country will reduce its emissions 26 per cent below ‘’business as usual’’ levels by

2020 and would aim to turn its forestry sector into a net emissions sink by 2030. President

Yudhoyono also stated that, with suffi cient international support, Indonesia would be

prepared to reduce emissions up to 41 per cent below business-as-usual levels by 2020.

While Indonesia has yet to provide detailed policies and plans as to how it will achieve

these cuts, it is clear that the bulk of its efforts will be directed towards reducing forestry

and land-use emissions caused by forest fi res and deforestation for pulp wood and palm-

oil plantations, and it is beginning to implement the necessary bureaucratic institutions

and rules. With international assistance from Australia and other sources, Indonesia is

developing the systems and the technical capacity to account for, monitor and report

its forestry and land-use emissions, and has established programs to demonstrate how

incentive schemes can reduce forestry emissions. The Indonesia–Australia Forest Carbon

Partnership, for example, establishes a framework for bilateral cooperation between

Australian and Indonesia on reducing forestry emissions, within which a project is being

undertaken to curb deforestation and restore degraded peatlands in central Kalimantan.

Renewable energy

Indonesia currently generates less than 5 per cent of its primary energy supply from

renewable sources – mainly hydro and geothermal. In 2006, the Government announced

a goal of increasing this proportion to 17 per cent by 2025. The Government plans to

meet this goal primarily by expanding biofuels and geothermal production, but also by

increasing its biomass, solar, wind and hydro capacity. Reaching this goal is expected

to require new investment of US$13.2 billion by 2025, most of which the country hopes

to attract from the private sector, albeit with some support from multilateral and bilateral

donors. Because of Indonesia’s plentiful and relatively cheap fossil fuel reserves and the

relatively underdeveloped state of its renewable energy sector, Indonesia will need to

develop effective policies, incentives and institutions to encourage the private investment

required in order to meet its goals.

While there has been resurgent interest in nuclear power in Indonesia over the past

decade, President Yudhoyono backed away from earlier plans to build reactors in the

seismically active country, stating that his Government would develop existing energy

sources and explore renewable alternatives before advancing the nuclear option.

20 21

JapanHit hard by the oil shocks of the 1970s, Japan, a large importer of fossil fuels, went to great lengths in the subsequent 30 years to improve its energy effi ciency.

Today Japan is one of the world’s most energy-effi cient industrialised countries.

Despite this, Japan has substantially increased its emissions since 1990 (by 8.7

per cent as at March 2008), and is therefore well on track to overshoot its Kyoto

target of a 6 per cent reduction below 1990 levels over the 2008-2012 commitment

period. While the Government has maintained that it will achieve its Kyoto target,

it is likely to do so only through purchasing assigned amount units or other

international credits, rather than by reducing its domestic emissions.

In June 2009, Japan’s previous Government announced a target of reducing

Japan’s emissions by 15 per cent below 2005 levels by 2020. Though widely

condemned by environmental groups, this target was to have been met entirely from

domestic reductions through increased energy effi ciency and new technologies,

with international offsets contributing to additional reductions beyond the 15 per

cent target. To international acclaim, the newly elected Hatoyama Government

has proposed a much higher target of 25 per cent below 1990 levels by 2020, but

meeting such an ambitious target is likely to be a tall order for the new Government.

Carbon pricing and emissions trading

Among the range of policy tools that the Japanese Government intends to deploy

to meet its proposed 2020 target of a 25 per cent emissions reduction on 1990

levels is the introduction of a domestic emissions trading mechanism by 2012 and

the possible introduction of a ‘’global warming tax’’ (the Government has said that it

will undertake a feasibility study on introducing an environmental tax on all kinds of

fossil fuels, including gasoline, light oil and coal, in 2010, with the tax being based

on their respective amounts of carbon dioxide emissions).

Japan’s previous Liberal Democratic Party Government introduced a Voluntary

Emissions Trading Scheme (J-VETS), the fi rst phase of which, commencing in

2005, involved 31 companies that were required to meet voluntarily selected

targets. Participants were given partial subsidies to purchase more energy-effi cient

equipment and were allocated emissions allowances that could be traded with other

participating companies. The Scheme has expanded signifi cantly since then and is

currently in its fourth phase.

Overlapping with J-VETS (and drawing on experience gained through it), the

previous Government also committed to introducing a Trial Emissions Trading

Scheme. The groundwork for that Scheme has been laid over the past year, and has

attracted a total number of 528 participants.

22 23

Renewable energy

Japan has a legislated goal of achieving 3 per cent of its total primary energy supply from renewable sources

by 2010. The previous Government set specifi c targets for renewable energy production for solar, wind, waste-

biomass power, and biomass-heat. In 2009, the Ministry of Environment laid out a proposal to increase solar

output (by 55 times the present level) to 79,000 MW by 2030 in an effort to make solar electricity cost-competitive

with other sources. This expansion is to be driven by implementing a solar feed-in tariff (which the Hatoyama

Government has announced it plans to expand to cover other renewable energy sources). Other policies to

promote renewable energy introduced under the previous Government include renewable portfolio standards for

power producers and subsidies for R&D projects that will contribute to the diffusion of new and renewable energy.

The Government has promoted the use of biofuels in transport, aiming to replace 500 ML/yr of transportation

petrol with liquid biofuels by 2010. It has introduced subsidies for ethanol production and it allows biofuel crop

producers and refi ners to claim exemptions from the gasoline tax and other tax benefi ts.

Energy effi ciency

Japan is a world leader in energy effi ciency, having taken concerted action to reduce the energy intensity of

its economic output since the oil shocks of the 1970s, which disproportionately affected its energy-import-

reliant economy. Current energy effi ciency policies are numerous and wide-ranging, covering the household

sector, transport and industry. Japan’s successful, multi-sector ‘’Top Runner’’ Program, for example, pushes

manufacturers to meet energy effi ciency standards by benchmarking effi cient production processes and setting

targets standardised at benchmark levels across a range of commercial, transport and household sectors. The law

includes a variety of fi scal incentives such as tax exemptions, special depreciation allowances and soft loans to

promote energy conservation measures by designated industry sectors.

Industrial energy effi ciency. The major programs for industry entail the direct regulation of businesses and

factories with high- and medium-energy consumption. Covered businesses and factories must appoint energy

managers and must prepare and submit periodic reports on the use of energy and mid- and long-term plans for

achieving energy conservation targets. The Government has also pledged ‘’intensive support’’ to industry for the

introduction of energy-effi cient technologies likely to achieve substantial improvements in energy conservation at

large-scale industrial complexes. In addition, tax concessions apply to business operators who purchase energy-

effi cient equipment. These concessions are either 7 per cent of the equipment acquisition cost (which should not

be more than 20 per cent of the income tax or corporate tax payable) or special depreciation of 30 per cent of the

equipment acquisition cost in the year of acquisition, in addition to ordinary depreciation.

Transport energy effi ciency. Energy effi ciency measures in the transport sector include gradually increasing

fuel economy standards for passenger vehicles, and vehicle taxes structured to promote fuel-effi cient vehicles.

Manufacturers must now meet fuel-economy standards for passenger vehicles of 39.5 miles per gallon by 2015.

Transport effi ciency is also addressed under the Top Runner program, discussed above, which targets passenger

vehicles and freight vehicles. Under this program, manufacturers and importers will need to achieve the

designated average fuel effi ciency levels, and vehicles achieving the standards undergo accelerated introduction

into the market. A wide range of other transport effi ciency measures are in place, including traffi c congestion

reduction measures, and ‘’eco-driving’’ campaigns.

Household and appliance effi ciency. Japan’s Top Runner Program also applies to a wide range of household

electrical appliances, such as air conditioners, TVs, microwave ovens and computers. In addition, household

energy effi ciency is promoted through a raft of policies, regulations and programs, including energy performance

labelling programs, subsidies for energy-effi cient hot water systems, measures to promote demand management

IT systems, an accreditation system to encourage retailers that promote energy conservation products and

information to consumers, and a range of public energy conservation education and information programs.

Forestry and land-use change

In 2002, recognising that the expansion of forest sinks presented a signifi cant opportunity to reduce Japan’s net

emissions and to meet its Kyoto Protocol target, the Japanese Government initiated a 10-Year Action Plan on the

Mitigation of Global Warming by Forest Carbon Sinks. The Plan aims to achieve an absorption of 13 million tonnes

of CO2 through forest carbon sinks, equating to 3.8 per cent of Japan’s 6 per cent Kyoto reduction commitment.

The Plan encompasses measures to improve forest management, increase public participation in and awareness

of forest management and tree-planting, and strengthen the carbon accounting and reporting systems for forests.

The Government has also pledged ‘’intensive support’’ to industry

for the introduction of energy-effi cient technologies likely to achieve

substantial improvements in energy conservation at large-scale

industrial complexes.

24 25

MalaysiaMalaysia’s energy policy is focused on energy security to meet the development needs of its growing economy.

To this end, Malaysia has expanded its reliance on fossil-fuels, for which it has

been criticised by environmental groups. However, the Government has recently

elevated the importance of low-emissions and energy-effi cient technology within

its governance and economic planning framework, launching its Green Technology

strategy in July 2009 and re-branding its energy ministry as the Ministry of Energy,

Green Technology and Water. Further institutional changes are planned to develop

and implement Malaysia’s green technology push, including the establishment

of a Cabinet Committee on Green Technology and a Green Technology Agency.

Substantively, the strategy entails short-, medium- and long-term goals designed to

inculcate a green technology mindset within Malaysian culture and develop Malaysia

into a major producer of green technologies through, for example, creating incentives

to encourage direct foreign investment in Malaysian green technology sectors,

information/labelling campaigns, the establishment of effi ciency standards, and

increased funding for R&D in green technologies. The Green Technology initiative is

currently at an early stage in its development and does not yet entail specifi c policy

measures. It is, at this stage, better viewed as an overarching framework for future

policy developments that embraces a range of energy-related climate policies (supply-

side, effi ciency etc). Malaysia’s existing climate policies are considered below.

Renewable energy

The Malaysian Government is seeking to expand its reliance on renewable energy,

particularly biomass, as the fi fth fuel resource under the country’s Fuel Diversifi cation

Policy. The Small Renewable Energy Program allows renewable projects with up to 10

MW of capacity to sell their electricity output to a state-owned electricity utility under

21-year licence agreements. The program is voluntary, and project developers must

negotiate directly with the utility on all aspects of the electricity supply agreement.

The production of renewable energy from biomass, small-scale hydroelectric

(<10MW) and solar is further encouraged through the provision of incentives in the

form of income tax deductions for capital expenditure, together with sales tax (and,

where relevant, import duty) exemptions on equipment.

As a major producer of palm oil, biofuels form a signifi cant plank of Malaysia’s energy

policy. In the hope of cutting the country’s diesel imports, the Government has

implemented a National Biofuel Policy, which mandates that 5 per cent of palm oil be

blended into diesel fuel. However, it is experiencing diffi culty enforcing the blending

mandate: while 91 biodiesel production licences have been issued to producers,

due to high prices for crude palm oil, few had begun operating as of late 2007.

With funding from the Global Environment Facility, the Government is developing a

project brief for a National Programme on Grid Connected Palm Oil Biomass Power

Generation. The main aim of the project is to identify and remove barriers to the

commercial utilisation of biomass residue co-generation as a power source.

26 27

Energy effi ciency

Income tax deductions and other tax concessions are provided to companies that undertake energy conservation

measures, as well as to companies that provide energy conservation services to others. The Government has also

focused on the installation of energy-effi cient features in government buildings and has completed energy audits

of a number of energy-intensive industries under the Malaysian Industrial Energy Effi ciency Improvement Project

to identify potential energy savings. Additional energy effi ciency measures are expected to be rolled out under the

Green Technology framework.

Forestry and land-use change

More than 60 per cent of Malaysia’s land mass is covered by forests; however, deforestation – particularly driven

by the production of palm oil – is a major problem. Malaysia’s ninth economic plan (2006-2010) included limited

proposals for improved forestry management or avoided deforestation beyond a proposal to strengthen forest

management systems and develop sustainable sources of wealth from forest products.

28 29

New ZealandDue to its substantial agricultural exports, signifi cant forest coverage and primary reliance on renewable energy for power generation, New Zealand has a unique emissions profi le.

Agricultural emissions account for nearly half of New Zealand’s greenhouse gas

emissions, with its emissions from electricity generation being relatively low because

of the predominance of hydroelectric power and other renewable sources in the

country’s energy mix.

In 2009 the New Zealand Government announced a target emissions reduction

range of 10-20 per cent below 1990 levels, depending on the negotiation of a

comprehensive global agreement. It has implemented an emissions trading scheme

to meet this target, along with a range of complementary policies and measures to

reduce emissions from various sectors of its economy.

Emissions trading

New Zealand has introduced an Emissions Trading Scheme (ETS), which is due to

commence in July 2010. The ETS legislation, which was introduced by the previous

Labor Government, was amended following the election of the Key National Party

Government in late 2008. The ETS sets a cap on New Zealand’s emissions (to

be determined based on the Copenhagen outcome) and establishes a system of

tradeable emissions permits, known as New Zealand Units (NZUs). It covers all six

greenhouse gases covered by the Kyoto Protocol and will eventually encompass all

sectors of the New Zealand economy. Transport fuels, electricity production, industrial

processes, synthetic gases and waste will be covered by the ETS from 1 July 2010

and agriculture will be included from 1 January 2015. Forestry is already covered by

the ETS and is considered further below.

The ETS will operate in a transition phase from 1 July 2010 to 31 December 2012,

whereby the liquid fossil fuel, energy and industrial sectors will be required to

surrender permits in respect of only 50 per cent of their emissions and permits can

be purchased at a fi xed price of NZ$25 per tonne. This means that participants in

these sectors will face a price of carbon that is no higher than NZ$12.50 per tonne

for the fi rst two-and-a-half years of the ETS. The Government is not planning to

introduce any price caps beyond the transition phase, though this may be reviewed in

2011, particularly if post-2012 price caps are needed to ensure consistency with the

Australian emissions trading scheme.

Assistance in the form of free permits will be granted to emissions-intensive trade-

exposed industries according to a production-based industry average intensity

approach. Highly emissions-intensive trade-exposed industries will receive 90 per cent

of their required permits free and medium emissions-intensive industries will receive

60 per cent of their required permits free (these amounts will be halved during the

transition phase to correspond with the 50 per cent obligation). This assistance will be

phased-out at a rate of 1.3 per cent per annum beginning in 2013.

30 31

International units established under the Kyoto Protocol (CERs, ERUs and RMUs) will be accepted in satisfaction

of ETS obligations, and the legislation allows the Government to make regulations to permit the importation of

assigned amount units from other Parties to the Protocol. The Government is open to establishing links with other

emissions trading schemes – indeed a number of the recent amendments were made to bring the scheme into

line with Australia’s proposed emissions trading scheme – however, it has not yet made any decisions to approve

such linkages.

Renewable energy

New Zealand already generates around 65 per cent of its electricity from renewable sources (including roughly

52 per cent from hydro, 9 per cent from geothermal and 2.5 per cent from wind). The previous Government

announced a goal of increasing the proportion of renewable energy to 90 per cent of the country’s total generation

by 2025. Although the New Zealand Energy Strategy is currently being reviewed by the new National Party

Government, the Government has maintained the 90 per cent renewable energy goal and is fi nalising a National

Policy Statement for Renewable Electricity Generation (expected to be completed by the end of 2009) to guide

administrative decision-making on the approval of new projects.

Renewable energy production is encouraged through Government grants for renewable energy producers,

including the NZ$12 million Low Carbon Energy Technologies Fund (LCETF) and the NZ$8 million Marine Energy

Deployment Fund. No market-based incentive schemes currently exist to promote renewable power generation.

The Government provides some incentives for biofuels production, solar hot water heaters, distributed energy

generation and wood residue-based energy sources. Funding for biofuels producers is available through various

mechanisms, including the LCETF and the Biodeisel Grants Scheme, which seeks to encourage the development

of the biodiesel industry in New Zealand. Funding is also available to households and businesses installing small

solar and heat pump water heating systems, to assist with feasibility studies for distributed renewable power

generation projects, and for businesses seeking to demonstrate wood energy generation projects.

Energy effi ciency

The New Zealand Energy Strategy and the New Zealand Energy Effi ciency and Conservation Strategy (NZEECS)

are currently being revised by the new National Party Government. At the moment, the NZEECS provides a

comprehensive plan to improve energy effi ciency in the household, commercial, electricity, industrial, transport

and government sectors. The new strategies are likely to refl ect a greater focus on energy security, economic

growth and market-driven approaches to energy effi ciency.

A number of programs regulate the energy effi ciency of products and appliances through mandatory standards

and ratings. New Zealand works with Australia to regulate mandatory minimum performance standards and

energy performance labeling for a range of residential, commercial, and industrial products. Vehicle effi ciency

is encouraged through the requirement that all new cars, and all cars manufactured since 2000 and imported

since 2005 for sale in New Zealand, must display available information about the vehicle’s fuel economy. The

Government has also announced that electric cars will be exempt from road-user charges until 2013.

On 1 July 2009, the Government began to roll-out a NZ$383 million program to retrofi t 180,000 New Zealand

homes with insulation and clean, effi cient heating over four years. The Government has also banned the import

of incandescent light bulbs into New Zealand and is implementing an effi cient lighting plan to improve energy

effi ciency by eliminating ineffi cient incandescent, fl uorescent and street lighting.

The Government assists energy intensive businesses to investigate and purchase energy-saving technologies by

providing grants of up to 40 per cent of the total project cost, up to a maximum of NZ$100,000. Grants are also

available to help large businesses conduct scoping studies for such technologies and carry out energy audits of

their businesses, new building and technology designs and vehicle fl eets.

Forestry and land-use change

Forestry was the fi rst sector to be subject to New Zealand’s ETS, providing incentives for the establishment

of post-1989 forests in New Zealand. Commencing 1 January 2008, landowners were entitled to generate

NZUs from eligible post-1989 forests under the ETS. Owners of forests established before 1990 are also given

allocations of NZUs to offset the impact of the ETS on landowners.

Afforestation is encouraged through the Permanent Forest Sink Initiative, which allows landowners to earn Kyoto

AAUs for carbon sequestered in permanent forests established after 1 January 1990 and through the Afforestation

Grant Scheme, which provides public funds to encourage planting of trees in small forests and on farms.

Agriculture

The New Zealand agriculture sector is subject to the ETS, although it will not incur liability for non-energy

emissions until 2015 (liable entities will, however, be able to voluntarily report such emissions in 2011 and will

be required to report them from 2012 onwards). It is currently intended that liability for scheme compliance

will attach at the processor level, meaning that dairy processors and fertiliser companies will be responsible for

emissions arising from farming (though the Government has left open the possibility of changing the ETS to apply

liability at the farm level).

The agriculture sector will be allocated free emissions units on an intensity basis (similar to industry) and this

allocation will phase out gradually from 2016 at a rate of 1.3 per cent per annum.

New Zealand already generates around 65 per cent of its

electricity from renewable sources... [but has] a goal of increasing the

proportion of renewable energy to 90 per cent of the country’s total

generation by 2025.

32 33

Papua New GuineaAs a relatively poor developing country, Papua New Guinea (PNG) has limited capacity to engage in climate change mitigation and is heavily reliant on international assistance to develop and implement climate change policies.

Owing to its vast coverage of tropical rainforests, the greatest contribution PNG can

make to climate change mitigation is through avoided deforestation and sound land-

use management – areas for which it has received signifi cant amounts of assistance

from international donors. PNG’s relatively decentralised population poses energy

supply and other development challenges. Accordingly, PNG’s climate policy is also

focused on distributed power generation from renewable energy sources.

Forestry and land-use change

The Australian Government is assisting PNG in its efforts to curb the deforestation

of its tropical forests through the PNG-Australia Forest Carbon Partnership, signed

in March 2006. The Partnership aims to prepare PNG to participate in incentive

schemes to reduce deforestation and ultimately to implement such schemes. The

Partnership is currently focused on policy dialogue, forest carbon monitoring and

measurement, and participation in global carbon markets.

Renewable energy

PNG, with the assistance of international donors, has established two programs to

provide low-cost, distributed renewable energy to local communities. The Teacher’s

Solar Lighting Project, fi nanced by the World Bank, installs solar panels in rural

areas to provide electricity for rural service-providers (particularly in schools), and

Chinese development aid is funding a Wind Energy Project that provides wind power

to local communities in the Duke of York Islands.

The Australian Government is assisting PNG in its efforts to curb the

deforestation of its tropical forests through the

PNG-Australia Forest Carbon Partnership, signed in March 2006.

34 35

PhilippinesOwing to its geography, the Philippines has immense potential to generate power from renewable energy sources.

It is already the second-largest geothermal producer in the world and has rich

potential to develop wind, solar, mini-hydro and biomass generation. As a result, the

Philippines’ climate and energy policy consists primarily of measures to expand the

production of renewable energy throughout the country, with the ultimate goal of

being 60 per cent energy self-suffi cient by 2010.

Renewable energy

The Government has set aggressive goals to expand renewable energy production in

the Philippines, aspiring to double current production by 2013. It aims to become

the world’s leading producer of geothermal power, to be the leading wind-power

producer in southeast Asia, to double its hydro capacity by 2013, and to expand

the capacity of solar, biomass and wave energy to 250 MW. The Government also

aims to favour renewable energy in the electrifi cation of rural villages, integrating

distributed renewable energy with poverty alleviation and rural economic

development.

Up until recently, the Philippines’ renewable energy efforts were pursued through

a piecemeal array of laws and policies. With the passage of the Renewable Energy

Act of 2008, these measures have been consolidated into an overarching legal

instrument, though the implementation of the policies and measures contained

in the Act will not necessarily result in the achievement of the Government’s

aspirational targets. The measures contained in the Act are a mix of production

and consumption incentives to expand the market for renewable energy. The

production incentives for renewable energy producers include renewable portfolio

standards and feed-in tariffs for all forms of renewable energy (except geothermal),

a seven-year income tax holiday, 10-year duty-free equipment and materials

importation, special realty tax rates, special accounting (loss-carry-over rules), lower

corporate tax rates (10 per cent), tax exemption on carbon credits, and tax credits

for domestic capital equipment and services. Consumption incentives include the

removal of Value-Added Tax on fuel generated from renewable sources, and net-

metering to allow end-users who generate their own power to sell it into the grid.

Many of the detailed rules relating to these policies are under ongoing development.

The Philippines is also looking to expand its use of biofuels as a means of reducing

its reliance on imported oil, and has set minimum mandates for the blending of

biodiesel and bioethanol in all diesel and gasoline fuels.

The Government has set aggressive goals to expand renewable energy

production in the Philippines, aspiring to double current production by 2013.

36 37

Energy effi ciency

The Philippines’ National Energy Effi ciency and Conservation Program is directed at a range of energy-effi ciency

measures across all sectors of the economy. These include: public information and awareness campaigns;

the provision of energy audit and advisory services for major industries and commercial buildings; mandatory

quarterly energy consumption reports for companies consuming more than 1 million litres of fuel oil equivalent,

and mandatory annual energy conservation reporting for companies consuming more than 2 million litres of

fuel oil equivalent; an energy-effi ciency labelling scheme for certain energy-intensive appliances; and increased

collaboration with the private sector to improve industrial and commercial effi ciency, eg through voluntary

agreements.

In 2008, President Arroyo announced an aspiration of phasing out incandescent light bulbs by 2010, however,

there is no publicly available plan for achieving this goal. The Asian Development Bank is funding a scheme,

which began in the last quarter of 2009, to give away 13 million energy-saving light bulbs to homeowners and

businesses in a push to save energy costs and defer investments in power supply. The scheme will also retrofi t

government offi ce buildings and public lighting systems with more effi cient lighting options and establish an

energy service company to provide support to companies planning to reduce their energy consumption.

38 39

South KoreaIn recent years, the South Korean Government has begun to integrate climate change policy and energy effi ciency with its economic development goals and to take a more active role in contributing to international efforts to address climate change.

The South Korean Government has recently announced a target of reducing its

emissions by 4 per cent below 2005 levels by 2020 – the equivalent of a 30 per cent

reduction on business as usual levels over the same time frame.

This is clear evidence of the Government’s commitment to the development

of a lower-carbon domestic economy and to the growth of its clean technology

industries, in which it aims to be a world leader. That the Government understands

the link between economic growth, climate change mitigation and environmental

sustainability was underscored by the high proportion of South Korea’s 2009

economic stimulus package that was directed at environmental and climate change

measures – at around 80 per cent of its total stimulus, South Korea’s package was

the world’s ‘greenest’. The US$30 billion-plus ‘Green New Deal’ will allocate funds to

energy and transport infrastructure, energy effi ciency measures, renewable energy

production and R&D into emerging energy technologies such as vehicle batteries,

non-silicon-based solar cells and smart-meters. In addition to its stimulus package,

the Government has also announced plans to establish a range of investment funds

to invest in such technologies and projects, with which it hopes to encourage large

investments from the private sector.

Carbon pricing

At present, the Government has no price on carbon, though it has foreshadowed the

introduction of a carbon tax and is considering introducing pilot emissions trading

schemes.

Renewable energy

The South Korean Government set a goal of achieving 5 per cent of its power

supply from renewable (solar, wind and tidal) sources by 2011 and 11 per cent

by 2030, and has established a New and Renewable Energy Centre to implement

its renewable energy agenda. South Korea currently has in place a generous solar

feed-in tariff regime to encourage solar energy production. The Government also

encourages the deployment of commercialised renewable energy systems by

providing subsidies to consumers of up to 60 per cent of the cost of such systems,

along with long-term, low interest loans and tax incentives for the purchasers and

manufacturers of such systems.

40 41

Energy effi ciency

South Korea has introduced a raft of energy effi ciency policies and programs aimed at households, businesses

and industry. These include the provision of long-term and low interest rate loans from the ‘Fund for the Rational

Use of Energy’, energy-effi ciency labelling and management schemes (eg for designated energy-intensive

products), building effi ciency standards, and fi nancial support such as tax incentives and loans for investments

in energy-effi cient equipment and measures. As of 2008, companies whose annual energy consumption is

more than 2,000 tonnes of oil-equivalent (high energy-consuming companies) are required to undertake energy

audits every fi ve years. Factories using more than 20,000 tonnes of oil-equivalent of energy can also participate

in the Energy Saving Through Partnership Program, which provides a forum for heavy industrial sectors to share

information and best practices on energy-saving technologies and processes.

In the transport sector, the Government recently announced a large increase in vehicle fuel effi ciency and

emissions standards. By 2015, automakers will have to either raise their vehicles’ average fuel economy to

17km per litre (40 mpg) or reduce their vehicles’ CO2 emissions to an average 140 grams per kilometre. The

Government also plans to complement this policy by introducing incentives for consumers to purchase cars with

high fuel economy and low CO2 emissions. The system is likely to take the form of subsidies for purchasers of

higher performing vehicles and taxes on less effi cient vehicles. Compact cars are promoted through the provision

of lower vehicle taxes and price discounts on road tolls, parking and other vehicle infrastructure.

A large proportion of South Korea’s Green New Deal stimulus package is directed towards energy effi ciency

measures, including some US$6 billion for energy conservation in communities and the construction of ‘green

homes’, US$7 billion for bike paths, railways and other low-emissions public transport, and US$1.8 billion for fuel-

effi cient vehicles.

In the transport sector, the Government recently announced a large

increase in vehicle fuel effi ciency and emissions standards

42 43

SingaporeSingapore is a city-state with limited natural resources. It is an export-oriented, energy-intensive economy and it relies overwhelmingly on imported fossil fuels (oil and gas) for its energy supplies.

Direct fossil fuel combustion and electricity usage in the industrial sectors accounts for more

than 50 per cent of Singapore’s emissions. Around 80 per cent of Singapore’s electricity

is generated by natural gas using effi cient combined-cycle technology, and 18 per cent is

generated from fuel oil. Singapore’s geography is unsuited to the deployment of renewable

energy sources, with the exception of solar (though solar is not widely utilised because it is

not yet cost competitive compared with fossil fuels).

As a consequence of these factors, Singapore’s climate change strategy is focused on

increasing energy effi ciency throughout the economy. It is already relatively energy effi cient

by world standards, but has introduced a range of policies to improve its energy and carbon

intensity even further. A further element of its strategy involves encouraging the use of lower

carbon fuels, particularly natural gas and – to a lesser degree – renewable energy.

Energy effi ciency

Industrial effi ciency. Singapore has implemented a voluntary energy audit scheme to

encourage industry to improve its energy effi ciency by undertaking professional audits of

its operations to identify energy saving opportunities and, since 2005, the Government has

co-funded companies’ energy audits. Various tax concessions and subsidies also apply to

investment in energy effi cient capital equipment and technology, including a deductible

capital allowance of 50 per cent of the capital expenditure on qualifying equipment, a one-

year accelerated depreciation allowance for energy-effi cient equipment and technology, and a

grant scheme to help fund energy-effi cient equipment acquisitions.

Transport effi ciency. The Government recently introduced a mandatory version of its existing

Fuel Economy Labelling Scheme, which requires automotive retailers to display labels

comparing the fuel effi ciency of all passenger vehicles. Green vehicle rebates are provided to

purchasers of hybrid and compressed natural gas vehicles, which also enjoy tax exemption

until 31 December 2009 and registration discounts. Mainly for planning reasons, Singapore

has taken steps to discourage car ownership, reduce congestion and promote public

transport, all of which have improved its energy effi ciency.

Building effi ciency. Singapore has been gradually tightening its building codes, standards

and regulations to reduce electricity consumed by buildings and has introduced a building

ratings/labelling scheme. It has also launched a program that provides cash incentives to

encourage builders of new buildings to meet higher energy ratings levels.

Renewable energy and supply-side effi ciency

Singapore has restructured and liberalised its electricity market and vastly increased the

proportion of its electricity supply derived from natural gas (using combined cycle turbines)

over the past decade. Singapore’s fi rst LNG terminal is currently under development, and

is expected to come online by 2012. To the limited extent the Government is promoting

renewable energy, it is focusing its efforts on R&D to improve the cost and effectiveness of

biomass and solar generation, and is reviewing its policies to promote distributed electricity

generation from renewable sources.

44 45

ThailandA developing country, Thailand is beginning to adopt energy policies explicitly focused on achieving greenhouse gas emissions reductions, however its primary focus remains energy security for economic development and its deployment of climate change policies has been limited to date.

Thailand’s energy policy is underpinned by a fi ve-pronged strategy that is focused on energy

security, renewable energy development, energy pricing and energy safety, energy effi ciency

and conservation, and environmental protection.

Renewable energy

Thailand’s renewable energy strategy aims to develop Thailand into the renewable energy

‘hub’ of southeast Asia by aggressively promoting the development of renewable energy. Its

strategy is focused on the promotion of biofuels and on the expansion of power generation

from renewable energy sources.

The Government is undertaking a range of measures to encourage the production and

consumption of biofuels such as ‘gasohol’ and bio-diesel, which it hopes will gradually

displace the use of oil, particularly in the transport sector. These measures include blending

mandates and other incentives.

The Government’s aim is to increase renewable energy supply from its current low level of 0.5

per cent of commercial primary energy to 8 per cent by 2011. The production of renewable

energy is encouraged through the provision of incentives to generators such as price subsidies

and tax credits.

Energy effi ciency

Thailand has implemented a number of energy effi ciency programs aimed at households,

communities, businesses and industry. The most signifi cant of these is the Energy

Conservation Program, which consists of a compulsory, a voluntary and a complementary

element. Under the compulsory program, large factories and buildings must undertake energy

audits and report to the relevant ministry. The voluntary program provides fi nancial assistance

and advice to private companies to introduce energy conservation methods and technologies.

The complementary program promotes public awareness about energy conservation and

effi ciency through public campaigns.

Thailand’s Greenhouse Gas Management Organisation administers three new energy-

effi ciency programs aimed explicitly at the reduction of greenhouse gas emissions: a

voluntary carbon labelling program that labels the life-cycle emissions embodied in products

produced by participating companies; a ‘Carbon Footprint’ program for industry, to measure

the life-cycle emissions embodied in commercial and industrial products; and ‘CoolMode’, a

partnership with the Thailand Textile Institute and Thai garment producers to produce cooler

garments from special materials so that people will be more comfortable in Thailand’s tropical

climate and will reduce their reliance on air conditioning (which currently accounts for some

65 per cent of electricity use in commercial buildings).

46 47

VietnamVietnam is a poor but rapidly developing country and a signifi cant fossil fuel exporter.

The Government’s energy policy is therefore primarily tied to Vietnam’s economic

development needs. It is heavily reliant on international development assistance to

develop and implement policies to mitigate climate change.

Renewable energy

Hydroelectricity already supplies around 50 per cent of Vietnam’s electricity.

The Government has announced plans to expand the country’s installed power

generating capacity to 81 GW by 2020 – nine times higher than the amount of

installed capacity in 2004 – and the state-owned electricity corporation has outlined

plans to build 74 new power stations to meet that goal, 48 of which are slated to be

hydroelectric stations.

The World Bank-sponsored Vietnam Renewable Energy Development Project aims

to increase the supply of electricity to the national grid from renewable energy

sources. The main component of the project is a re-fi nancing facility for commercial

banks to provide loans to eligible small-scale renewable energy projects (less than

30 MW). Other components of the project include the provision of technical and

investment assistance to the Ministry of Industry and Trade, commercial banks

and project developers to develop, fi nance and implement projects according

to international best practice; the development of regulatory infrastructure and

capacity within relevant state agencies; and support to develop a pipeline of

renewable energy projects. A pilot program to develop 20 community-based hybrid

renewable energy grids in remote areas is also being undertaken by the World

Bank.

Energy effi ciency

A number of energy-effi ciency projects, also supported by international

development assistance, are currently in operation in Vietnam. A program to

improve the effi ciency of Vietnam’s electricity transmission and distribution systems

is being funded by the World Bank, along with a project to improve demand-

side energy effi ciency. The latter project will support a suite of energy-effi ciency

measures, including the roll-out of superior metering infrastructure, the promotion

of compact fl uorescent light globes and capacity-building in government agencies

and in commercial service providers. A third program seeks to improve the quality

and effi ciency of public lighting (ie lighting of streets, schools and hospitals)

by developing technical capacity within the local lighting industry and relevant

government and municipal agencies to design and install energy effi cient public

lighting systems.

48

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