COP-8 Side Event - Thursday 31 October

Development & Climate Change:

Issues & Opportunities in Asia

IPIECA Workshop - Key Messages and Learning's

Kuala Lumpur, Malaysia

25-26 September 2002

Background to IPIECA

Founded in 1974

United Nations NGO Status (ECOSOC II)

Non-profit

Global oil and gas membership 25 national & multinational companies

13 national & regional associations

Secretariat based in London

Focus on key global environmental issues

Share information, understanding & good practice

Does not lobby on behalf of the industry

Core IPIECA Activities

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

Aim: to provide members and external stakeholders with reliable and timely information, issues analysis, education and involvement in international process related to global climate change

Climate Change Working Group established in 1988

IPIECA Climate Change Activities

1/ Interaction with UNFCCC– Inform members of developments in the negotiations

– Publications (e.g. Guides, Glossary of Terms)

2/ Contributing to the IPCC– Industry expert Lead Authors and peer review

– Guide to IPCC processes, structure and functions

3/ Workshops and Symposia– International and regional events

– Scientific, technical, socio-economic aspects of climate change

– Comprehensive series of reports and publications

IPIECA Workshop (25-26 September)

Workshop on Development & Climate Change: Issues & Opportunities in Asia

Hosted by PETRONAS in Kuala Lumpur, Malaysia

Workshop goals: 1/ assess future regional energy demand, GHG trends, & options

to meet climate change concerns and development priorities

2/ consider opportunities for effective technology transfer and capacity building

3/ explore the potential for market-based emission reduction approaches, particularly through CDM

• Key priorities in Asia – sustainable development and poverty alleviation

– technology transfer and capacity building

• Anticipated economic growth– average 3-7% annual GDP

– considerable national and regional variation

• Affordable energy is a key factor to achieve economic & social development

• Over 2 billion people globally without access to electricity

Development Trends in Asia

• According to the IEA, demand for energy will increase twofold between 2000 and 2020– increased consumption of coal, oil, and particularly natural gas

• Future fossil fuel resources:– adequate for many decades– require technology developments & investment

• Renewable energy sources (hydro, solar, wind, geothermal and biomass) – expected to grow considerably– remain a small % of total energy mix

Long-Term Energy Demand in Asia

Long-Term Emission Forecasts in Asia

0

500

1000

1500

2000

2500

3000

3500

4000

1990 1998 1999 2005 2010 2015 2020

miilion tons C eq

    Other Asia

    South Korea

    India

    China

    Australasia

    Japan

(IEA, 2002)

Policy challenge to provide affordable energy for development, whilst at the same time limiting long

term GHG emissions

Examples of Technology Options

• Efficiency improvements

- Buildings, energy supply and use, transport

• CO2 Capture and Storage

- Biological sinks (create & maintain stocks)

- Geological sequestration

• Non Fossil Fuel Energy Supply

- Nuclear, biomass, hydro, wind, solar...

- Decades to implement additional new technologies

Effective technology solutions

Must be efficient and economic

Short term: Global deployment of current technologies

Long term: Support research and development of new technologies e.g. biotechnology

Technology Transfer

Barriers:

cost

intellectual property rights

institutional structures

personnel

Enabling frameworks:

rule of law

open markets

foreign direct investment

private / public collaboration

training

market based mechanisms

CDM offers one new pathway to encourage technology transfer

• Projects that:– Promote sustainable development

– Reduce emissions

– Result in technology transfer

– Mobilize new investment (no diversion of ODA)

• Generating CER’s of less importance

• Early focus on– Energy efficiency

– Renewable energy

– Small scale projects

CDM: Common Priorities - Host Countries

• Institutions and procedures under development

• Significant progress in most countries

• Wide variety of approaches that reflect differing national priorities & structures

• Large potential for CDM projects &

emission reductions in Asia

– High growth, low abatement cost

– Japan major credit buyer

– Potential reductions > 100 million ton of CO2

– Projects particularly in larger Asia countries

CDM: National Approaches

Need to:

- Establish local Operational Entities

- Develop capacity

- Lower transaction

costs

- Raise awareness

• “Learning by doing” builds better understanding than

analysis & workshops

• Private-public partnerships foster understanding

– Needs & expectations of government/business

– How to balance priorities of sustainable development with

generation of CERs

• Project viability only affected by CERs at margin

– Projects must be economically sound

• Transaction costs remain high

Learnings from CDM Case Studies

• Currently receive little attention• Present significant technical challenges (baselines,

additionality, only part of a project…) • Potential for time-consuming, confrontational debates

over political acceptability (eligibility, approval process…)

• Large scale projects have potential to:– reduce emissions significantly

– encourage substantial investment

– promote technology transfer

– contribute to sustainable development

Large-scale CDM Projects

• Company emissions obligations in Annex 1 countries– extent to which CDM might contribute

• Economic basis for valuing CERs• Rules for project eligibility, baselines, additionality• Approval process, especially for large projects

– information requirements– transaction costs– time and process for decisions

• Contrasts between public/private sector approaches

Private Sector Perspectives

Uncertainties at every step...

Key Messages

Development & poverty alleviation key priorities

Need to consider climate change in this context

Access to affordable energy essential for development

Fossil fuel usage in Asia set to double by 2020

Technology offers a variety of opportunities

CDM offers one new pathway – multiple objectives

Key Messages (cont.)

Significant potential for CDM in Asia identified

Current focus on small scale projects

Large-scale projects (many benefits & challenges)

Diversity of National approaches being developed

Lower transaction costs & faster approval needed

Investment in CDM from a variety of sources

Key Messages (cont.)

Uncertainties

Project (additionality, baselines, eligibility…)

In most cases credits affect viability at the margins

Business (obligations, demand, cost…)

Long-term issues

International framework post 2012

Technology developments > significant reductions

Mechanisms to promote technology transfer

For further details about IPIECA, and our joint Latin American workshop with ARPEL on

3-4 December 2002, please visit:

http://www.ipieca.org

or contact:

info@ipieca.org