Towards a LowTowards a Low--Carbon Asia: Carbon Asia: The Role of Development The Role of Development

Cooperation & FinanceCooperation & Finance

Masahiro KAWAIMasahiro KAWAIDean, Asian Development Bank InstituteDean, Asian Development Bank Institute

““Toward LowToward Low--Carbon Society:Carbon Society:Japan Scenarios and Asian ChallengesJapan Scenarios and Asian Challenges””

Ministry of the Environment & NIESMinistry of the Environment & NIESTsukuba, 13 February 2009Tsukuba, 13 February 2009

OutlineOutline

•• Carbon Trends in Developing/ Carbon Trends in Developing/ Emerging AsiaEmerging Asia

•• A New Development Model for A New Development Model for a Lowa Low--Carbon AsiaCarbon Asia

•• Strategies for Development Strategies for Development Cooperation and FinancingCooperation and Financing

•• ConclusionConclusion

Global energy consumptionGlobal energy consumption

Source: OECD, 2008

Carbon Trends Carbon Trends in Developing/Emerging in Developing/Emerging

AsiaAsia

Developing/emerging AsiaDeveloping/emerging Asia’’s s share in global carbon emissions share in global carbon emissions

from energy consumptionfrom energy consumption

2006 ActualTotal = 27,889 Mil tons CO2

2030 ProjectionTotal = 40,553 Mil tons CO2

Rest of the

World

Rest of the

World

Developing/emerging Asia

70%

30% 43%

57%

Source: IEA World Energy Outlook 2008

Carbon emission from developing/ Carbon emission from developing/ emerging Asia is growingemerging Asia is growing

0 – 5.0 t CO2 eq./person

5.0 – 12.8 t CO2 eq./person

12.8 – 67.8 t CO2 eq./person

Source: WRI, 2005.

Human development index (HDI) & Human development index (HDI) & per capita electricity consumptionper capita electricity consumption

China

• 1.3 billion people live on less than US $ 1 a day.• Overall consumption of the richest fifth of Asia’s

population is 16 times that of the poorest fifth.• Nearly 1 billion people lack access to energy.

Source: UNDP, 2006

Per capita emissions remain low in Per capita emissions remain low in most developing/emerging Asiamost developing/emerging Asia

Income and motorizationIncome and motorization

Japan

Singapore

Hong Kong

China

Korea

Malaysia

Philippines

Indonesia

Thailand

1

10

100

1000

100 1,000 10,000 100,000

GDP Per Capita

MVs

Per 100

0 Po

pulatio

n

Source: Robin Carruthers, World Bank, 2003

Vehicle ownership in developing/ Vehicle ownership in developing/ emerging Asian countriesemerging Asian countries

1012

25

30115

250285

0 50 100 150 200 250 300

INDIA

CHINA

INDONESIA

PHILIPPINES

THAILAND

M ALAYSIA

KOREA

NUMBER OF VEHICLES PER 1000 PERSONS IN ASIAN COUNTRIES

Source: Alok Rawat, “Fuel Efficiency Improvement and Automotive CO2 ReductionPolicies – an Indian Perspective” UNEP Workshop, Shanghai, October 2004

GDP and primary energy consumption, GDP and primary energy consumption, on per capita base, are still low but on per capita base, are still low but

growing in growing in emerging economies of Asiaemerging economies of Asia

1997$)

Source: Li Zheng, Tsinghua Univ.

Developing/emerging AsiaDeveloping/emerging Asia’’s s primary energy mixprimary energy mix

Fuel MixFuel Mix 20062006 20302030 EUEU(Present)(Present)

CoalCoalOilOilGasGasNuclearNuclearHydroHydroBiomassBiomassGeo, solarGeo, solar

49%49%23%23%7%7%1%1%2%2%

17%17%1%1%

51%51%24%24%9%9%2%2%2%2%

10%10%1%1%

30%30%7%7%

21%21%17%17%15%15%1%1%9%9%

World gross product

Population

A New Development Model A New Development Model for a Lowfor a Low--Carbon AsiaCarbon Asia

Asia needs to shift to a lowAsia needs to shift to a low--carbon development modelcarbon development model

• The current model, which is highly energy & carbon intensive, is not sustainable

• Energy security (rising energy demand) to achieve economic development and poverty reduction (electricity for all)

• National and local environmental concerns (eg. air quality)

• Climate change (adverse impacts on global GHG emissions, next generations, and poor who are most vulnerable)

A lowA low--carbon economy is based carbon economy is based on on ““decouplingdecoupling”” principlesprinciples

Carbon emissionsCarbon emissions

Qualityof lifeQualityof life

EconomicgrowthEconomicgrowth

Changes inproduction

and consumption

patternsChanges

inproduction

patterns

To achieve a lowTo achieve a low--carbon carbon economy, a paradigm shift is economy, a paradigm shift is

necessary:necessary:

•• DeDe--couple economic growth from couple economic growth from

carbon emissionscarbon emissions

•• Increase resource use efficiency and Increase resource use efficiency and

renewable energy developmentrenewable energy development

•• Change production (industrial Change production (industrial

composition) & consumption patternscomposition) & consumption patterns

•• Consider interConsider inter--generational equitygenerational equity

““DecouplingDecoupling”” of economic growth of economic growth from carbon emissions is possiblefrom carbon emissions is possible

In Japan, CO2 emissions grew at a much slower pace than GDP growth, from the 1970s

0.5

1

1.5

2

2.5

3

1970 1975 1980 1985 1990 1995 2000 2005

GDP CO2 emissions per GDP CO2emissions

In Japan, SOx emissions grew at a much slowerpace than GDP growth,from the 1980s

Significant CO2 reduction potential Significant CO2 reduction potential exists for Asian emerging economiesexists for Asian emerging economies

Energy efficiency potential in Energy efficiency potential in selected industrial sectorsselected industrial sectors

Energy efficiency Energy efficiency improvement potentialimprovement potential

Industrial sector Industrial sector categorycategory

MtoeMtoe/year/year MtCOMtCO22/year/yearChemicals/petrochemicalsChemicals/petrochemicalsIron and steelIron and steelCementCementPulp and paperPulp and paperAluminiumAluminium

120120--1551555555--1081086060--72723131--363677--1010

370370--470470220220--360360480480--5205205252--1051052020--3030

If the best of low-carbon energy technology available is spread, developing/emerging Asia can reduce carbon emissions by 20-30%(IPCC 4th Assessment Report)

Potential for improved efficiency in Potential for improved efficiency in passenger transportpassenger transport

Energy efficiency and CO2 emissions of public transport compared to car transport

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

MegaJoule/pkm CO2/pkm

carbus, light railrail

Scope: Germany 2005Source: TREMOD

Policies that can support transition Policies that can support transition to a lowto a low--carbon Asiacarbon Asia

•• A national strategy to achieve both economic A national strategy to achieve both economic growth (& poverty reduction) and a lowgrowth (& poverty reduction) and a low--carbon carbon economy by focusing on economy by focusing on ““coco--benefitsbenefits””

•• Use of market forces through liberalization of Use of market forces through liberalization of fuel prices (e.g. removal of fuel subsidies) and fuel prices (e.g. removal of fuel subsidies) and adoption of enabling economic measures (e.g. a adoption of enabling economic measures (e.g. a cap & trade system and carbon tax)cap & trade system and carbon tax)

•• Introduction of specific policy measures to Introduction of specific policy measures to improve energy efficiency in targeted sectors improve energy efficiency in targeted sectors (such as industry, power generation, transport )(such as industry, power generation, transport )

•• Increased public funding for research on low Increased public funding for research on low carbon technologiescarbon technologies

““CoCo--benefitsbenefits”” approach indispensable approach indispensable for developing/emerging Asiafor developing/emerging Asia

Integrated efforts to address both development needs(growth & poverty reduction) and climate change

Removing fuel subsidies in Removing fuel subsidies in developing/emerging economies can developing/emerging economies can

create tangible benefitscreate tangible benefitsCountryCountry Average rate Average rate

of subsidy of subsidy (% of market (% of market

price)price)

Annual Annual economic economic

gaingain(% of GDP)(% of GDP)

Reduction in Reduction in energy energy

consumption consumption (%)(%)

Reduction Reduction in COin CO22

emissionsemissions

ChinaChina 10.910.9 0.40.4 9.49.4 13.413.4

IndiaIndia 14.214.2 0.30.3 7.27.2 14.114.1

IndonesiaIndonesia 27.527.5 0.20.2 7.17.1 11.011.0

IranIran 80.480.4 2.22.2 47.547.5 49.449.4

KazakhstanKazakhstan 18.218.2 1.01.0 19.219.2 22.822.8

RussiaRussia 32.532.5 1.51.5 18.018.0 17.117.1

Source: UNEP, 2006

Strategies for Strategies for Development Cooperation Development Cooperation

and Financingand Financing

Building blocks of a lowBuilding blocks of a low--carbon Asiacarbon AsiaGlobal LevelGlobal Level•• Political agreement on the role of developing/ Political agreement on the role of developing/

emerging economies by recognizing their historical emerging economies by recognizing their historical positions, development needs, differentiated positions, development needs, differentiated responsibilities, and external assistanceresponsibilities, and external assistance

Regional LevelRegional Level•• Creation of efficient carbon markets that attach Creation of efficient carbon markets that attach

significant price on carbon at the regional level to significant price on carbon at the regional level to reduce CO2 emissionsreduce CO2 emissions

National LevelNational Level•• National ownership over development strategies with National ownership over development strategies with

the the ““coco--benefitsbenefits”” approach approach •• Balancing markets, regulations, and innovative Balancing markets, regulations, and innovative

financing to drive investment into clean financing to drive investment into clean technologytechnology

Differentiated responsibilitiesDifferentiated responsibilities

•• Per capita emissions in developing/emerging Per capita emissions in developing/emerging Asia may be allowed to rise, from a low base, Asia may be allowed to rise, from a low base, to a certain point over the next yearsto a certain point over the next years

•• But its per GDP emissions should decline, But its per GDP emissions should decline, from a high base, in a substantial wayfrom a high base, in a substantial way

•• Once a developing/emerging economy Once a developing/emerging economy reaches a sufficiently high income level, the reaches a sufficiently high income level, the economy should make a commitment to economy should make a commitment to overall reductions of CO2 and GHG emissionsoverall reductions of CO2 and GHG emissions

•• The international community should assist The international community should assist developing/emerging Asia to achieve thisdeveloping/emerging Asia to achieve this

Barriers to a lowBarriers to a low--carbon economycarbon economyBarriers are principally related toBarriers are principally related to(i)(i) governmental interventionsgovernmental interventions(ii)(ii) private sector capacity, andprivate sector capacity, and(iii)(iii) financial support systems financial support systems Specifically:Specifically:•• Presence of perverse policies and absence of Presence of perverse policies and absence of policy incentives due to social concerns policy incentives due to social concerns •• Limited access to energy efficient technologiesLimited access to energy efficient technologies•• Shortage of ready availability of financeShortage of ready availability of finance•• Lack of implementation capacity for Lack of implementation capacity for policymakerspolicymakers

Strategies in development Strategies in development cooperation for a lowcooperation for a low--carbon Asiacarbon Asia

•• Helping developing/emerging Asia in Helping developing/emerging Asia in harnessing market mechanisms to accelerate harnessing market mechanisms to accelerate a shift to a lowa shift to a low--carbon economy, supported carbon economy, supported by adequate social sector protection to by adequate social sector protection to mitigate the negative impact of higher energy mitigate the negative impact of higher energy prices on the poor and socially vulnerableprices on the poor and socially vulnerable

•• Technical and economic cooperation in clean Technical and economic cooperation in clean energy development & energy efficiency energy development & energy efficiency improvementimprovement

•• Capacity building for strong and effective Capacity building for strong and effective governmentsgovernments

International support is needed for International support is needed for AsiaAsia’’s shift to a lows shift to a low--carbon economycarbon economy

Mitigation

• Improving energy efficiency.• Access to clean energy & technology, smart transport

High-carboncountries

More vulnerablecountries

Low-carbonAsia

Economic assistance for climate actions

Adaptation

Climate proofing of vulnerable sectors agriculture, water etc

Technical assistance and capacity building for strong, effective governments

Public and private

financing

International financing

Financing strategies Financing strategies for climate for climate actionsactions

PublicPublic--private partnerships (private partnerships (PPPsPPPs) for ) for affordable and competitive climate affordable and competitive climate actions through:actions through:

•• Maximizing the use of marketMaximizing the use of market--based based mechanisms (e.g. carbon markets)mechanisms (e.g. carbon markets)

•• Catalyzing private capitalCatalyzing private capital

•• Mobilizing concessional resourcesMobilizing concessional resources

MaximizingMaximizingMarketMarket

MechanismsMechanismsFina

ncin

gIn

itiat

ives MobilizingMobilizing

ConcessionalConcessionalResourcesResources

CatalyzingCatalyzingPrivatePrivateCapitalCapital

Ada

ptat

ion

Initi

ativ

es

Addressing Vulnerability Risks in National Development Strategies and Actions

Advancing Energy Efficiency and Use of Low-Carbon Energy Sources

Miti

gatio

nIn

itiat

ives Enabling Sustainable Transport Policies and Applying Efficient Systems

Promoting Improved Urban Sanitation and Reduction of Fugitive Methane Emissions

Promoting Sustainable Land Use and Forestry

Increasing Climate Resilience of Vulnerable Sectors

Climate Proofing Projects

Addressing Social Dimensions

ADBADB’’ss core approachcore approach

Climate change funds:Climate change funds:global and ADB initiativesglobal and ADB initiatives

Mitigation Adaptation Both

Clean Energy Financing Partnership Facility

($90 m)

Carbon Market Initiative FundsAsia-Pacific Carbon Fund ($151 m to 2012)Future Carbon Fund (target $100m for post 2012)

Water Financing Partnership Facility

($65 m, including adaptation)

Poverty and Environment Fund($3.6 m, including adaptation)

Climate Change Fund($40 m)

INTE

RN

AL

-de

velo

ping

Asi

a

Small Grants for Promoting Climate Change Adaptation

($1.2 m)

Special Climate Change Fund (GEF as administrator)

(adaptation priority, $80m - $67m committed; mitigation, target $15m)

Least Developed Countries Fund(GEF as administrator)

($189 m - $58m committed)

Adaptation Fund(GEF as administrator in

cooperation with UNFCCC) ($100 m by 2009)

EXTE

RN

AL

-Glo

bal

Global Environment Facility (GEF) Climate Change Focal

Area ($250 m/ year)

Strategic Priority on Adaptation (art of GEF Trust Fund)

($50 m – now fully committed)Clean Technology Fund of the Climate Investment Funds

(WB as Trustee)(target $5 b for 2009-2012)

Strategic Climate Fund of the Climate Investment Funds

(WB Trustee)Target:

- Pilot Program for Climate Resilience $500 m

- Forest Investment Prog. $500 m- Greening Energy Access $500 m

CMI attempts to maximize market CMI attempts to maximize market potentials in ADB projectspotentials in ADB projects

CarbonFunds

CMI is available to projects where ADB provides financing support such as loans, technical assistance, equities, and guarantees

ConclusionConclusion•• Developing/emerging Asia should and can Developing/emerging Asia should and can

shift its development model to sustain shift its development model to sustain economic growth and exploit economic growth and exploit ““coco--benefitsbenefits””

•• A new development model calls for a set of A new development model calls for a set of marketmarket--oriented policies to encourage oriented policies to encourage energy efficiency and a wider mix of energy energy efficiency and a wider mix of energy supply, to be complemented by stronger supply, to be complemented by stronger social protection programssocial protection programs

•• This requires support from the international This requires support from the international community in technical assistance, capacity community in technical assistance, capacity building (to strengthen institutions) and building (to strengthen institutions) and financingfinancing

Dr. Masahiro Kawai Dr. Masahiro Kawai Dean & CEO Dean & CEO

Asian Development Asian Development Bank InstituteBank Institute

mkawai@adbi.org+81 3 3593 5527www.adbi.org