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Market Based Climate Mitigation Policies In Emerging Economies
by Sara Moarif and Namrata Patodia Rastogi
Used by governments for decades, market-based policies are mechanisms to control environmental pollution at various leverage points. They work by changing relative prices – raising the cost of emissions-intensive activities and/or lowering the cost of lower-emitting alternatives – to provide producers and consumers with a financial incentive to adopt the latter. Policies that can be considered market-based include taxes and fees, subsidies, and the use of pollution control trading systems. Market-based policy instruments provide financial incentive to elicit specific behavior from entities responsible for greenhouse gas (GHG) emissions, whether consumers or producers.
This brief provides an overview of market-based policies aimed at reducing GHG emissions in several major emerging economies: Brazil, China, India, South Africa and South Korea. By implementing regulatory and marketbased policy instruments across their economies, these countries are seeking to promote cleaner technologies and behavior change while also promoting economic development and growth.
Data from International Energy Agency, CO2 Emissions from Fuel Combustion, IEA, 2014, with C2ES calculations. Per Capita GDP is calculated on a Power Purchasing Parity (PPP) basis.
Share of Global Energy-Related CO2 Emissions (2013): 1.22 percent (Ranked 14th)
Per Capita CO2 emissions: 16.70 tons CO2 (370 percent of global average)
Per Capita GDP (2005 US Dollars): $37,720 (Ranked 10th)
Kyoto Reduction Target: 5 percent below 1990 levels by 2020
Intended Nationally Determined Contribution (INDC): 26-28 percent below 2005 levels by 2030.
Australia’s main climate policy is currently the Emission Reductions Fund (ERF), where the government will purchase credits from projects that reduce emissions in the industrial and land sectors. The fund currently has AU$ 2.25 billion allocated from the Australian government. A regulator issues credits for each ton of emission reductions that a project produces, which can then be sold to the government through a reverse auction. The ERF is being integrated with the Carbon Farming Initiative, an existing offset mechanism for domestic agriculture projects.
The Carbon Pricing Mechanism (CPM) was in operation until it was repealed in July 2014. It set a fixed carbon price of AU$ 23 per ton available at quarterly auctions, with plans to allow the price to float from 2015 onwards. The ERF serves as the replacement for the CPM.
- Australia’s Carbon Pricing Mechanism (2012), C2ES brief summarizing the carbon price mechanism and other key features of the Clean Energy Future plan.
- Australia Ministry of Environment - Renewable Energy Target
- Australian Government – Renewable Energy Target Review 2014
Share of Global Energy-Related CO2 Emissions (2013): 1.39 percent (Ranked 11th)
Per Capita CO2 emissions: 2.22 tons CO2 (49 percent of global average)
Per Capita GDP (2005 US Dollars): $12,750 (Ranked 38th)
Copenhagen Pledge: Between 36.1 and 38.9 percent reduction by 2020 relative to business as usual (BAU)
INDC: 37 percent below 2005 levels by 2025, with an indicative target of 43 percent below 2005 levels by 2030
Brazil’s key policy is the National Climate Change Plan (PNMC), signed into law in December 2008. It contains a number of targets that focus on particular sectors. For example, land-use is the major sources of Brazil’s emissions, due to increased deforestation and the expansion of agriculture. The PNMC sets out specific targets, such as reductions in the annual deforestation rates, relative to the 1965-2005 average, in the Amazon and Bioma Cerrado rainforests of 80 percent and 40 percent, respectively. In June 2012, the Brazilian government followed up with national targets for the heavy industry, transportation, and mining sectors to reduce emissions by 2020 relative to business as usual by 5 percent, 2 percent and 4 percent, respectively.
Share of Global Energy-Related CO2 Emissions (2013): 1.68 percent (Ranked 8th)
Per Capita CO2 emissions: 15.02 tons CO2 (339% of global average)
Per Capita GDP (2005 US Dollars): $37,020 (Ranked 11th)
Copenhagen Pledge: 17 percent reduction from 2005 levels by 2020
INDC: 30 percent below 2005 levels by 2030
Many of Canada’s policies to combat climate change occur at the provincial level. In Alberta, the Specified Gas Emitters Regulation provides an intensity-based target for power and industrial facilities above 100,000 tons of carbon dioxide equivalent per year. The law requires an annual intensity reduction of 2 percent, up to a maximum cumulative reduction of 12 percent. Alternatively, firms can contribute CAD 15 per ton to the Alberta Technology Fund, or purchasing either credits from other firms, or approved offset credits.
In July 2008, British Columbia introduced a carbon tax of CAD 25 per metric ton of CO2- equivalent on the purchase and use of fossil fuels within the province. It covers gasoline and other transportation fuels, natural gas, propane and coal. The government passed amendments increasing the tax rate to CAD 30 per metric ton of CO2 equivalent.
Quebec has a provincial GHG reduction target of 20 percent below 1990 levels by 2020. A key measure to achieve that goal is an emissions trading system, which took effect in January 2013. It covers the power sector, and a broad range of industrial facilities. From 2015 onwards, the program expanded to include the supply of transportation fuels, including gasoline and natural gas. The program is linked to California’s cap-and-trade program, so that allowances and offsets accepted in one program can be used in the other to comply with their obligations. In April 2015, Ontario proposed a similar cap-and-trade system to reduce its provincial emissions.
At the federal level, the government is implementing national greenhouse gas emissions standards across different sectors. Vehicle standards for cars, trucks, and heavy duty vehicles ae aligned with those in the United States. Regulations on new coal fired power plants, which set a performance standard of 420 tons of CO2 per gigawatt hour, commenced on July 1, 2015.
- Canadian Hydropower and the Clean Power Plan, C2ES brief assessing the potential for imports of hydropower under the U.S. Clean Power Plan.
- Environment Canada – Greenhouse Gas Emissions Regulations
- Alberta Environment - SGER
- British Columbia Ministry of Finance – Carbon Tax
- Quebec Ministry of Sustainable Development, Environment and the Fight against Climate Change – Cap-and-Trade Program
Share of Global Energy-Related CO2 Emissions (2013): 25.86 percent (Ranked 1st)
Per Capita CO2 emissions: 6.08 tons CO2 (135 percent of global average)
Per Capita GDP (2005 US Dollars): $9,600 (Ranked 52nd)
Copenhagen Pledge: Carbon intensity reduction of 40-45 percent below 2005 levels by 2020
INDC: Emissions to peak no later than 2030, and carbon intensity reduction of 60-65 percent below 2005 levels by 2030
China’s twelfth five-year plan (FYP), covering 2011-15, spelled out a number of reforms to domestic energy and climate policies. The headline targets were to reduce energy intensity by an additional 16 percent, and carbon intensity by 17 percent, by 2015. It has been widely reported that China is currently on track to meet these 2015 targets.
Carbon trading is currently being piloted in Beijing, Chongqing, Guangdong, Hubei, Shanghai, Shenzhen, and Tianjin. Each has designed its own regulations and emissions exchanges to conduct carbon trading between participating companies. In July 2014, Chongqing became the seventh pilot to commence trading. In a joint statement with U.S. President Barack Obama on September 25, 2015, Chinese President Xi Jinping announced China's plan to establish a national carbon trading program in 2017.
China’s government set goals to increase renewable energy’s share of primary energy to 11.5 percent by 2015, and then 15 percent by 2020. This includes technology specific goals – for example, to increase hydroelectric power capacity from 230 GW in 2011 to 330 GW in 2017. Under the Renewable Energy Law the government put forward market incentives, government subsidies and other policies to help meet these targets. China has announced an updated target of 20 percent non-fossil energy (including nuclear power) by 2030. To improve energy efficiency, the government requires utilities to achieve 0.3 percent electricity savings per year, in addition to efficiency standards for buildings, household appliances and other products. New cars must also meet fuel efficiency standards, equivalent to approximately 47 miles per gallon.
- China's Climate and Energy Policies, C2ES summary.
- U.S-China Workshop: Domestic MRV of Climate Efforts (2012)
- Energy and Climate Goals of China’s 12th Five Year plan (2011)
- Coal in China: Resources, Uses, and Advanced Coal Technologies
- Common Challenge, Collaborative Response: A Roadmap for U.S.-China Cooperation on Energy and Climate Change (in collaboration with the Asia Society)
- Climate Change Mitigation Measures in China
- China Releases Climate Change Plan
European Union (EU)
Share of Global Energy-Related CO2 Emissions (2013): 11.04 percent (Ranked 3rd)
Per Capita CO2 emissions: 6.91 tons CO2 (153 percent of global average)
Per Capita GDP (2005 US Dollars): $28,800 (Ranked 17th)
Kyoto Target: 20 percent below 1990 levels by 2020
INDC: 40 percent below 1990 levels by 2030
The centerpiece of the European Union’s climate policy is the Emissions Trading System (EU ETS), the world’s largest market for greenhouse gas emissions. It covers the 28 countries of the European Union, plus Iceland, Lichtenstein, and Norway, and includes approximately 45 percent of all EU GHG emissions at over 11,500 installations. The program is currently in its third phase, from 2012-2020, to achieve the EU goal of 20 percent below 1990 levels by 2020. The program also allows for certain offset credits, generated through the UNFCCC’s Clean Development Mechanism and Joint Implementation, to be used by companies to comply with the program.
EU Member states agreed to a non-binding goal of increasing energy efficiency by 20 percent by 2020. In 2011, a common framework for all member states was set out in the Energy Efficiency Directive. The directive does not set a pan-EU mechanism for increasing energy efficiency, instead instructing member states to set their own targets and then institute national policies such as energy efficiency obligations schemes or other targeted measures. There is an agreed non-binding target of 27 percent increase in energy efficiency by 2030.
The EU has a 2020 target to achieve 20 percent of power generation and 10 percent of transportation fuel use through renewables. The EU set individual targets for each member state for power generation, depending on their starting point and their capability to deploy renewable energy. However, the transportation fuel target is set at 10 percent for all member states. In October 2014, EU member states agreed to extend the target to 27 percent by 2030.
- Emissions Trading in the European Union: Its Brief History
- Report: The European Union's Emissions Trading System in Perspective
- Overview of the European Union Emissions Trading System
- Climate Change Mitigation Measures in the European Union
- Summary of the European Commission's Proposed Climate Action and Renewable Energy Package
- Presentation: Allocation and Offsets: Experienced Gained by the EU ETS (February 2008) Presented by Damien Meadows, Deputy Head of Unit, DG Environment, European Commission. For the Center's State and Federal Workshop
- Presentation: EU Emissions Trading (November 2008); Presented by Jill Duggan, Carbon Markets Insights
- European Commission – 2030 Climate and Energy Framework
- European Commission – EU Emissions Trading Scheme
- European Commission – Energy Efficiency Directive
- European Commission – Renewable Energy Directive
Share of Global Energy-Related CO2 Emissions (2013): 6.16 percent (Ranked 4th)
Per Capita CO2 emissions: 1.58 tons CO2 (35 percent of global average)
Per Capita GDP (2005 US Dollars): $4,500 (Ranked 78th)
Copenhagen Pledge: 20-25 percent emissions intensity reduction versus 2005 levels by 2020
While India’s economy and CO2 emissions have grown rapidly, per capita emissions remain well below the global average. India’s 2009 National Plan on Climate Change established eight National Missions addressing solar power, energy efficiency, water issues, sustainable habitat, agriculture, the Himalayan ecosystem, land use, and strategic knowledge on climate change. In the 2010 Cancun Agreements, India pledged to reduce emissions intensity 20 percent to 25 percent below 2005 levels by 2020. India’s current Five-Year Plan (2012-2017), which guides overall economic policy, includes goals to: achieve average 8 percent annual GDP growth; reduce emissions intensity in line with India’s Copenhagen pledge; and add 300,000 MW of renewable energy capacity. Early this year, the newly reconstituted Prime Minister’s Council on Climate Change launched new initiatives on renewable energy, coastal zone management, health and waste-to-energy.
At the federal level, India has implemented two major renewable energy-related policies: the Strategic Plan for New and Renewable Energy, which provides a broad framework, and the National Solar Mission, which sets capacity targets for renewables. Last year, the Indian government announced it would increase solar ambition to 100 GW installed capacity by 2022, bring solar power to every home by 2019, and invest in 25 solar parks. The Twelfth Five Year Plan proposes a National Wind Energy Mission which will boost wind energy production to 50,000 to 60,000 MW by 2022. The government also announced new vehicle fuel-economy standards of 4.8 liters per 100 kilometers (49 MPG) by 2021-2022, a 15 percent improvement. The Prime Minister has also launched an initiative to create 100 “smart cities” with better transport systems, utilities, and energy networks to address the challenges of urban growth.
- India's Climate and Energy Policies, C2ES summary.
- India National Climate Change Summary, C2ES overview of key policies.
- India and Climate Change, C2ES analysis of India's climate change policies.
- India’s Ministry of Environment and Forests and Climate Change
- Prime Minister’s Council on Climate Change - The National Action Plan on Climate Change (NAPCC) (2008)
- Government of India Planning Commission - 12th Five Year Plan (2012)
- India Climate Portal, Information provided by the independent Climate Challenge India (CCI)
Share of Global Energy-Related CO2 Emissions (2013): 3.85 percent (Ranked 6th)
Per Capita CO2 Emissions: 9.59 tons CO2 (213 percent of global average)
Per Capita GDP (2005 US Dollars): $31,310 (Ranked 14th)
Copenhagen Pledge: 3.8 percent below 2005 levels by 2020 (revised from 25 percent below 1990 levels by 2020)
INDC: 26 percent below 2013 levels by 2030
Domestically, Japan has numerous policies to reduce its GHG emissions. In 2012, a carbon tax was set at USD 2.12 per kiloliter of oil, with all proceeds from the tax used for renewable energy and increased energy efficiency. In 2011, a law passed that required utilities to purchase power generated through renewable energy using a fixed contract with fixed pricing. There are also tax incentives and preferences given to high efficiency buildings, or those that deploy rooftop solar photovoltaics. Another law, from 2007, requires local government authorities to take into consideration environmental performance when awarding contracts for projects.
Internationally, Japan is not included under the second commitment period of the Kyoto Protocol. Under the KP, Japan has used market mechanisms to comply with its Kyoto target, both by purchasing Certified Emission Reductions (CERs) and Assigned Amount Units (AAUs). In 2011, it established an alternative mechanism governed outside of the UNFCCC. The JCM establishes bilateral agreements between Japan and host countries to generate projects that reduce emissions. These reductions are credited and can be used by domestic firms to meet emission reduction targets. So far, Japan has signed bilateral agreements with 12 countries.
Share of Global Energy-Related CO2 Emissions (2013): 1.37 percent (Ranked 12th)
Per Capita CO2 emissions: 3.72 tons CO2 (83 percent of global average)
Per Capita GDP (2005 US Dollars): $13,420 (Ranked 35th)
Copenhagen Pledge: 30 percent below BAU levels by 2020
INDC: 22 percent reduction on GHG emissions from BAU by 2030. A 40 percent reduction from BAU by 2030 is conditional on the outcome of a Paris agreement.
In 2007, the Mexican government released its climate change strategy, encompassing energy, sustainable development, waste management, agriculture, forestry, land use, and conservation. Climate change policy was brought into law in 2012 with the passing of the General Law on Climate Change. In October 2013, Mexican president Enrique Pen?a Nieto announced the establishment of a carbon tax for fossil fuel producers, set at US$ 3.90 per ton of CO2e. The program entered into compliance in January 2014.
- SEMARNAT - Carbon Tax in Mexico, May 2014 – Presentation to World Bank PMR
- Government of Mexico – 2012 General Law on Climate Change (Spanish)
- International Development Law Organization (IDLO) - Legal Analysis of Mexico’s General Law on Climate Change (2012)
Republic of Korea
Share of Global Energy-Related CO2 Emissions (2013): 1.87 percent (Ranked 7th)
Per Capita CO2 emissions: 11.82 tons CO2 (263 percent of global average)
Per Capita GDP (2005 US Dollars): $27,990 (Ranked 12th)
Copenhagen Pledge: 30 percent below BAU levels by 2020
INDC: 37 percent below BAU levels by 2030
Korea launched the world’s second largest emissions trading system (ETS) on January 1, 2015. The ETS is a key policy to reach Korea’s Copenhagen target of 30 percent below BAU levels by 2020. The program covers roughly two-thirds of nationwide emissions. It builds from the country’s previous experience with a voluntary trading program, the Target Management Scheme. The program is currently scheduled to run until 2026 and includes over 500 companies across the country. In addition to the ETS, since 2012 Korea has a renewable portfolio standard requiring a steadily increasing percentage of power generation come from renewable sources, up to 10 percent in 2022.
- Republic of Korea Ministry of Environment – Emissions Trading Scheme
- Greenhouse Gas Inventory and Research Center of Korea (GIR) – Target Management Scheme
Share of Global Energy-Related CO2 Emissions (2013): 1.19 percent (Ranked 15th)
Per Capita CO2 emissions: 7.20 tons CO2 (160 percent of global average)
Per Capita GDP (2005 US Dollars): $10,690 (Ranked 45th)
Copenhagen Pledge: 34 percent below BAU emissions in 2020
INDC: Emissions to peak at between 398-614 MTCO2e by 2025, plateau for approximately a decade, then decline thereafter.
South Africa is a significant coal consumer and exporter, and imports substantial volumes of oil and natural gas. The country’s climate strategy calls for emissions to peak between 2020 and 2025, stabilize for about a decade, and then begin to decline. The South African government has proposed a national carbon tax to reduce emissions, currently under consideration by the legislature. The tax will cover power generation and industrial emissions, and account for approximately three-quarters of national emissions. The tax is scheduled to come into force in mid-2016.
- Treasury of Republic of South Africa – Carbon Tax Policy Paper May 2013
- Government of the Republic of South Africa - 2011 Climate Change Response Strategy (2011)
- Government of the Republic of South Africa - Mitigation Overview
SPEECH BY EILEEN CLAUSSEN
PRESIDENT, CENTER FOR CLIMATE AND ENERGY SOLUTIONS
ENERGY EXCHANGE SERIES BREAKFAST
OCTOBER 25, 2012
Thank you very much. It is wonderful to be here in Brisbane. I want to thank the Energy Policy Institute of Australia and Rio Tinto for bringing us together today for this timely discussion. This is the fourth breakfast in this series and all of them have been quite well attended, which suggests to me one of two things: Either the event sponsors have done an excellent job putting together some provocative discussions, or all of you really enjoy eating breakfast.
I also want to thank the conference sponsors for allowing me to escape the United States at an opportune moment. Although Australian politics has its share of vitriol, it is nice to be missing the onslaught of negative presidential campaign ads back home. A couple of weeks ago, the candidates argued about the fate of public television and the children’s TV character, Big Bird.
All I can say is this is a perfect example of politics at its most … fowl.
In all seriousness, I know you have spent these breakfasts talking about the future of energy, and I will do that as well. But I would not do justice to the mission of my organization if I did not focus on the intersection between our energy future and the future of the global climate.
Many of you may have known my organization as the Pew Center on Global Climate Change. About a year ago, we became the Center for Climate and Energy Solutions – C2ES. Our focus remains the same: working in and outside the United States to advance policy and action to address the twin challenges of energy and climate change. We are engaged in this work because we believe real challenges require real solutions.
The real challenge I want to talk about today is, I believe, one of the most important of the 21st century: that is providing safe, affordable and reliable energy for all, while at the same time protecting the global climate.
And the real solution to this challenge? Simply put, we must transition to a low-carbon economy. It may sound simple, but it is a very tall order.
To help put it in perspective, I’d like to do three things this morning. First, I will highlight the primary forces shaping the energy picture today. Then I’ll look at what key countries are – or are not – doing to move us toward a low-carbon economy. And finally I will make some suggestions about what we must do to make this transition real.
I’d like to begin by restating the challenge we face. Remember, it’s a two-part challenge – and the trick is dealing with both parts together. The first part we all get. We need affordable, reliable and safe energy because millions around the world still lack it, and because we cannot continue to grow our economies without it. The connection between energy, improved living standards, and economic growth is quite clear.
But what about the second part of the challenge? Why do we need to protect the global climate? In short, because the world is getting warmer. And the reason it is getting warmer is because we continue to produce enormous amounts of greenhouse gases, mostly by burning fossil fuels.
According to most scenarios, global emissions of greenhouse gases would have to peak by 2015 for us to have a reasonable chance of limiting global warming to no more than 2 degrees Celsius. That is the goal embraced by the world’s governments, first in Copenhagen in 2009, and again in Cancun in 2010.
At this stage, I think it would take heroic efforts around the globe to meet that goal. But if we exceed it, we will be entering very dicey territory.
Indeed, we are already experiencing the impacts of warming. Climate change is no longer a theory. It is here and now.
The global temperature has been above the 20th century average for 331 months in a row. That means the last time the global temperature was below average was February 1985.
In the United States, we had the hottest July in 118 years of recordkeeping. We also experienced some of the worst wildfires in our history and the worst drought in half a century.
We are not alone. Here in Australia, you have seen your own heat waves, flooding, wildfires and drought. And ocean warming and acidification, both caused by growing carbon dioxide emissions, threaten the future of the Great Barrier Reef ecosystem.
It is bound to get worse if we cannot once and for all get a handle on greenhouse gas emissions. Yet they keep rising.
Between 2009 and 2010, worldwide carbon dioxide emissions jumped 6 percent; it was the largest year-to-year increase on record. Of course, this global increase masks important national differences. While in most developed countries emissions are stabilizing or on the decline, emissions from China, India, Indonesia and other developing countries are growing rapidly. By 2035, if current trends continue, China alone will be responsible for one-third of global emissions.
So, with global emissions growing, and with the world already experiencing the weather extremes that scientists have always said would accompany global warming, it is time to face facts. It is time to jumpstart the transition to a low-carbon economy because it is only through this transition that we can meet both challenges: providing safe, reliable energy and addressing climate change.
So let’s look at the major forces shaping the production and use of energy today, and then drill down (no pun intended) to what governments are doing in key parts of the world to redirect our energy future. I’ll focus in particular on China, the United States, Europe and Australia. I also want to touch briefly on what we can hope to see from the new round of international climate talks launched last year in Durban.
We see five forces shaping our global energy future.
The first is rising demand. Even with the global economy still in recovery, developing countries are growing quite fast (China, in a year of “slowing growth,” still grew by 7.8 percent in the first half of this year.) And with that economic growth comes a rising middle class that wants cars and air conditioners and other essentials of modern life that require energy. Global energy demand is projected to rise 50 percent over the next 20 years, with more than 80 percent of this growth in developing countries.
A second major force shaping the world’s energy future is a growing desire for energy security. Countries are anxious. They don’t want to be tethered to just one or two sources of energy, especially if it comes from beyond their borders. So they are enhancing their energy security in three ways: by developing domestic energy sources; by diversifying their energy supplies; and by improving energy efficiency.
A third major force is new technology. Only recently did hydraulic fracturing advance to a point where it was economical to extract natural gas from the shale formations under large swaths of the continental United States Now the U.S. is in the midst of a fracking revolution. Our Energy Information Administration projects that shale gas production in the U.S. will jump 170 percent by 2035, and over the coming decade, the U.S. might become a net exporter of liquefied natural gas. A dramatic example of how technological breakthroughs can rewrite our energy future.
A fourth force shaping the energy picture is what I will call the unforeseen. Think of the Fukushima disaster, which could dramatically reshape the trajectory of nuclear power worldwide. Similarly, the Arctic is melting faster than we’d anticipated, prompting new competition for its vast energy resources. Not long ago, few analysts would have predicted the sustained high price for oil that has made it worthwhile to unlock the potential of oil sands, making Canada the world’s No. 3 oil producer and changing the geopolitics of the oil market. It’s impossible, of course, to predict what other unforeseen circumstances we might soon face.
The fifth important force is policy. While market forces may predominate, governments around the world are adopting a range of policies to try to meet their current and future energy needs. I’ll note that, as countries craft these new energy policies, climate change is, more often than not, an afterthought.
I want to focus on this last force – policy – in four parts of the world because, in the end, only through policy can we harness or manage these other forces to deliver the low-carbon transition we need.
First, China. At your February breakfast, you heard directly from influential Chinese energy policy maker Zhang Guobao (pronounced: Jong Gwoh-Baugh). Mr. Zhang explained how China has surpassed the United States to become the world’s largest energy producer and consumer.
Because of its rising demand, China increasingly is concerned about the security of its energy supplies. China is the second largest net importer of oil in the world, and this accounts for many of its actions on the international stage. For example, China is nowhere near the Arctic, but with recent melting opening new possibilities for oil exploration, China is now lobbying for permanent observer status at the Arctic Council.
China also is looking to diversify its energy supplies beyond oil and coal. It has set a goal of 15 percent of total energy output from renewable sources by 2020, and invested heavily to lead the clean tech market. China is now the world’s number-one solar manufacturer and home to four of the world’s top 10 wind turbine manufacturers.
China is mindful not only of commercial and energy security concerns, but also of the climate. China, after all, has not been immune to extreme weather. Since the summer of 2007, it has experienced major flooding and hurricanes. Heavy snowstorms last winter disrupted travel during the Lunar New Year celebration.
Increasingly, climate is an explicit focus of Chinese policymaking. Having pledged in Copenhagen to reduce its carbon intensity 40 to 45 percent from 2005 levels by 2020, the government effectively legislated this goal through targets and actions in its 12th five-year plan. Among other things, China is setting up seven local or regional greenhouse gas trading systems, with the goal of moving toward nationwide trading.
These are impressive steps, but they are hardly enough. China’s greenhouse gas emissions already exceed those of Europe and the United States combined, and they are projected to rise 45 percent between 2009 and 2020. The country has doubled its electric generation capacity since 2005, but just 0.2 percent of it is solar. Meanwhile, coal generating capacity has tripled since 2000, and is projected to grow another 50 percent by 2030.
The next country I want to talk about is the United States. As I mentioned, we are on the brink of an election, and the outcome could influence the direction of U.S. energy and climate policy. As Washington’s partisan gridlock has only grown worse, we’ve had no coherent national approach to energy or climate. Our approach has been essentially ad hoc.
On the bright side, the Obama administration recently issued new fuel economy and greenhouse gas standards for vehicles that represent the single largest step ever aimed at reducing U.S. carbon emissions. As a result, by 2025, we will see 90 percent increased fuel economy and 40 percent decreased greenhouse gas emissions for the average new vehicle. This is a big deal.
Meanwhile, the state of California, the ninth largest economy in the world, is on the verge of launching a cap-and-trade program. On November 14th, it will auction off more than 21 million greenhouse gas allowances, each representing one ton of carbon dioxide. Once it reaches its full scope, California will have the second largest cap-and-trade program, in terms of emissions covered, in the world – behind only the European Union. California intends to link its program with Quebec’s, and is discussing linking with others, including Australia.
So there is some progress on the policy front in the U.S. Yet, Congress is debating for the umpteenth time whether to pull the plug on a production tax credit that has helped advance wind power, at the very moment that lower natural gas prices threaten to undermine renewables. And, although the Environmental Protection Agency has moved forward on vehicle emissions, it’s unclear how the agency will regulate greenhouse gases from power plants and other stationary sources. If re-elected, President Obama would likely ramp up that effort. Governor Romney, on the other hand, favors stripping the agency’s authority to regulate greenhouse gases.
One wild card is the possibility – and at this stage, I’d say the remote possibility – of a carbon tax as part of a broader fiscal package. You may have heard of our looming “fiscal cliff.” In fact, there is a slew of looming tax- and deficit-related issues, the resolution of which might be eased by the revenue generated by a carbon tax. There’s no big public push for this, but a lot of quiet discussion among people from across the political spectrum and from different stakeholder groups, including some from business. It’s an intriguing possibility, especially since we’ve always assumed a carbon tax was out of the question, but I’m not holding my breath.
I’m afraid that no matter who’s in the White House, the U.S. approach will likely remain ad hoc for the foreseeable future, with partisan politics standing in the way of broader solutions.
Still, natural gas is now the fuel of choice for new power plants, and older coal plants are being retired, although coal exports are up. U.S. oil consumption is projected to remain virtually flat for years to come. Greenhouse gas emissions are down somewhat, although certainly not enough. And looking as far out as 2035, the U.S. Energy Information Administration doesn’t see them returning to pre-recession levels.
The third place I want to talk about, Europe, has done the best job so far of integrating energy and climate policy. Europe 2020, the EU’s overarching growth strategy, spells out specific targets for reducing carbon emissions, increasing energy efficiency and increasing the use of renewable energy.
Europe is a leading producer and consumer of renewable energy. 2011 was the biggest year yet for renewable installations in the EU, with Germany, Italy and Spain taking the lead. Across Europe, 71 percent of new generating capacity in 2011 was renewable, with solar PV accounting for nearly half. In all, renewables accounted for almost a third of Europe’s electricity generation last year, a larger share than either coal or natural gas. And the EU will likely over-deliver on its commitment to cut greenhouse gas emissions 20 percent below 1990 levels by 2020.
The EU’s groundbreaking Emissions Trading System has had its ups and downs, and a lot has been learned along the way. But the ETS continues to demonstrate the practicality and value of the cap-and-trade approach, and remains the bulwark of the emerging global carbon market.
But Europe is facing stiff economic challenges. Cash-strapped governments are reducing their support for renewable energy. The retrenchment in nuclear power following the Fukushima disaster will likely mean increased reliance on fossil fuels. We’ve counted on Europe to lead the global climate effort for many years now. It’s not clear at the moment just how strong a leader Europe can remain going forward.
The fourth and final part of the world I want to talk about today is Australia. As all of you know very well, this nation is blessed with an abundance of natural resources, including large amounts of coal and natural gas. Australia’s electricity mix reflects these home-grown resources … with 78 percent of electricity coming from coal and about 14 percent coming from natural gas (with the natural gas share rising fast). What’s more, exports of coal are growing as Asian demand soars. For the next five years at least, exports are projected to grow an average of 10 percent a year.
Even as Australia remains heavily dependent on coal, though, it has put in place a comprehensive framework to begin the transition to a low-carbon economy. The goal of the Clean Energy Future plan is to reduce greenhouse gas emissions to 80 percent below 2000 levels by 2050. It aims to achieve this in large part through an innovative market-based approach that begins with a fixed carbon price and transitions over time to full-fledged emissions trading. To those of us in Washington now thinking about a carbon tax, it’s very interesting to see how the pricing system was coupled with tax reforms to benefit not only affected sectors but also households broadly. There are lessons to be learned here – about both policy design and politics. And you can be certain that many are watching Australia closely as another important laboratory for carbon trading.
What happens here, in Europe, in the United States and in China is vitally important to achieving progress in the low-carbon transition … domestic policies are where the rubber meets the road. But what about the international climate effort? Twenty years after the first Rio summit, where does it stand?
From the start, there has been tension between two competing approaches – top-down and bottom-up. And the UN process has produced examples of both – top-down in the form of the Kyoto Protocol, and bottom-up in the parallel voluntary framework that’s emerged under the Copenhagen and Cancun agreements. One brings greater rigor – legal and otherwise. But it encompasses a relatively small and shrinking share of global emissions. The other is strictly voluntary. But it has now mustered explicit mitigation pledges from more than 90 countries – including all of the major economies.
Neither approach, of course, is delivering the effort we need. The new round of talks launched last year in Durban is a chance to see if there might be a mid-way approach that draws on the best of both. Countries said in Durban that by 2015, they’ll negotiate a “legal agreement…applicable to all” covering the period starting in 2020. Beyond those basic terms, the Durban Platform is pretty much a blank slate. Filling it in will require new thinking, and real compromise on issues that have bedeviled these negotiations from the start. Issues like the balance of responsibility across developed and developing countries, and how to capture that in a quote-unquote legal agreement.
What we should aim for, I think, is an agreement that’s flexible – one that encourages broad participation by allowing a diversity of approaches. But at the same time, an agreement more rigorous than a strictly voluntary approach, particularly for those who want to play in the global carbon market.
Whatever emerges in 2015, we cannot count on the UN process to drive the global climate effort. With the right kind of agreement, it can be the place to weave together emerging national efforts, and hopefully encourage a stronger collective effort. But we need to tackle this challenge on multiple fronts. And I believe the real drivers for action come not through multilateral talks, but at home.
So far, I’ve talked about some of the forces shaping the global energy future, and the role of policy in facilitating the low-carbon transition, both at the national level and globally. I want to wrap up by highlighting some key priorities if we are to succeed.
The first priority is increased energy efficiency. This one is a no-brainer. It saves money, it reduces emissions, and it improves our energy security. And this is one area where we don’t need to wait for government. There are huge opportunities here, and smart companies are seizing them. The bottom line: We need to push efficiency whenever and wherever we can.
Next, we must take full advantage of natural gas on the way to a low-carbon economy. But in doing so, we must be proactive in understanding and addressing any health and environmental issues associated with fracking. We must minimize leakage of methane. And we must ensure that increased reliance on natural gas does not come at the expense of the renewable and nuclear sources we also need to get us to a low-carbon economy.
Third, and in my view, most important, we must finally get serious about carbon capture and storage. Under any realistic scenario – even if we become masters at energy efficiency – global energy demand is going to rise. Coal and natural gas might not be inexhaustible, but they are certainly plentiful – increasingly so, in the case of natural gas. Under any realistic scenario, we are going to continue burning coal and natural gas for a long time. The bottom line is this: We cannot avoid climate change unless we put in place the technology needed to capture and sequester these emissions. We must ramp up investment in CCS technologies, and enact strong policies to ensure that they are deployed.
As I said at the beginning of my talk, we face two challenges: providing safe, affordable and reliable energy for all, while at the same time protecting the global climate.
The solution to both is a low-carbon economy. And to make that transition, we need a mix of policies to move us in the right direction.
These policies include carbon pricing, mandates where necessary, and targeted incentives for critical technologies.
And these policies are vital because climate change is real; we are already suffering its costs in the form of extreme weather; and the costs will just keep rising unless we act. We need to help the public understand this, so that their elected leaders can acknowledge and address the challenges before us. We need, in other words, to detoxify the issue of climate change. We all have a role to play here. And I’m hoping I can count on each of you to play yours
Thank you very much.
October 22, 2012
Good afternoon. My name is Eileen Claussen and I'm delighted to be here at Singapore International Energy Week.
Many of you may have known my organization as the Pew Center on Global Climate Change. About a year ago, we became the Center for Climate and Energy Solutions – C2ES. Our focus remains the same: finding practical solutions to address two closely related challenges -- meeting the world’s growing demand for energy while averting the worst potential consequences of climate change.
You don't need me to tell you that the impacts of global warming are already here and now.
The global temperature has been above the 20th century average for 331 months in a row. That means the last time the global temperature was below average was February 1985. That's what they mean by the "new normal."
In my country, the United States, we had the hottest July ever. We've had one of the worst wildfire seasons in history. And two-thirds of the country is still experiencing the worst drought in more than half a century.
Here in Asia, damaging droughts, floods and storms have hurt the production of rice and taken lives.
These are the kinds of weather extremes that will become more frequent and more intense with climate change, unless we act.
We know that we need to change the way we produce energy. We need more low-carbon and zero-carbon energy, such as solar and wind. And we need to use our fossil fuels more wisely, by capturing and storing the carbon they emit.
But we also need to change the way we consume energy. We can no longer afford to waste it. Energy efficiency saves money, it reduces carbon emissions, and it improves our energy security.
How do we do it? Let me draw on a recent success story in the United States – the adoption of new vehicle fuel efficiency standards. These new standards will nearly double the fuel efficiency of the average new car by 2025. This represents the single largest step ever by the U.S. government to reduce carbon emissions.
Three critical factors made it possible: consumer commitment, technological progress, and smart public policy.
First, with gasoline prices going up and up, consumers were definitely on board for greater fuel economy.
Thanks to technological advances, including hybrid-electric drivetrains and high-strength steel, the auto industry certainly is capable of producing more efficient vehicles.
As for public policy, if you combine the government’s desire for more energy security with industry's desire for regulatory certainty, you can get to common ground.
Transportation is not the only sector where we can achieve greater energy efficiency. There are huge opportunities across our economies – in buildings, manufacturing, anywhere we use energy. And in many cases, we don’t need to wait on government to achieve huge gains. The opportunities are there, and smart companies are seizing them.
We undertook a two-year study of corporate energy efficiency to identify the most effective methods to reduce energy consumption and lower greenhouse gas emissions. For our report, From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency, we surveyed nearly 100 companies and conducted some very detailed case studies.
And we identified a number of keys to success. These include designating full-time staff to be accountable for energy performance; communicating about the company’s successes in reducing energy costs and emissions; and – perhaps most importantly – integrating sustainability as a core part of corporate strategic planning.
We also found that the benefits of energy efficiency go beyond dollars saved and emissions reduced. A focus on energy efficiency can drive broader innovation and a re-evaluation of business practices. The results are often improved productivity and quality.
So to conclude: Energy efficiency sits atop the list of low-carbon choices that can help transition us to a clean energy economy. But efficiency alone is hardly enough. As efficient as we become, global energy demand will continue to rise. And we will continue to meet much of that demand by burning fossil fuels.
So if we’re serious about a low-carbon transition, we need to be pushing on other fronts too. One of the most urgent priorities is putting in place the technologies needed to capture and store the carbon emissions generated by burning coal and natural gas. And that’s one area where strong policy, including carbon pricing, will be absolutely critical. But that’s a topic perhaps for another discussion.
C2ES President Eileen Claussen headlines the finall installment of a four-part breakfast series designed to facilitate constructive, informed and robust debate on energy policy.
Claussen, a critical thought leader on energy and climate issues, will share her views on climate change, energy policy and the leadership needed to find solutions for these global challenges.
The previous three breakfasts have featured keynote speakers:
Dr Fatih Birol - Chief Economist of the International Energy Agency;
Mr Zhang Guobao - Chairman of the Advisory Board of China's National Energy Committee and Deputy Chairman of the Economic Committee of the Chinese People's Political Consultative Conference;
To download the slide presentation please click here.
To see the video please click here.
Dr Bryan Hannegan, Vice President, Environment and Renewables for the US-based Electric Power Research Institute;
To download the slide presentation please click here.
For information on the Energy Exchange Series click here.
When climate negotiators meet in Bangkok this week for the latest session of the UN Framework Convention on Climate Change (UNFCCC), they will (hopefully) begin substantive discussions under new terms better reflecting how much the world has changed since the Convention’s adoption in 1992.
Of particular relevance is the dramatic shift in the distribution of global carbon dioxide (CO2) emissions over the past two decades, as highlighted in the Netherlands Environmental Assessment Agency’s 2012 Trends in global CO2 emissions. A telling statistic: In 1990, industrialized countries that negotiated targets under the Kyoto Protocol (including the U.S.) accounted for 68 percent of global CO2 emissions; in 2011, the authors estimate, this share was 41 percent. Developing countries now account for well over half of annual global emissions – with China and India generating a full third.
As Rio+20 negotiators rush to complete a consolidated text of outcomes before heads of state begin arriving tomorrow, participants at hundreds of side events are calling on business and government to take stronger action on clean energy, poverty elimination, food security, oceans, sustainable cities, green technology development, education, and more.
On Sunday at the U.S. Center pavilion, C2ES and the Global Environment Facility (GEF) convened a panel of companies, small-business innovators, and business representatives highlighting the critical roles played by each in promoting low-carbon innovation and sustainable development.
One of the centerpieces of this month’s Rio+20 summit is an important initiative called Sustainable Energy for All (SE4All). C2ES is pleased to be contributing to this initiative as a founding member of a new global partnership aimed at improving energy efficiency and curbing greenhouse gas emissions through the use of information and communication technologies.
Led by UN Secretary General Ban Ki-moon, SE4All recognizes the dual energy challenges facing the global community. We need to rapidly expand access to affordable energy for the 1.3 billion people who now lack even basic services, but do so in an environmentally sustainable manner that doesn’t put their health at risk or threaten the climate stability of our planet.
Opportunities for low-carbon innovation are growing, driven by policy changes, market shifts, and continued growth in energy demand, particularly in developing countries. This Sunday in Rio de Janeiro, ahead of the UN’s “Rio+20” Conference on Sustainable Development, C2ES will have a chance to share what it’s learned about low-carbon innovation with partners from around the world.
With the Global Environment Facility (GEF), we will convene a panel of companies (Johnson Controls, DuPont), small-business innovators (from the Cleantech Open), and government and business representatives (from UNIDO and ABDI) to share stories and lessons from the front lines of clean-tech entrepreneurship. The event, to be held at the U.S. Center pavilion, will examine the keys to successful low-carbon innovation, and the benefits for climate mitigation and adaptation, energy security, resource efficiency, and job creation.