Lu Xuedu

Clim ate Change: P olicy and I nstrum ent

Xuedu LU 吕学都 October 18, 2011 Haerbin， PRC

Outline

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UN Climate Change Policies and Instruments

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National Climate Change Policies and Instruments

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Issues and solutions

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ADB efforts on addressing climate change

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Perspectives on Emission Trading in China

UN Climate Change Policies and Instruments

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Policies: UNFCCC, KP, Decisions by COP/CMP Ultimate policy objectives: stabilizing GHG level in atmosphere Instruments: technology research, transfer and deployment, financial support, capacity building, carbon markets (AIJ, CDM, JI and ET)

National Climate Change Policies and Instruments 

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National Climate Change strategies, actions plans, … many. Policy objectives: to help achieve UNFCCC goals, and help achieve sustainable development Instruments: administrative demand/code, subsidy, and market instruments (carbon tax, carbon trade)

Issues and solutions

UN: 

Policy uncertainty and short timeframe

Solution: setting up long term and stable policies 

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Instruments: long and complicated procedure, ambiguous requirements, UN exemption and privilege policies lead to abusing power of UN decision making. Solutions: based on practical experience to reform UN body in charge of operation, like EB,

Issues and solutions Nations: 

Policy uncertainty: in many countries because of ruling party change

Solution: setting up long term and stable policies by law 

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Instruments: low/lack of capacity and capability to implement policies in developing countries. Solutions: capacity building through piloting and testing

ADB Climate Change Strategy Five Priorities for Actions Modalities Finance

Knowledge

Partnership

Priorities

Scaling-up Clean Energy Encouraging Sustainable Transport and Urban Development Managing Land Use and Forests for Carbon Sequestration Promoting Climate-resilient Development Strengthening Policies, Governance and Capacity

Annual Clean Energy Investments

Year

Total Annual Financing to Clean Energy Projects/Components ($ million)

2003

226

2004

306

2005

757

2006

657

2007

668

2008

1,691

2009

1,261

2010-12

Above $1 Billion

2013 onwards

Above $2 Billion

Strengthening Policies, Governance, and Capacity

 PRC: Carbon Capture and Sequestration Strategic Analysis and Capacity Strengthening  BHU: Capacity Building of the National Environment Commission in Climate Change  NEP: Strengthening Capacity for Managing Climate Change and the Environment  Pacific: Strengthening the Capacity of Pacific developing member countries to respond to climate change  SRI: Strengthening Capacity for Climate Change Adaptation

Financing: Concessional Resources  ADB’s Clean Energy Financing Partnership Facility (CEFPF)  Pledges: approx. $103m; target $250m  ADB’s Climate Change Fund (CCF): for innovation/incubation  $40m (depleted) + $10m new replenishment; open for contributions  MDBs’ Climate Investment Funds (ADB as implementing agency)  Pledges: $6.1B  Global Environment Facility (ADB as executing agency)  About $2b for climate change under GEF-5 ($1.4b for mitigation from the GEF Trust Fund and an estimated $600m for adaptation from the LDCF/SCCF).  Asia Accelerated Solar Development Fund (AASDF)  To be launched soon for rapidly enlarging the solar energy market, target $500 million

Carbon Market Program of ADB

1. Asia Pacific Carbon Fund, APCF (151.8MUS$) : contract CDM credits before 2012 . 20M not yet signed. 2. Future Carbon Fund, FCF, (115MUS$), contract CDM project credits after 2012 . About 40M not yet signed. 3. Technical Support Facility, TSF, a technical team to support operation of the two funds and ADB reginal and operational departments for CDM projects and other climate change investment projects.

ADB-Financed CDM Projects (sample) Country

Project Type

Bangladesh

Waste composting

Bhutan

Run-of-river hydropower

China, PR

Geothermal space heating

China, PR

Urban transport system

India

Wind power

India

Waste-to-energy

Indonesia

Geothermal power

Mongolia

Boiler efficiency improvement

Pakistan

Hydropower

Philippines

Energy-saver bulb distribution

Thailand

Biomass power

Uzbekistan

Small hydropower

Glimpse of ADB ongoing efforts 1. Support to and partnership with DMCs to establish domestic trading scheme on GHG emission reductions: PRC, Viet Nam,… 2. Support to DMCs to develop low carbon economy 3. Support technology transfer for addressing climate change

Possibility to build up domestic ETS in China 1. The domestic target of CO2 per GDP to 2015 and 2020 made by Government makes it possible to build up domestic ETS. 2. Based on past experiences, Government may allocate the targets to each of provinces/cities, or to sectors. It seems that it would allocate the target of CO2 per GDP to provinces/cities, to reflect the characters and development levels for easier management.

Necessity to build up domestic ETS 1. Past experiences show that market mechanism is helpful to achieve policy goals at lower cost 2. CDM experiences show that it is possible to build GHG emission reduction unit trade. 3. The lessons from China for achieving goals of energy saving of 2010 by cutting power to stop production show that a market mechanism may help achieve goals but can avoid affecting economy development.

Infrastructure for domestic ETS 1. Law and policies for assigning national targets, mechanisms for achieving targets and clear incentives/consequence for noncompliance 2. Clear modalities and procedures, methodologies and monitoring system for carbon trade. 3. Clear governing agencies and capacity building for carbon trade, including enough qualified professionals.

Perspectives for domestic ETS Optimistic to the future of domestic ETS 1. Chinese Government has set domestic target of GHG intensity per GDP 2. Government expressed the intention to use trading market to fulfill its goal But there are great challenges 1. Very complexity to convert CO2 intensity target into trading unit 2Would entities be active in this business? Would entities wish to achieve its goal by trading?

Issues that need further studies UN climate change policies: issues under negotiation National climate change policies: guide implementation of UN decisions

Climate change technology research, development and demonstration Guidelines, standards, operational modalities and procedure

Some examples: MRV system: data collection, data verification, data processing ETS policies, operational modalities and procedure, operational platform

Technology transfer policies and procedure ……

Thank you for your attention!

Lu Xuedu 吕学都 Phone: (00632) 632-5275 email: [email protected] [email protected]