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Sectoral approaches to Sectoral approaches to climate action:climate action:

‘Complementary opportunities ‘Complementary opportunities or dead end?’or dead end?’

Business and Industry Global Dialogue 2008Business and Industry Global Dialogue 2008

23 October 200823 October 2008

Richard Baron – IEARichard Baron – IEA

Disclaimer – The views expressed here are the author’s and may not reflect the views of the individual IEA Member countries.

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OutlineOutline

Sectoral approaches: do we have a choice? An illustration.

A look at countries’ recent submissions to the UNFCCC

Questions for debate

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Complementary or dead end?Complementary or dead end?

Sectoral approaches are likely to be an essential element of future international mitigation efforts

Hence, handle with care

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Sectoral approaches: Sectoral approaches: do we have a choice?do we have a choice?

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0

500

1000

1500

2000

2500

Mill

ion

tons

of C

O2

Power and heat (including autoproduction)

Other energy industries

Manufacturing industries and construction

Transport

Other sectors

Illustration - COIllustration - CO22 emissionsemissions in China in China

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0

100

200

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1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Mill

ion

tons

of C

O2

Power and heat (including autoproduction)

Other energy industries

Manufacturing industries and construction

Transport

Other sectors

Illustration - COIllustration - CO22 emissions in India emissions in India

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Electricity (supply and use) should Electricity (supply and use) should be a priority for actionbe a priority for action

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*

*

*

Source: IEA(2008), Energy Technology Perspectives 2050. IEA(2008), Energy Technology Perspectives 2050.

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Why are we, internationally, Why are we, internationally, looking at sectors?looking at sectors?

Since Kyoto: from ‘simple’ country caps (-and-trade) to the actual complexity of specific mitigation policies Whether market-based or else, useful lessons can be drawn from

Annex I progress on various policy areas See G8 best practice work and concrete recommendations on

energy efficiency

Most developing countries not ready for country-wide goals – political and capability issues (CBDR/RC) In the meantime, GHG accumulate

Some will need sector-specific support Best policy practice and policy design Training (see Asia-Pacific Partnership on efficiency of existing

plants) Targeted financial support Carbon market

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SA under the UNFCCC at presentSA under the UNFCCC at present

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Views on SA from submissionsViews on SA from submissions

China: no to benchmarks, standards, etc. but calls for larger finance incl. via carbon markets. Review of EST on basis of cost, reliability, obstacles

India: no common standards, cooperative R&D, IPR cost, standards on certain products and practices, voluntary energy efficiency programmes (pledge)

S. Africa: Register of actions. Toolbox of support instruments, SD-PAMs No-lose

S. Korea: Registry for NAMA (nationally appropriate mitigation actions): crediting to provide finance

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UNFCCC submissions (ctd.)UNFCCC submissions (ctd.)

EU: two categories. Sectoral technology and policy cooperation / sectoral approaches w. carbon market (incl. differentiated instruments)

Japan: comparability of efforts / binding sectoral intensity targets for developing countries / crediting as support to NAMA / no trade sanctions / supplementarity

Norway: explore crediting /SA further to transfer resources to move towards low-carbon economy

Russia: risk of speculation through carbon market

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SA toolkit on UNFCCC table SA toolkit on UNFCCC table at this stageat this stage

Prioritize global action & discuss comparability of effortsBroaden crediting from CDM (project) to sectoral CDM

Move away from offsets towards actual, global mitigation (no-lose targets)

Sectoral targets under emissions trading (article 17 under the Kyoto Protocol)

SA to organize technology diffusion/transfer etc. (as per Bali Action Plan, 1.b.iv)

Absent: international negotiation over a sector (a.k.a. transnational agreement)

Outside: IAI, worldsteel, CSI, APP …

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Questions for debateQuestions for debate

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Role(s) of the carbon marketRole(s) of the carbon marketOptions abound on how to harness the carbon

market: Sector-wide CDM, sectoral crediting, no-lose, sectoral

caps, intensity-based or not

Offsetting vs. crediting: how to evolve away from CDM?

How do the options bring incentives to countries / domestic agents? CDM project developers/installations have a clear

incentive (CDM project cycle notwithstanding…) Sectoral targets, intensity, non-binding installations

are steps away from carbon market – does this matter?

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Role(s) of the carbon marketRole(s) of the carbon market

Uncertainty on supply (CDM + sectoral + … ) and demand (developed country commitments) – and back Merely a political issue (‘show me the level of your

ambition, I’ll show you mine’) or also about details of instruments, incl. SA? Incentives should matter.

Limited (or lack of) data / eligibility / likely timing of entry of various sectors/countries in the market?

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Other possible considerations on Other possible considerations on SA in UNFCCC negotiationsSA in UNFCCC negotiations

Differentiation of countries or actions What implications for a sectoral approach to mitigation? Differentiate by type? SD-PAMs … Sectoral targets Differentiate by level of international support to NAMA

Support mitigation in developing countries / sectors via carbon market or other means? Economically attractive for ‘donors’ Verification = Intrusiveness Countries to pledge actions: will they go beyond these pledges

with SA?

Competitiveness/leakage issues: ‘elephant in the room’ or can be handled with ad-hoc measures?

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Going forward: Integration in an Going forward: Integration in an agreement by Copenhagen?agreement by Copenhagen?

Numbers on sectors / countries by COP15? Unlikely for most – esp. w/o agreement on precise format of SA,

or differentiation of actions

Areas for decisions by COP15? Principles for SA?

Role of carbon market, other support, eligibility sectors/countries?

A registry structure (format) to record ‘pledges’? Pilot phase data gathering … Deadline for submissions of SA pledges/goals by developing

countries? Process for evaluation of submissions, as they come? Sectoral

expert groups?

Annex I Expert Group

on the UNFCCC

coming sooncoming soon

Options for integrating Options for integrating sectoral approaches sectoral approaches (SA)(SA) into into

the UNFCCCthe UNFCCC

Richard Baron, Ingrid Barnsley (IEA), Jane Ellis (OECD)