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Energy & Climate: A contribution to the dialogue on long-term cooperative action
Energy is the fuel for growth, an essential requirement for
economic and social development. By 2050, energy
demand could double or even triple as population rises
and developing countries expand their economies. With the
prospect of such increases in energy demand giving rise to
further increases in greenhouse gas (GHG) emissions, action on
climate change is now a high priority for society.
Government
is seeking approaches to stabilize the concentration of GHGs in
the atmosphere in an equitable and an economically
responsible way. The focus must be on improving energy
efficiency within the global economy and managing emissions
from the energy we use. In broad terms this will require:
- Increased societal awareness and understanding of energy
and carbon emission issues leading to greater demands for
energy efficiency along the energy value chain;
- Better utilization of established low emission energy
technologies now (e.g., wind, hybrid vehicles, heat pumps,
combined heat and power generation, hydro electricity,
nuclear);
- Development and deployment of advanced low-carbon
technologies (e.g., hydrogen for mobility, fuel cells, carbon
capture and storage (CCS), next generation nuclear power)
over the next two decades;
- Marked improvement in energy efficiency in power
generation, mobility, manufacturing, buildings, goods and
services.
The solution must encompass both developed and developing
economies and give business the confidence to invest in low-carbon
energy projects.
For many low- and zero-carbon
technologies to take their firm place in the market, a long-term
value for GHG reductions is needed. In certain cases, such as
CCS, there is no genuine business case without it.
Before business invests, it evaluates the future. It gauges longterm
supply and demand for its products, assesses the
prevailing economic conditions including tax structures and
policy frameworks and decides on an investment strategy.
The investments required for managing GHG emissions
challenge this model.
The absence of clear long-term policy
may mean no future demand for a given product or could
leave a higher cost, early technology project without the
needed incentives.
Business needs to articulate its requirements,
and in response government needs to provide clear signals as
to where we are headed. Under the right conditions, and
given the right tools, technologies can develop and be
deployed quickly – leading ultimately to a fall in emissions.
Key components of the revised framework
The revised framework would learn and build from existing international
agreements and incorporates the new long-term goal. The evolution of
national and sector programs into an international framework is shown in
the adjacent diagram and is illustrated by a forward-looking case study in
the power sector (see box). The framework would consist of the elements
outlined below.
National / industry sector programs
To accommodate national interests and promote inclusiveness, nations can
introduce individual “wedges” or sectors of the economy into the
international framework – e.g., X gigawatts of renewable energy by 2050,
X gigawatts of nuclear by 2050, X mega tonnes of CCS by 2050. This allows
the flexibility to introduce segments by part rather than the whole nation
entering all at once.
Industry sector programs would also be accommodated. A sector program
might be structured around an energy efficiency goal, a ‘best available
technology’ objective or a direct reduction in CO2 emissions. Importantly, a
sector program could cross national borders.
Projects
In the revised framework the project mechanism remains, but the definition
of a project is broadened considerably such that a whole wedge or sector in
one nation or across several nations could become an eligible project.
Projects can be done in any signatory country but normally in sectors not
covered by a specific program that may already be part of the framework.
With projects taking a broader more expansive role, emphasis on streamlined
approval processes with low transaction costs will be needed.
Technology Cooperation
Technology development is a key to success, but so too will be the rapid
transfer of technology between nations as an enabler of the large-scale
deployment required. Global cooperation through an international
framework will be required to achieve this level of technology transfer.
GHG market participation
This allows international trading between parties, sectors and projects,
facilitating the movement of capital to lowest cost abatement opportunities.
Emission allowances could be issued at the international level against specific
national or sector commitments and reduction units continue to be issued for
projects (but both subject to scrutiny). For example, the USA might enter the
scheme once it has a domestic trading program up and running with its own
long-term targets. It would receive an allocation of international allowances
equivalent to the objective of the trading program over the same period.
Many nations with developing economies and rapidly expanding energy
demand (e.g., India, Brazil, China) may enter sectors into the scheme with a
rising emissions profile, but with a policy program in place that delivers a
relative improvement over time against some metric, such as population or
GDP. For any given compliance period (e.g. 5-years), emission projections
would be translated at the beginning into an absolute value for that period
for allocation purposes. For reasons of economic development, the allocation
would increase from period to period, but would represent a relative
improvement in CO2 emissions against the metric.
Industry sector programs would also be candidates for optional inclusion in
the trading framework, either as a single project or as a national sector with
allowance allocation.
Check-back
The attainment of the long-term goal requires significant international
cooperation. A regular process of check-back at the international level will
be required to follow the development of national responses and assess the
likelihood of collective success in achieving the goal. This process should be
referenced to the latest scientific information and include governments,
business and civil society. |
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What is needed?
Energy policy is set at the national level against a backdrop of
prevailing financial, security and environmental signals. A
climate change policy framework must recognize the sovereign
nature of energy policy decisions but, at the same time,
provide clarity and context within which such decisions are
taken. The framework should provide the tools to optimize
GHG emissions management and direct capital towards low
and zero GHG emissions technologies.
Outlined below are some key concepts that would collectively
form the basis of a flexible and diverse framework aimed at
supporting GHG emissions reduction efforts
(specific components of the revised framework are detailed in
the following sections). Elements include:
- Establishing by 2010 a quantifiable, long-term (50-year) goal
for the management of global GHG emissions and actively
disseminating its meaning through all levels of society.
- Encouraging the development and deployment of leadingedge
technologies through partnerships and incentives and
an approach to mitigate long-term market risk and deliver
secure benefits for large-scale, low-carbon, new technology
projects.
- Including ideas and lessons learned from current approaches
and in particular building on existing GHG reduction markets.
- Modifying the existing international framework so that it
builds progressively (bottom up) from local, national, regional
or sector programs that contribute to the quantifiable longterm
international goal and catalyzing the implementation of
such programs.
- Allowing industry sector participation across multiple facilities
or technology platforms at the national level and across
national boundaries, and enhancing GHG project
mechanisms to allow them to cater for sector projects.
- The progressive inclusion of all countries – both developing
and developed.
The points above are directed primarily at energy use and
infrastructure. Further international frameworks will be required
to deal with issues such as deforestation and adaptation to
climate change.
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WBCSD |
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8 Nov 2006 |
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Publications
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Energy & Climate
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WBCSD
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WBCSD Publications
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