Growing in the Greenhouse

Growing฀in฀the฀Greenhouse Protecting฀the฀Climate฀฀ by฀Putting฀Development฀First EDITED฀BY: IN฀COLLABORATION฀WITH: ROB ฀ BRADLEY NAVROZ ฀ K .฀DUBASH KEVIN ฀ A .฀ BAUMERT JOSÉ ฀ ROBERTO ฀ MOREIRA STANFORD ฀ MWAKASONDA WEI - SHIUEN ฀ NG LUIZ ฀ AUGUSTO ฀ HORTA ฀ NOGUEIRA VIRGINIA ฀ PARENTE JONATHAN ฀ PERSHING LEE ฀ SCHIPPER HARALD ฀ WINKLER Hyacinth฀Billings Publications฀Director Edited฀by:฀Rob฀Bradley,฀Kevin฀A.฀Baumert In฀collaboration฀with:฀Navroz฀K.฀Dubash,฀José฀Roberto฀Moreira,฀Stanford฀Mwakasonda,฀ Wei-Shiuen฀Ng,฀Luiz฀Augusto฀Horta฀Nogueira,฀Virginia฀Parente,฀Jonathan฀Pershing,฀฀ Lee฀Schipper,฀Harald฀Winkler Authors Dever฀Designs Cover฀Design฀and฀Layout Each฀World฀Resources฀Institute฀report฀represents฀a฀timely,฀scholarly฀treatment฀of฀a฀subject฀of฀public฀concern.฀฀ WRI฀takes฀responsibility฀for฀choosing฀the฀study฀topics฀and฀guaranteeing฀its฀authors฀and฀researchers฀freedom฀of฀฀ inquiry.฀It฀also฀solicits฀and฀responds฀to฀the฀guidance฀of฀advisory฀panels฀and฀expert฀reviewers.฀Unless฀otherwise฀stated,฀ however,฀all฀the฀interpretation฀and฀findings฀set฀forth฀in฀WRI฀publications฀are฀those฀of฀the฀authors.฀ Copyright฀©฀2005฀World฀Resources฀Institute.฀All฀rights฀reserved. ISBN฀1-56973-601-4 Library฀of฀Congress฀Control฀Number:฀2005937342 Printed฀in฀the฀United฀States฀of฀America฀on฀chlorine-free฀paper฀with฀recycled฀content฀of฀50%,฀฀ 15%฀of฀which฀is฀post-consumer. The฀cover฀images฀are฀photographs฀by฀Barbara฀Pfeffer,฀Mark฀Edwards,฀Ron฀Giling,฀and฀Cornelius฀Paas,฀฀ courtesy฀of฀Peter฀Arnold,฀Inc. II GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Table฀of฀Contents ACKNOWLEDGEMENTS฀ V FOREWORD฀ VI EXECUTIVE฀SUMMARY฀ VII Chapter฀1฀฀INTRODUCTION฀TO฀SD-PAMs฀ Chapter฀1 1.฀Climate฀Meets฀Development฀ 2.฀Development฀Meets฀Climate฀ 3.฀SD-PAMS:฀฀Breaking฀the฀Logjam฀฀ 4.฀Funding฀SD-PAMS฀฀ 5.฀The฀Limitations฀of฀SD-PAMS฀฀ 6.฀This฀Report฀฀ Chapter฀2฀฀SD-PAMs฀AND฀INTERNATIONAL฀CLIMATE฀AGREEMENTS฀฀ Chapter฀2 1.฀Defining฀and฀Formalizing฀SD-PAMs฀ 2.฀Pledging฀SD-PAMs฀ 3.฀Keeping฀Track:฀฀International฀Registry฀ 4.฀Assessing฀Progress:฀Reporting฀and฀Review฀ 5.฀Quantitative฀Approaches:฀฀Accounting฀for฀Emission฀Reductions฀ 6.฀Conclusion฀฀฀ Chapter฀3 Chapter฀3฀฀BIOFUELS฀FOR฀TRANSPORT,฀DEVELOPMENT฀AND฀CLIMATE฀CHANGE:฀฀ ฀ LESSONS฀FROM฀BRAZIL฀ 1.฀Introduction฀ 2.฀Biofuels฀in฀Brazil฀ 3.฀Reasons฀for฀the฀Success฀of฀Biofuels฀in฀Brazil฀ 4.฀The฀Sustainable฀Development฀Benefits฀of฀Biofuels฀ 5.฀The฀Potential฀for฀Expansion฀of฀Biofuels฀Use฀in฀Brazil฀ 6.฀Biofuels฀and฀Climate฀ 7.฀Biofuels฀in฀the฀International฀Context฀฀ 8.฀Conclusion฀ ฀ Chapter฀4 Chapter฀4฀฀CHINA฀MOTORIZATION฀TRENDS:฀POLICY฀OPTIONS฀IN฀A฀WORLD฀฀ ฀ OF฀TRANSPORT฀CHALLENGES฀ 1.฀Introduction฀ 2.฀Transport฀Tends฀and฀Challenges฀in฀China฀ 3.฀China's฀Transport฀Related฀Priorities฀and฀Policies฀ 4.฀Future฀Motorization฀and฀Motor฀Vehicle฀Use฀in฀China:฀฀The฀Scenarios฀ 5.฀Scenario฀Results฀ 6.฀Policy฀Options฀฀ 7.฀Conclusion฀ ฀ 1 2 4 6฀ 10 11 12฀ 15 16 16 18 18 20 22 24 25 26 30 32 38 40 41 44 48 49 50 52 55 57 58 62 C ON TEN TS III Chapter฀5฀฀PATHWAYS฀TO฀RURAL฀ELECTRIFICATION฀IN฀INDIA:฀ARE฀NATIONAL฀฀ Chapter฀5 ฀ GOALS฀ALSO฀AN฀INTERNATIONAL฀OPPORTUNITY?฀ 1.฀Introduction฀ 2.฀Estimating฀Rural฀Demand:฀How฀Much฀Power฀to฀the฀People?฀ 3.฀Meeting฀this฀Demand฀฀ 4.฀Conclusion฀ ฀ IV 68฀ 69 73 76 88 Chapter฀6฀฀CARBON฀CAPTURE฀AND฀STORAGE฀IN฀SOUTH฀AFRICA฀ Chapter฀6 94 1.฀Introduction฀ 2.฀What฀is฀Carbon฀Capture฀and฀Storage฀ 3.฀The฀Potential฀for฀CCS฀in฀South฀Africa฀฀ 4.฀CCS฀and฀Sustainable฀Development฀฀ 5.฀Conclusion฀ ฀ 95 97฀ 99 100 107 Chapter฀7฀฀CONCLUSIONS฀ Chapter฀7 111 GLOSSARY฀AND฀ABBREVIATIONS฀ 115 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Acknowledgements฀ Growing฀in฀the฀Greenhouse฀has฀been฀made฀possible฀first฀and฀foremost฀by฀the฀talented฀authors฀that฀have฀contributed฀ their฀work฀and฀expertise.฀The฀editors฀would฀like฀to฀convey฀their฀deep฀appreciation.฀But฀as฀always฀in฀the฀preparation฀of฀ such฀a฀volume,฀many฀others฀have฀contributed.฀ This฀report฀benefited฀enormously฀from฀peer฀review.฀We฀are฀thankful฀for฀the฀input฀received฀from฀the฀following฀฀ reviewers:฀Jason฀Anderson,฀Isaias฀Macedo,฀S.฀Padmanaban,฀M.฀V.฀Ramana,฀Daniel฀Sperling,฀Frank฀Rosillo฀Calle,฀Hari฀ Sharan,฀Suani฀Teixeira฀Coelho,฀David฀Victor฀and฀Zhi฀Liu.฀The฀many฀helpful฀comments฀and฀suggestions฀we฀received฀฀ substantially฀improved฀the฀manuscript.฀Any฀remaining฀errors฀and฀omissions฀are,฀of฀course,฀the฀responsibility฀of฀the฀editors.฀ Not฀least,฀we฀would฀like฀to฀thank฀those฀at฀WRI฀who฀were฀generous฀with฀their฀time฀and฀input฀as฀this฀report฀progressed.฀ Derik฀Broekhoff,฀Florence฀Daviet,฀David฀Jhirad,฀Liz฀Marshall,฀Smita฀Nakhooda,฀John฀Sohn฀and฀Annie฀Woollam฀฀ provided฀review฀comments฀and฀other฀assistance.฀Britt฀Childs฀worked฀tirelessly฀on฀both฀research฀and฀production฀assistance.฀ For฀production฀and฀organizational฀support,฀we฀thank฀Hyacinth฀Billings,฀Evan฀Branosky,฀and฀Jennie฀Hommel.฀We฀would฀ like฀to฀thank฀Emily฀Weninger฀for฀lending฀us฀a฀hand฀in฀Chapter฀2.฀The฀skillful฀editing฀of฀Bob฀Livernash฀further฀improved฀ the฀final฀product.฀The฀exquisite฀design฀of฀Kim฀Pollock฀and฀her฀colleagues฀at฀Dever฀Designs฀turned฀it฀into฀the฀jewel฀you฀ now฀hold฀in฀your฀hands.฀ Finally,฀without฀financial฀support,฀this฀report฀would฀not฀have฀been฀possible.฀We฀are฀grateful฀for฀the฀support฀of฀the฀฀ Canadian฀International฀Development฀Agency,฀the฀government฀of฀the฀Netherlands,฀and฀the฀government฀of฀Norway.฀฀ Support฀from฀these฀institutions฀was฀integral฀to฀the฀development฀of฀this฀report.฀ The฀Editors฀ A C KN OWLED GEMEN TS V Foreword฀ “The฀trouble฀with฀being฀poor”฀said฀the฀artist฀Willem฀de฀Kooning,฀“is฀that฀it฀takes฀up฀all฀your฀time.”฀Countries฀faced฀ with฀the฀problems฀of฀poverty—people฀without฀electricity,฀without฀transportation,฀without฀livelihoods—have฀little฀scope฀ to฀raise฀their฀eyes฀from฀these฀immediate฀concerns.฀But฀the฀ways฀in฀which฀they฀deal฀with฀these฀challenges฀can฀make฀a฀big฀ difference฀to฀future฀climate฀change.฀ In฀Brazil฀in฀the฀1970s,฀we฀were฀faced฀with฀daunting฀problems.฀Our฀dependence฀on฀imported฀oil฀at฀a฀time฀of฀escalating฀ prices฀was฀sucking฀resources฀out฀of฀the฀country,฀and฀our฀rural฀communities฀were฀battered฀by฀their฀dependence฀on฀volatile฀ commodity฀markets,฀especially฀sugar.฀In฀response฀to฀these฀seemingly฀separate฀problems฀we฀began฀a฀consistent฀push฀to฀ encourage฀and฀support฀the฀use฀of฀ethanol฀as฀a฀transport฀fuel.฀Over฀time฀the฀nature฀of฀this฀support฀both฀changed฀and฀ shrank,฀as฀the฀technology฀and฀systems฀improved.฀But฀the฀clear฀government฀policy฀remained฀to฀keep฀ethanol฀as฀a฀major฀ part฀of฀our฀energy฀mix.฀As฀the฀study฀in฀this฀book฀shows,฀Brazil฀is฀far฀better฀off฀today฀because฀of฀it;฀our฀national฀external฀ debt฀stands฀at฀$100฀billion฀lower฀than฀it฀would฀have฀done฀if฀we฀had฀relied฀exclusively฀on฀oil.฀The฀additional฀revenue฀in฀ our฀rural฀areas฀has฀helped฀support฀agricultural฀communities฀and฀hundreds฀of฀thousands฀of฀jobs.฀And฀the฀world฀is฀also฀ better฀off:฀Brazil’s฀ethanol฀program฀offsets฀some฀26฀million฀tons฀of฀CO2฀every฀year.฀Was฀this฀primarily฀a฀climate฀measure?฀ No.฀But฀the฀climate฀has฀benefited฀from฀Brazil’s฀choices.฀ Developing฀countries฀are฀acutely฀aware฀of฀the฀risks฀of฀climate฀change.฀After฀all,฀our฀people฀are฀the฀ones฀most฀likely฀to฀ bear฀the฀brunt฀of฀its฀impacts.฀The฀poor฀depend฀critically฀on฀agriculture,฀forests,฀fresh฀water฀resources฀and฀coastal฀ecosystems—the฀very฀systems฀most฀at฀risk฀from฀climate฀change.฀When฀disaster฀strikes,฀developing฀country฀governments฀do฀not฀ have฀at฀their฀command฀the฀billions฀of฀dollars฀that฀their฀richer฀counterparts฀can฀bring฀to฀bear฀on฀fixing฀the฀mess. So฀climate฀change฀matters฀to฀us.฀It฀is฀a฀problem฀not฀of฀our฀making:฀the฀greenhouse฀gases฀that฀have฀accumulated฀ in฀the฀atmosphere฀to฀date฀are฀overwhelmingly฀from฀industrialized฀countries,฀and฀the฀average฀citizen฀of฀an฀OECD฀ country฀still฀emits฀six฀times฀more฀CO2฀than฀his฀developing฀country฀counterpart.฀We฀expect฀these฀countries฀to฀make฀ meaningful฀efforts฀to฀reduce฀their฀emissions฀first.฀Still,฀there฀is฀no฀escaping฀the฀fact฀that฀climate฀change฀brings฀a฀new฀ reality.฀If฀we฀want฀to฀avoid฀a฀global฀catastrophe,฀developing฀countries฀will฀have฀to฀find฀development฀paths฀that฀avoid฀ huge฀greenhouse฀gas฀emissions. The฀question฀explored฀in฀this฀book฀is:฀where฀are฀the฀new฀opportunities฀for฀this฀kind฀of฀success?฀The฀studies฀presented฀ here,฀in฀Brazil,฀China,฀India฀and฀South฀Africa฀are฀not฀just฀interesting฀in฀themselves,฀but฀because฀they฀represent฀a฀new฀way฀ of฀engaging฀developing฀countries฀–฀by฀speaking฀directly฀to฀the฀pressing฀concerns฀of฀energy฀poverty,฀lack฀of฀mobility฀and฀ energy฀security฀that฀are฀their฀immediate฀concerns. Nelson฀Mandela฀once฀said:฀“If฀you฀talk฀to฀a฀man฀in฀a฀language฀he฀understands,฀that฀goes฀to฀his฀head.฀If฀you฀talk฀to฀ him฀in฀his฀language,฀that฀goes฀to฀his฀heart.”฀This฀book฀presents฀a฀way฀of฀talking฀to฀developing฀countries฀about฀climate฀ change฀in฀our฀language:฀the฀language฀of฀those฀that฀see฀human฀need฀and฀poverty฀as฀vast฀and฀vital฀challenges฀that฀we฀must฀ overcome.฀A฀language฀that฀does฀not฀merely฀talk฀of฀sustainable฀development฀as฀an฀adjunct฀to฀fighting฀climate฀change,฀but฀ of฀climate฀change฀as฀one฀challenge฀in฀our฀fight฀against฀poverty.฀ This฀book฀then฀is฀a฀start.฀The฀world฀has฀far฀to฀go฀in฀finding฀the฀approach฀that฀will฀deal฀with฀the฀worst฀of฀climate฀ change.฀But฀the฀ideas฀explored฀here฀are฀perhaps฀a฀basis฀for฀a฀more฀constructive฀engagement฀between฀developed฀and฀฀ developing฀countries.฀ Fernando฀Henrique฀Cardoso President฀of฀the฀Federative฀Republic฀of฀Brazil,฀1995–2002 Director฀of฀the฀World฀Resources฀Institute VI GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Executive฀Summary This฀report฀explores฀an฀approach฀to฀climate฀change฀ policy฀called฀Sustainable฀Development฀Policies฀and฀Measures,฀or฀SD-PAMs.฀SD-PAMs฀are฀policies฀and฀measures฀ that฀are฀aimed฀at฀meeting฀the฀domestic฀objectives฀of฀the฀ host฀country,฀but฀that฀also฀bring฀significant฀benefits฀to฀the฀ climate฀through฀reduced฀GHG฀emissions.฀This฀concept฀ offers฀a฀potentially฀less฀divisive฀approach฀to฀engagement฀ between฀developed฀and฀developing฀countries฀in฀tackling฀ dangerous฀climate฀change. International฀climate฀change฀policy฀is฀based฀on฀the฀ United฀Nations฀Framework฀Convention฀on฀Climate฀ Change฀(UNFCCC),฀which฀emphasizes฀both฀the฀need฀to฀ avoid฀dangerous฀climate฀change฀and฀the฀special฀challenges฀ faced฀by฀developing฀countries.฀This฀raises฀a฀potential฀conflict:฀on฀one฀hand,฀meeting฀the฀objective฀of฀the฀UNFCCC฀ of฀preventing฀dangerous฀climate฀change฀is฀impossible฀ without฀limiting฀emissions฀in฀at฀least฀some฀major฀developing฀countries.฀On฀the฀other,฀these฀countries฀face฀vital฀and฀ urgent฀priorities฀that฀inevitably฀trump฀considerations฀related฀to฀greenhouse฀gas฀emissions:฀the฀need฀to฀reduce฀poverty,฀extend฀the฀provision฀of฀modern฀energy฀services,฀meet฀ citizens’฀growing฀demand฀for฀mobility,฀and฀many฀others.฀ How฀can฀these฀two฀vital฀sets฀of฀priorities฀be฀reconciled?฀ While฀the฀concept฀of฀combining฀domestic฀and฀climate฀ priorities฀is฀firmly฀embedded฀in฀the฀UNFCCC฀itself,฀existing฀climate฀agreements฀have฀not฀attempted฀to฀systematically฀foster฀the฀integration฀of฀climate฀change฀and฀development฀ at฀the฀policy฀level.฀This฀report฀is฀an฀attempt฀to฀explore฀ some฀ways฀in฀which฀this฀might฀be฀done,฀as฀well฀as฀provide฀ some฀illustrative฀examples฀of฀the฀types฀of฀policies฀and฀฀ measures฀that฀might฀fall฀under฀the฀SD-PAMs฀rubric฀and฀ some฀of฀the฀advantages฀and฀limitations฀of฀this฀approach. What฀are฀SD-PAMs? SD-PAMs฀are฀defined฀broadly฀in฀this฀report฀as฀policies฀ and฀measures฀taken฀by฀a฀country฀in฀pursuit฀of฀its฀domestic฀ policy฀objectives—energy฀security,฀provision฀of฀electricity,฀ improved฀urban฀transportation,฀for฀example—but฀which฀ are฀shaped฀so฀as฀to฀take฀a฀lower-emission฀path฀to฀those฀ objectives.฀These฀may฀be฀wholly฀domestic฀in฀nature,฀or฀involve฀support฀or฀other฀interaction฀from฀other฀countries฀or฀ international฀institutions.฀By฀describing฀these฀SD-PAMs,฀ this฀report฀seeks฀to฀open฀the฀possibility฀of฀including฀them฀ in฀an฀international฀agreement,฀thus฀engaging฀developing฀ countries฀more฀directly฀in฀climate฀change฀policy฀while฀ promoting฀their฀development. Why฀include฀SD-PAMs฀within฀an฀international฀฀ climate฀agreement? From฀the฀point฀of฀view฀of฀climate฀protection,฀the฀฀ potential฀benefit฀of฀including฀SD-PAMs฀is฀obvious:฀฀ important฀developing฀countries฀that฀are฀not฀yet฀ready฀to฀ take฀specific฀measures฀aimed฀at฀reducing฀emissions฀can฀฀ be฀helped฀to฀place฀their฀development฀on฀a฀significantly฀ lower-carbon฀pathway.฀ From฀the฀point฀of฀view฀of฀developing฀countries฀the฀use฀ of฀SD-PAMs฀brings฀several฀potential฀advantages: 1.฀Recognition.฀Many฀developing฀countries฀have฀ implemented฀policies฀and฀measures฀that฀bring฀significant฀ emission฀reductions,฀which฀if฀implemented฀in฀industrialized฀countries฀would฀be฀labeled฀as฀climate฀policy.฀Yet฀it฀is฀ often฀claimed฀by฀some฀industrialized฀countries฀that฀developing฀countries฀are฀not฀contributing฀anything฀towards฀the฀ fight฀against฀climate฀change.฀SD-PAMs฀offer฀the฀opportunity฀to฀dispel฀that฀impression,฀and฀codify฀contributions฀of฀ different฀countries. 2.฀Learning.฀By฀formally฀sharing฀and฀examining฀each฀ others’฀policies฀and฀measures฀there฀is฀considerable฀scope฀ for฀exchanging฀best฀practice฀and฀other฀information.฀ 3.฀Engagement.฀Rather฀than฀advocating฀a฀new฀set฀of฀ priorities฀for฀developing฀countries,฀SD-PAMs฀engage฀precisely฀on฀the฀issues฀that฀these฀countries฀consider฀most฀pressing.฀This฀allows฀the฀leveraging฀of฀investment฀and฀policy฀ efforts฀made฀in฀these฀core฀development฀areas,฀rather฀than฀ trying฀to฀carve฀out฀a฀separate฀effort฀for฀climate฀protection. 4.฀Promotion.฀The฀potential฀to฀promote฀both฀development฀and฀climate฀goals฀in฀a฀way฀that฀reduces฀their฀ total฀cost฀is฀a฀powerful฀incentive฀to฀both฀host฀and฀donor฀ countries฀to฀support฀appropriate฀SD-PAMs.฀The฀fact฀that฀ these฀SD-PAMs฀are฀not฀exclusively฀“additional”฀emission฀ reduction฀measures฀also฀opens฀up฀a฀wider฀range฀of฀sources฀ for฀support. How฀might฀they฀be฀paid฀for? SD-PAMs฀of฀the฀scale฀needed฀to฀change฀emissions฀ and฀development฀trajectories฀will฀require฀higher฀levels฀ of฀funding฀than฀have฀hitherto฀been฀available฀for฀mitigation฀in฀developing฀countries.฀Existing฀mechanisms฀based฀ on฀explicit฀“climate”฀funding฀are฀assessed฀and฀found฀ inadequate฀(Chapter฀1).฀Accordingly,฀the฀real฀challenge฀ EXEC U TIVE฀ SU MMA RY VII is฀to฀instill฀climate฀benefits฀and฀risks฀into฀the฀broader฀ set฀of฀international฀capital฀flows,฀only฀some฀of฀which฀are฀ climate-specific.฀ Along฀these฀lines,฀it฀is฀suggested฀that฀SD-PAM฀funding฀฀ should฀be฀able฀to฀come฀from฀any฀source:฀bilateral฀aid฀ agencies,฀the฀Global฀Environment฀Facility,฀multilateral฀ development฀banks,฀export฀credit฀agencies,฀the฀private฀฀ sector,฀the฀host฀government฀(federal฀and฀perhaps฀state/฀ local),฀state฀and฀local฀communities,฀or฀others.฀The฀฀ aspiration฀of฀the฀SD-PAMs฀approach฀is฀that฀by฀targeting฀actions฀of฀clear฀mutual฀benefit,฀larger฀financial฀flows฀ will฀be฀freed฀up฀than฀would฀otherwise฀have฀been฀the฀ case.฀This฀remains฀a฀complex฀issue฀however,฀and฀one฀that฀ requires฀further฀exploration. How฀might฀SD-PAMs฀be฀incorporated฀in฀an฀agreement? The฀report฀presents฀a฀pledge-based฀approach฀to฀implementing฀SD-PAMs.฀These฀pledges฀are฀voluntary,฀and฀may฀ take฀several฀forms,฀as฀outlined฀in฀Chapter฀2: 1.฀First,฀a฀single฀country฀might฀pledge฀one฀or฀more฀SDPAM฀that฀is฀unique฀to฀its฀national฀circumstances฀and฀not฀ directly฀related฀to฀the฀pledges฀of฀other฀countries. 2.฀Two฀or฀more฀countries฀may฀make฀mutual฀pledges,฀ perhaps฀consisting฀of฀simultaneous฀pledges฀by฀both฀a฀ developing฀and฀developed฀country.฀This฀might฀involve฀ a฀developed฀country฀pledging฀support฀for฀a฀developing฀ country’s฀activities.฀This฀has฀the฀additional฀attraction฀of฀ engaging฀donor฀countries฀on฀SD-PAMs฀in฀which฀they฀ have฀a฀mutual฀interest,฀such฀as฀for฀the฀development฀of฀a฀ particular฀technology฀or฀sector.฀ 3.฀A฀group฀of฀countries฀could฀make฀harmonized฀pledges฀ in฀an฀SD-PAMs฀negotiation฀process.฀This฀approach฀acknowledges฀the฀global฀nature฀of฀many฀industrial฀activities,฀ and฀opens฀the฀door฀to฀multiple฀countries฀agreeing฀to฀the฀ same฀kind฀of฀measures฀to฀promote฀or฀maintain฀an฀“even฀ playing฀field”฀for฀competitive฀industries. Accounting฀for฀SD-PAMs Methods฀for฀defining฀SD-PAMs,฀establishing฀a฀registry,฀ reporting฀and฀reviewing฀are฀examined฀in฀Chapter฀2.฀ Consideration฀is฀also฀given฀to฀whether฀and฀how฀emission฀reductions฀from฀SD-PAMs฀might฀be฀“credited.”฀The฀ premise฀of฀SD-PAMs,฀however,฀is฀distinct฀from฀project฀ mechanisms฀such฀as฀the฀Clean฀Development฀Mechanism฀ (CDM)฀in฀that฀an฀SD-PAM฀will฀not฀need฀to฀demonstrate฀ that฀it฀was฀undertaken฀for฀climate฀protection฀reasons.฀This฀ is฀a฀major฀advantage฀of฀the฀approach,฀but฀also฀means฀that฀ it฀is฀unlikely฀to฀practicable฀to฀allocate฀credits฀for฀emission฀ reductions฀achieved฀in฀the฀manner฀of฀a฀CDM฀approach. VIII Being฀able฀to฀reasonably฀assess,฀in฀quantitative฀terms,฀ the฀contributions฀different฀countries฀make฀to฀the฀collective฀ global฀effort฀to฀protect฀the฀climate฀would฀provide฀useful฀input฀and฀information฀to฀negotiations฀that฀will฀likely฀ stretch฀over฀multiple฀decades.฀However,฀it฀is฀important฀to฀ note฀that฀an฀SD-PAM฀is฀a฀commitment฀to฀implement฀a฀ policy฀or฀measure,฀not฀on฀a฀specific฀outcome฀expressed฀in฀ terms฀of฀emissions.฀Additional฀work฀is฀needed฀at฀the฀sector฀ and฀policy฀levels฀to฀develop฀reasonably฀simple฀and฀transparent฀methodologies฀to฀quantitatively฀capture฀the฀GHG฀ benefits฀of฀SD-PAMs. Country฀studies This฀report฀presents฀four฀country฀studies฀that฀examine฀ the฀types฀of฀policies฀and฀measures฀that฀might฀be฀framed฀as฀ SD-PAMs฀(Chapters฀3-6).฀The฀authors฀of฀these฀studies฀are฀ in-country฀experts,฀but฀the฀aim฀of฀presenting฀them฀here฀is฀ both฀to฀investigate฀the฀potential฀SD-PAMs฀themselves฀and฀ to฀draw฀some฀more฀general฀conclusions฀about฀the฀SDPAMs฀model.฀The฀order฀in฀which฀they฀are฀presented฀is฀in฀ some฀sense฀a฀descending฀scale฀of฀how฀compelling฀the฀cases฀ are฀for฀an฀SD-PAMs฀approach.฀Seen฀another฀way,฀they฀are฀ an฀indication฀of฀how฀much฀outside฀assistance฀would฀likely฀ be฀needed฀to฀make฀them฀work.฀By฀a฀happy฀coincidence,฀ the฀order฀is฀also฀alphabetical. Biofuels฀for฀transport฀in฀Brazil฀ Brazil’s฀biofuels฀program,฀discussed฀in฀Chapter฀3,฀is฀the฀ only฀policy฀set฀described฀here฀which฀is฀already฀implemented฀ on฀a฀large฀scale฀and฀over฀a฀long฀time฀period.฀Brazil฀has฀used฀ a฀range฀of฀measures฀to฀support฀the฀use฀of฀ethanol฀from฀sugarcane฀as฀a฀transport฀fuel฀since฀the฀1970s,฀when฀this฀model฀ emerged฀as฀a฀means฀of฀responding฀to฀the฀oil฀crisis.฀Although฀ the฀system฀was฀initially฀based฀on฀large฀subsidies,฀these฀have฀ declined฀towards฀zero,฀and฀ethanol฀is฀now฀competitive฀with฀ gasoline.฀The฀authors฀find฀that฀the฀effects฀have฀been฀huge:฀ although฀the฀extent฀of฀ethanol฀use฀has฀varied฀over฀time,฀ it฀now฀accounts฀for฀approximately฀one฀third฀of฀Brazil’s฀ transport฀fuel.฀The฀savings฀in฀oil฀imports฀and฀associated฀ debt฀servicing฀have฀saved฀the฀country฀around฀$100฀billion฀ in฀hard฀currency.฀Brazil’s฀external฀debt฀would฀be฀50฀percent฀ higher฀today฀were฀it฀not฀for฀ethanol.฀Over฀a฀million฀jobs฀in฀ rural฀Brazil฀depend฀on฀ethanol฀and฀sugar฀production,฀and฀ the฀industry฀has฀been฀protected฀from฀exclusive฀dependence฀ on฀the฀volatile฀world฀price฀for฀sugar.฀Air฀quality฀has฀generally฀improved,฀and฀biofuel฀manufacture฀produces฀around฀ 1,350฀gigawatt฀hours฀per฀year฀of฀electricity฀for฀export฀to฀ the฀grid,฀a฀figure฀that฀is฀rising฀fast฀as฀technology฀improves.฀ These฀benefits฀are฀reason฀enough฀for฀Brazil฀to฀continue฀and฀ expand฀ethanol฀use,฀but฀the฀incidental฀impact฀on฀GHG฀ emissions฀has฀been฀significant:฀an฀estimated฀saving฀of฀574฀ million฀tons฀of฀CO2฀since฀1975,฀or฀roughly฀ten฀percent฀of฀ Brazil’s฀CO2฀emissions฀over฀that฀period. GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST The฀nature฀of฀Brazil’s฀support฀for฀biofuels฀has฀changed฀ over฀time,฀and฀is฀thus฀perhaps฀best฀viewed฀as฀a฀series฀of฀ SD-PAMs,฀with฀costs฀declining฀over฀time฀to฀a฀situation฀ requiring฀small฀or฀no฀subsidies฀today.฀The฀net฀effect฀has฀ been฀considerable฀benefits฀to฀the฀country,฀and฀the฀authors฀ consider฀that฀some฀20฀other฀countries฀might฀also฀find฀ the฀Brazilian฀model฀attractive.฀The฀model฀depends฀on฀ sugarcane,฀which฀at฀present฀offers฀much฀better฀energy฀ yields฀than฀other฀crops,฀and฀a฀tropical฀climate฀to฀grow฀it฀ effectively.฀But฀improved฀production฀technology,฀together฀ with฀new฀flexfuel฀cars฀that฀can฀run฀on฀either฀gasoline฀or฀ ethanol,฀will฀make฀implementation฀easier.฀In฀countries฀ with฀more฀temperate฀climates,฀a฀technology฀breakthrough฀ is฀still฀needed฀to฀make฀cellulosic฀ethanol฀more฀viable. As฀one฀might฀surmise฀from฀the฀fact฀that฀it฀has฀survived฀ for฀more฀than฀three฀decades,฀Brazil’s฀biofuels฀program฀has฀ flourished฀independent฀of฀explicit฀climate฀change฀concerns.฀It฀represents฀one฀end฀of฀a฀spectrum฀of฀SD-PAMs.฀A฀ number฀of฀countries฀might฀be฀helped฀to฀implement฀such฀a฀ program฀with฀little฀more฀incentive฀than฀exchange฀of฀information฀and฀easier฀access฀to฀relevant฀technologies,฀although฀ depending฀on฀national฀circumstances฀more฀direct฀financial฀ support฀might฀be฀warranted.฀The฀reduction฀in฀GHG฀emissions฀from฀this฀development฀would฀be฀very฀significant,฀but฀ would฀not฀need฀to฀be฀treated฀as฀a฀mitigation฀cost. Transport฀efficiency฀in฀China China’s฀growing฀transport฀sector,฀which฀is฀the฀subject฀of฀ Chapter฀4,฀presents฀a฀more฀complex฀case.฀In฀urban฀areas฀in฀ particular,฀the฀growth฀in฀car฀ownership฀and฀use฀is฀spectacular,฀and฀the฀gap฀between฀China฀and฀developed฀economies฀ suggests฀that฀this฀growth฀will฀continue฀for฀some฀time.฀The฀ welfare฀benefits฀of฀the฀increased฀mobility฀that฀this฀implies฀ are฀very฀large,฀but฀they฀also฀give฀rise฀to฀rapidly฀increasing฀ GHG฀emissions.฀ The฀authors฀see฀potential฀constraints฀on฀these฀mobility฀ gains฀emerging฀from฀two฀factors:฀ ■ ฀฀China’s฀rapidly-growing฀oil฀demand,฀which฀is฀making฀the฀price฀and฀provenance฀of฀its฀imported฀oil฀an฀ increasing฀concern,฀and ■ ฀฀The฀rapid฀growth฀in฀car฀use,฀which฀is฀leading฀to฀ gridlock฀in฀cities฀that฀were฀not฀designed,฀and฀cannot฀ be฀easily฀adapted,฀for฀such฀traffic.฀ They฀present฀three฀scenarios฀for฀China’s฀urban฀transport฀through฀2020.฀“The฀Road฀Ahead”฀describes฀a฀business-as-usual฀scenario;฀“Oil฀Saved”฀applies฀measures฀taken฀ expressly฀to฀curtail฀oil฀demand฀growth;฀and฀“Integrated฀ Transport”฀includes฀measures฀to฀reduce฀the฀burden฀on฀ China’s฀urban฀infrastructure. These฀scenarios฀give฀an฀indication฀of฀the฀scope฀for฀policy฀to฀work.฀Oil฀Saved฀results฀in฀a฀55฀percent฀reduction฀in฀ transport฀energy฀use฀by฀2020฀relative฀to฀The฀Road฀Ahead,฀ while฀Integrated฀Transport฀leads฀to฀a฀78฀percent฀reduction.฀ These฀reductions฀come฀through฀three฀improvements:฀more฀ efficient฀engine฀types฀(hybrids,฀compressed฀natural฀gas);฀ smaller฀vehicles฀to฀adapt฀to฀constrained฀road฀and฀parking฀ space;฀and฀lower฀vehicle-miles-traveled฀as฀people฀use฀public฀transportation฀alternatives.฀The฀authors฀are฀at฀pains฀to฀ point฀out฀that฀these฀measures฀are฀likely฀to฀improve,฀rather฀ than฀constrain,฀mobility฀for฀urban฀Chinese.฀ The฀challenges฀described฀in฀this฀chapter฀lend฀themselves฀to฀an฀SD-PAMs฀approach฀in฀several฀ways: ■ ฀฀China฀has฀already฀recognized฀these฀problems฀and฀is฀ starting฀to฀implement฀policies฀to฀address฀them,฀such฀ as฀improved฀vehicle฀efficiency฀standards. ■ ฀฀The฀scope฀for฀extending฀and฀accelerating฀such฀policies฀ and฀measures฀appears฀to฀be฀significant,฀and฀the฀benefits฀are฀major฀both฀for฀Chinese฀policy฀interests฀and฀ for฀reduced฀CO2฀emissions. ■ ฀฀The฀sectors฀involved,฀especially฀the฀automobile฀sector,฀ are฀global฀in฀scope฀and฀work฀in฀global฀markets.฀Concerted฀international฀action฀may฀prove฀more฀effective฀ than฀countries฀acting฀individually. Rural฀electrification฀in฀India Rural฀electrification฀is฀a฀pivotal฀development฀issue฀in฀ many฀parts฀of฀the฀world.฀Electricity฀provides฀a฀wide฀range฀ of฀development฀advantages,฀promoting฀better฀education,฀ better฀health,฀and฀more฀economic฀activity.฀The฀Indian฀government฀has฀set฀ambitious฀targets฀for฀providing฀full฀electrification,฀but฀it฀is฀far฀from฀clear฀that฀these฀goals฀can฀be฀met.฀ Experience฀in฀India฀to฀date฀suggests฀that฀electrification฀ goals฀will฀prove฀extremely฀challenging.฀Despite฀repeated฀ efforts,฀56฀percent฀of฀Indian฀households฀have฀no฀electricity฀ supply,฀and฀the฀problem฀is฀growing฀worse฀as฀new฀connections฀fail฀to฀keep฀pace฀with฀population฀growth.฀ For฀the฀purposes฀of฀this฀study,฀the฀authors฀start฀from฀ the฀premise฀that฀these฀goals฀will฀need฀to฀be฀met฀somehow,฀ and฀consider฀three฀scenarios฀under฀which฀this฀is฀done:฀an฀ extension฀of฀the฀grid฀using฀India’s฀existing฀generation฀mix;฀ a฀scenario฀dominated฀by฀off-grid฀diesel฀generators;฀and฀ one฀dominated฀by฀off-grid฀renewable฀energy฀generation.฀ They฀also฀consider฀three฀levels฀of฀demand฀in฀rural฀communities,฀including฀households,฀communal฀services,฀and฀ (for฀the฀high฀level฀scenario)฀productive฀uses฀of฀power.฀ They฀evaluate฀these฀approaches฀according฀to฀a฀set฀of฀nonclimate฀criteria: ■ ฀฀speed฀in฀meeting฀the฀electrification฀targets ■ ฀฀quality฀and฀reliability฀of฀the฀power ■ ฀฀cost ■ ฀฀security฀of฀fuel฀supply EXEC U TIVE฀ SU MMA RY IX They฀find฀reason฀to฀doubt฀whether฀grid-based฀electrification฀can฀meet฀the฀ambitious฀timetable฀of฀the฀government’s฀targets,฀given฀fundamental฀structural฀problems฀ with฀India’s฀electricity฀market.฀Diesel฀generation฀is฀perhaps฀ more฀promising,฀with฀perhaps฀the฀best฀potential฀for฀quickly฀delivering฀electrification฀off-grid,฀and฀in฀many฀ways฀it฀ can฀be฀expected฀to฀play฀an฀important฀role.฀However,฀the฀ authors฀point฀out฀that฀high฀levels฀of฀diesel฀use฀do฀present฀ a฀significant฀import฀dependence฀and฀fuel฀security฀problem฀ for฀India.฀Depending฀on฀the฀demand฀scenario฀used,฀the฀ increase฀in฀oil฀imports฀is฀between฀6฀percent฀and฀41฀percent฀ of฀today’s฀levels.฀The฀authors฀argue฀that฀this฀economic฀ impact,฀together฀with฀the฀strategic฀issues฀associated฀with฀ growing฀oil฀imports,฀raise฀doubts฀as฀to฀the฀desirability฀of฀ seeing฀a฀large฀use฀of฀diesel฀in฀electrification. Favoring฀renewable฀energy฀sources฀brings฀significant฀ CO2฀emission฀savings:฀14฀to฀102฀million฀tons฀of฀CO2฀per฀ year฀compared฀to฀using฀the฀grid.฀The฀authors฀argue฀that฀ this฀in฀itself฀should฀not฀decisively฀influence฀India’s฀choice฀ of฀technology;฀they฀conclude฀however฀that฀based฀on฀the฀ concerns฀raised฀about฀the฀grid฀and฀diesel฀technologies,฀ there฀are฀significant฀reasons฀for฀India฀to฀prefer฀renewable฀ energy฀on฀domestic฀policy฀grounds,฀provided฀that฀the฀ institutional฀delivery฀mechanisms฀can฀be฀put฀in฀place.฀ They฀acknowledge฀that฀the฀cost฀of฀renewable฀energy฀technologies฀tends฀to฀be฀high฀in฀India฀due฀to฀the฀high฀cost฀of฀ capital,฀but฀suggest฀that฀making฀India’s฀electrification฀goals฀ part฀of฀an฀international฀climate฀effort฀might฀offer฀scope฀for฀ addressing฀this฀obstacle. India’s฀rural฀electrification฀therefore฀seems฀to฀offer฀an฀ opportunity฀for฀an฀SD-PAMs฀approach฀that฀is฀challenging฀ in฀its฀scope฀but฀equally฀large฀in฀its฀potential฀development฀ and฀climate฀benefits. Carbon฀capture฀and฀storage฀in฀South฀Africa South฀Africa฀typifies฀an฀important฀challenge฀for฀several฀ major฀developing฀countries.฀A฀significant฀part฀of฀its฀population฀lacks฀access฀to฀electricity,฀and฀providing฀that฀access฀ is฀an฀urgent฀political฀priority.฀However,฀the฀country’s฀ fuel฀mix฀is฀dominated฀by฀coal,฀and฀the฀large฀domestic฀ coal฀resource฀suggests฀that฀expanding฀generation฀means฀ a฀major฀increase฀in฀CO2฀emissions.฀Carbon฀capture฀and฀ storage฀(CCS)฀technology,฀which฀involves฀the฀capture฀of฀ CO2฀emissions฀from฀power฀plants฀or฀industrial฀processes฀ and฀its฀permanent฀disposal฀in฀geological฀formations,฀offers฀ X the฀technical฀potential฀to฀address฀this฀problem.฀Can฀the฀ implementation฀of฀this฀technology฀work฀as฀an฀SD-PAM?฀ The฀authors฀examine฀the฀technical฀potential฀in฀South฀Africa฀for฀both฀the฀capture฀from฀particular฀facilities฀and฀the฀ availability฀of฀disposal฀sites.฀They฀also฀address฀issues฀such฀ as฀the฀technical฀and฀institutional฀capacity฀in฀South฀Africa฀ to฀makes฀CCS฀work.฀ They฀conclude฀that฀CCS฀has฀significant฀potential฀for฀ cutting฀emissions฀in฀South฀Africa.฀Some฀of฀this฀is฀at฀relatively฀low฀cost—some฀30฀million฀tons฀CO2฀per฀year฀may฀ be฀available฀for฀capture฀and฀storage฀at฀an฀estimated฀$20฀ per฀ton—but฀most฀will฀be฀much฀more฀expensive฀than฀this.฀ More฀importantly,฀they฀find฀few฀sustainable฀development฀ benefits฀for฀South฀Africa฀beyond฀the฀mitigation฀of฀GHGs.฀ One฀possible฀exception฀is฀in฀the฀potential฀for฀transfer฀ of฀technologies฀that฀are฀more฀generally฀useful฀in฀South฀ Africa,฀such฀as฀CO2฀gas฀transmission฀which฀may฀also฀be฀ useful฀for฀piping฀natural฀gas.฀But฀this฀alone฀is฀far฀from฀ making฀the฀case฀for฀South฀Africa฀to฀implement฀CCS฀in฀the฀ absence฀of฀a฀formal฀emission฀constraint,฀which฀is฀unlikely฀ in฀the฀foreseeable฀future. This฀case฀illustrates฀one฀of฀the฀limitations฀of฀the฀SDPAMs฀approach.฀CCS฀brings฀few฀sustainable฀development฀ benefits,฀and฀none฀that฀come฀close฀to฀making฀it฀viable฀in฀ the฀absence฀of฀explicit฀mitigation฀commitments.฀These฀ mitigation฀commitments฀would฀not฀need฀to฀be฀on฀the฀part฀ of฀South฀Africa:฀it฀would฀be฀possible฀for฀donor฀countries฀ to฀finance฀the฀future฀capture฀and฀storage฀of฀South฀African฀ emissions.฀But฀the฀amounts฀of฀money฀involved฀would฀ be฀a฀step-change฀in฀the฀willingness฀of฀the฀international฀ community฀to฀pay฀for฀GHG฀mitigation,฀which฀thus฀far฀ has฀been฀low.฀The฀authors฀make฀a฀valuable฀contribution฀ to฀the฀study฀of฀CCS฀in฀South฀Africa,฀but฀it฀does฀not฀seem฀ that฀the฀SD-PAMs฀model฀will฀serve฀well,฀absent฀significant฀ international฀support. Conclusions The฀use฀of฀SD-PAMs฀opens฀up฀a฀way฀of฀putting฀into฀ more฀formal฀effect฀the฀provisions฀of฀the฀UNFCCC฀and฀offers฀hope฀of฀a฀more฀constructive฀dialogue฀around฀developing฀country฀emissions฀and฀the฀importance฀of฀development.฀ While฀the฀concept฀is฀not฀new,฀this฀report฀aims฀to฀lay฀the฀ idea฀out฀systematically฀and฀to฀explore฀some฀of฀its฀implications฀and฀potential฀applications. The฀country฀studies฀presented฀in฀this฀report฀show฀a฀ range฀of฀opportunities฀for฀SD-PAMs.฀In฀the฀case฀of฀Brazil’s฀ biofuels฀program,฀the฀potential฀is฀not฀so฀much฀to฀expand฀ ethanol฀use฀in฀Brazil฀itself฀as฀to฀find฀ways฀to฀expand฀the฀ approach฀to฀other฀countries.฀In฀China,฀more฀efficient฀ vehicles฀and฀integrated฀transport฀solutions฀are฀already฀a฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST target฀of฀government฀policy,฀but฀an฀SD-PAMs฀approach฀ has฀potential฀to฀help฀the฀uptake฀of฀these฀be฀faster฀and฀ deeper.฀India฀has฀already฀made฀rural฀electrification฀a฀policy฀ priority,฀but฀has฀seen฀renewable฀energy฀as฀a฀relatively฀minor฀component฀within฀that฀policy;฀SD-PAMs฀can฀be฀used฀ to฀set฀the฀conditions฀for฀a฀shift฀towards฀making฀renewables฀ the฀core฀of฀a฀rural฀electrification฀strategy. The฀chief฀advantage฀of฀SD-PAMs฀is฀that฀they฀align฀the฀ interests฀of฀climate฀protection฀with฀those฀of฀policy฀goals฀ that฀have฀a฀higher฀priority฀for฀developing฀country฀policy฀ makers.฀The฀emphasis฀must฀be฀on฀how฀to฀improve฀the฀ delivery฀of฀development฀goals฀at฀the฀same฀time฀as฀reducing฀emissions.฀This฀leveraging฀of฀existing฀policy฀priorities฀means฀both฀that฀the฀appropriate฀level฀of฀domestic฀ incentive฀will฀exist฀to฀implement฀the฀necessary฀laws฀and฀ policies,฀and฀that฀larger฀financial฀flows฀can฀be฀influenced,฀ rather฀than฀depending฀on฀more฀limited฀funds฀dedicated฀to฀ climate฀policy.฀The฀overwhelming฀importance฀of฀domestic฀ and฀private฀capital฀in฀energy฀investment฀in฀major฀developing฀countries฀means฀that฀leveraging฀existing฀financial฀flows฀ is฀far฀more฀significant฀than฀creating฀new฀funds฀specifically฀ aimed฀at฀climate฀protection. The฀process฀of฀establishing฀SD-PAMs฀promises฀to฀ be฀more฀varied฀than฀many฀existing฀proposals฀for฀future฀ climate฀policy.฀In฀some฀cases฀the฀approach฀may฀be฀a฀simple฀ pledge฀and฀review;฀in฀others฀an฀agreement฀of฀comparable฀ commitments฀in฀specific฀sectors;฀in฀yet฀others฀negotiation฀ of฀mutual฀commitments฀between฀countries.฀This฀may฀ seem฀messy,฀but฀in฀fact฀most฀international฀agreements฀ with฀aims฀of฀a฀similar฀level฀of฀ambition฀to฀those฀of฀climate฀ policy฀have฀proceeded฀a฀similar฀fashion.฀ More฀work฀needs฀to฀be฀done.฀Analysis฀is฀needed฀of฀sectors฀such฀as฀water,฀agriculture,฀forestry฀and฀non-electricity฀ energy฀efficiency.฀The฀interaction฀between฀SD-PAMs฀and฀ market฀mechanisms฀such฀as฀the฀CDM,฀how฀SD-PAMs฀ might฀be฀financed,฀and฀how฀mutual฀commitments฀could฀ work,฀are฀all฀important฀areas฀of฀further฀enquiry, The฀world฀needs฀a฀climate฀agreement฀beyond฀2012฀ that฀will฀meet฀the฀needs฀of฀all฀the฀world’s฀countries,฀rich฀ and฀poor;฀it฀also฀needs฀to฀accelerate฀the฀rise฀of฀its฀poorest฀ inhabitants฀out฀of฀poverty.฀SD-PAMs฀offers฀some฀hope฀ that฀these฀two฀crucial฀aims฀can฀be฀met. EXEC U TIVE฀ SU MMA RY XI XII GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST chapter฀i Introduction฀to฀฀ Introduction฀to฀฀ Sustainable฀Development฀฀฀ Sustainable฀Development฀ Policies฀and฀Measures Rob฀Bradley฀ ■ ฀Jonathan฀Pershing If฀you฀fill฀your฀car฀with฀petrol฀in฀Brazil,฀you’re฀not฀getting฀฀ quite฀what฀you฀may฀think.฀Even฀basic฀petrol฀is฀a฀quarter฀ ethanol,฀which฀is฀produced฀from฀fermentation฀of฀sugar฀from฀฀ Brazil’s฀vast฀sugarcane฀crop.฀Indeed,฀if฀you฀have฀a฀“flexfuel”฀ car,฀as฀do฀a฀significant฀proportion฀of฀Brazilians,฀you฀need฀ not฀use฀petrol฀at฀all.฀Such฀cars฀can฀run฀on฀pure฀ethanol. Ethanol฀was฀used฀as฀a฀supplement฀to฀petrol฀in฀Brazil฀for฀ much฀of฀the฀20th฀century,฀but฀starting฀in฀the฀1970s฀it฀was฀ actively฀promoted฀by฀the฀government.฀Then,฀Brazil—like฀ most฀countries—faced฀a฀fast-rising฀oil฀price฀and฀insecurity฀ over฀the฀future฀stability฀of฀the฀countries฀that฀sit฀atop฀the฀ world’s฀major฀reserves.฀It฀also฀had฀a฀large฀and฀economically฀ important฀sugar฀sector,฀which฀was฀struggling฀in฀the฀face฀฀ of฀low฀world฀sugar฀prices฀and฀eager฀for฀another฀source฀฀ of฀income.฀Promoting฀ethanol฀as฀a฀transport฀fuel฀helped฀ address฀both฀of฀these฀seemingly฀unrelated฀problems.฀ Climate฀change฀played฀no฀part฀in฀Brazil’s฀decision฀to฀ embrace฀biofuels.฀At฀the฀time,฀climate฀change฀was฀not฀ even฀recognized฀as฀a฀problem.฀But฀the฀climate฀has฀certainly฀ benefited.฀The฀Brazilian฀government฀calculates฀that฀฀ between฀1975฀and฀2000฀this฀program฀avoided฀emissions฀ of฀403฀million฀tons฀(Mt)฀of฀carbon฀dioxide฀(CO2)฀equivalent.1฀Today,฀it฀still฀offsets฀some฀26฀MtCO2฀equivalent฀ each฀year—more฀than฀would฀be฀saved฀each฀year฀by฀taking฀ all฀of฀Sweden’s฀cars฀permanently฀off฀the฀road.฀Wider฀use฀ of฀this฀strategy,฀in฀both฀developed฀and฀developing฀countries,฀would฀be฀a฀major฀contribution฀to฀fighting฀dangerous฀climate฀change.฀If฀it฀were฀implemented฀in฀a฀developed฀ country฀today,฀it฀would฀almost฀certainly฀be฀described฀as฀ a฀climate฀protection฀measure.฀Yet฀at฀present฀international฀ climate฀policy฀offers฀no฀way฀of฀recognizing฀and฀supporting฀such฀measures. This฀report฀explores฀an฀approach฀to฀reconciling฀ development฀and฀climate฀priorities,฀termed฀sustainable฀ development฀policies฀and฀measures฀(SD-PAMs).฀This฀ approach฀was฀first฀put฀forward฀in฀this฀form฀by฀Winkler฀ et฀al.฀(2002)฀and฀describes฀policies฀and฀measures฀that฀ are฀firmly฀within฀the฀national฀sustainable฀development฀ IN TR OD U C TION ฀ TO฀ SU STA IN A B LE฀ D EVELOPMEN T฀ POLIC IES฀ A ND ฀ MEA SU R ES 1 priorities฀of฀the฀host฀country,฀but฀through฀inclusion฀in฀ an฀international฀climate฀framework฀seeks฀to฀recognize,฀ promote฀and฀support฀means฀of฀meeting฀these฀policy฀ priorities฀on฀a฀lower-carbon฀trajectory.฀The฀SD-PAMs฀ approach฀has฀been฀the฀subject฀of฀some฀discussion฀within฀ the฀climate฀change฀literature2฀and฀has฀been฀presented฀as฀ a฀component฀of฀a฀climate฀regime฀by฀the฀Climate฀Action฀ Network฀(2003),฀among฀others.฀It฀has฀thus฀entered฀the฀ climate฀policy฀vocabulary.฀However,฀a฀great฀deal฀of฀work฀ remains฀to฀be฀done฀to฀explore฀the฀operational฀implications฀ of฀SD-PAMs฀as฀part฀of฀an฀international฀policy฀framework.฀ This฀report฀is฀a฀contribution฀to฀that฀effort.฀We฀first฀discuss฀ the฀merits฀and฀limitations฀of฀SD-PAMs฀(Chapter฀1)฀and฀ how฀an฀SD-PAMs฀pledging฀process฀might฀fit฀within฀the฀ international฀policy฀context฀(Chapter฀2).฀We฀then฀examine฀ in฀detail฀four฀case฀studies฀of฀policy฀options฀in฀developing฀ countries:฀Brazil’s฀use฀of฀biofuels฀for฀transport฀(Chapter฀ 3),฀efficient฀urban฀transport฀in฀China฀(Chapter฀4),฀options฀ for฀rural฀electrification฀in฀India฀(Chapter฀5)฀and฀carbon฀ capture฀and฀storage฀in฀South฀Africa฀(Chapter฀6). SD-PAMs฀are฀not฀a฀panacea.฀In฀particular,฀they฀do฀not฀฀ change฀the฀need฀for฀industrialized฀countries฀to฀lead฀with฀ explicit฀action฀to฀mitigate฀their฀own฀greenhouse฀gas฀(GHG)฀฀ emissions.฀However,฀they฀do฀offer฀the฀potential฀for฀a฀less฀ confrontational฀approach฀between฀industrialized฀and฀ developing฀countries,฀and฀a฀means฀to฀address฀developing฀ country฀emissions฀by฀promoting฀rather฀than฀threatening฀ their฀development.฀This฀approach฀has฀great฀potential฀for฀ trust-building,฀as฀SD-PAMs฀are฀made฀complementary฀to,฀ and฀not฀exclusive฀of,฀other฀forms฀of฀developing฀country฀ policy.฀They฀can฀coexist฀with฀Kyoto-style฀targets,฀project฀ mechanisms,฀and฀other฀forms฀of฀engagement. This฀chapter฀presents฀the฀SD-PAMs฀approach฀in฀the฀ following฀sections: 1)฀฀Climate฀meets฀development:฀why฀an฀innovative฀ solution฀to฀the฀current฀impasse฀in฀climate฀policy฀is฀ needed,฀and฀what฀SD-PAMs฀aim฀to฀achieve. 2)฀฀Development฀meets฀climate:฀the฀challenges฀faced฀by฀ developing฀countries,฀and฀how฀these฀can฀and฀should฀ be฀overcome฀in฀more฀climate-friendly฀ways. 3)฀฀Fitting฀SD-PAMs฀into฀future฀climate฀agreements:฀ how฀SD-PAMs฀might฀work,฀their฀advantages,฀and฀ how฀they฀relate฀to฀other฀climate฀instruments. 4)฀฀Financing฀SD-PAMs:฀how฀SD-PAMs฀might฀be฀฀ paid฀for. 5)฀฀Limitations฀of฀SD-PAMs:฀the฀importance฀of฀understanding฀what฀SD-PAMs฀can฀and฀can’t฀do. 6)฀฀This฀report:฀mapping฀out฀the฀remainder฀of฀this฀report. 2 1.฀CLIMATE฀MEETS฀DEVELOPMENT The฀story฀so฀far Ever฀since฀international฀efforts฀to฀combat฀climate฀ change฀began,฀a฀tension฀has฀existed฀between฀developing฀and฀industrialized฀countries.฀Richer฀countries฀have฀ pointed฀to฀the฀need฀for฀global฀climate฀policy฀and฀the฀rising฀ absolute฀emissions฀of฀large฀developing฀countries฀such฀as฀ China฀and฀India.฀Developing฀countries฀retort฀that฀their฀ per-capita฀emissions฀remain฀much฀below฀those฀of฀industrialized฀countries,฀and฀that฀their฀historical฀contribution฀ to฀today’s฀greenhouse฀gas฀concentrations฀is฀still฀smaller.฀ This฀implies฀that฀industrialized฀countries฀should฀therefore฀ take฀the฀lead฀in฀reducing฀emissions,฀not฀least฀to฀allow฀for฀ developing฀country฀growth.฀Furthermore,฀the฀“capacity”฀of฀developing฀countries—that฀is฀the฀resources฀and฀ institutional฀capabilities—to฀invest฀in฀cleaner฀technology฀ and฀take฀other฀mitigation฀measures฀is฀lower.฀Most฀of฀all,฀ developing฀countries฀face฀urgent฀sustainable฀development฀ needs—reducing฀poverty,฀increasing฀access฀to฀modern฀฀ energy฀services,฀increasing฀mobility,฀and฀attaining฀the฀ other฀benefits฀enjoyed฀by฀richer฀countries. These฀tensions฀are฀apparent฀in฀the฀1992฀UN฀Framework฀ Convention฀on฀Climate฀Change฀(UNFCCC,฀or฀“Convention”).฀The฀Convention฀establishes฀the฀basic฀principles฀ and฀preliminary฀steps฀for฀addressing฀climate฀change฀at฀a฀ global฀level,฀as฀well฀as฀an฀ultimate฀objective฀of฀stabilizing฀ atmospheric฀concentrations฀of฀GHGs฀at฀a฀level฀that฀avoids฀ dangerous฀human฀interference฀with฀the฀climate฀system.฀ While฀the฀Convention฀has฀nearly฀universal฀membership,฀it฀ also฀divides฀the฀world฀into฀two฀groups—Annex฀I฀(developed)฀and฀non-Annex฀I฀(developing).฀It฀places฀the฀primary฀ responsibility฀on฀the฀developed฀countries฀to฀reduce฀their฀ emissions฀and฀assist฀developing฀countries฀in฀doing฀the฀ same.฀This฀is฀expressed฀as฀the฀“common฀but฀differentiated฀ responsibilities”฀of฀the฀Parties:฀all฀have฀responsibilities,฀but฀ these฀vary฀to฀reflect฀their฀differing฀national฀circumstances. Under฀the฀1997฀Kyoto฀Protocol,฀the฀Annex฀I฀countries฀ assumed฀legally฀binding฀emission฀caps฀to฀be฀achieved฀during฀the฀five-year฀period฀from฀2008฀to฀2012.฀Targets฀range฀ from฀a฀decrease฀of฀8฀percent฀relative฀to฀1990฀(European฀ Union฀and฀others)฀to฀an฀increase฀of฀10฀percent฀(Iceland).฀ However,฀two฀industrialized฀countries—the฀United฀States฀ and฀Australia—have฀not฀acceded฀to฀the฀Kyoto฀Protocol,฀ which฀entered฀into฀force฀in฀February฀2005,฀and฀are฀therefore฀not฀bound฀by฀its฀emission฀controls.฀For฀their฀part,฀the฀ developing฀countries฀have฀no฀emission฀limits฀under฀Kyoto,฀ although฀they฀may฀host฀emission-reduction฀projects฀under฀ the฀Kyoto฀Protocol’s฀Clean฀Development฀Mechanism฀ (CDM).฀Such฀projects,฀it฀is฀hoped,฀will฀generate฀some฀development฀benefits,฀while฀also฀earning฀emission฀reduction฀ credits฀that฀may฀be฀used฀by฀Annex฀I฀countries฀to฀help฀meet฀ their฀Kyoto฀targets.฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST The฀unwillingness฀of฀countries฀such฀as฀the฀United฀ States฀and฀Australia฀to฀engage฀meaningfully฀in฀international฀climate฀policy฀remains฀the฀single฀biggest฀obstacle฀ to฀confronting฀the฀problem฀of฀climate฀change.฀Looking฀ ahead,฀however,฀some฀form฀of฀more฀active฀developing฀ country฀participation฀is฀generally฀regarded฀as฀a฀prerequisite฀ for฀a฀climate฀agreement฀to฀follow฀the฀first฀“commitment฀ period”฀of฀the฀Kyoto฀Protocol,฀which฀ends฀in฀2012.฀And฀ these฀two฀challenges฀are฀to฀some฀extent฀linked—critics฀of฀ the฀Kyoto฀Protocol฀point฀to฀the฀apparent฀lack฀of฀participation฀by฀developing฀countries,฀while฀developing฀countries฀ are฀unlikely฀to฀take฀more฀active฀climate฀measures฀while฀the฀ world’s฀largest฀emitter฀remains฀unwilling฀to฀do฀so.฀Inasmuch฀as฀developing฀countries฀have฀made฀clear฀that฀they฀are฀ not฀prepared฀to฀take฀on฀the฀same฀kinds฀of฀targets฀as฀Annex฀ I฀countries฀(in฀large฀part฀because฀of฀the฀disparities฀in฀development฀discussed฀in฀section฀2฀below),฀moving฀ahead฀will฀ require฀creative฀thinking฀on฀how฀to฀find฀more฀appropriate฀ ways฀for฀developing฀countries฀to฀promote฀and฀accelerate฀ their฀growth฀while฀limiting฀their฀GHG฀emissions. The฀next฀phase Examining฀the฀basis฀for฀future฀agreements,฀policy฀analysts฀have฀suggested฀a฀set฀of฀options฀for฀next฀steps.฀These฀ include฀(1)฀the฀expansion฀and฀amplification฀of฀the฀Kyoto฀ structure฀of฀emissions฀targets฀and฀market฀mechanisms;฀(2)฀ a฀focus฀on฀technology,฀including฀research,฀development,฀ transfer,฀and฀diffusion;฀(3)฀an฀emphasis฀on฀development฀ policies฀and฀measures฀(the฀focus฀of฀this฀report),฀and฀(4)฀ agreements฀that฀may฀encompass฀any฀or฀all฀of฀the฀above฀ measures฀and฀options,฀but฀that฀may฀be฀regionally฀or฀฀ sectorally฀defined฀rather฀than฀global฀in฀scope.฀ Kyoto฀Plus.฀With฀more฀than฀150฀countries฀and฀regions฀ Party฀to฀the฀Kyoto฀Protocol,฀this฀option฀has฀enormous฀ support.฀Targets฀are฀being฀implemented,฀and฀the฀markets฀ established฀under฀the฀Protocol฀are฀operative.฀The฀European฀Union฀has฀allocated฀emissions฀allowances฀for฀more฀than฀ 2฀billion฀metric฀tons฀of฀CO2—and฀prices฀in฀2005฀were฀ approximately฀�30/ton.฀While฀still฀a฀relatively฀new฀market,฀ the฀CDM,฀with฀support฀from฀similar฀efforts฀by฀the฀World฀ Bank฀and฀others,฀has฀attracted฀approximately฀$1฀billion฀ of฀pledged฀investment฀in฀developing฀countries.฀However,฀ notwithstanding฀the฀broad฀level฀of฀agreement฀on฀the฀structure,฀key฀countries—in฀particular฀the฀United฀States—have฀ rejected฀the฀Protocol.฀Aside฀from฀this฀problem,฀the฀most฀ important฀gap฀in฀this฀approach฀is฀that฀it฀lacks฀an฀appropriate฀means฀of฀dealing฀with฀developing฀country฀emissions.฀ Technology.฀A฀rather฀different฀approach,฀one฀emphasizing฀the฀need฀to฀develop฀alternate฀and฀long-term฀technologies,฀particularly฀for฀the฀energy฀sector,฀has฀been฀postulated฀ as฀complementary฀to—or฀possibly฀as฀a฀replacement฀ for—the฀Kyoto฀structure.฀Proponents฀have฀argued฀that฀ the฀indirect฀and฀near-term฀influence฀of฀pricing฀mechanisms฀established฀through฀emissions฀caps฀are฀inadequate฀ to฀create฀incentives฀that฀will฀drive฀the฀major฀technology฀ changes฀required฀to฀redirect฀the฀global฀economy฀to฀zero฀ net฀emissions.฀Aggressive฀efforts฀at฀research,฀development,฀ and฀deployment฀(RD&D)—in฀specific฀technologies฀such฀ as฀renewable฀energy,฀energy฀efficiency,฀new฀fuels฀such฀as฀ hydrogen฀and฀biofuels,฀and฀carbon฀capture฀and฀storage฀ to฀allow฀safe฀use฀of฀fossil฀fuels—are฀a฀focus฀of฀this฀vision.฀ On฀the฀negative฀side,฀critics฀worry฀that฀such฀a฀program฀ runs฀the฀risk฀of฀choosing฀poorly;฀governments฀have฀been฀ notorious฀for฀technology฀push฀policies฀that฀have฀failed฀to฀ generate฀benefits฀claimed—and฀that฀have฀cost฀substantially฀ more฀than฀projected.฀Some฀also฀worry฀that฀too฀strong฀an฀ emphasis฀on฀long-term฀technologies฀can฀act฀as฀a฀cover฀for฀ deferring฀action฀on฀climate฀change฀altogether,฀while฀failing฀to฀create฀a฀carbon฀market,฀which฀provides฀one฀of฀the฀ major฀incentives฀to฀develop฀technologies.฀ Development.฀This฀approach฀assumes฀that,฀particularly฀ in฀developing฀countries,฀the฀priorities฀for฀the฀foreseeable฀ future฀will฀be฀to฀tackle฀basic฀necessities,฀such฀as฀poverty฀ alleviation,฀food฀supply,฀health,฀and฀access฀to฀modern฀energy฀services฀and฀transportation.฀However,฀as฀discussed฀in฀ detail฀in฀this฀report,฀many฀of฀these฀development฀priorities฀ can฀be฀met฀in฀a฀manner฀consistent฀with฀climate฀mitigation.฀The฀key฀is฀to฀identify฀such฀practices฀and฀promote฀ IN TR OD U C TION ฀ TO฀ SU STA IN A B LE฀ D EVELOPMEN T฀ POLIC IES฀ A ND ฀ MEA SU R ES 3 them.฀This฀emphasis฀also฀has฀critics.฀Not฀least,฀proponents฀ must฀address฀the฀rather฀woeful฀global฀history:฀the฀richest฀countries฀in฀the฀world฀have฀seen฀emissions฀of฀GHGs฀ increase฀proportional฀to฀their฀economic฀growth.฀Even฀ efforts฀to฀provide฀international฀development฀assistance฀ have฀not฀apparently฀helped:฀both฀World฀Bank฀and฀bilateral฀ loans฀in฀the฀energy฀sector฀(to฀choose฀but฀one฀example)฀ have฀predominantly฀funded฀massive฀fossil฀fuel฀electricity฀ generating฀facilities฀rather฀than฀clean,฀renewable฀energy฀ alternatives฀(Sohn฀et฀al.,฀2005).฀ Regional฀Structure.฀Under฀this฀theory,฀progress฀is฀best฀ made฀when฀like-minded฀groups฀of฀countries—or฀companies—band฀together฀to฀address฀common฀problems.฀For฀ example,฀The฀African฀Union฀has฀sought฀to฀join฀together฀ to฀address฀African฀development฀issues.฀It฀brings฀to฀the฀task฀ an฀intimate฀understanding฀of฀the฀region’s฀needs฀and฀opportunities฀unmatched฀by฀representatives฀of฀other฀regions.฀ In฀climate฀mitigation,฀such฀groupings฀may฀emerge฀around฀ oil฀exporting฀or฀importing฀countries,฀which฀in฀the฀1970s฀ gave฀rise฀both฀to฀the฀Organization฀of฀Petroleum฀Exporting฀ Countries฀and฀to฀the฀International฀Energy฀Agency.฀Groupings฀might฀also฀be฀linked฀to฀sectors,฀such฀as฀automobiles;฀ witness฀the฀effort฀by฀the฀European฀Union฀to฀set฀standards฀ for฀vehicle฀emissions,฀which฀brought฀to฀the฀table฀European,฀Japanese,฀and฀Korean฀car฀manufacturers.฀Here฀too,฀ critics฀have฀legitimate฀concerns:฀how฀to฀address฀issues฀of฀ monopoly฀controls฀and฀trade฀distortions?฀How฀to฀promote฀ more฀than฀the฀“lowest฀common฀denominator”฀solution— where฀the฀effect฀is฀likely฀to฀be฀minimal?฀How฀to฀integrate฀ a฀series฀of฀such฀agreements฀to฀ensure฀that฀aggregate฀global฀ emissions฀are฀really฀being฀curtailed? In฀reality,฀the฀international฀climate฀effort฀is฀likely฀to฀be฀ formed฀from฀an฀amalgam฀of฀these฀choices,฀with฀elements฀ from฀each฀adopted฀by฀different฀countries฀depending฀on฀ their฀circumstances฀and฀priorities.฀Indeed,฀a฀system฀based฀ on฀only฀one฀seems฀likely฀to฀be฀insufficient.฀Each฀alternative฀brings฀complementary฀choices฀to฀the฀discussion,฀ which฀if฀successfully฀implemented฀could฀help฀construct฀ an฀effective฀global฀regime฀to฀address฀the฀climate฀problem.฀ The฀SD-PAMs฀approach฀explored฀in฀this฀report฀has฀at฀its฀ center฀of฀gravity฀the฀development฀component,฀but฀it฀is฀ important฀to฀recognize฀that฀it฀is฀compatible฀with฀all฀the฀ components฀discussed฀above. 4 2.฀DEVELOPMENT฀MEETS฀CLIMATE Meanwhile,฀developing฀countries฀face฀the฀challenge฀of฀ developing฀in฀what฀is฀increasingly฀likely฀to฀be฀a฀carbon-฀ constrained฀world.฀Although฀developing฀country฀emissions฀ are฀not฀constrained฀today,฀the฀threat฀of฀climate฀change฀ means฀that฀an฀unchecked฀rise฀in฀emissions฀will฀inevitably฀act฀ as฀a฀constraint฀to฀their฀long-term฀economic฀development.฀ Heading฀down฀a฀lower-carbon฀path฀now฀may฀prove฀far฀ cheaper฀in฀the฀long฀term฀than฀investing฀in฀energy฀systems฀ today฀that฀become฀a฀liability฀through฀high฀GHG฀emissions. While฀economic฀growth฀and฀prosperity฀matter฀to฀฀ people฀all฀over฀the฀world,฀in฀developing฀countries฀the฀needs฀฀ are฀particularly฀acute.฀Quite฀apart฀from฀the฀economic฀ growth฀needed฀to฀lift฀billions฀of฀people฀out฀of฀poverty,฀ there฀are฀a฀number฀of฀key฀services฀and฀opportunities฀that฀ are฀vital฀from฀the฀point฀of฀view฀of฀development฀but฀offer฀ additional฀challenges฀to฀climate฀policy.฀These฀include฀฀ access฀to฀modern฀energy฀services฀(with฀concomitant฀฀ provision฀of฀lighting,฀refrigeration,฀and฀other฀services),฀ transportation,฀and฀improved฀agricultural฀practices฀that฀ are฀linked฀to฀adequate฀food฀supplies.฀Presently,฀these฀฀ services,฀where฀available,฀are฀provided฀in฀the฀main฀with฀ the฀use฀of฀fossil฀fuels—with฀associated฀GHG฀emissions.฀ Increased฀Access฀to฀Modern฀Energy฀Services Estimates฀of฀the฀number฀of฀people฀worldwide฀that฀ lack฀access฀to฀modern฀energy฀services฀vary,฀but฀as฀many฀ as฀2฀billion฀have฀no฀reliable฀access฀to฀electricity฀or฀clean฀ cooking฀or฀heating฀fuels฀(ESMAP,฀2000),฀with฀significant฀ variation฀by฀country฀(Figure฀1).฀The฀lack฀of฀such฀services฀ is฀a฀contributing฀factor฀in฀poverty.฀Women฀in฀particular฀ spend฀much฀of฀their฀time฀gathering฀wood฀for฀fuel,฀and฀ then฀inhaling฀the฀fumes฀that฀come฀from฀the฀cooking฀fires.฀ Forest฀cover฀is฀also฀reduced;฀modern฀appliances฀such฀as฀ refrigeration฀are฀not฀available,฀and฀small฀businesses฀lack฀ the฀motive฀power฀for฀many฀applications.฀The฀relationship฀ between฀poverty฀and฀energy฀services฀is฀a฀complex฀one,฀but฀ for฀any฀government฀determined฀to฀reduce฀poverty,฀rolling฀ out฀access฀to฀electricity฀and฀other฀modern฀energy฀carriers฀is฀ a฀high฀priority.฀ Building฀a฀Modern฀Economy Most฀developing฀countries฀want฀to฀cultivate฀industries฀ that฀will฀create฀employment,฀economic฀growth,฀and฀technological฀progress฀in฀their฀countries.฀This฀means฀building฀ industries฀and฀jobs฀in฀sectors฀that฀promise฀growth,฀higher฀ wages,฀improved฀domestic฀living฀standards,฀technological฀modernization,฀and฀export฀potential.฀Many฀of฀these฀ sectors฀can฀lead฀to฀rising฀emissions.฀Conversely,฀there฀are฀a฀ growing฀number฀of฀opportunities฀for฀the฀development฀of฀ industries฀that฀produce฀the฀cleaner฀technologies฀that฀allow฀ economic฀development฀with฀lower฀emissions.฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST 589m 60% 150 % Population Without Access 57% Millions 50% 47% 125 47% 100 34% 30% 75 20% 50 5% 1% China 5% Mexico Argentina S. Africa Indonesia 0% Pakistan 5% Brazil 10% Millions of People 40% India Energy฀Security฀and฀Access฀to฀Oil฀Supplies The฀role฀that฀oil฀has฀played฀in฀the฀development฀of฀ today’s฀world฀economy฀is฀seminal.฀World฀trade฀may฀sometimes฀seem฀based฀on฀flashes฀of฀internet-based฀information,฀ but฀it฀is฀likewise฀driven฀by฀oil฀tankers฀chugging฀across฀the฀ oceans฀and฀kerosene-fired฀jets฀winging฀through฀the฀sky.฀ Oil฀is฀an฀essential฀ingredient฀in฀a฀bewildering฀array฀of฀ products,฀from฀plastics฀to฀medicines,฀transported฀in฀oil-fueled฀trucks฀to฀stores฀that฀are฀in฀turn฀visited฀by฀oil-fueled฀ customers.฀But฀increasingly,฀getting฀hold฀of฀it฀and฀dealing฀ with฀the฀consequences฀of฀its฀use฀are฀a฀major฀burden฀on฀ most฀modern฀economies,฀and฀the฀burden฀is฀greater฀still฀in฀ the฀case฀of฀developing฀countries,฀which฀use฀more฀oil฀per฀ unit฀of฀GDP.฀The฀economic฀cost฀of฀this฀oil฀use฀is฀huge,฀ and฀affects฀indebtedness฀in฀many฀developing฀countries฀(see฀ Figure฀3).฀The฀energy฀security฀concerns฀such฀imports฀raise฀ are฀similarly฀daunting,฀in฀view฀of฀the฀sometimes฀unstable฀ countries฀that฀produce฀them.฀Some฀72฀percent฀of฀known฀ reserves฀are฀found฀in฀just฀seven฀countries฀(Saudi฀Arabia,฀ Iran,฀Iraq,฀United฀Arab฀Emirates,฀Kuwait,฀Venezuela,฀and฀ Russia)฀(BP,฀2005).฀Nearly฀all฀of฀the฀world’s฀largest฀economies,฀including฀the฀United฀States,฀Japan,฀China,฀India,฀ Brazil,฀and฀South฀Africa,฀are฀oil฀importers.฀ Figure฀1.฀฀Access฀to฀Electricity฀in฀Selected฀Countries Percent of Population Without Access Increased฀Mobility฀and฀Car฀Ownership Improved฀mobility฀is฀both฀a฀cause฀and฀consequence฀ of฀economic฀development.฀Access฀to฀cheap฀and฀efficient฀ modern฀transportation฀increases฀the฀scope฀for฀economic฀ activity,฀allowing฀workers฀to฀find฀work฀more฀easily฀and฀ reducing฀the฀time฀wasted฀in฀transit,฀which฀is฀neither฀useful฀ nor฀enjoyable.฀In฀addition,฀greater฀use฀of฀transport฀is฀a฀ favorite฀purchase฀for฀people฀leaving฀poverty฀behind,฀and฀ does฀much฀to฀improve฀their฀quality฀of฀life.฀At฀the฀same฀ time,฀given฀that฀almost฀all฀mechanized฀transport฀is฀fueled฀ by฀oil,฀improved฀mobility฀places฀strong฀upward฀pressure฀ on฀GHG฀emissions.฀This฀will฀be฀especially฀the฀case฀in฀ developing฀countries,฀where฀motor฀vehicle฀use฀is฀low,฀but฀ poised฀to฀rise฀considerably฀relative฀to฀the฀industrialized฀ countries฀(Figure฀2). 25 0 Source:฀IEA฀(2002) Figure฀2.฀฀Motor฀Vehicles฀per฀1,000฀People฀ 0 200 400 600 800 779 U.S. 572 Japan 159 Mexico China 12 India 10 Source:฀World฀Bank฀(2005).฀Data฀ranges฀from฀1997-2000. Local฀Health฀and฀Environmental฀Quality Often,฀reduced฀GHG฀emissions฀and฀improved฀local฀ environment฀go฀hand฀in฀hand,฀but฀there฀are฀important฀ exceptions.฀For฀example,฀the฀use฀of฀(carbon฀neutral)฀biomass฀indoors,฀particularly฀for฀cooking฀and฀space฀heating,฀ is฀a฀major฀source฀of฀illness฀and฀premature฀death฀in฀many฀ developing฀countries.฀A฀switch฀to฀more฀modern฀fuels฀฀ such฀as฀electricity฀or฀LPG฀is฀often฀desirable.฀Finding฀low-฀ emission฀ways฀to฀meet฀the฀same฀goal฀is฀a฀major฀challenge.฀ Similarly,฀a฀switch฀to฀biofuel฀crops฀to฀replace฀oil฀may฀lead฀ IN TR OD U C TION ฀ TO฀ SU STA IN A B LE฀ D EVELOPMEN T฀ POLIC IES฀ A ND ฀ MEA SU R ES 5 Figure฀3.฀฀฀Developing฀Country฀External฀Debt฀Tends฀to฀Increase฀as฀Oil฀Prices฀Rise 40 External Debt 35 Crude Oil Price 65 55 45 25 35 20 15 25 10 15 5 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 -5 5 1972 0 Oil Price per barrel (US$ 2000) Growth of External Debt (%) 30 -5 Source:฀IEA฀(2003) to฀increased฀requirements฀for฀fertilizers฀as฀well฀as฀additional฀soil฀erosion;฀both฀can฀lead฀to฀increased฀net฀GHG฀ emissions฀as฀well฀as฀to฀local฀pollution.฀ While฀developing฀countries฀face฀urgent฀development฀needs,฀it฀should฀also฀be฀remembered฀that฀the฀poor฀ are฀generally฀most฀dependent฀on฀natural฀resources฀and฀ ecosystems,฀which฀can฀form฀the฀basis฀for฀their฀survival฀and฀ even฀prosperity฀(WRI,฀2005).฀Climate฀change,฀while฀not฀ an฀immediately฀pressing฀issue฀for฀developing฀countries,฀is฀ in฀fact฀a฀serious฀threat฀to฀precisely฀those฀systems฀on฀which฀ their฀poor฀generally฀depend.฀ Climate฀change฀constraints฀and฀the฀imperatives฀of฀ development฀are฀therefore฀often฀in฀tension.฀Developing฀ countries฀need฀a฀means฀of฀dealing฀with฀these฀formidable฀ challenges,฀while฀avoiding฀creating฀a฀serious฀future฀liability฀ for฀themselves฀by฀making฀GHG฀emissions฀integral฀to฀their฀ economies.฀This,฀as฀much฀as฀the฀present฀impasse฀in฀international฀climate฀policy,฀suggests฀that฀a฀future฀regime฀must฀ improve฀the฀prospects฀of฀integrating฀GHG฀considerations฀ into฀development฀considerations,฀and฀vice฀versa. 6 3.฀SD-PAMS:฀BREAKING฀THE฀LOGJAM The฀SD-PAMs฀approach฀proposes฀to฀make฀the฀development฀policies฀of฀each฀country฀the฀basis,฀or฀even฀substitute,฀ for฀climate฀policy฀in฀that฀country.฀In฀many฀cases,฀the฀ priorities฀facing฀developing฀countries฀can฀be฀met฀in฀a฀variety฀of฀ways,฀with฀profoundly฀different฀outcomes฀from฀a฀ climate฀perspective.฀For฀instance,฀a฀plan฀for฀electrification฀ of฀a฀region฀that฀lacks฀electricity฀can฀be฀based฀on฀fossil฀fuel฀ technologies฀or฀renewable฀energy.฀In฀some฀cases,฀the฀difference฀between฀the฀two฀is฀small฀from฀a฀local฀or฀national฀ perspective,฀even฀though฀the฀difference฀in฀impact฀on฀the฀ climate฀can฀be฀significant.฀ 3.1฀฀SD-PAMs฀within฀a฀climate฀agreement The฀basic฀foundations฀of฀the฀SD-PAMs฀concept฀are฀ contained฀in฀the฀1992฀Climate฀Convention,฀discussed฀ above.฀Specifically,฀the฀Convention฀requires฀all฀countries฀ to฀develop฀national฀GHG฀mitigation฀programs.3฀At฀the฀ same฀time,฀the฀Convention฀affirms฀“Parties฀have฀a฀right฀ to,฀and฀should,฀promote฀sustainable฀development.”฀Accordingly,฀“policies฀and฀measures฀to฀protect฀the฀climate฀ system฀.฀.฀.฀should฀be฀integrated฀with฀national฀development฀ programmes.”4฀The฀Kyoto฀Protocol฀reinforces฀this฀notion฀ by฀observing฀that฀mitigation฀commitments฀be฀advanced฀ “in฀order฀to฀achieve฀sustainable฀development.”5฀Thus,฀ under฀the฀climate฀agreements,฀sustainable฀development฀ and฀climate฀protection฀objectives฀are฀to฀be฀pursued฀in฀an฀ integrated฀and฀complementary฀fashion.฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST As฀many฀observers฀have฀noted,฀however,฀the฀Convention฀obligations฀are฀vague฀and฀indefinite.฀There฀is฀no฀ official฀recognition฀of฀policies฀and฀measures฀actually฀ undertaken,฀or฀review฀of฀their฀implementation.6฀Nor฀are฀ there฀mechanisms฀within฀the฀Convention฀or฀Protocol฀that฀ provide฀incentives฀or฀financing,฀or฀otherwise฀promote฀SDPAMs฀in฀developing฀countries.฀Mechanisms฀such฀as฀the฀ Global฀Environment฀Facility฀and฀the฀Clean฀Development฀ Mechanism,฀while฀important,฀are฀oriented฀toward฀projects฀ that฀reduce฀emissions.฀ These฀shortcomings฀are฀not฀surprising.฀The฀Convention฀is฀only฀a฀framework฀agreement฀containing฀mostly฀ generalized฀provisions.฀The฀expectation฀is฀that฀the฀basic฀ Convention฀obligations฀will฀help฀build฀capacity฀and฀ experience,฀which฀can฀subsequently฀form฀the฀basis฀of฀ adopting฀more฀defined฀and฀rigorous฀approaches.฀The฀challenge฀is฀for฀Parties฀to฀operationalize฀the฀vision฀set฀forth฀in฀ the฀Climate฀Convention.฀SD-PAMs฀represent฀one฀such฀ operational฀vision. The฀possible฀operational฀mechanics฀of฀an฀SD-PAMs฀ approach฀are฀discussed฀in฀detail฀in฀Chapter฀2.฀In฀brief,฀an฀ SD-PAM฀system฀could฀involve฀the฀pledging,฀by฀governments,฀of฀specific฀actions฀to฀be฀undertaken,฀or฀already฀ being฀implemented.฀Additional฀provisions฀for฀monitoring,฀ reporting,฀and฀review฀would฀also฀be฀essential,฀as฀well฀as฀ funding.฀A฀pledged฀SD-PAM฀might฀be฀expected฀to฀have฀ the฀following฀characteristics: ■ ฀฀A฀legislative,฀regulatory,฀or฀other฀government฀action.฀ Thus฀it฀is฀distinct฀from฀purely฀private฀initiatives฀or฀ projects. ■ ฀฀Aimed฀at฀the฀country’s฀own฀sustainable฀development฀ objectives,฀as฀defined฀by฀the฀developing฀country฀ (Box฀1).฀There฀is฀no฀need฀to฀prove฀or฀even฀claim฀that฀ climate฀change฀is฀a฀motivation฀for฀implementing฀an฀ SD-PAM—thus฀it฀does฀not฀need฀to฀demonstrate฀ “additionality”฀in฀the฀same฀sense฀that฀a฀CDM฀project฀ would฀need฀to. ■ ฀฀Having฀a฀beneficial฀effect฀on฀GHG฀emissions.฀This฀ factor฀needs฀to฀be฀evaluated฀against฀some฀alternative฀ (for฀example,฀a฀biofuels฀program฀would฀be฀replacing฀ petrol฀use),฀but฀it฀would฀not฀necessarily฀have฀to฀be฀ calculated฀against฀a฀specific฀baseline. Such฀an฀approach฀would฀differ฀substantially฀from฀most฀ existing฀and฀previous฀proposals฀for฀advancing฀and฀assisting฀ developing฀country฀participation,฀in฀that฀it฀focuses฀on฀ efforts฀and฀policy฀commitments฀rather฀than฀commitments฀ to฀a฀specific฀outcome.฀In฀this฀respect,฀however,฀it฀does฀resemble฀international฀processes฀in฀other฀domains.฀The฀trade฀ Box฀1.฀฀Defining฀Sustainable฀Development The฀general฀enthusiasm฀for฀the฀concept฀of฀sustainable฀development฀is฀matched฀ by฀the฀confusion฀over฀what฀it฀means.฀The฀best-known฀definition฀comes฀from฀the฀ Brundtland฀Report฀(WCED,฀1987):฀“[Development฀that]฀meets฀the฀needs฀of฀the฀ present฀without฀compromising฀the฀ability฀of฀future฀generations฀to฀meet฀their฀ own฀needs.”฀In฀general,฀it฀is฀taken฀to฀mean฀development฀that฀goes฀beyond฀pure฀ economic฀growth฀to฀include฀aspects฀of฀environmental฀and฀social฀protection.฀ Within฀the฀UNFCCC฀however,฀there฀has฀been฀strong฀resistance฀to฀any฀definition฀฀ of฀sustainable฀development฀that฀appears฀to฀constrain฀developing฀country฀choices.฀ The฀CDM,฀for฀example,฀is฀mandated฀to฀promote฀sustainable฀development—but฀ this฀is฀defined฀as฀whatever฀the฀host฀country฀declares฀to฀be฀in฀line฀with฀its฀interests. In฀this฀report,฀we฀do฀not฀attempt฀to฀define฀rigorously฀what฀sustainable฀development฀means.฀As฀the฀authors฀of฀the฀country฀studies฀(Chapters฀3-6)฀show,฀national฀ priorities฀are฀many฀and฀varied.฀In฀practice,฀it฀is฀likely฀that฀host-country฀definitions฀ of฀sustainable฀development฀will฀remain฀the฀order฀of฀the฀day. liberalization฀process฀under฀the฀World฀Trade฀Organization฀ (and฀its฀predecessor,฀the฀General฀Agreement฀on฀Tariffs฀and฀ Trade)฀has฀proceeded฀under฀rounds฀of฀interactive฀and฀flexible฀negotiations,฀which฀resulted฀in฀mutual฀commitments฀ from฀the฀Parties.฀It฀has฀been฀suggested฀that฀a฀similar฀process฀could฀be฀followed฀in฀forming฀climate฀commitments฀ (Victor,฀2001).฀International฀Monetary฀Fund฀country฀ reviews฀have฀also฀been฀suggested฀as฀a฀model฀(Chayes฀and฀ Chayes,฀1991).฀The฀Marshall฀Fund฀process฀after฀World฀ War฀II฀involved฀a฀detailed฀sharing฀of฀each฀country’s฀plans฀ for฀(re)development,฀although฀the฀existence฀of฀the฀United฀ States฀as฀an฀effective฀overseer฀is฀clearly฀different฀from฀the฀ climate฀policy฀situation฀(Schelling,฀1998). An฀important฀difference฀between฀the฀Marshall฀Plan฀ process฀and฀that฀of฀the฀UNFCCC฀was฀the฀number฀of฀ countries฀involved.฀The฀fact฀that฀the฀largest฀20฀or฀so฀emitters฀(counting฀the฀European฀Union฀as฀a฀single฀emitter)฀ account฀for฀over฀75฀percent฀of฀global฀GHG฀emissions฀has฀ led฀a฀number฀of฀commentators฀to฀propose฀negotiations฀ among฀a฀group฀of฀major฀emitters.7฀In฀the฀case฀of฀climate฀ change,฀it฀is฀unlikely฀that฀the฀United฀Nations฀will฀lose฀its฀ role฀as฀the฀principle฀venue฀for฀negotiations,฀but฀an฀SDPAMs฀structure฀allows฀the฀possibility฀of฀smaller฀groups฀ deepening฀their฀cooperation฀within฀a฀larger฀agreement. IN TR OD U C TION ฀ TO฀ SU STA IN A B LE฀ D EVELOPMEN T฀ POLIC IES฀ A ND ฀ MEA SU R ES 7 3.2฀฀SD-PAMs฀and฀existing฀฀ proposals฀for฀developing฀country฀฀ engagement To฀date,฀most฀proposals฀for฀limiting฀emissions฀in฀ developing฀countries฀are฀oriented฀toward฀various฀formulas฀for฀quantitative฀GHG฀targets,฀including฀many฀with฀ “top-down”฀determinations฀of฀national฀obligations.8฀Such฀ proposals฀tend฀to฀lack฀an฀explicit฀development฀dimension,฀ and฀are฀typically฀viewed฀by฀developing฀country฀Parties฀ as฀potentially฀constraining฀their฀economic฀development.฀ Overall,฀the฀adoption฀of฀emission฀targets฀in฀developing฀ countries฀faces฀substantial฀political,฀capacity฀building,฀and฀ technical฀hurdles.9฀ A฀second฀approach฀is฀to฀rely฀increasingly฀on฀projectbased฀mechanisms,฀such฀as฀the฀CDM,฀as฀the฀main฀form฀ of฀developing฀country฀engagement.฀While฀the฀CDM฀ remains฀promising฀and฀could฀complement฀SD-PAMs,฀it฀ differs฀from฀SD-PAMs฀in฀key฀respects.฀First,฀the฀CDM฀ is฀restricted฀to฀projects,฀which฀limits฀its฀potential.฀Policy฀ change,฀more฀than฀individual฀projects,฀is฀needed฀to฀achieve฀ the฀Climate฀Convention฀and฀development฀objectives.฀It฀is฀ widely฀understood฀that฀meeting฀sustainable฀development฀ challenges฀will฀require฀“profound฀structural฀changes฀in฀ socio-economic฀and฀institutional฀arrangements,”฀(WCED,฀ 1987)฀which฀will฀be฀difficult฀or฀impossible฀to฀bring฀about฀ on฀a฀project-by-project฀basis.฀Second,฀because฀CDM฀credits฀are฀used฀by฀Annex฀I฀Parties฀to฀offset฀their฀own฀emissions,฀it฀is฀essential฀that฀CDM฀projects฀are฀“additional”— that฀is,฀projects฀need฀to฀prove฀that฀they฀reduce฀emissions฀ relative฀to฀those฀that฀would฀have฀occurred฀in฀the฀absence฀ of฀the฀CDM.฀This฀“additionality”฀requirement฀does฀not฀ exist฀for฀SD-PAMs,฀which฀is฀not฀a฀crediting฀mechanism฀ (although฀there฀may฀be฀scope฀for฀crediting,฀if฀certain฀ safeguards฀were฀in฀place,฀as฀discussed฀in฀Chapter฀2).฀Under฀ an฀SD-PAMs฀system,฀it฀is฀more฀likely฀that฀pledged฀actions฀ are฀motivated฀by฀non-climate฀considerations,฀such฀as฀ energy฀security฀or฀local฀pollution฀reduction.฀Several฀case฀ studies฀in฀this฀report฀are฀illustrative฀of฀such฀outcomes.฀ Although฀SD-PAMs฀would฀complement฀and฀not฀replace฀ the฀CDM,฀baselines฀for฀CDM฀projects฀can฀be฀affected฀ by฀whether฀policies฀and฀measures฀are฀already฀in฀place฀in฀ the฀relevant฀sector฀and฀country.฀At฀present,฀this฀leads฀to฀a฀ clear฀disincentive฀for฀policies฀and฀measures฀in฀developing฀ countries—CDM฀projects฀are฀valued,฀while฀policies฀and฀ 8 measures฀are฀not.฀An฀SD-PAMs฀approach฀may฀not฀remove฀ this฀perverse฀incentive฀entirely,฀but฀by฀granting฀some฀value฀ to฀policies฀and฀measures฀it฀may฀reduce฀it. A฀final฀approach,฀focusing฀on฀harmonized฀policies฀ and฀measures,฀has฀been฀under฀discussion฀for฀many฀years฀ within฀the฀UNFCCC฀and฀Kyoto฀Protocol.฀This฀approach฀ involves฀countries฀adopting฀identical฀or฀similar฀policies฀ in฀particular฀sectors.฀An฀agreement฀on฀a฀common฀set฀of฀ PAMs฀has฀been฀resisted฀by฀many฀Parties฀on฀the฀grounds฀ that฀it฀intrudes฀too฀strongly฀into฀domestic฀policymaking฀prerogatives.฀Indeed,฀the฀prevailing฀principle฀of฀the฀ Climate฀Convention฀that฀has฀facilitated฀cooperation฀is฀ differentiation,฀not฀harmonization.฀Under฀Kyoto,฀for฀instance,฀governments฀are฀free฀to฀achieve฀their฀targets฀in฀any฀ way฀they฀deem฀appropriate,฀including฀by฀using฀trading฀ and฀other฀regulatory฀approaches.฀Similarly,฀under฀an฀SDPAMs฀approach,฀there฀would฀be฀no฀specific฀policies฀and฀ measures฀imposed฀on฀countries.฀Rather,฀a฀country฀would฀ pledge฀only฀its฀own฀policies฀and฀measures,฀consistent฀with฀ its฀unique฀national฀circumstances.฀As฀discussed฀in฀Chapter฀ 2,฀it฀is฀possible฀that฀groups฀of฀countries฀with฀similar฀concerns฀might฀choose฀to฀coordinate฀their฀SD-PAMs,฀but฀this฀ would฀be฀a฀bottom-up฀process. 3.3฀ Why฀take฀on฀an฀SD-PAM? Although฀SD-PAMs,฀as฀noted฀above,฀are฀already฀a฀part฀ of฀the฀Climate฀Convention,฀one฀may฀ask฀why฀any฀country฀ should฀present฀(or฀subject)฀its฀current฀or฀proposed฀sustainable฀development฀policies฀to฀an฀international฀climate฀ regime.฀There฀are฀several฀advantages฀discussed฀in฀this฀ section:฀recognition,฀learning,฀better฀alignment฀between฀ climate฀protection฀and฀other฀interests,฀and฀promotion. First,฀official฀recognition฀of฀SD-PAMs฀would฀enable฀all฀ Parties฀to฀participate฀formally฀in฀mitigation฀efforts฀under฀ the฀climate฀regime.฀This฀would฀have฀positive฀political฀as฀ well฀as฀substantive฀implications.฀The฀formal฀pledging฀of฀ SD-PAMs฀could฀reduce฀the฀perception฀in฀industrialized฀ countries—especially฀the฀United฀States,฀but฀also฀elsewhere—that฀developing฀countries฀are฀not฀contributing฀to฀ global฀climate฀protection฀efforts.฀Indeed,฀as฀this฀report฀and฀ others฀have฀illustrated,10฀developing฀countries฀are฀in฀some฀ cases฀already฀taking฀measures฀to฀bend฀the฀trajectory฀of฀ their฀emissions฀downward.฀However,฀developing฀countries฀ are฀not฀getting฀sufficient฀recognition฀for฀climate-friendly฀ actions.฀This฀leads฀to฀misperceptions฀on฀the฀part฀of฀ politicians฀in฀some฀wealthier฀countries,฀who฀point฀toward฀ apparent฀inaction฀in฀the฀developing฀world฀as฀part฀of฀a฀ justification฀for฀their฀own฀lack฀of฀effort.฀Indeed,฀identical฀ measures,฀especially฀on฀energy฀efficiency,฀may฀be฀presented฀ as฀“climate฀policies”฀in฀industrialized฀countries฀and฀simply฀ as฀“energy฀policies”฀in฀developing฀countries. GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST between฀these฀scenarios.฀This฀will฀not฀in฀itself฀be฀enough฀ to฀deal฀with฀the฀climate฀problem—explicit฀mitigation฀ measures฀will฀be฀called฀for—but฀it฀would฀make฀the฀task฀ less฀daunting.฀More฀to฀the฀point,฀it฀is฀a฀task฀we฀can฀ embark฀upon฀now฀in฀developing฀countries,฀while฀richer฀ countries฀lead฀the฀way฀on฀mitigation.฀฀฀฀฀฀฀ Box฀2.฀฀The฀IPCC฀Scenarios The฀IPCC฀has฀modeled฀the฀possible฀trend฀in฀future฀global฀emissions฀through฀ the฀lens฀of฀a฀number฀of฀scenarios.฀None฀of฀these฀scenarios฀includes฀any฀specific฀ action฀to฀mitigate฀climate฀change.฀However,฀they฀vary฀significantly฀in฀terms฀of฀ trade,฀technology฀development,฀energy฀prices,฀and฀other฀factors.฀For฀instance,฀ the฀AIT฀scenario฀assumes฀technological฀development฀of฀non-fossil฀energy฀ sources,฀while฀the฀B1฀scenario฀emphasizes฀“global฀solutions฀to฀economic,฀social฀ and฀environmental฀sustainability,฀including฀improved฀equity,฀but฀without฀additional฀climate฀initiatives”฀(IPCC,฀2001).฀The฀resulting฀GHG฀emissions฀vary฀by฀a฀ factor฀of฀six. Figure฀4.฀฀IPCC฀SRES฀Scenarios 40 35 30 Total emissioins (Gt/yr) Second,฀a฀system฀of฀SD-PAMs฀implementation฀would฀ help฀accelerate฀learning฀in฀climate฀protection฀efforts฀and฀ help฀build฀capacity฀to฀take฀further฀actions.฀The฀information฀gathered฀in฀a฀review฀of฀implementation฀should฀ enhance฀the฀ability฀of฀regulators฀and฀stakeholders฀to฀distinguish฀between฀policies฀that฀are฀effective฀from฀those฀that฀ fail฀to฀produce฀desired฀results,฀either฀in฀terms฀of฀emission฀ reductions฀or฀sustainable฀development฀benefits฀(Chapter฀ 2).฀Many฀industrialized฀and฀developing฀countries฀share฀ similar฀sets฀of฀concerns฀and/or฀natural฀resources,฀and฀a฀ better฀understanding฀of฀each฀others’฀priorities฀may฀reveal฀ new฀areas฀of฀collaboration.฀In฀this฀report,฀the฀value฀of฀ learning฀is฀related฀to฀climate฀benefits.฀However,฀SD-PAMs฀ may฀likewise฀accelerate฀learning฀on฀development฀matters.฀ Policies฀taken฀by฀countries฀to฀increase฀energy฀security,฀to฀ improve฀access฀to฀modern฀energy฀services,฀and฀to฀extend฀ the฀reach฀of฀transport฀systems฀are฀of฀inestimable฀value฀on฀ their฀own฀and฀provide฀an฀additional฀incentive฀to฀share฀ information฀and฀learning. Third,฀SD-PAMs฀offer฀a฀chance฀to฀make฀climate฀ change฀policy฀matter฀to฀developing฀countries฀by฀aligning฀it฀more฀directly฀with฀their฀interests.฀Development฀is฀a฀ key฀priority฀for฀decision฀makers฀in฀developing฀countries,฀ so฀that฀building฀climate฀change฀policy฀on฀development฀ priorities฀would฀make฀it฀attractive฀to฀these฀stakeholders.฀ Starting฀from฀development฀objectives฀and฀then฀describing฀ paths฀that฀also฀address฀climate฀change฀may฀be฀the฀easiest฀ way฀for฀many฀developing฀countries฀to฀take฀the฀first฀steps฀in฀ longer-term฀action฀on฀climate฀change.฀ Finally,฀by฀articulating฀the฀kinds฀of฀measures฀that฀ contribute฀to฀both฀the฀Convention฀objective฀and฀national฀ sustainable฀development฀objectives,฀those฀measures฀can฀ be฀more฀vigorously฀promoted฀by฀Parties฀and฀international฀ organizations.฀This฀can฀be฀done฀in฀a฀number฀of฀ways,฀including฀new฀financing฀arrangements,฀discussed฀in฀section฀ 4,฀and฀credit฀trading฀(Chapter฀2).฀Formalizing฀SD-PAMs฀ would฀likewise฀give฀stakeholders,฀including฀national฀civil฀ society฀groups฀and฀the฀media,฀concrete฀policy฀options฀to฀ promote,฀track,฀and฀evaluate฀at฀the฀domestic฀level.฀ If฀such฀an฀approach฀were฀successful฀in฀altering฀development฀paths,฀the฀climate฀benefits฀would฀likely฀be฀substantial.฀In฀fact,฀the฀scenarios฀of฀the฀Intergovernmental฀ Panel฀on฀Climate฀Change฀(IPCC)฀suggest฀that฀the฀type฀of฀ development฀path฀taken฀by฀a฀country฀is฀more฀significant฀ in฀terms฀of฀long-term฀emissions฀than฀explicit฀mitigation฀measures฀(see฀Box฀2).฀Because฀of฀this฀dynamic,฀the฀ objective฀of฀the฀Climate฀Convention฀can฀be฀furthered฀by฀ addressing฀development฀considerations฀more฀directly฀in฀ its฀architecture.฀SD-PAMs฀can฀be฀thought฀of฀as฀a฀means฀ of฀identifying฀and฀making฀operational฀the฀differences฀฀ 25 20 15 10 5 0 1980 2000 2020 2040 2060 2080 2100 2120 AIT Scenatio (SRES) B1 Scenario (SRES) A1F1 (A1G) Scenario (SRES) A2 Scenario (SRES) B2 Scenario (SRES) A1 (A1B) Scenario (SRES) Source:฀IPCC฀(2001) IN TR OD U C TION ฀ TO฀ SU STA IN A B LE฀ D EVELOPMEN T฀ POLIC IES฀ A ND ฀ MEA SU R ES 9 4.฀FUNDING฀SD-PAMS฀ SD-PAMs฀of฀the฀scale฀needed฀to฀change฀emissions฀ and฀development฀trajectories฀will฀require฀higher฀levels฀of฀ funding฀than฀have฀hitherto฀been฀available฀for฀mitigation฀ in฀developing฀countries.฀The฀present฀model฀for฀funding฀ mitigation฀in฀developing฀countries฀has฀had฀only฀limited฀ success.฀Developing฀countries,฀as฀discussed,฀are฀required฀ under฀the฀UNFCCC฀to฀formulate฀and฀implement฀GHG฀ mitigation฀measures.฀For฀their฀part,฀industrialized฀countries฀ are฀obligated฀to฀provide฀the฀finance฀and฀technology฀to฀฀ meet฀the฀“agreed฀full฀incremental฀costs”฀of฀implementing฀these฀measures.11฀Financial฀resources฀can฀be฀provided฀ through฀the฀Global฀Environment฀Facility฀(GEF)฀or฀ through฀bilateral,฀regional,฀or฀multilateral฀channels.12฀฀ This฀system,฀however,฀has฀no฀definitions,฀guidelines,฀or฀ requirements฀as฀to฀what฀measures฀developing฀countries฀฀ might฀take,฀nor฀does฀it฀establish฀a฀systematic฀accounting฀฀ of฀funding฀provided฀(aside฀from฀the฀GEF),฀or฀of฀the฀฀ resulting฀emission฀reductions.13฀(See฀Box฀3฀for฀relevant฀฀ existing฀financial฀mechanisms.) For฀these฀reasons,฀both฀mitigation฀programs฀(with฀ respect฀to฀PAMs฀in฀developing฀countries)฀and฀the฀associated฀financing฀and฀technology฀transfer฀(from฀developed฀ countries)฀are฀viewed฀as฀more฀hortatory฀than฀required.฀ Not฀surprisingly,฀funding฀is฀a฀topic฀of฀considerable฀ 10 disagreement฀and฀acrimony฀in฀the฀international฀climate฀ negotiations.฀Developing฀countries฀tend฀to฀continually฀ insist฀on฀more฀funding฀through฀the฀UNFCCC,฀whereas฀ industrialized฀countries฀tend฀to฀resist฀open-ended฀promises฀ of฀financing.฀ To฀achieve฀the฀Convention฀objective,฀the฀present฀system฀will฀need฀to฀improve.฀Whether฀SD-PAMs฀will฀deliver฀ such฀an฀improvement฀cannot฀be฀known฀in฀advance.฀The฀ approach฀does,฀however,฀offer฀more฀rigor฀and฀flexibility฀ than฀the฀present฀system.฀It฀is฀more฀rigorous,฀as฀discussed฀ below,฀in฀that฀it฀establishes฀tangible฀commitments฀toward฀ which฀financial฀resources฀can฀meaningfully฀be฀directed.฀It฀ is฀more฀flexible฀in฀that฀climate฀change฀funding฀need฀not฀be฀ so฀separated฀from฀non-climate฀funding.฀The฀problem฀with฀ continually฀creating฀discrete฀“pots”฀of฀money฀earmarked฀ for฀GHG฀mitigation฀is฀that฀they฀will฀never฀be฀large฀ enough฀to฀achieve฀the฀Convention฀objective.฀Accordingly,฀ the฀real฀challenge฀is฀to฀instill฀carbon฀considerations฀into฀ the฀broader฀set฀of฀international฀capital฀flows,฀only฀some฀of฀ which฀are฀climate-specific.฀ Along฀these฀lines,฀SD-PAM฀funding฀should฀be฀able฀to฀ come฀from฀any฀source:฀bilateral฀aid฀agencies,฀the฀GEF,฀ multilateral฀development฀banks,฀export฀credit฀agencies,฀the฀ private฀sector,฀the฀host฀government฀(federal฀and฀perhaps฀ state/local),฀state฀and฀local฀communities,฀or฀others.฀Some฀ funders—host฀governments,฀development฀banks,฀and฀aid฀ agencies—would฀be฀primarily฀concerned฀with฀alleviating฀ poverty฀or฀otherwise฀boosting฀economic฀development.14฀ Other฀funders,฀such฀as฀the฀GEF,฀would฀invest฀because฀of฀ the฀explicit฀climate฀benefit.฀Still฀others,฀such฀as฀private฀ banks฀or฀corporations,฀would฀have฀commercial฀purposes,฀ or฀finance฀the฀GHG฀component฀of฀a฀policy฀or฀project฀in฀ order฀to฀acquire฀resulting฀emission฀reductions.฀The฀intent฀ is฀to฀align฀and฀strengthen฀the฀linkages฀between฀the฀relevant฀ financial฀institutions฀in฀a฀manner฀that฀maximizes฀resource฀ and฀technology฀flows฀to฀development฀initiatives฀that฀ deliver฀climate฀benefits.15฀ Which฀funding฀approach฀is฀most฀appropriate฀is฀dependent฀on฀the฀circumstances,฀as฀the฀case฀studies฀in฀this฀ report฀illustrate.฀In฀some฀cases—such฀as฀biofuels฀or฀energy฀ efficiency—measures฀may฀have฀no฀incremental฀costs,฀as฀ they฀are฀sufficiently฀attractive฀on฀non-climate฀grounds฀and฀ thus฀may฀not฀require฀international฀assistance.฀A฀whole฀ basket฀of฀SD-PAMs฀in฀the฀transport฀sector,฀for฀instance,฀ could฀benefit฀China฀(in฀terms฀of฀reduced฀oil฀dependency,฀ greater฀mobility,฀and฀improved฀public฀health)฀as฀well฀as฀ the฀global฀environment฀(Chapter฀4).฀Here,฀international฀ funding฀may฀not฀be฀critical,฀as฀domestic฀benefits฀drive฀ down฀the฀incremental฀costs฀of฀climate฀friendly฀action.฀ In฀other฀instances,฀such฀as฀carbon฀capture฀and฀storage฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST (CCS)฀in฀South฀Africa฀(Chapter฀6),฀sustainable฀development฀benefits฀are฀low฀while฀global฀benefits฀are฀high.฀Here,฀ international฀financing฀of฀CCS฀technology฀is฀crucial.฀In฀ still฀other฀cases,฀such฀as฀renewable฀energy฀in฀India’s฀power฀ sector฀(Chapter฀5),฀there฀are฀large฀national฀and฀global฀benefits,฀yet฀capital฀and฀institutional฀constraints฀necessitate฀ international฀assistance.฀ An฀SD-PAMs฀approach฀to฀funding฀also฀offers฀rigor฀in฀ that฀it฀would฀direct฀financial฀resources฀to฀tangible฀commitments.฀The฀fact฀that฀a฀country฀has฀committed฀to฀ undertake฀a฀particular฀action฀might฀make฀it฀more฀likely฀ to฀attract฀funding.฀By฀way฀of฀comparison,฀the฀successful฀financial฀mechanism฀of฀the฀Montreal฀Protocol฀on฀ Substances฀that฀Deplete฀the฀Ozone฀Layer฀(together฀with฀ bilateral฀assistance)฀finances฀the฀phaseout฀commitments฀ agreed฀to฀by฀developing฀countries.฀If฀GEF฀and฀other฀ assistance฀were฀similarly฀geared฀toward฀implementing฀ pledged฀SD-PAMs,฀then฀developing฀countries฀may฀be฀able฀ to฀negotiate฀additional฀funding,฀and฀all฀stakeholders฀could฀ monitor฀progress.฀ The฀international฀carbon฀market฀may฀also฀be฀able฀to฀ give฀a฀tangible฀financial฀boost฀to฀some฀SD-PAMs.฀Whether฀this฀is฀possible฀depends฀on฀the฀degree฀to฀which฀emissions฀reductions฀from฀certain฀SD-PAMs฀can฀be฀quantified,฀ a฀topic฀returned฀to฀in฀Chapter฀2.฀ 5.฀THE฀LIMITATIONS฀OF฀SD-PAMS฀ There฀are฀few฀ideas฀so฀good฀that฀they฀cannot฀be฀killed฀ by฀being฀oversold.฀While฀an฀approach฀based฀on฀SD-PAMs฀ seems฀to฀offer฀some฀promise฀for฀engaging฀developing฀ countries฀in฀lower-emission฀development,฀it฀has฀its฀limits.฀ Some฀challenges฀include: SD-PAMs฀do฀not฀substitute฀for฀mitigation฀by฀developed฀countries.฀Although฀the฀level฀of฀emissions฀consistent฀ with฀avoiding฀dangerous฀climate฀change฀is฀subject฀to฀ both฀scientific฀and฀political฀uncertainties,฀even฀the฀most฀ “sustainable”฀of฀the฀IPCC฀emission฀scenarios฀does฀not฀ seem฀likely฀to฀adequately฀reduce฀greenhouse฀gases.฀As฀an฀ exclusive฀policy,฀SD-PAMs฀are฀aimed฀at฀poorer฀or฀less฀ developed฀countries฀that฀are฀not฀able฀to฀take฀on฀explicit฀ climate฀mitigation฀programs.฀Richer฀countries฀do฀not฀fall฀ into฀this฀group.฀For฀this฀group,฀SD-PAMs฀may฀possibly฀ be฀adopted฀as฀complements฀to,฀rather฀than฀substitutes฀for,฀ existing฀and฀new฀mitigation฀policy฀options. SD-PAMs฀do฀not฀seem฀appropriate฀for฀every฀technology฀or฀policy.฀The฀South฀Africa฀case฀study฀in฀Chapter฀ 6฀suggests฀that฀for฀a฀technology฀option฀such฀as฀carbon฀ capture฀and฀storage,฀the฀sustainable฀development฀benefits฀ are฀simply฀not฀a฀significant฀factor.฀Thus,฀measures฀such฀as฀ these,฀if฀they฀are฀to฀be฀undertaken,฀will฀need฀full฀financial฀ support฀on฀the฀basis฀of฀the฀climate฀benefits฀alone.฀Furthermore,฀some฀policies฀and฀measures฀that฀are฀appropriate฀for฀ Box฀3.฀฀Existing฀Funding฀Mechanisms:฀the฀GEF฀and฀CDM The฀two฀concrete฀mechanisms฀for฀financing฀GHG฀mitigation฀that฀do฀exist—฀ the฀Global฀Environment฀Facility฀and฀the฀Clean฀Development฀Mechanism—are฀ primarily฀focused฀on฀projects,฀rather฀than฀policy฀change฀or฀sectoral฀strategies. During฀2003–04,฀the฀GEF,฀as฀the฀financial฀mechanism฀of฀the฀Convention,฀ contributed฀about฀$217฀million฀to฀climate฀change฀activities,฀about฀$150฀million฀ of฀which฀was฀targeted฀at฀GHG฀mitigation฀efforts฀related฀to฀wind฀power,฀energy฀ efficiency,฀and฀other฀areas.฀Since฀its฀inception฀in฀the฀mid-1990s,฀the฀GEF฀has฀ committed฀$1.8฀billion฀in฀grants฀to฀climate฀change฀projects,฀and฀leveraged฀about฀ five฀times฀that฀amount฀in฀cofinancing.฀The฀GEF฀is฀capitalized฀by฀Parties฀from฀ industrialized฀countries฀in฀multiyear฀replenishments.฀ The฀Kyoto฀Protocol’s฀Clean฀Development฀Mechanism฀is฀expected฀to฀generate฀ financial฀flows฀on฀the฀same฀order฀of฀magnitude฀as฀the฀GEF.฀A฀review฀of฀estimates฀ of฀the฀projected฀size฀of฀CDM฀activity฀reveals฀a฀central฀estimate฀of฀about฀250฀ million฀tons฀per฀year฀(range฀of฀50฀to฀500).฀At฀a฀market฀price฀of฀$3฀per฀ton฀of฀ CO2฀equivalent,฀this฀would฀amount฀to฀about฀$750฀million฀per฀year.฀The฀CDM฀is฀ geared฀primarily฀toward฀private฀funding,฀and฀is฀expressly฀segregated฀from฀other฀ financial฀flows฀under฀the฀Convention.฀Specifically,฀CDM฀project฀participants฀must฀ provide฀an฀“affirmation”฀that฀“funding฀does฀not฀result฀in฀a฀diversion฀of฀official฀ development฀assistance฀and฀is฀separate฀from฀and฀is฀not฀counted฀toward฀the฀ financial฀obligations฀of฀those฀Parties.” The฀Special฀Climate฀Change฀Fund฀(SCCF)฀also฀provides฀funding฀for฀Convention฀ implementation,฀including฀for฀mitigation฀projects.฀At฀the฀10th฀Conference฀of฀฀ the฀Parties฀to฀the฀UNFCCC฀in฀2004,฀industrialized฀country฀Parties฀pledged฀$34.7฀ million฀to฀the฀SCCF.฀ Sources:฀UNFCCC฀(2004a);฀Haites฀(2004);฀UNFCCC฀(2001):฀Appendix฀B;฀http://unfccc.int. non-climate฀goals฀will฀be฀harmful฀from฀a฀climate฀perspective—for฀instance฀responding฀to฀oil฀security฀concerns฀with฀ technologies฀that฀produce฀liquid฀fuels฀from฀high-carbon฀ sources฀such฀as฀coal.฀Along฀the฀same฀lines,฀some฀potentially฀fruitful฀SD-PAMs฀might฀be฀counteracted฀by฀other฀ PAMs฀that฀promote฀increases฀in฀emissions. SD-PAMs฀implementation,฀on฀the฀scale฀needed,฀may฀ not฀attract฀sufficient฀funding.฀The฀scale฀of฀the฀challenges฀ being฀addressed฀by฀SD-PAMs฀is฀large฀in฀terms฀of฀the฀ potential฀gains,฀both฀to฀development฀and฀to฀the฀climate.฀ As฀with฀development฀itself,฀however,฀the฀associated฀costs฀ are฀correspondingly฀high.฀It฀remains฀to฀be฀seen฀whether฀the฀ multiple฀benefits฀from฀SD-PAMs฀make฀them฀more฀successful฀than฀other฀approaches฀in฀attracting฀the฀levels฀of฀support,฀ both฀within฀the฀host฀country฀and฀from฀the฀international฀ community,฀appropriate฀to฀the฀scale฀of฀the฀challenge. ฀ IN TR OD U C TION ฀ TO฀ SU STA IN A B LE฀ D EVELOPMEN T฀ POLIC IES฀ A ND ฀ MEA SU R ES 11 6.฀THIS฀REPORT At฀the฀core฀of฀the฀report฀are฀four฀case฀studies฀of฀actual฀ or฀potential฀policies฀and฀measures฀that฀might฀fit฀within฀an฀ SD-PAMs฀framework.฀They฀show฀the฀potential฀links฀between฀international฀policy฀and฀domestic฀efforts,฀and฀how฀ this฀balance฀might฀differ฀for฀different฀SD-PAM฀types—in฀ which฀some฀measures฀may฀be฀compelling฀in฀their฀own฀ right,฀while฀others฀are฀dependent฀on฀funding฀and฀support฀ from฀developed฀countries. Chapter฀Two฀discusses฀some฀of฀the฀possible฀operational฀mechanics฀of฀how฀SD-PAMs฀might฀be฀incorporated฀ into฀an฀international฀climate฀agreement.฀It฀addresses฀the฀฀ key฀issues฀of฀definition฀of฀eligible฀types฀of฀SD-PAMs฀ and฀the฀procedures฀for฀pledging,฀tracking,฀and฀reviewing฀ SD-PAMs.฀Resolving฀GHG฀accounting฀issues฀may฀also฀ enable฀quantification฀of฀the฀GHG฀benefits฀flowing฀from฀ particular฀PAMs,฀or฀sectors฀within฀which฀multiple฀PAMs฀ are฀targeted. Chapter฀Three฀presents฀the฀case฀of฀the฀Brazilian฀biofuels฀ program,฀which฀has฀promoted฀the฀use฀of฀ethanol฀as฀a฀ transport฀fuel฀to฀substitute฀for฀petrol.฀This฀was฀established฀ in฀the฀1970s฀in฀response฀to฀both฀the฀oil฀crisis,฀which฀ presented฀a฀major฀balance฀of฀payments฀problem฀for฀oil฀ importers,฀and฀a฀weak฀sugar฀market,฀which฀was฀damaging฀฀ Brazil’s฀large฀sugarcane฀industry.฀To฀date,฀it฀has฀saved฀ Brazil฀some฀$100฀billion฀in฀external฀debt฀and฀created฀ directly฀and฀indirectly฀an฀estimated฀1฀million฀jobs฀in฀rural฀ 12 areas.฀The฀climate฀has฀also฀benefited,฀as฀ethanol฀use฀in฀ place฀of฀petrol฀offsets฀some฀26฀MtCO2฀emissions฀per฀year.฀ While฀the฀authors฀conclude฀that฀the฀ethanol฀program฀does฀ not฀depend฀on฀recognition฀of฀its฀climate฀benefits฀for฀its฀ success,฀they฀suggest฀that฀valuation฀of฀these฀benefits฀might฀ accelerate฀the฀expansion฀of฀biofuel฀use.฀Such฀benefits฀฀ may฀also฀serve฀to฀promote฀the฀implementation฀of฀such฀a฀ program฀in฀other฀countries. Chapter฀Four฀examines฀two฀major฀emerging฀constraints฀ on฀transport฀in฀the฀fast-growing฀“megacities”฀of฀China:฀ oil฀supply฀and฀urban฀infrastructure.฀The฀government฀in฀ China฀is฀beginning฀to฀take฀measures฀to฀encourage฀the฀use฀ of฀higher-efficiency฀vehicles฀to฀reduce฀oil฀import฀growth,฀ and฀small฀vehicle฀platforms฀to฀limit฀the฀impact฀on฀road฀ and฀parking฀space.฀In฀addition฀there฀are฀a฀number฀of฀ measures฀proposed฀to฀reduce฀car฀miles฀traveled฀by฀offering฀public฀transport฀alternatives.฀The฀study฀examines฀the฀ consequences฀of฀significantly฀increasing฀the฀policy฀“push”฀ in฀these฀directions,฀showing฀how฀adoption฀of฀thoughtful฀transport฀policies฀in฀China฀could฀decrease฀carbon฀ emissions฀an฀enormous฀79฀percent฀in฀2020฀relative฀to฀a฀ continuation฀of฀present฀trends.฀Such฀policies฀would฀have฀ the฀major฀added฀benefit฀of฀reducing฀dependence฀on฀oil฀use฀ and฀relieving฀pressure฀on฀urban฀infrastructure.฀It฀is฀these฀ characteristics฀that฀make฀the฀measures฀attractive฀both฀for฀ China฀and฀for฀other฀growing฀economies฀faced฀with฀similar฀ energy฀supply฀constraints. Chapter฀Five฀looks฀at฀the฀options฀facing฀India฀as฀it฀aims฀ to฀provide฀electricity฀to฀the฀more฀than฀100฀million฀households฀that฀currently฀lack฀it.฀While฀the฀task฀is฀daunting,฀the฀ development฀stakes฀are฀huge.฀The฀study฀examines฀rural฀ electrification฀approaches฀based฀on฀extension฀of฀the฀grid,฀ as฀proposed฀by฀the฀Ministry฀of฀Power,฀as฀well฀as฀two฀alternative฀scenarios฀based฀on฀off-grid฀power:฀one฀dominated฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST by฀diesel,฀the฀other฀based฀mainly฀on฀renewable฀energy.฀The฀ authors฀suggest฀that฀a฀renewable฀energy฀approach฀brings฀ some฀significant฀potential฀advantages,฀notably฀in฀reduced฀ import฀dependence฀for฀both฀oil฀and฀coal,฀as฀well฀as฀setting฀ rural฀India฀on฀a฀low-emission฀trajectory฀that฀will฀grow฀in฀ importance฀as฀their฀power฀demand฀does.฀However,฀it฀is฀ not฀clear฀that฀the฀non-climate฀benefits฀outweigh฀the฀additional฀cost฀of฀renewable฀technologies.฀This฀may฀present฀a฀ potential฀opportunity฀for฀India฀to฀seek฀support฀from฀international฀donors฀to฀reflect฀the฀global฀benefit฀at฀issue;฀it฀may฀ also฀provide฀the฀potential฀for฀the฀dispersion฀of฀new฀and฀ lower-cost฀technologies฀that฀could฀find฀a฀large฀competitive฀ market฀if฀prices฀did฀decline.฀Inasmuch฀as฀other฀developing฀ countries฀face฀a฀similar฀cost฀hurdle—with฀comparable฀limits฀on฀financial฀wherewithal—this฀case฀is฀of฀clear฀relevance฀ to฀a฀potentially฀large฀global฀renewable฀energy฀market.฀ Chapter฀Six฀examines฀the฀use฀of฀carbon฀capture฀and฀ storage฀in฀South฀Africa.฀South฀Africa฀is฀one฀of฀several฀ developing฀countries฀highly฀dependent฀on฀coal฀for฀power฀ generation฀(93฀percent฀of฀its฀power฀comes฀from฀coal),฀and฀ likely฀to฀remain฀so฀for฀the฀foreseeable฀future.฀South฀Africa฀ also฀shares฀with฀many฀developing฀countries฀the฀need฀to฀expand฀access฀to฀electric฀power,฀particularly฀in฀its฀rural฀areas.฀ If฀indeed฀the฀country฀is฀locked฀into฀growing฀coal฀demand,฀ then฀the฀use฀of฀carbon฀capture฀and฀storage฀to฀mitigate฀the฀ resulting฀emissions฀is฀an฀option฀that฀has฀to฀be฀examined.฀ The฀authors฀suggest฀that฀some฀minor฀non-climate฀ sustainable฀development฀benefits฀for฀South฀Africa฀may฀accrue,฀particularly฀in฀the฀transfer฀of฀some฀technologies฀with฀ broader฀application.฀However,฀these฀benefits฀are฀tiny฀in฀ comparison฀with฀the฀costs฀involved.฀This฀case฀study฀suggests฀one฀limit฀to฀the฀SD-PAMs฀approach:฀carbon฀capture฀ and฀storage฀remains฀an฀explicit฀mitigation฀measure,฀and฀as฀ such฀a฀developing฀country฀such฀as฀South฀Africa฀is฀unlikely฀ to฀shoulder฀its฀cost.฀Although฀capture฀and฀storage฀is฀not฀ going฀to฀be฀an฀SD-PAM,฀the฀case฀does฀provide฀a฀useful฀framework฀for฀evaluating฀the฀magnitude฀of฀the฀costs฀ that฀may฀need฀to฀be฀borne฀in฀any฀country฀that฀chooses฀ to฀adopt฀such฀a฀technology.฀Given฀the฀reliance฀on฀coal฀in฀ other฀major฀economies—such฀as฀China,฀India,฀and฀the฀ United฀States—this฀study฀provides฀insights฀that฀may฀have฀ application฀beyond฀the฀SD-PAMs฀framework. Chapter฀Seven฀offers฀some฀conclusions฀and฀suggests฀ areas฀that฀need฀further฀investigation฀and฀debate฀to฀develop฀ the฀SD-PAMs฀concept฀further.฀It฀argues฀that฀the฀SDPAMs฀approach฀offers฀genuine฀scope฀for฀limiting฀emissions฀growth฀in฀developing฀countries฀while฀accelerating฀ their฀economic฀development.฀The฀key฀aspect฀of฀SD-PAMs฀ is฀that฀the฀sustainable฀development฀goals฀of฀the฀host฀country฀form฀the฀basis฀of฀a฀policy฀commitment,฀rather฀than฀an฀ emissions-based฀target.฀There฀are฀limitations฀in฀the฀types฀ of฀climate฀technologies฀that฀can฀be฀supported฀in฀this฀way,฀ but฀this฀is฀in฀itself฀an฀indicator฀of฀what฀types฀of฀abatement฀ strategies฀are฀most฀appropriate.฀The฀issue฀of฀how฀SDPAMs฀will฀be฀supported฀is฀one฀that฀requires฀further฀work,฀ but฀there฀is฀reason฀to฀hope฀that฀a฀mixture฀of฀financial฀and฀ other฀types฀of฀support฀may฀be฀easier฀to฀leverage฀through฀a฀ policy-based฀negotiation฀focused฀on฀development฀than฀by฀ broader฀emissions-based฀commitments.฀ ENDNOTES ฀ ฀See฀Chapter฀3฀reference฀MCT,฀2004. ฀ ฀See฀for฀instance฀Bondansky฀et฀al.,฀2004;฀Mquadi฀et฀al.,฀2005;฀den฀ Elzen฀and฀Berk,฀2004. ฀ 3฀ ฀UNFCCC,฀Art.฀4.1(b),฀stating฀that฀“all฀Parties฀shall฀“[f ]ormulate,฀ implement,฀publish฀and฀regularly฀update฀national฀...฀programmes฀ containing฀measures฀to฀mitigate฀climate฀change...”฀This฀requirement,฀ however,฀pertains฀mainly฀to฀developing฀countries,฀since฀industrialized฀ countries฀have฀additional฀specific฀commitments.฀ ฀ 4฀ ฀UNFCCC,฀Art.฀3.4.฀Emphasis฀added. ฀ 5฀ ฀Kyoto฀Protocol,฀1997:฀Art.฀10. ฀ 6฀ ฀In฀terms฀of฀reporting฀obligations,฀some฀developing฀countries฀include฀ PAMs฀in฀their฀national฀communications฀under฀the฀Convention,฀ but฀there฀are฀no฀guidelines฀or฀requirements฀or฀for฀doing฀so.฀Kyoto฀ Protocol,฀Art.฀10(b)(ii)฀(“Parties฀shall฀seek฀to฀include฀in฀their฀national฀ communications,฀as฀appropriate,฀information฀on฀[GHG]฀programmes฀ ...฀.”฀฀Emphasis฀added.).฀Parties฀included฀in฀Annex฀I฀are฀required฀to฀ report฀on฀progress฀made฀in฀implementing฀policies฀and฀measures฀฀ (Marrakech฀Accords฀Decision฀22/CP.7),฀but฀this฀obligation฀does฀not฀ extend฀to฀developing฀country฀Parties. ฀ 7฀ ฀See฀for฀instance฀Victor฀et฀al,฀2004,฀part฀of฀a฀broader฀process฀on฀ creating฀an฀“L20”฀of฀the฀leaders฀of฀large฀countries฀to฀focus฀on฀major฀ international฀problems.฀Available฀at:฀http://www.L20.org.฀ ฀ 8฀ ฀See฀e.g.,฀La฀Rovere฀et฀al.,฀2002฀(exploring฀the฀Brazilian฀proposal฀based฀ on฀historical฀responsibility),฀Aslam,฀2002฀(analyzing฀equal฀per฀capita฀ entitlements),฀and฀Blanchard,฀2002฀(comparing฀three฀proposals).฀ ฀ 9฀ ฀Baumert฀et฀al.,฀2005฀(noting฀the฀technical฀and฀political฀problems,฀in฀ particular฀associated฀with฀uncertainties฀in฀future฀emission฀projections฀ in฀developing฀countries).฀ ฀10฀ ฀Goldemberg฀and฀Reid,฀1999;฀Chandler฀et฀al.,฀2002. ฀11฀ ฀UNFCCC,฀1992:฀Art.฀4.1(b);฀Art.฀4.3. ฀12฀ ฀UNFCCC,฀1992:฀Art.฀11. ฀13฀ ฀See฀UNFCCC฀2004b.฀The฀most฀recent฀estimates฀of฀bilateral฀assistance฀ are฀from฀1998-2000,฀when฀the฀OECD฀estimated฀“climate-changerelated฀aid”฀(broadly฀defined)฀at฀about฀$2.7฀billion฀per฀year฀(OECD,฀ 2002).฀Multilateral฀funding฀through฀the฀World฀Bank,฀UNDP,฀and฀ others฀for฀support฀of฀Convention฀implementation฀is฀significant,฀but฀ not฀presently฀known. ฀14฀ ฀Care฀would฀have฀to฀be฀taken฀that฀SD-PAMs฀not฀divert฀development฀ assistance฀flows฀away฀from฀other฀priorities฀(health฀care,฀education,฀ etc.)฀that฀do฀not฀offer฀similar฀potential฀for฀cutting฀GHG฀emissions. ฀15฀ ฀For฀an฀excellent฀discussion฀of฀this฀concept,฀see฀Heller฀and฀Shukla,฀ 2003:฀132฀(referring฀to฀“programmatic฀climate฀cooperation”). ฀ 1 ฀ 2 IN TR OD U C TION ฀ TO฀ SU STA IN A B LE฀ D EVELOPMEN T฀ POLIC IES฀ A ND ฀ MEA SU R ES 13 REFERENCES BP.฀2005. BP.฀2005.฀Statistical฀Review฀of฀World฀Energy.฀Available฀at:฀http:// www.bp.com/downloads.do?categoryId=9003093&contentId=฀ 7005944. IPCC฀(Intergovernmental฀Panel฀on฀Climate฀Change).฀2001.฀ Climate฀Change฀2001:฀Mitigation.฀Contribution฀of฀Working฀ Group฀III฀to฀the฀Third฀Assessment฀report฀of฀the฀IPCC.฀Available฀ at:฀http://www.grida.no/climate/ipcc_tar/.฀ Baumert,฀K.,฀T.฀Herzog,฀and฀J.฀Pershing,฀2005. Baumert,฀K.,฀T.฀Herzog,฀and฀J.฀Pershing,฀2005.฀Navigating฀the฀ Numbers:฀Greenhouse฀Gas฀Data฀and฀International฀Climate฀Policy.฀ Washington,฀DC:฀World฀Resources฀Institute.฀ Mquadi,฀Lwandle,฀Harald฀Winkler,฀and฀Angela฀Churie฀Kallhaug. Mquadi,฀Lwandle,฀Harald฀Winkler,฀and฀Angela฀Churie฀Kallhaug.฀ 2005.฀South฀Africa฀beyond฀Kyoto.฀Stockholm:฀Swedish฀Environ2005. mental฀Protection฀Agency.฀Available฀at:฀www.naturvardsverket. se/dokument/press/2004/juni/postkyoto/southafrica.pdf. Bodansky,฀D.,฀S.฀Chou,฀and฀Christie฀Jorge-Tresolini.฀2004.฀ International฀Climate฀Efforts฀beyond฀2012:฀a฀Survey฀of฀Approaches.฀ Washington,฀DC:฀Pew฀Center฀on฀Global฀Climate฀Change. OECD฀(Organisation฀for฀Economic฀Co-operation฀and฀฀ OECD฀(Organisation฀for฀Economic฀Co-operation฀and฀฀ Development).฀2002.฀Aid฀Targeting฀the฀Objectives฀of฀the฀Rio฀฀ Development).฀2002. Conventions฀1998-2000.฀Paris:฀OECD. Chandler,฀W.฀et฀al.฀2002. Chandler,฀W.฀et฀al.฀2002.฀Climate฀Change฀Mitigation฀in฀Developing฀Countries:฀Brazil,฀China,฀India,฀Mexico,฀S.฀Africa,฀and฀Turkey.฀ Washington,฀DC:฀Pew฀Center฀on฀Global฀Climate฀Change.฀ Schelling,฀Thomas฀C.฀1998. Schelling,฀Thomas฀C.฀1998.฀Costs฀and฀Benefits฀of฀Greenhouse฀฀ Gas฀Reduction.฀Washington,฀DC:฀AEI฀Press. Chayes,฀Abram฀and฀Antonia฀Handler฀Chayes.฀1991.฀ Chayes,฀Abram฀and฀Antonia฀Handler฀Chayes.฀1991.฀“Adjustment฀and฀Compliance฀Processes฀in฀International฀Regulatory฀ Regimes.”฀In฀Jessica฀Tuchman฀Mathews,฀ed.฀Preserving฀the฀Global฀ Environment:฀The฀Challenge฀of฀Shared฀Leadership.฀New฀York:฀ W.W.฀Norton฀&฀Co. Climate฀Action฀Network.฀2003. Climate฀Action฀Network.฀2003.฀A฀Viable฀Global฀Framework฀for฀ Preventing฀Dangerous฀Climate฀Change—CAN฀Discussion฀Paper.฀ Available฀at:฀http://www.climatenetwork.org.฀ den฀Elzen,฀M.G.J.฀and฀M.M.฀Berk.฀2004. den฀Elzen,฀M.G.J.฀and฀M.M.฀Berk.฀2004.฀Bottom฀Up฀Approaches฀ for฀Defining฀Future฀Climate฀Mitigation฀Commitments.฀Bilthoven:฀ RIVM. Goldemberg,฀J.฀and฀W.฀Reid,฀eds.฀1999.฀Promoting฀Development฀ Goldemberg,฀J.฀and฀W.฀Reid,฀eds.฀1999. while฀Limiting฀Greenhouse฀Gas฀Emissions:฀Trends฀and฀Baselines.฀ New฀York:฀UNDP฀and฀World฀Resources฀Institute. Haites,฀E.฀2004. Haites,฀E.฀2004.฀Estimating฀the฀Market฀Potential฀for฀the฀Clean฀ Development฀Mechanism:฀Review฀of฀Models฀and฀Lessons฀Learned.฀ Available฀at:฀http://carbonfinance.org/docs/EstimatingMarket฀ Potential.pdf. Hare,฀B.฀and฀M.฀Meinshausen,฀2004, Hare,฀B.฀and฀M.฀Meinshausen,฀2004,฀“How฀Much฀Warming฀ Are฀We฀Committed฀to฀and฀How฀Much฀Can฀Be฀Avoided?”฀PIK฀ Report฀49฀(93).฀Potsdam:฀Potsdam฀Institute฀for฀Climate฀Impact฀ Research.฀Online฀at:฀http://www.pik-potsdam.de/publications/ pik_reports.฀ IEA฀(International฀Energy฀Agency).฀2002.฀ IEA฀(International฀Energy฀Agency).฀2002.฀World฀Energy฀฀ Outlook฀2002:฀Energy฀&฀Poverty.฀Paris.฀Available฀at:฀http://www. worldenergyoutlook.org/weo/pubs/weo2002/EnergyPoverty.pdf. IEA.฀2003. IEA.฀2003.฀“The฀Impact฀of฀Higher฀Oil฀Prices฀on฀the฀World฀ Economy.”฀Available฀at:฀http://library.iea.org/dbtw-wpd/textbase/ weo/papers/SLTZO.pdf.฀ Sohn,฀J.,฀S.฀Nakhooda,฀and฀K.฀Baumert.฀2005.฀Mainstreaming฀ Sohn,฀J.,฀S.฀Nakhooda,฀and฀K.฀Baumert.฀2005. Climate฀Change฀at฀the฀Multilateral฀Development฀Banks.฀฀ Washington,฀DC:฀World฀Resources฀Institute. Victor,฀David฀G.฀2001. Victor,฀David฀G. 2001.฀The฀Collapse฀of฀the฀Kyoto฀Protocol฀and฀฀ the฀Struggle฀to฀Slow฀Global฀Warming.฀Princeton,฀New฀Jersey:฀ Princeton฀University฀Press. Victor,฀David฀G.฀et฀al.฀2004. Victor,฀David฀G.฀et฀al.฀2004.฀“Climate฀Change฀at฀the฀L20?฀ Overview฀of฀the฀Issues.”฀Commissioned฀briefing฀notes฀for฀the฀ CIGI/CFGS฀L20฀Project.฀New฀York,฀September฀20-21,฀2004.฀ Available฀at:฀http://www.L20.org.฀ WCED฀(World฀Commission฀on฀Environment฀and฀DevelopWCED฀(World฀Commission฀on฀Environment฀and฀Development)฀(The฀Brundtland฀Report).฀1987.฀“Our฀Common฀Future.”฀ ment)฀(The฀Brundtland฀Report).฀1987.฀ Oxford฀and฀New฀York:฀Oxford฀University฀Press. Winkler,฀H.,฀R.฀Spalding-Fecher,฀S.฀Mwakasonda,฀and฀฀ Winkler,฀H.,฀R.฀Spalding-Fecher,฀S.฀Mwakasonda,฀and฀฀ O.฀Davidson.฀2002.฀“Policies฀and฀Measures฀for฀Sustainable฀ O.฀Davidson.฀2002.฀ Development.”฀In฀Baumert฀et฀al.฀(eds.).฀Building฀on฀the฀Kyoto฀ Protocol:฀Options฀for฀Protecting฀the฀Climate.฀Washington,฀DC:฀ World฀Resources฀Institute. UNFCCC.฀2001. UNFCCC.฀2001.฀Report฀of฀the฀Conference฀of฀the฀Parties฀on฀its฀ Seventh฀Session,฀Held฀at฀Marrakesh฀from฀29฀Oct.฀to฀10฀Nov.฀2001,฀ decision฀17/CP.7,฀UNFCCC฀Doc.฀FCCC/CP/2001/13/Add.2. UNFCCC.฀2004a. UNFCCC.฀2004a.฀Report฀of฀the฀Global฀Environment฀Facility฀to฀ the฀Conference฀of฀the฀Parties.฀Note฀by฀the฀Secretariat.฀Document฀ FCCC/CP/2004/6.฀Available฀at:฀http://unfccc.int/resource/docs/ cop10/06.pdf.฀ UNFCCC.฀2004b.฀ UNFCCC.฀2004b.฀Implementation฀of฀decisions฀12/CP.2฀and฀12/ CP.3:฀determination฀of฀funding฀for฀the฀implementation฀of฀the฀Convention.฀Note฀by฀the฀Secretariat.฀Document฀FCCC/SBI/2004/6. World฀Bank.฀2005. World฀Bank.฀2005.฀World฀Development฀Indicators฀Online฀฀ Database฀(some฀data฀is฀also฀drawn฀from฀previous฀editions). WRI฀(World฀Resources฀Institute).฀2005.฀World฀Resources฀2005:฀ WRI฀(World฀Resources฀Institute).฀2005. The฀Wealth฀of฀the฀Poor—Managing฀Ecosystems฀to฀Fight฀Poverty.฀ Washington,฀DC:฀United฀Nations฀Development฀Programme,฀ United฀Nations฀Environment฀Programme,฀World฀Bank,฀and฀WRI. 14 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST chapter฀ii Sustainable฀Development฀฀ Sustainable฀Development฀฀ Policies฀and฀Measures฀and฀฀฀ Policies฀and฀Measures฀and฀ International฀Climate฀฀฀ International฀Climate฀ Agreements฀ Agreements Kevin฀A.฀Baumert฀ ■ ฀Harald฀Winkler One฀of฀the฀most฀difficult฀challenges฀facing฀nations฀ attempting฀to฀implement฀the฀Climate฀Convention฀is฀the฀ integration฀of฀GHG฀considerations฀into฀national฀development฀programs.฀Building฀on฀Winkler฀et฀al.฀(2002),฀this฀ chapter฀explores฀this฀challenge฀at฀the฀international฀level.฀ Namely,฀how฀might฀an฀approach฀based฀on฀policies฀and฀ measures฀be฀formalized฀and฀defined฀within฀a฀future฀international฀climate฀agreement?฀In฀other฀words,฀how฀might฀ Parties฀develop฀a฀mechanism฀for฀formally฀recognizing฀and฀ advancing฀the฀kinds฀of฀sustainable฀development฀policies฀ and฀measures฀(SD-PAMs)฀discussed฀in฀this฀volume?฀ The฀approach฀outlined฀here฀proceeds฀along฀several฀ steps.฀First,฀the฀international฀community฀would฀likely฀ need฀to฀agree฀on฀general฀guidelines฀for฀what฀constitutes฀ an฀“SD-PAM”฀that฀is฀eligible฀to฀be฀pledged฀under฀the฀ UNFCCC.฀These฀basic฀definitional฀considerations฀are฀ outlined฀in฀section฀1.฀Second,฀a฀process฀would฀be฀needed฀ whereby฀Parties฀would฀actually฀pledge฀eligible฀SD-PAMs.฀ Such฀a฀process,฀discussed฀in฀section฀2,฀could฀work฀in฀a฀ variety฀of฀different฀ways,฀either฀as฀unilateral,฀mutual,฀or฀ harmonized฀pledges.฀Third,฀once฀pledged,฀SD-PAMs฀ could฀be฀recorded฀and฀tracked฀by฀the฀Convention฀Secretariat฀or฀other฀body฀(section฀3).฀Fourth,฀a฀broader฀program฀ of฀assessing฀progress฀would฀likely฀be฀needed,฀including฀ reporting฀and฀review฀procedures฀(section฀4).฀Finally,฀while฀ this฀is฀essentially฀a฀qualitative฀approach,฀it฀is฀conceivable฀ that฀it฀could฀incorporate฀a฀quantitative฀dimension,฀and฀ perhaps฀also฀be฀integrated฀into฀the฀nascent฀international฀ carbon฀market.฀Section฀5฀discusses฀issues฀and฀options฀ regarding฀quantifying฀SD-PAMs. S U S TA IN A B LE ฀ D E VE LOPM EN T฀ POLIC IES฀ A N D ฀ M EA SU R ES฀ A N D ฀ IN TER N ATION A L฀ C LIMATE฀ A GR EEMEN TS฀ 15 1.฀DEFINING฀AND฀฀ 1.฀DEFINING฀AND฀฀ FORMALIZING฀SD-PAMS฀ Generally,฀SD-PAMs฀deliver฀both฀tangible฀national฀and฀ global฀benefits.฀This฀could฀include฀many฀of฀the฀actions฀฀ described฀in฀the฀case฀studies฀presented฀here,฀as฀well฀as฀฀ others,฀such฀as฀renewable฀energy฀initiatives,฀energy฀฀ efficiency฀standards,฀and฀forest฀conservation฀programs.฀ Beyond฀this฀foundational฀description฀and฀indicative฀ examples,฀however,฀three฀of฀the฀salient฀characteristics฀of฀ SD-PAMs฀warrant฀elaboration.฀ First,฀as฀discussed฀in฀Chapter฀1,฀“sustainable฀development”฀is฀not฀a฀rigidly฀defined฀concept.฀Sustainable฀฀ development,฀as฀articulated฀in฀the฀Rio฀Declaration฀on฀Environment฀and฀Development,฀is฀about฀the฀promotion฀of฀ healthy฀and฀productive฀lifestyles฀through฀improved฀social฀ and฀economic฀conditions฀(UNGA,฀1992).฀This฀includes฀ environmental฀protection฀and฀conservation.฀Because฀ priorities฀and฀circumstances฀differ฀widely฀by฀country,฀the฀ sustainable฀development฀aspect฀of฀SD-PAMs฀would฀be฀ defined฀by฀individual฀developing฀countries฀(Winkler฀et฀al.,฀ 2002).฀This฀is฀similar฀to฀the฀approach฀taken฀in฀the฀Clean฀ Development฀Mechanism฀(CDM),฀where฀it฀is฀the฀host฀ country’s฀prerogative฀to฀determine฀whether฀a฀project฀assists฀฀ in฀its฀sustainable฀development฀objectives฀(UNFCCC,฀2001).฀ Accordingly,฀national฀sustainable฀development฀benefits฀ may฀pertain฀to฀a฀wide฀variety฀of฀areas,฀including฀economic,฀ social,฀and฀environmental.฀In฀a฀study฀of฀SD-PAMs฀in฀ South฀Africa,฀for฀example,฀Winkler฀et฀al.฀(2002)฀identified฀ energy฀development฀and฀housing฀as฀important฀priorities฀ within฀a฀national฀sustainability฀context.฀Chapters฀3-6฀of฀ this฀report฀identify฀some฀other฀priorities฀within฀varying฀ national฀contexts. Second,฀“policies฀and฀measures”฀could฀include฀legislative฀or฀executive฀acts,฀regulations,฀and฀public-private฀ partnerships฀such฀as฀negotiated฀agreements.฀PAMs฀could฀ be฀fiscal฀(taxes,฀charges,฀subsidies),฀regulatory฀(mandates,฀ standards,฀sector฀reforms),฀or฀other฀initiatives฀that฀have฀ some฀official฀status฀(Table฀2,฀p.฀19).฀Although฀there฀is฀no฀ need฀to฀form฀a฀restrictive฀definition฀of฀what฀form฀of฀action฀ might฀constitute฀a฀“policy”฀or฀“measure,”฀they฀are฀generally฀ distinguishable฀from฀solely฀private฀initiatives฀or฀projects.1฀฀ In฀this฀way,฀SD-PAMs฀are฀distinct฀from฀the฀project-based฀ CDM,฀discussed฀in฀Chapter฀1.฀ Of฀course,฀not฀all฀policies฀and฀measures฀have฀a฀beneficial฀effect฀on฀GHG฀emissions;฀in฀fact,฀development฀ would฀generally฀be฀expected฀to฀increase฀emissions.฀Thus,฀ a฀third฀basic฀characteristic฀of฀SD-PAMs฀is฀that฀they฀must฀ have฀some฀beneficial฀effect฀on฀GHG฀emissions฀or฀absorptions.฀As฀this฀report฀and฀other฀studies฀demonstrate,฀there฀ 16 are฀a฀wide฀range฀of฀policies฀in฀transport,฀energy฀efficiency฀ (industrial฀and฀buildings),฀power฀generation,฀forestry,฀and฀ elsewhere฀that฀contribute฀to฀the฀Convention฀objective฀ while฀having฀the฀primary฀purpose฀of฀supporting฀local฀and฀ national฀priorities฀(Goldemberg฀and฀Reid,฀1999;฀Chandler฀ et฀al.,฀2002).฀Table฀1฀lists฀national฀(sustainable฀development)฀benefits฀and฀indicative฀global฀(emissions)฀benefits฀ that฀might฀be฀derived฀from฀SD-PAMs.฀ An฀SD-PAM฀may฀have฀a฀beneficial฀GHG฀effect฀ without฀reducing฀emissions฀in฀absolute฀terms.฀As฀the฀ Climate฀Convention฀suggests,฀energy฀use฀and฀emissions฀ in฀developing฀countries฀will฀need฀to฀grow฀to฀meet฀the฀ requirements฀of฀sustainable฀economic฀development.฀This฀ is฀illustrated฀clearly฀in฀China’s฀transport฀sector฀(Chapter฀ 4)฀and฀India’s฀power฀sector฀(Chapter฀5),฀where฀even฀the฀ cleanest฀scenarios฀show฀emissions฀increasing.฀Rather฀than฀ absolute฀emission฀reductions,฀the฀test฀should฀be฀whether฀ development฀is฀proceeding฀using฀clean,฀efficient,฀and฀ energy-saving฀technologies฀and฀processes. Thus,฀pledged฀SD-PAMs฀must฀be฀(1)฀government฀฀ actions฀that฀have฀(2)฀development฀benefits฀and฀(3)฀GHG฀ benefits.฀In฀considering฀which฀SD-PAMs฀are฀eligible฀for฀ international฀recognition฀and฀assistance,฀the฀motivating฀฀ rationale฀among฀these฀factors฀should฀not฀be฀relevant.฀In฀ most฀cases,฀developing฀countries฀are฀likely฀to฀act฀on฀the฀฀ basis฀of฀development฀rather฀than฀global฀priorities,฀given฀that฀ poverty,฀public฀health,฀employment,฀and฀other฀factors฀continually฀keep฀climate฀change฀low฀on฀the฀political฀agenda.฀ Finally,฀accompanying฀the฀pledge฀of฀a฀particular฀policy฀ or฀measure฀might฀also฀be฀a฀description฀of฀what฀the฀intended฀results฀or฀impacts฀are฀in฀terms฀of฀both฀development฀ objectives฀and฀emissions฀cobenefits.฀Such฀a฀description฀ might฀be฀a฀set฀of฀key฀performance฀indicators฀reflected฀in฀ particular฀policy฀goals฀(for฀example,฀the฀number฀of฀homes฀ electrified,฀jobs฀created,฀and฀so฀on)฀or฀framed฀in฀more฀ general฀terms฀(for฀example,฀the฀means฀by฀which฀GHG฀ emissions฀are฀kept฀in฀check).฀Such฀an฀approach฀would฀assist฀ in฀ascertaining฀whether฀the฀pledged฀action฀is฀in฀keeping฀ with฀the฀basic฀characteristics฀of฀an฀SD-PAM. 2.฀PLEDGING฀SD-PAMS The฀incorporation฀of฀SD-PAMs฀into฀the฀international฀ climate฀regime฀could฀involve฀additional฀discrete฀stages,฀ including฀(1)฀a฀pledging฀process฀for฀national฀governments,฀(2)฀the฀tracking฀of฀pledges฀through฀an฀international฀ registry,฀and฀(3)฀review฀of฀implementation.฀This฀section฀ considers฀the฀first฀operational฀stage—pledging—while฀the฀ following฀sections฀consider฀the฀two฀subsequent฀stages.฀ Emission฀targets฀for฀industrialized฀countries฀under฀the฀ Kyoto฀Protocol฀were฀established฀through฀the฀usual฀giveand-take฀of฀an฀intergovernmental฀negotiation฀process.฀ The฀general฀approach฀was฀that฀a฀Party฀would฀propose฀a฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST target฀for฀itself฀(pledge),฀and฀subsequently฀try฀to฀convince฀ other฀Parties฀that฀this฀was฀a฀reasonable฀and฀fair฀level฀ of฀effort฀considering฀the฀principles฀of฀the฀Convention,฀ the฀unique฀circumstances฀of฀the฀Party,฀and฀the฀relative฀ stringency฀of฀other฀countries’฀targets.฀Negotiations฀over฀ SD-PAMs฀could฀proceed฀in฀a฀procedurally฀similar฀manner,฀but฀with฀notable฀differences.฀ Instead฀of฀setting฀a฀target฀emission฀level฀(as฀in฀Kyoto),฀ developing฀country฀Parties฀would฀pledge฀either฀to฀implement฀existing฀policies฀or฀adopt฀new฀ones฀that฀meet฀the฀ broad฀criteria฀agreed฀to฀by฀the฀Parties.฀Where฀good฀policies฀ are฀on฀the฀books,฀but฀not฀being฀implemented,฀they฀could฀ be฀worthy฀of฀recognition฀and฀support฀by฀the฀international฀ community.฀In฀the฀course฀of฀negotiations,฀several฀different฀approaches฀to฀pledging฀SD-PAMs฀might฀be฀adopted,฀ including฀single-country฀pledges,฀mutual฀pledges,฀and฀ harmonized฀pledges.฀ First,฀a฀single฀country฀might฀pledge฀one฀or฀more฀SDPAMs฀that฀are฀unique฀to฀its฀national฀circumstances฀and฀not฀ directly฀related฀to฀the฀pledges฀of฀other฀countries.฀In฀this฀ way,฀the฀system฀functions฀in฀a฀bottom-up฀fashion,฀starting฀ from฀the฀premise฀that฀different฀countries฀are฀likely฀to฀prefer฀ different฀approaches฀to฀social฀and฀economic฀development.฀ A฀second฀approach฀would฀be฀mutual฀pledges,฀which฀ would฀involve฀simultaneous฀pledges฀by฀both฀a฀developing฀ and฀developed฀country.฀Here,฀the฀approach฀envisioned฀ in฀Article฀4฀of฀the฀UNFCCC2฀would฀be฀implemented.฀A฀ developing฀country฀Party฀would฀pledge฀to฀undertake฀a฀ particular฀PAM,฀and฀one฀or฀more฀industrialized฀countries฀ would฀agree฀to฀assist฀in฀technology฀transfer฀or฀funding฀ support.฀This฀approach฀might฀build฀on฀existing฀bilateral฀ relationships฀between฀countries,฀including฀through฀provision฀of฀official฀development฀assistance.฀Particular฀industrialized฀countries฀might฀pledge฀to฀take฀lead฀roles฀in฀assisting฀ with฀particular฀SD-PAMs,฀with฀further฀implementation฀ and฀financing฀details฀to฀be฀worked฀out฀later฀among฀a฀ broader฀range฀of฀participants฀and฀stakeholders.฀This฀has฀ the฀additional฀attraction฀of฀engaging฀donor฀countries฀on฀ SD-PAMs฀in฀which฀they฀have฀a฀mutual฀interest,฀such฀as฀ for฀the฀development฀of฀a฀particular฀technology.฀Of฀course,฀ as฀discussed฀in฀Chapter฀1,฀entities฀such฀as฀the฀Global฀฀ Environment฀Facility฀(GEF),฀multilateral฀development฀ banks,฀private฀companies,฀or฀other฀organizations฀could฀ also฀play฀important฀roles฀in฀financing฀or฀implementing฀ mutual฀(or฀single-country)฀pledges. Harmonized฀pledges฀among฀multiple฀countries฀could฀ constitute฀a฀third฀element฀of฀an฀SD-PAMs฀negotiation฀ process.฀This฀approach฀acknowledges฀the฀global฀nature฀of฀ many฀industrial฀activities,฀and฀opens฀the฀door฀to฀multiple฀countries฀agreeing฀to฀the฀same฀kind฀of฀measures฀to฀ promote฀or฀maintain฀an฀“even฀playing฀field”฀for฀competitive฀industries฀(Baumert฀et฀al.,฀2005).฀Iron฀and฀steel,฀ Table฀1.฀฀Indicative฀Policy฀Outcomes:฀Emissions฀and฀Development Sustainable฀Development฀ GHG฀Emissions Greater฀access฀to฀electricity฀ Improved฀energy฀efficiency* Reduced฀costs฀to฀consumers฀ Improved฀energy฀conservation* Reduced฀costs฀to฀companies฀ Switching฀to฀lower฀carbon฀fuels Improved฀national฀security฀ Increased฀market฀share฀of฀clean฀products Improved฀balance฀of฀payments฀ Reduced฀deforestation฀rates Higher฀employment฀levels฀ Changed฀agricultural฀practices Increased฀housing฀ Reduced฀air฀pollution฀ Improved฀public฀heath฀ Export฀promotion฀ *฀The฀amount฀of฀GHG฀benefit฀in฀these฀instances฀would฀depend฀on฀the฀underlying฀fuel฀mix. chemicals,฀aluminum,฀and฀motor฀vehicles,฀for฀instance,฀ are฀sectors฀characterized฀by฀significant฀cross-border฀trade฀ and฀investment.฀In฀these฀kinds฀of฀areas,฀it฀is฀less฀likely฀that฀ individual฀countries฀would฀unilaterally฀pledge฀significant฀ actions,฀given฀the฀perceived฀or฀actual฀impact฀on฀international฀competitiveness.฀ Harmonized฀pledges฀might฀have฀particular฀potential฀ among฀major฀trading฀partners,฀where฀relationships฀tend฀to฀ already฀be฀established฀through฀regional฀organizations,฀such฀ as฀MERCOSUR฀(in฀Latin฀America)฀and฀ASEAN฀(Southeast฀Asia).฀Although฀SD-PAMs฀are฀advanced฀here฀primarily฀as฀an฀approach฀for฀developing฀countries฀to฀engage฀in฀ global฀mitigation฀efforts,฀it฀may฀be฀equally฀important฀to฀ engage฀industrialized฀countries฀in฀harmonized฀pledge฀systems.฀The฀North฀America฀Free฀Trade฀system฀(NAFTA),฀for฀ instance,฀might฀be฀one฀grouping฀that฀would฀bring฀together฀ important฀Annex฀I฀and฀non-Annex฀I฀Parties.฀Other฀groupings,฀either฀formal฀or฀informal,฀also฀have฀potential.฀ A฀system฀within฀which฀governments฀pledge฀actions— either฀unilaterally,฀through฀mutual฀cooperation,฀or฀in฀a฀ harmonized฀fashion—would฀require฀significant฀preparatory฀work฀at฀the฀national฀and฀international฀levels.฀At฀the฀ national฀level,฀individual฀countries฀would฀of฀course฀need฀ to฀determine฀ahead฀of฀time,฀through฀their฀own฀domestic฀ processes,฀which฀actions฀they฀are฀prepared฀to฀pledge฀(Box฀ 1).฀At฀the฀international฀level,฀governments฀might฀need฀to฀ engage฀in฀bilateral,฀multilateral,฀and฀regional฀consultations฀ prior฀to฀a฀formal฀negotiation฀session.฀A฀series฀of฀sub-฀ negotiations฀on฀specific฀topics฀would฀likely฀emerge.3฀This฀ could฀resemble฀other฀international฀negotiations฀on฀complex฀issues,฀such฀as฀trade,฀which฀some฀have฀suggested฀is฀a฀ S U S TA IN A B LE ฀ D E VE LOPM EN T฀ POLIC IES฀ A N D ฀ M EA SU R ES฀ A N D ฀ IN TER N ATION A L฀ C LIMATE฀ A GR EEMEN TS฀ 17 model฀for฀climate฀negotiations฀(Reinstein,฀2004).฀On฀a฀ smaller฀scale,฀an฀analogous฀process฀took฀place฀at฀the฀2004฀ Bonn฀Renewable฀Energies฀Conference฀(Box฀2),฀where฀ developed฀and฀developing฀countries฀made฀specific฀pledges. Overall,฀the฀expectation฀is฀that฀a฀pledge-based฀system฀ for฀engaging฀developing฀countries฀opens฀up฀new฀space฀ and฀opportunity฀for฀international฀cooperation฀on฀what฀ might฀be฀the฀most฀complex฀global฀issue.฀At฀the฀same฀time,฀ it฀is฀equally฀important฀that฀the฀UNFCCC,฀by฀embracing฀ SD-PAMs,฀coordinate฀its฀efforts฀with฀those฀under฀way฀ elsewhere,฀including฀the฀U.N.฀Commission฀for฀Sustainable฀ Box฀1.฀฀Steps฀in฀Applying฀the฀SD-PAMs฀Approach Winkler฀et฀al.฀(2002)฀outline฀five฀steps฀that฀a฀developing฀country฀might฀undertake฀in฀considering฀its฀commitment฀to฀SD-PAMs: 1.฀Outline฀future฀development฀objectives,฀where฀possible฀quantifying฀the฀ expected฀benefits฀and฀possible฀risks.฀Many฀developing฀countries฀already฀identify฀ development฀objectives฀through฀National฀Strategies฀for฀Sustainable฀Development฀or฀Agenda฀21฀plans. 2.฀Identify฀PAMs฀that฀would฀make฀the฀development฀path฀more฀sustainable,฀ primarily฀for฀reasons฀other฀than฀climate฀change฀(e.g.,฀greater฀social฀equity฀ and฀local฀environmental฀protection฀while฀maintaining฀or฀enhancing฀economic฀ growth).฀This฀might฀include฀existing฀or฀new฀policies.฀ 3.฀Quantify฀the฀changes฀in฀GHG฀emissions฀of฀particular฀SD-PAMs,฀which฀should฀ be฀reported฀in฀accordance฀with฀the฀Convention฀or฀other฀reporting฀provisions.฀ 4.฀Compare฀the฀results฀from฀steps฀2฀and฀3฀to฀show฀which฀actions฀create฀synergies฀between฀sustainable฀development฀objectives฀and฀climate฀change฀policy,฀ and฀which฀conflict. 5.฀Summarize฀the฀net฀impact฀of฀a฀basket฀of฀SD-PAMs฀on฀development฀benefits฀ and฀GHG฀emissions.฀ Source:฀Adapted฀from฀Winkler฀et฀al.฀(2002) Box฀2.฀฀The฀International฀Action฀Programme฀for฀Renewable฀Energies฀ The฀International฀Action฀Programme฀(IAP)฀for฀renewable฀energies฀is฀one฀of฀the฀ main฀outcomes฀of฀the฀2004฀Bonn฀Renewable฀Energies฀Conference.฀The฀IAP฀ contains฀concrete฀actions฀and฀commitments฀toward฀developing฀renewable฀ energy฀put฀forward฀by฀governments,฀international฀organizations,฀stakeholders฀ from฀civil฀society,฀the฀private฀sector,฀and฀others.฀All฀conference฀participants฀were฀ invited—through฀a฀“Call฀for฀Actions฀and฀Commitments”—to฀contribute฀to฀the฀ IAP฀by฀pledging฀voluntary฀commitments฀to฀goals,฀targets,฀and฀actions฀within฀ their฀own฀spheres฀of฀responsibility.฀ Source:฀Adapted฀from฀International฀Conference฀on฀Renewable฀Energies,฀Bonn,฀at:฀฀ http://www.renewables2004.de/en/2004/outcome_actionprogramme.asp.฀The฀IAP฀and฀฀ other฀documents฀can฀be฀found฀on฀this฀website. 18 Development,฀the฀International฀Civil฀Aviation฀Organization฀(ICAO),฀the฀International฀Maritime฀Organization฀ (IMO),฀and฀other฀specialized฀and฀regional฀organizations. 3.฀KEEPING฀TRACK:฀฀ 3.฀KEEPING฀TRACK:฀฀ INTERNATIONAL฀REGISTRY An฀important฀element฀of฀formalizing฀an฀SD-PAMs฀ system฀could฀be฀to฀maintain฀an฀international฀registry฀of฀ pledged฀actions฀(Winkler฀et฀al.,฀2002).฀The฀registry฀could฀ be฀a฀database฀containing฀information฀on฀all฀SD-PAMs฀ pledged฀by฀governments.฀Such฀a฀system฀would฀serve฀฀ several฀purposes.฀ The฀registry฀would฀serve฀as฀a฀tool฀to฀exchange฀information฀among฀governments฀and฀among฀governments฀and฀฀ civil฀society,฀including฀industry.฀Making฀information฀on฀ pledged฀SD-PAMs฀public฀would฀help฀inform฀the฀international฀community฀and฀national฀stakeholders฀of฀how฀various฀฀ governments฀are฀contributing฀to฀the฀UNFCCC฀objective฀฀ within฀the฀context฀of฀their฀own฀national฀priorities.฀A฀ registry฀would฀be฀consistent฀with฀existing฀practice฀(such฀as฀ the฀registry฀of฀CDM฀projects)฀and฀Article฀6฀of฀the฀Climate฀ Convention,฀which฀calls฀on฀Parties฀to฀promote฀and฀facilitate฀ public฀access฀to฀climate฀change-related฀information. The฀SD-PAMs฀registry฀could฀be฀maintained฀by฀an฀ international฀organization฀or฀body,฀such฀as฀the฀UNFCCC฀ Secretariat.฀Parties฀would฀need฀to฀agree฀on฀the฀basic฀elements฀of฀the฀registry.฀Table฀2฀presents฀a฀series฀of฀indicative฀ categories฀that฀might฀be฀used฀to฀structure฀such฀a฀registry. 4.฀ASSESSING฀PROGRESS:฀฀ 4.฀ASSESSING฀PROGRESS:฀฀ REPORTING฀AND฀REVIEW A฀final฀element฀of฀a฀successful฀SD-PAMs฀system฀would฀ be฀to฀assess฀implementation.฀This฀is฀necessary฀to฀ensure฀ that฀pledged฀policies฀and฀measures฀are฀more฀than฀mere฀ words฀contained฀in฀a฀registry.฀There฀are฀perhaps฀two฀฀ central฀elements฀of฀a฀successful฀assessment฀system:฀reporting฀and฀review.฀ First,฀Parties฀should฀report฀on฀the฀implementation฀of฀ their฀pledged฀SD-PAMs.฀This฀could฀come฀in฀the฀form฀of฀฀ an฀annual฀or฀other฀regular฀progress฀report.฀Reporting฀could฀฀ cover฀both฀aspects฀of฀PAM฀implementation—development฀ and฀emissions—perhaps฀using฀key฀performance฀indicators฀ pertaining฀to฀each.฀Some฀information฀from฀the฀reports฀ could฀be฀entered฀into฀the฀registry฀as฀well. Procedurally,฀one฀option฀would฀be฀to฀integrate฀reporting฀into฀the฀existing฀reporting฀structure฀of฀the฀Climate฀ Convention,฀under฀which฀Parties฀must฀submit฀national฀ communications฀that,฀among฀other฀things,฀describe฀the฀ steps฀taken฀or฀envisaged฀to฀implement฀the฀Convention฀ (UNFCCC,฀1992:฀Art.฀12.1b).฀However,฀this฀system฀suffers฀low฀levels฀of฀reporting,฀as฀some฀developing฀countries฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Table฀2.฀฀Indicative฀Classification฀Parameters฀for฀SD-PAMs Policy฀Types฀ Sector฀ Fuel/Technology฀ Other฀Classification฀Details฀ Fiscal฀ ฀ ■฀Taxes฀(exemptions,฀credits,฀etc.)฀ ฀ ■฀Fees,฀charges,฀refunds฀ ฀ ■฀Subsidies฀(transfers,฀grants,฀etc.)฀ Market฀/฀Regulatory฀ ฀ ■฀Mandates฀(products,฀processes)฀ ฀ ■฀Standards฀(products,฀processes)฀ ฀ ■฀Sector฀regulatory฀reforms฀ ฀ ■฀Product฀labelling฀ ฀ ■฀Disclosure฀requirements฀ ฀ ■฀Consumer฀purchase฀options฀ Voluntary฀Agreements฀ ฀ ■฀Corporate฀challenges฀ ฀ ■฀Public-private฀partnerships฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ Energy฀production฀ ฀ ■฀Extraction฀ ฀ ■฀Processing/refining฀ ฀ ■฀Transport/transmission฀ ฀ ■฀Electricity฀generation฀ Buildings฀ ฀ ■฀Appliances฀ ฀ ■฀Heating฀ ฀ ■฀Cooking,฀lighting,฀etc.฀ Industry฀ ฀ ■฀Steel,฀chemicals,฀cement฀ ฀ ฀฀aluminum,฀others฀ Transportation฀ ฀ ■฀Passenger,฀freight,฀air,฀etc.฀ Waste฀Management฀ ฀ ■฀Landfills,฀etc.฀ Forestry฀ Agriculture฀ Fossil฀Fuels฀ ฀ ■฀Coal฀ ฀ ■฀Oil฀ ฀ ■฀Natural฀Gas฀ Renewables฀ ฀ ■฀Geothermal฀ ฀ ■฀Solar฀ ฀ ■฀Wind฀ ฀ ■฀Biomass฀ ฀ ■฀Tidal฀/฀wave฀ ฀ ■฀Hydroelectric,฀etc.฀ Others ฀ ■฀Hydrogen ฀ ■฀Carbon฀capture฀/฀storage฀ ฀ ■฀Fuel฀cells ฀ ■฀Landfill฀gas ฀ ■฀Biofuels ฀ ■฀Industrial฀process฀change Country Policy฀name฀&฀description Key฀Performance฀Indicators ฀ ■฀Sust.฀Development ฀ ■฀Emissions Status ฀ ■฀Pledged ฀ ■฀Enacted฀/฀Implemented ฀ ■฀Completed Effective฀Date(s) References฀/฀Links Source:฀WRI,฀based฀on฀IEA/OECD฀(2001) have฀yet฀to฀submit฀a฀single฀communication.฀Others฀have฀ only฀recently฀submitted฀their฀first฀report,฀more฀than฀a฀decade฀after฀the฀Convention฀entered฀into฀force.฀One฀reason฀ why฀is฀that฀national฀communications฀are฀presently฀accompanied฀by฀complete฀national฀GHG฀inventories,฀which฀ are฀technically฀challenging฀and฀expensive฀to฀produce.฀A฀ reporting฀system฀under฀SD-PAMs฀could฀focus฀less฀on฀ inventories,฀and฀more฀on฀policies฀and฀measures,฀including฀ the฀status฀and฀results฀of฀their฀implementation.฀ A฀second฀element฀of฀the฀assessment฀process฀would฀be฀a฀ review฀of฀national฀reports.฀This฀process฀could฀be฀analogous฀ to฀the฀present฀“in-depth”฀review฀system฀employed฀for฀ reviewing฀the฀national฀communications฀of฀industrialized฀ country฀Parties.4฀According฀to฀the฀UNFCCC฀Secretariat,฀ these฀reviews฀aim฀“to฀provide฀a฀comprehensive,฀technical฀ assessment฀of฀a฀Party’s฀implementation฀of฀its฀commitments.”5฀For฀SD-PAMs,฀these฀reviews฀would฀be฀facilitative฀ in฀nature฀and฀would฀try฀to฀identify฀both฀successes฀and฀ areas฀where฀implementation฀can฀be฀improved.฀Civil฀society฀ groups฀and฀international฀organizations฀might฀also฀provide฀ reviews฀of฀national฀reports,฀although฀these฀would฀have฀an฀ unofficial฀status. A฀process฀whereby฀an฀independent฀body฀evaluates฀ implementation฀of฀SD-PAMs฀might฀assist฀in฀the฀learning฀ process฀and฀help฀build฀capacity฀to฀take฀further฀actions.฀ This฀kind฀of฀review฀might฀uncover฀underlying฀reasons฀ why฀some฀SD-PAMs฀did฀not฀achieve฀their฀desired฀results.฀ In฀some฀instances,฀it฀could฀be฀that฀promised฀financial฀or฀ technology฀transfer฀was฀not฀delivered฀(for฀example,฀in฀a฀ mutual฀pledge).฀In฀other฀instances,฀it฀could฀be฀that฀the฀ effects฀of฀“unpledged”฀policies฀and฀measures฀nullified฀the฀ expected฀influence฀on฀GHGs฀of฀the฀pledged฀policies.฀For฀ example,฀the฀removal฀of฀coal฀production฀subsidies฀could฀ be฀counterbalanced฀by฀increases฀in฀subsidies฀for฀combustion฀of฀coal฀in฀electric฀power฀generation.฀SD-PAMs,฀by฀ their฀nature,฀would฀capture฀only฀the฀former฀and฀therefore฀ would฀give฀an฀incomplete฀picture.฀ There฀are฀precedents฀for฀these฀kinds฀of฀approaches฀in฀ other฀areas฀of฀international฀relations.฀The฀World฀Trade฀ Organization’s฀Trade฀Policy฀Review฀Mechanism,฀for฀ example,฀provides฀a฀kind฀of฀“peer฀review”฀of฀a฀country’s฀ trade฀policies฀and฀practices,฀which฀helps฀“enable฀outsiders฀to฀understand฀a฀country’s฀policies฀and฀circumstances,”฀ while฀“providing฀feedback฀to฀the฀reviewed฀country฀on฀its฀ performance฀….”6฀This฀system฀provides฀for฀reports฀by฀ both฀the฀WTO฀member฀country฀and฀a฀review฀by฀a฀body฀ independent฀of฀the฀Parties,฀the฀WTO฀Secretariat.฀ With฀respect฀to฀SD-PAMs,฀the฀information฀generated฀ in฀a฀review฀process฀would฀enhance฀the฀ability฀of฀regulators฀ and฀stakeholders฀to฀distinguish฀between฀policies฀that฀were฀ effective฀from฀those฀that฀failed฀to฀produce฀desired฀results,฀ either฀in฀terms฀of฀local฀sustainable฀development฀benefits฀ or฀emission฀reductions.฀This฀would฀inform฀future฀policy฀ S U S TA IN A B LE ฀ D E VE LOPM EN T฀ POLIC IES฀ A N D ฀ M EA SU R ES฀ A N D ฀ IN TER N ATION A L฀ C LIMATE฀ A GR EEMEN TS฀ 19 widespread฀behavior.฀The฀viability฀of฀Kyoto’s฀CDM,฀for฀ instance,฀is฀partly฀a฀function฀of฀emission฀reduction฀commitments฀of฀industrialized฀countries,฀which฀stimulates฀ the฀demand฀for฀emission-reducing฀projects฀in฀developing฀countries.฀If฀President฀Bush฀and฀subsequent฀U.S.฀ administrations฀continue฀to฀oppose฀such฀an฀approach,฀ it฀is฀uncertain฀whether฀the฀European฀Union,฀Japan,฀and฀ Canada฀will฀be฀willing฀to฀continue฀with฀emission฀caps฀ beyond฀2012.฀Thus,฀broader฀future฀climate฀change฀policy฀ considerations฀factor฀heavily฀into฀the฀viability฀of฀some฀ options฀outlined฀in฀this฀section. 5.1฀฀Clean฀Development฀Mechanism making฀at฀the฀national฀level,฀as฀well฀as฀promote฀useful฀ cross-country฀exchanges฀of฀experiences.฀Finally,฀beyond฀ promoting฀learning,฀both฀official฀and฀unofficial฀country฀ reviews฀would฀promote฀accountability฀and฀increase฀the฀ likelihood฀that฀pledged฀actions฀are฀fully฀implemented.฀ 5.฀QUANTITATIVE฀APPROACHES:฀฀ 5.฀QUANTITATIVE฀APPROACHES:฀฀ ACCOUNTING฀FOR฀฀฀ ACCOUNTING฀FOR฀ EMISSION฀REDUCTIONS฀ SD-PAMs฀are฀qualitative฀in฀nature฀and฀are฀clearly฀ distinguishable฀from฀quantitative฀approaches฀to฀climate฀ protection฀such฀as฀emission฀targets฀and฀the฀Clean฀Development฀Mechanism.฀However,฀it฀may฀be฀possible฀or฀even฀ desirable฀to฀connect฀the฀pledged฀actions฀to฀these฀and฀other฀ quantitative฀approaches฀in฀order฀to฀harness฀the฀potential฀ benefits฀of฀the฀international฀carbon฀market.฀There฀are฀at฀ least฀three฀possibilities฀of฀building฀a฀quantitative฀dimension฀into฀SD-PAMs:฀the฀existing฀CDM,฀an฀expanded฀ “policy”฀or฀“sector-based฀CDM”฀(Samaniego฀and฀Figueres,฀ 2002;฀Bosi฀and฀Ellis,฀2005),฀and฀“action฀targets”฀(Baumert฀ and฀Goldberg,฀2005).฀ These฀three฀options฀each฀have฀advantages฀and฀drawbacks,฀ and฀are฀explored฀briefly฀in฀this฀section.฀A฀cross-cutting฀ issue฀that฀affects฀all฀options฀is฀whether฀a฀carbon฀market฀ will฀exist฀after฀2012฀and,฀even฀if฀it฀does,฀whether฀it฀will฀ establish฀a฀price฀signal฀sufficiently฀strong฀enough฀to฀affect฀ 20 The฀basic฀elements฀of฀the฀CDM฀are฀set฀out฀in฀Article฀ 12฀of฀the฀Kyoto฀Protocol฀and฀elaborated฀further฀in฀the฀ 2001฀Marrakesh฀Accords.7฀The฀CDM฀has฀a฀dual฀purpose:฀ (1)฀to฀assist฀developing฀countries฀“in฀achieving฀sustainable฀ development,”฀and฀(2)฀to฀assist฀industrialized฀countries฀ in฀achieving฀compliance฀with฀their฀emission฀limits.฀This฀ is฀done฀through฀GHG-reducing฀projects฀in฀developing฀ countries฀(such฀as฀installing฀wind-based฀power฀instead฀of฀ coal-fired฀power),฀which฀generate฀emission฀credits฀that,฀in฀ turn,฀can฀be฀used฀by฀industrialized฀countries฀to฀offset฀their฀ own฀domestic฀emissions.฀The฀sustainable฀development฀ dimension฀of฀the฀CDM,฀as฀discussed฀above,฀is฀decided฀ on฀a฀project-by-project฀basis฀at฀the฀discretion฀of฀the฀host฀ government. Although฀the฀CDM฀is฀a฀project-based฀mechanism,฀ it฀could฀be฀supportive฀of฀SD-PAMs.฀SD-PAMs฀could฀ provide฀the฀regulatory฀mandates฀or฀market฀incentives฀to฀ develop฀projects฀that฀have฀concrete฀sustainable฀development฀and฀climate฀benefits.฀Those฀projects,฀in฀turn,฀could฀ be฀eligible฀for฀crediting฀under฀the฀CDM.฀Indirectly,฀this฀ would฀provide฀a฀further฀incentive฀to฀implement฀SDPAMs,฀given฀that฀some฀costs฀could฀be฀recouped฀through฀ sale฀of฀emission฀reduction฀credits. To฀operate฀in฀this฀manner,฀CDM฀rules฀may฀need฀to฀be฀ changed.฀CDM฀rules฀are฀designed฀to฀ensure฀that฀projects฀ are฀additional฀to฀what฀would฀have฀occurred฀in฀the฀absence฀ of฀the฀CDM.฀Projects฀implemented฀under฀existing฀or฀ new฀SD-PAMs฀could฀be฀rendered฀“non-additional”฀by฀ the฀mere฀fact฀that฀they฀are฀now฀required฀by฀law฀or฀made฀ financially฀attractive฀through฀government฀intervention.฀ In฀other฀words,฀projects฀might฀be฀precipitated฀by฀an฀ SD-PAM—not฀the฀CDM—and฀therefore฀be฀considered฀ non-additional.฀In฀2004,฀the฀CDM฀Executive฀Board,฀ which฀oversees฀the฀mechanism,฀established฀guidelines฀that฀ partially฀address฀this฀issue.฀Under฀the฀guidelines,฀“climatefriendly”฀policy฀incentives฀(such฀as฀an฀energy฀efficiency฀ subsidy)฀may฀be฀ignored฀by฀project฀developers฀in฀baseline฀ formulations฀(UNFCCC,฀2004b).฀However,฀projects฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST adopted฀pursuant฀to฀mandatory฀regulations฀are฀still฀not฀ subject฀to฀any฀guidance,฀and฀it฀is฀not฀clear฀whether฀they฀ would฀qualify฀for฀CDM฀crediting.8฀ Finally,฀the฀use฀of฀SD-PAMs฀as฀a฀platform฀for฀CDM฀ project฀development฀could฀significantly฀increase฀the฀overall฀ flow฀of฀projects.฀While฀this฀would฀be฀favorable,฀it฀would฀ also฀overwhelm฀the฀already฀strained฀administrative฀capacity฀of฀the฀CDM฀Executive฀Board,฀which฀is฀responsible฀for฀ registering฀projects,฀certifying฀emission฀reductions,฀and฀ issuing฀credits.฀A฀renewable฀energy฀program฀in฀a฀single฀ country,฀for฀example,฀could฀generate฀tens฀or฀even฀hundreds฀of฀projects฀that฀would฀all฀need฀to฀be฀validated฀and฀ registered,฀with฀subsequent฀claimed฀emission฀reductions฀ verified,฀certified,฀and฀issued.฀A฀significant฀restructuring฀ of฀the฀mechanism’s฀basic฀regulatory฀and฀administrative฀ systems฀would฀likely฀be฀needed.฀ 5.2฀฀Policy฀or฀Sector฀CDM Some฀observers฀have฀already฀examined฀the฀prospect฀of฀ expanding฀the฀scope฀of฀the฀CDM฀to฀encompass฀policies฀or฀cover฀entire฀national฀sectors฀or฀geographic฀areas฀ (Samaniego฀and฀Figueres,฀2002;฀Schmidt฀et฀al.,฀2004;฀Bosi฀ and฀Ellis,฀2005).฀Under฀this฀vision,฀an฀SD-PAM฀itself,฀or฀ the฀sector฀in฀which฀one฀or฀more฀SD-PAMs฀is฀targeted,฀ could฀generate฀emission฀reduction฀credits.฀ This฀approach฀has฀some฀apparent฀advantages.฀It฀could฀ help฀create฀incentives฀for฀positive฀policy฀change฀along฀the฀ lines฀discussed฀throughout฀this฀report.฀Second,฀restructuring฀the฀mechanism฀along฀sectoral฀or฀policy฀lines฀could฀ alleviate฀some฀of฀the฀bottlenecks฀and฀high฀transaction฀ costs฀of฀a฀burgeoning฀project-only฀mechanism.฀A฀basket฀of฀ policies฀and฀measures฀in฀a฀single฀sector฀could,฀for฀instance,฀ all฀be฀aggregated฀together฀for฀a฀determination฀of฀emission฀ reductions.฀All฀of฀the฀policies฀and฀projects฀undertaken฀ in฀China’s฀transportation฀sector,฀discussed฀in฀Chapter฀4,฀ might฀be฀treated฀collectively,฀for฀example. There฀are฀also฀a฀number฀of฀challenges฀and฀shortcomings฀ associated฀with฀a฀sector-฀or฀policy-based฀CDM.฀The฀most฀ significant฀challenge฀would฀be฀determining฀the฀amount฀of฀ emission฀reductions฀(or฀avoidance)฀associated฀with฀PAMs.฀ Even฀under฀the฀present฀project-oriented฀CDM,฀this฀has฀ proven฀controversial฀and฀more฀difficult฀than฀expected.฀ Disagreement฀is฀particularly฀rife฀with฀respect฀to฀determinations฀of฀“additionality,”฀as฀it฀is฀very฀difficult฀to฀develop฀ simple฀rules฀capable฀of฀reasonably฀ensuring฀that฀credits฀are฀ issued฀only฀to฀projects฀that฀would฀not฀have฀occurred฀absent฀the฀CDM.฀Additionality฀assessments฀in฀the฀context฀of฀ SD-PAMs฀would฀be฀virtually฀impossible.฀Indeed,฀the฀very฀ concept฀of฀additionality฀is฀at฀odds฀with฀SD-PAMs,฀which฀ are฀likely฀to฀be฀implemented฀for฀non-climate฀reasons.฀ Furthermore,฀the฀SD-PAMs฀approach฀would฀cover฀the฀ implementation฀of฀existing฀policy.฀ Accordingly,฀a฀new฀framework฀would฀be฀needed฀for฀ deciding฀which฀policies฀and฀measures฀are฀creditworthy฀ and฀which฀are฀not.฀Rather฀than฀additionality฀assessments,฀ a฀more฀promising฀approach฀might฀be฀to฀define฀a฀set฀of฀ activities฀or฀policies—such฀as฀some฀of฀those฀discussed฀in฀ this฀report—that฀are฀unquestionably฀climate-friendly฀and฀ therefore฀a฀priori฀eligible฀for฀crediting,฀regardless฀of฀the฀ motivation฀for฀enactment.฀Accounting฀standards,฀based฀on฀ such฀a฀set฀of฀activities฀and฀policies,฀would฀then฀need฀to฀be฀ developed฀to฀enable฀emission฀reduction฀determinations฀in฀ a฀manner฀that฀is฀reasonably฀simple฀and฀transparent.9฀This฀ might฀be฀done฀through฀a฀system฀of฀performance฀benchmarks฀or฀rate-based฀emission฀baselines฀(for฀example,฀CO2฀ per฀unit฀of฀output),฀probably฀on฀a฀sector฀or฀subsector฀level.฀ Even฀if฀this฀is฀feasible,฀however,฀a฀sector/policy-based฀ CDM฀still฀has฀a฀remaining฀problem฀pertaining฀to฀the฀ structure฀and฀balance฀of฀the฀overall฀carbon฀market.฀A฀ sector/policy-based฀crediting฀mechanism฀could฀generate฀ large฀quantities฀of฀emission฀reductions.฀As฀illustrated฀in฀ this฀report,฀just฀a฀handful฀of฀large฀sectoral฀initiatives฀could฀ generate฀reductions฀of฀hundreds฀of฀millions฀of฀tons฀of฀ CO2.฀However,฀reductions฀of฀this฀scale฀might฀overwhelm฀ the฀demand฀from฀industrialized฀countries,฀or฀otherwise฀ dampen฀incentives฀in฀those฀countries฀to฀continue฀abatement฀efforts.฀This฀problem฀might฀be฀remedied฀by฀deeper฀ emission฀cuts฀in฀industrialized฀countries.฀Yet฀such฀cuts฀ do฀not฀appear฀to฀be฀forthcoming.฀In฀particular,฀some฀ countries฀like฀the฀U.S.—even฀if฀it฀agreed฀to฀an฀emission฀ limit—would฀not฀likely฀cap฀emissions฀at฀a฀level฀that฀would฀ leave฀it฀overly฀dependent฀on฀credits฀from฀other฀countries฀ to฀comply.10฀ 5.3฀฀Action฀Targets Action฀targets,฀summarized฀in฀Box฀3,฀are฀a฀third฀possibility฀for฀incorporating฀a฀quantitative฀dimension฀into฀ SD-PAMs.฀Action฀targets฀would฀address฀some฀of฀the฀ difficulties฀discussed฀above,฀though฀substantial฀challenges฀ would฀remain. Under฀an฀action฀targets฀approach,฀in฀addition฀to฀pledging฀SD-PAMs,฀a฀country฀would฀pledge฀to฀achieve฀a฀quantity฀of฀emission฀reductions฀(the฀“action฀target”).฀The฀expectation฀would฀be฀that฀the฀SD-PAMs฀(“actions”)฀pledged฀ would฀generate฀emission฀reductions฀that,฀in฀turn,฀would฀ be฀used฀to฀satisfy฀the฀target.฀If฀SD-PAMs฀were฀to฀generate฀ emission฀reductions฀in฀excess฀of฀the฀target,฀all฀or฀part฀of฀ these฀surplus฀reductions฀could฀be฀sold฀to฀governments฀or฀ private฀buyers,฀thereby฀generating฀a฀financial฀return.฀ S U S TA IN A B LE ฀ D E VE LOPM EN T฀ POLIC IES฀ A N D ฀ M EA SU R ES฀ A N D ฀ IN TER N ATION A L฀ C LIMATE฀ A GR EEMEN TS฀ 21 Box฀3.฀฀Action฀Targets An฀action฀target฀would฀be฀a฀pledge฀to฀achieve฀or฀acquire฀an฀agreed฀amount฀of฀ GHG฀emission฀reductions.฀For฀example,฀if฀a฀country฀adopted฀an฀action฀target฀ of฀2฀percent฀for฀the฀period฀2013–17,฀it฀would฀need฀to฀demonstrate฀emission฀ reductions฀equal฀to฀2฀percent฀of฀its฀actual฀emissions฀during฀this฀period.฀In฀this฀ way,฀an฀action฀target฀defines฀the฀amount฀of฀abatement฀to฀be฀achieved฀during฀ a฀commitment฀period.฀This฀differs฀from฀Kyoto-style฀or฀dynamic฀targets,฀which฀ define฀a฀level฀of฀emissions฀(or฀emissions฀per฀unit฀of฀GDP)฀to฀be฀achieved฀during฀ a฀particular฀period.฀ To฀illustrate,฀suppose฀Country฀A฀agrees฀to฀an฀action฀target฀(AT)฀of฀5฀percent฀for฀ the฀year฀2015.฀If฀Country฀A’s฀emissions฀(E)฀in฀that฀year฀are฀100฀million฀tons฀of฀ carbon฀(MtCO2),฀then฀the฀required฀amount฀of฀reductions฀is฀5฀MtCO2฀(5฀percent฀ of฀100).฀It฀follows฀that,฀if฀emissions฀are฀actually฀100฀MtCO2฀in฀2015฀and฀the฀ country฀has฀demonstrated฀5฀MtCO2฀of฀domestic฀reductions,฀then฀emissions฀ would฀have฀been฀105฀MtCO2฀in฀the฀absence฀of฀any฀actions฀taken฀to฀reach฀฀ the฀target.฀In฀this฀way,฀action฀targets฀would฀have฀the฀effect฀of฀bending฀the฀ emissions฀trajectory฀of฀a฀country฀downward.฀ Source:฀Adapted฀from฀Baumert฀and฀Goldberg฀(2005) Action฀targets฀entail฀some฀advantages฀over฀sector/policy฀ CDM.฀In฀particular,฀the฀risk฀of฀overwhelming฀the฀demand฀ for฀credits฀from฀Annex฀I฀is฀substantially฀reduced฀because฀ not฀all฀credits฀generated฀are฀transferable;฀only฀emission฀ reductions฀achieved฀in฀excess฀of฀domestic฀action฀targets฀ could฀be฀sold.฀An฀appraisal฀of฀the฀expected฀abatement฀ quantities฀generated฀by฀existing฀SD-PAMs฀might฀constitute฀ a฀useful฀starting฀point฀for฀setting฀an฀action฀target.฀In฀this฀ way,฀substantial฀quantities฀of฀“non-additional”฀credits฀(in฀ the฀parlance฀of฀the฀CDM)฀could฀be฀used฀to฀satisfy฀domestic฀action฀targets,฀with฀new฀SD-PAMs฀generating฀emission฀ reductions฀that,฀in฀whole฀or฀part,฀could฀be฀transferred. Second,฀by฀adopting฀quantitative฀commitments,฀it฀is฀ possible฀that฀SD-PAMs฀when฀coupled฀with฀action฀targets฀ could฀attract฀more฀concessional฀financing฀from฀industrialized฀countries฀under฀the฀UNFCCC.฀With฀the฀added฀ quantitative฀commitment,฀developing฀countries฀may฀improve฀their฀negotiating฀position฀with฀respect฀to฀additional฀ funding.฀On฀the฀other฀hand,฀developing฀countries฀have฀ long฀resisted฀quantitative฀commitments฀in฀any฀form,฀and฀ might฀continue฀to฀do฀so. The฀chief฀challenge฀associated฀with฀sector/policy฀CDM,฀ however,฀remains฀for฀action฀targets฀as฀well.฀Namely,฀what฀ constitutes฀an฀“emission฀reduction”฀that฀can฀be฀used฀to฀satisfy฀an฀action฀target฀or฀be฀sold?฀How฀could฀an฀accounting฀ system฀be฀devised฀that฀captures฀emission฀reductions฀from฀ diverse฀kinds฀of฀SD-PAMs,฀such฀as฀renewable฀energy฀port- 22 folio฀standards,฀product฀efficiency฀standards,฀road฀charges,฀ and฀clean฀energy฀subsidies,฀among฀many฀others?฀Although฀ a฀full฀exploration฀of฀this฀topic฀is฀beyond฀the฀scope฀of฀this฀ report,฀some฀preliminary฀observations฀can฀be฀made.฀ First,฀because฀not฀all฀emission฀reductions฀would฀be฀ tradable,฀the฀need฀for฀quantitative฀precision฀is฀reduced,฀ and฀in฀any฀case฀experience฀shows฀that฀accuracy฀is฀unachievable.฀The฀purpose฀of฀the฀accounting฀system฀for฀SDPAMs,฀coupled฀with฀action฀targets,฀would฀be฀to฀identify฀ and฀promote฀the฀kinds฀of฀SD-PAMs฀that฀are฀needed฀to฀ achieve฀the฀Climate฀Convention’s฀objective,฀including฀ those฀actions฀taken฀mainly฀for฀economic,฀social,฀or฀other฀ purposes.฀In฀this฀way,฀it฀would฀differ฀substantially฀from฀ the฀CDM’s฀additionality฀tests.฀A฀system฀of฀performance฀ benchmarks฀or฀rate-based฀emission฀baselines฀might฀be฀ called฀for฀(as฀with฀sector/policy฀CDM),฀probably฀on฀a฀฀ sector฀or฀subsector฀level. Second,฀lessons฀from฀Kyoto฀suggest฀some฀procedural฀ safeguards฀that฀could฀improve฀the฀likelihood฀of฀success.฀ Most฀importantly,฀negotiators฀should฀agree฀on฀an฀accounting฀system—at฀least฀the฀main฀contours฀of฀one—prior฀to฀ adopting฀action฀targets฀under฀an฀SD-PAMs฀system.฀In฀ doing฀so,฀governments฀would฀avoid฀the฀approach฀taken฀ under฀Kyoto,฀which฀turned฀negotiations฀on฀CDM฀project฀ eligibility,฀additionality฀methodologies,฀and฀other฀issues฀ into฀de฀facto฀renegotiations฀of฀national฀targets.฀To฀the฀ extent฀possible,฀an฀accounting฀system฀should฀be฀developed฀ through฀broad฀stakeholder฀participation฀(given฀the฀inevitable฀policy฀issues฀that฀will฀arise)฀coupled฀with฀the฀input฀of฀ technical฀competence฀and฀expertise.11฀฀ 6.฀CONCLUSION This฀chapter฀has฀outlined฀several฀ideas฀and฀parameters฀ for฀formalizing฀SD-PAMs฀in฀the฀context฀of฀the฀broader฀ evolution฀of฀the฀climate฀change฀regime.฀A฀number฀of฀elements฀are฀likely฀to฀required,฀including฀definition฀of฀eligible฀ types฀of฀SD-PAMs,฀as฀well฀as฀procedures฀for฀pledging,฀ tracking,฀reporting฀on,฀and฀reviewing฀SD-PAMs฀implementation.฀Resolving฀GHG฀accounting฀issues฀may฀also฀enable฀ quantification฀of฀the฀GHG฀benefits฀flowing฀from฀particular฀ PAMs,฀or฀sectors฀within฀which฀multiple฀PAMs฀are฀targeted.฀ Additional฀future฀work฀is฀needed฀in฀these฀areas.฀ While฀the฀concept฀of฀pledging฀national฀policies฀and฀ measures฀may฀be฀untried,฀many฀elements฀described฀above฀ are฀adapted฀or฀borrowed฀from฀existing฀practice฀under฀฀ the฀Convention.฀For฀instance,฀the฀process฀of฀agreeing฀on฀฀ emission฀targets฀involved,฀in฀some฀sense,฀a฀bottom-up฀ pledging฀process.฀Likewise,฀the฀Convention฀already฀฀ employs฀a฀system฀for฀reporting฀and฀review฀of฀policy฀฀ implementation.฀To฀be฀successful,฀an฀SD-PAMs฀system฀ would฀need฀to฀build฀on฀and฀improve฀these฀systems.฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST ENDNOTES ฀ ฀The฀line฀between฀projects฀and฀policies฀could฀be฀blurred฀in฀some฀ instances,฀particularly฀if฀a฀project฀is฀large฀scale.฀฀Large-scale฀infrastructure฀projects,฀for฀instance,฀may฀require฀enabling฀legislation,฀partnerships,฀or฀even฀international฀agreements฀as฀prerequisites฀to฀planning,฀ financing,฀and฀implementation. ฀ 2฀ ฀UNFCCC,฀Article฀4.1(b),฀states฀that฀“all฀Parties฀shall฀“[f ]ormulate,฀ implement,฀publish฀and฀regularly฀update฀national฀...฀programmes฀containing฀measures฀to฀mitigate฀climate฀change...”฀Article฀4.3฀then฀states฀ that฀the฀developed฀countries฀shall฀“provide฀such฀financial฀resources,฀ including฀for฀the฀transfer฀of฀technology,฀needed฀by฀the฀developing฀ country฀Parties฀to฀meet฀the฀agreed฀full฀incremental฀costs฀of฀implementing฀measures฀that฀are฀covered฀by฀paragraph฀1฀of฀this฀Article....” ฀ 3฀ ฀An฀issue฀for฀future฀consideration฀would฀be฀whether฀pledge฀“periods”฀ (i.e.,฀negotiations)฀should฀be฀set฀in฀regular฀intervals฀or฀be฀rolling.฀฀ Parties฀may฀need฀to฀hold฀pledge฀periods฀in฀regular฀intervals฀(such฀as฀ every฀three฀to฀five฀years). ฀ 4฀ ฀In-depth฀review฀process฀is฀defined฀in฀COP฀decisions฀2/CP.1฀(1995)฀ and฀6/CP.3฀(1997). ฀ 5฀ ฀UNFCCC,฀2005.฀National฀Communications฀Annex฀I:฀Review฀of฀฀ Information.฀Available฀at:฀http://unfccc.int/national_reports/annex_i_ natcom_/items/1095.php.฀ ฀ 6฀ ฀See฀WTO,฀1995฀and฀“Trade฀policy฀reviews:฀ensuring฀transparency.”฀ Available฀at:฀฀http://www.wto.org/english/thewto_e/whatis_e/tif_e/ agrm11_e.htm. ฀ 7฀ ฀UNFCCC,฀2001.฀฀Ongoing฀guidance฀is฀also฀promulgated฀by฀the฀ CDM฀Executive฀Board.฀฀For฀information฀about฀the฀Executive฀Board,฀ see฀http://unfccc.int/cdm/EB. ฀ 8฀ ฀UNFCCC,฀2004b฀(Referring฀to฀type฀L-฀and฀L+฀policies฀or฀regulations). ฀ 9฀ ฀See฀the฀GHG฀Protocol฀Initiative฀(convened฀by฀the฀World฀Resources฀ Institute฀and฀World฀Business฀Council฀for฀Sustainable฀Development)฀ for฀an฀example฀of฀such฀accounting฀standards฀at฀the฀corporate฀and฀ project฀level.฀Information฀available฀at:฀http://www.ghgprotocol.org.฀ ฀10฀ ฀See฀e.g.,฀Bush฀Administration,฀2001฀(Asserting฀that฀the฀“Kyoto฀฀ Protocol฀would฀leave฀the฀United฀States฀dangerously฀dependent฀on฀ other฀countries฀to฀meet฀its฀emission฀targets฀...฀There฀is฀no฀guarantee฀ that฀these฀allowances฀would฀be฀available.”)฀Similar฀objections฀would฀ likely฀be฀expected฀from฀future฀administrations฀as฀well.฀ ฀11฀ ฀The฀GHG฀Protocol฀may฀be฀a฀useful฀multistakeholder฀model฀for฀฀ developing฀such฀standard.฀See฀supra฀note฀9. ฀ 1 REFERENCES Baumert,฀K.A.฀and฀D.฀Goldberg.฀2005 Baumert,฀K.A.฀and฀D.฀Goldberg.฀2005฀(forthcoming).฀฀ “Action฀Targets:฀A฀New฀Approach฀to฀International฀Greenhouse฀ Gas฀Controls.”฀Submitted฀to฀Climate฀Policy. Baumert,฀K.,฀T.฀Herzog,฀and฀J.฀Pershing.฀2005. Baumert,฀K.,฀T.฀Herzog,฀and฀J.฀Pershing.฀2005.฀Navigating฀the฀ Numbers:฀Greenhouse฀Gas฀Data฀and฀International฀Climate฀Policy.฀ Washington,฀DC:฀World฀Resources฀Institute. Bosi,฀M.฀and฀J.฀Ellis.฀2005.฀“Exploring฀Options฀for฀Sectoral฀ Bosi,฀M.฀and฀J.฀Ellis.฀2005.฀ Crediting฀Mechanisms.”฀Paris:฀OECD/IEA. Bush฀Administration.฀2001. Bush฀Administration.฀2001.฀Analysis฀of฀the฀Kyoto฀Protocol.฀฀ The฀Climate฀Change฀Review฀issued฀by฀the฀Cabinet-level฀climate฀ change฀working฀group,฀July฀13.฀Available฀at:฀http://www.฀ whitehouse.gov/news/releases/2001/06/climatechange.pdf. Chandler,฀W.฀et฀al.฀2002. Chandler,฀W.฀et฀al.฀2002.฀Climate฀Change฀Mitigation฀in฀Developing฀Countries:฀Brazil,฀China,฀India,฀Mexico,฀S.฀Africa,฀and฀Turkey.฀ Washington,฀DC:฀Pew฀Center฀on฀Global฀Climate฀Change. IEA/OECD฀(International฀Energy฀Agency฀and฀Organisation฀for฀ Economic฀Co-operation฀and฀Development).฀2001.฀Dealing฀with฀ Economic฀Co-operation฀and฀Development).฀2001.฀ Climate฀Change:฀Policies฀and฀Measures฀in฀IEA฀Member฀Countries.฀ Paris:฀IEA.฀ OECD.฀2002. OECD.฀2002.฀Aid฀Targeting฀the฀Objectives฀of฀the฀Rio฀Conventions฀ 1998-2000.฀Paris:฀OECD. Reinstein,฀R.A.฀2004.฀“A฀Possible฀Way฀Forward฀on฀Climate฀ Reinstein,฀R.A.฀2004. Change.”฀Mitigation฀and฀Adaptation฀Strategies฀for฀Global฀Change฀ 9฀(3):฀245–309. Samaniego,฀J.฀and฀C.฀Figueres.฀2002. Samaniego,฀J.฀and฀C.฀Figueres.฀2002.฀“A฀Sector-Based฀Clean฀ Development฀Mechanism,”฀in฀Baumert฀et฀al.฀eds.,฀Building฀on฀ the฀Kyoto฀Protocol:฀Options฀for฀Protecting฀the฀Climate.฀Washington,฀ DC:฀World฀Resources฀Institute. Schmidt,฀J.฀et฀al.฀2004. Schmidt,฀J.฀et฀al.฀2004.฀“Sector-Based฀Greenhouse฀Gas฀Emissions฀ Reduction฀Approach฀for฀Developing฀Countries:฀Some฀Options.”฀ Center฀for฀Clean฀Air฀Policy฀Working฀Paper.฀Washington,฀DC:฀ Center฀for฀Clean฀Air฀Policy. UNFCCC.฀1992.฀ UNFCCC.฀1992.฀United฀Nations฀Framework฀Convention฀on฀ Climate฀Change.฀ UNFCCC.฀2001. UNFCCC.฀2001.฀Report฀of฀the฀Conference฀of฀the฀Parties฀on฀its฀ Seventh฀Session,฀Held฀at฀Marrakesh฀from฀29฀Oct.฀to฀10฀Nov.฀2001,฀ decision฀17/CP.7,฀UNFCCC฀Doc.฀FCCC/CP/2001/13/Add.2. UNFCCC.฀2004a. UNFCCC.฀2004a.฀Report฀of฀the฀Global฀Environment฀Facility฀to฀ the฀Conference฀of฀the฀Parties.฀Note฀by฀the฀Secretariat.฀Document฀ FCCC/CP/2004/6.฀Available฀at:฀http://unfccc.int/resource/docs/ cop10/06.pdf.฀ UNFCCC.฀2004b.฀ UNFCCC.฀2004b.฀Report฀of฀the฀Sixteenth฀Meeting฀of฀the฀฀ [CDM]฀Executive฀Board฀Annex฀3,฀FCCC฀Doc.฀Ref.฀CDM-EB-16฀฀ (Oct.฀21-22).฀Available฀at:฀http://cdm.unfccc.int/EB/Meetings/฀ 016/eb16repan3.pdf.฀ UNFCCC.฀2005. UNFCCC.฀2005.฀National฀Communications฀Annex฀I:฀Review฀฀ of฀Information.฀Available฀at:฀http://unfccc.int/national_reports/ annex_i_natcom_/items/1095.php. UNGA฀(United฀Nations฀General฀Assembly).฀1992. UNGA฀(United฀Nations฀General฀Assembly).฀1992.฀“Rio฀ Declaration฀on฀Environment฀and฀Development,”฀in฀Report฀of฀ the฀United฀Nations฀Conference฀on฀Environment฀and฀Development,฀ UNGA฀Doc.฀A/Conf.151/26฀(Vol.฀I)฀(August฀12).฀Available฀at:฀ http://www.un.org/documents/ga/conf151/aconf15126-1annex1.htm. Winkler,฀H.,฀R.฀Spalding-Fecher,฀S.฀Mwakasonda,฀and฀฀ Winkler,฀H.,฀R.฀Spalding-Fecher,฀S.฀Mwakasonda,฀and฀฀ O.฀Davidson.฀2002.฀“Policies฀and฀Measures฀for฀Sustainable฀฀ O.฀Davidson.฀2002. Development,”฀in฀Baumert฀et฀al.฀(eds.),฀Building฀on฀the฀Kyoto฀ Protocol:฀Options฀for฀Protecting฀the฀Climate.฀Washington,฀DC:฀ World฀Resources฀Institute. WCED฀(World฀Commission฀on฀Environment฀and฀฀ WCED฀(World฀Commission฀on฀Environment฀and฀฀ Development).฀1987.฀“Our฀Common฀Future.”฀New฀York:฀฀ Development).฀1987. Oxford฀University฀Press. WTO฀(World฀Trade฀Organization).฀1995. WTO฀(World฀Trade฀Organization).฀1995.฀Marrakesh฀Agreement฀ Establishing฀the฀World฀Trade฀Organization.฀Annex฀3.฀Available฀at:฀ http://www.wto.org/english/docs_e/legal_e/legal_e.htm. Goldemberg,฀J.฀and฀W.฀Reid,฀eds.฀1999.฀Promoting฀Development฀ Goldemberg,฀J.฀and฀W.฀Reid,฀eds.฀1999. while฀Limiting฀Greenhouse฀Gas฀Emissions:฀Trends฀and฀Baselines.฀ New฀York:฀UNDP฀and฀World฀Resources฀Institute. S U S TA IN A B LE ฀ D E VE LOPM EN T฀ POLIC IES฀ A N D ฀ M EA SU R ES฀ A N D ฀ IN TER N ATION A L฀ C LIMATE฀ A GR EEMEN TS฀ 23 Editor's฀Note I n฀the฀1970s,฀Brazil฀faced฀two฀ seemingly฀unrelated฀challenges.฀ Most฀critically,฀the฀oil฀crisis฀and฀ the฀huge฀rise฀in฀prices฀had฀imposed฀ a฀damaging฀burden฀on฀the฀country’s฀ economy,฀pushing฀its฀external฀debt฀ up฀to฀levels฀that฀would฀be฀difficult฀to฀ sustain.฀At฀the฀same฀time,฀Brazil’s฀฀ sugar฀industry,฀a฀major฀component฀฀ of฀its฀economy,฀was฀struggling฀with฀฀ low฀world฀market฀prices,฀and฀rural฀ community฀revenues฀were฀depressed. The฀answer฀to฀both฀of฀these฀problems฀lay฀in฀the฀production฀of฀ethanol฀ from฀sugarcane.฀The฀government฀implemented฀wide-ranging฀measures฀to฀ ensure฀that฀ethanol฀was฀a฀significant฀ part฀of฀the฀transport฀fuel฀mix—partly฀ blended฀with฀gasoline,฀and฀partly฀for฀ use฀as฀a฀pure฀fuel฀in฀specially-adapted฀ car฀engines.฀Since฀that฀time,฀Brazil฀ has฀saved฀some฀$100฀billion฀in฀foreign฀ exchange,฀both฀in฀reduced฀import฀costs฀ and฀in฀reduced฀service฀payment฀on฀ the฀debt฀that฀it฀would฀have฀incurred฀ from฀larger฀oil฀imports.฀This฀saving฀ is฀equivalent฀to฀50฀percent฀of฀Brazil’s฀ actual฀(sizeable)฀national฀debt,฀and฀ some฀8฀percent฀of฀current฀GDP.฀Over฀ a฀million฀jobs฀in฀rural฀Brazil฀depend฀ on฀ethanol฀and฀sugar฀production,฀and฀ the฀industry฀has฀been฀protected฀from฀ exclusive฀dependence฀on฀the฀volatile฀ world฀price฀for฀sugar.฀Air฀quality฀ has฀generally฀improved,฀and฀biofuel฀ manufacture฀produces฀around฀1,350฀ gigawatt฀hours฀(GWh)฀per฀year฀of฀ useful฀electricity฀for฀export฀to฀the฀grid,฀ a฀figure฀that฀has฀risen฀from฀a฀mere฀80฀ GWh฀in฀1997฀and฀is฀still฀rising฀fast฀as฀ technology฀improves. 24 These฀domestic฀gains฀have฀been฀the฀ real฀measures฀of฀the฀program’s฀success,฀ but฀the฀incidental฀benefits฀to฀the฀climate฀have฀been฀considerable.฀Without฀ the฀biofuels฀program฀Brazil’s฀cumulative฀emissions฀of฀CO2฀from฀higher฀฀ oil฀consumption฀between฀1975฀and฀ the฀present฀would฀have฀been฀10฀฀ percent฀higher—a฀saving฀of฀almost฀ 600฀million฀tons฀of฀CO2 . ฀ The฀strategy฀examined฀in฀this฀ chapter฀is฀the฀only฀one฀in฀this฀report฀ which฀is฀already฀implemented฀on฀a฀ large฀scale฀and฀over฀a฀long฀time฀period.฀Although฀the฀goal฀of฀promoting฀ ethanol฀has฀remained฀constant,฀the฀ policy฀mix฀employed฀to฀this฀end฀has฀ changed฀over฀time.฀Initial฀subsidies฀ were฀high,฀but฀as฀the฀technology฀and฀ the฀infrastructure฀developed,฀these฀ have฀steadily฀declined฀and฀have฀now฀ been฀eliminated.฀A฀mandated฀level฀of฀ ethanol฀admixture฀remains฀central฀to฀ the฀ethanol฀market,฀but฀pure฀ethanol฀ sales฀are฀also฀important.฀The฀market฀ for฀renewable฀electricity฀is฀emerging฀ as฀mutually฀supportive฀with฀ethanol฀ production,฀and฀new฀“flexfuel”฀฀ vehicle฀technology฀makes฀ethanol฀฀ more฀appealing฀to฀consumers.฀ The฀authors฀suggest฀that฀some฀฀ 20฀other฀countries฀have฀suitable฀ conditions฀for฀a฀similar฀expansion฀of฀ sugarcane฀ethanol.฀In฀countries฀with฀ more฀temperate฀climates,฀a฀technology฀breakthrough฀is฀still฀needed฀to฀ make฀cellulosic฀ethanol฀more฀viable.฀ Both฀approaches฀have฀some฀local฀ impacts,฀particularly฀on฀land฀use,฀that฀ will฀need฀careful฀management,฀but฀ the฀authors฀suggest฀that฀these฀can฀be฀ overcome.฀An฀appeal฀of฀ethanol฀is฀that฀ it฀allows฀a฀gradual฀increase฀in฀its฀use฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST rather฀than฀an฀all-or-nothing฀switch฀ to฀a฀new฀technology,฀so฀adverse฀impacts฀ can฀be฀managed฀as฀they฀arise. Brazil’s฀biofuels฀program฀represents,฀ in฀a฀sense,฀one฀end฀of฀a฀spectrum฀of฀ SD-PAMs฀and฀raises฀some฀interesting฀ questions฀of฀its฀own.฀Brazil’s฀ethanol฀ program฀has฀reached฀a฀stage฀at฀which฀ it฀requires฀little฀additional฀support,฀ though฀it฀is฀possible฀that฀this฀might฀ change฀if฀oil฀prices฀return฀to฀low฀levels.฀ International฀recognition฀no฀doubt฀฀ has฀some฀appeal,฀but฀the฀additional฀ benefit฀of฀exploring฀this฀as฀an฀SD-PAM฀฀ may฀seem฀to฀be฀limited฀for฀Brazil.฀ Conversely,฀a฀number฀of฀countries฀ might฀be฀helped฀to฀implement฀such฀ a฀program฀with฀additional฀support฀ ranging฀from฀exchange฀of฀information฀ and฀easier฀access฀to฀relevant฀technologies,฀to฀financial฀support฀in฀cases฀where฀ this฀is฀needed.฀This฀illustrates฀the฀ potentially฀eclectic฀nature฀of฀SD-PAMs,฀ as฀a฀similar฀technology฀choice฀may฀ be฀supported฀in฀different฀ways฀as฀the฀ needs฀of฀the฀host฀country฀dictate. The฀climate฀benefits฀of฀this฀development฀would฀be฀huge,฀but฀would฀not฀ need฀to฀be฀treated฀exclusively฀as฀a฀mitigation฀cost.฀Furthermore,฀as฀today’s฀oil฀ market฀shows,฀the฀levels฀of฀demand฀ from฀one฀country฀affect,฀to฀a฀greater฀ or฀lesser฀degree,฀prices฀for฀all.฀There฀ can฀be฀few฀more฀compelling฀examples฀ of฀policy฀areas฀ripe฀for฀international฀ cooperation. chapter฀iii Biofuels฀for฀Transport,฀฀ Biofuels฀for฀Transport,฀฀ Development,฀and฀ Climate฀Change:฀ Lessons฀from฀Brazil฀ Jose฀Roberto฀Moreira 1 ฀ ■ ฀Luiz฀Augusto฀Horta฀Nogueira 2 ฀ ■ ฀Virginia฀Parente 3 ฀ 1.฀INTRODUCTION Scientific฀consensus฀suggests฀that฀avoiding฀serious฀or฀ even฀catastrophic฀impacts฀from฀climate฀change฀will฀require฀ global฀emissions฀of฀greenhouse฀gases฀(GHGs)฀to฀begin฀to฀ decline฀within฀the฀next฀few฀decades.฀While฀rich฀industrialized฀countries฀must฀lead฀in฀making฀these฀emission฀cuts,฀ large฀developing฀countries฀must฀also฀find฀ways฀to฀avoid฀ emissions฀growth฀and฀even฀reduce฀their฀emissions.฀However,฀ urgent฀development฀needs฀mean฀that฀findings฀ways฀to฀combine฀development฀and฀emission฀reductions฀is฀imperative. One฀major฀potential฀opportunity฀for฀this฀kind฀of฀synergy฀is฀the฀replacement฀of฀fossil฀fuels฀by฀biofuels฀for฀transport.฀This฀approach฀has฀been฀promoted฀in฀many฀countries฀ as฀a฀way฀to฀reduce฀dependence฀on฀imports฀of฀fossil฀fuels,฀ reduce฀price฀volatility,฀and฀provide฀local฀environmental฀ benefits.฀In฀addition,฀biofuels฀can฀also฀bring฀large฀potential฀ climate฀advantages.฀Brazil฀has฀for฀several฀decades฀been฀at฀ the฀forefront฀of฀introducing฀these฀fuels,฀and฀is฀an฀ideal฀ place฀to฀look฀for฀lessons฀that฀can฀be฀applied฀elsewhere. This฀chapter฀looks฀at฀the฀non-climate฀reasons฀behind฀ Brazil’s฀biofuels฀program;฀the฀technical,฀economic,฀and฀ institutional฀hurdles฀it฀faced;฀the฀incidental฀climate฀advantages;฀and฀how฀lessons฀learned฀in฀Brazil฀might฀be฀usefully฀ applied฀elsewhere. 1.1฀฀Sustainable฀Development฀Policies To฀put฀the฀biofuels฀issue฀in฀perspective,฀we฀begin฀with฀ a฀few฀words฀about฀Brazilian฀sustainable฀development฀goals฀ and฀the฀policies฀and฀measures฀to฀achieve฀them.฀A฀policy฀ designed฀for฀sustainable฀development฀must,฀as฀a฀minimum,฀guarantee฀development.฀Since฀shortage฀of฀capital฀ is฀a฀frequent฀problem฀in฀developing฀countries,฀economic฀ development฀depends฀strongly฀on฀foreign฀investment.฀ Unfortunately,฀the฀country฀has฀faced฀several฀serious฀economic฀crises.฀The฀overall฀international฀current฀transaction฀ B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 25 account฀was฀positive฀during฀only฀six฀of฀the฀last฀40฀years,฀ and฀negative฀values฀have฀been฀as฀high฀as฀4.6฀percent฀of฀ GNP฀(Banco฀Central,฀2004).4฀Brazil’s฀external฀debt฀is฀the฀ largest฀of฀any฀large฀developing฀country.฀Risks฀associated฀ with฀Brazil’s฀capacity฀to฀repay฀debt฀pushed฀interest฀rates฀to฀ high฀levels.฀Since฀2003,฀4.25฀percent฀of฀GNP฀has฀been฀set฀ aside฀for฀external฀debt฀repayment฀in฀the฀federal฀government฀budget,฀but฀absolute฀debt฀levels฀have฀declined฀only฀ modestly.฀These฀issues฀undermined฀Brazil’s฀credibility,฀ often฀reducing฀foreign฀direct฀investment.฀ On฀the฀other฀hand,฀the฀low-technology฀industrial฀sector฀ and฀the฀agricultural฀sector฀were฀not฀able฀to฀push฀exports฀ at฀a฀significant฀rate฀until฀recently฀(2003–05).฀With฀a฀modest฀flow฀of฀foreign฀currency฀receipts,฀economic฀survival฀ required฀significantly฀reducing฀imports.฀Given฀the฀large฀ cost฀of฀oil฀expenditures฀in฀the฀country’s฀trade,฀any฀national฀ alternative฀displacing฀imported฀oil฀would฀bring฀major฀ benefits.฀With฀less฀spending฀on฀oil,฀it฀would฀be฀possible฀to฀ use฀scarce฀capital฀domestically.฀ As฀economic฀development฀has฀proceeded,฀the฀next฀issue,฀sustainability,฀has฀gained฀importance฀in฀the฀country’s฀ planning.฀But฀several฀barriers฀to฀sustainable฀development฀concerned฀government฀policymakers,฀including฀ (1)฀the฀nation’s฀low฀education฀level;฀(2)฀lack฀of฀adequate฀ infrastructure;฀(3)฀poor฀income฀distribution;฀and฀(4)฀ insufficient฀social฀welfare฀spending.฀A฀number฀of฀these฀ problems฀are฀encapsulated฀in฀the฀state฀of฀much฀of฀Brazil’s฀ rural฀economy.฀Although฀significant฀programs฀exist฀to฀help฀ address฀each฀of฀these฀problems฀directly,฀there฀remains฀a฀ significant฀demand฀for฀jobs฀for฀workers฀with฀low฀education฀levels,฀as฀well฀as฀a฀need฀for฀revenue฀in฀rural฀areas.฀The฀ lack฀of฀rural฀employment฀affects฀both฀low฀rural฀incomes฀ and฀migration฀rates฀to฀urban฀centers.฀ Infrastructure฀improvement฀has฀occurred฀in฀areas฀such฀ as฀energy฀production฀and฀distribution,฀sewage฀and฀water,฀ and฀construction฀of฀roads฀and—to฀a฀lesser฀extent—฀ railways.฀Unfortunately,฀restrained฀demand฀is฀huge,฀and฀ infrastructure฀maintenance฀is฀not฀a฀priority.฀In฀essence,฀ demand฀for฀services฀is฀outstripping฀available฀resources.฀Environmental฀priorities฀also฀are฀starting฀to฀emerge.฀Environmental฀institutions,฀officials,฀and฀NGOs฀already฀exist฀and฀ are฀gaining฀prestige.฀In฀more฀developed฀states,฀compliance฀ with฀environmental฀legislation฀requires฀a฀significant฀effort฀ on฀those฀proposing฀new฀projects.฀Large฀energy฀projects฀are฀ facing฀severe฀limitations฀due฀the฀enforcement฀of฀environmental฀norms.฀Sustainable฀development฀conditions฀are฀ being฀sought฀much฀more฀emphatically฀than฀in฀the฀past,฀ and฀results฀are฀starting฀to฀appear.฀ We฀shall฀see฀in฀this฀chapter฀that฀the฀use฀of฀biofuels฀has฀ had฀positive฀impacts฀on฀each฀of฀these฀areas,฀as฀a฀contribution฀to฀the฀rural฀economy฀and฀job฀creation;฀to฀energy฀infrastructure,฀including฀electricity;฀and฀to฀the฀environment. 2.฀BIOFUELS฀IN฀BRAZIL 2.1฀฀What฀is฀a฀biofuel? A฀biofuel฀is฀a฀fuel฀produced฀from฀dry฀organic฀matter฀or฀ combustible฀oils฀produced฀from฀plants.฀There฀are฀several฀ kinds฀of฀biofuels,฀including฀alcohol฀(from฀fermented฀ sugar),฀black฀liquor฀from฀the฀paper฀manufacturing฀process,฀ wood,฀and฀soybean฀oil฀(IPCC,฀2001).฀While฀a฀range฀ of฀biofuels฀can฀be฀used฀as฀automotive฀fuel,฀either฀pure฀ or฀blended฀with฀fossil฀fuels,฀the฀important฀biofuel฀for฀ transport฀in฀Brazil฀is฀ethanol฀from฀sugarcane.฀Although฀ other฀kinds฀are฀being฀considered,฀in฀particular฀biodiesel฀ (see฀Box฀1),฀their฀use฀remains฀minimal.฀By฀contrast,฀there฀ were฀about฀21฀million฀vehicles฀in฀the฀country฀running฀on฀ ethanol฀or฀ethanol฀blends฀as฀of฀2005.฀So,฀in฀the฀Brazilian฀ context,฀biofuels฀are฀virtually฀synonymous฀with฀ethanol. 2.2฀฀Current฀status฀of฀biofuels฀฀ in฀the฀Brazilian฀market Ethanol฀is฀largely฀used฀as฀an฀alternative฀for฀gasoline฀in฀ the฀automobile฀sector.฀In฀Brazil,฀all฀ethanol฀is฀produced฀ from฀sugarcane฀through฀the฀fermentation฀of฀sugars฀contained฀in฀sugarcane฀juice.฀The฀same฀agricultural฀product฀ can฀be฀used฀to฀produce฀either฀sugar฀or฀ethanol฀(see฀Figure฀ 1).฀The฀market฀for฀ethanol฀is฀therefore฀intimately฀interlinked฀with฀that฀for฀sugar฀and฀related฀products,฀and฀the฀history฀of฀ethanol฀needs฀to฀be฀understood฀with฀this฀in฀mind. Box฀1.฀฀Biodiesel฀in฀Brazil While฀ethanol฀has฀been฀successfully฀introduced฀as฀a฀partial฀ substitute฀for฀gasoline,฀there฀has฀so฀far฀been฀no฀equivalent฀ replacement฀of฀diesel฀fuels.฀Diesel฀oil฀is฀the฀most฀important฀ fuel฀in฀Brazil,฀with฀an฀annual฀consumption฀of฀about฀38฀billion฀ liters,฀amounting฀to฀36฀percent฀of฀total฀oil฀product฀demand.฀ Today,฀15฀percent฀of฀Brazilian฀diesel฀demand฀is฀imported.฀A฀ national฀biodiesel฀program฀was฀launched฀in฀January฀2005฀ and฀is฀now฀under฀development.฀An฀official฀national฀standard฀ for฀biodiesel฀is฀already฀available.฀Recently,฀the฀National฀ Petroleum฀Agency฀(ANP)฀issued฀a฀set฀of฀regulatory฀documents฀ to฀prepare฀the฀downstream฀oil฀industry฀to฀deal฀with฀biodiesel฀ implementation.฀Since฀January฀2005,฀the฀government฀has฀allowed฀the฀blending฀of฀up฀to฀2฀percent฀of฀biodiesel฀in฀regular฀ diesel.฀This฀amount฀will฀be฀adjusted฀annually,฀moving฀toward฀ 5฀percent฀in฀2008. Source:฀Ministério฀de฀Minas฀e฀Energia,฀Programa฀Combustível฀Verde,฀Brasília฀(2004).฀฀ Available฀at:฀http://www.mme.gov.br. 26 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Figure฀1.฀฀฀Simplified฀Flow฀Diagram฀for฀Sugar฀and฀Ethanol฀Production฀from฀Sugarcane Source:฀Macedo฀(2003)฀ Sugarcane฀is฀grown฀in฀more฀than฀100฀countries฀ worldwide฀and฀accounts฀for฀the฀majority฀of฀global฀sugar฀ production.฀Brazil฀plants฀and฀harvests฀a฀large฀amount฀of฀ sugarcane:฀about฀400฀million฀tons฀were฀harvested฀in฀the฀ 2004–05฀growing฀season,฀covering฀an฀area฀of฀5.5฀million฀ hectares.฀Aside฀from฀sugar฀and฀ethanol,฀products฀from฀the฀ cane฀include฀biodegradable฀plastics฀and฀low-grade฀paper.฀ The฀byproducts,฀bagasse฀(residues฀from฀the฀sugar฀manufacturing฀process)฀and฀barbojo฀(tops฀and฀leaves฀remaining฀ from฀harvesting),฀are฀generally฀burned.฀Bagasse,฀in฀particular,฀is฀traditionally฀used฀as฀a฀source฀of฀heat฀and฀electricity฀ for฀the฀agroindustries฀processing฀sugarcane฀into฀ethanol฀ and฀sugar,฀as฀well฀as฀in฀other฀agroindustries฀such฀as฀orange฀ juice฀production. Nearly฀half฀of฀Brazil’s฀cane฀is฀destined฀for฀ethanol.฀Brazil฀ has฀two฀distinct฀sugar฀producing฀regions.฀The฀SouthernCentral฀region฀is฀dominated฀by฀the฀state฀of฀São฀Paulo,฀ which฀alone฀accounts฀for฀65฀percent฀of฀the฀country’s฀sugarcane฀production.฀This฀region฀supplies฀three-quarters฀of฀ the฀country’s฀cane,฀over฀70฀percent฀of฀the฀sugar฀output,฀and฀ approximately฀90฀percent฀of฀the฀ethanol.฀The฀Northeast฀ accounts฀for฀less฀than฀20฀percent฀of฀Brazil’s฀sugarcane฀production,฀approximately฀25฀to฀30฀percent฀of฀the฀country’s฀ sugar฀output,฀and฀about฀10฀percent฀of฀its฀ethanol.฀ Table฀1฀summarizes฀major฀indicators฀of฀the฀sugar/฀ ethanol฀sector฀in฀Brazil฀for฀the฀year฀2003.฀Raw฀and฀refined฀ sugar฀account฀for฀roughly฀2฀to฀4฀percent฀of฀Brazil’s฀exports,฀ depending฀on฀yields.฀The฀large-scale฀use฀of฀ethanol฀as฀ fuel฀for฀vehicles฀in฀Brazil฀dates฀from฀1931.฀From฀1931฀to฀ Table฀1.฀฀The฀Sugar/Ethanol฀Sector฀in฀Brazil,฀2003 ฀ A฀US$12฀billion฀annual฀market฀ Gross฀Turnover฀ $12฀billion฀(R$36฀billion) Share฀of฀National฀Income฀ 3.5฀percent฀of฀GNP Employment฀ ฀ 3.6฀million฀jobs฀(direct,฀indirect,฀and฀฀ some฀induced) ฀sugarcane฀growers฀ 70,000฀farmers ฀sugarcane฀harvest฀ 340฀million฀tons฀of฀sugarcane Output฀–฀Sugar฀ 24฀million฀tons฀of฀sugar Output฀–฀Ethanol฀ 14฀billion฀liters฀of฀alcohol Exports฀–฀Sugar฀ 13.5฀million฀tons฀of฀sugar Exports฀–฀Ethanol฀ 690฀million฀liters฀of฀alcohol Taxes฀ $1.5฀billion฀(R$4.5฀billion) Investments฀ $1.2฀billion/year฀(R$3.5฀billion/year)฀ Producers฀ 302฀mills Source:฀Moreira฀(2004) 1975,฀around฀7฀percent฀of฀total฀Brazilian฀gasoline฀consumption฀was฀replaced฀by฀ethanol,฀as฀established฀by฀law.฀ In฀1975,฀the฀Brazilian฀Alcohol฀Program฀(Proalcool)฀was฀ launched,฀increasing฀the฀use฀of฀gasohol฀and฀promoting฀ pure฀ethanol฀use฀in฀dedicated฀models.฀Figure฀2฀shows฀the฀ evolution฀of฀alcohol฀production฀since฀then.฀ B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 27 Figure฀2.฀฀฀Ethanol฀Production฀(Anhydrous฀plus฀Hydrous)฀by฀Growing฀Season 18 Ethanol Production (million m3) 16 14 12 10 8 6 4 2 2003/2004 2001/2002 1999/2000 1997/1998 1995/1996 1993/1994 1991/1992 1989/1990 1987/1988 1985/1986 1983/1984 1981/1982 1979/1980 1977/1978 1975/1976 1973/1974 1971/1972 0 Source:฀Datagro฀(2004);฀Datagro฀(2002) It฀is฀commonly฀asserted฀in฀the฀international฀alternative฀ energy฀literature฀that฀biomass-derived฀transport฀fuels฀are฀ uneconomic฀at฀present.฀However,฀substantial฀cost฀reductions฀have฀occurred฀for฀sugarcane-derived฀ethanol฀since฀the฀ early฀1980s฀(Goldemberg,฀2005).฀This฀trend฀accelerated฀ further฀after฀the฀1999฀currency฀devaluation.฀This฀effect,฀ plus฀the฀increase฀in฀the฀cost฀of฀oil฀since฀2000,฀has฀made฀ ethanol฀cost-competitive฀with฀gasoline.฀The฀number฀of฀ new฀automobiles฀running฀on฀pure฀(or฀“hydrous”)฀ethanol฀ was฀almost฀zero฀in฀the฀period฀1995–2000฀but฀recently฀has฀ started฀to฀show฀significant฀improvement฀(see฀Figure฀3). 2.3฀฀A฀brief฀history฀of฀biofuels฀in฀Brazil Ethanol฀has฀been฀proposed฀as฀a฀fuel฀since฀the฀beginning฀ of฀automobile฀use฀in฀Brazil.฀In฀1903,฀a฀national฀meeting฀ on฀applications฀of฀ethanol฀put฀forward฀plans฀to฀develop฀ an฀infrastructure฀to฀produce฀and฀distribute฀ethanol฀from฀ sugarcane฀as฀a฀motor฀fuel.5฀During฀World฀War฀I,฀the฀use฀ of฀alcohol฀was฀compulsory฀in฀many฀areas฀of฀the฀country.฀ By฀1923,฀production฀of฀ethanol฀had฀grown฀to฀150฀million฀ liters฀per฀year;฀in฀1927฀it฀was฀blended฀with฀diethyl฀(ethyl)฀ ether฀and฀castor฀oil.฀In฀1931,฀a฀Federal฀Decree฀established฀ 28 the฀compulsory฀addition฀of฀5฀percent฀of฀ethanol฀in฀฀ gasoline;฀this฀was฀elevated฀to฀10฀percent฀in฀1966.฀By฀1941,฀ ethanol฀production฀had฀reached฀650฀million฀liters.฀ The฀impetus฀for฀the฀huge฀growth฀of฀ethanol฀use฀in฀recent฀ decades฀started฀in฀the฀1970s.฀Brazil฀faced฀two฀seemingly฀ unrelated฀challenges.฀The฀oil฀crisis฀and฀the฀consequent฀rise฀ in฀oil฀prices฀were฀putting฀great฀strains฀on฀Brazil’s฀external฀ trade฀balance.฀At฀the฀same฀time,฀the฀international฀market฀ price฀for฀sugar฀was฀falling฀rapidly,฀and฀the฀sugarcane฀sector฀ was฀looking฀for฀alternative฀sources฀of฀revenue.฀In฀1975,฀ the฀Federal฀Government฀decided฀to฀encourage฀the฀production฀of฀alcohol฀to฀replace฀gasoline฀(see฀Box฀2).฀ In฀a฀sense,฀there฀have฀been฀two฀ethanol฀programs:฀the฀ somewhat฀fluctuating฀use฀of฀pure฀ethanol฀fuel,฀and฀the฀ steady฀success฀of฀mixed฀(anhydrous)฀ethanol฀in฀gasoline. The฀target฀set฀in฀1975฀was฀to฀displace฀a฀share฀of฀gasoline฀by฀blending฀it฀with฀10฀percent฀anhydrous฀ethanol฀ (see฀Figure฀4).฀In฀addition,฀the฀government,฀which฀had฀at฀ that฀time฀full฀control฀over฀fuel฀distribution฀and฀pricing,฀ mandated฀that฀all฀filling฀stations฀should฀have฀at฀least฀one฀ ethanol฀pump.฀Significant฀ethanol฀production฀and฀the฀ continuing฀high฀price฀of฀oil฀pushed฀the฀government฀to฀ steadily฀increase฀this฀proportion.฀In฀1979,฀cars฀running฀ on฀“neat”฀(pure)฀hydrous฀ethanol฀entered฀the฀market,฀and฀ both฀these฀and฀“gasohol”฀cars฀running฀on฀blended฀ethanol฀ and฀gasoline฀were฀popular.฀Between฀1975฀and฀1985,฀the฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST production฀of฀sugarcane฀quadrupled฀and฀alcohol฀became฀a฀ very฀important฀fuel฀in฀Brazil฀(see฀Annex฀1฀and฀Figure฀3).฀ Government฀intervention฀in฀the฀sugar฀and฀alcohol฀ market฀was฀significant฀(see฀Box฀2).฀Although฀oil฀prices฀ declined฀in฀the฀1980s,฀the฀impact฀of฀this฀decline฀on฀the฀ ethanol฀program฀was฀minimized,฀as฀the฀government฀ indexed฀the฀price฀of฀ethanol฀to฀the฀price฀of฀gasoline,฀ranging฀from฀59฀to฀75฀percent฀of฀its฀price.฀The฀gasoline฀price฀ was฀always฀higher฀than฀that฀of฀other฀oil-derived฀fuels฀due฀ to฀differentiated฀federal฀and฀state฀taxes฀charged฀on฀fuels.฀ Even฀so,฀interest฀in฀alcohol฀declined฀significantly฀when฀ it฀reached฀the฀upper฀limit฀(75฀percent)฀of฀its฀price฀index฀ against฀gasoline.฀ The฀neat฀ethanol฀car฀faced฀some฀technical฀problems฀ during฀the฀first฀two฀years,฀but฀after฀that฀it฀was฀a฀significant฀ success฀up฀to฀1989.฀In฀that฀year,฀a฀shortage฀of฀ethanol฀hit฀ those฀with฀cars฀that฀would฀only฀run฀on฀that฀fuel฀and฀seriously฀dented฀consumer฀confidence฀and฀sales฀of฀neat฀ethanol฀vehicles฀(Figure฀3).฀After฀1996,฀much฀lower฀oil฀prices฀ and฀the฀decline฀in฀government฀support฀made฀sales฀drop฀ even฀further.฀Ethanol฀subsidies฀came฀to฀an฀end฀in฀1998.฀ Even฀then,฀gasoline฀prices฀were฀kept฀higher฀than฀other฀ fossil฀fuels฀due฀to฀an฀extra฀tax.฀As฀the฀fuel฀markets฀were฀ liberalized,฀hydrous฀ethanol฀was฀sold฀in฀service฀stations฀at฀ up฀to฀90฀percent฀of฀the฀price฀of฀gasoline฀(or฀to฀be฀more฀ precise,฀gasoline/ethanol฀blends).฀This฀virtual฀elimination฀ of฀its฀price฀advantage฀coupled฀with฀memories฀of฀the฀supply฀ crunch฀of฀a฀decade฀before฀brought฀sales฀of฀neat฀ethanol฀ cars฀down฀close฀to฀zero. By฀2001,฀however,฀a฀falling฀ethanol฀price฀caused฀฀ by฀stronger฀competition—coupled฀with฀a฀significant฀ devaluation฀of฀the฀national฀currency—revived฀consumer฀ interest฀in฀neat฀ethanol฀cars.฀Initially,฀there฀was฀an฀increase฀ in฀neat฀ethanol฀car฀sales,฀but฀the฀arrival฀of฀flexfuel฀cars฀ on฀the฀market฀accelerated฀this฀effect฀(see฀Annex฀1฀and฀ Figure฀3).฀Such฀cars฀can฀operate฀either฀with฀gasoline฀(all฀ gasoline฀in฀Brazil฀has฀25฀percent฀ethanol฀blend)฀or฀with฀ hydrous฀alcohol,฀or฀any฀combination฀of฀these฀fuels.฀The฀ Box฀2.฀฀Overview฀of฀Government฀Support฀for฀Ethanol From฀1975฀to฀the฀1980s฀ ฀ Ethanol:฀ ฀ Level฀of฀guaranteed฀purchase,฀at฀controlled฀prices ฀ Fixed฀ratio฀of฀ethanol/gasoline฀selling฀prices ฀ Low฀interest฀rate฀in฀loans฀for฀investment฀(1980–85)฀ ฀ Sugar: ฀ Government฀issued฀“production฀quotas” ฀ Exports:฀by฀the฀government From฀1990฀to฀1999 ฀ Ethanol฀and฀sugar:฀ ฀ ฀ Production฀and฀commercialization฀were฀entirely฀฀ deregulated฀for฀both฀products Source:฀Macedo฀(2003) Figure฀3.฀฀Ethanol-fueled฀Vehicle฀Sales฀since฀1980 800,000 Number of Cars (left axis) 700,000 % of All Car Sales (right axis) 100% 90% 80% 600,000 70% 500.000 60% 400,000 50% 40% 300,000 30% 200,000 20% 100,000 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 2004 (estimated) Note:฀Since฀2003,฀total฀ethanol฀car฀sales฀include฀flexfuel฀cars. Source:฀Datagro฀(2002);฀updated฀by฀authors. 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 0 10% 0% B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 29 flexfuel฀technology฀was฀improved฀in฀Brazil฀and฀its฀cost฀ was฀significantly฀reduced.฀Flexfuel฀cars฀were฀being฀sold฀at฀ the฀same฀price฀as฀models฀running฀exclusively฀on฀gasoline฀ or฀on฀hydrous฀ethanol.฀There฀was฀a฀significant฀increase฀in฀ sales฀in฀2004,฀when฀several฀local฀car฀manufacturers฀offered฀ flexfuel฀models.฀ Conversely,฀anhydrous฀ethanol฀blended฀with฀gasoline,฀ fixed฀by฀government฀mandate,฀had฀a฀smoother฀path฀over฀ the฀last฀30฀years.฀During฀the฀1980s,฀the฀shortage฀of฀ethanol฀caused฀some฀variability฀in฀the฀share฀of฀ethanol฀blended฀ with฀gasoline฀during฀this฀period,฀but฀it฀has฀stabilized฀in฀ more฀recent฀years฀(see฀Figure฀4).฀Figure฀5฀shows฀a฀breakdown฀of฀the฀pump฀price฀of฀gasohol,฀diesel฀and฀ethanol฀ fuels฀(note฀that฀pure฀gasoline฀is฀not฀generally฀sold.) With฀an฀accumulated฀production฀above฀280฀billion฀฀ liters฀and฀with฀technical฀improvements,฀it฀has฀been฀฀ possible฀to฀produce฀ethanol฀at฀a฀cost฀below฀$0.20฀per฀liter.฀ Figure฀4.฀฀Share฀of฀Anhydrous฀Ethanol฀in฀Brazilian฀Gasoline฀ 25% 20% 15% 10% 5% 2002 1998 1994 1990 1986 1982 1978 1974 0 Source:฀BEN฀(2004) 3.฀REASONS฀FOR฀THE฀SUCCESS฀฀ 3.฀REASONS฀FOR฀THE฀SUCCESS฀฀ OF฀BIOFUELS฀IN฀BRAZIL As฀discussed฀above,฀the฀biofuels฀program฀in฀Brazil฀had฀ more฀than฀one฀aim฀and฀was฀in฀turn฀affected฀by฀a฀number฀ of฀factors.฀In฀this฀section,฀we฀examine฀some฀of฀these฀฀ factors฀and฀their฀impact฀on฀ethanol฀use฀in฀Brazil. 30 3.1฀฀Synergies฀with฀the฀sugar฀market As฀discussed฀above,฀the฀production฀of฀ethanol฀is฀intimately฀linked฀with฀sugar฀production.฀Sugarcane฀produces฀ exceptionally฀good฀yields฀as฀an฀energy฀crop฀(Figure฀6),฀and฀ technical฀improvements฀are฀expected฀to฀push฀these฀yields฀ further.฀The฀2001฀worldwide฀average฀(over฀22฀million฀ hectares฀[Mha]฀of฀land)฀for฀aboveground฀biomass฀yield฀was฀ 28.4฀dry฀tons฀per฀hectares฀per฀year฀(dt/ha/yr)฀(Hall฀et฀al.,฀ 1993,฀and฀FAO,฀2002).฀The฀yield฀for฀Zambia฀(averaged฀ over฀10,000฀ha)฀was฀77dt/ha/yr฀(Hall฀et฀al.,฀1993). Brazil฀has฀a฀large฀sugar฀industry,฀which฀has฀been฀able฀ to฀take฀advantage฀of฀the฀flexibility฀between฀ethanol฀and฀ sugar฀production.฀During฀most฀of฀the฀period฀of฀declining฀ ethanol฀car฀sales฀(1990–98)฀and฀low฀sales฀(1999–2003),฀ as฀shown฀in฀Figure฀7,฀sugarcane฀producers฀expanded฀sugar฀ production;฀both฀sugarcane฀productivity฀and฀planted฀area฀ increased.฀As฀ethanol฀production฀declined,฀this฀production฀ was฀diverted฀to฀sugar.฀Between฀1992฀and฀2004,฀Brazil’s฀ share฀of฀world฀sugar฀exports฀grew฀from฀10฀to฀30฀percent฀ due฀to฀lower฀costs฀in฀Brazil฀and฀difficulties฀in฀other฀producing฀countries.฀ The฀coupled฀production฀of฀alcohol฀and฀sugar฀can฀be฀ seen฀as฀a฀significant฀driver฀for฀the฀successful฀alcohol฀฀ program฀in฀Brazil.฀The฀steps฀involved฀in฀sugar฀and฀฀ alcohol฀production฀from฀sugarcane,฀as฀shown฀in฀Figure฀1฀ (p.฀27),฀allow฀flexibility฀of฀production.฀If฀sugar฀production฀becomes฀less฀attractive฀due฀to฀reduced฀prices฀in฀the฀ international฀market,฀it฀might฀become฀more฀profitable฀to฀ shift฀production฀to฀alcohol.฀In฀common฀with฀many฀agricultural฀commodities,฀international฀sugar฀prices฀have฀been฀ both฀highly฀volatile฀and฀on฀a฀general฀downward฀trend.฀ However,฀it฀is฀important฀to฀take฀into฀account฀the฀need฀to฀ protect฀the฀fuel฀alcohol฀domestic฀market;฀that฀is,฀sugarcane฀ producers฀often฀have฀to฀produce฀ethanol฀even฀when฀they฀ could฀make฀greater฀profits฀by฀selling฀sugar.฀This฀was฀an฀ important฀lesson฀learned฀from฀the฀past฀alcohol฀shortage. The฀sugar฀industry฀has฀shown฀significant฀improvements฀ in฀its฀productivity,฀which฀has฀in฀turn฀benefited฀ethanol฀ production฀(see฀Table฀2). 3.2฀฀Synergies฀with฀electricity฀and฀฀ heat฀production A฀second฀important฀area฀of฀synergy,฀which฀is฀still฀being฀ fully฀realized,฀is฀in฀associated฀energy฀production.฀Globally,฀ the฀energy฀content฀of฀sugarcane฀residues฀has฀been฀evaluated฀ as฀7.7฀exajoules฀(EJ)฀per฀year฀(Hall฀et฀al.,฀1993).฀Updating฀this฀figure฀using฀crop฀area฀and฀yield฀data฀for฀2001฀ (FAO,฀2002),฀we฀calculate฀that฀the฀energy฀content฀of฀such฀ residues฀today฀to฀be฀9.83฀EJ฀per฀year. Capturing฀this฀energy฀for฀electricity฀generation฀and฀heat฀ production฀is฀an฀important฀contributor฀to฀the฀success฀of฀ biofuels.฀At฀present,฀cogeneration฀of฀heat฀and฀electricity฀฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Figure฀5.฀฀฀Gasoline,฀Diesel,฀and฀Hydrous฀Ethanol฀Price฀฀ Composition฀–฀Oct.฀2002 0.50 0.45 0.40 Price for Final User (US$/l) from฀bagasse฀residues฀covers฀most฀of฀the฀energy฀needs฀ of฀the฀biofuel฀production฀process฀itself.฀It฀also฀allows฀an฀ increasing฀amount฀of฀electricity฀to฀be฀exported฀to฀the฀grid.฀ From฀1997฀to฀2004,฀the฀amount฀of฀electricity฀from฀biomass฀sold฀to฀the฀grid฀increased฀from฀80฀to฀1,350฀gigawatt฀ hours฀(GWh)฀in฀the฀State฀of฀São฀Paolo฀(see฀Figure฀8).฀This฀ energy฀came฀mainly฀from฀retrofitting฀existing฀energy฀supply฀ facilities฀in฀some฀30฀sugar฀mills฀(from฀a฀total฀of฀more฀than฀ 300฀presently฀in฀operation฀in฀Brazil).฀This฀growth฀is฀expected฀to฀continue,฀sponsored฀by฀a฀renewable฀energy฀support฀ system฀(PROINFA)฀recently฀instituted฀by฀the฀Federal฀฀ Government.฀This฀program฀provides฀a฀guaranteed฀price฀ for฀biomass฀electricity฀($32฀per฀megawatt฀hour฀[MWh]),฀ the฀same฀price฀as฀for฀new฀hydropower฀and฀around฀half฀that฀ ($60-70฀per฀MWh)฀of฀wind.฀The฀aim฀is฀for฀a฀total฀of฀9,000฀ MW฀of฀new฀renewable฀power,฀of฀which฀biomass฀contributes฀up฀to฀one฀third.฀Such฀goals฀are฀difficult฀to฀achieve฀due฀ to฀the฀difficulties฀of฀competing฀with฀low-cost฀hydropower฀ in฀Brazil.฀Some฀hydro฀production฀costs฀(for฀example,฀in฀the฀ case฀of฀Itaipu)฀do฀not฀really฀reflect฀the฀real฀cost,฀since฀the฀ cost฀of฀building฀the฀plant฀($14฀billion)฀has฀not฀been฀fully฀ incorporated฀into฀the฀final฀price฀of฀electricity;฀that฀is,฀much฀ of฀this฀cost฀has฀been฀written฀off฀as฀foreign฀debt. 0.35 Disribution/ Resale 14.7% State Taxes 25.0% 0.30 0.25 0.20 Federal Taxes 28.5% 0.15 0.10 0.05 0.00 Disribution/ Resale 25.6% State Taxes 7.0% Federal Taxes 16.1% Disribution/ Resale 31.4% State Taxes 11.9% Federal Taxes 13.0% Product 31.9% Product 51.3% Product 43.7% Gasohol Diesel Hydrated Ethanol Source:฀Nogueira฀(2003) Table฀2.฀฀Technology฀Evolution฀1975-2000฀(São฀Paulo฀Region) 3.3฀฀Institutional฀support For฀a฀variety฀of฀reasons,฀replacing฀gasoline฀with฀another฀ fuel฀has฀been฀a฀challenge฀in฀several฀countries.฀One฀reason฀ has฀to฀do฀with฀a฀“chicken-and-egg”฀problem฀in฀the฀supply฀ chain.฀Consumers฀are฀afraid฀of฀buying฀cars฀that฀use฀any฀ new฀fuel฀due฀to฀difficulties฀in฀finding฀the฀new฀fuel฀in฀the฀ large฀area฀around฀which฀an฀automobile฀is฀designed฀to฀ move.฀Service฀station฀owners฀are฀not฀interested฀in฀investing฀in฀a฀parallel฀fuel฀supply฀distribution฀system,฀since฀the฀ number฀of฀potential฀users฀is฀usually฀very฀small.฀ In฀this฀context,฀the฀leadership฀role฀of฀the฀Brazilian฀฀ government฀(at฀both฀the฀federal฀and฀state฀levels)฀in฀ providing฀incentives฀and฀a฀clear฀institutional฀framework฀ was฀absolutely฀essential.฀This฀role฀included฀the฀setting฀of฀ technical฀standards,฀support฀for฀the฀technologies฀involved฀ in฀ethanol฀production฀and฀use,฀financial฀advantages,฀and฀ market฀conditions.฀ The฀set฀of฀incentives฀has฀changed฀significantly฀over฀the฀ lifetime฀of฀the฀ethanol฀program.฀In฀the฀1970s,฀the฀government฀controlled฀the฀fuel฀market฀through฀its฀state-owned฀ oil฀company฀Petrobras,฀which฀had฀a฀monopoly฀on฀ethanol฀ distribution.฀The฀government’s฀role฀receded฀gradually,฀and฀ the฀monopoly฀ended฀in฀the฀late฀1990s.฀The฀government’s฀ remaining฀participation,฀according฀to฀Presidential฀Decree,฀ regulates฀the฀level฀of฀ethanol฀to฀be฀blended฀into฀gasoline.฀ As฀noted,฀the฀program฀started฀with฀subsidies,฀but฀they฀ were฀gradually฀phased฀out.฀This฀is฀an฀ideal฀policy฀for฀renewable฀fuels,฀but฀it฀may฀not฀be฀possible฀in฀many฀cases.฀ Production฀parameter฀ Change฀1975–2000 Sugarcane฀yields฀(ton฀cane฀per฀ha)฀ Sugar฀production฀from฀cane฀(ton฀sucrose฀per฀ton฀cane)฀ Ethanol฀production฀from฀sucrose฀ Fermentation฀productivity:฀m3฀ethanol฀per฀m3฀reactor฀per฀day)6฀฀ +฀33%฀ +฀8% +฀14% +฀130%฀ Source:฀Macedo฀(2003).฀For฀absolute฀value฀of฀some฀parameters,฀see฀Table฀A,฀Annex฀1. 3.4฀฀Geographical฀aspects Brazil฀has฀a฀large฀area฀of฀agricultural฀land฀and฀an฀appropriate฀climate฀for฀sugarcane.฀Its฀sugarcane฀industry฀was฀ already฀developed.฀São฀Paulo,฀the฀dominant฀state฀in฀this฀ industry,฀has฀accounted฀for฀over฀half฀of฀the฀country’s฀car฀ fleet.฀In฀other฀areas฀of฀the฀country,฀the฀transport฀costs฀of฀ ethanol฀were฀subsidized฀in฀order฀to฀ensure฀wide฀geographical฀coverage.฀This฀policy฀was฀used฀for฀all฀fuels฀in฀the฀ country฀for฀decades,฀with฀the฀purpose฀of฀setting฀uniform฀ prices฀for฀each฀fuel฀everywhere.฀Since฀ethanol฀production฀ occurs฀in฀fewer฀states฀than฀oil฀derivatives,฀this฀policy฀was฀ very฀helpful฀in฀promoting฀the฀alcohol฀market.฀ B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 31 4.฀THE฀SUSTAINABLE฀DEVELOPMENT฀฀ 4.฀THE฀SUSTAINABLE฀DEVELOPMENT฀฀ BENEFITS฀OF฀BIOFUELS฀ Figure฀6.฀฀Biomass฀Energy฀Yields฀from฀Various฀Activities฀ The฀reasons฀for฀supporting฀biofuels฀have฀changed฀somewhat฀over฀time.฀In฀the฀beginning,฀these฀reasons฀were฀purely฀ economic฀and—after฀the฀first฀and฀second฀oil฀crises—were฀ tied฀to฀the฀high฀cost฀of฀oil.฀More฀recently,฀the฀rationale฀ behind฀this฀support฀broadened;฀its฀roots฀are฀in฀factors฀that฀ might฀impact฀the฀country’s฀economy฀in฀the฀short-฀and฀midterm,฀such฀as฀(1)฀global฀future฀oil฀depletion฀and฀energy฀ security,฀(2)฀global฀air฀pollution฀caused฀by฀GHGs,฀and฀(3)฀ job฀creation฀opportunities฀and฀local฀pollution฀reduction.฀ Even฀more฀recently,฀these฀aims฀have฀been฀tied฀to฀mid-฀and฀ long-term฀issues,฀such฀as฀the฀growing฀importance฀of฀renewables,฀the฀use฀of฀fuel฀cells฀based฀on฀ethanol,฀and฀public฀ policies฀that฀guarantee฀rural฀development. 200 0 Wood from commercial forests, US Sugarcane (total above-ground biomass) Alamo Switchgrass, US Maximum stand yield, 1986–91 Average commercial yield on 80,000 hectares, 1986–91 Average for years 2-6 for experimental plot, Alabama Global average yield, 1987 Maize, US (grain + stover) Average of 5 experimental plots, Texas (1993–94) 400 High Estimate 600 Average yield, 1985–87 800 Record yield (1994) Iowa corn-growers’ contest 1000 Low Estimate Energy Yield (GJ/hectare/year) 1200 Average yield for Zambia on 10,000 hectares 1400 4.1฀฀Employment,฀economic฀฀ development,฀and฀land฀rights Eucalyptus at Aracruz, Brazil The฀issue฀of฀land฀rights฀is฀a฀particularly฀important฀one฀ in฀Brazil,฀where฀landless฀people฀are฀a฀major฀group฀of฀rural฀ poor.฀The฀federal฀government฀has฀a฀program฀aimed฀at฀allocating฀nonproductive฀farms฀to฀landless฀farmers.฀Any฀policy฀ Source:฀IPCC฀(1996) Figure฀7.฀฀Sugarcane฀Production฀for฀Sugar฀and฀Alcohol,฀1975–2004 400 Amount of cane for sugar 350 Amount of cane for alcohol 300 Million tons 250 200 150 100 50 Harvesting Season Source:฀Datagro฀(2004);฀Datagro฀(2002) 32 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST 2003/2004 2001/2002 1999/2000 1997/1998 1995/1996 1993/1994 1991/1992 1989/1990 1987/1988 1985/1986 1983/1984 1981/1982 1979/1980 1977/1978 1975/1976 0 Figure฀8.฀฀Electricity฀Sales฀from฀Cogeneration฀at฀Sugar฀Mills—Electricity฀Sold฀to฀the฀Grid—State฀of฀São฀Paulo 1,600 MW 1,400 GWh 1,200 1,000 800 600 400 Source:฀Authors Figure฀9.฀฀Jobs฀Provided฀by฀Various฀Energy฀Sources 16 14 Relative Number of Jobs (Oil=1) that฀affects฀land฀use฀therefore฀must฀be฀considered฀from฀ this฀perspective.฀It฀is฀not฀clear฀what฀the฀impacts฀might฀be฀ in฀the฀case฀of฀expanded฀ethanol฀production,฀but฀there฀are฀ reasons฀to฀think฀that฀they฀will฀not฀be฀substantially฀either฀ positive฀or฀negative.฀Since฀sugarcane฀crops฀are฀an฀expanding฀agricultural฀activity,฀carried฀out฀in฀good฀to฀moderate฀ quality฀soils,฀and฀in฀regions฀where฀commercial฀agricultural฀ activities฀are฀well-established,฀there฀is฀likely฀to฀be฀little฀ impact฀on฀agricultural฀reform.฀ Conversely,฀the฀number฀of฀landless฀property฀claims฀ has฀been฀significantly฀reduced฀by฀the฀major฀creation฀of฀ employment฀by฀the฀sugar/alcohol฀sector.฀This฀sector฀is฀ a฀major฀employer:฀in฀2001,฀an฀analysis฀using฀1997฀data฀ (Guilhoto,฀2001)฀concluded฀there฀were฀roughly฀one฀million฀jobs฀in฀ethanol฀production฀in฀Brazil,฀of฀which฀about฀ 65฀percent฀were฀permanent฀and฀the฀remainder฀seasonal฀ (for฀harvesting).฀The฀indirect฀creation฀of฀employment฀in฀ manufacturing฀and฀other฀sectors฀is฀estimated฀at฀roughly฀ another฀300,000฀jobs฀(Macedo,฀1995).฀Ethanol฀production฀creates฀job฀opportunities฀at฀a฀level฀15฀times฀bigger฀ than฀the฀oil฀industry฀(see฀Figure฀9). This฀employment฀intensity฀will฀of฀course฀decline฀as฀ mechanization฀increases.7฀Manual฀harvesting฀is฀a฀major฀ generator฀of฀employment,฀but฀for฀ethanol฀derived฀from฀ sugarcane,฀this฀labor฀cost฀alone฀represents฀$7.60฀per฀ barrel฀of฀oil฀equivalent.฀Sugarcane฀workers฀in฀the฀state฀ of฀São฀Paulo฀receive฀relatively฀high฀wages—on฀average,฀ 80฀percent฀more฀than฀the฀labor฀force฀employed฀in฀other฀ agricultural฀sectors.฀Their฀incomes฀are฀also฀higher฀than฀50฀ 12 10 8 6 4 2 0 Coal Hydroelectricity Oil Ethanol Source:฀Goldemberg฀(2002) B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 33 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 0 1987 200 percent฀of฀the฀labor฀force฀in฀the฀services฀sector฀and฀40฀percent฀of฀those฀in฀industry.฀Social฀conditions฀are฀reported฀to฀ be฀improving฀in฀the฀Northeast฀region.฀Special฀legislation฀ has฀mandated฀that฀one฀percent฀of฀the฀net฀sugarcane฀price฀ and฀two฀percent฀of฀the฀net฀ethanol฀price฀be฀channeled฀into฀ medical,฀dental,฀pharmaceutical,฀sanitary,฀and฀educational฀ activities฀for฀sugarcane฀workers฀(Melquiades,฀1996). This฀ability฀to฀create฀jobs฀in฀rural฀areas,฀most฀of฀them฀ for฀unskilled฀workers,฀fits฀nicely฀with฀the฀labor฀supply฀level฀ and฀has฀made฀sugarcane฀plantations฀attractive,฀particularly฀ in฀developing฀countries.฀In฀many฀countries,฀sugarcane฀ plantations฀and฀sugar฀production฀are฀managed฀by฀public฀ enterprises฀and/or฀are฀extremely฀regulated฀by฀governmental฀bodies.฀However,฀Brazilian฀sugarcane฀producers฀are฀all฀ privately฀owned.฀Around฀30฀percent฀of฀sugarcane฀production฀is฀in฀the฀hands฀of฀60,000฀independent฀producers,฀ representing฀a฀major฀activity฀for฀small฀farmers. Table฀3.฀฀Harvested฀Area฀of฀Main฀Crops฀in฀Brazil Crop฀ ฀ Harvested฀area฀ (million฀hectares)฀ Share฀of฀cultivated land฀(%) ฀ 1988฀ 1988฀ 2004 2004฀ Corn 13.2 ฀ 12.4 24.0 19.1 Soya 10.5 ฀ 21.5 19.2 33.1 Bean 5.9 ฀ 4.0 10.7 6.2 Rice 6.0 ฀ 3.7 10.8 5.8 Sugarcane 4.1 ฀ 5.6 7.5 8.6 Wheat 3.5 ฀ 2.8 6.3 4.3 Coffee 3.0 ฀ 2.4 5.4 3.7 Cotton 2.6 ฀ 4.8 4.7 8.4 Cassava 1.8 ฀ 1.8฀ 3.2 2.7 Orange 0.8 ฀ 0.82 1.5 1.3 Other฀crops 3.7 ฀ 5.1 6.7 7.8 ฀ 64.8 100.0 100.0 Total 55.0 Source:฀IBGE฀(1989);฀FAO฀(2005) 4.2฀฀Land฀use฀and฀competition฀with฀฀ food฀crops฀and฀deforestation Sugar/alcohol฀production฀from฀sugarcane฀is฀a฀land-฀ intensive฀activity.฀A฀medium-size฀Brazilian฀industrial฀plant฀ (processing฀300฀tons฀per฀hour฀of฀crushed฀cane)฀needs฀ 11,000฀hectares฀(ha)฀to฀supply฀its฀demand฀for฀sugarcane.฀ Some฀distilleries฀require฀areas฀over฀55,000฀ha.฀These฀land฀ requirements฀have฀produced฀a฀concentration฀of฀land฀ownership฀and฀displacement฀of฀food฀cultivation฀(Oliveira,฀1991). The฀availability฀of฀agricultural฀land฀is฀a฀heavily฀discussed฀and฀debated฀issue฀in฀Brazil.฀Sugarcane฀production฀ (for฀alcohol)฀competes฀with฀food฀supply฀and฀other฀export฀ crops.฀Recent฀data,฀however,฀show฀a฀relatively฀low฀level฀of฀ utilization฀of฀agricultural฀land฀in฀Brazil,฀even฀in฀the฀State฀ of฀São฀Paulo,฀by฀far฀the฀most฀developed฀in฀the฀country.฀ Furthermore,฀some฀200฀million฀hectares฀(Mha)฀are฀classified฀as฀“pastureland;”฀most฀of฀the฀cane฀expansion฀areas฀ west฀of฀São฀Paulo฀are฀using฀this฀pastureland.฀They฀may฀include฀old฀“cerrados.”฀Nevertheless,฀an฀excessive฀concentration฀of฀crops฀can฀be฀a฀source฀of฀pests฀and฀diseases,฀or฀when฀ poorly฀planned,฀can฀create฀difficult฀access฀to฀food฀crops฀ for฀small฀villages฀that฀may฀have฀most฀of฀their฀nearby฀areas฀ used฀for฀non-food฀crops฀(Rosillo-Cale฀et฀al.,฀1996).฀The฀ risk฀of฀pests฀and฀diseases฀is฀minimized฀in฀Brazil฀through฀ the฀use฀of฀several฀varieties฀of฀sugarcane.฀ The฀cultivated฀area฀in฀Brazil฀in฀1988฀and฀2004฀is฀ presented฀in฀Table฀3.฀Sugarcane฀corresponded฀to฀about฀5.6฀ million฀hectares,฀8.6฀percent฀of฀the฀total฀harvested฀area฀ 34 with฀essential฀crops฀(Borges,฀1990).฀This฀is฀a฀small฀relative฀ increment฀since฀1988฀when฀it฀represented฀7.5฀percent฀of฀ total฀area.฀The฀total฀agricultural฀area฀increased฀by฀around฀ 10฀Mha฀in฀this฀period,฀which฀is฀modest฀for฀a฀country฀with฀ a฀large฀potential฀agricultural฀area.฀ In฀addition,฀crop฀rotation฀between฀food฀crops฀and฀sugarcane฀is฀increasingly฀being฀applied.฀This฀has฀been฀an฀effective฀way฀to฀maintain฀the฀balance฀between฀energy฀and฀food,฀ improving฀the฀profitability฀of฀the฀land.฀Other฀crops—such฀ as฀tomatoes,฀soya,฀peanuts,฀beans,฀rice,฀and฀corn—have฀ been฀harvested฀in฀rotation฀with฀sugarcane฀(Borges,฀1990). While฀the฀displacement฀of฀food฀cultivation฀is฀a฀debatable฀issue,฀further฀sugarcane฀plantations฀can฀lead฀to฀ increased฀deforestation฀through฀indirect฀activity.฀Displacement฀of฀extensive฀cattle฀ranching฀from฀present฀pasture฀ land฀by฀strong฀expansion฀of฀sugarcane฀areas฀or฀other฀crops฀ may฀become฀a฀driver฀for฀deforestation.฀Although฀many฀of฀ the฀current฀sugarcane฀areas฀were฀already฀being฀used฀at฀the฀ beginning฀of฀Proalcool฀in฀1975,฀the฀practice฀of฀cutting฀ forests฀for฀sugarcane฀plantations฀continued฀in฀the฀following฀decades,฀although฀it฀has฀shown฀signs฀of฀having฀stopped฀ more฀recently.฀Most฀of฀the฀land฀planted฀for฀sugarcane฀ came฀from฀earlier฀coffee฀plantations,฀although฀the฀recent฀ trend฀has฀been฀to฀replace฀cattle฀ranching฀activities฀with฀ more฀advantageous฀crops.฀ Although฀it฀does฀not฀lead฀to฀complete฀deforestation,฀the฀ recreational฀activities฀of฀the฀harvesters฀in฀the฀season฀can฀ severely฀disrupt฀the฀local฀ecosystem.฀The฀small฀wildlife฀and฀ nature฀reserves฀still฀existing฀in฀the฀proximity฀of฀the฀estates฀ are฀under฀heavy฀stress฀(Zandbergen,฀1993).฀In฀2001,฀a฀ Governmental฀Decree฀was฀issued฀requiring฀that฀a฀part฀of฀ the฀land฀be฀put฀aside฀for฀non-cane฀use฀or฀for฀recuperation฀ of฀native฀vegetation.8฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST 4.3฀฀Air฀quality Cities The฀introduction฀of฀gasohol฀has฀had฀an฀immediate฀ impact฀on฀the฀air฀quality฀of฀large฀cities,฀particularly฀São฀ Paulo.฀As฀the฀amount฀of฀alcohol฀in฀gasoline฀was฀increased,฀ lead฀additives฀were฀reduced฀(and฀eventually฀eliminated฀in฀ 1991).฀Aromatic฀hydrocarbons,฀such฀as฀benzene,฀which฀are฀ particularly฀toxic,฀were฀also฀eliminated,฀and฀sulfur฀emissions฀were฀reduced฀(Figure฀10). In฀addition,฀carbon฀monoxide฀(CO)฀emissions฀were฀ drastically฀reduced.฀Before฀1980,฀when฀gasoline฀was฀the฀ only฀fuel฀in฀use,฀CO฀emissions฀were฀higher฀than฀50฀grams฀ per฀kilometer฀(g/km).฀This฀amount฀was฀reduced฀to฀less฀ than฀5.8฀g/km฀by฀1995. Compared฀to฀gasoline฀or฀gasohol,฀one฀of฀the฀drawbacks฀ of฀the฀use฀of฀ethanol฀is฀the฀increase฀in฀aldehyde฀emissions฀ (formaldehyde฀+฀acetaldehyde).฀There฀is฀an฀increase฀in฀ exhaust฀emission฀of฀aldehydes฀when฀ethanol฀is฀blended฀to฀ gasoline,฀and฀this฀increase฀is฀greater฀still฀in฀the฀case฀of฀pure฀ ethanol.9฀The฀significance฀of฀this฀issue฀to฀air฀quality฀must฀ be฀evaluated฀carefully฀to฀avoid฀misinterpretation.฀Typically,฀ 2003฀model-year฀Brazilian฀vehicles฀fueled฀with฀the฀reference฀blend10฀for฀governmental฀certification฀(a฀blend฀with฀ 22฀percent฀ethanol฀by฀volume฀–฀E22)฀emit฀0.004฀g/km฀of฀ aldehydes,฀a฀concentration฀that฀is฀about฀45฀percent฀of฀the฀ strict฀California฀limit฀that฀is฀required฀only฀for฀formaldehyde฀(CETESB,฀2003).฀Automotive฀use฀of฀diesel฀oil฀can฀be฀ a฀more฀important฀source฀of฀aldehydes฀than฀gasoline-ethanol฀ blends.฀Data฀from฀diesel฀vehicle฀aldehyde฀measurements฀ Figure฀10.฀฀Automobile฀Emissions฀in฀Brazil,฀1980–2000 NOx (g/km) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Limit in Brazil Gasoline Ethanol Limit in USA Gasohol Limit Brazil Ethanol Limit USA Model Year Model Year CO (g/km) Aldehydes 0.20 60 50 Gasoline Pre 80 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Gasohol Pre 80 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Hydrocarbon Gasoline Ethanol Limit Brazil 0.15 Gasohol 30 20 0.10 Limit in Brazil Ethanol 0.05 10 Limit in USA 2g/km 0.00 Pre 80 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 0 Model Year Gasoline Gasohol Limit USA Pre 80 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 40 Model Year Source:฀CETESB฀(2001) B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 35 show฀that฀emissions฀(formaldehyde฀+฀acetaldehyde)฀are฀5.6฀ to฀40฀percent฀higher฀than฀those฀from฀vehicles฀running฀on฀ E22฀(Abrantes,฀2003).฀The฀acetaldehyde฀from฀alcohol฀use฀ is฀arguably฀less฀harmful฀to฀human฀health฀and฀the฀environment฀than฀formaldehyde฀produced฀when฀gasoline฀is฀used. There฀have฀been฀a฀number฀of฀evaluations฀of฀ethanol’s฀ impact฀on฀air฀quality.฀Some฀key฀findings฀are฀that: ■ ฀฀A฀10฀percent฀blend฀of฀ethanol฀reduces฀carbon฀฀ monoxide—a฀precursor฀to฀ground-level฀ozone฀฀ formation—by฀more฀than฀25฀percent.฀The฀reduction฀ in฀CO฀emissions฀increases฀as฀the฀percentage฀of฀฀ ethanol฀in฀the฀fuel฀increases.฀ ■ ฀฀Ethanol฀when฀used฀as฀an฀additive฀displaces฀highly฀ toxic฀and฀volatile฀components฀of฀gasoline฀(benzene,฀ toluene,฀and฀xylene). ■ ฀฀Ethanol฀at฀a฀10฀percent฀or฀lower฀blend฀also฀increases฀ the฀total฀volatile฀organic฀compound฀(VOC)฀emissions฀ from฀the฀gasoline฀by฀about฀15฀percent.฀However,฀ since฀the฀VOCs฀emitted฀by฀pure฀gasoline฀are฀more฀ reactive฀than฀those฀produced฀with฀ethanol฀blends฀and฀ because฀of฀the฀significant฀carbon฀monoxide฀reductions฀resulting฀from฀the฀use฀of฀ethanol,฀any฀increase฀ in฀ozone฀formation฀is฀negligible. ■ ฀฀At฀higher฀concentrations฀of฀ethanol,฀the฀volatility฀of฀ the฀gasoline-ethanol฀blend฀drops.฀At฀concentrations฀ above฀25฀to฀40฀percent,฀evaporative฀emissions฀drop฀below฀the฀level฀they฀were฀before฀any฀ethanol฀was฀added฀ to฀the฀gasoline.฀This฀eliminates฀volatility฀as฀a฀problem.฀ ■ ฀฀There฀is฀some฀concern฀that฀an฀increase฀in฀oxygen฀will฀ increase฀nitrous฀oxides฀(NOX),฀also฀a฀contributor฀to฀ ozone฀formation.฀But฀NOX฀is฀generated฀from฀high฀ combustion฀temperatures฀and฀ethanol฀burns฀cooler฀ than฀gasoline.฀That฀is฀one฀of฀the฀reasons฀it฀makes฀such฀ a฀good฀racing฀fuel.฀The฀new฀low-emitting฀vehicles฀ that฀are฀entering฀the฀marketplace฀in฀ever-higher฀numbers฀(including฀hybrids)฀appear฀not฀to฀lead฀to฀a฀NOX฀ increase฀from฀an฀increase฀in฀fuel฀oxygen. ■ ฀฀Improvements฀in฀gasoline฀quality฀(low฀sulfur฀and฀aromatics)฀together฀with฀improved฀engines฀and฀efficiency฀ have฀themselves฀improved฀air฀quality,฀making฀the฀relative฀benefits฀of฀ethanol฀in฀this฀respect฀more฀marginal. Rural฀areas Despite฀widespread฀concern฀about฀health฀impacts,฀ sugarcane฀is฀burned฀in฀almost฀all฀countries฀where฀it฀is฀ produced,฀including฀the฀United฀States฀and฀Brazil.฀Preharvest฀burning฀(where฀dry฀leaves฀are฀burned)฀is฀intended฀ to฀promote฀pest฀control฀and฀lower฀harvesting฀costs;฀it฀is฀ carried฀out฀just฀a฀few฀hours฀before฀harvesting.฀Post-harvest฀ 36 burning฀(tops฀and฀remaining฀green฀leaves),฀which฀involves฀ smaller฀amounts฀of฀material,฀eliminates฀residues฀and฀฀ expedites฀plowing฀and฀replanting. Little฀is฀known฀about฀the฀health฀effects฀of฀cane฀burning฀฀ emissions฀on฀employees฀or฀surrounding฀communities,฀ although฀it฀is฀generally฀considered฀that฀any฀amount฀of฀ smoke฀will฀worsen฀an฀existing฀respiratory฀condition.฀ Contradictory฀reports฀exist฀with฀respect฀to฀lung฀cancer฀ (Echavarria฀and฀Whalen,฀1991).฀According฀to฀Coopersucar฀(Macedo,฀1995),฀there฀is฀no฀proof฀that฀the฀burning฀of฀ the฀cane-fields฀has฀a฀damaging฀effect฀on฀human฀health,฀a฀ statement฀mainly฀based฀on฀studies฀in฀Hawaii.฀The฀health฀ effect฀is฀considered฀to฀be฀relatively฀minor,฀because฀the฀ particles฀are฀rather฀big฀and฀inhalation฀is฀not฀likely฀to฀result฀ in฀lung฀damage฀to฀the฀extent฀caused฀by฀very฀fine฀particles฀ (Zandbergen,฀1993).฀The฀nuisance฀of฀the฀particulates,฀ however,฀is฀obvious. There฀is฀already฀legislation฀in฀effect฀in฀São฀Paulo฀State฀ (Law฀11241฀from฀2002)฀that฀sets฀procedures฀and฀limits฀ for฀burning฀of฀open฀sugarcane฀fields.฀The฀land฀area฀where฀ burning฀is฀allowed฀is฀declining.฀It฀will฀be฀prohibited฀by฀ 2021฀in฀areas฀suitable฀for฀mechanical฀harvesting฀and฀by฀ 2031฀for฀all฀areas.฀ 4.4฀฀Oil฀import฀dependence฀and฀฀ security฀of฀supply The฀1973฀OPEC฀oil฀embargo฀caused฀oil฀prices฀to฀soar฀ from฀$3฀per฀barrel฀in฀1973฀to฀$12฀per฀barrel฀in฀1973–74.฀ This฀was฀chiefly฀responsible฀for฀the฀global฀economic฀recession฀that฀followed.฀This฀price฀rise฀represented฀a฀significant฀ increase฀in฀import฀expenses—from฀around฀$500฀million฀ in฀1972฀to฀$2.8฀billion฀in฀1974.11฀In฀1979,฀the฀Iranian฀ revolution฀led฀to฀a฀second฀surge฀in฀oil฀prices฀to฀$40฀per฀ barrel—pushing฀Brazilian฀expenditures฀for฀oil฀imports฀ to฀over฀$10฀billion฀and฀causing฀another฀global฀recession฀ (Brasil฀Energia,฀2003). In฀order฀to฀pay฀these฀high฀import฀bills฀(Figure฀11)฀ and฀to฀develop฀domestic฀energy฀alternatives,฀Brazil,฀like฀ many฀other฀countries฀in฀Latin฀America,฀absorbed฀excessive฀ liquidity฀from฀the฀United฀States,฀European,฀and฀Japanese฀ banks฀in฀the฀form฀of฀loans฀on฀favorable฀terms.฀Huge฀ capital฀inflows฀were฀directed฀to฀infrastructure฀investments,฀ and฀state฀enterprises฀were฀formed฀in฀areas฀that฀were฀not฀ attractive฀for฀private฀investment.฀In฀the฀case฀of฀Brazil,฀this฀ occurred฀mostly฀in฀the฀energy฀sector฀(refineries฀and฀largescale฀hydropower฀plants).฀ In฀the฀early฀1980s,฀however,฀the฀significant฀rise฀in฀U.S.฀ interest฀rates฀began฀to฀affect฀international฀capital฀markets,฀ ending฀the฀favorable฀conditions฀to฀foreign฀debtors.฀A฀substantial฀increase฀in฀interest฀rates฀worldwide฀forced฀Brazil,฀ along฀with฀other฀Latin฀American฀countries,฀to฀implement฀ strict฀economic฀adjustments฀that฀led฀to฀negative฀growth฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Figure฀11.฀฀Net฀Fuel฀Expenses฀in฀Brazil฀ 12 25 Historic (left axis) Current (right axis) 10 20 15 6 10 4 5 2 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 0 1976 0 Source:฀Brasil฀Energia฀(2003) Figure฀12.฀฀Annual฀Savings฀from฀Displaced฀Oil฀Imports 4.0 Oil Import Costs Avoided 3.5 US$ billion (2003) 3.0 2.5 2.0 1.5 1.0 0.5 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 0 Source:฀Authors,฀based฀on฀Petrobras฀data,฀Brasil฀Energia฀(2003) B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 37 Billion US$ (Current) 8 Billion US$ (Historic) rates.฀The฀suspension฀of฀capital฀inflows฀reduced฀Brazil’s฀฀ capacity฀to฀invest.฀The฀debt฀burden฀affected฀public฀฀ finances฀and฀contributed฀to฀an฀acceleration฀of฀inflation. The฀critical฀fuel฀situation฀in฀the฀country฀started฀to฀be฀ significantly฀mitigated฀by฀the฀beginning฀of฀the฀1990s,฀ when฀growth฀in฀national฀oil฀production฀started฀to฀overcome฀the฀growth฀in฀demand,฀thus฀reducing฀the฀volume฀ of฀imported฀oil.฀In฀the฀late฀1970s฀and฀1980s,฀ethanol฀ production฀played฀an฀important฀role฀in฀promoting฀fuel฀ security฀with฀the฀advantage฀of฀not฀requiring฀hard฀currency.฀ The฀amount฀of฀ethanol฀produced฀was฀significant;฀during฀a฀ few฀years฀in฀the฀1980s,฀it฀surpassed฀gasoline฀consumption. Alcohol฀production฀and฀its฀use฀as฀an฀alternative฀fuel฀ have฀brought฀significant฀benefits฀to฀the฀Brazilian฀economy.฀ Since฀1975,฀ethanol฀has฀displaced฀over฀240฀billion฀liters฀ (1.5฀billion฀barrels)฀of฀gasoline.฀It฀not฀only฀avoided฀disbursement฀of฀more฀than฀$56฀billion฀in฀direct฀oil฀importation฀(Figure฀12),฀but฀a฀much฀larger฀amount฀($94฀billion)฀ once฀we฀include฀the฀avoided฀cost฀of฀servicing฀the฀debt฀that฀ would฀have฀been฀incurred฀to฀import฀this฀oil฀(Figure฀13).฀ Due฀to฀the฀country’s฀poor฀economic฀performance,฀any฀ disbursement฀in฀hard฀currency฀would฀have฀added฀to฀the฀ already฀large฀external฀debt,฀implying฀higher฀interest฀rate฀ payments.฀Typical฀interest฀rates฀paid฀were฀5฀to฀10฀percentage฀points฀above฀LIBOR.12฀ ฀Figure฀13.฀฀฀Cumulative฀Savings฀from฀Avoided฀Oil฀Imports฀and฀Debt฀Service 100 Cumulative Interest Avoided 90 Cumulative Oil Cost Displaced 80 US$ billion (2003) 70 60 50 40 30 20 10 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 0 ฀Source:฀Moreira฀and฀Goldemberg฀(1999),฀updated฀by฀authors. The฀traditional฀approach฀to฀energy฀security฀has฀been฀to฀ diversify฀energy฀sources฀and฀suppliers,฀both฀internally฀and฀ externally.฀Internally,฀the฀emphasis฀is฀on฀maximizing฀the฀ use฀of฀domestic฀resources,฀preferably฀based฀on฀domestic฀ technologies;฀externally,฀it฀is฀selecting฀a฀variety฀of฀products฀from฀a฀diversity฀of฀supplies฀from฀different฀geographical฀regions.฀However,฀there฀is฀no฀consensus฀about฀the฀ level฀of฀energy฀import฀dependence฀considered฀acceptable฀ or฀sustainable,฀and฀this฀varies฀from฀country฀to฀country.฀ In฀the฀case฀of฀Brazil,฀ethanol฀use฀has฀brought฀a฀major฀ diversification฀of฀fuel฀options฀in฀a฀sector฀that฀is฀generally฀ dominated฀by฀oil. 5.฀THE฀POTENTIAL฀FOR฀EXPANSION฀OF฀ BIOFUELS฀USE฀IN฀BRAZIL This฀section฀explores฀the฀potential฀for฀scaling-up฀biofuel฀use฀in฀Brazil.฀The฀discussion฀is฀centered฀on฀ethanol,฀ because฀the฀issues฀regarding฀its฀production฀and฀use฀are฀well฀ documented.฀Biodiesel,฀for฀which฀there฀is฀at฀present฀little฀ information,฀also฀has฀potential. Ethanol฀production฀in฀Brazil฀in฀2004–05฀was฀about฀14฀ billion฀liters,฀corresponding฀to฀185฀thousands฀barrels฀of฀ oil฀per฀day.13฀This฀could฀increase฀significantly฀in฀the฀next฀ decade,฀driven฀by฀both฀escalating฀internal฀demand฀and฀ the฀growing฀international฀trade฀for฀such฀biofuels฀(Nastari,฀ 38 2003).฀Figure฀14฀shows฀a฀projection฀for฀national฀ethanol฀ demand,฀while฀Figure฀15฀displays฀potential฀demand฀for฀ ethanol฀in฀the฀internal฀and฀external฀markets,฀as฀well฀as฀potential฀increases฀in฀sugar฀exports.฀Based฀on฀these฀forecasts,฀ in฀2013฀total฀ethanol฀production฀is฀expected฀to฀be฀26.4฀ billion฀liters,฀of฀which฀17฀percent฀are฀for฀export฀(Macedo฀ and฀Nogueira,฀2004).฀The฀market฀clearly฀expects฀such฀ growth:฀34฀new฀distilleries฀are฀under฀construction,฀enough฀ to฀raise฀the฀milling฀capacity฀80฀percent฀by฀2009฀(Gazeta฀ Mercantil,฀2004). Sugar฀production฀is฀also฀forecast฀to฀grow฀by฀44฀percent฀ during฀this฀time.฀Together,฀these฀products฀will฀require฀ an฀annual฀production฀of฀572฀million฀tons฀of฀sugarcane,฀ roughly฀150฀million฀more฀tons฀than฀currently.฀This฀would฀ require฀approximately฀3฀million฀additional฀hectares฀of฀land.฀ In฀recent฀times,฀Brazilian฀oil฀production฀has฀increased฀ significantly,฀and฀it฀could฀reach฀self-sufficiency฀in฀the฀near฀ future.฀Coming฀mainly฀from฀offshore฀oil฀fields,฀current฀oil฀ production฀is฀about฀1.7฀million฀barrels฀per฀day,฀90฀percent฀ of฀national฀oil฀demand.฀However,฀considering฀the฀level฀of฀ proved฀reserves฀of฀fossil฀fuels—about฀17฀billion฀barrels— and฀the฀forecast฀demand,฀the฀duration฀of฀such฀oil฀reserves฀ is฀only฀about฀16฀years.฀Moreover,฀according฀to฀a฀study฀on฀ the฀evolution฀of฀oil฀production฀curves,฀using฀the฀Hubbert฀approach,฀peak฀oil฀production฀will฀probably฀occur฀ in฀2013—associated฀with฀ultimate฀reserves฀of฀27฀billion฀ barrels฀(Andrade฀and฀Santos,฀2002).฀The฀continuation฀of฀ the฀Brazilian฀biofuels฀program฀is฀not฀dependent฀on฀Brazil’s฀ oil฀production฀levels. GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Figure฀14.฀฀Projected฀Ethanol฀Demand฀in฀Brazil 20,000 Ethanol Demand (billion liters) ฀Productivity฀growth฀in฀Brazilian฀sugarcane฀agriculture฀has฀been฀strong:฀during฀the฀period฀1990฀to฀2003,฀ sugarcane฀production฀increased฀3.7฀percent฀and฀sugar฀ production฀4.7฀percent฀annually฀(see฀Annex฀1).฀Important฀ drivers฀of฀this฀evolution฀were฀the฀genetic฀improvement฀of฀ sugarcane฀and฀the฀introduction฀of฀new฀varieties.฀Currently,฀ about฀550฀different฀varieties฀are฀simultaneously฀cultivated,฀ assuring฀good฀biodiversity฀and฀allowing฀a฀natural฀resistance฀against฀plagues฀and฀diseases.฀Many฀other฀technical฀ improvements฀enhanced฀productivity,฀including฀better฀ soil฀preparation,฀planting,฀harvesting,฀and฀transportation.฀ Paying฀for฀cane฀according฀to฀sugar฀content฀rather฀than฀by฀ weight฀provided฀a฀strong฀motivation฀for฀many฀of฀these฀ improvements. The฀area฀currently฀cultivated฀for฀ethanol฀production฀is฀ about฀5.5฀million฀ha.฀An฀evaluation฀by฀the฀Brazilian฀฀ Agricultural฀Research฀Agency฀(Embrapa)฀estimates฀that฀ around฀100฀Mha฀that฀are฀currently฀natural฀pastures฀and฀ low-density฀savannas฀could฀be฀used฀for฀annual-cycle฀ plants.14฀Additionally,฀as฀a฀result฀of฀improvements฀in฀cattle฀ ranching฀practices,฀it฀is฀estimated฀that฀about฀20฀million฀ hectares฀of฀low฀productivity฀pastures฀could฀be฀liberated฀ for฀biofuels฀production.฀If฀this฀hypothetical฀total฀of฀120฀ million฀ha฀(14฀percent฀of฀the฀country฀area฀and฀25฀percent฀ of฀available฀land฀for฀agriculture)฀were฀used฀for฀the฀ethanol฀ agroindustry,฀a฀total฀annual฀production฀of฀about฀312฀฀ billion฀liters฀would฀be฀feasible.฀That฀is฀more฀than฀twice฀฀ the฀total฀current฀Brazilian฀consumption฀of฀all฀oil฀products. Since฀the฀beginning฀of฀2005,฀there฀has฀been฀increasing฀ attention฀in฀the฀media฀about฀expanding฀production฀of฀฀ alcohol฀and฀sugar.฀The฀real฀number฀of฀new฀mills฀under฀ construction฀is฀not฀available,฀but฀it฀is฀commonly฀assumed฀ to฀be฀around฀40฀to฀60฀units฀with฀an฀average฀capacity฀to฀฀ process฀3฀million฀tons฀of฀sugarcane฀per฀year.฀Of฀these,฀ probably฀30฀will฀be฀sited฀in฀the฀state฀of฀São฀Paulo,฀where฀฀ the฀environment฀authority฀has฀received฀almost฀30฀ environmental฀applications.฀Other฀mills฀are฀planned฀in฀ Mato฀Grosso,฀Minas฀Gerais,฀and฀Parana฀states.฀Some฀ investors฀are฀traditional฀sugar/ethanol฀producers฀from฀the฀ Northeast฀region.฀The฀total฀cost,฀including฀sugarcane฀area฀ expansion฀and฀new฀industrial฀processing฀to฀sugar/ethanol,฀ should฀be฀around฀$4฀to฀$8฀billion.฀Investors฀are฀expecting฀ BNDES฀(the฀National฀Development฀Bank)฀financing฀and฀ have฀already฀raised฀the฀necessary฀amount฀for฀equity.฀This฀ behavior฀is฀very฀unusual฀for฀developing฀countries,฀and฀ seems฀to฀confirm฀that฀sugar/ethanol฀production฀in฀Brazil฀ is฀highly฀profitable. 15,000 10,000 5,000 0 2005 2006 2007 2008 2009 2010 Source:฀Pereira฀de฀Carvalho฀(2004) Figure฀15.฀฀Futures฀Perspectives฀for฀Brazil Mid-term Projection Increased International Market Access: 6.5 million tons Sugar Export Increase: 2.0 million tons Domestic Market: 18 billion liters Ethanol Exports: 5 billion liters Cane Additional 100 million tons = 2.5 million acres Source:฀Pereira฀de฀Carvalho฀(2004) B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 39 6.฀BIOFUELS฀AND฀CLIMATE The฀energy฀balance฀of฀the฀Brazilian฀biofuels฀programs฀is฀ in฀principle฀neutral฀in฀terms฀of฀CO2฀emissions.฀In฀practice,฀ however,฀planting,฀transporting,฀and฀transforming฀energy฀ crops฀to฀biofuels฀uses฀external฀energy,฀sometimes฀derived฀ from฀fossil฀fuels.฀A฀life฀cycle฀assessment฀is฀therefore฀needed฀ to฀calculate฀the฀net฀effect฀on฀GHG฀emissions. 6.1฀฀General฀Overview The฀Brazilian฀sugar฀industry฀is฀almost฀energy-self-฀ sufficient฀due฀to฀the฀use฀of฀bagasse,฀a฀process฀byproduct.฀ The฀food฀and฀beverage฀sector฀in฀Brazil฀is฀highly฀dependent฀ on฀sugarcane฀bagasse฀that฀is฀exported฀from฀the฀sugar฀mills฀ and฀on฀other฀renewable฀energy฀sources฀(see฀Table฀4).15฀ A฀detailed฀life฀cycle฀analysis฀shows฀how฀ethanol฀and฀ bagasse฀from฀sugarcane฀have฀been฀contributing฀to฀the฀ reduction฀of฀GHG฀emissions฀in฀Brazil฀by฀substituting฀for฀ fossil฀fuels.฀The฀results฀are฀presented฀in฀Table฀5.฀ Table฀4.฀฀Energy฀Consumption฀of฀Brazilian฀Food/Beverage฀Industry,฀2003 ฀ 1,000฀toe/yr฀ Natural฀gas฀ % 432฀ Coal฀ 58฀ 0.4% 1,720฀ 10.4% 11,938฀ 71.9% 849฀ 5.1% Wood฀ Bagasse฀ Fuel฀oil฀ Electricity฀ Total฀ 2.6% 1,612฀ 9.7% 16,609฀ 100% Source:฀BEN฀(2004).฀Toe฀is฀tons฀of฀oil฀equivalent. Table฀5.฀฀฀Energy฀Balance฀of฀Ethanol฀Agroindustrial฀Process฀in฀฀ São฀Paulo,฀Brazil ฀ Energy฀flows฀(megajoules฀per฀ton฀of฀sugarcane) ฀ Average฀ ฀ consumption฀ Agricultural฀activities฀ Industrial฀process฀ 202฀ Best฀case production฀ consumption฀ ฀ 192฀ 40฀ production 49฀ ฀ Ethanol฀production฀ ฀ 1,922฀ ฀ Bagasse฀surplus฀ ฀ 169฀ ฀ 316 251฀ 2,090฀ 232฀ 2,368 Total฀ Energy฀output฀per฀unit฀฀ of฀energy฀input Source:฀Macedo฀et฀al.฀(2004) 40 8.3฀ 2,052 10.2 The฀use฀of฀biomass฀energy฀in฀the฀production฀process,฀as฀ well฀as฀process฀efficiencies,฀mean฀that฀Brazilian฀biofuels฀are฀ highly฀effective฀at฀displacing฀fossil฀fuel฀use,฀and฀therefore฀ at฀avoiding฀GHG฀emissions.฀GHG฀sources฀may฀be฀divided฀ into฀two฀groups:฀emissions฀derived฀from฀the฀use฀of฀nonrenewable฀energy฀(diesel฀and฀fuel฀oil)฀and฀emissions฀from฀ other฀sources฀(cane฀trash฀burning,฀fertilizer฀decomposition).฀For฀the฀first฀group,฀the฀calculated฀values฀were฀19.2฀ and฀17.7฀kilograms฀of฀CO2฀equivalent฀per฀ton฀cane฀(kg฀ CO2/t)฀for฀average฀and฀best฀case฀scenarios,฀respectively.฀For฀ the฀second฀group,฀the฀values฀were฀12.2฀kg฀CO2/t฀for฀both฀ scenarios.฀The฀emissions฀avoided฀due฀to฀the฀substitution฀฀ of฀ethanol฀for฀gasoline฀and฀surplus฀bagasse฀for฀fuel฀oil,฀฀ deducting฀the฀above฀values,฀gives฀a฀net฀result฀of฀2.6฀and฀ 2.7฀tons฀of฀CO2฀per฀cubic฀meter฀(tCO2/m3)฀anhydrous฀ ethanol฀and฀1.7฀and฀1.9฀tCO2/m3฀of฀hydrous฀ethanol฀for฀ average฀and฀best฀case฀scenarios,฀respectively. Brazilian฀fuel฀ethanol฀consumption฀in฀2002฀was฀around฀ 12฀billion฀liters,฀reducing฀GHG฀emissions฀by฀25.8฀million฀ tons฀CO2,฀assuming฀emissions฀are฀proportional฀to฀the฀ amount฀of฀anhydrous฀and฀hydrous฀ethanol.฀This฀is฀approximately฀the฀same฀level฀of฀avoided฀CO2฀emissions฀as฀in฀ 1995฀(based฀on฀results฀from฀Macedo฀et฀al.,฀2004). Sugarcane฀crops฀for฀ethanol฀production,฀which฀covered฀ 2.5฀million฀hectares฀in฀Brazil฀in฀2002,฀abated฀11.0฀tCO2฀ per฀hectare฀per฀year.฀Assuming฀the฀production฀of฀ethanol฀ remains฀stable,฀in฀a฀time฀span฀of฀100฀years฀1,100฀tCO2฀ per฀hectare฀will฀be฀avoided,฀showing฀that฀in฀the฀long฀term฀ ethanol฀is฀more฀effective,฀strictly฀in฀terms฀of฀CO2,฀than฀the฀ preservation฀of฀native฀forests16฀or฀production฀of฀charcoal฀ from฀plantations฀(Fearnside,฀1995).฀ An฀additional฀climate฀benefit฀comes฀from฀the฀export฀of฀ surplus฀biomass-generated฀electricity฀to฀the฀grid฀(see฀section฀1.2).฀The฀60฀kilowatt฀hours฀(kWh)฀of฀electricity฀that฀ can฀be฀generated฀from฀a฀ton฀of฀sugarcane฀could฀replace฀ 0.65฀gigajoules฀(GJ)฀of฀fuel฀oil฀(assuming฀33฀percent฀ conversion฀efficiency฀to฀electricity).฀This฀amount฀of฀energy฀ represents฀52.3฀GJ฀per฀hectare฀(for฀a฀yield฀of฀80฀tons฀of฀ cane฀per฀hectare฀annually)฀abating฀4.0฀tCO2฀per฀hectare฀ annually.฀Factoring฀in฀this฀abatement฀from฀biomass-generated฀electricity฀increases฀the฀total฀CO2฀savings฀by฀about฀ 37฀percent,฀from฀11.0฀(quoted฀above)฀to฀15.0฀tCO2฀per฀ hectare฀annually.฀There฀is฀considerable฀scope฀for฀improving฀this฀performance;฀as฀discussed฀in฀section฀1.2,฀use฀of฀ barbojo฀and฀improved฀technology฀can฀raise฀electricity฀ production฀from฀60฀kWh฀per฀ton฀to฀500฀kWh฀per฀ton. According฀to฀the฀Brazilian฀National฀Communication,฀ the฀biofuels฀program฀has฀displaced฀the฀emission฀of฀403฀ million฀tons฀of฀CO2฀from฀1975–2000฀(MCT,฀2004).฀ Based฀on฀our฀figure฀of฀11.0฀tCO2฀per฀ha฀per฀year,฀and฀ taking฀the฀production฀figures฀in฀Annex฀1,฀our฀estimate฀is฀ somewhat฀higher,฀at฀574฀million฀tons฀of฀CO2฀up฀to฀2004. GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST 6.2฀฀Rewarding฀climate฀protection Finding฀the฀carbon฀price฀that฀could฀lead฀to฀further฀ expansion฀of฀biofuels฀is฀a฀challenging฀task.฀The฀Brazilian฀฀ government฀has฀supported฀ethanol฀use฀in฀the฀country฀ through฀reduced฀taxation.฀One฀of฀the฀most฀significant฀ federal฀taxes,฀the฀CIDE17฀tax,฀only฀applies฀to฀fossil-fuel฀ use.฀Total฀taxes฀are฀highly฀variable฀with฀time,฀but฀are฀ known฀(see฀for฀example฀Figure฀5)฀and฀can฀be฀calculated.฀ Taking฀an฀annual฀production฀of฀6.1฀million฀cubic฀meters฀ of฀hydrous฀ethanol฀(average฀annual฀production฀for฀the฀ 1998–2004฀period),฀the฀total฀revenue฀foregone฀from฀this฀ exemption฀is฀$710฀million฀per฀year.฀On฀average,฀a฀cubic฀ meter฀of฀hydrous฀ethanol฀displaces฀1.7฀tons฀of฀CO2฀(when฀ used฀in฀flexfuel฀engines)฀(Macedo฀et฀al.,฀2004),฀which฀ yields฀an฀estimated฀loss฀of฀tax฀revenue฀of฀$65.30฀per฀ton฀of฀ CO2฀emissions฀avoided.฀ Thus,฀in฀most฀years,฀real฀alcohol฀prices฀(corrected฀for฀ lower฀energy฀content฀and฀potentially฀uncollected฀taxes)฀ were฀higher฀than฀gasoline.฀The฀average฀difference฀in฀price฀ was฀around฀R$0.27/liter฀after฀1998,฀when฀price฀liberalization฀was฀implemented.฀This฀figure฀($0.074)฀means฀that฀a฀ carbon฀credit฀equivalent฀of฀$36/tCO2฀added฀to฀hydrous฀ ethanol฀would฀offset฀the฀price฀difference.฀However,฀with฀ the฀increase฀in฀oil฀prices฀in฀the฀last฀two฀years,฀no฀further฀ carbon฀credit฀would฀be฀necessary฀to฀offset฀the฀price฀฀ difference.฀While฀this฀difference฀may฀vary฀with฀the฀price฀ of฀gasoline,฀in฀general฀ethanol฀use฀results฀in฀some฀loss฀of฀ revenue฀to฀the฀government.฀Use฀of฀a฀carbon฀price฀in฀some฀ form฀may฀offset฀this฀burden. 7.฀BIOFUELS฀IN฀THE฀฀ 7.฀BIOFUELS฀IN฀THE฀฀ INTERNATIONAL฀CONTEXT 7.1฀฀What฀lessons฀can฀other฀countries฀ learn฀from฀Brazil’s฀case? Since฀the฀1970s,฀many฀countries—notably฀Brazil฀and฀ the฀United฀States—started฀to฀put฀ethanol฀programs฀in฀ place.฀Argentina,฀Paraguay,฀and฀Zimbabwe฀also฀launched฀ important฀programs.฀As฀oil฀prices฀dropped,฀government฀ support฀waned฀and,฀by฀the฀end฀of฀the฀last฀century,฀only฀ Brazil฀and฀the฀United฀States฀still฀maintained฀those฀programs.฀The฀programs฀in฀Argentina,฀Paraguay฀and฀Zimbabwe฀were฀too฀small฀to฀survive฀when฀oil฀prices฀declined฀ in฀the฀early฀1980s.฀However,฀China,฀India,฀Colombia,฀ Thailand,฀and฀Australia฀have฀started฀their฀own฀programs,฀ which฀may฀trigger฀large-scale฀use฀of฀ethanol฀worldwide. The฀Brazilian฀experience฀demonstrates฀that฀it฀is฀possible฀ to฀quadruple฀sugarcane฀production฀in฀less฀than฀a฀decade฀ and฀that฀public฀acceptance฀for฀a฀new฀liquid฀fuel฀can฀be฀secured฀through฀appropriate฀government฀policies.฀Nevertheless,฀it฀is฀important฀to฀recognize฀the฀following฀constraints: ■ ฀฀Since฀sugarcane฀is฀a฀tropical฀crop,฀it฀requires฀appropriate฀levels฀of฀warmth฀and฀rainfall. ■ ฀฀Biomass฀energy,฀mainly฀when฀derived฀from฀crops,฀฀ requires฀large฀amounts฀of฀labor.฀This฀has฀the฀advantage฀of฀job฀creation,฀but฀is฀a฀disadvantage฀if฀labor฀ costs฀are฀high. B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 41 ฀฀Despite฀the฀advantages฀of฀sugarcane฀in฀both฀primary฀ energy฀productivity฀and฀high฀conversion฀efficiency,฀ land฀requirements฀are฀high.฀A฀country฀wishing฀to฀ make฀a฀significant฀impact฀on฀its฀fuel฀consumption฀ will฀require฀large฀amounts฀of฀available฀land. These฀constraints฀mean฀that,฀as฀with฀oil,฀relatively฀few฀ countries฀can฀be฀major฀producers,฀although,฀again฀like฀ oil,฀many฀countries฀may฀produce฀on฀a฀smaller฀scale.฀With฀ these฀constraints฀in฀mind,฀a฀series฀of฀experiences฀tested฀ successfully฀in฀Brazil฀could฀be฀transferred฀to฀some฀dozen฀ countries.฀They฀are,฀according฀to฀Morris฀(2003): ■ ฀฀Support฀for฀renewable฀electricity,฀which฀has฀been฀a฀ major฀component฀of฀the฀biofuels฀business฀model.฀ This฀can฀be฀done฀through฀measures฀such฀as฀Renewable฀Portfolio฀Standards฀(RPS),฀which฀mandate฀ specific฀numerical฀goals฀for฀renewable฀energy. ■ ฀฀Mandated฀levels฀of฀ethanol฀blending฀in฀gasoline.฀This฀ might฀be฀termed฀a฀Renewable฀Fuel฀Standard฀(RFS)฀to฀ complement฀RPS฀standards.฀These฀could฀begin฀with฀a฀ 10฀percent฀level,฀and฀should฀encompass฀all฀renewable฀ fuels—including฀renewable฀electricity฀for฀electric฀cars฀ as฀well฀as฀biofuels.฀ ■ ฀฀Moving฀beyond฀a฀10฀percent฀blend฀will฀necessitate฀ the฀wide฀availability฀of฀vehicles฀with฀flexible฀fuel฀capa■ 42 bility.18฀This฀capability฀could฀be฀mandated.฀It฀would฀ need฀to฀be฀tied฀to฀the฀rapid฀construction฀of฀a฀nationwide฀infrastructure฀of฀appropriate฀fueling฀facilities. ■ ฀฀The฀success฀of฀biofuels฀in฀Brazil฀was฀tied฀to฀the฀rural฀ economy.฀Encouraging฀smaller,฀locally฀owned฀biorefineries฀and฀creating฀new,฀more฀flexible฀markets฀for฀ agricultural฀crops฀offers฀great฀potential฀for฀countries฀ that฀might฀be฀poor฀in฀fossil฀fuels฀but฀rich฀in฀sunlight฀ and฀plant฀matter,฀as฀well฀as฀in฀rural฀labor.฀ In฀addition,฀some฀recommendations฀should฀be฀considered฀฀ by฀most฀of฀the฀developed฀countries฀that฀face฀significant฀ limitations฀in฀the฀use฀of฀sugarcane.฀ ■ ฀฀To฀enable฀biofuels฀to฀move฀beyond฀a฀10฀percent฀ blend,฀policy฀makers฀should฀accelerate฀the฀commercialization฀of฀cellulose-to-ethanol฀plants.฀This฀involves฀ financing฀of฀commercial-sized฀facilities฀testing฀different฀technological฀approaches.฀It฀also฀involves฀research฀ and฀development฀into฀low฀cost฀and฀environmentally฀ benign฀ways฀to฀collect฀and฀store฀cellulose.฀Production฀ of฀ethanol฀from฀cellulose฀is฀welcome฀not฀only฀for฀economic฀reasons,฀but฀as฀a฀way฀to฀guarantee฀low฀carbon฀ emissions฀from฀renewable฀energy.฀As฀discussed฀earlier,฀ ethanol฀from฀sugarcane฀displaces฀a฀considerable฀ amount฀of฀CO2฀emissions,฀since฀its฀energy฀balance฀is฀ between฀8฀and฀10.฀This฀means฀that฀for฀each฀unit฀of฀ fossil฀fuel฀invested฀in฀all฀phases฀of฀ethanol฀production,฀ it฀is฀possible฀to฀get฀7฀or฀9฀units฀of฀fully฀renewable฀฀ fuels฀created฀by฀photosynthesis.฀Unfortunately,฀the฀ same฀record฀for฀maize฀and฀wheat฀is฀much฀lower.฀฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Ethanol฀from฀maize฀produced฀in฀the฀United฀States฀ has฀an฀energy฀balance฀of฀around฀1.3฀(Shapouri฀et฀ al.,฀2002).฀This฀implies฀very฀modest฀CO2฀abatement฀ capability฀of฀the฀alcohol฀program,฀which฀can฀be฀a฀barrier฀for฀its฀future฀expansion฀as฀global฀climate฀change฀ gains฀social฀importance.฀ ■ ฀฀On฀the฀other฀hand,฀although฀sweet฀sorghum฀has฀ never฀been฀commercially฀used฀as฀a฀source฀of฀alcohol฀ in฀Brazil,19฀it฀could฀be฀a฀good฀candidate฀for฀temperate฀countries.฀The฀primary฀product฀(juice)฀and฀main฀ byproduct฀(bagasse)฀are฀similar฀to฀sugarcane,฀and฀the฀ available฀technologies฀and฀policies฀already฀developed฀ could฀be฀used฀for฀sweet฀sorghum. 7.2฀฀Lessons฀learned฀that฀may฀be฀฀ applied฀elsewhere We฀can฀identify฀several฀relevant฀drivers฀that฀explain฀ the฀significant฀amount฀of฀ethanol฀being฀used฀in฀Brazilian฀cars.฀Nevertheless,฀it฀is฀necessary฀to฀ask฀why,฀after฀30฀ years฀of฀use,฀its฀share฀only฀represents฀one฀third฀of฀all฀liquid฀ fuel฀used฀for฀passenger฀cars.฀The฀first฀explanation฀is฀the฀ difficulty฀of฀competing฀with฀low฀oil฀prices.฀During฀the฀ first฀ten฀years,฀production฀costs฀were฀not฀a฀major฀concern฀ of฀alcohol฀producers฀because฀of฀subsidies฀and฀the฀decline฀ in฀production฀costs.฀In฀the฀next฀decade฀(1985–95),฀support฀provided฀by฀subsidies฀and฀regulations฀started฀to฀be฀ reduced,฀while฀economic฀efficiency฀in฀alcohol฀processing฀ continued฀to฀occur฀but฀not฀at฀a฀pace฀sufficient฀to฀justify฀ further฀private฀investment.฀The฀most฀important฀barrier฀ appeared฀in฀1989฀when฀there฀was฀a฀mismatch฀between฀ supply฀and฀demand.฀Considering฀Brazil฀was฀the฀only฀fuel฀ ethanol฀producer,20฀the฀shortage฀of฀supply฀could฀not฀easily฀ be฀compensated฀by฀imports.฀The฀neat฀ethanol฀car฀driver฀ was฀exposed,฀for฀several฀months,฀to฀a฀real฀fuel฀shortage.฀ This฀was฀minimized฀by฀reducing฀the฀amount฀of฀ethanol฀ blended฀in฀gasoline,฀blending฀of฀imported฀methanol฀to฀ gasoline,฀and฀importation฀of฀out-of-specification฀ethanol.฀ This฀crisis฀immediately฀pushed฀down฀neat฀ethanol฀car฀ sales,฀which฀resulted฀in฀declining฀demand฀for฀ethanol฀as฀ the฀old฀cars฀retired.฀ After฀1995,฀it฀was฀clear฀that฀only฀ethanol฀blended฀ in฀gasoline฀would฀survive฀since฀it฀was฀set฀by฀legislation.฀ Consequently,฀ethanol฀production฀would฀decline;฀by฀ 2010,฀it฀should฀return฀to฀the฀1997฀peak฀level,฀when฀the฀ growth฀in฀car฀sales฀would฀guarantee฀an฀increase฀in฀ethanol฀ consumption.฀Internal฀economic฀crises฀occurred฀in฀the฀ period฀1999–2001,฀and฀the฀further฀devaluation฀of฀national฀ currency฀in฀2002฀(due฀to฀political฀changes฀in฀the฀country’s฀ leadership)฀revived฀interest฀in฀neat฀alcohol฀cars.฀Only฀by฀ 2003—with฀the฀launching฀of฀flexfuel฀cars—was฀there฀a฀ recovery฀in฀ethanol฀consumption.฀Already฀in฀2004,฀oil฀ price฀increases฀pushed฀up฀sales฀of฀flexfuel฀cars฀further.฀It฀is฀ thus฀clear฀that฀shortage฀of฀supply฀postponed฀the฀interest฀ in฀alcohol฀use฀by฀more฀than฀a฀decade.฀By฀2005,฀investors฀ announced฀the฀construction฀of฀around฀50฀new฀sugar฀mills฀ (with฀an฀average฀capacity฀of฀3฀million฀tons฀of฀sugarcane฀ per฀year),฀which฀is฀under฀way฀having฀had฀little฀difficulty฀in฀ securing฀investment. The฀oil฀industry The฀participation฀of฀the฀oil฀sector฀is฀a฀real฀necessity,฀ since฀only฀through฀them฀is฀it฀possible฀to฀distribute฀a฀ blended฀liquid฀fuel.฀However,฀this฀sector฀also฀has฀powerful฀interests฀that฀can฀be฀threatened฀by฀the฀widespread฀use฀ of฀biofuels.฀Alcohol฀stock฀storage฀and฀management,฀and฀ the฀collection฀of฀subsidies฀designed฀for฀alcohol,฀was฀also฀ transferred฀to฀the฀oil฀sector.฀These฀activities฀should฀be฀the฀ responsibility฀of฀private฀and/or฀another฀government฀organization.฀Poor฀stock฀management฀was฀the฀major฀reason฀ for฀the฀alcohol฀shortage฀in฀1989฀and฀delayed฀the฀success฀of฀ Proalcool฀for฀almost฀a฀decade. Technology฀development Due฀to฀the฀immediate฀demand฀for฀neat฀alcohol฀cars฀set฀ by฀government฀institutional฀measures,฀there฀was฀little฀time฀ for฀performance฀testing฀of฀the฀new฀fuel.฀Neat฀alcohol฀automobiles฀built฀in฀1979฀and฀1980฀suffered฀excessive฀damage฀ to฀some฀parts฀that฀were฀in฀direct฀contact฀with฀the฀fuel.฀ These฀mistakes฀have฀since฀been฀completely฀addressed.฀This฀ does฀not฀preclude฀difficulties฀for฀newcomers;฀it฀is฀possible฀ that฀the฀main฀problems฀for฀some฀countries฀will฀arise฀from฀ an฀inadequate฀agronomic฀basis฀(sugarcane฀varieties,฀agricultural฀processes฀and฀logistics,฀management)฀rather฀than฀ from฀lack฀of฀industrial฀technology,฀which฀can฀be฀more฀ easily฀transferred.฀ Power฀production Until฀1997,฀the฀electric฀sector฀was฀in฀the฀hands฀of฀public฀companies฀without฀any฀opportunity฀for฀small฀producers฀ to฀sell฀electricity฀to฀the฀grid.฀As฀soon฀as฀new฀legislation฀ allowed฀electricity฀producers฀to฀deliver฀energy฀to฀the฀grid฀ and฀forced฀utilities฀to฀acquire฀and฀transport฀it,฀the฀sugarmill฀sector฀started฀to฀retrofit฀their฀energy-producing฀plants฀ to฀generate฀surplus฀electricity.฀Considering฀the฀significant฀ potential฀of฀surplus฀electricity฀and฀the฀environmentally฀ safe฀opportunity฀of฀co-production฀of฀ethanol฀and฀electricity,฀we฀strongly฀recommend฀that฀such฀experience฀be฀ implemented฀in฀any฀other฀country฀seeking฀to฀produce฀ liquid฀fuel฀from฀sugarcane.฀ B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 43 7.3฀฀Valuing฀international฀coordination฀฀ on฀biofuels฀promotion Coordinated฀efforts฀between฀countries฀to฀promote฀ biofuels฀are฀already฀in฀effect฀in฀the฀European฀Union฀(EU)฀ through฀the฀acceptance฀of฀renewable฀fuel฀targets฀and฀timetables.฀The฀effort฀could฀be฀more฀effective฀and฀its฀target฀ improved฀if฀taken฀one฀step฀forward฀through฀the฀involvement฀of฀biomass-rich฀countries฀in฀an฀international฀agreement.฀As฀already฀stated,฀large฀production฀of฀biofuels฀will฀ only฀be฀possible฀in฀some฀10฀or฀20฀developing฀countries.฀ These฀countries฀probably฀will฀produce฀biofuels฀at฀lower฀ cost฀than฀the฀EU฀and฀could฀help฀provide฀enough฀biofuels฀ for฀more฀ambitious฀targets.฀With฀long-term฀agreements฀in฀ place,฀such฀biomass-rich฀countries฀would฀be฀motivated฀to฀ develop฀their฀biomass฀potential.฀On฀the฀other฀side,฀the฀EU฀ would฀be฀able฀to฀combine฀internally฀produced฀high-cost฀ biofuels฀with฀low-cost฀imported฀biofuels,฀reducing฀the฀ average฀price฀and฀minimizing฀the฀economic฀burden฀for฀ its฀citizens.฀With฀more฀ambitious฀biofuels฀consumption฀ targets,฀there฀is฀room฀for฀increased฀Brazilian฀production,฀ keeping฀opportunities฀for฀local฀farmers฀and฀for฀imports.฀ With฀consumption฀level฀of฀biofuels฀around฀20฀to฀30฀฀ percent฀of฀all฀liquid฀fuels,฀it฀is฀clear฀that฀a฀real฀alternatives฀for฀oil฀exists,฀finally฀setting฀an฀economic฀ceiling฀to฀ the฀international฀oil฀price.฀ Although฀this฀would฀entail฀dependence฀on฀imports฀for฀ some฀countries,฀the฀large฀number฀of฀potential฀biofuels฀ suppliers฀means฀greater฀diversity฀of฀supply฀and฀therefore฀ supply฀security.฀Such฀trade฀would฀also฀promote฀sustainable฀ development฀by฀improving฀economic฀conditions฀in฀the฀ biomass-rich฀countries.฀Essentially,฀there฀would฀be฀transfer฀ of฀a฀share฀of฀revenues฀from฀oil-rich฀to฀biomass-rich฀countries,฀though฀it฀would฀be฀a฀long฀time฀before฀losses฀to฀oil฀ exporters฀became฀significant.฀From฀previous฀experiences฀in฀ the฀ethanol฀area,฀it฀is฀possible฀to฀establish฀initial฀guidance฀ to฀set฀such฀international฀cooperation.฀Examples฀are฀the฀ Ethanol฀Governors฀Coalition฀in฀the฀United฀States฀and฀the฀ Ethanol฀Coalition฀in฀India.฀Such฀national฀efforts฀have,฀at฀ least,฀the฀following฀purposes฀(Winrock,฀2000): ■ ฀฀To฀serve฀as฀a฀source฀of฀reliable฀information฀for฀members,฀media,฀and฀other฀interested฀parties฀on฀renewable฀ fuel฀usage฀and฀development.฀ ■ ฀฀To฀provide฀information฀to฀policy฀makers,฀government฀ officials,฀the฀media,฀and฀other฀key฀individuals฀and฀ organizations,฀which฀will฀promote฀policy฀initiatives฀ beneficial฀to฀ethanol฀fuel฀development฀and฀usage.฀ 44 ฀฀To฀represent฀and฀promote฀fuel฀ethanol฀interests฀at฀ meetings฀of฀government฀task฀forces,฀commissions,฀ committees,฀and฀other฀related฀events/initiatives฀฀ pertinent฀to฀this฀industry.฀ ■ ฀฀To฀organize฀seminars฀and฀meetings฀across฀the฀country฀ to฀present฀and฀discuss฀fuel฀ethanol฀usage฀and฀฀ development,฀and฀to฀encourage฀market฀expansion.฀ ■ ฀฀To฀generate฀and฀maintain฀consumer฀interest฀in฀฀ renewable฀fuels.฀ ■ ฀฀To฀help฀keep฀members฀abreast฀of฀new฀technological฀ developments฀on฀renewable฀fuels฀abroad. ■ 8.฀CONCLUSION Biofuels฀are฀responsible฀for฀a฀large฀and฀growing฀share฀ of฀Brazil’s฀energy฀mix.฀After฀decades฀of฀development฀the฀ ethanol฀program฀can฀be฀considered฀a฀mature฀and฀proven฀ renewable฀option฀to฀supply฀automotive฀fuels.฀This฀clear฀ success฀can฀be฀observed฀in฀the฀large฀and฀indisputable฀interest฀in฀flexible฀fuel฀cars฀in฀Brazil,฀which฀are฀using฀almost฀ exclusively฀ethanol.฀Brazilian฀ethanol฀has฀several฀relevant฀ characteristics,฀including฀current฀prices฀at฀the฀producer฀ gate฀of฀about฀$฀0.25฀per฀liter,฀removal฀of฀all฀subsidies,฀฀ the฀very฀positive฀energy฀balance฀(8฀to฀10฀energy฀units฀for฀ each฀unit฀of฀energy฀put฀in฀the฀agroindustrial฀system),฀and฀ beneficial฀impacts฀for฀air฀quality,฀jobs฀generation,฀electricity฀production,฀and฀national฀economic฀growth.฀These฀ factors฀explain฀the฀strong฀support฀of฀Brazilian฀society฀for฀ sugarcane฀biofuel.฀In฀any฀foreseeable฀future,฀ethanol฀will฀ be฀an฀important฀fuel฀in฀Brazil.฀The฀next฀stage฀will฀be฀to฀see฀ how฀many฀countries฀can฀reap฀similar฀benefits฀in฀the฀future.฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Annex฀1.฀ Annex฀1. Table฀A.฀฀Sugarcane,฀Sugar,฀and฀Alcohol฀Production฀in฀Brazil ฀ Season฀ ฀ ฀ ฀Sugarcane฀ (1000฀tons)฀ Alcohol Anhydrous฀ (1000฀m3)฀ Hydrous฀ (1000฀m3)฀ Total฀ (1000฀m3)฀ Sugar฀ (1000฀tons)฀ TRS (1000฀tons)฀ 1970/1971฀ 79,753฀ 525฀ 385฀ 910฀ 5070฀ 1971/1972฀ 79,595฀ 390฀ 23฀ 413฀ 5081฀ 6437 1972/1973฀ 95,074฀ 389฀ 292฀ 681฀ 5926฀ 7441 1973/1974฀ 91,994฀ 306฀ 260฀ 566฀ 6680฀ 8021 1974/1975฀ 95,624฀ 217฀ 409฀ 626฀ 6673฀ 8113 1975/1976฀ 91,525฀ 233฀ 323฀ 556฀ 6017฀ 7304 1976/1977฀ 103,173฀ 300฀ 364฀ 664฀ 6851฀ 8375 1977/1978฀ 120,082฀ 1177฀ 293฀ 1470฀ 8306฀ 11388 1978/1979฀ 129,145฀ 2096฀ 395฀ 2491฀ 7476฀ 12392 1979/1980฀ 138,899฀ 2712฀ 671฀ 3383฀ 6980฀ 13498 1980/1981฀ 148,651฀ 2104฀ 1602฀ 3706฀ 7844฀ 14935 1981/1982฀ 153,858฀ 1413฀ 2750฀ 4163฀ 7912฀ 15772 1982/1983฀ 166,753฀ 3550฀ 2274฀ 5824฀ 8843฀ 19837 1983/1984฀ 197,993฀ 2469฀ 5392฀ 7861฀ 9086฀ 23637 1984/1985฀ 202,765฀ 2102฀ 7150฀ 9252฀ 8849฀ 25832 1985/1986฀ 224,364฀ 3208฀ 8612฀ 11820฀ 7819฀ 29386 1986/1987฀ 227,873฀ 2168฀ 8338฀ 10506฀ 8157฀ 27338 1987/1988฀ 224,496฀ 1983฀ 9474฀ 11457฀ 7983฀ 28833 1988/1989฀ 221,339฀ 1726฀ 9978฀ 11704฀ 8070฀ 29345 1989/1990฀ 223,410฀ 1341฀ 10557฀ 11898฀ 7301฀ 28857 1990/1991฀ 222,163฀ 1309฀ 10474฀ 11783฀ 7365฀ 28718 1991/1992฀ 228,791฀ 1984฀ 10768฀ 12752฀ 8665฀ 31845 1992/1993฀ 223,881฀ 2216฀ 9470฀ 11686฀ 9249฀ 30581 1993/1994฀ 216,963฀ 2523฀ 8774฀ 11297฀ 9326฀ 29990 1994/1995฀ 240,869฀ 2867฀ 9825฀ 12692฀ 11696฀ 34973 1995/1996฀ 251,346฀ 3040฀ 9631฀ 12671฀ 13235฀ 36558 1996/1997฀ 285,664฀ 4600฀ 9634฀ 14234฀ 13467฀ 39681 1997/1998฀ 302,169฀ 5688฀ 9720฀ 15409฀ 14845฀ 43282 1998/1999฀ 315,641฀ 5692฀ 8236฀ 13928฀ 17961฀ 43916 1999/2000฀ 310,049฀ 6134฀ 6934฀ 13068฀ 19380฀ 43907 2000/2001฀ 257,969฀ 5616฀ 4998฀ 10615฀ 16221฀ 36216 2001/2002฀ 291,924฀ 6440฀ 5062฀ 11502฀ 19096฀ 40850 2002/2003฀ 320,683฀ 7010฀ 5628฀ 12638฀ 22533฀ 46182 2003/2004฀ 356,079฀ 8790฀ 5839฀ 14629฀ 24860฀ 52226 ฀ 6458 Yearly฀Growth฀Rate฀(%) 1975/1985฀ 9.4฀ 30฀ 38.9฀ 35.8฀ 2.7฀ 14.9 1985/2003฀ 2.6฀ 5.8฀ -2.1฀ 1.2฀ 6.6฀ 3.2 1985/1993฀ -0.4฀ -3.0฀ 0.2฀ -0.6฀ 2.2฀ 0.3 1993/2003฀ 5.1฀ 13.3฀ -4.0฀ 2.6฀ 10.3฀ 5.7 1990/2003฀ 3.7฀ 15.8฀ -4.4฀ 1.7฀ 9.8฀ 4.7 Source:฀Datagro฀(2004)฀no฀06;฀Datagro฀(2002)฀n.o฀05.฀TRS฀is฀Total฀Reducible฀Sugars. B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 45 ENDNOTES ฀฀฀CENBIO฀-฀Centro฀Nacional฀de฀Referência฀em฀Biomassa,฀R.฀Álvaro฀ Rodrigues,฀283,฀Sao฀Paulo,฀SP,฀Brazil,฀04582-000,฀bun2@tsp.com.br. ฀ 2฀฀฀Instituto฀de฀Recursos฀Naturais,฀Universidade฀Federal฀de฀Itajubá,฀ Itajubá,฀Minas฀Gerais,฀horta@unifei.edu.br. ฀ 3฀฀฀Energy฀Program,฀Instituto฀de฀Eletrotécnica฀e฀Energia,฀University฀of฀ Sao฀Paulo฀(IEE/USP),฀Av.฀Prof.฀Luciano฀Gualberto,฀1289,฀Sao฀Paulo,฀ SP,฀Brazil,฀05508-900,฀vparente@iee.usp.br. ฀ 4฀฀฀Total฀external฀debt฀at฀the฀end฀of฀2004฀was฀$221฀billion,฀including฀ loans฀from฀the฀World฀Bank.฀This฀is฀a฀significant฀burden฀compared฀ with฀Brazil’s฀GNP฀of฀$604฀billion.฀Not฀only฀is฀the฀amount฀of฀debt฀ large,฀but฀the฀schedule฀of฀payments฀is฀short;฀total฀debt฀service฀in฀2004฀ was฀$53฀billion฀(World฀Bank,฀2005). ฀ 5฀฀฀Instituto฀Nacional฀de฀Tecnologia,฀Primeiro฀Congresso฀Nacional฀de฀ Aplicações฀Industriais฀do฀Álcool,฀Rio฀de฀Janeiro,฀1903.฀ ฀ 6฀฀฀Cubic฀meters฀of฀ethanol฀produced฀per฀cubic฀meter฀of฀fermentation฀ tank฀capacity฀per฀day. ฀ 7฀฀฀An฀increase฀in฀mechanization฀would฀be฀useful,฀for฀example฀by฀promoting฀the฀need฀to฀stop฀sugarcane฀burning฀(particularly฀in฀many฀areas฀ of฀São฀Paulo฀near฀towns฀and฀roads).฀Increasing฀employment฀opportunities฀outside฀the฀sugarcane฀industry฀and฀the฀low฀prestige฀of฀some฀jobs฀ (such฀as฀cane฀cutters)฀has฀resulted฀in฀shortages฀(or฀high฀costs)฀of฀labor฀ in฀some฀areas. ฀ 8฀฀฀Governmental฀Decree฀2166-67฀of฀August฀24,฀2001,฀Brasilia฀Brazil.฀ Available฀in฀Portuguese฀at:฀http://www.planalto.gov.br/ccivil_03/ MPV/2166-67.htm. ฀ 9฀฀฀Total฀aldehyde฀emissions฀from฀alcohol฀engines฀are฀typically฀higher฀ than฀from฀gasoline฀ones,฀but฀they฀are฀predominantly฀acetaldehydes,฀ not฀formaldehydes.฀Acetaldehyde฀emissions฀produce฀less฀harmful฀ health฀effects฀than฀the฀formaldehydes฀emitted฀by฀gasoline฀and฀diesel฀ engines.฀In฀1993,฀CETESB฀obtained฀the฀concentration฀ratio฀of฀ acetaldehyde/formaldehyde฀based฀on฀ambient฀air฀monitoring฀data.฀ The฀results฀were฀in฀the฀range฀of฀1.7–1.8฀and฀in฀1996/97,฀1.6–2.1.฀ Comparing฀these฀figures฀to฀the฀typical฀values฀encountered฀in฀Los฀ Angeles,฀Atlanta,฀and฀Chicago฀(0.18–0.96),฀the฀higher฀concentrations฀of฀acetaldehydes฀were฀observed฀in฀São฀Paulo฀due฀to฀the฀intensive฀ ethanol฀use฀as฀an฀automotive฀fuel.฀It฀must฀be฀emphasized฀that฀during฀ this฀monitoring฀campaign฀period,฀only฀a฀very฀small฀portion฀of฀the฀ Brazilian฀light-duty฀fleet฀was฀equipped฀with฀catalytic฀converters,฀which฀ help฀significantly฀in฀the฀reduction฀of฀aldehyde฀emission. ฀10฀฀฀Currently,฀light-duty฀vehicles฀in฀Brazil฀use฀predominantly฀two฀ major฀types฀of฀fuel:฀gasohol,฀which฀is฀a฀blend฀of฀22฀to฀25฀percent฀of฀ dehydrated฀ethanol฀and฀75฀to฀78฀percent฀gasoline,฀or฀neat฀ethanol฀ (hydrated฀form,฀which฀contains฀4฀percent฀water). ฀11฀฀฀All฀prices฀mentioned฀here฀are฀in฀current฀US$. ฀12฀฀฀The฀London฀Interbank฀Offered฀Rate,฀an฀international฀benchmark฀rate฀ for฀interest฀charged฀on฀loans. ฀13฀฀฀The฀conversion฀factor฀was฀1.3฀liters฀ethanol/liter฀gasoline,฀taking฀into฀ account฀the฀lower฀heating฀value฀and฀the฀higher฀efficiency฀allowed฀by฀ ethanol฀in฀engines.฀ ฀14฀฀฀Vânia฀Beatriz฀R.฀Castiglioni,฀EMBRAPA,฀2004.฀Personal฀Communication. ฀15฀฀฀Around฀90฀percent฀of฀electricity฀generation฀in฀Brazil฀comes฀from฀hydro฀sources.฀This฀means฀that฀around฀90฀percent฀of฀the฀total฀Brazilian฀ energy฀consumption฀in฀this฀sector฀is฀renewable. ฀16฀฀฀Protection฀of฀native฀forests฀does฀of฀course฀bring฀other฀benefits. ฀17฀฀฀Aiming฀to฀simplify฀the฀federal฀tax฀structure,฀since฀2002฀the฀Brazilian฀ government฀has฀imposed฀a฀value-added฀tax฀on฀fossil฀fuels,฀which฀is฀ used฀to฀finance฀roads฀and฀fuel฀logistics.฀ ฀ 1 ฀฀฀The฀limit฀of฀10฀percent฀ethanol฀blend฀in฀gasoline฀is฀debatable.฀In฀ Brazil,฀more฀than฀15฀million฀cars฀have฀used฀ethanol฀blends฀of฀around฀ 25฀percent฀for฀more฀than฀a฀decade.฀Brazilian-made฀cars฀are฀already฀ manufactured฀for฀such฀fuel,฀and฀a฀few฀parts฀are฀designed฀to฀be฀more฀ resilient฀to฀alcohol฀corrosion.฀But฀it฀is฀worthwhile฀to฀mention฀that฀a฀ few฀percent฀of฀the฀cars฀are฀imported.฀Some฀imported฀car฀dealers฀claim฀ that฀the฀car฀is฀adjusted฀to฀Brazilian฀fuel฀through฀minor฀retrofit.฀As฀a฀ conclusion,฀we฀can฀say฀that฀there฀are฀few฀indications฀that฀a฀20฀percent฀ alcohol฀blend฀imposes฀a฀real฀difficulty฀for฀car฀owners. ฀19฀฀฀Although฀several฀international฀studies฀found฀that฀sweet฀sorghum฀could฀ replace฀sugarcane฀used฀for฀the฀production฀(see,฀for฀instance,฀report฀ prepared฀by฀the฀Hindu฀Line฀at฀http://www.blonnet.com/2004/08/13/ stories/2004081301211200.htm฀or฀article฀“Beyond฀Corn:฀Alternative฀Feedstock฀for฀Ethanol฀production”฀at฀http://www.ksgrains. com/ethanol/Altfeedstocks.pdf ),฀experimental฀tests฀in฀Brazil฀before฀ the฀implementation฀of฀the฀Próalcool฀program฀found฀that฀sugarcane฀ was฀more฀suitable฀in฀alcohol฀production฀(Serra,1977).฀Another฀factor฀ is฀that฀once฀the฀commercial฀sector฀selected฀sugarcane,฀interest฀in฀sweet฀ sorghum฀disappeared.฀ ฀20฀฀฀The฀United฀States฀had฀already฀started฀alcohol฀production,฀but฀the฀ volume฀produced฀was฀too฀small฀to฀mitigate฀Brazil’s฀internal฀shortage. ฀18 REFERENCES Abrantes,฀R.A.฀2003.฀ Abrantes,฀R.A.฀2003.฀“Emissão฀de฀Aldeídos฀e฀Hidrocarbonetos฀ Policíclicos฀Aromáticos฀de฀Veículos฀Comerciais฀a฀Diesel.”฀฀ CETESB,฀SIMEA,฀São฀Paulo,฀Brazil. Andrade,฀C.A.,฀E.M.฀Santos.฀2002. Andrade,฀C.A.,฀E.M.฀Santos.฀2002.฀“Hubbert฀Curve฀for฀Brazilian฀ Oil฀Production.”฀Energy฀and฀Electrotechnology฀Institute.฀฀ São฀Paulo฀University. Banco฀Central.฀2004. Banco฀Central.฀2004.฀“Boletim฀do฀Banco฀Central฀do฀Brasil,฀฀ Annual฀Report฀2003.”฀Brasilia:฀Banco฀Central฀do฀Brasil. BEN.฀2004. BEN.฀2004.฀“Balanço฀Energético฀Nacional฀–฀2004.”฀Brasilia:฀ Ministério฀de฀Minas฀e฀Energia฀(MME). Borges,฀J.M.฀1990.฀“The฀Brazilian฀Alcohol฀Program฀-฀FoundaBorges,฀J.M.฀1990. tions,฀Results,฀and฀Perspectives.”฀Energy฀sources฀12:฀451–61. Brasil฀Energia.฀2003. Brasil฀Energia.฀2003.฀Petrobras฀50฀anos.฀Revista฀Brasil฀Energia,฀ edição฀especial,฀No฀275,฀Outubro.฀Rio฀de฀Janeiro. Castiglioni,฀Vânia฀Beatriz฀R.฀2004. Castiglioni,฀Vânia฀Beatriz฀R.฀2004.฀Empresa฀Brasileira฀de฀฀ Pesquisa฀Agropecuária.฀Personal฀Communication. CETESB.฀2001. CETESB.฀2001.฀Companhia฀Estadual฀de฀Tecnologia฀e฀฀ Saneamento฀Basico,฀2001.฀Relatorio฀de฀Emissões฀Automotivas,฀ Governo฀de฀São฀Paulo.฀ CETESB.฀2003. CETESB.฀2003.฀Companhia฀de฀Tecnologia฀de฀Saneamento฀ Ambiental,฀2003,฀Relatório฀de฀Qualidade฀do฀Ar฀no฀Estado฀de฀ São฀Paulo,฀Brazil. Datagro.฀2002.฀no.฀5.฀P.฀Nastari,฀ed.฀São฀Paulo.฀ Datagro.฀2002. Datagro.฀2004.฀no.฀6.฀P.฀Nastari,฀ed.฀São฀Paulo.฀ Datagro.฀2004. Echavarria,฀M.฀and฀S.฀Whalen.฀1991. Echavarria,฀M.฀and฀S.฀Whalen.฀1991.฀“Cane฀Burning฀and฀฀ Factory฀Emissions.”฀Paper฀presented฀at฀the฀International฀฀ Conference฀on฀Energy฀from฀Sugar฀Cane,฀Hawaii. FAO฀(Food฀and฀Agriculture฀Organization฀of฀United฀Nations฀ Forestry฀Databank).฀2002.฀Available฀at:฀http://faostat.fao.org/฀ Forestry฀Databank).฀2002.฀ faostat/collection?version=ext&hasbulk=08subset=agriculture. 46 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST FAO.฀2005. FAO.฀2005.฀Available฀at:฀http://faostat.fao.org/faostat/collection? version=ext&hasbulk=08subset=agriculture. MCT.฀2004. MCT.฀2004.฀Ministério฀Ciência฀e฀e฀Tecnologia.฀Available฀at:฀ http://www.mct.gov.br/clima/comunic/Default.htm.฀ Fearnside,฀P.M.฀1995. Fearnside,฀P.M.฀1995.฀“Global฀Warming฀Response฀Options฀in฀ Brazil’s฀Forest฀Sector:฀Comparison฀of฀Project-level฀Costs฀and฀ Benefits.”฀Biomass฀and฀Bioenergy฀8(5):฀309–322. Melquiades,฀A.฀1996. Melquiades,฀A.฀1996.฀“A฀Produção฀de฀energia,฀a฀criação฀de฀ emprego฀e฀as฀relações฀capital-trabalho.฀O฀Álcool฀e฀a฀nova฀ordem฀ econômica฀mundial.”฀Frente฀Parlamentar฀Sucroalcooleira.,฀Brasília.฀ Available฀at:฀http://www.mct.gov.br/clima/ingles/comunic_old/฀ alcohol7.htm. Gazeta฀Mercantil. 2004.฀“Meta฀é฀elevar฀em฀80%฀produção฀de฀ Gazeta฀Mercantil.฀2004. álcool฀até฀2009.”฀São฀Paulo.฀Nov.฀5. Goldemberg,฀J.฀2002. Goldemberg,฀J.฀2002.฀“The฀Brazilian฀Energy฀Initiative—฀ Support฀Report.”฀Paper฀presented฀at฀the฀Johannesburg฀2002฀ World฀Summit฀for฀Sustainable฀Development.฀Secretaria฀de฀฀ Meio฀Ambiente,฀São฀Paulo฀(The฀Brazilian฀São฀Paulo฀State฀฀ Environmental฀Secretariat). Goldemberg,฀J.฀2005. Goldemberg,฀J.฀2005.฀“Bioenergy฀Development฀and฀Deployment:฀ Getting฀Benefits฀from฀the฀Use฀of฀International฀Cooperation.”฀฀ Preparatory฀Meeting฀International฀Partnership฀on฀Bioenergy,฀ Rome,฀September฀6.฀Consiglio฀Nazionale฀delle฀Ricerche,฀Italy. Guilhoto,฀J.M.M.฀2001. Guilhoto,฀J.M.M. 2001.฀Geração฀de฀emprego฀nos฀setores฀฀ produtores฀de฀cana฀de฀açúcar,฀açúcar฀e฀álcool฀no฀Brasil฀e฀suas฀ macro-regiões;฀Relatório฀Cenários฀para฀a฀produção฀de฀açúcar฀e฀ álcool.฀São฀Paulo:฀MB฀Associados฀e฀FIPE. Moreira,฀J.R.฀2004.฀ Moreira,฀J.R.฀2004.฀“The฀Brazilian฀Biomass฀Experience฀–฀A฀Success฀ Story.”฀Paper฀presented฀at฀the฀LAMNET฀Workshop฀on฀Biomass฀ Opportunities฀in฀Venezuela,฀Caracas,฀Venezuela,฀October฀22. Moreira,฀J.R.฀and฀J.฀Goldemberg.฀1999. Moreira,฀J.R.฀and฀J.฀Goldemberg.฀1999.฀“The฀Alcohol฀Program.”฀ Energy฀Policy฀27(4):฀229–245. Morris,฀D.฀2003.฀ Morris,฀D.฀2003.฀“New฀Rules฀for฀a฀Sustainable฀Transportation฀ System.฀A฀Better฀Way฀to฀Get฀from฀Here฀to฀There.฀A฀Commentary฀on฀the฀Hydrogen฀Economy฀and฀a฀Proposal฀for฀an฀Alternative฀ Strategy.”฀Minneapolis:฀The฀New฀Rules฀Project฀of฀the฀Institute฀ for฀Local฀Self-Reliance. Nastari,฀P.฀2003. Nastari,฀P.฀2003.฀“Demand฀Forecast฀for฀Ethanol฀and฀Sugar฀in฀ Brazil฀for฀Medium฀and฀Long฀Term.”฀III฀Conferência฀Internacional฀ DATAGRO฀sobre฀Açúcar฀e฀Álcool,฀São฀Paulo. Guilhoto,฀J.M.M.฀et฀al.฀2002.฀ Guilhoto,฀J.M.M.฀et฀al.฀2002.฀“Mechanization฀Process฀of฀the฀ Sugar฀Cane฀Harvest฀and฀its฀Direct฀and฀Indirect฀Impact฀over฀the฀ Employment฀in฀Brazil฀and฀in฀its฀5฀Macro-Regions.”฀Piracicaba:฀ Relatório฀ESALQ฀–฀CEPEA.฀ Nogueira,฀L.A.H.฀2003.฀Os฀Preços฀de฀Combustíveis฀no฀Brasil.฀ Nogueira,฀L.A.H.฀2003. Seminario฀Internacional฀Politicas฀de฀Precios฀de฀la฀Energia฀y฀su฀ Impacto฀en฀el฀Desarollo฀Sustentable,฀CEPAL,฀Santiago฀do฀Chile,฀ December฀3–4. Hall,฀D.O.,฀F.฀Rosillo-Calle,฀R.H.฀Williams,฀and฀J.฀Woods. Hall,฀D.O.,฀F.฀Rosillo-Calle,฀R.H.฀Williams,฀and฀J.฀Woods.฀฀ 1993.฀“Biomass฀for฀Energy:฀Supply฀Prospects.”฀In฀T.B.฀Johansson฀฀ 1993. et฀al.,฀eds.฀Renewable฀Energy฀-฀Sources฀for฀Fuels฀and฀Electricity.฀ Washington,฀DC:฀Island฀Press. Oliveira,฀A.฀1991.฀ Oliveira,฀A.฀1991.฀“Reassessing฀the฀Brazilian฀Alcohol฀฀ Programmes.”฀Energy฀Policy฀19(1):฀47-55. IBGE.฀1989. IBGE.฀1989.฀Instituto฀Brasileiro฀de฀Geografia฀e฀Estatistica,฀฀ Rio฀de฀Janeiro,฀Brazil. IPCC.฀1996. IPCC.฀1996.฀Climate฀Change฀1995฀–฀Impacts,฀Adaptations฀and฀ Mitigation฀of฀Climate฀Change:฀Scientific-Technical฀Analyses.฀ Contribution฀of฀Working฀Group฀II฀to฀the฀Second฀Assessment฀ Report฀of฀the฀Intergovernmental฀Panel฀on฀Climate฀Change.฀R.T.฀ Watson,฀M.C.฀Zinywera,฀and฀R.H.฀Moss,฀eds.฀Cambridge,฀UK,฀ and฀New฀York:฀Cambridge฀University฀Press. IPCC.฀2001.฀Climate฀Change฀2001฀–฀Mitigation.฀Contribution฀฀ IPCC.฀2001. of฀Working฀Group฀III฀to฀the฀Third฀Assessment฀Report฀of฀the฀ Intergovernmental฀Panel฀on฀Climate฀Change.฀B.฀Metz,฀O.฀ Davidson,฀R.฀Swart,฀and฀J.฀Pan,฀eds.฀Cambridge,฀UK,฀and฀New฀ York:฀Cambridge฀University฀Press. Macedo,฀I.C.,฀R.฀Lima฀Verde฀Leal,฀and฀J.E.A.R.฀Silva.฀2004. Macedo,฀I.C.,฀R.฀Lima฀Verde฀Leal,฀and฀J.E.A.R.฀Silva.฀2004.฀฀ “Assessment฀of฀Greenhouse฀Gas฀Emission฀in฀the฀Production฀ and฀Use฀of฀Fuel฀Ethanol฀in฀Brazil.”฀São฀Paulo:฀Secretariat฀of฀the฀ Environment,฀Government฀of฀the฀State฀of฀São฀Paulo. Macedo,฀I.฀1995. Macedo,฀I.฀1995.฀[then]฀Research฀Director฀of฀COPERSUCAR,฀ Piracicaba,฀Brazil.฀Personal฀Communication.฀ Macedo,฀I.฀and฀L.A.H.฀Nogueira.฀2004. Macedo,฀I.฀and฀L.A.H.฀Nogueira.฀2004.฀“Evaluation฀of฀Ethanol฀ Production฀Expansion฀in฀Brazil.”฀Brasilia:฀CGEE฀Centro฀de฀ Gestão฀de฀Estudos฀Estratégicos. Pereira฀de฀Carvalho,฀E.฀2004.฀ Pereira฀de฀Carvalho,฀E.฀2004.฀“Brazilian฀Sugar฀and฀Ethanol฀Market฀ 2004.”฀UNICA฀Presentation,฀Sugar฀Dinner,฀March,฀New฀York. Rosillo-Cale฀F,฀P.฀Furtado,฀M.E.A.฀Rezende,฀and฀D.O.฀Hall.฀1996. Rosillo-Cale฀F,฀P.฀Furtado,฀M.E.A.฀Rezende,฀and฀D.O.฀Hall.฀1996.฀ The฀Charcoal฀Dilemma:฀Finding฀Sustainable฀Solutions฀for฀Brazilian฀ Industry.฀London:฀Intermediate฀Technology฀Publications.฀ Serra,฀G.E.฀1997.฀ Serra,฀G.E.฀1997.฀“O฀Sorgo฀Sacarino฀como฀matéria-prima฀para฀ a฀produção฀do฀álcool฀etílico.”฀Report฀prepared฀for฀the฀Brazilian฀ Symposium฀on฀Sorghum,฀Brasilia,฀Brazil.฀ Shapouri,฀H.,฀J.฀A.฀Duffield,฀and฀M.฀Wang.฀2002. Shapouri,฀H.,฀J.฀A.฀Duffield,฀and฀M.฀Wang.฀2002.฀“The฀Energy฀ Balance฀of฀Corn฀Ethanol:฀An฀Update.”฀Agricultural฀Economic฀ Report฀No.฀813.฀Washington,฀DC:฀U.S.฀Department฀of฀Agriculture,฀Office฀of฀the฀Chief฀Economist,฀Office฀of฀Energy฀Policy฀and฀ New฀Uses.฀ Winrock.฀2000.฀ Winrock.฀2000.฀“Ethanol฀2000:฀Sustainable฀Fuel฀for฀the฀Transport฀ Sector.”฀Paper฀presented฀at฀a฀workshop฀in฀New฀Delhi,฀India,฀ February฀25. World฀Bank.฀2005. World฀Bank.฀2005.฀Data฀available฀at:฀http://www.worldbank. org/data/countrydata/aag/bra_aag.pdf. Zandbergen,฀P.฀1993.฀“Energy฀and฀Environmental฀Policy฀in฀ Zandbergen,฀P.฀1993. Latin฀America฀:฀The฀Case฀of฀Fuel฀Ethanol฀in฀Argentina฀and฀ Brazil.”฀Masters฀thesis,฀Development฀Studies฀at฀the฀Technology฀ and฀Development฀Group,฀University฀of฀Twente,฀Enschede,฀the฀ Netherlands.฀ Macedo,฀I.C.฀2003. Macedo,฀I.C.฀2003.฀“Technology:฀Key฀to฀Sustainability฀and฀฀ Profitability฀–฀a฀Brazilian฀View.”฀Paper฀presented฀at฀the฀฀ Workshop฀on฀Technology฀and฀Profitability฀in฀Sugar฀Production,฀ International฀Sugar฀Council,฀Cebu,฀Philippines,฀May฀27. B IOFU ELS฀ FOR ฀ TR A N SPOR T, ฀ D EVELOPMEN T, ฀ A N D ฀ C LIMATE฀ C HA N GE 47 Editor's฀Note A lmost฀every฀achievement฀ in฀development,฀and฀every฀ challenge฀surrounding฀it,฀is฀ writ฀large฀in฀China.฀The฀country’s฀ spectacular฀economic฀growth฀during฀ recent฀decades฀has฀pulled฀hundreds฀of฀ millions฀out฀of฀poverty,฀but฀has฀also฀ produced฀wrenching฀social฀changes฀ and฀environmental฀challenges.฀ Few฀sectors฀demonstrate฀this฀ achievement฀and฀this฀challenge฀more฀ clearly฀than฀transport.฀Famed฀barely฀ two฀decades฀ago฀for฀their฀streets฀overrun฀by฀bicycles,฀China’s฀major฀cities฀ are฀now฀increasingly฀dominated฀by฀ private฀cars.฀Though฀car฀ownership฀ is฀very฀low฀compared฀to฀rich฀countries—the฀total฀number฀is฀about฀9฀ cars฀per฀1,000฀people,฀as฀compared฀ to฀over฀700฀per฀1,000฀people฀in฀the฀ United฀States—it฀is฀growing฀at฀impressive฀rates,฀as฀China’s฀urban฀middle฀ class฀embraces฀the฀automobile฀just฀ as฀Americans฀did฀in฀the฀1930s.฀This฀ growth฀is฀symptomatic฀of฀China’s฀economic฀success,฀but฀the฀authors฀argue฀ that฀this฀success฀can฀only฀be฀sustained฀ through฀creative฀policymaking,฀as฀ this฀rapid฀growth฀in฀car฀ownership฀is฀ being฀accompanied฀by฀local,฀national,฀ and฀global฀problems.฀ Within฀China,฀the฀growth฀in฀ mobility฀faces฀two฀major฀constraints.฀ First,฀locally,฀the฀rapid฀growth฀in฀car฀ use฀is฀leading฀to฀gridlock฀in฀cities฀that฀ were฀not฀designed,฀and฀cannot฀be฀easily฀adapted,฀for฀such฀traffic.฀Second,฀ nationally,฀China’s฀rapidly฀growing฀ oil฀demand฀is฀making฀the฀price฀and฀ provenance฀of฀its฀imported฀oil฀an฀ 48 increasing฀concern.฀After฀being฀a฀net฀ exporter฀a฀decade฀ago,฀China฀now฀ imports฀about฀one-third฀of฀the฀oil฀it฀ consumes,฀a฀figure฀that฀is฀poised฀to฀ continue฀rising.฀ At฀the฀global฀level,฀the฀manner฀in฀ which฀China’s฀transport฀sector฀develops฀ over฀the฀coming฀decades฀has฀worldwide฀implications฀for฀the฀climate฀system.฀The฀future฀CO2฀emissions฀growth฀ will฀depend฀on฀vehicle฀efficiency,฀the฀ choice฀of฀fuels,฀and฀the฀distance฀driven฀ per฀vehicle.฀These฀factors฀are฀also฀important฀for฀addressing฀China’s฀congestion฀and฀oil฀security฀constraints.฀This฀ is฀fortunate,฀because฀these฀constraints,฀ having฀more฀immediate฀influence฀on฀ policymakers฀than฀climate฀change,฀ will฀be฀the฀decisive฀considerations฀in฀ China’s฀evolving฀transport฀policy.฀ The฀authors฀consider฀the฀impact฀ of฀policies฀and฀measures฀designed฀to฀ anticipate฀and฀avoid฀congestion฀and฀ oil฀security฀concerns.฀These฀policies฀ lead฀to฀more฀efficient฀engine฀types฀(hybrids,฀compressed฀natural฀gas);฀smaller฀ vehicles฀to฀adapt฀to฀constrained฀road฀ and฀parking฀space;฀and฀lower฀vehicle฀ mileage฀as฀people฀use฀public฀transport฀alternatives.฀The฀authors฀are฀at฀ pains฀to฀point฀out฀that฀these฀measures฀ do฀not฀amount฀to฀reduced฀mobility฀ for฀urban฀Chinese;฀to฀the฀contrary,฀ by฀avoiding฀or฀at฀least฀deferring฀the฀ constraints฀mentioned฀above,฀mobility฀will฀be฀increased.฀The฀results฀are฀ striking.฀Compared฀to฀a฀“businessas-usual”฀scenario,฀energy฀use฀(and,฀ therefore,฀to฀a฀rough฀approximation฀ CO2฀emissions)฀is฀78฀percent฀lower฀ with฀a฀policy฀mix฀designed฀to฀save฀the฀ cities฀from฀a฀congestion฀crunch฀and฀ avoid฀excess฀oil฀dependence. GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST SD-PAMs฀seek฀to฀find฀climate฀ benefits฀from฀meeting฀non-climate฀ development฀goals฀and,฀as฀such,฀this฀ is฀a฀fascinating฀case.฀China฀is฀already฀ aware฀of฀the฀constraints฀it฀faces,฀and฀ has฀taken฀action—witness฀its฀recently฀ applied฀vehicle฀efficiency฀standards,฀ more฀stringent฀than฀those฀in฀the฀ United฀States.฀But฀the฀scope฀to฀do฀ more฀is฀large฀indeed,฀and฀the฀benefits฀ to฀China฀of฀reducing฀its฀growing฀ dependence฀on฀expensive฀and฀volatile฀ oil฀supplies฀and฀keeping฀its฀cities฀moving฀are฀obvious.฀Anything฀that฀can฀be฀ done฀to฀accelerate฀measures฀to฀address฀ these฀challenges฀is฀clearly฀important฀ both฀for฀China฀and฀for฀the฀climate.฀ Finally,฀the฀economic฀sectors฀that฀will฀ play฀a฀vital฀role฀in฀making฀these฀responses฀work฀(including฀most฀notably฀ the฀auto฀sector)฀are฀international฀in฀ scope฀and฀develop฀their฀products฀for฀ global฀markets.฀A฀coordinated฀effort฀ between฀China฀and฀other฀major฀markets฀to฀favor฀the฀introduction฀of฀more฀ efficient฀vehicle฀technologies฀would฀be฀ far฀more฀effective฀than฀countries฀acting฀in฀isolation. chapter฀iv China฀Motorization฀Trends:฀ Policy฀Options฀in฀a฀World฀of฀Transport฀Challenges Wei-Shiuen฀Ng ฀ ■ ฀Lee฀Schipper 1.฀INTRODUCTION฀ As฀the฀fastest฀growing฀large฀economy฀in฀the฀world,฀ China฀is฀experiencing฀a฀rapid฀increase฀in฀motor฀vehicle฀ ownership฀and฀use,฀in฀the฀process฀gaining฀immense฀ economic฀and฀personal฀mobility฀benefits.฀However,฀this฀ explosion฀in฀car฀ownership฀is฀unsustainable,฀as฀evidenced฀ by฀the฀impacts฀of฀rising฀congestion,฀increased฀air฀pollution,฀increased฀oil฀consumption,฀and฀high฀rates฀of฀traffic฀ fatalities.฀A฀sustainable฀transportation฀system฀would฀meet฀ the฀increasing฀demand฀for฀private฀motorization฀without฀ compromising฀the฀economic฀and฀welfare฀gains฀from฀ greater฀mobility.฀The฀rapid฀growth฀of฀private฀vehicles฀in฀ China,฀which฀will฀no฀doubt฀increase฀in฀ownership฀and฀use,฀ threatens฀this฀sustainability,฀even฀though฀private฀vehicles฀ currently฀contribute฀as฀little฀as฀10฀percent฀of฀the฀total฀daily฀ trips฀in฀most฀cities.฀ Scenarios฀are฀used฀in฀this฀chapter฀to฀illustrate,฀but฀not฀ predict,฀how฀a฀series฀of฀assumptions฀can฀lead฀to฀different฀outcomes.฀The฀scenarios฀show฀how฀effective฀mobility฀ management,฀with฀the฀aid฀of฀advanced฀and฀alternative฀ fuel฀vehicle฀technologies,฀could฀reduce฀oil฀consumption฀ and฀many฀of฀the฀impacts฀of฀rapid฀private฀motorization฀ that฀threaten฀sustainability.฀In฀addition,฀advanced฀fuel฀and฀ vehicle฀technologies฀and฀approaches฀could฀help฀reduce฀the฀ conflict฀between฀the฀economic฀development฀and฀environmental฀sustainability฀goals฀of฀the฀country฀by฀providing฀ relatively฀smaller,฀safer,฀and฀cleaner฀vehicles฀to฀meet฀the฀ growing฀demand.฀The฀forecasts฀of฀high฀private฀motor฀ vehicle฀ownership฀and฀the฀subsequent฀oil฀demand฀imply฀ enormous฀strains฀on฀urban฀infrastructure,฀as฀well฀as฀energy฀ imports.฀These฀strains฀would฀be฀much฀easier฀to฀avoid฀with฀ sustainable฀transport฀policies฀enacted฀now,฀rather฀than฀being฀rectified฀one฀or฀two฀decades฀later. This฀chapter฀explores฀existing฀and฀potential฀Chinese฀ transport฀and฀energy฀policy฀options฀related฀to฀private฀ individual฀motor฀vehicles฀that฀have฀been฀or฀may฀be฀implemented฀in฀response฀to฀energy฀security,฀air฀pollution,฀and฀ other฀challenges฀associated฀with฀motorization.฀It฀develops฀ three฀different฀personal฀mobility฀scenarios฀that฀project฀oil฀ and฀energy฀demand฀outcomes฀in฀2010฀and฀2020,฀revealing฀ a฀wide฀range฀of฀future฀oil฀demand฀levels฀and฀potential฀฀ oil฀imports.฀The฀results฀also฀translate฀into฀a฀wide฀range฀of฀฀ future฀carbon฀emissions฀from฀personal฀transportation.฀ These฀outcomes฀depend฀primarily฀on฀choices฀Chinese฀ C H IN A ฀ MOTOR IZATION ฀ TR EN D S 49 policymakers฀make฀now.฀Different฀policy฀options฀are฀linked฀ to฀the฀scenarios,฀suggesting฀how฀different฀policies฀could฀ affect฀vehicle฀use,฀as฀well฀as฀how฀advanced฀and฀alternative฀ fuel฀vehicle฀technologies฀could฀reduce฀some฀of฀the฀negative฀ impact฀of฀motorization฀and฀improve฀energy฀efficiency. Section฀2฀describes฀motorization฀trends฀in฀China฀and฀ the฀energy฀and฀environmental฀consequences฀that฀follow.฀ Section฀3฀reviews฀current฀transport-related฀policies,฀฀ targets,฀and฀standards฀in฀China.฀The฀scenarios฀and฀key฀฀ results฀are฀explained฀in฀sections฀4฀and฀5.฀Policy฀options฀ that฀could฀create฀the฀optimal฀transport฀scenario฀are฀฀ presented฀in฀section฀6.฀Section฀7฀provides฀the฀final฀฀ discussion฀and฀conclusion. ฀฀ 2.฀TRANSPORT฀TRENDS฀AND฀฀ 2.฀TRANSPORT฀TRENDS฀AND฀฀ CHALLENGES฀IN฀CHINA1฀ 2.1฀฀The฀rise฀of฀the฀transport฀sector Transportation฀in฀China฀today฀is฀dominated฀by฀public฀ transit฀and฀traditional฀transport฀modes.฀Public฀transport฀ carries฀approximately฀50฀percent฀of฀all฀urban฀trips฀in฀ China,฀with฀cycling฀and฀walking฀carrying฀another฀40฀percent฀(Schipper฀and฀Ng,฀2005).฀Most฀Chinese฀cities฀have฀ good฀transport฀systems฀built฀on฀buses,฀metros,฀and฀local฀ rail฀systems฀that฀are฀extended฀to฀a฀greater฀region.฀Virtually฀ all฀intercity฀(long-distance)฀travel฀is฀by฀rail฀or฀air.฀The฀average฀Chinese฀person฀travels฀about฀1,000฀kilometers฀(km)฀ per฀year,฀compared฀with฀averages฀of฀15,000฀km฀per฀year฀ for฀Europeans฀and฀over฀24,000฀km฀per฀year฀for฀Americans.฀ Although฀mobility฀in฀China฀(measured฀in฀annual฀personal฀ travel)฀still฀has฀a฀long฀way฀to฀grow,฀increases฀in฀travel฀ distance฀do฀not฀always฀imply฀social฀benefits,฀as฀the฀benefits฀ of฀private฀motorization฀could฀be฀easily฀exceeded฀by฀its฀ incurred฀high฀costs฀(The฀National฀Academies,฀2003).฀ One฀reason฀for฀low฀mobility฀is฀the฀low฀number฀of฀motor฀vehicles.฀In฀2004,฀there฀were฀only฀27฀million฀privately฀ owned฀motor฀vehicles฀in฀China฀(Brown,฀2004),฀with฀most฀ of฀them฀concentrated฀in฀large฀Chinese฀cities.฀The฀total฀ number฀of฀cars—private฀and฀state-owned—was฀approximately฀12฀million,฀or฀9฀cars฀per฀1,000฀people,฀far฀below฀ the฀global฀average฀(He฀et฀al.,฀2004).฀By฀comparison,฀there฀ are฀over฀700฀cars฀(including฀personal฀vans,฀light฀trucks,฀ and฀SUVs)฀per฀1,000฀people฀in฀the฀United฀States,฀400฀฀ 50 in฀Japan,฀350–500฀in฀Europe,฀and฀150–200฀in฀middle-฀ income฀countries฀like฀Mexico,฀Brazil,฀and฀Korea.฀฀ Motorized฀mobility฀in฀China,฀however,฀is฀set฀to฀change฀ significantly฀as฀private฀car฀ownership฀takes฀off.฀ The฀growth฀of฀the฀transport฀sector฀in฀China฀accelerated฀markedly฀after฀1978,฀when฀the฀country฀underwent฀ massive฀policy฀reforms฀leading฀to฀significant฀economic฀ development,฀industrialization,฀and฀urbanization.฀These฀ changes฀have฀resulted฀in฀rapid฀increases฀in฀motorization฀ and฀urban฀mobility.฀If฀lessons฀from฀the฀rest฀of฀the฀world฀ apply฀to฀China,฀existing฀transport฀modes฀will฀face฀increasingly฀stiff฀competition฀from฀individual฀cars.฀With฀an฀ increasing฀number฀of฀middle-class฀families,฀car฀ownership฀ is฀no฀longer฀restricted฀to฀a฀selective฀group฀of฀governmental฀ officials฀and฀high-income฀families.฀National฀passenger฀car฀ sales฀increased฀by฀76฀percent฀from฀2002฀to฀2003฀while,฀ over฀the฀same฀period,฀passenger฀car฀production฀increased฀ by฀86฀percent฀(CATARC,฀2004).฀฀ Given฀its฀large฀population฀and฀the฀small฀absolute฀ number฀of฀vehicles฀in฀China,฀present฀trends฀point฀to฀ enormous฀increases฀in฀motor฀vehicle฀ownership฀and฀fuel฀ use.฀China฀appears฀to฀be฀following฀a฀path฀defined฀by฀other฀ diverse฀nations.฀Figure฀1฀portrays฀motorization฀in฀relation฀ to฀income.฀On฀a฀per฀capita฀basis,฀China’s฀motorization฀ in฀2003฀(the฀point฀farthest฀to฀the฀right฀and฀highest฀for฀ China)฀is฀comparable฀to฀the฀U.S.฀in฀1907,฀though฀China’s฀ per฀capita฀GDP฀in฀2003฀was฀only฀half฀of฀U.S.฀levels฀in฀ 1907.฀The฀last฀dozen฀points฀for฀China฀in฀Figure฀1฀(bottom฀ left)฀are฀very฀close฀to฀the฀first฀dozen฀points฀for฀Korea฀(from฀ the฀1970s),฀which฀fall฀somewhere฀between฀those฀of฀West฀ Germany฀and฀Japan,฀when฀Korea฀was฀at฀income฀levels฀that฀ those฀countries฀achieved฀in฀the฀1960s฀and฀1970s. Rapid฀growth฀in฀motorization฀is฀bringing฀both฀costs฀ and฀benefits฀to฀Chinese฀societies฀(Schipper฀and฀Ng,฀2005).฀ Benefits฀include฀economic฀growth—due฀to฀better฀accessibility฀for฀commercial,฀public,฀and฀private฀transportation—and฀improved฀social฀welfare฀as฀a฀result฀of฀increased฀ flexibility฀and฀mobility.฀Costs฀are฀incurred฀in฀areas฀such฀ as฀energy฀consumption฀and฀security,฀environmental฀and฀ health฀impacts,฀congestion,฀and฀traffic฀fatalities. 2.2฀฀Energy฀consumption฀and฀security฀ Energy฀consumption฀and฀oil฀imports,฀which฀are฀ increasingly฀driven฀by฀the฀transport฀sector,฀have฀raised฀ concerns฀over฀energy฀security.฀In฀2003,฀China฀consumed฀ approximately฀275฀million฀metric฀tons฀of฀oil,฀of฀which฀30฀ percent฀was฀imported฀(BP,฀2004)฀(Figure฀2).฀The฀increase฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST 2.3฀฀Environmental฀pollution฀ Figure฀1.฀฀฀Comparison฀of฀Car/Light฀Truck฀Ownership฀in฀U.S.,฀China,฀฀ Korea,฀Japan,฀and฀West฀Germany 1000 Cars and personal light trucks – SUVs/1000 people in฀energy฀consumption฀has฀resulted฀in฀China’s฀transformation฀from฀an฀oil฀exporter฀prior฀to฀1993฀to฀a฀large฀net฀oil฀ importer.฀Absent฀specific฀measures,฀the฀demand฀for฀crude฀ oil฀is฀expected฀to฀increase฀by฀12฀percent฀annually฀until฀ 2020฀(He฀et฀al.,฀2004).฀ The฀Chinese฀transport฀sector,฀which฀is฀almost฀entirely฀ dependent฀on฀oil,฀is฀increasingly฀a฀leading฀driver฀of฀overall฀ consumption฀increases,฀contributing฀more฀than฀one-third฀ of฀China’s฀total฀oil฀consumption฀in฀2002฀compared฀to฀ about฀16฀percent฀in฀1980฀(IEA,฀2004b).฀From฀1990฀to฀ 2002,฀gasoline฀and฀diesel฀consumption฀in฀the฀transport฀ sector฀increased฀157฀percent฀(IEA,฀2004b).฀Within฀the฀ transport฀sector,฀it฀is฀notable฀that฀private฀car฀use฀constitutes฀a฀relatively฀small฀share฀of฀China’s฀oil฀consumption— about฀10฀percent฀in฀2001฀(Figure฀3).฀In฀the฀ensuing฀three฀ years,฀however,฀the฀number฀of฀cars฀in฀China฀increased฀by฀ 75฀percent.฀As฀motorization฀trends฀continue,฀the฀share฀of฀ oil฀consumption฀from฀cars฀will฀quickly฀become฀dominant.฀ 100 United States 1910-2003 China 1987-2003 10 Korea 1970-2002 Japan 1965-2000 W. Germany 1960-1995 1 Pollutants฀produced฀during฀the฀combustion฀of฀gasoline฀ or฀diesel฀fuel฀in฀vehicle฀engines฀have฀major฀environmental฀ impacts.฀Such฀pollutants฀include฀carbon฀monoxide฀(CO),฀ ozone฀(O3),฀volatile฀organic฀compounds฀(VOCs),฀nitrogen฀ oxides฀(NOx),฀and฀fine฀particulate฀matter฀(Walsh,฀2003a).฀ Respiratory฀diseases฀such฀as฀infections,฀asthma,฀and฀ decreased฀lung฀efficiency฀are฀common฀in฀polluted฀urban฀ cities฀(Stares฀and฀Liu,฀1996),฀in฀addition฀to฀reduction฀in฀ $1,000 $100,000 $10,000 GDP/Capita, 1990 USD (PPP) Notes:฀The฀horizontal฀axis฀shows฀per฀capita฀GDP฀converted฀to฀US$฀at฀purchasing฀power฀parity฀(PPP).฀฀ The฀range฀of฀years฀for฀each฀country฀covered฀by฀this฀GDP฀range฀is฀shown฀in฀the฀legend.฀ Source:฀U.S.฀Federal฀Highway฀Administration฀(various฀years),฀National฀Statistical฀Abstracts฀and฀฀ Transportation฀year฀books฀(vehicles),฀International฀Energy฀Agency฀Energy฀Indicators฀Data฀base฀฀ (vehicles฀for฀West฀Germany฀and฀Japan)฀and฀OECD฀(for฀PPP฀conversions,฀GDP,฀and฀population฀data).฀ Figure฀2.฀฀Oil฀Production,฀Consumption,฀and฀Exports฀in฀China 300 Consumption 250 Production Exports Millions of Tons of Oil Equiv. 200 150 100 50 0 -50 2004 1999 1994 1989 1984 1979 -150 1974 -100 Source:฀IEA฀(2004b)฀with฀estimates฀for฀2003฀and฀2004฀based฀on฀BP฀(2004฀and฀2005).฀Negative฀values฀indicate฀imports. C H IN A ฀ MOTOR IZATION ฀ TR EN D S 51 pulmonary฀function.฀These฀public฀health฀impacts฀will฀not฀ only฀lead฀to฀losses฀in฀individual฀welfare,฀they฀could฀also฀ inflict฀substantial฀economic฀costs฀upon฀the฀society.฀ Air฀pollution฀from฀industry฀and฀households฀is฀gradually฀ declining;฀as฀a฀result,฀vehicular฀emissions฀comprise฀a฀high฀ and฀rising฀proportion฀of฀total฀urban฀air฀pollution฀in฀many฀ Chinese฀cities฀(Table฀1).฀Studies฀have฀shown฀that฀45-60฀ percent฀of฀NOx฀emissions฀and฀85฀percent฀of฀CO฀emissions฀ are฀from฀mobile฀sources฀in฀most฀Chinese฀cities฀(Walsh,฀ 2000).฀It฀is฀estimated฀that฀by฀2010฀in฀Shanghai,฀vehicular฀ emissions฀will฀produce฀75฀percent฀of฀total฀NOx฀emissions,฀ 94฀percent฀of฀total฀CO฀emissions,฀and฀98฀percent฀of฀total฀ hydrocarbon฀(HC)฀emissions฀(Wang฀and฀Wu,฀2004).฀฀ Even฀with฀improved฀emissions฀controls฀and฀cleaner฀fuels,฀ mobile-source฀pollution฀in฀Chinese฀cities฀is฀likely฀to฀฀ continue฀rising฀due฀to฀increased฀use฀of฀individual฀vehicles฀ and฀the฀total฀distance฀traveled.฀฀ Table฀1.฀฀Motor฀Vehicle฀Shares฀of฀Criteria฀Pollutants฀in฀Chinese฀Cities CO฀(%)฀ HC฀(%)฀ NOx฀(%) Beijing฀(2000)฀ City฀ 77฀ 78฀ 40 Shanghai฀(1996)฀ 86฀ 96฀ 56 Guangzhou฀(2000)฀ 84฀ 50฀ 45 Source:฀Adapted฀from฀Mao฀et฀al.฀(2001) Figure฀3.฀฀฀Shares฀of฀Oil฀Consumption฀in฀Road฀Transportation฀฀ in฀China,฀2001 Motorcycles 9% Rural Vehicles 18% Cars 10% Buses 21% Trucks 42% Source:฀Adapted฀from฀An฀(2003) 52 3.฀CHINA’S฀TRANSPORT-RELATED฀฀ 3.฀CHINA’S฀TRANSPORT-RELATED฀฀ PRIORITIES฀AND฀POLICIES The฀Government฀of฀China฀has฀enacted฀various฀policies฀ and฀regulations฀relating฀to฀transportation฀and฀fuel฀use.฀ These฀are฀targeted฀at฀improving฀ambient฀air฀quality฀in฀ urban฀cities,฀reducing฀congestion,฀and฀improving฀transport฀ energy฀efficiency.฀Many฀of฀these฀policies฀will฀reduce฀the฀ impact฀of฀each฀kilometer฀driven฀or฀traveled฀in฀China.฀Policies฀are฀also฀targeted,฀however,฀at฀promoting฀the฀development฀of฀the฀automobile฀industry฀and฀greater฀domestic฀ consumption฀of฀motor฀vehicles.฀The฀challenge฀for฀China฀is฀ to฀resolve฀the฀tensions฀between฀these฀competing฀priorities฀ and฀policies.฀ 3.1฀฀Developing฀the฀automobile฀industry The฀Chinese฀automobile฀industry฀has฀been฀one฀of฀ the฀most฀rapidly฀growing฀in฀the฀world;฀China฀now฀ranks฀ as฀the฀world’s฀third฀largest฀automobile฀producer.฀Over฀ the฀1999฀to฀2004฀period,฀Chinese฀production฀of฀motor฀ vehicles฀increased฀by฀177฀percent,฀from฀about฀1.8฀to฀5.7฀ million฀vehicles฀per฀year฀(OICA,฀2005).฀China’s฀share฀of฀ global฀production฀in฀terms฀of฀quantity฀has฀risen฀from฀3.3฀ percent฀to฀almost฀8฀percent฀in฀five฀years.฀The฀automobile฀ industry฀has฀been฀a฀“pillar”฀of฀economic฀development฀ since฀1988;฀this฀role฀has฀been฀reaffirmed฀by฀the฀government฀in฀preparing฀its฀11th฀5-year฀plan฀(2006-2011).฀ The฀development฀of฀the฀Chinese฀automobile฀industry฀ has฀resulted฀in฀significant฀economic฀benefits.฀The฀sector฀ has฀employed฀1.8฀million฀people฀and฀has฀total฀assets฀of฀ $61.3฀billion฀(The฀National฀Academies,฀2003),฀as฀well฀ as฀receiving฀significant฀levels฀of฀foreign฀direct฀investment฀ (Gallagher,฀2003).฀Total฀investment฀in฀new฀automobile฀ manufacturing฀capacity฀in฀China฀is฀projected฀to฀reach฀ $25.5฀billion฀by฀2007฀(Xinhuanet,฀2004a).฀ The฀rapid฀growth฀and฀development฀of฀the฀Chinese฀ automobile฀industry฀has฀resulted฀in฀a฀new฀auto฀industry฀ policy,฀which฀was฀launched฀by฀the฀National฀Development฀and฀Reform฀Commission฀in฀June฀2004฀(Xinhuanet,฀ 2004b).฀This฀policy฀is฀aimed฀at฀slowing฀investment฀and฀ consolidating฀the฀auto฀industry,฀which฀has฀been฀one฀of฀the฀ most฀over-invested฀industrial฀sectors฀in฀China—mainly฀ because฀of฀massive฀investment฀from฀foreign฀automakers฀ and฀domestic฀state฀and฀private฀enterprises.฀New฀restrictions฀will฀include฀the฀regulation฀of฀new฀foreign฀investors฀ entering฀the฀market.฀Nevertheless,฀foreign฀investors฀will฀ still฀play฀an฀important฀role฀in฀the฀production฀of฀vehicles฀in฀ the฀Chinese฀automobile฀industry.฀ Another฀goal฀of฀this฀policy฀is฀to฀further฀develop฀an฀ automobile฀market฀largely฀dominated฀by฀private฀consumption,฀rather฀than฀state-owned฀vehicles.฀As฀the฀benefits฀ of฀worldwide฀production฀practices฀and฀lower-priced฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST advanced฀automotive฀technologies฀are฀now฀available฀in฀ China,฀cars฀have฀increasingly฀become฀more฀appealing฀to฀ Chinese฀consumers.฀However,฀the฀type฀of฀vehicle฀technologies฀likely฀to฀dominate฀the฀market฀is฀still฀uncertain.฀The฀ 2004฀auto฀industry฀policy฀also฀supports฀alternative฀fuel฀ and฀advanced฀vehicle฀technologies,฀and฀it฀is฀expected฀that฀ research฀and฀development฀in฀these฀areas฀will฀increase.฀ 3.2฀฀Saving฀transport฀energy฀ The฀need฀and฀urgency฀to฀restrain฀the฀growth฀in฀energy฀ demand฀has฀become฀a฀national฀priority฀in฀recent฀years,฀ mainly฀due฀to฀the฀experience฀of฀frequent฀energy฀shortages฀ since฀2000,฀brought฀on฀by฀China’s฀booming฀economy.฀ China,฀which฀now฀ranks฀as฀the฀world’s฀second฀largest฀energy฀consumer฀after฀the฀U.S.,฀has฀introduced฀energy฀conservation฀plans฀and฀increased฀public฀awareness฀of฀energy฀ conservation.฀The฀recently฀agreed฀Chinese฀11th฀5-year฀plan฀ national฀plan฀has฀restated฀and฀strengthened฀this฀commitment฀to฀improved฀energy฀efficiency. Premier฀Wen฀Jiabao฀has฀announced฀that฀China฀will฀ build฀an฀energy-saving฀society฀and฀implement฀state฀policies฀ to฀promote฀efficient฀technological฀processes฀and฀encourage฀ sustainable฀consumption฀through฀economic฀restructuring฀ (Xinhuanet,฀2004c).฀Accordingly,฀energy-efficiency฀policies฀for฀industry฀and฀the฀transport฀sector฀are฀expected฀to฀ increase.฀Overall,฀energy฀demand฀will฀still฀rise฀with฀China’s฀ near฀double-digit฀economic฀growth,฀but฀economic฀growth฀ could฀continue฀to฀outpace฀energy฀demand฀if฀energy฀conservation฀policies฀increasingly฀take฀hold.฀This฀has฀generally฀ been฀the฀case฀since฀the฀1980s,฀largely฀as฀a฀result฀of฀industrial฀modernization. Policy฀changes฀are฀reflected฀in฀the฀2004฀National฀ Energy฀Policy,฀which฀has฀shifted฀the฀focus฀from฀energy฀ exploitation฀to฀energy฀conservation฀and฀improving฀energy฀ efficiency,฀when฀compared฀with฀the฀previous฀energy฀ policy฀implemented฀in฀1998.฀The฀National฀Energy฀Policy฀ launched฀a฀long-term฀energy-saving฀plan฀and฀is฀currently฀ the฀biggest฀and฀most฀ambitious฀energy-saving฀plan฀in฀ China’s฀history฀(Mai,฀2004).฀The฀burden฀to฀reduce฀energy฀ consumption฀will฀no฀doubt฀be฀distributed฀across฀all฀industries฀and฀sectors,฀including฀the฀transport฀sector,฀which,฀as฀ noted,฀is฀becoming฀a฀significant฀oil฀consumer.฀ The฀fuel฀economy฀standards฀announced฀in฀October฀ 2004฀are฀a฀key฀regulation฀to฀aid฀energy฀security.฀These฀ standards฀require฀the฀auto฀industry฀to฀produce฀more฀fuelefficient฀vehicles,฀which฀could฀include฀cleaner฀advanced฀ vehicles฀or฀alternative-fuel฀vehicle฀technologies.฀The฀first฀ phase฀of฀the฀standards฀will฀be฀implemented฀for฀newly฀ introduced฀vehicles฀sold฀from฀July฀1,฀2005.฀For฀continued฀ vehicle฀models,฀vehicles฀sold฀must฀meet฀the฀same฀standards฀ by฀January฀1,฀2006.฀A฀stricter฀second฀phase฀for฀new฀car฀ models฀entering฀the฀Chinese฀market฀will฀be฀in฀effect฀by฀ January฀1,฀2008฀(An฀and฀Sauer,฀2004).฀ These฀standards฀establish฀maximum฀fuel฀intensities฀(fuel฀ per฀km)฀for฀new฀vehicles,฀which฀are฀a฀function฀of฀weight฀ and฀transmission฀type.฀For฀passenger฀vehicles฀weighing฀ less฀than฀750฀kilograms,฀the฀maximum฀new฀vehicle฀fuel฀ intensity฀is฀7.2฀liters฀of฀fuel฀per฀100฀km฀(equivalent฀to฀33฀ miles฀per฀gallon฀[mpg])฀for฀a฀vehicle฀with฀manual฀transmission฀and฀7.6฀liters/100฀km฀(32฀mpg)฀for฀vehicles฀with฀an฀ automatic฀transmission.฀Permitted฀fuel฀intensity฀then฀rises฀ with฀new฀vehicle฀weight฀in฀15฀additional฀weight฀classes.฀ Future฀uncertainties฀regarding฀consumer฀preferences฀ and฀vehicle฀weights฀make฀it฀difficult฀to฀evaluate฀the฀overall฀ likely฀impact฀of฀the฀fuel฀economy฀standards.฀A฀shift฀toward฀lighter฀cars฀could฀lead฀to฀lower฀average฀fuel฀intensity฀ than฀those฀required฀by฀the฀standards฀alone.2฀The฀2003฀ average฀new฀vehicle฀weight฀in฀China฀was฀about฀1,500฀kilograms฀(Sauer฀and฀An,฀2004),฀which฀is฀considered฀heavy฀ by฀international฀standards.฀The฀prominent฀share฀of฀large฀ imported฀cars฀and฀SUVs฀in฀the฀sales฀mix฀over฀the฀past฀five฀ years฀may฀contribute฀to฀this฀high฀average฀vehicle฀weight.฀ As฀seen฀in฀many฀other฀countries,฀the฀weight฀and฀engine฀ size฀of฀new฀vehicles฀tends฀to฀increase฀as฀income฀rises.฀ Because฀China’s฀fuel฀economy฀standards฀are฀weight-based,฀ they฀would฀not฀inhibit฀such฀a฀trend.฀However,฀it฀is฀unclear฀ if฀this฀will฀apply฀to฀China,฀as฀an฀increasing฀number฀of฀ smaller฀vehicles฀are฀being฀purchased฀by฀the฀growing฀group฀ of฀middle-class฀households.฀฀฀฀฀ 3.3฀฀Reducing฀air฀pollution Through฀a฀series฀of฀legislative฀acts,฀regulations,฀and฀ standards,฀the฀Chinese฀government฀has฀responded฀to฀the฀ growing฀air฀pollution฀and฀public฀health฀risks฀described฀ in฀section฀2.3.฀These฀include฀national฀ambient฀air฀quality฀ standards฀for฀different฀air฀pollutants,฀emission฀standards,฀ and฀fuel฀quality฀standards.฀Generally,฀the฀established฀legislation฀states฀that฀the฀national฀government฀is฀responsible฀ for฀measures฀to฀control฀air฀pollutants,฀while฀local฀governments฀have฀the฀responsibility฀for฀implementation฀and฀ enforcement฀(Wang฀and฀Wu,฀2004).฀ C H IN A ฀ MOTOR IZATION ฀ TR EN D S 53 The฀2000฀Chinese฀Clean฀Air฀Act฀requires฀motor฀vehicles฀ to฀meet฀emission฀standards฀and฀prohibits฀the฀manufacture,฀ sales,฀or฀import฀of฀motor฀vehicles฀that฀have฀levels฀higher฀ than฀the฀standards฀set฀by฀the฀State฀Environmental฀Protection฀Administration฀(SEPA).฀The฀2002฀Clean฀Air฀Act฀also฀ encourages฀the฀development฀and฀sale฀of฀clean฀fuels฀for฀ motor฀vehicles.฀The฀enforcement฀of฀the฀Clean฀Air฀Act฀and฀ other฀requirements,฀however,฀is฀still฀weak,฀especially฀when฀ certain฀regulations฀are฀not฀comprehensive฀enough.฀ Because฀air฀pollutants฀from฀mobile฀sources฀are฀highly฀ dependent฀upon฀fuels,฀improving฀fuel฀quality฀is฀an฀important฀approach฀to฀reducing฀mobile฀source฀emissions.฀The฀ “Emission฀Standard฀for฀Exhaust฀Pollutants฀from฀LightDuty฀Vehicles”฀was฀implemented฀in฀1999฀by฀SEPA฀and฀ went฀into฀effect฀in฀January฀2000.฀This฀law฀set฀emissions฀ standards฀equivalent฀to฀Euro฀I฀standards฀(He฀and฀Cheng,฀ 1999).3฀฀Increasingly,฀China฀is฀following฀emission฀standards฀regulations฀from฀the฀United฀States,฀Europe,฀and฀ Japan,฀even฀though฀the฀level฀of฀control฀(i.e.,฀grams฀per฀ km฀permitted)฀and฀enforcement฀is฀still฀less฀stringent฀in฀ China.฀The฀government฀nevertheless฀recognizes฀the฀need฀ to฀improve฀its฀air฀quality฀and฀has฀implemented฀Euro฀II฀ equivalent฀fuel฀quality฀standards฀in฀Beijing฀and฀Shanghai฀ in฀2003.฀SEPA฀in฀Beijing฀has฀also฀charted฀emission฀standards฀that฀are฀equivalent฀to฀Euro฀III฀and฀expects฀the฀entire฀ country฀to฀adopt฀the฀Euro฀III฀level฀by฀2008฀(Li,฀2004).฀ Table฀2฀shows฀the฀European฀Union฀emission฀standards฀for฀ passenger฀cars฀and฀their฀year฀of฀implementation.฀Other฀ transport฀policies,฀such฀as฀those฀that฀restrain฀automobile฀ use,฀will฀of฀course฀also฀have฀air฀pollution฀benefits.฀ Table฀2.฀฀EU฀Emission฀Standards฀for฀Passenger฀Cars฀(grams฀per฀km) ฀฀ Date฀ CO฀ HC฀ HC+NOx฀ NOx฀ PM Diesel Euro฀I฀ 1992฀ 2.72฀ –฀ 0.97฀ –฀ 0.14 Euro฀II฀ 1996฀ 1฀ –฀ 0.7฀ –฀ 0.08 Euro฀III฀ 2000฀ 0.64฀ –฀ 0.56฀ 0.5฀ 0.05 Euro฀IV฀ 2005฀ 0.5฀ –฀ 0.3฀ 0.25฀ 0.025 Euro฀V฀ mid-2008฀ 0.5฀ –฀ 0.25฀ 0.2฀ 0.005฀ Petrol฀(Gasoline) Euro฀I฀ 1992฀ 2.72฀ –฀ 0.97฀ –฀ – Euro฀II฀ 1996฀ 2.2฀ –฀ 0.5฀ –฀ – Euro฀III฀ 2000฀ 2.3฀ 0.2฀ –฀ 0.15฀ – Euro฀IV฀ 2005฀ 1฀ 0.1฀ –฀ 0.08฀ – Euro฀V฀ mid-2008฀ 1฀ 0.075฀ –฀ 0.06฀ 0.005 Source:฀Adapted฀from฀the฀European฀Commission฀Directive฀70/220/EEC฀(2002)฀and฀Diesel฀Net฀(2005). 54 3.4฀฀Public฀transportation According฀to฀the฀2004฀National฀Energy฀Policy,฀public฀ transportation—buses฀and฀taxis—should฀be฀the฀main฀access฀method฀in฀big฀cities,฀with฀rail฀transportation฀supporting฀the฀transport฀network,฀while฀personal฀cars฀and฀bicycles฀ should฀be฀used฀as฀supplements.฀In฀medium฀and฀small฀ cities,฀public฀transportation฀will฀be฀developed,฀as฀well฀as฀ the฀use฀of฀personal฀cars.฀ Public฀transport฀systems฀are฀in฀high฀demand฀in฀megacities,฀as฀well฀as฀middle-sized฀cities,฀where฀some฀are฀ already฀actively฀adopting฀urban฀transport฀policies฀that฀ encourage฀public฀transport.฀For฀instance,฀municipal฀ authorities฀in฀Shanghai฀are฀now฀putting฀a฀high฀priority฀on฀ buses฀and฀are฀seeking฀to฀increase฀public฀transport฀travel฀ volume฀(People’s฀Government฀of฀Shanghai฀Municipality,฀ 2002).฀Overall,฀the฀Government฀of฀China฀is฀publicly฀฀ encouraging฀the฀construction฀of฀bus฀rapid฀transit฀(BRT)฀ and฀other฀public฀transit฀modes.฀Beijing฀is฀projected฀to฀ have฀an฀increase฀of฀100฀kilometers฀in฀BRT฀bus฀routes,฀ leading฀to฀a฀total฀length฀of฀360฀kilometers฀for฀the฀entire฀ network฀by฀2008.฀Kunming,฀Shanghai,฀Xi’an,฀Chengdu,฀ Chongqing,฀Tianjin,฀Hangzhou,฀and฀Shenyang฀are฀฀ either฀already฀in฀the฀process฀of฀developing฀BRT฀systems,฀ planning฀BRT฀designs,฀or฀awaiting฀approval฀for฀their฀ BRT฀proposals.฀ ฀ 3.5฀฀United฀Nations฀Climate฀฀ Convention฀commitments฀ As฀a฀party฀to฀the฀1992฀Framework฀Convention฀on฀ Climate฀Change฀and฀1997฀Kyoto฀Protocol,฀China฀has฀also฀ committed฀to฀taking฀steps฀to฀limit฀greenhouse฀gas฀(GHG)฀ emissions.฀Developing฀countries฀do฀not฀have฀quantified฀ emission฀limitations฀under฀these฀agreements,฀though฀all฀ countries฀have฀committed฀in฀the฀Convention฀to฀implement฀policies฀and฀measures฀to฀mitigate฀climate฀change฀ (UNFCCC,฀1992,฀Art.฀4.1b).฀The฀Kyoto฀Protocol฀affirms฀ these฀obligations฀for฀developing฀countries฀and฀also฀adds฀ some฀additional฀detail฀by฀specifying฀particular฀sectors—including฀transport—where฀measures฀might฀best฀be฀targeted฀ (UNFCCC,฀1997,฀Art.฀10b). In฀1990,฀China฀set฀up฀a฀National฀Climate฀Change฀ Coordination฀Committee—composed฀of฀15฀government฀ departments฀and฀institutions—to฀look฀at฀policymaking฀ and฀scientific฀research฀(Qin฀and฀Zhu,฀2004).฀China฀has฀ also฀completed฀and฀submitted฀its฀first฀national฀communications฀to฀the฀UNFCCC,฀which฀includes฀a฀GHG฀inventory,฀and฀is฀increasingly฀engaged฀in฀emission-reducing฀ projects฀through฀Kyoto’s฀Clean฀Development฀Mechanism.฀ With฀respect฀to฀policies,฀a฀number฀of฀existing฀policies฀and฀ measures฀in฀the฀transport฀sector,฀such฀as฀the฀fuel฀intensity฀ standards฀for฀new฀vehicles,฀are฀likely฀to฀have฀beneficial฀ effects฀on฀CO2฀emissions.฀Many฀of฀the฀policy฀approaches฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST outlined฀in฀the฀sections฀that฀follow฀would฀likewise฀ contribute฀significantly฀to฀China’s฀national฀priorities฀on฀ energy฀security฀and฀air฀pollution,฀but฀also฀to฀China’s฀฀ obligations฀under฀the฀UNFCCC. 4.฀FUTURE฀MOTORIZATION฀AND฀฀ 4.฀FUTURE฀MOTORIZATION฀AND฀฀ MOTOR฀VEHICLE฀USE฀TRENDS฀IN฀CHINA:฀ THE฀SCENARIOS The฀future฀of฀the฀Chinese฀transportation฀sector฀is฀ difficult฀to฀model฀or฀predict.฀There฀is฀inadequate฀data฀on฀ fuel฀use,฀car฀ownership,฀fuel฀economy,฀and฀driving฀habits,฀ among฀other฀parameters.฀Even฀when฀data฀is฀available,฀ it฀may฀be฀unreliable,฀in฀part฀because฀future฀car฀owners฀ in฀China฀will฀be฀different฀from฀today’s.฀Historically,฀the฀ majority฀of฀car฀owners฀and฀users฀were฀taxi฀and฀professional฀ drivers,฀high฀functionaries,฀and฀company฀employees.฀ Modeling฀their฀future฀behavior฀tells฀us฀little฀about฀how฀the฀ average฀Chinese฀family฀will฀behave.฀Furthermore,฀discon- tinuities฀are฀expected,฀in฀part฀due฀to฀newly฀imposed฀fuel฀ economy฀and฀emissions฀standards,฀policies฀to฀encourage฀ alternative฀fuels,฀and฀other฀policies฀and฀conditions฀that฀ could฀strongly฀reshape฀and฀regulate฀car฀use.฀ To฀better฀understand฀the฀future฀of฀the฀transport฀sector฀ and฀the฀influence฀of฀policies,฀this฀chapter฀develops฀three฀ scenarios฀that฀use฀different฀assumptions฀about฀the฀level฀of฀ transport฀activity,4฀vehicle฀size/characteristics,฀and฀vehicle฀ technology.฀The฀scenarios฀are฀constructed฀in฀a฀bottom-up฀ fashion,฀in฀part฀using฀parameters฀and฀extrapolations฀based฀ on฀experiences฀in฀two฀countries,฀Japan฀and฀Korea฀(South).฀ Each฀scenario฀is฀accompanied฀by฀policies฀(or฀lack฀of฀policies)฀that฀could฀plausibly฀lead฀to฀the฀outcomes฀we฀describe.฀ These฀scenarios฀are฀accounting,฀not฀behavioral,฀models.฀ The฀main฀input฀assumptions฀for฀the฀scenarios฀are฀ shown฀in฀Table฀3.฀Fuel฀taxes,฀vehicle฀use฀fees,฀and฀other฀ policies฀are฀not฀quantitative฀and฀are฀simply฀used฀as฀qualitative฀measures฀to฀trigger฀the฀other฀input฀assumptions฀in฀ Table฀3.฀฀Transport฀and฀Technology฀Scenarios฀Assumptions฀ Scenarios฀ Road฀Ahead฀(Baseline)฀ Oil฀Saved฀ Integrated฀Transport GDP฀and฀Population฀ ฀ GDP฀projected฀to฀increase฀ at฀6%฀annually฀ GDP฀projected฀to฀increase฀ at฀6%฀annually฀ GDP฀projected฀to฀increase฀ at฀6%฀annually Motorization฀Rate฀of฀Increase฀฀ ฀ ฀ ฀ ฀ ฀ By฀2020,฀China฀reaches฀the฀฀ car/GDP฀ratio฀that฀Korea฀had฀ in฀the฀mid-1990s฀ ฀ ฀ ฀ With฀higher฀oil฀prices฀and฀฀ taxes,฀the฀number฀of฀cars฀in฀ 2020฀is฀10%฀lower฀than฀it฀is฀ in฀“Road฀Ahead”฀ ฀ ฀ With฀space฀being฀a฀severe฀ constraint฀in฀Chinese฀cities฀and฀ the฀implementation฀of฀parking฀ charges,฀fees,฀and฀taxes,฀the฀฀ number฀of฀cars฀in฀2020฀is฀50%฀฀ less฀than฀in฀“Road฀Ahead” Total฀Number฀of฀Cars฀(Millions)฀ ฀ 2010:฀22.8฀ 2020:฀145.7฀ 2010:฀20.5฀ 2020:฀131.2฀ 2010:฀18.2 2020:฀72.9 Car฀Characteristics฀(Weight)฀ ฀ ฀ Average฀weight฀falls฀to฀฀ 1,200฀kg฀ ฀ Average฀weight฀falls฀to฀฀ 1,200฀kg฀and฀power฀is฀lower฀฀ than฀in฀“Road฀Ahead”฀ Average฀weight฀falls฀to฀less฀ than฀1,000฀kg฀as฀mini-cars฀ become฀popular Car฀Utilization฀-฀Distance฀฀ Traveled฀(km/vehicle/year)฀ 2010:฀14,496฀ 2020:฀12,484฀ 2010:฀13,466฀ 2020:฀10,238฀ 2010:฀12,948 2020:฀8,775 Fuel฀Choices฀ ฀ ฀ ฀ ฀ ฀ ฀ Almost฀all฀cars฀run฀on฀oil,฀฀ with฀1%฀of฀total฀motor฀฀ vehicle฀fleet฀based฀on฀CNG฀in฀฀ 2015฀and฀2%฀in฀2020฀฀ ฀ ฀ ฀ 20%฀of฀motor฀vehicles฀use฀ conventional฀gasoline;฀฀ 15%฀of฀vehicle฀share฀are฀HEVs฀฀ in฀2010฀and฀50%฀in฀2020;฀฀ 10%฀of฀vehicles฀are฀CNG฀in฀฀ 2010,฀20%฀in฀2020,฀and฀฀ 10%฀are฀electric฀in฀2020฀฀ In฀2020,฀30%฀of฀total฀motor฀ vehicles฀are฀gasoline฀vehicles,฀ of฀which฀15%฀are฀small฀฀ vehicles;฀market฀penetration฀ of฀HEVs฀is฀25%,฀small฀electric฀ cars฀25%,฀and฀CNG฀cars฀20%฀ ฀฀฀฀ Assumptions฀in฀the฀scenarios Assumptions฀made฀but฀not฀quantified฀in฀the฀scenarios฀ Fuel฀Taxes฀ (Crude฀oil฀price฀in฀2005฀assumed฀to฀be฀฀ approximately฀$50฀[2005]฀per฀barrel)฀ ฀ U.S.฀level฀of฀taxation,฀i.e.฀ approximately฀$0.20฀(2005)฀฀ per฀liter฀฀ Japanese/European฀level฀of฀ taxation,฀i.e.฀approximately฀ $0.70฀(2005)฀per฀liter฀ Japanese/European฀level฀of฀ taxation,฀i.e.฀approximately฀ $0.70฀(2005)฀per฀liter Vehicle฀Use฀fees฀ ฀ ฀ None฀ ฀ ฀ None฀ ฀ ฀ Significant฀charges฀on฀vehicle฀฀ use฀in฀cities฀such฀as฀road฀฀ pricing฀and฀parking฀charges Other฀Policies฀ ฀ ฀ None฀ ฀ ฀ Encouragement฀of฀alternatives฀฀ to฀traditional฀gasoline฀cars฀฀ (hybrids,฀CNG,฀mini-cars)฀ Urban฀transport฀policies฀actively฀฀ promoting฀the฀use฀of฀public฀฀ transportation฀systems฀ Acronyms:฀GDP฀(gross฀domestic฀product);฀HEV฀(hybrid฀electric฀vehicle);฀CNG฀(compressed฀natural฀gas). C H IN A ฀ MOTOR IZATION ฀ TR EN D S 55 Box฀1.฀฀฀Introduction฀to฀Advanced฀and฀Alternative฀Fuel฀฀ Vehicle฀Technologies 1.฀Hybrid฀Electric฀Vehicles฀(HEVs) HEVs฀are฀a฀cross฀between฀conventional฀automobiles฀and฀electric฀vehicles,฀combining฀an฀electric฀drive฀(motor฀and฀electricity฀storage)฀and฀an฀internal฀combustion฀engine.฀HEVs฀consume฀less฀energy฀by฀regenerating฀energy฀while฀braking,฀ using฀smaller฀engines,฀allowing฀the฀engines฀to฀be฀turned฀off฀during฀stops,฀ braking฀or฀coasting,฀and฀in฀some฀configurations,฀the฀motor฀alone฀can฀be฀used฀to฀ accelerate฀from฀a฀stop฀(Santini฀et฀al.,฀2001).฀Apart฀from฀energy฀and฀oil฀savings,฀ HEVs฀will฀also฀improve฀air฀quality฀and฀reduce฀CO2฀emissions.฀HEVs฀are฀relatively฀ less฀expensive฀to฀introduce฀to฀the฀market฀than฀other฀technologies฀such฀as฀fuel฀ cells,฀as฀they฀do฀not฀require฀new฀infrastructures฀for฀fuel฀production฀and฀distribution฀(Wang,฀2003).฀Plug-in฀hybrids฀are฀not฀considered฀in฀this฀chapter.฀ 2.฀Compressed฀Natural฀Gas฀(CNG) Vehicles฀powered฀by฀CNG,฀as฀an฀alternative฀fuel,฀could฀reduce฀air฀pollution฀ and฀reliance฀on฀oil.฀Per฀vehicle-kilometer฀traveled,฀CNG฀vehicles฀could฀emit฀25฀ percent฀less฀carbon฀dioxide,฀90-97฀percent฀less฀carbon฀monoxide,฀and฀35-60฀ percent฀less฀nitrogen฀oxide฀than฀conventional฀gasoline฀vehicles,฀depending฀on฀ the฀engine฀design฀(US฀EPA,฀2002).฀Other฀than฀being฀a฀cleaner฀fuel,฀CNG฀also฀has฀ potential฀advantages฀with฀respect฀to฀cost,฀performance,฀and฀durability฀(due฀to฀ a฀clean฀combustion฀process฀of฀natural฀gas)฀(US฀EPA,฀2002).฀On฀the฀other฀hand,฀ its฀fuel฀economy฀could฀be฀lower฀or฀identical฀to฀conventional฀gasoline฀vehicles฀ (US฀DOE,฀1999),฀and฀such฀vehicles฀generally฀have฀higher฀vehicle฀capital฀and฀ infrastructure฀costs.฀ Natural฀gas฀is฀currently฀used฀for฀public฀vehicles,฀including฀buses฀and฀taxis฀in฀ about฀11฀cities,฀including฀Beijing,฀Shanghai,฀Chongqing,฀Xi’an,฀and฀Sichuan.฀ There฀are฀currently฀50,900฀natural-gas-fueled฀vehicles฀in฀China฀(He,฀2003).฀ When฀compared฀with฀the฀United฀States,฀which฀had฀about฀twice฀as฀many฀natural฀ gas฀vehicles฀in฀2003,฀the฀market฀penetration฀of฀natural฀gas฀vehicles฀is฀relatively฀ higher฀due฀to฀China’s฀significantly฀lower฀number฀of฀total฀vehicles.฀Since฀CNG฀฀ offers฀the฀most฀engine฀and฀vehicle฀diversities฀(Rubin,฀2003),฀this฀market฀is฀likely฀ to฀further฀expand฀as฀China฀searches฀for฀sustainable฀energy฀resources.฀ 3.฀Small฀Conventional฀Gasoline฀Vehicles For฀many฀decades,฀“mini฀cars”฀with฀displacement฀of฀less฀than฀600cc฀were฀฀ common฀in฀space-constrained฀Japan฀(Schipper฀and฀Kiang,฀1995).฀More฀recently,฀ a฀number฀of฀major฀companies,฀notably฀Mercedes฀Benz,฀have฀begun฀to฀develop฀ somewhat฀larger฀“mini-cars.”฀Created฀by฀the฀stylish฀“smart”฀of฀Mercedes฀Benz฀ and฀Swatch฀Group฀Ltd.,฀these฀cars฀are฀popular฀for฀their฀small฀size฀and฀are฀fitted฀ for฀urban฀parking฀and฀driving.฀At฀40-60฀mpg,฀these฀are฀some฀of฀the฀most฀fuel฀ efficient฀internal฀combustion฀cars฀in฀the฀market฀and,฀at฀eight฀feet฀in฀length,฀ small฀enough฀to฀back฀into฀a฀parallel฀parking฀spot,฀with฀two฀fitting฀in฀a฀single฀ parking฀space.฀With฀aluminum฀engines฀weighing฀only฀60฀kilograms฀and฀a฀curb฀ weight฀of฀about฀730฀kilograms฀(SMART,฀2004),฀its฀light฀weight฀contributes฀to฀ excellent฀fuel฀economy.฀฀฀฀ 4.฀Small฀Electric฀Vehicles Electric฀cars฀tend฀to฀have฀lower฀overall฀primary฀energy฀requirements฀per฀kilometer฀than฀gasoline฀cars฀of฀the฀same฀size฀(Delucchi,฀2005),฀depending฀on฀primary฀ energy฀sources.฀However,฀their฀lower฀speeds฀and฀performance฀means฀they฀will฀ not฀be฀driven฀as฀much฀or฀as฀fast฀as฀conventional฀gasoline฀cars,฀thus฀indirectly฀ contributing฀to฀energy฀savings.฀Small฀electric฀vehicles฀are฀most฀suitable฀for฀urban฀ low-speed฀driving฀environments฀and฀could฀form฀a฀key฀component฀in฀creating฀a฀ sustainable฀transport฀system.฀Electric฀vehicles฀are฀emissions-free฀at฀the฀point฀of฀ use฀and฀could฀potentially฀transfer฀emissions฀to฀less฀populated฀and฀polluted฀areas฀ (Lave฀et฀al.,฀1995),฀reducing฀transport฀emissions฀in฀urban฀cities.฀If฀the฀electricity฀ used฀to฀recharge฀such฀vehicles฀is฀produced฀using฀efficient฀technologies฀and฀renewable฀energy฀resources,฀pollution฀and฀energy-saving฀benefits฀would฀increase.฀ Likewise,฀with฀future฀advancement฀on฀alternative฀battery฀technologies,฀energy฀ and฀cost-efficiency฀would฀improve.฀฀฀฀ 56 the฀scenarios.฀Box฀1฀includes฀summaries฀of฀the฀different฀ vehicle฀technologies.฀A฀more฀complete฀description฀of฀the฀ assumptions฀can฀be฀found฀in฀Appendix฀1.฀The฀outputs฀of฀ the฀scenarios—measured฀in฀energy฀and฀oil฀consumption,฀ and฀resulting฀carbon฀emissions—are฀of฀course฀only฀as฀robust฀as฀the฀parameters฀and฀policies฀applied฀to฀the฀scenarios.฀ These฀outcomes฀are฀not฀predictions,฀but฀by฀setting฀up฀ three฀possible฀futures,฀we฀provide฀a฀picture฀of฀the฀potential฀ impact฀of฀various฀technologies฀and฀other฀options฀that฀could฀ significantly฀affect฀personal฀automobiles฀and฀their฀use.฀ 4.1฀฀Road฀Ahead฀ The฀“Road฀Ahead”฀(baseline)฀scenario฀assumes฀that฀the฀ current฀growth฀rate฀of฀motorization฀continues.฀Conventional฀gasoline฀vehicles฀are฀the฀dominant฀vehicle฀technology,฀car฀use฀is฀not฀restricted,฀and฀no฀significant฀fuel฀taxes฀ are฀implemented฀through฀2020฀as฀Chinese฀policymakers฀ follow฀a฀pricing฀policy฀with฀minimal฀taxes.฀It฀is฀also฀assumed฀that฀no฀other฀vehicle฀or฀fuel฀policies฀other฀than฀fuel฀ economy฀standards฀will฀be฀implemented฀and฀enforced.฀In฀ this฀scenario,฀the฀market฀penetration฀of฀HEVs฀is฀5฀percent,฀CNG฀2฀percent,฀and฀small฀electric฀cars฀0.5฀percent฀ by฀2020.฀China’s฀level฀of฀motorization฀is฀derived฀from฀ Korea’s,฀as฀suggested฀by฀Figure฀1.฀China,฀in฀this฀scenario,฀ reaches฀the฀same฀number฀of฀cars฀per฀unit฀GDP฀in฀2020฀as฀ Korea฀when฀Korea฀had฀China’s฀projected฀2020฀per฀capita฀ GDP฀in฀1993.฀The฀best฀estimate฀of฀China’s฀on-road฀fuel฀ economy฀today฀is฀9.5฀liters/100฀km.฀In฀the฀Road฀Ahead฀ scenario,฀this฀figure฀improves฀simply฀because฀of฀improved฀ technology฀and฀the฀likely฀rise฀in฀demand฀for฀smaller฀cars฀ (i.e.,฀under฀1,500฀kilograms).฀ 4.2฀฀Oil฀Saved฀ “Oil฀Saved”฀is฀driven฀by฀a฀clear฀move฀to฀save฀oil,฀backed฀ by฀phasing-in฀of฀fuel฀taxes฀until฀they฀reach฀the฀level฀of฀ those฀in฀Japan฀in฀early฀2005,฀at฀approximately฀$2.70/gallon฀(Oil฀Market฀Report,฀2005).฀Apart฀from฀conventional฀ gasoline฀vehicles,฀CNG฀fuels฀20฀percent฀of฀cars฀by฀2020,฀ obtaining฀5฀percent฀better฀fuel฀economy฀(US฀DOE,฀2005),฀ and฀small฀electric฀vehicles฀power฀10฀percent,฀using฀less฀ primary฀energy฀than฀gasoline฀or฀even฀CNG฀vehicles.฀In฀ this฀scenario,฀there฀are฀10฀percent฀fewer฀cars฀than฀in฀Road฀ Ahead,฀consistent฀with฀the฀small฀effect฀of฀higher฀fuel฀prices฀ on฀car฀ownership฀observed฀by฀Johansson฀and฀Schipper฀ (1997).฀Spurred฀by฀higher฀fuel฀prices,฀fuel฀economy฀improves฀much฀faster฀than฀in฀Road฀Ahead.฀This฀encourages฀฀ a฀market฀share฀of฀15฀percent฀HEV฀by฀2010฀and฀a฀more฀ significant฀50฀percent฀by฀2020.฀The฀hybrid฀vehicles฀฀ use฀only฀80฀percent฀of฀the฀fuel฀per฀km฀of฀conventional฀ gasoline฀cars,฀a฀figure฀that฀falls฀to฀75฀percent฀by฀2020฀as฀ technology฀improves.฀Higher฀oil฀prices฀will฀push฀car฀use฀ downward,฀implying฀that฀25฀percent฀of฀all฀vehicles฀sold฀in฀ the฀2006–10฀period฀are฀hybrids.฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST The฀“Integrated฀Transport”฀scenario฀is฀a฀result฀of฀ thoughtful฀and฀successful฀resistance฀to฀congestion฀by฀ the฀Chinese฀authorities.฀The฀outcome฀is฀bolstered฀by฀the฀ popularity฀of฀very฀small฀gasoline฀and฀electric฀cars฀whose฀ required฀road฀space฀is฀less฀than฀that฀of฀conventional฀cars,฀ and฀parking฀space฀significantly฀less.฀Additionally,฀such฀ small฀cars฀are฀not฀as฀fast฀as฀conventional฀cars;฀hence,฀the฀ overall฀utilization฀per฀car฀in฀this฀scenario฀is฀the฀lowest฀ in฀all฀three฀scenarios.฀In฀this฀scenario,฀small฀and฀highly฀ efficient฀vehicles฀will฀play฀a฀considerable฀role฀in฀reducing฀ fuel฀consumption.฀Hybrids—together฀with฀small฀gasoline,฀ electric,฀and฀CNG฀vehicles—dominate฀the฀market,฀with฀ conventional฀gasoline฀vehicles฀constituting฀only฀30฀percent฀ of฀the฀total฀market฀by฀2020.฀With฀the฀general฀reduction฀in฀ congestion฀time,฀hybrids฀have฀less฀of฀an฀advantage฀under฀ Integrated฀Transport฀than฀they฀do฀in฀the฀urban฀traffic฀ conditions฀illustrated฀in฀the฀first฀two฀scenarios.฀ Congestion,฀parking฀and฀access฀difficulties,฀as฀well฀ as฀the฀implementation฀of฀European-level฀fuel฀taxes฀and฀ different฀transport฀policies,฀suppress฀the฀total฀number฀of฀ cars฀to฀approximately฀50฀percent฀of฀what฀is฀estimated฀in฀ Road฀Ahead฀in฀2020.฀Similarly,฀annual฀distance฀traveled฀ plummets฀to฀9,000฀km฀per฀vehicle฀by฀2020฀because฀of฀the฀ high฀costs฀of฀driving฀and฀the฀extra฀advantages฀of฀public฀ transport,฀such฀as฀bus฀rapid฀transit฀(BRT)฀and฀metro฀systems฀designed฀to฀give฀alternative฀high฀speed฀travel.5฀Higher฀ oil฀prices฀support฀better฀fuel฀economy฀together฀with฀the฀ popularity฀of฀very฀small฀cars,฀which฀are฀assumed฀to฀be฀25฀ percent฀gasoline฀and฀25฀percent฀electric฀by฀2020.฀ 5.฀SCENARIO฀RESULTS 6000 140 Road Ahead Oil Saved 5000 120 Integrated Transport 100 4000 80 3000 60 2000 40 1000 20 0 0 2005 2010 2015 2020 Energy฀use฀in฀each฀scenario฀is฀broken฀down฀by฀vehicle฀ and฀fuel฀type฀in฀Figure฀5.฀Compared฀to฀Road฀Ahead,฀energy฀use฀is฀38฀percent฀lower฀by฀2010฀and฀78฀percent฀lower฀by฀ 2020฀in฀the฀Integrated฀Transport฀scenario,฀assuming฀that฀ strong฀transport฀policies฀and฀measures฀are฀implemented.฀ Total฀2020฀oil฀use฀in฀Oil฀Saved฀is฀approximately฀55฀percent฀ less฀than฀in฀Road฀Ahead,฀but฀it฀is฀still฀more฀than฀two฀times฀ higher฀than฀oil฀use฀in฀Integrated฀Transport.฀Additionally,฀ the฀total฀oil฀consumed฀in฀2020฀in฀the฀Integrated฀Transport฀scenario฀is฀only฀marginally฀higher฀than฀in฀2003.฀This฀ distinction,฀while฀fully฀a฀consequence฀of฀our฀assumptions,฀ shows฀how฀powerful฀transport฀policies฀can฀be฀in฀leading฀ indirectly฀to฀huge฀oil฀savings฀and฀increasing฀energy฀security. Oil฀consumption฀comprises฀most฀of฀the฀transport฀ energy฀use฀in฀Road฀Ahead฀at฀450฀thousand฀barrels฀per฀day฀ (kbpd)฀in฀2010฀and฀2,500฀kbpd฀in฀2020.฀Oil฀use฀in฀2010฀ in฀Oil฀Saved฀is฀300฀kbpd฀and฀rises฀to฀800฀kbpd฀by฀2020.฀ In฀Integrated฀Transport,฀oil฀use฀is฀a฀mere฀300฀kbpd฀by฀ 2020,฀12฀percent฀of฀its฀value฀in฀Road฀Ahead.฀ 5.1฀฀Energy฀consumption The฀Road฀Ahead฀scenario฀demonstrates฀that฀if฀car฀ ownership฀and฀use฀is฀unconstrained,฀oil฀consumption฀will฀ continue฀to฀increase฀rapidly฀as฀the฀number฀of฀automobiles฀ increases฀in฀China.฀The฀two฀other฀scenarios฀offer฀considerably฀contrasting฀results฀and฀present฀important฀alternative฀ outcomes฀led฀by฀policy฀options฀that฀are฀worth฀considering฀ (Figure฀4).฀ C H IN A ฀ MOTOR IZATION ฀ TR EN D S 57 Total Primary Energy, Mtoe 4.3฀฀Integrated฀transport Figure฀4.฀฀Energy฀Consumption฀Levels฀in฀the฀Three฀Scenarios Total Primary Energy, PJ The฀assumptions฀used฀are฀consistent฀with฀experience฀in฀ Europe,฀where฀the฀price฀elasticity฀of฀car฀use฀is฀within฀the฀ range฀from฀-0.2฀to฀-0.3฀(Johansson฀and฀Schipper,฀1997).฀ Since฀real฀fuel฀prices฀in฀Oil฀Saved฀are฀roughly฀2฀to฀3฀times฀ higher฀than฀in฀the฀Road฀Ahead฀scenario,฀which฀used฀2003฀ prices,฀annual฀distance฀traveled฀is฀reduced฀by฀roughly฀40฀ percent฀over฀its฀initial฀value,฀arriving฀at฀10,238฀km฀per฀ vehicle฀by฀2020.฀The฀fact฀that฀car฀use฀does฀not฀further฀decrease฀is฀a฀reflection฀of฀an฀improvement฀in฀fuel฀economy.฀ Figure฀5.฀฀Energy฀Use฀for฀Cars,฀by฀Fuel฀and฀Propulsion 120 Oil in Hybrids 1.5 Oil in Conventional Gasoline Cars 80 1 60 40 0.5 Gasoline equiv, mn bbl per day CNG 100 Energy Use for Cars, by source, Mtoe 2 Electricity, as Primary Energy 20 0 Road Ahead Oil Saved 2020 2015 2010 2005 2003 2020 2015 2010 2005 2003 2020 2015 2010 2003 2005 0 Integrated Transport Note:฀Primary฀energy฀required฀for฀electricity฀generation฀and฀transmission฀is฀included,฀but฀no฀primary฀adjustments฀were฀made฀for฀production,฀transmissions,฀or฀distribution฀of฀gasoline฀or฀CNG.฀ 5.2฀฀Carbon฀emissions Using฀our฀input฀assumptions,฀we฀estimated฀2003฀ carbon฀emissions฀from฀cars฀in฀China฀at฀around฀8.8฀million฀ metric฀tons฀of฀carbon฀(MtC).6฀Emissions฀grow฀to฀20฀MtC฀ in฀2010฀and฀102฀MtC฀in฀2020฀in฀Road฀Ahead,฀assuming฀that฀no฀additional฀policies฀other฀than฀existing฀fuel฀ economy฀regulations฀will฀be฀implemented฀(Figure฀6).฀The฀ only฀boundary฀condition฀for฀our฀base฀case฀is฀that฀imposed฀ by฀the฀existing฀fuel฀economy฀standards.฀For฀comparison,฀ IEA฀(2004a)฀foresees฀China’s฀transport-related฀CO2฀emissions฀at฀162฀MtC฀by฀2020,฀up฀from฀67฀MtC฀in฀2002.฀The฀ share฀from฀cars,฀while฀small฀now,฀rises฀rapidly.฀ In฀the฀second฀scenario,฀Oil฀Saved,฀improved฀fuel฀economy,฀largely฀due฀to฀a฀high฀penetration฀of฀hybrids฀and฀ 58 restraints฀in฀the฀size฀and฀power฀of฀cars฀(aided฀by฀reduced฀ driving฀distances),฀could฀reduce฀carbon฀emissions฀in฀2020฀ by฀50฀percent฀(Figures฀6฀and฀7).฀One฀of฀the฀driving฀forces฀ for฀this฀decrease฀in฀carbon฀emissions฀is฀a฀shift฀from฀present฀ fuel฀pricing฀to฀the฀Japanese฀or฀European฀level฀of฀fuel฀taxation,฀which฀would฀boost฀prices฀by฀a฀factor฀of฀three.฀ In฀Integrated฀Transport฀thoughtful฀transport฀policies,฀ listed฀in฀Section฀6,฀have฀a฀profound฀impact฀on฀energy฀use,฀ leading฀to฀40฀percent฀lower฀carbon฀emissions฀in฀2010฀and฀ 79฀percent฀in฀2020฀compared฀to฀Road฀Ahead฀(Figure฀7).฀ Despite฀more฀than฀ten฀times฀today’s฀number฀of฀cars,฀primary฀energy฀use฀increases฀by฀only฀a฀factor฀of฀2.5,฀only฀22฀ percent฀of฀the฀level฀in฀the฀unconstrained฀case฀in฀2020.฀In฀ Integrated฀Transport,฀distance฀traveled฀per฀vehicle฀is฀half฀ compared฀to฀Oil฀Saved.฀This,฀combined฀with฀the฀important฀share฀of฀mini-cars,฀reduces฀overall฀oil฀use฀and฀carbon฀ emissions฀significantly.฀ 6.฀POLICY฀OPTIONS China฀already฀has฀a฀strong฀set฀of฀policy฀measures฀that฀ can฀assist฀in฀achieving฀its฀energy฀security,฀air฀quality,฀and฀ other฀goals.฀This฀section฀proposes฀additional฀options฀that฀ will฀have฀an฀impact฀on฀vehicle฀ownership,฀vehicle฀use,฀ infrastructure฀use,฀infrastructure฀access,฀road฀space฀use,฀ and฀fuel฀demand,฀leading฀to฀increased฀energy฀efficiency,฀ increased฀mobility,฀and฀reduced฀transport฀emissions.฀Most฀ of฀these฀policies฀are฀implied฀in฀the฀assumptions฀underlying฀ our฀scenarios฀in฀section฀4,฀where฀their฀impacts฀are฀reflected฀ in฀the฀scenario฀results฀in฀section฀5.฀The฀policies฀assumed฀in฀ the฀scenarios฀and฀proposed฀to฀be฀implemented฀are฀discussed฀below฀and฀include฀technology฀requirements,฀motor฀ vehicle฀taxation,฀fuel฀taxation,฀road฀and฀congestion฀pricing฀ policies,฀and฀public฀transport฀system฀improvements.฀ 6.1฀฀Vehicle฀technology฀requirements As฀described฀earlier,฀China฀has฀already฀started฀developing฀its฀advanced฀and฀alternative-fuel฀vehicle฀technologies.฀ For฀example,฀HEVs฀will฀be฀available฀in฀the฀market฀by฀the฀ end฀of฀2005.฀Toyota฀has฀started฀building฀its฀Prius฀hybrid฀ sedans฀in฀China฀with฀a฀Chinese฀partner฀(First฀Automotive฀Works).฀If฀this฀effort฀is฀a฀success,฀it฀will฀lead฀to฀greater฀ availability฀of฀HEV฀technology฀in฀China฀and฀could฀lead฀to฀ more฀HEV฀production.฀The฀Government฀of฀China฀has฀the฀ option฀to฀continue฀attracting฀and฀encouraging฀such฀joint฀ efforts,฀and฀to฀increase฀the฀diversity฀of฀advanced฀vehicle฀ technologies฀in฀China.฀ Fuels฀other฀than฀gasoline฀and฀diesel฀have฀already฀been฀ used฀in฀the฀transport฀sector.฀The฀two฀alternative฀transport฀ energy฀sources฀discussed฀in฀this฀chapter฀are฀CNG฀and฀electricity.฀It฀is฀likely฀that฀the฀use฀of฀natural฀gas฀for฀transportation฀will฀continue฀to฀increase฀in฀order฀to฀meet฀the฀growing฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST 6.2฀฀Motor฀vehicle฀taxation Vehicle฀taxation฀has฀been฀implemented฀in฀many฀ developed฀and฀developing฀countries.฀When฀integrated฀ into฀transport฀policies,฀it฀may฀lead฀to฀improved฀transport฀ demand฀management฀and฀be฀a฀good฀source฀of฀revenue.฀ Vehicle฀taxation฀may฀also฀encourage฀demand฀to฀shift฀to฀ other฀transport฀modes.฀Current฀taxes฀applicable฀to฀motor฀ vehicles฀in฀China฀include฀value฀added฀(VAT),฀excise,฀vehicle฀acquisition,฀and฀vehicle฀usage฀taxes฀(Huang,฀2005).฀฀ A฀vehicle฀usage฀tax฀in฀China฀is฀collected฀on฀an฀annual฀basis฀ and฀the฀amount฀of฀tax฀paid฀depends฀on฀the฀type฀of฀vehicle.฀ An฀annual฀tax฀offers฀more฀flexibility฀than฀sales฀tax,฀as฀tax฀ rates฀can฀be฀altered฀over฀time฀and฀the฀burden฀is฀distributed฀ over฀a฀longer฀time฀period฀for฀vehicle฀owners฀(Schwaab฀and฀ Thielmann,฀2002).฀฀฀ Different฀features฀might฀be฀incorporated฀into฀vehicle฀ taxation฀according฀to฀different฀transport฀strategies.฀For฀ instance,฀taxation฀could฀be฀implemented฀by฀vehicle฀type,฀ vehicle฀price,฀vehicle฀size,฀or฀test฀emission฀and฀noise฀levels.฀ A฀differentiated฀system,฀as฀applied฀in฀Sweden฀and฀Germany,฀ offers฀incentives฀for฀vehicle฀owners฀to฀switch฀to฀low฀ emission฀vehicles฀(IEA,฀2000;฀Breithaupt,฀2002).฀This฀is฀ often฀true฀when฀vehicle฀taxation฀is฀differentiated฀according฀ to฀specific฀emission฀standards,฀where฀taxes฀are฀higher฀on฀ more฀polluting฀vehicles.฀Vehicle฀manufacturers฀may฀also฀ Figure฀6.฀฀฀Total฀Carbon฀Emissions฀from฀Road฀Transportation฀in฀the฀ Three฀Scenarios,฀2005–20 120 Road Ahead Oil Saved 100 Total Carbon Emissions (Mt) need฀for฀clean฀transport฀fuel.฀Natural฀gas฀is฀now฀used฀in฀ approximately฀110,000฀vehicles฀(mostly฀buses฀and฀taxis)฀ in฀12฀Chinese฀cities฀(Walsh,฀2003b).฀However,฀this฀fuel฀ is฀constrained฀by฀the฀supply฀of฀natural฀gas,฀and฀the฀fact฀ that฀it฀is฀harder฀to฀transport฀than฀oil.฀Therefore,฀despite฀it฀ being฀a฀relatively฀clean฀fuel,฀CNG-operated฀vehicles฀might฀ be฀limited฀to฀a฀smaller฀role฀in฀the฀transport฀sector,฀but฀ could฀be฀used฀in฀public฀vehicles฀in฀polluted฀urban฀areas.฀ Electricity฀is฀another฀clean฀transport฀energy฀source฀with฀ minimal฀emissions฀impact.฀It฀is฀important฀to฀note฀that฀ although฀emissions฀may฀be฀produced฀during฀the฀production฀of฀electricity,฀depending฀on฀the฀type฀of฀electric฀power฀ generation,฀electric฀vehicles฀are฀still฀effective฀when฀used฀for฀ short฀travel฀distances,฀especially฀small฀electric฀cars฀used฀in฀ urban฀cities.฀Since฀the฀main฀barrier฀to฀using฀electricity฀in฀ motor฀vehicles฀is฀the฀storage฀of฀electricity฀(Walsh,฀2003b),฀ further฀vehicle฀technology฀development฀is฀required฀for฀ greater฀battery฀storage฀systems.฀฀฀฀฀฀฀฀฀฀ Although฀most฀technologies฀are฀already฀available,฀China฀ needs฀to฀create฀the฀right฀market฀for฀such฀technologies฀to฀ be฀developed฀commercially.฀The฀demand฀for฀advanced฀ and฀alternative-fuel฀vehicle฀technologies฀should฀also฀be฀ encouraged. Integrated Transport 80 60 40 20 0 2005 2010 2015 2020 be฀encouraged฀to฀develop฀less฀polluting฀vehicles฀that฀could฀ be฀preferred฀by฀consumers฀due฀to฀lower฀taxation฀(Schwaab฀ and฀Thielmann,฀2002).฀However,฀it฀is฀important฀to฀note฀ that฀vehicle฀taxation,฀unlike฀other฀taxation฀options,฀does฀ not฀contribute฀to฀variable฀costs฀of฀transportation฀and฀ therefore฀is฀unlikely฀to฀influence฀vehicle฀miles฀traveled฀or฀ other฀driving฀habits.฀ Vehicle฀taxation฀would฀be฀the฀highest฀in฀the฀third฀ scenario,฀Integrated฀Transport,฀as฀authorities฀reduce฀ congestion฀and฀private฀motorization฀demand฀by฀increasing฀vehicle฀costs.฀In฀the฀other฀two฀scenarios—Road฀Ahead฀ and฀Oil฀Saved—the฀ownership฀and฀use฀of฀vehicles฀are฀not฀ taxed฀as฀substantially.฀฀฀฀฀ ฀ C H IN A ฀ MOTOR IZATION ฀ TR EN D S 59 Figure฀7.฀฀฀Carbon฀Emissions฀from฀Motor฀Vehicles฀of฀Different฀฀ Technologies฀by฀Fuel 90 0.09 CNG Oil 80 0.08 Carbon/km 70 0.07 60 0.06 50 0.05 40 0.04 30 0.03 20 0.02 10 0.01 0 Road Ahead Oil Saved 2020 2015 2010 2005 2003 2020 2015 2010 2005 2003 2020 2015 2010 2003 0 2005 Carbon Emissions (Mt) 0.1 Electric Cars Carbon (kg/km) 100 Integrated Transport 6.3฀฀Fuel฀taxation Using฀fuel฀taxation฀as฀a฀policy฀instrument฀can฀recover฀ the฀variable฀costs฀of฀driving฀by฀charging฀vehicle฀users฀for฀ transport฀infrastructure฀indirectly฀through฀individual฀use.฀ Since฀fuel฀is฀one฀of฀the฀highest฀and฀most฀visible฀variable฀ costs฀of฀vehicle฀use,฀fuel฀taxes฀encourage฀drivers฀to฀make฀ more฀efficient฀use฀of฀their฀vehicles,฀reduce฀trip฀frequencies,฀and฀even฀switch฀to฀less฀fuel-intensive฀vehicles.฀Most฀ importantly,฀fuel฀taxes฀help฀reflect฀the฀real฀costs฀of฀dependency฀on฀foreign฀oil฀supplies,฀storing฀oil฀in฀the฀event฀of฀an฀ interruption,฀and฀other฀externalities.฀ The฀level฀of฀fuel฀taxes฀imposed฀should฀be฀enough฀to฀ abate฀vehicle฀emissions฀and฀serve฀as฀revenue฀for฀transport฀ infrastructure฀and฀maintenance฀purposes.฀The฀revenues฀ collected฀from฀transport฀fuel฀are฀usually฀allocated฀for฀ transport฀purposes,฀as฀seen฀in฀many฀other฀developed,฀ transition,฀and฀developing฀countries฀(Carruthers,฀2002).฀ Fuel฀prices฀should฀include฀taxes฀to฀reflect฀the฀perceived฀ 60 externalities฀and฀risks฀of฀foreign฀oil฀imports,฀and฀fees฀to฀ reflect฀the฀environmental฀damages฀related฀to฀fuel฀quality.฀ The฀latter฀was฀the฀goal฀of฀fuel฀taxation฀reform฀in฀Sweden฀ in฀the฀late฀1980s฀and฀early฀1990s,฀as฀taxes฀rose฀on฀more฀ polluting฀fuels฀but฀fell฀on฀cleaner฀fuels฀(IEA,฀2000). Fuel฀taxes฀in฀China฀are฀virtually฀nonexistent฀at฀present.฀ If฀fuel฀prices฀continue฀to฀remain฀low,฀energy฀consumption฀ and฀emissions฀from฀the฀transport฀sector฀could฀follow฀the฀ projections฀in฀the฀Road฀Ahead฀scenario.฀If฀China฀wants฀to฀ reduce฀its฀energy฀consumption฀to฀levels฀projected฀in฀the฀ Oil฀Saved฀and฀Integrated฀Transport฀scenarios,฀a฀Japaneseequivalent฀rate฀of฀fuel฀taxes฀should฀be฀implemented฀in฀ order฀to฀encourage฀less฀oil฀consumption฀by฀individual฀ consumers.฀An฀increase฀in฀fuel฀taxes฀will฀lead฀to฀a฀stronger฀ interest฀for฀advanced฀vehicles฀and฀alternative฀fuel฀vehicle฀ technologies.฀ ฀ 6.4฀฀Road฀pricing Road฀pricing฀is฀another฀demand฀management฀strategy฀ through฀which฀drivers฀pay฀directly฀for฀utilizing฀public฀ services.฀Some฀examples฀are฀toll฀roads,฀toll฀bridges,฀and฀ congestion฀pricing฀systems,฀whereby฀drivers฀are฀charged฀ when฀entering฀specific฀zones฀during฀certain฀time฀periods.฀ Road฀pricing฀is฀usually฀implemented฀by฀public฀or฀private฀ highway฀agencies฀or฀local฀authorities฀as฀part฀of฀transportation฀demand฀management฀programs;฀this฀would฀be฀the฀ case฀for฀China฀as฀well.฀Revenue฀collected฀can฀be฀used฀to฀ cover฀investment฀costs฀of฀transport฀infrastructure฀and฀ maintenance,฀including฀alternatives฀to฀cars. These฀approaches฀can฀reduce฀overall฀vehicle฀use฀and฀ shift฀some฀travel฀patterns฀to฀less฀congested฀times.฀Since฀ fuel฀use฀per฀kilometer฀rises฀with฀congestion,฀congestion฀ measures฀tend฀to฀slightly฀improve฀fuel฀economy.฀Experience฀from฀London,฀for฀example,฀shows฀that฀the฀imposition฀of฀a฀£5฀fee฀on฀bringing฀a฀car฀into฀a฀well-defined฀ zone฀during฀business฀hours฀led฀to฀15฀percent฀fewer฀cars฀ entering฀that฀zone.฀Singapore฀has฀also฀achieved฀similar฀ results฀(Menon,฀2000).฀Given฀the฀congestion฀in฀most฀ large฀Chinese฀cities,฀the฀implementation฀of฀such฀systems฀ is฀an฀option฀to฀consider.฀ Charging฀for฀scarce฀road฀space฀is฀an฀important฀strategy฀ for฀Chinese฀cities,฀where฀central฀areas฀have฀as฀little฀as฀one฀ fifth฀of฀the฀space฀per฀capita฀compared฀with฀even฀more฀ traffic฀congested฀cities฀such฀as฀London,฀Paris,฀and฀New฀ York฀(Mao,฀2004).฀The฀Shanghai฀Metropolitan฀Transport฀ White฀Paper฀(People’s฀Government฀of฀Shanghai฀Municipality,฀2002)7฀discusses฀electronic฀road฀pricing,฀which฀is฀a฀ model฀that฀Singapore฀has฀followed฀in฀its฀general฀transport฀ strategy฀for฀the฀past฀two฀decades฀(Menon,฀2000).฀This฀ pricing฀scheme฀is฀sophisticated,฀as฀vehicles฀are฀charged฀on฀ a฀per฀entry฀basis฀and฀could฀vary฀depending฀on฀the฀day,฀ time฀of฀day,฀the฀type฀and฀size฀of฀vehicle,฀congestion฀level,฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST and฀the฀road฀and฀place฀of฀entry฀(Breithaupt,฀2002).฀Here,฀ public฀education฀was฀necessary฀before฀the฀implementation฀ of฀the฀system฀to฀better฀inform฀motorists฀and฀to฀ensure฀a฀ smooth฀transition.฀ A฀lesson฀that฀emerges฀from฀existing฀experience฀is฀ that฀an฀effective฀road฀pricing฀system฀has฀to฀be฀designed฀ specifically฀to฀a฀city’s฀needs฀and฀to฀match฀the฀local฀traffic฀ conditions.฀Applying฀one฀city’s฀approach฀to฀another฀city฀ without฀careful฀adaptation฀is฀risky.฀The฀Vehicle฀Quota฀ System฀implemented฀in฀Singapore฀in฀1990,฀for฀instance,฀ could฀be฀applicable฀elsewhere฀but฀would฀require฀adaptation.฀This฀quota฀system฀determines฀the฀number฀of฀new฀ vehicles฀allowed฀for฀registration,฀while฀the฀demand฀for฀new฀ vehicle฀registrations฀determines฀the฀price฀to฀register.฀The฀ vehicle฀quota฀for฀a฀given฀year฀is฀administered฀through฀the฀ monthly฀release฀of฀Certificates฀of฀Entitlement,฀which฀may฀ cost฀as฀much฀as฀a฀car.฀ Road฀pricing฀policies฀are฀extremely฀important฀in฀the฀ Integrated฀Transport฀scenario,฀where฀congestion฀is฀largely฀ avoided฀as฀a฀significant฀problem฀because฀of฀road฀pricing฀ and฀other฀complementary฀measures฀to฀regulate฀car฀use.฀If฀ this฀scenario฀is฀to฀be฀realized,฀it฀is฀important฀to฀announce฀ and฀implement฀road฀pricing฀policies฀early,฀before฀too฀ much฀investment฀in฀private฀automobiles฀and฀on฀infrastructure฀that฀is฀dependent฀on฀private฀vehicle฀use฀is฀made฀ in฀the฀most฀congested฀zones.฀Of฀particular฀appeal฀for฀ Chinese฀cities฀is฀the฀fact฀that฀with฀a฀few฀exceptions,฀private฀ car฀ownership฀is฀low,฀hence฀the฀initial฀impacts฀will฀only฀ be฀felt฀by฀consumers฀of฀relatively฀higher฀income฀levels.฀A฀ major฀impact฀of฀the฀London฀scheme฀was฀the฀clearing฀of฀ car฀traffic฀that฀otherwise฀slowed฀buses฀(and฀bicycles),฀even฀ at฀a฀20฀percent฀reduction฀in฀car฀traffic.฀Therefore,฀the฀early฀ imposition฀of฀congestion฀charging฀in฀Chinese฀cities฀would฀ likely฀benefit฀the฀majority฀of฀present฀non-car฀users,฀as฀well฀ as฀car฀users฀who฀do฀elect฀to฀pay฀car฀use฀fees.฀ 6.5฀฀Public฀transportation฀and฀฀ non-motorized฀transport฀ To฀be฀an฀attractive฀alternative,฀a฀public฀transport฀system฀ has฀to฀provide฀speed,฀convenience,฀comfort,฀and฀affordability.฀This฀requires฀policy฀changes฀and฀significant฀investment.฀If฀mass฀transit฀systems฀such฀as฀conventional฀buses,฀ fast฀buses฀in฀dedicated฀corridors฀(i.e.฀BRT),฀metros,฀and฀ other฀rail-bound฀systems฀are฀to฀compete฀with฀private฀cars฀ or฀even฀motorbikes,฀they฀must฀improve฀with฀respect฀to฀ speed฀and฀cost,฀as฀an฀increasing฀number฀of฀Chinese฀families฀will฀be฀able฀to฀afford฀private฀motor฀vehicles.฀Doing฀so฀ would฀also฀deliver฀environmental฀benefits฀and฀transport฀ efficiency฀benefits.฀ The฀most฀important฀and฀cost-effective฀way฀of฀promoting฀effective฀public฀transport฀systems฀in฀China฀is฀through฀ BRT.฀These฀systems฀have฀high฀capacity฀volume,฀segregated฀ bus฀lanes,฀rapid฀embarking฀and฀disembarking฀features,฀ transit฀prioritization฀at฀intersections,฀and฀modal฀integration฀at฀bus฀stations฀and฀terminals.฀Such฀characteristics฀are฀ appealing฀to฀passengers,฀and฀will฀aid฀in฀achieving฀sustainable฀urban฀transportation฀in฀high-population-density฀urban฀cities฀by฀reducing฀congestion,฀vehicular฀emissions,฀and฀ by฀providing฀a฀cost-effective฀alternative฀transport฀mode.฀ Some฀of฀these฀benefits฀can฀also฀be฀attained฀by฀nonmotorized฀transport฀(NMT).฀Pedestrians฀and฀cyclists฀generate฀ neither฀conventional฀air฀pollution฀nor฀CO2.฀Pedestrians฀ and฀cyclists฀are฀also฀more฀efficient฀users฀of฀scarce฀road฀space฀ than฀private฀motor฀vehicles,฀along฀with฀being฀the฀most฀ efficient฀and฀environmentally฀sustainable฀when฀making฀ relatively฀short฀trips฀(Hook,฀2002).฀In฀virtually฀every฀other฀ country,฀however,฀NMT฀has฀yielded฀to฀motorized฀public฀ transport฀and฀then฀individual฀vehicles.฀The฀most฀notable฀ countries฀where฀NMT฀retains฀20฀percent฀or฀more฀share฀of฀ all฀trips฀in฀urban฀areas฀are฀Denmark฀and฀the฀Netherlands,฀ but฀the฀high฀share฀of฀NMT฀comes฀principally฀at฀the฀cost฀of฀ bus฀travel฀and฀short฀car฀trips.฀High฀fuel฀taxes,฀careful฀urban฀ planning,฀an฀integrated฀network฀of฀dedicated฀bike฀lanes,฀ and฀a฀strong฀component฀of฀local฀commercial฀activities฀keep฀ these฀alternatives฀to฀cars฀important.฀฀ The฀Government฀of฀China฀could฀continue฀to฀encourage฀public฀transport฀investments฀to฀enhance฀its฀quality฀and฀ promote฀cycling฀and฀walking฀within฀urban฀cities.฀Good฀ alternative฀transport฀modes฀provide฀options฀to฀private฀car฀ ownership฀and฀use,฀and฀will฀limit฀congestion฀and฀transport฀ pollution.฀This฀phenomenon฀is฀projected฀in฀the฀Integrated฀ Transport฀scenario,฀where฀severe฀traffic฀congestion฀starts฀ to฀restrict฀total฀car฀utilization฀and฀significant฀charges฀are฀ added฀to฀increase฀the฀total฀cost฀of฀driving฀at฀the฀same฀time.฀ In฀the฀Oil฀Saved฀scenario,฀the฀use฀of฀public฀transportation฀ will฀also฀increase฀as฀higher฀oil฀prices฀and฀taxes฀will฀discourage฀private฀vehicle฀use.฀A฀good฀public฀transport฀system฀ will฀hence฀aid฀in฀decreasing฀private฀vehicle฀use฀by฀being฀a฀ more฀affordable฀and฀efficient฀alternative.฀The฀challenge฀for฀ China฀is฀to฀increase฀the฀speed,฀reliability,฀and฀convenience฀ of฀its฀public฀transportation฀systems฀before฀too฀many฀individuals฀choose฀to฀use฀private฀transport฀modes. C H IN A ฀ MOTOR IZATION ฀ TR EN D S 61 6.6฀฀Parking฀charges As฀urban฀land฀for฀parking฀becomes฀scarcer,฀parking฀ charges฀should฀be฀increased฀as฀a฀measure฀to฀efficiently฀ allocate฀parking฀spaces.฀Parking฀is฀free฀or฀charged฀at฀a฀ subsidized฀rate฀in฀many฀countries฀(Breithaupt,฀2002).฀ However,฀as฀a฀demand฀side฀management฀measure,฀the฀ costs฀of฀parking฀facilities฀or฀on-street฀parking฀should฀be฀ distributed฀to฀motorists.฀Every฀motorist฀should฀know฀what฀ it฀really฀costs฀to฀bring฀a฀car฀into฀a฀zone฀where฀land฀space฀ is฀scarce.฀Parking฀charges฀can฀create฀substantial฀revenues฀ for฀local฀municipalities฀and฀could฀be฀used฀for฀transport฀ infrastructure฀maintenance. The฀implementation฀of฀parking฀fees฀will฀increase฀the฀ cost฀of฀driving฀in฀urban฀areas,฀which฀will฀make฀private฀car฀ use฀less฀appealing.฀For฀China,฀this฀will฀certainly฀influence฀ future฀patterns฀of฀car฀use.฀Congestion,฀as฀well฀as฀vehicular฀ emissions,฀could฀decrease,฀especially฀when฀public฀transport฀ modes฀are฀encouraged.฀Raising฀parking฀fees฀to฀reflect฀the฀ real฀costs฀and฀value฀of฀space—and฀enforcing฀existing฀parking฀rules—discourages฀the฀use฀of฀cars฀in฀congested฀regions.฀ 62 7.฀CONCLUSION฀ The฀trends฀and฀scenarios฀examined฀in฀this฀chapter฀ illustrate฀important฀choices฀Chinese฀policymakers฀must฀ confront.฀On฀a฀national฀level,฀China฀is฀in฀the฀“infancy”฀of฀ personal฀motorization;฀Chinese฀authorities฀have฀nearly฀100฀ years฀of฀experience฀to฀draw฀on฀from฀other฀countries฀on฀the฀ positive฀and฀negative฀impacts฀of฀motorization.฀Given฀the฀ rapidity฀of฀motorization฀growth฀in฀China,฀authorities฀have฀ to฀act฀fast฀in฀order฀to฀avoid฀traffic฀safety,฀urban฀congestion,฀ pollution,฀and฀energy฀problems฀that฀will฀increase฀together฀ with฀continued฀rapid฀motorization.฀Cleaner,฀safer,฀rapid฀ transportation฀systems฀that฀increase฀access฀to฀more฀people฀ have฀to฀be฀developed,฀rather฀than฀following฀the฀narrower฀ path฀of฀rapid฀individual฀motorization,฀as฀scenes฀from฀ congested฀Beijing฀and฀other฀major฀Chinese฀cities฀already฀ suggest.฀The฀sooner฀measures฀are฀considered,฀the฀more฀effective฀they฀will฀be.฀The฀longer฀policymakers฀wait,฀the฀more฀ technologies,฀fuel฀choices,฀and฀travel฀patterns฀will฀be฀locked฀ in฀by฀the฀fixed฀investments฀required฀to฀support฀them. A฀key฀issue฀so฀far฀overlooked฀by฀Chinese฀authorities฀ is฀that฀many฀motorization฀impacts฀depend฀not฀only฀on฀ the฀emissions฀per฀kilometer,฀but฀also฀on฀the฀total฀distance฀ driven.฀In฀the฀case฀of฀urban฀air฀pollution,฀the฀current฀ focus฀on฀emissions฀per฀kilometer฀is฀proper,฀given฀the฀need฀ to฀improve฀fuel฀quality฀and฀the฀enforcement฀of฀more฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST stringent฀emissions฀standards.฀If฀the฀present฀trends฀in฀car฀ use฀continue,฀the฀huge฀increase฀in฀distance฀traveled฀will฀ increase฀emissions฀significantly,฀hence฀offsetting฀much฀ of฀the฀promise฀of฀improved฀emissions฀control฀through฀ current฀air฀quality฀and฀emissions฀regulations.฀Thus,฀there฀ are฀good฀reasons฀for฀authorities฀to฀consider฀strategies฀that฀ will฀slow฀the฀rise฀in฀total฀distance฀traveled,฀particularly฀in฀ urban฀cities.฀ Similarly,฀the฀number฀of฀motor฀vehicles฀and฀the฀total฀ distance฀traveled฀are฀the฀key฀factors฀in฀determining฀total฀ energy฀consumption฀and฀carbon฀emissions.฀Nevertheless,฀ since฀the฀growth฀of฀motorization฀in฀China฀is฀likely฀to฀ continue฀to฀increase฀for฀the฀next฀few฀decades,฀the฀use฀of฀ advanced฀and฀alternative-fuel฀vehicle฀technologies฀should฀ also฀reduce฀the฀externalities฀of฀motorization฀while฀meeting฀ the฀demands฀for฀private฀car฀use.฀With฀the฀appropriate฀ policy฀actions,฀it฀is฀also฀possible฀to฀have฀widespread฀use฀ of฀clean,฀small,฀and฀efficient฀cars฀in฀the฀future,฀especially฀ if฀car฀use฀is฀regulated฀by฀both฀restraint฀policies฀and฀the฀ strategic฀provision฀of฀alternative฀transport฀means.฀ Our฀third฀scenario,฀Integrated฀Transport,฀is฀driven฀by฀ a฀vision฀of฀an฀ideal฀future฀Chinese฀city฀with฀minimal฀congestion฀delay.฀Oil฀is฀a฀limiting฀concern,฀but฀not฀the฀driving฀ factor฀for฀the฀results฀shown฀in฀this฀scenario.฀The฀issues฀ that฀decide฀the฀quality฀of฀life฀in฀Chinese฀cities—including฀ population฀density฀and฀size,฀land฀use,฀and฀the฀structure฀of฀ economic฀and฀cultural฀activities—are฀far฀too฀important฀ to฀be฀determined฀solely฀by฀oil฀markets.฀However,฀Chinese฀ authorities฀may฀recognize฀that฀a฀high-oil,฀high-car-use฀ model฀of฀a฀city฀in฀China฀may฀actually฀leave฀most฀Chinese฀ with฀fewer฀choices฀and฀a฀lower฀quality฀of฀life฀because฀of฀ the฀constraints฀of฀space฀and฀air฀pollution.฀ Fuel฀taxation฀and฀road฀pricing฀play฀a฀major฀role฀in฀ reducing฀vehicle฀use,฀energy฀consumption,฀and฀carbon฀ emissions฀in฀Integrated฀Transport.฀The฀timing฀of฀fuel฀ taxation฀is฀crucial,฀as฀early฀imposition฀gives฀the฀automobile฀ industry฀more฀time฀to฀adapt฀to฀its฀growing฀production฀ capabilities฀to฀produce฀vehicles฀that฀capture฀the฀desired฀ social฀benefits฀of฀the฀taxes.฀The฀earlier฀policies฀are฀implemented,฀the฀larger฀the฀fraction฀of฀China’s฀potential฀future฀ drivers฀will฀have฀grown฀up฀under฀a฀policy฀with฀the฀goal฀of฀ a฀sustainable฀transport฀system฀in฀mind.฀Since฀only฀a฀small฀ minority฀of฀Chinese฀own฀private฀cars฀today,฀and฀most฀฀ of฀them฀are฀from฀relatively฀well-to-do฀urban฀households,฀ imposing฀fuel฀taxes฀and฀road฀pricing฀is฀likely฀to฀bring฀a฀ net฀societal฀benefit.฀Private฀car฀users฀will฀bear฀the฀burden฀ of฀increased฀taxes฀and฀charges,฀but฀the฀potential฀results฀of฀ less฀driving฀and฀congestion฀will฀benefit฀the฀large฀majority฀ of฀pedestrians,฀cyclists,฀and฀bus฀riders.฀The฀more฀revenue฀ is฀channeled฀into฀infrastructure฀projects,฀congestion-alleviating฀projects,฀and฀alternative฀transport฀development,฀ the฀more฀the฀public฀will฀accept฀the฀imposition฀of฀relevant฀ charges.฀Finally,฀as฀such฀changes฀are฀introduced,฀it฀would฀ be฀important฀for฀Chinese฀local฀and฀national฀authorities฀ to฀measure฀the฀impact฀of฀pricing฀policies฀through฀surveys฀ of฀car฀and฀fuel฀use,฀travel฀time,฀and฀other฀impacts฀of฀the฀ policies,฀as฀has฀been฀done฀in฀London฀and฀Singapore฀in฀ connection฀with฀congestion฀charging.฀ Advanced฀vehicles,฀alternative฀vehicles฀(such฀as฀minicars),฀and฀alternative-vehicle฀fuel฀technologies฀already฀ exist฀and฀could฀be฀affordable฀if฀China฀creates฀a฀market฀for฀ these฀technologies.฀Since฀the฀transport฀sector,฀in฀terms฀of฀ private฀motorization,฀is฀still฀relatively฀young฀compared฀to฀ most฀other฀countries,฀China฀has฀an฀opportunity฀to฀truly฀ revolutionize฀its฀auto฀industry฀and฀private฀automobile฀ market.฀It฀is฀important฀to฀note,฀however,฀that฀even฀if฀the฀ entire฀Chinese฀fleet฀of฀motor฀vehicles฀is฀transformed฀to฀ advanced฀or฀alternative฀fuel฀vehicles,฀the฀basic฀problems฀of฀ motorization,฀such฀as฀heavy฀congestion฀and฀road฀traffic฀accidents,฀will฀still฀persist.฀Additionally,฀cleaner฀vehicles฀and฀ fuels฀alone฀may฀not฀eliminate฀air฀pollution฀if฀the฀distance฀ traveled฀per฀vehicle฀is฀not฀also฀reduced฀(Walsh,฀1996).฀ Vehicle฀demand฀has฀to฀be฀optimally฀managed฀and฀ regulated฀in฀order฀to฀reduce฀the฀adverse฀impacts฀of฀transportation,฀including฀energy฀consumption,฀congestion,฀air฀ pollution,฀and฀ultimately฀GHG฀emissions.฀Advanced฀and฀ alternative฀fuel฀vehicle฀technologies฀are฀part฀of฀the฀solution฀ to฀reduce฀such฀adverse฀motorization฀impacts,฀but฀appropriate฀policy฀measures฀that฀could฀change฀travel฀patterns฀have฀ to฀be฀implemented฀and฀enforced฀as฀complementary฀tools.฀ C H IN A ฀ MOTOR IZATION ฀ TR EN D S 63 ENDNOTES REFERENCES ฀฀฀Further฀background฀on฀trends฀and฀impacts฀of฀rapid฀motorization฀in฀ China฀can฀be฀found฀in฀Schipper฀and฀Ng,฀2005. ฀ 2฀฀฀Numerous฀press฀reports฀in฀the฀first฀third฀of฀2005฀suggest฀overall฀ slowing฀of฀car฀sales,฀and฀a฀shift฀toward฀smaller,฀less฀expensive฀models฀ as฀well.฀฀The฀1,500฀kilogram฀average฀should฀fall,฀at฀least฀during฀the฀ present฀phase฀of฀market฀expansion.฀฀A฀tightening฀market฀for฀car฀loans฀ is฀the฀principal฀reason฀for฀this฀market฀weakening. ฀ 3฀฀฀Euro฀emissions฀standards฀for฀passenger฀cars฀and฀light฀vehicles฀were฀ implemented฀in฀the฀European฀Union฀as฀early฀as฀in฀1993฀(Euro฀I)฀to฀ reduce฀air฀pollution฀from฀transportation.฀฀Vehicles฀must฀meet฀certain฀ exhaust฀emissions฀standards฀before฀they฀can฀be฀approved฀for฀sale฀in฀ the฀European฀Union.฀฀The฀Euro฀IV฀emissions฀standard฀is฀currently฀ implemented฀in฀the฀European฀Union.฀฀฀ ฀ 4฀฀฀“Activity฀level”฀includes฀the฀number฀of฀cars,฀the฀distances฀cars฀are฀ driven,฀and฀the฀overall฀distance฀people฀travel฀in฀cars,฀on฀foot,฀and฀on฀ all฀other฀modes,฀which฀is฀referred฀to฀as฀“modal฀split”฀as฀described฀in฀ Schipper฀et฀al.฀(2002). ฀ 5฀฀฀Since฀bus฀travel,฀particularly฀by฀BRT,฀would฀only฀use฀10฀percent฀as฀ much฀fuel/passenger-km฀as฀car฀travel,฀the฀incremental฀oil฀needs฀for฀ shifts฀to฀buses฀indicated฀here฀are฀small. ฀ 6฀฀฀CO ฀from฀“road฀transport”฀in฀2002,฀according฀to฀IEA฀(2004c),฀was฀ 2 about฀41฀MtC.฀฀Calculations฀here฀suggest฀that฀cars฀constitute฀just฀ over฀20฀percent฀of฀this฀figure.฀฀Trucks,฀buses,฀two-wheelers,฀and฀other฀ motor฀vehicles฀operating฀on฀roadways฀are฀likely฀to฀constitute฀the฀large฀ (but฀declining)฀part฀of฀transport-related฀emissions฀from฀China. ฀ 7฀฀฀The฀Shanghai฀Metropolitan฀Transport฀White฀Paper฀is฀the฀first฀comprehensive฀transport฀plan฀for฀the฀city฀that฀outlines฀current฀and฀future฀ transportation฀needs฀and฀sets฀specific฀objectives฀and฀actions฀for฀city฀ planners฀and฀managers.฀฀The฀white฀paper฀was฀issued฀in฀April฀2002,฀ and฀is฀the฀first฀of฀its฀kind฀for฀any฀city฀in฀China.฀฀The฀white฀paper฀was฀ created฀to฀respond฀to฀the฀transportation฀needs฀Shanghai฀will฀face฀as฀ its฀population฀expands฀in฀the฀next฀20฀years฀and฀as฀private฀automobile฀ ownership฀grows฀along฀with฀it. ฀ 8฀฀฀“Private฀vehicles,”฀defined฀as฀cars฀and฀privately฀owned฀household฀light฀ trucks฀and฀SUVs,฀numbered฀approximately฀12฀million฀in฀2003,฀or฀9.2฀ per฀1000฀population.฀฀The฀number฀of฀cars฀we฀have฀chosen฀for฀historical฀analysis฀is฀from฀a฀time฀series฀devised฀and฀used฀as฀the฀basis฀of฀the฀ work฀in฀He฀et฀al.฀(2004).฀ ฀ 9฀฀฀In฀addition฀to฀the฀key฀scenario฀assumptions฀noted฀here,฀the฀number฀of฀ cars,฀share฀of฀cars฀by฀each฀fuel฀type,฀distance฀driven,฀fuel฀economy,฀and฀ improvement฀in฀fuel฀economy฀from฀hybridization฀are฀just฀as฀important.฀Other฀assumptions฀made฀in฀the฀scenarios฀include฀the฀availability฀ of฀natural฀gas฀used฀for฀compressing฀gas฀at฀filling฀stations,฀the฀exact฀ fuel฀cycle฀carbon฀emission฀for฀gasoline,฀natural฀gas,฀and฀fuels฀used฀for฀ electric฀power฀production.฀฀These฀minor฀assumptions฀differ฀very฀little฀ among฀the฀scenarios฀and฀therefore฀do฀not฀“cause”฀the฀variations฀driven฀ by฀the฀key฀assumptions. An,฀F.฀2003. An,฀F.฀2003.฀GHG฀Emissions฀and฀Oil฀Consumptions฀from฀฀ Transportation฀Sectors฀in฀US฀and฀China:฀Current฀Status฀and฀฀ Future฀Trend.฀PowerPoint฀Presentation.฀Sustainable฀Multi-Modal฀ Transportation฀for฀Chinese฀Cities฀International฀Seminar.฀฀ Shanghai,฀China.฀Available฀at:฀http://www.autoproject.org.cn/ Chinese/new_advance_cn/2003_shanghai.pdf฀(May฀10,฀2005).฀ ฀ 1 An,฀F.฀and฀A.฀Sauer.฀2004.฀Comparison฀of฀Automobile฀Fuel฀฀ An,฀F.฀and฀A.฀Sauer.฀2004. Efficiency฀and฀GHG฀Emissions฀Standards฀around฀the฀World.฀Pew฀ Center฀on฀Global฀Climate฀Change.฀ Bezlova,฀Antoaneta.฀2005. Bezlova,฀Antoaneta.฀2005.฀Suspicions฀Remain฀over฀China’s฀฀ Greeting฀of฀Kyoto฀Protocol.฀IPS-Inter฀Press฀Service.฀Available฀at:฀ http://www.ipsnews.net/interna.asp?idnews=27475฀(May฀9,฀2005).฀ BP.฀2004.฀Energy฀in฀Focus.฀BP฀Statistical฀Review฀of฀World฀฀ BP.฀2004. Energy.฀June.฀ Breithaupt,฀Manfred.฀2002. Breithaupt,฀Manfred.฀2002.฀“Module฀1d:฀Economic฀Instruments.”฀Sustainable฀Transport:฀A฀Sourcebook฀for฀Policy-makers฀in฀ Developing฀Cities.฀GTZ,฀TZ฀Verlagsgesellschaft฀mbH. Brown,฀Warren.฀2004.฀“Automakers฀find฀China฀ripe฀for฀new฀ Brown,฀Warren.฀2004. technology.”฀Washington฀Post.฀Oct.฀17. Carruthers,฀Robin.฀2002. Carruthers,฀Robin.฀2002.฀Implementing฀a฀Transport฀Fuel฀Charge฀ in฀China.฀East฀Asia฀Transport฀Sector฀Unit.฀The฀World฀Bank.฀ CATARC.฀2004. CATARC.฀2004.฀China฀Automotive฀Industry฀Yearbook.฀China฀ Automotive฀Technology฀&฀Research฀Center.฀Tianjin,฀China.฀ Chen,฀Changhong฀et฀al.฀2005. Chen,฀Changhong฀et฀al.฀2005.฀Shanghai฀Mobile฀Source.฀฀ Emissions฀Inventory฀Study.฀Final฀Report.฀Shanghai฀Academy฀of฀ Environmental฀Sciences.฀฀ Delucchi,฀Mark฀A.฀2005.฀Research฀Scientist,฀Institute฀฀ Delucchi,฀Mark฀A.฀2005. of฀Transportation฀Studies,฀University฀of฀California฀–฀Davis.฀ Personal฀Communication. Demirdöven,฀N.฀and฀J.฀Deutch.฀2004. Demirdöven,฀N.฀and฀J.฀Deutch.฀2004.฀“Hybrid฀Cars฀Now,฀฀ Fuel฀Cell฀Cars฀Later.”฀Science.฀Vol.฀305:฀974-976. Diesel฀net.฀2005. Diesel฀net.฀2005.฀Emission฀Standards.฀European฀Union.฀฀ Available฀at:฀http://www.dieselnet.com/standards/eu/ld.html฀ (Oct.฀6,฀2005).฀ Duvall,฀M.฀et฀al.฀2002. Duvall,฀M.฀et฀al.฀2002.฀Comparing฀the฀Benefits฀and฀Impacts฀฀ of฀Hybrid฀Electric฀Vehicle฀Options฀for฀Compact฀Sedan฀and฀Sport฀฀ Utility฀Vehicles.฀Technical฀Report,฀Electric฀Power฀Research฀฀ Institute฀(EPRI). European฀Commission฀Directive฀70/220/EEC.฀2002. European฀Commission฀Directive฀70/220/EEC.฀2002.฀Official฀ Journal฀of฀the฀European฀Communities.฀The฀European฀Parliament.฀ Gallagher,฀K.S.฀2003.฀“Foreign฀Technology฀in฀China’s฀AutomoGallagher,฀K.S.฀2003. bile฀Industry:฀Implications฀for฀Energy,฀Economic฀Development,฀ and฀Environment.”฀China฀Environment฀Series.฀Woodrow฀Wilson฀ Center฀for฀International฀Scholars,฀Washington฀DC.฀฀฀ He,฀K.฀and฀C.฀Cheng.฀1999.฀“Present฀and฀Future฀Pollution฀ He,฀K.฀and฀C.฀Cheng.฀1999. from฀Urban฀Transport฀in฀China.”฀China฀Environmental฀Series,฀3.฀ Woodrow฀Wilson฀Center.฀ 64 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST He,฀D.฀2003. He,฀D.฀2003.฀Natural฀Gas฀Vehicle฀Development฀in฀China.฀฀ Presentation฀at฀Better฀Air฀Quality฀(BAQ)฀2003.฀The฀China฀฀ Sustainable฀Energy฀Program,฀Energy฀Foundation฀Beijing.฀฀฀ OICA฀(International฀Association฀of฀Automobile฀Manufacturers).฀ 2005.฀“OICA฀Statistics”฀(for฀2004฀and฀2000)฀Available฀at:฀฀ 2005. http://www.oica.net/htdocs/statistics/statistics.htm฀(June฀7,฀2005). He,฀Kebin฀et฀al.฀2004.฀“Oil฀Consumption฀and฀CO2฀Emissions฀ He,฀Kebin฀et฀al.฀2004.฀ in฀China’s฀Road฀Transport:฀Current฀Status,฀Future฀Trends,฀and฀ Policy฀Implications.”฀Energy฀Policy,฀article฀in฀press.฀฀ Oil฀Market฀Report.฀2005.฀IEA.฀Available฀at:฀http://omrpublic. Oil฀Market฀Report.฀2005. iea.org/฀(October฀6,฀2005).฀ Hook,฀Walter.฀2002. Hook,฀Walter.฀2002.฀“Module฀3d:฀Preserving฀and฀Expanding฀ the฀Role฀of฀Non-motorized฀Transport.”฀Sustainable฀Transport:฀ A฀Sourcebook฀for฀Policy-makers฀in฀Developing฀Cities.฀GTZ,฀TZ฀ Verlagsgesellschaft฀mbH. Huang,฀Y.฀2005.฀“Leveraging฀the฀Chinese฀Tax฀System฀to฀Promote฀ Huang,฀Y.฀2005.฀ Clean฀Vehicles.”฀CATARC.฀Studies฀on฀International฀Fiscal฀Policies฀ for฀Sustainable฀Transportation.฀Energy฀Foundation.฀฀฀฀฀ IEA฀(International฀Energy฀Agency).฀2000.฀ IEA฀(International฀Energy฀Agency).฀2000.฀The฀Road฀from฀Kyoto:฀ Current฀CO2฀and฀Transport฀Policies฀in฀the฀IEA.฀Paris:฀OECD/IEA.฀ IEA.฀2004a.฀World฀Energy฀Outlook.฀Paris:฀OECD/IEA.฀฀ IEA.฀2004a. IEA.฀2004b. IEA.฀2004b.฀Energy฀Balances฀for฀OECD฀Countries฀and฀Energy฀ Balances฀for฀non-OECD฀Countries฀(2004฀editions).฀Paris:฀฀ OECD/IEA.฀ IEA.฀2004c.฀CO2฀Emissions฀from฀Fuel฀Combustion฀(2004฀edition).฀ IEA.฀2004c.฀ Paris:OECD/IEA.฀Available฀at:฀http://data.iea.org/ieastore/co2_ main.asp. Johansson-Stenman,฀O.฀and฀L.฀Schipper.฀1997. Johansson-Stenman,฀O.฀and฀L.฀Schipper.฀1997.฀“Measuring฀ Long-run฀Automobile฀Fuel฀Demand;฀Separate฀Estimations฀฀ of฀Vehicle฀Stock,฀Mean฀Fuel฀Intensity,฀and฀Mean฀Annual฀฀ Driving฀Distance.”฀Journal฀of฀Transport฀Economics฀and฀Policy฀ 31(3):฀277-92. Kiang,฀N.฀and฀L.฀Schipper.฀1996. Kiang,฀N.฀and฀L.฀Schipper.฀1996.฀“Energy฀Trends฀in฀the฀Japanese฀ Transportation฀Sector.”฀Transport฀Policy฀3(1/2):฀21-35.฀ Lan,฀X.฀2005. Lan,฀X.฀2005.฀“What฀Will฀the฀Kyoto฀Protocol฀Mean฀for฀the฀ Largest฀Developing฀Country฀in฀the฀World?”฀Beijing฀Review฀11.฀ Available฀at:฀http://www.bjreview.com.cn/En-2005/05-11-e/฀ 11-china-2.htm฀(May฀6).฀ Lave,฀L.B.฀et฀al.฀1995. Lave,฀L.B.฀et฀al.฀1995.฀“Environmental฀Implications฀of฀Electric฀ Cars.”฀Science฀268(5213):฀993-995.฀ Li,฀J.฀2004.฀“Euro฀III฀in฀the฀Pipeline.”฀Global฀Times.฀Available฀฀ Li,฀J.฀2004.฀ at:฀http://www.china.org.cn/english/2004/Aug/103326.htm฀ (June฀7,฀2005).฀ Li,฀Y.฀2000. Li,฀Y.฀2000.฀“The฀Costs฀of฀Implementing฀the฀Kyoto฀Protocol฀฀ and฀its฀Implications฀to฀China.”฀International฀Review฀for฀฀ Environmental฀Strategies฀1(1):฀159-174.฀Institute฀for฀Global฀ Environmental฀Strategies.฀฀฀ People’s฀Government฀of฀Shanghai฀Municipality.฀2002. People’s฀Government฀of฀Shanghai฀Municipality.฀2002.฀“Shanghai฀ Metropolitan฀Transport฀White฀Paper.”฀Document฀No.฀[2002]฀ 35.฀(April฀30). Plotkin,฀S.฀et฀al.฀2001. Plotkin,฀S.฀et฀al.฀2001.฀Hybrid฀Electric฀Vehicle฀Technology฀Assessment:฀Methodology,฀Analytical฀Issues,฀and฀Interim฀Results.฀Center฀ for฀Transportation฀Research,฀Energy฀Systems฀Division,฀Argonne฀ National฀Laboratory. Qin฀Chuan฀and฀Zhu฀Baoxia.฀2004. Qin฀Chuan฀and฀Zhu฀Baoxia.฀2004.฀“Government฀moves฀to฀ comply฀with฀Kyoto.”฀China฀Daily.฀Available฀at:฀http://www. chinadaily.com.cn/english/doc/2004-11/17/content_392361. htm฀(May฀9,฀2005).฀฀฀ Rubin,฀J.฀2003. Rubin,฀J.฀2003.฀“Driving฀to฀New฀Sources฀of฀Transportation฀ Energy:฀Gaining฀Flexibility,฀Ensuring฀Supply,฀and฀Reducing฀ Emissions.”฀TR฀News฀226.฀(May—June)฀Transportation฀Research฀ Board. Santini,฀D.฀et฀al.฀2001.฀Hybrid฀Electric฀Vehicle฀Technology฀AssessSantini,฀D.฀et฀al.฀2001. ment:฀Methodology,฀Analytical฀Issues,฀and฀Interim฀Results.฀Center฀ for฀Transportation฀Research,฀Argonne฀National฀Laboratory.฀ United฀States฀Department฀of฀Energy.฀฀ Sauer,฀A.฀and฀F.฀An.฀2004.฀Taking฀the฀High฀(Fuel฀Economy)฀฀ Sauer,฀A.฀and฀F.฀An.฀2004.฀ Road:฀What฀Do฀the฀New฀Chinese฀Fuel฀Economy฀Standards฀Mean฀฀ for฀Foreign฀Automakers฀in฀China?฀Washington,฀DC:฀World฀฀ Resources฀Institute.฀฀฀ Schipper,฀L.,฀C.฀Marie-Lilliu,฀and฀R.฀Gorham.฀2000. Schipper,฀L.,฀C.฀Marie-Lilliu,฀and฀R.฀Gorham.฀2000.฀Flexing฀the฀ Link฀between฀Transport฀and฀Greenhouse฀Gas฀Emissions:฀A฀Path฀for฀ the฀World฀Bank.฀Paris:฀IEA.฀ Schipper,฀Lee฀and฀Wei-Shieun฀Ng.฀2005. Schipper,฀Lee฀and฀Wei-Shieun฀Ng.฀2005.฀“Rapid฀Motorization฀ in฀China:฀Environmental฀and฀Social฀Challenges.”฀Background฀ paper฀for฀Connecting฀East฀Asia:฀A฀New฀Framework฀for฀Infrastructure.฀Asian฀Development฀Bank,฀Japan฀Bank฀for฀International฀ Cooperation,฀and฀the฀World฀Bank.฀Available฀at:฀http://lnweb18. worldbank.org/eap/eap.nsf/Attachments/background+2/$File/ China_Motorization.pdf฀(June฀16,฀2005). Schipper,฀Lee฀et฀al.฀2002. Schipper,฀Lee฀et฀al.฀2002.฀Rapid฀Motorization฀in฀the฀Largest฀฀ Countries฀in฀Asia:฀Implication฀for฀Oil,฀Carbon฀Dioxide฀and฀฀ Transportation.฀Paris:฀IEA.฀฀฀ Mao,฀Z.฀et฀al.฀2001.฀ Mao,฀Z.฀et฀al.฀2001.฀Traffic฀and฀Urban฀Air฀Pollution:฀The฀Case฀of฀ Xi’an฀city,฀P.R.฀China.฀Presented฀at฀the฀Asian฀Development฀Bank฀ (ADB)฀Transport฀Planning,฀Demand฀Management,฀and฀Air฀ Quality฀Workshop,฀Manila,฀Philippines,฀Feb.฀26—27.฀Available฀ at:฀http://www.adb.org/Documents/Events/2002/RETA5937/ Manila/downloads/tp_15C_maozhongan.PDF฀(June฀7,฀2005).฀ Menon,฀G.฀2000.฀“ERP฀in฀Singapore:฀A฀Perspective฀One฀Year฀ Menon,฀G.฀2000. On.”฀The฀ERP฀Experience฀in฀Singapore,฀tec,฀February.฀฀ C H IN A ฀ MOTOR IZATION ฀ TR EN D S 65 US฀EPA.฀2002.฀ US฀EPA.฀2002.฀Clean฀Alternative฀Fuels:฀Compressed฀Natural฀฀ Gas.฀EPA420-F-00-033.฀Transportation฀and฀Air฀Quality,฀ Transportation฀and฀Regional฀Programs฀Division,฀United฀States฀ Environmental฀Protection฀Agency.฀ US฀DOE.฀1999. US฀DOE.฀1999.฀Alternative฀Fuel฀Case฀Study:฀Barwood฀Cab฀Fleet฀ Study฀Summary.฀Office฀of฀Energy฀Efficiency฀and฀Renewable฀ Energy,฀United฀States฀Department฀of฀Energy.฀ Walsh,฀Michael฀P.฀1996.฀“Theme฀Paper฀2:฀Motor฀Vehicle฀฀ Walsh,฀Michael฀P.฀1996. Pollution฀Control฀in฀China:฀An฀Urban฀Challenge.”฀China’s฀Urban฀Transport฀Development฀Strategy.฀Proceedings฀of฀a฀symposium฀ in฀Beijing,฀November฀8–10,฀1995.฀(eds.฀S.฀Stares฀and฀Liu฀Zhi).฀ The฀World฀Bank฀Discussion฀Paper฀No.฀352,฀the฀World฀Bank.฀ Walsh,฀Michael฀P.฀2000.฀“Transportation฀and฀the฀Environment฀ Walsh,฀Michael฀P.฀2000. in฀China.”฀China฀Environment฀Series฀(3).฀Woodrow฀Wilson฀฀ Center฀Environmental฀Change฀and฀Security฀Project.฀The฀฀ Woodrow฀Wilson฀Center. Walsh,฀Michael฀P.฀2003a.฀The฀Need฀for฀and฀Potential฀Benefits฀฀ Walsh,฀Michael฀P.฀2003a. of฀Advanced฀Technology฀Vehicles฀in฀China.฀Hybrid฀Vehicle฀฀ Technology฀Workshop.฀The฀China฀Sustainable฀Program,฀the฀ Energy฀Foundation.฀ Walsh,฀Michael฀P.฀2003b.฀“Motor฀Vehicle฀Pollution฀and฀Fuel฀ Walsh,฀Michael฀P.฀2003b. Consumption฀in฀China:฀the฀Long-term฀Challenges.”฀Energy฀for฀ Sustainable฀Development฀VII(4).฀ Schwaab,฀J.฀and฀S.฀Thielmann.฀2002.฀ Schwaab,฀J.฀and฀S.฀Thielmann.฀2002.฀Policy฀Guidelines฀for฀฀ Road฀Transport฀Pricing:฀A฀Practical฀Step-by-step฀Approach.฀United฀ Nations฀Economic฀and฀Social฀Commission฀for฀Asia฀and฀the฀ Pacific฀&฀Deutsche฀Gesellschaft฀fur฀Technische฀Zusammenarbeit฀ (GTZ)฀GmbH.฀฀ SMART.฀2004. SMART.฀2004.฀Technical฀Data.฀Smart฀Fortwo฀Coupe฀&฀Smart฀ Fortwo฀Cabrio฀Catalogue.฀Available฀at:฀www.thesmart.co.uk.฀฀ (Feb.฀2,฀2005).฀฀฀ Stares,฀S.฀and฀Z.฀Liu.฀1996. Stares,฀S.฀and฀Z.฀Liu.฀1996.฀“Motorization฀in฀Chinese฀Cities:฀฀ Issues฀and฀Actions.”฀In฀China’s฀Urban฀Transport฀Development฀ Strategy.฀Proceedings฀of฀a฀Symposium฀in฀Beijing,฀November฀8–10,฀฀ 1995,฀World฀Bank฀Discussion฀Paper฀No.฀352.฀East฀Asia฀and฀ Pacific฀Region฀Series,฀the฀World฀Bank.฀ The฀National฀Academies.฀2003. The฀National฀Academies.฀2003.฀Personal฀Cars฀and฀China.฀฀ Chinese฀Academy฀of฀Engineering,฀National฀Research฀Council฀of฀ the฀National฀Academies.฀The฀National฀Academies฀Press.฀ UNFCCC.฀1992.฀ UNFCCC.฀1992.฀United฀Nations฀Framework฀Convention฀on฀ Climate฀Change.฀ UNFCCC.฀1997.฀ UNFCCC.฀1997.฀Kyoto฀Protocol฀to฀the฀Climate฀Change฀฀ Convention.฀ Walsh,฀Michael฀P.฀2004.฀“Motor฀Vehicle฀Pollution฀and฀Fuel฀฀ Walsh,฀Michael฀P.฀2004. Consumption฀in฀China.”฀Urbanization,฀Energy,฀and฀Air฀Pollution฀ in฀China:฀The฀Challenges฀Ahead,฀Proceedings฀of฀a฀Symposium.฀ The฀National฀Academies฀Press. Wang,฀H.฀and฀C.฀Wu.฀2004.฀“Environmental฀Institutions฀in฀ Wang,฀H.฀and฀C.฀Wu.฀2004. China.”฀Urbanization,฀Energy,฀and฀Air฀Pollution฀in฀China:฀฀ The฀Challenges฀Ahead,฀Proceedings฀of฀a฀Symposium.฀The฀฀ National฀Academies฀Press. Wang,฀Michael.฀2003. Wang,฀Michael.฀2003.฀Hybrid฀Electric฀Vehicle฀Status฀and฀฀ Development฀in฀the฀U.S.฀Hybrid฀Vehicle฀Technology฀Workshop.฀ The฀China฀Sustainable฀Program,฀the฀Energy฀Foundation.฀฀฀ Wang,฀M.Q.฀and฀H.S.฀Huang.฀1999. Wang,฀M.Q.฀and฀H.S.฀Huang.฀1999.฀A฀Full฀Fuel-Cycle฀Analysis฀ of฀Energy฀and฀Emissions฀Impacts฀of฀Transportation฀Fuels฀Produced฀ from฀Natural฀Gas.฀Center฀for฀Transportation฀Research,฀Energy฀ Systems฀Division,฀Argonne฀National฀Laboratory.฀฀ Xinhuanet.฀2004a.฀“China฀New฀Auto฀Rules฀Explained฀by฀the฀ Xinhuanet.฀2004a.฀ China฀Daily.”฀APECC฀News฀Briefing,฀1(2)฀July.฀Supplementary฀ Issue฀on฀China’s฀New฀Auto฀Policy.฀Auto฀Project฀on฀Energy฀and฀ Climate฀Change฀(APECC),฀China฀Program.฀฀฀ Xinhuanet.฀2004b. Xinhuanet.฀2004b.฀“China฀Issues฀New฀Auto฀Rules.”฀APECC฀ News฀Briefing,฀1(1)฀July.฀Auto฀Project฀on฀Energy฀and฀Climate฀ Change฀(APECC),฀China฀Program. Xinhuanet.฀2004c. Xinhuanet.฀2004c.฀“BP฀Claims฀World฀Reserves฀of฀Oil,฀Gas฀in฀ Good฀Shape.”฀APECC฀News฀Briefing,฀1(1)฀July.฀Auto฀Project฀on฀ Energy฀and฀Climate฀Change฀(APECC),฀China฀Program. Yan,฀W.฀2005.฀ Yan,฀W.฀2005.฀“New฀Start฀for฀Clean฀Air:฀The฀Kyoto฀Protocol฀ Places฀New฀Limits฀on฀Global฀Emissions,฀but฀Challenges฀Remain.”฀฀ Beijing฀Review฀10.฀Available฀at:฀http://www.bjreview.com.cn/฀ En-2005/05-10-e/10-world-5.htm฀(May฀6,฀2005).฀฀฀฀ 66 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Appendix฀1.฀SCENARIO฀AND฀TECHNICAL฀ASSUMPTIONS฀ Appendix฀1. The฀variables฀in฀this฀chapter฀include฀basic฀motorization฀ factors฀and฀trends฀in฀China,฀estimates฀of฀car฀ownership,฀ car฀use,฀and฀fuel฀economy.฀The฀number฀of฀cars฀in฀China฀ in฀a฀given฀future฀year฀is฀the฀parameter฀with฀the฀greatest฀ likely฀variation.฀฀This฀and฀other฀variables฀are฀projected฀into฀ the฀future฀with฀trends฀derived฀from฀neighboring฀countries฀ with฀higher฀income฀levels.฀Description฀of฀the฀assumptions฀ include฀the฀following:฀ 3.฀Final฀and฀Primary฀Energy฀Consumption Total฀energy฀use฀consists฀of฀the฀numbers฀of฀cars,฀ distances฀cars฀traveled,฀and฀fuel฀economy฀values฀assumed,฀ which฀will฀depend฀on฀the฀type฀of฀vehicles฀such฀as฀HEVs,฀ conventional฀gasoline฀cars฀(including฀mini-cars),฀CNG฀ cars,฀and฀electric฀cars.฀For฀electric฀power,฀the฀electricity฀per฀ kilometer฀reflects฀what฀is฀put฀into฀the฀battery฀(Delucchi,฀ 2005).฀Hence,฀total฀energy฀consumption฀(EN)฀is: 1.฀Car฀use:฀distance฀traveled฀per฀car฀per฀year The฀current฀average฀annual฀distance฀traveled฀in฀China฀ is฀18,000฀kilometers฀per฀car,฀excluding฀taxis฀whose฀annual฀ usage฀is฀probably฀well฀above฀50,000฀kilometers฀(Chen฀et฀ al.,฀2005).฀The฀18,000฀average฀distance฀is฀swollen฀by฀the฀ large฀number฀of฀government฀and฀company฀cars฀with฀high฀ usage.฀Since฀the฀private฀car฀fleet฀is฀expected฀to฀grow฀much฀ faster฀than฀the฀taxi฀or฀government/company฀fleet,฀average฀฀ use฀will฀fall.฀Indeed,฀as฀the฀number฀of฀cars฀grew฀from฀฀ low฀numbers฀in฀Japan฀or฀West฀Germany,฀usage฀per฀car฀fell฀ slowly.฀This฀reflected฀both฀fewer฀people฀“sharing”฀the฀same฀ car,฀and฀more฀truly฀private฀cars฀as฀opposed฀to฀heavily฀used฀ company฀cars.฀ EN฀=฀∑฀(Ne฀*฀FIe฀*฀De )฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀(1) ฀ where,฀FIe฀is฀the฀fuel฀intensity฀(the฀inverse฀of฀fuel฀economy)฀for฀each฀car฀type฀e฀(in฀energy/km),฀Ne฀is฀the฀total฀ number฀of฀cars฀of฀each฀type,฀and฀De฀is฀the฀average฀distance฀ traveled฀by฀each฀type฀of฀car.฀Electricity฀is฀converted฀to฀ primary฀energy฀using฀the฀figures฀modeled฀in฀World฀Energy฀ Outlook฀2004.฀ ฀ 4.฀Carbon฀Emissions฀ Carbon฀emissions฀are฀calculated฀for฀each฀fuel฀using฀ IPCC฀coefficients฀of฀CO2฀(converted฀to฀carbon)฀per฀unit฀ of฀energy฀in฀fuel฀at฀the฀lower฀heating฀value.฀To฀model฀ approximately฀the฀full฀fuel฀cycle฀emissions฀of฀each฀fuel,฀ we฀have฀added฀7฀percent฀“overhead”฀to฀CNG฀and฀oil,฀and฀ 5฀percent฀to฀utility฀fuels.฀The฀lower฀figure฀for฀utility฀fuels฀ reflects฀the฀fact฀that฀they฀are฀largely฀delivered฀in฀much฀ greater฀quantities,฀and฀at฀least฀for฀oil,฀not฀refined฀as฀much฀ as฀is฀gasoline฀delivered฀to฀vehicles.฀The฀overall฀results฀are฀ not฀very฀sensitive฀to฀the฀assumed฀“overheads”฀we฀have฀ added฀here.฀ 2.฀Fuel฀consumption For฀each฀scenario,฀fuel฀use฀is฀calculated฀as฀a฀product฀of฀ the฀number฀of฀vehicles,฀distance฀traveled฀per฀car฀per฀year,฀ and฀fuel฀per฀unit฀of฀distance฀(fuel฀economy),฀in฀accordance฀ with฀the฀ASIF฀model฀of฀Schipper฀et฀al.฀(2000).฀With฀the฀ introduction฀of฀gasoline฀hybrids,฀mini-cars,฀CNG฀vehicles,฀ and฀electric฀vehicles,฀separate฀assumptions฀are฀made฀for฀fuel฀ economy฀of฀each฀kind฀of฀vehicle.฀Fuel฀economy฀depends฀ on฀both฀car฀weight/power฀and฀the฀efficiency฀of฀propulsion.฀We฀cannot฀separate฀these฀two฀variables,฀but฀we฀can฀ estimate฀the฀range฀of฀fuel฀economy฀expected฀for฀a฀car฀of฀ 3,000฀kilograms฀(for฀example,฀a฀Hummer)฀in฀contrast฀to฀ one฀weighing฀close฀to฀750฀kilograms฀(for฀example,฀a฀฀ Mercedes฀Smart).฀Lying฀between฀these฀extremes฀is฀the฀average฀new฀Chinese฀car฀of฀1,500฀kilograms.฀Previous฀analysis฀ (He฀et฀al.,฀2004)฀has฀used฀the฀road฀fuel฀economy฀at฀about฀ 11฀km/liter,฀or฀9.1฀liter/100฀km.฀The฀best฀estimate฀of฀ China’s฀on-road฀fuel฀economy฀today฀is฀9.5฀liters/100฀km.฀ C H IN A ฀ MOTOR IZATION ฀ TR EN D S 67 Editor's฀Note R ural฀electrification฀is฀a฀pivotal฀development฀issue฀in฀many฀ parts฀of฀the฀world.฀Electricity฀ provides฀a฀huge฀range฀of฀development฀ advantages,฀facilitating฀better฀education,฀better฀health,฀and฀more฀economic฀ activity.฀There฀are฀few฀higher฀priorities฀ than฀providing฀modern฀energy฀services฀ to฀the฀poor,฀mainly฀rural,฀populations฀ around฀the฀world฀that฀lack฀them.฀฀ But฀it฀is฀also฀very฀hard฀to฀deliver฀and฀ requires฀the฀establishment฀of฀effective฀institutions,฀delivery฀mechanisms฀ and฀policy฀incentives.฀Nowhere฀better฀ illustrates฀these฀challenges฀than฀India.฀ Despite฀repeated฀efforts,฀56฀percent฀of฀ Indian฀households฀have฀no฀electricity฀ supply,฀and฀the฀problem฀is฀growing฀ worse฀as฀new฀connections฀fail฀to฀keep฀ pace฀with฀population฀growth.฀The฀฀ new฀government฀has฀set฀ambitious฀ targets฀for฀providing฀full฀electrification,฀ but฀it฀is฀far฀from฀clear฀that฀these฀goals฀ can฀be฀met.฀ The฀authors฀consider฀three฀scenarios฀ under฀which฀electrification฀goals฀could฀ be฀met:฀an฀extension฀of฀the฀grid฀using฀ India’s฀existing฀generation฀mix;฀a฀ scenario฀dominated฀by฀off-grid฀diesel฀ generators;฀and฀one฀dominated฀by฀offgrid฀renewable฀energy฀generation. It฀comes฀as฀no฀surprise฀that฀the฀scenario฀dominated฀by฀renewable฀energy฀ results฀in฀significantly฀lower฀GHG฀ emissions—depending฀on฀demand฀levels฀this฀approach฀saves฀from฀14฀to฀100฀ million฀tons฀of฀CO2฀per฀year฀compared฀ to฀the฀grid-based฀model.฀The฀authors฀ also฀point฀out฀that฀the฀longer-term฀ effect฀could฀be฀more฀important฀still:฀ if฀renewable฀energy฀is฀important฀in฀ the฀rural฀electricity฀mix฀now฀it฀will฀ probably฀remain฀so฀as฀demand฀grows฀ in฀the฀future.฀However,฀the฀choices฀for฀ 68 India฀need฀to฀be฀taken฀primarily฀on฀ non-climate฀grounds,฀and฀the฀authors฀ consider฀a฀number฀of฀these:฀how฀fast฀ electrification฀can฀be฀delivered,฀the฀ quality฀of฀supply,฀cost฀issues,฀and฀implications฀for฀India’s฀energy฀security. The฀authors฀express฀serious฀reservations฀as฀to฀whether฀India’s฀creaking฀ power฀delivery฀institutions฀can฀be฀ expected฀to฀deliver฀grid฀electrification฀ in฀rural฀areas฀before฀fundamental฀ problems฀are฀solved.฀It฀is฀hard฀to฀ envisage฀how฀a฀grid-based฀electrification฀can฀meet฀the฀government’s฀targets.฀ Dispersed฀diesel฀generation฀is฀far฀more฀ promising,฀with฀entrepreneurial฀suppliers฀already฀springing฀to฀the฀aid฀of฀ customers฀eager฀to฀escape฀erratic฀grid฀ power,฀and฀in฀many฀ways฀it฀can฀be฀ expected฀to฀play฀an฀important฀role.฀ However,฀the฀authors฀point฀out฀that฀ high฀levels฀of฀diesel฀use฀do฀present฀a฀ significant฀import฀dependence฀and฀ security฀problem฀for฀India.฀This฀“Diesel฀First”฀scenario฀leads฀to฀an฀increase฀ in฀oil฀product฀imports฀of฀between฀6฀ and฀41฀percent฀over฀2004฀levels,฀as฀ opposed฀to฀between฀1฀and฀11฀percent฀ in฀the฀other฀two฀scenarios.฀What฀this฀ means฀in฀cost฀terms฀depends฀on฀the฀ price฀of฀oil;฀the฀authors฀consider฀$30฀ and฀$70฀per฀barrel฀as฀an฀indicative฀ range.฀The฀Diesel฀First฀scenario฀under฀ high฀demand฀assumptions฀adds฀$8.4฀ billion฀per฀year฀(at฀$30฀per฀barrel฀ crude)฀or฀$15.8฀billion฀per฀year฀(at฀ $70).฀The฀security฀implications฀of฀this฀ additional฀dependence฀are฀well฀beyond฀ the฀scope฀of฀this฀chapter฀to฀predict,฀but฀ it฀is฀safe฀to฀say฀that฀such฀significant฀ additional฀import฀dependence฀will฀at฀ least฀be฀a฀concern. A฀model฀based฀on฀off-grid฀renewable฀energy฀therefore฀offers฀considerable฀ attractions,฀provided฀that฀appropriate฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST delivery฀mechanisms฀and฀policy฀incentives฀can฀be฀developed.฀Although฀India฀ already฀offers฀a฀range฀of฀support฀for฀ renewable฀energy,฀it฀remains฀a฀relatively฀minor฀part฀of฀the฀energy฀mix.฀ The฀authors฀suggest฀that฀the฀advantages฀they฀identify฀here฀partly฀make฀the฀ case฀for฀a฀much฀more฀significant฀use฀of฀ renewable฀energy฀technologies.฀But฀are฀ these฀reasons฀enough?฀Although฀high฀ fuel฀prices฀tilt฀life-cycle฀costs฀in฀favor฀ of฀renewable฀energy,฀the฀relatively฀high฀ capital฀cost฀of฀these฀technologies฀is฀a฀ major฀barrier฀in฀a฀country฀like฀India฀ where฀capital฀is฀expensive. This฀is฀an฀interesting฀case฀in฀which฀ framing฀the฀challenge฀as฀an฀SD-PAM฀ may฀make฀a฀difference.฀India฀must฀ reach฀its฀goal฀of฀providing฀electricity฀to฀ all฀its฀citizens,฀and฀the฀international฀ community฀has฀an฀interest฀in฀helping฀ it฀meet฀this฀goal฀on฀a฀low-emission฀ trajectory.฀India฀would฀see฀substantial฀ benefits฀from฀having฀a฀high฀use฀of฀ renewable฀energy฀in฀meeting฀rural฀ electricity฀demand,฀but฀is฀hampered฀ by฀the฀lack฀of฀low-cost฀capital.฀This฀ is฀an฀area฀in฀which฀the฀international฀ community฀is฀well-placed฀(through฀international฀lending฀institutions,฀export฀ credit฀agencies฀and฀other฀financial฀ support)฀to฀help. Compared฀to฀the฀examples฀we฀have฀ considered฀earlier฀in฀this฀volume,฀ the฀degree฀of฀assistance฀is฀likely฀to฀ be฀greater฀and฀will฀probably฀have฀a฀ greater฀financial฀component.฀But฀the฀ interests฀of฀both฀India฀and฀its฀international฀partners฀seem฀sufficiently฀ well-aligned฀to฀make฀this฀an฀attractive฀ area฀in฀which฀to฀explore฀the฀potential฀ for฀SD-PAMs. chapter฀v Pathways฀to฀Rural฀฀ Pathways฀to฀Rural฀฀ Electrification฀in฀India:฀฀฀ Electrification฀in฀India:฀ Are฀National฀Goals฀Also฀an฀International฀Opportunity? Navroz฀K.฀Dubash฀ ■ ฀Rob฀Bradley 1.฀INTRODUCTION In฀the฀first฀decade฀of฀the฀21st฀century,฀rural฀India฀ remains฀in฀darkness.฀While฀the฀rest฀of฀the฀country฀debates฀ whether฀or฀not฀India฀is฀shining฀(a฀catchy,฀but฀ultimately฀ unsuccessful฀election฀slogan),฀whether฀7฀to฀8฀percent฀ growth฀rates฀are฀sustainable,฀and฀whether฀or฀not฀India’s฀ creaky฀electricity฀infrastructure฀and฀cobwebbed฀institutions฀can฀support฀a฀21st฀century฀economy,฀these฀questions฀ are฀academic฀for฀more฀than฀half฀of฀India’s฀poorest฀households.฀They฀have฀no฀access฀to฀electricity. After฀a฀decade฀of฀inattention,฀however,฀rural฀electrification฀has฀slowly฀climbed฀up฀the฀political฀agenda.฀The฀ Electricity฀Act,฀passed฀in฀2003,฀promises฀a฀new฀approach฀ to฀rural฀electrification.฀Support฀for฀rural฀areas,฀including฀ electrification,฀was฀prominent฀in฀the฀electoral฀program฀of฀ the฀governing฀“United฀Progressive฀Alliance,”฀(UPA)฀which฀ came฀to฀power฀in฀mid-2004.฀Following฀bold฀declarations฀ of฀electricity฀for฀all฀within฀ambitious฀time฀frames,฀bureaucrats฀and฀technocrats฀have฀scrambled฀to฀prepare฀policies฀ and฀plans฀to฀meet฀these฀commitments.฀ This฀chapter฀is฀an฀attempt฀to฀better฀understand฀how฀ the฀country฀can฀best฀go฀about฀the฀enormous฀task฀of฀ providing฀electricity฀to฀half฀its฀population.฀Our฀premise฀ is฀that฀rural฀electrification฀is฀central฀to฀India’s฀development฀efforts,฀and฀that฀achieving฀this฀outcome฀should฀be฀ driven฀by฀national฀development฀goals,฀such฀as฀providing฀ electricity฀rapidly,฀effectively,฀cheaply฀and฀securely.฀We฀ evaluate—quantitatively฀where฀possible,฀otherwise฀qualitatively—a฀range฀of฀different฀approaches฀to฀rural฀electrification฀against฀these฀criteria.฀We฀add฀to฀this฀list฀the฀impact฀ of฀electrification฀on฀India’s฀national฀energy฀security฀and฀ its฀dependence฀on฀fossil-fuel฀imports.฀Consistent฀with฀the฀ approach฀of฀this฀volume,฀we฀also฀recognize฀that฀a฀major฀฀ effort฀like฀rural฀electrification฀in฀India฀also฀has฀potential฀ global฀climate฀implications—negative,฀if฀growing฀consumption฀rests฀primarily฀on฀fossil฀fuels,฀and฀positive,฀if฀electricity฀use฀displaces฀kerosene฀or฀reduces฀pressure฀on฀forests฀by฀ reducing฀the฀need฀for฀unsustainably-harvested฀wood.฀ PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 69 Regardless฀of฀the฀climate฀impacts,฀however,฀the฀development฀advantages฀of฀electrification฀should฀be฀pursued.฀ Since฀there฀are฀active฀global฀negotiations฀and฀deliberations฀on฀addressing฀the฀problem฀of฀climate฀change,฀it฀is฀ relevant฀to฀these฀global฀processes,฀and฀certainly฀to฀India’s฀ bargaining฀stance฀within฀them,฀to฀ask฀if฀those฀approaches฀ to฀rural฀electrification฀that฀best฀meet฀national฀development฀ goals฀are฀also฀those฀that฀minimize฀greenhouse฀gas฀(GHG)฀ emissions.฀If฀the฀rural฀electrification฀option฀that฀best฀meets฀ India’s฀development฀goals฀is฀consistent฀with฀climate฀reduction฀goals,฀the฀country฀has฀a฀potentially฀strong฀case฀to฀ make฀to฀the฀global฀community฀for฀international฀support฀ for฀India’s฀rural฀electrification.฀This฀chapter฀assesses฀the฀ strength฀of฀this฀claim. 1.1฀ Importance฀of฀electrification฀฀ for฀development Provision฀of฀energy฀services฀is฀a฀central฀element฀of฀a฀ development฀agenda.฀While฀electricity฀is฀by฀no฀means฀ the฀only฀source฀of฀energy฀for฀rural฀populations,฀as฀a฀high฀ quality฀source฀of฀energy,฀it฀is฀an฀important฀element฀in฀ a฀larger฀development฀framework.1฀Electricity฀reduces฀ household฀drudgery,฀frees฀up฀time,฀provides฀opportunities฀ for฀economic฀entrepreneurship,฀supports฀education,฀supports฀health-enhancing฀efforts฀through฀refrigeration฀and฀ pumped฀water,฀is฀critical฀for฀agriculture,฀and฀enables฀more฀ effective฀communication฀with฀the฀world฀beyond฀the฀village.฀Rural฀electrification฀can฀particularly฀benefit฀women.฀ Mathur฀and฀Mathur฀(2005)฀report฀that฀in฀households฀with฀ electricity,฀women฀spend฀significantly฀less฀time฀collecting฀ wood฀for฀fuel฀and,฀because฀of฀the฀availability฀of฀lighting,฀ are฀able฀to฀spend฀a฀portion฀of฀their฀day฀reading. Moreover,฀access฀to฀more฀efficient฀technologies฀such฀฀ as฀electricity฀for฀lighting฀can฀actually฀save฀money,฀in฀ addition฀to฀providing฀health฀and฀development฀benefits.฀ In฀rural฀India,฀poor฀households฀spend฀8฀percent฀of฀their฀ incomes฀(which฀are฀low฀in฀cash฀terms)฀on฀kerosene฀for฀ lighting฀(Saghir,฀2004),฀a฀proportion฀that฀is฀likely฀to฀fall฀ with฀use฀of฀electricity฀for฀lighting.฀ 70 1.2฀ India฀has฀a฀lot฀to฀do Rural฀electrification฀is฀hard฀to฀accomplish.฀Rural฀ households฀are฀remote฀and฀therefore฀costly฀to฀serve;฀they฀ do฀not฀use฀much฀electricity,฀which฀makes฀them฀relatively฀ unprofitable฀(under฀the฀prevalent฀tariff฀structure,฀they฀are฀ loss-making),฀and฀they฀are฀poor฀credit฀risks.฀In฀the฀recent฀ past,฀efforts฀at฀restructuring฀State฀Electricity฀Boards฀and฀ attracting฀private฀capital฀to฀the฀electricity฀sector฀have฀ contributed฀to฀the฀neglect฀of฀rural฀electrification฀(Singha฀ et฀al.,฀2004).฀While฀220,000฀villages฀were฀electrified฀in฀the฀ 1980s,฀just฀under฀40,000฀villages฀were฀electrified฀in฀the฀ 1990s฀(Ministry฀of฀Power,฀2003).2฀ India’s฀record฀since฀independence฀has฀been฀poor.฀In฀ 2001,฀78฀million฀of฀India’s฀138฀million฀households฀(56฀ percent)฀did฀not฀have฀any฀connection฀to฀an฀electricity฀supply฀(Ministry฀of฀Power,฀2003;฀World฀Bank,฀2004).฀At฀the฀ recent฀pace฀of฀a฀million฀households฀a฀year,฀India฀is฀actually฀ seeing฀an฀annual฀increase฀in฀numbers฀of฀households฀without฀electricity,฀since฀the฀household฀population฀is฀growing฀ even฀faster,฀at฀a฀rate฀of฀1.85฀million฀households฀a฀year฀ (World฀Bank,฀2004).฀India’s฀performance฀also฀falls฀well฀ behind฀international฀standards.฀China,฀for฀example,฀is฀well฀ on฀its฀way฀to฀complete฀electrification฀(Figure฀1฀and฀Box฀1).฀ In฀recent฀years,฀rural฀electrification฀has฀come฀back฀ to฀political฀center฀stage,฀driven฀by฀the฀realization฀of฀its฀ neglect฀and฀by฀a฀realignment฀of฀political฀forces.฀In฀mid2005,฀the฀UPA฀government฀announced฀the฀“Rajiv฀Gandhi฀ Grameen฀Vidyutikaran฀Yojana”฀or฀village฀electrification฀ scheme฀to฀electrify฀125,000฀villages฀and฀78฀million฀households฀in฀five฀years.฀This฀ambitious฀scheme฀promises,฀in฀ essence,฀to฀complete฀the฀task฀of฀rural฀electrification฀in฀one฀ massive฀five-year฀push.฀The฀scheme฀is฀even฀more฀ambitious,฀promising฀electricity฀for฀rural฀industry฀and฀livelihoods฀on฀a฀24-hour฀basis฀(Ministry฀of฀Power,฀2005a).฀The฀ backdrop฀for฀this฀announcement฀is฀the฀commitment฀to฀ rural฀India฀in฀the฀UPA฀government’s฀Common฀Minimum฀ Program฀and฀subsequent฀pronouncements฀about฀providing฀electricity฀to฀all฀remaining฀unelectrified฀households฀by฀ 2009.฀The฀previous฀National฀Democratic฀Alliance฀(NDA)฀ government฀sought฀to฀reach฀this฀milestone฀by฀2012.฀ The฀Indian฀government฀has฀a฀track฀record฀of฀underachieving฀on฀ambitious฀targets.฀Tongia฀(2003)฀notes฀that฀ “unlike฀in฀China,฀where฀the฀planning฀mechanism฀is฀often฀ gospel,฀in฀India฀actual฀plant฀constructions฀are฀typically฀ about฀half฀the฀official฀Plan฀target,฀and฀in฀recent฀years฀the฀ gap฀between฀Plans฀and฀reality฀has฀grown.”฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Although฀the฀chances฀that฀the฀government฀will฀redeem฀ its฀promise฀in฀full฀remain฀slight,฀there฀are฀at฀least฀two฀reasons฀to฀expect฀a฀more฀serious฀effort฀at฀rural฀electrification฀ than฀in฀the฀past.฀ First,฀the฀UPA฀government’s฀surprise฀victory฀in฀the฀ 2004฀general฀election฀is฀often฀attributed฀to฀a฀protest฀vote฀ from฀rural฀constituencies฀who฀felt฀excluded฀from฀the฀image฀of฀“India฀Shining”฀portrayed฀by฀the฀then-governing฀ NDA.3฀Whether฀this฀explanation฀is฀true฀or฀not,฀the฀perception฀is฀firmly฀rooted,฀and฀the฀UPA฀clearly฀sees฀its฀support฀as฀rural-driven.฀For฀this฀reason,฀rural฀development,฀ including฀electrification,฀is฀central฀to฀its฀electoral฀platform฀ and฀many฀of฀its฀policies฀in฀its฀year฀in฀government.฀The฀ UPA’s฀commitment฀to฀this฀agenda฀will฀help฀ensure฀that฀the฀ spotlight฀remains฀on฀rural฀electrification฀at฀least฀through฀ the฀electoral฀cycle. A฀second฀reason฀is฀the฀Electricity฀Act฀of฀2003.฀Previously,฀responsibility฀for฀electrification฀rested฀in฀the฀hands฀ of฀various฀state฀institutions,฀notably฀the฀Rural฀Electrification฀Corporation฀in฀coordination฀with฀the฀State฀Electricity฀ Boards฀(SEBs).฀Their฀performance฀was฀uneven,฀marked฀ by฀relatively฀rapid฀electrification฀in฀some฀decades฀and฀extremely฀low฀levels฀of฀activity฀in฀others,฀notably฀the฀1990s฀ (see฀Section฀2).฀Perhaps฀more฀significant฀than฀the฀pace฀of฀ new฀connections,฀the฀level฀and฀quality฀of฀service฀has฀been฀ poor,฀as฀rural฀electrification฀has฀been฀caught฀up฀in฀a฀larger฀ malaise฀of฀inefficient฀administration,฀poor฀technology,฀and฀ financial฀collapse฀that฀has฀afflicted฀the฀SEBs฀(World฀Bank,฀ 2004).฀Rural฀electrification,฀which฀is฀heavily฀loss-making,฀ actually฀has฀been฀an฀important฀contributing฀factor฀to฀this฀ financial฀imbroglio.฀ The฀Electricity฀Act฀of฀2003฀opens฀the฀electricity฀market฀ to฀new฀institutions฀and฀new฀thinking฀in฀rural฀electrification.฀It฀allows฀for฀decentralized฀provision฀of฀electricity฀ without฀prior฀need฀for฀a฀license฀by,฀for฀example,฀Panchayats฀(village฀councils),฀user฀association’s฀cooperatives,฀ NGOs,฀and฀franchisees.฀The฀success฀of฀this฀approach฀remains฀to฀be฀tested,฀and฀it฀certainly฀brings฀its฀own฀risks฀and฀ dangers,฀such฀as฀the฀potential฀for฀new฀unregulated฀entrants฀ to฀unduly฀exploit฀rural฀consumers฀(Dubash,฀2004).฀However,฀the฀change฀in฀approach฀certainly฀opens฀the฀door฀to฀a฀ great฀deal฀more฀activity,฀ferment,฀and฀experimentation฀in฀ rural฀electrification,฀and฀marks฀a฀departure฀from฀the฀past. The฀existence฀of฀new฀political฀momentum฀and฀supporting฀legislation฀behind฀rural฀electrification฀by฀no฀means฀ guarantees฀success฀in฀rapidly฀enhancing฀access฀to฀electricity฀ in฀rural฀India.฀Indeed,฀there฀remain฀considerable฀obstacles,฀ notably฀institutional฀and฀financial,฀to฀achieving฀rural฀฀ Figure฀1.฀฀Population฀Without฀Access฀to฀Electricity฀ 900 800 700 600 Millions 1.3฀ A฀New฀Political฀and฀฀ Institutional฀Context 500 400 300 200 100 0 1970 1980 1990 2000 2010 2020 North Africa Middle East East Asia/China Sub-Saharan Africa Latin America South Asia Source:฀International฀Energy฀Agency฀(2002b) electrification.฀For฀example,฀what฀service฀delivery฀฀ mechanism(s)฀are฀most฀appropriate฀to฀deliver฀rural฀ electricity฀services?฀How฀can฀electrification฀be฀sustainably฀ financed,฀whether฀through฀cost฀recovery฀or฀public฀฀ expenditures?฀Viably฀addressing฀such฀short-฀and฀mediumterm฀issues฀is฀necessary฀to฀jump-start฀India’s฀rural฀฀ electrification.฀In฀this฀paper,฀we฀recognize฀these฀central฀ and฀practical฀issues฀that฀stand฀in฀the฀way฀of฀rural฀electrification฀in฀India.฀These฀issues฀are฀extensively฀debated฀ within฀India฀and฀elsewhere;฀we฀draw฀on฀these฀debates฀฀ for฀portions฀of฀the฀analysis฀that฀follows.4฀ 1.4฀ Framework฀and฀Approach This฀chapter฀is฀focused฀on฀understanding฀the฀implications฀of฀alternative฀trajectories฀of฀rural฀electrification.฀We฀ understand฀this฀exploration฀to฀be฀complementary฀to,฀and฀฀ by฀no฀means฀a฀substitute฀for,฀work฀on฀the฀institutional฀฀ and฀financial฀concerns฀that฀are฀the฀primary฀roadblocks฀to฀ rural฀electrification.฀In฀assessing฀the฀promise฀of฀various฀฀ approaches฀to฀rural฀electrification,฀we฀examine฀the฀potential฀ PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 71 2030 Box฀1.฀฀The฀Chinese฀Success China฀and฀India฀are฀in฀many฀respects฀very฀different฀countries,฀but฀over฀the฀last฀ few฀decades฀they฀have฀faced฀similar฀electrification฀challenges.฀The฀difference฀in฀ the฀levels฀of฀success฀at฀rural฀electrification฀between฀the฀two฀countries฀is฀striking.฀ So฀how฀did฀China฀do฀it? For฀the฀first฀decade฀or฀so฀after฀the฀revolution฀(1949),฀electrification฀in฀rural฀ areas฀fell฀largely฀to฀the฀rural฀communities฀themselves.฀Increasingly฀aware฀of฀the฀ advantages฀of฀electric฀power,฀such฀communities฀established฀off-grid฀generation฀ using฀locally฀available฀fuels—coal,฀diesel,฀and฀hydropower.฀These฀efforts฀were฀ small-scale,฀typically฀used฀only฀for฀lighting฀and฀food฀processing.฀By฀1957,฀they฀ still฀accounted฀for฀around฀0.6฀percent฀of฀China’s฀power฀consumption.฀ Starting฀in฀1958,฀the฀central฀government฀began฀to฀take฀an฀active฀role฀in฀promoting฀rural฀electrification,฀first฀for฀irrigation฀and฀flood฀prevention,฀and฀later฀for฀ other฀productive฀uses.฀The฀dominant฀technology฀was฀small฀hydropower฀(SHP),฀ an฀enormous฀resource฀in฀China.฀The฀central฀government฀supplied฀demonstration฀ projects,฀workshops,฀and฀other฀encouragement,฀while฀the฀turbines฀were฀generally฀manufactured฀locally.฀ In฀1979,฀the฀government฀established฀the฀National฀Primary฀Rural฀Electrification฀ County฀Program฀(NPRECP),฀targeted฀at฀specific฀counties฀with฀low฀levels฀of฀electrification.฀Banks฀were฀instructed฀to฀give฀high฀priority฀to฀rural฀electrification฀in฀their฀ lending.฀Even฀as฀investment฀in฀transmission฀infrastructure฀meant฀that฀new฀areas฀ could฀be฀connected฀to฀the฀grid,฀the฀government฀recognized฀the฀importance฀of฀ SHP฀in฀alleviating฀power฀supply฀constraints,฀and฀support฀was฀maintained.฀From฀ the฀late฀1980s฀on,฀the฀shift฀away฀from฀government฀control฀and฀toward฀a฀market฀ economy฀gave฀rise฀to฀new฀sources฀of฀demand,฀and฀the฀NPRECP฀was฀expanded.฀ Two฀codes฀for฀renewable฀energy฀were฀developed:฀one฀for฀systems฀in฀remote฀ areas,฀generally฀based฀on฀SHP,฀and฀one฀for฀grid-based฀electrification.฀These฀are฀ expected฀to฀produce฀the฀same฀standard฀of฀power฀supply.฀The฀results฀have฀been฀ spectacular:฀by฀1997,฀96฀percent฀of฀Chinese฀households฀had฀an฀electricity฀supply. Since฀1998,฀the฀focus฀has฀been฀on฀the฀reform฀of฀rural฀power฀markets.฀The฀government฀has฀also฀committed฀public฀funds฀(180฀billion฀yuan,฀roughly฀$22฀billion฀ over฀three฀years)฀to฀strengthening฀rural฀electricity฀grids.฀Clearly฀there฀is฀much฀ in฀the฀Chinese฀story฀that฀cannot฀be฀applied฀in฀India—the฀central฀government฀ does฀not฀have฀equivalent฀powers฀to฀instruct฀banks฀to฀lend฀to฀certain฀sectors,฀for฀ instance.฀Nevertheless,฀the฀fact฀that฀the฀electrification฀of฀rural฀areas฀was฀led฀by฀ decentralized฀approaches,฀with฀central฀government฀policy฀supporting฀it,฀is฀noteworthy.฀It฀is฀also฀important฀that฀China฀was฀able฀to฀apply฀identical฀quality฀criteria฀ to฀both฀on-฀and฀off-grid฀power฀supplies. Source:฀Based฀on฀Yao฀and฀Barnes฀(2005) of฀a฀range฀of฀approaches฀to฀meet฀national฀development฀ goals.฀In฀brief,฀these฀three฀approaches฀are฀(1)฀largely฀gridbased฀electrification฀with฀conventional฀thermal฀sources,฀(2)฀ largely฀off-grid฀electrification฀with฀diesel฀technology;฀and฀฀ (3)฀off-grid฀electrification฀with฀renewable฀energy฀technology. For฀the฀purpose฀of฀this฀study,฀the฀Government฀of฀India’s฀ stated฀goals฀in฀its฀proposed฀Rural฀Electrification฀Policies฀ (Ministry฀of฀Power,฀no฀date)฀provide฀a฀starting฀point฀for฀ developing฀a฀framework฀against฀which฀to฀assess฀rural฀electrification฀approaches.฀There฀are฀five฀components฀to฀the฀ government’s฀approach:฀(1)฀accessibility,฀or฀the฀speed฀and฀ 72 effectiveness฀with฀which฀access฀to฀electricity฀is฀provided฀to฀ those฀that฀otherwise฀lack฀it;฀(2)฀availability,฀or฀the฀provision฀to฀each฀connection฀of฀the฀full฀power฀demand฀of฀the฀ user;฀(3)฀reliability,฀or฀the฀proportion฀of฀time฀during฀which฀ this฀power฀is฀available฀to฀the฀user฀(blackouts฀and฀brownouts฀are฀indicators฀of฀low฀reliability);฀(4)฀quality,฀or฀the฀ consistency฀of฀such฀features฀as฀the฀voltage฀and฀frequency฀ of฀the฀power—poor฀quality฀can฀both฀reduce฀the฀usefulness฀of฀the฀power฀and฀damage฀appliances฀and฀equipment,฀ a฀major฀problem฀with฀rural฀electricity฀in฀India฀today;฀and฀ (5)฀affordability,฀or฀the฀appropriate฀pricing฀of฀the฀power฀to฀ ensure฀that฀those฀who฀need฀it฀can฀afford฀it.฀ For฀tractability,฀we฀combine฀availability,฀reliability,฀and฀ quality,฀all฀three฀of฀which฀are฀closely฀related,฀into฀a฀single฀ goal฀of฀quality฀supply.฀We฀also฀add฀another฀important,฀ but฀often฀forgotten฀goal—ensuring฀energy฀security.฀While฀ India฀has฀plentiful฀coal฀reserves,฀its฀stocks฀of฀other฀fossil฀ fuels฀are฀limited.฀A฀massive฀future฀expansion฀of฀demand฀ could฀become฀a฀factor฀in฀India’s฀energy฀security฀and฀in฀ related฀macroeconomic฀considerations.฀Consequently,฀the฀ framework฀of฀national฀development฀goals฀against฀which฀ we฀examine฀alternative฀rural฀electrification฀approaches฀is: 1.฀Speed฀at฀which฀access฀is฀provided 2.฀฀Quality฀of฀supply,฀including฀availability,฀reliability฀ and฀consistency 3.฀Affordability฀or฀cost฀criteria 4.฀Security฀of฀supply From฀a฀global฀point฀of฀view,฀climate฀impacts฀are฀also฀ relevant.฀This฀is฀treated฀separately฀from฀the฀four฀“national”฀ policy฀priorities,฀as฀India฀does฀not฀currently฀have฀specific฀ commitments฀to฀abate฀GHG฀emissions,฀and฀is฀not฀expected฀to฀have฀such฀commitments฀in฀the฀foreseeable฀future.฀ GHG฀emissions฀from฀rural฀India,฀certainly฀in฀per฀capita฀ terms฀but฀also฀in฀absolute฀terms,฀are฀likely฀to฀be฀relatively฀ minor฀in฀the฀short฀run.฀But฀it฀is฀important฀to฀keep฀in฀ mind฀a฀longer฀timeframe,฀when฀“lock-in”฀to฀particular฀ technologies฀and฀forms฀of฀electrification฀may฀result฀in฀a฀ tighter฀than฀necessary฀linkage฀between฀economic฀development฀and฀electricity฀consumption฀one฀the฀one฀hand,฀and฀ GHG฀emissions฀on฀the฀other฀(see฀Section฀3.2.5฀for฀further฀ discussion). While฀India฀has฀no฀specific฀obligations฀to฀reduce฀GHG฀ emissions,฀it฀is฀in฀the฀nation’s฀long-term฀interest฀to฀understand฀the฀congruence฀(or฀lack฀thereof )฀of฀national฀goals฀and฀ global฀climate฀protection฀goals.฀A฀country฀of฀India’s฀size,฀ representing฀around฀one฀sixth฀of฀the฀world’s฀population,฀ will฀surely฀be฀drawn฀into฀climate฀policy฀in฀the฀long฀run฀as฀ its฀development฀permits.฀Furthermore,฀India฀with฀its฀many฀ vulnerable฀ecosystems฀and฀poor฀communities฀is฀expected฀to฀ suffer฀significant฀impacts฀from฀climate฀change.5฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST To฀anticipate฀the฀conclusions฀of฀this฀study,฀we฀find฀ that฀there฀is฀at฀least฀a฀case฀to฀further฀explore฀renewable฀ energy-based฀rural฀electrification฀as฀a฀way฀to฀meet฀the฀four฀ national฀development฀goals฀outlined฀above,฀and,฀unsurprisingly,฀it฀is฀also฀the฀clear฀winner฀from฀a฀climate฀point฀ of฀view.฀A฀lynchpin฀of฀our฀argument฀is฀the฀likely฀value฀of฀ renewable฀energy฀in฀ensuring฀energy฀security,฀a฀criterion฀ we฀have฀added฀on฀to฀the฀government’s฀own฀goals.฀While฀ this฀conclusion฀rests฀on฀assumptions฀and฀judgments฀that฀ are฀certainly฀open฀to฀question฀and฀comment,฀we฀have฀attempted฀to฀lay฀these฀assumptions฀out฀clearly.฀The฀assumptions฀and฀the฀ensuing฀analysis฀will,฀we฀hope,฀serve฀as฀the฀ basis฀for฀a฀broader฀discussion฀about฀alternative฀trajectories฀ for฀India’s฀rural฀electrification,฀and฀specifically฀about฀the฀ appropriate฀role฀of฀renewable฀energy.฀ Section฀2฀undertakes฀the฀task฀of฀defining฀reasonable฀ demand฀parameters฀for฀rural฀electrification.฀ Section฀3฀spells฀out฀three฀pathways฀to฀meeting฀demand,฀ and฀assesses฀these฀pathways฀against฀the฀framework฀of฀ national฀goals฀and฀global฀climate฀goal฀spelled฀out฀above.฀ Section฀4฀provides฀some฀concluding฀observations. ฀ ฀ 2.฀ESTIMATING฀RURAL฀DEMAND:฀฀ 2.฀ESTIMATING฀RURAL฀DEMAND:฀฀ HOW฀MUCH฀POWER฀TO฀THE฀PEOPLE? How฀much฀electricity฀do฀people฀need?฀It฀is฀notoriously฀ difficult฀to฀identify฀the฀latent฀demand฀for฀electricity฀in฀ rural฀communities฀(ESMAP,฀2000).฀In฀most฀cases,฀actual฀ consumption฀is฀constrained฀by฀the฀quantity฀or฀quality฀ of฀supply,฀as฀well฀as฀the฀ability฀to฀pay฀for฀both฀the฀power฀ itself฀and฀the฀appliances฀that฀use฀it.฀This฀section฀will฀consider฀what฀an฀aspirational฀goal฀might฀be฀for฀a฀government฀ determined฀to฀provide฀adequate฀electricity฀supply฀to฀its฀ rural฀populations. Between฀2003฀and฀2005,฀a฀blizzard฀of฀ever฀more฀challenging฀rural฀electrification฀pronouncements฀and฀targets฀ were฀put฀forward฀by฀two฀different฀governments.฀The฀most฀ recent฀such฀target฀calls฀for฀the฀government฀to฀provide฀ electricity฀to฀78฀million฀households—all฀the฀remaining฀ unelectrified฀households—in฀a฀short฀five-year฀span;฀that฀is,฀ by฀2009฀(Ministry฀of฀Power,฀2005a).฀The฀description฀of฀the฀ target฀in฀terms฀of฀households฀is฀significant,฀since฀past฀targets฀have฀been฀in฀terms฀of฀villages฀that฀are฀provided฀access฀ and฀were฀based฀on฀an฀incomplete฀and฀misleading฀definition฀ of฀what฀constitutes฀an฀electrified฀village฀(Box฀2).฀ From฀a฀range฀of฀perspectives,฀the฀timescale฀applied฀ to฀the฀targets฀is฀highly฀infeasible.6฀To฀achieve฀the฀more฀ modest฀target฀of฀village฀electrification฀in฀five฀years฀would฀ require฀connecting฀20,000฀villages฀a฀year—based฀on฀the฀ definition฀in฀Box฀2฀(Rejikumar,฀2005).฀This฀pace฀was฀ achieved฀during฀the฀1980s,฀but฀only฀according฀to฀the฀old,฀ Box฀2.฀฀Changing฀Definition฀of฀Village฀Electrification Figures฀for฀the฀extent฀of฀electrification฀in฀India฀can฀be฀confusing.฀Government฀figures฀have฀reported฀87฀percent฀of฀Indian฀villages฀as฀being฀“electrified.”฀ However,฀this฀is฀based฀on฀the฀very฀modest฀definition฀that฀a฀village฀is฀electrified฀ if฀electricity฀is฀used฀for฀any฀purpose฀anywhere฀in฀the฀village.฀In฀recognition฀that฀ this฀is฀an฀inadequate฀definition฀that฀fails฀to฀capture฀whether฀electricity฀is฀actually฀being฀used,฀by฀whom,฀and฀how,฀a฀proposed฀revised฀definition฀enumerates฀ multiple฀criteria฀that฀collectively฀would฀define฀an฀electrified฀village: 1.฀฀Basic฀electricity฀infrastructure฀is฀available฀within฀the฀village,฀including฀in฀ adjoining฀hamlets฀occupied฀by฀disadvantaged฀groups. 2.฀฀฀Electricity฀is฀available฀in฀public฀places฀such฀as฀schools,฀the฀Pandhayat฀฀ ฀office,฀and฀health฀centers. 3.฀At฀least฀10฀percent฀of฀village฀households฀have฀access฀to฀electricity. 4.฀The฀voltage฀is฀sufficient฀to฀enable฀lighting฀during฀peak฀evening฀hours. These฀criteria฀seek฀to฀articulate฀a฀definition฀of฀electrification฀that฀encompasses฀ actual฀use฀rather฀than฀simply฀theoretical฀availability,฀making฀it฀a฀far฀more฀satisfactory฀definition฀of฀electrification.฀Moreover,฀the฀government’s฀target฀for฀2009฀ extends฀beyond฀this฀more฀ambitious฀definition฀of฀village฀electrification฀to฀aim฀at฀ full฀household฀electrification. Source:฀Ministry฀of฀Power฀(2005b) far฀more฀modest฀definition฀of฀village฀electrification.฀฀ In฀fact,฀the฀pace฀has฀slowed฀down฀in฀recent฀years฀(See฀฀ Figure฀2).฀Based฀on฀the฀new฀definition,฀only฀2,626฀villages฀ were฀electrified฀in฀2002–03฀and฀4,589฀in฀2003–04.฀To฀ achieve฀the฀target฀would฀require฀accelerating฀the฀pace฀by฀ a฀multiple฀of฀four฀or฀five.฀If฀anything,฀the฀task฀is฀even฀ harder฀at฀the฀household฀level.฀Electrifying฀all฀households฀ by฀2012฀would฀require฀connecting฀10฀million฀households฀ a฀year,฀ten฀times฀the฀recent฀pace฀of฀household฀electrification฀(Dubash,฀2004).฀To฀imagine฀that฀full฀electrification฀ can฀be฀achieved฀within฀this฀timeframe฀has฀to฀be฀regarded฀ as฀framing฀an฀aspiration฀rather฀than฀as฀a฀realistic฀plan.฀ These฀observations฀suggest฀that฀making฀significant฀ progress฀toward฀meeting฀the฀government’s฀targets฀will฀ mean฀a฀quantum฀leap฀in฀the฀rate฀of฀electrification.฀It฀may฀ equally฀imply฀a฀change฀in฀the฀approach฀to฀electrification.฀ For฀the฀purposes฀of฀this฀study,฀we฀assume฀that฀2020฀is฀a฀ more฀realistic฀date฀by฀which฀to฀achieve฀the฀government’s฀ targets,฀and฀will฀use฀this฀date฀in฀further฀analysis. Connecting฀households฀is฀only฀part฀of฀the฀challenge;฀ the฀capacity฀must฀exist฀to฀serve฀newly฀connected฀households.฀How฀much฀power฀will฀be฀needed฀to฀serve฀rural฀ India?฀While฀demand฀will฀rise฀over฀time฀as฀households฀ become฀more฀affluent,฀some฀near-term฀idea฀is฀needed฀for฀ PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 73 2.1฀ Household฀demand Figure฀2.฀฀Villages฀Electrified฀(Old฀Definition)฀by฀5-Year฀Plan 600 100% Cumulative % of Villages 500 81.47 83.07 80% 400 64.11 60% 300 43.36 40% 37.64 200 27.20 Percent of Villages Number of Villages (thousands) 86.59 Actual 20% 100 12.80 7.83 IX: 1996-2001 VIII: 1991-96 VII: 1986-91 VI: 1980-85 1978-79 V: 1974-78 IV: 1969-74 1968-69 III: 1961-66 II: 1956-61 I: 1951-56 1947 1.26 0 3.77 0% Five year Plans Source:฀Sinha฀(2005) planning฀purposes.฀Whether฀extending฀transmission฀lines฀ or฀installing฀distributed฀generators,฀the฀specifications฀need฀ to฀be฀as฀accurate฀as฀possible฀to฀avoid฀either฀frustrating฀ demand฀or฀adding฀to฀the฀cost฀by฀over-engineering. The฀aim฀of฀this฀study฀is฀not฀to฀make฀detailed฀predictions฀of฀future฀demand,฀but฀rather฀to฀illustrate฀the฀scale฀ involved฀in฀meeting฀certain฀future฀standards฀of฀service.฀ We฀have฀therefore฀made฀simplifying฀assumptions฀in฀each฀ case,฀which฀are฀discussed฀in฀the฀remainder฀of฀this฀section.฀ Village฀electricity฀consumption฀can฀be฀divided฀into฀three฀ categories:฀(1)฀consumption฀in฀households,฀for฀lighting,฀ television฀and฀other฀domestic฀appliances;฀(2)฀consumption฀in฀communal฀buildings,฀such฀as฀clinics฀and฀schools;฀ and฀(3)฀consumption฀for฀productive฀applications,฀such฀as฀ machinery฀and฀agricultural฀pumping. 74 To฀what฀uses฀do฀rural,฀typically฀low-income,฀users฀put฀ electricity?฀Electricity’s฀first฀role฀is฀almost฀always฀lighting.฀This฀displaces฀kerosene,฀which฀is฀generally฀the฀first฀ commercial฀(and฀expensive)฀form฀of฀energy฀used฀in฀poor฀ households.฀Electricity฀provides฀a฀much฀higher฀quality฀ light,฀without฀the฀problems฀associated฀with฀kerosene,฀ which฀include฀indoor฀pollution฀and฀safety฀issues.฀Second,฀it฀allows฀several฀appliances฀that฀cannot฀be฀powered฀ without฀electricity—radio,฀television,฀electric฀irons฀and฀ refrigeration,฀electric฀fans฀(in฀hot฀climates),฀and฀eventually฀ computers฀and฀associated฀technology฀and฀services.7฀Electricity฀for฀poor฀users฀does฀not฀replace฀traditional฀fuels฀for฀ cooking฀and฀heating฀until฀a฀number฀of฀these฀high-value฀ services฀have฀been฀provided.฀For฀cooking฀in฀particular,฀ many฀people฀prefer฀to฀use฀traditional฀fuels฀even฀at฀quite฀ high฀income฀levels฀(ESMAP,฀2000;฀Victor,฀2002).฀ Rural฀electricity฀demand฀is฀shaped฀by฀a฀range฀of฀factors,฀ all฀of฀which฀are฀uncertain฀and฀contingent.฀Household฀ income฀levels฀are฀one฀important฀factor.฀Rural฀households฀ are฀unlikely฀to฀spend฀more฀than฀about฀5฀percent฀of฀their฀ household฀budget฀on฀electricity.฀The฀cost฀of฀electricity฀is฀ certainly฀also฀relevant฀to฀translating฀household฀budget฀figures฀into฀demand฀estimates.฀One฀often-used฀composite฀way฀ of฀examining฀household฀use฀is฀to฀scrutinize฀households’฀ “willingness฀to฀pay”฀for฀electricity.฀Willingness฀can฀be฀high฀ for฀the฀first฀few฀units฀of฀electricity,฀which฀are฀invariably฀ used฀for฀lighting฀(ESMAP,฀2000).฀However,฀assumptions฀ about฀the฀reliability฀and฀quality฀of฀supply฀certainly฀affect฀ estimates฀of฀willingness฀to฀pay;฀households฀are฀hardly฀likely฀ to฀buy฀electricity฀to฀power฀a฀refrigerator฀for฀two฀hours฀a฀ day.฀In฀a฀climate฀of฀unreliable฀and฀subsidized฀electricity,฀ demand฀projections฀are฀at฀best฀informed฀guesses. The฀question฀of฀demand฀estimates฀is฀further฀confused฀ by฀underlying฀assumptions฀about฀the฀efficiency฀of฀use.฀ Rural฀populations฀ultimately฀care฀about฀electricity฀services,฀ not฀the฀amount฀of฀electricity฀delivered.฀For฀example,฀the฀ same฀amount฀of฀light฀could฀be฀provided฀by฀a฀60-watt฀ incandescent฀bulb฀or฀an฀18-watt฀compact฀fluorescent฀bulb.฀ The฀latter฀will฀rapidly฀pay฀for฀its฀higher฀price฀through฀savings฀in฀operating฀cost,฀and฀use฀a฀fraction฀of฀the฀electricity,฀although฀for฀rural฀populations฀the฀up-front฀cost฀can฀ be฀hard฀to฀pay,฀even฀if฀it฀saves฀money฀later.฀Since฀every฀ unit฀saved฀is฀at฀least฀one฀less฀unit฀generated,฀investment฀ in฀end-use฀efficiency฀can฀be฀a฀substitute฀for฀investment฀ in฀generation฀capacity฀and,฀in฀the฀case฀of฀grid-connected฀ electricity,฀in฀transmission฀capacity฀as฀well.฀In฀the฀Indian฀ context฀where฀rural฀electricity฀is฀loss-making,฀energy฀efficiency฀can฀also฀reduce฀utility฀losses.฀While฀the฀demand฀ estimates฀derived฀below฀are฀based฀on฀household฀electricity฀consumption,฀it฀is฀important฀to฀keep฀in฀mind฀that฀in฀ reality,฀effective฀service฀delivery฀for฀each฀unit฀of฀electricity฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST consumed฀will฀be฀much฀higher฀if฀accompanied฀by฀a฀deliberate฀effort฀at฀enhancing฀end-use฀efficiency. Turning฀to฀demand฀estimates,฀we฀start฀with฀actual฀ demand฀from฀poor฀rural฀households฀that฀receive฀grid฀electricity.฀Although฀data฀from฀India฀are฀difficult฀to฀obtain,฀ studies฀of฀“low฀demand฀households”฀in฀Senegal,฀Brazil,฀ Indonesia,฀and฀Vietnam฀suggest฀a฀consumption฀range฀of฀ 91฀to฀182.5฀kWh฀per฀household-year฀(Gabler,฀2004).฀In฀ this฀study,฀we฀use฀the฀upper฀end฀of฀this฀estimate฀as฀the฀ low-demand฀scenario. The฀National฀Electricity฀Policy฀(Government฀of฀India,฀ 2005)฀also฀prescribes฀a฀minimum฀of฀365฀kWh฀per฀household฀per฀year฀as฀a฀“merit฀good,”฀or฀basic฀entitlement.฀This฀ is฀two฀to฀four฀times฀higher฀than฀the฀actual฀low-demand฀ consumption฀recorded฀from฀the฀countries฀noted฀above.฀ This฀is฀intended฀as฀a฀minimum,฀not฀as฀a฀target฀for฀mean฀ household฀consumption.฀We฀use฀the฀figure฀of฀365฀kWh฀ per฀household-year฀as฀the฀medium-demand฀scenario฀for฀ this฀study. Rural฀electrification฀should฀aspire฀to฀more฀than฀minimal฀ service.฀Victor฀(2004)฀advocates฀a฀benchmark฀minimum฀ consumption฀of฀1000฀kWh฀per฀person-year฀(equivalent฀to฀ about฀5,000kWh฀per฀household-year),฀noting฀that฀average฀ per฀capita฀consumption฀is฀already฀higher฀than฀this฀in฀50฀ percent฀of฀Chinese฀provinces.8฀However,฀if฀heating฀and฀ cooking฀needs฀(which฀are฀generally฀met฀with฀other฀fuels฀ in฀India)฀are฀excluded,฀250฀kWh฀per฀person-year฀would฀ cover฀the฀“core”฀electric฀services฀for฀which฀electricity฀is฀ the฀strongly฀preferred฀or฀only฀choice.฀This฀would฀include฀ such฀services฀as฀lighting,฀television฀and/or฀radio,฀an฀electric฀ iron,฀and฀a฀limited฀amount฀of฀domestic฀refrigeration.฀Although฀all฀of฀these฀appliances฀are฀not฀in฀reach฀of฀the฀rural฀ poor฀today,฀the฀example฀of฀China฀suggests฀that฀as฀purchasing฀power฀increases฀the฀appetite฀for฀such฀appliances฀grows฀ rapidly.฀If฀India฀continues฀to฀grow฀at฀4฀to฀6฀percent฀per฀ annum,฀the฀economy฀in฀2020฀will฀be฀75฀to฀150฀percent฀ larger฀than฀in฀2005.฀At฀least฀some฀of฀this฀increased฀wealth฀ will฀likely฀be฀reflected฀in฀the฀consumption฀power฀of฀rural฀ households.฀As฀a฀result,฀we฀consider฀250฀kWh฀per฀personyear฀as฀a฀reasonable฀aspiration฀for฀the฀rural฀electrification฀ program,฀and฀we฀use฀this฀figure฀as฀a฀plausible฀high-end฀ demand฀for฀our฀purposes.฀As฀Indian฀households฀average฀ over฀five฀people,9฀a฀target฀of฀250฀kWh฀per฀person-year฀ is฀roughly฀equivalent฀to฀1,250฀kWh฀per฀household-year.฀ For฀comparison,฀a฀typical฀U.S.฀household฀consumes฀25฀to฀ 40฀kWh฀per฀day฀(Byrne฀et฀al.,฀1998),฀some฀7฀to฀12฀times฀ more฀than฀our฀high-end฀scenario. How฀many฀households฀will฀require฀electrification?฀In฀ 2001,฀India฀had฀137฀million฀rural฀households฀(Census฀of฀ India,฀2001),฀of฀which฀57฀percent฀lack฀electricity฀(UNDP,฀ 2003).฀By฀2020,฀the฀number฀of฀rural฀households฀is฀expected฀to฀grow฀to฀161฀million.10฀Projections฀do฀not฀allow฀us฀to฀ say฀how฀many฀of฀these฀new฀households฀will฀arise฀in฀areas฀ already฀served฀by฀the฀grid฀and฀how฀many฀will฀require฀new฀ connections.฀For฀simplicity฀we฀assume฀that฀the฀current฀ ratio฀of฀57฀percent฀persists.฀By฀2020,฀India฀will฀have฀to฀ provide฀new฀grid฀connections฀or฀off-grid฀electricity฀supply฀ for฀57฀percent฀of฀161฀million,฀or฀91฀million฀households.฀ These฀simple฀calculations฀should฀be฀refined฀with฀more฀ detailed฀future฀analyses;฀here฀the฀aim฀is฀only฀to฀establish฀ the฀order฀of฀magnitude฀of฀the฀challenge. 2.2฀ Non-household฀demand Aside฀from฀households,฀villages฀have฀two฀other฀main฀ sources฀of฀demand. ■ ฀฀Public฀buildings,฀such฀as฀schools,฀Panchayat฀offices,฀ health฀centers,฀dispensaries,฀and฀community฀centers. ■ ฀฀Water฀pumping:฀Here฀we฀consider฀pumped฀water฀ for฀drinking฀and฀domestic฀use—not฀for฀agriculture,฀ which฀is฀considered฀a฀productive฀use฀(see฀below). Few฀data฀exist฀for฀average฀village฀requirements฀of฀these฀ services.฀For฀the฀purposes฀of฀this฀study฀we฀use฀the฀electricity฀requirements฀of฀a฀minimal฀set฀of฀applications฀for฀an฀ “electrified”฀village฀(Box฀3).฀The฀one฀area฀this฀leaves฀unexamined฀is฀the฀use฀of฀electricity฀for฀productive฀purposes฀ such฀as฀machinery.฀ Box฀3.฀฀The฀“Model฀Village” Under฀the฀new฀definition฀of฀rural฀electrification฀adopted฀by฀the฀Ministry฀of฀ Power,฀a฀village฀will฀only฀be฀considered฀“electrified”฀if,฀inter฀alia:฀“public฀places฀ like฀Schools,฀Panchayat฀Offices,฀Health฀Centers,฀Dispensaries,฀Community฀centers฀etc.฀have฀available฀power฀supply฀on฀demand.”฀Additionally,฀power฀to฀pump฀ water฀for฀domestic฀purposes฀(that฀is,฀not฀including฀irrigation)฀is฀an฀important฀ development฀benefit฀of฀electrification. Few฀data฀exist฀to฀estimate฀the฀likely฀addition฀these฀village฀public฀utilities฀will฀ make฀to฀electricity฀demand.฀In฀order฀to฀get฀a฀reasonable฀approximation,฀we฀have฀ made฀a฀“reasonable฀guess”฀list฀of฀applications฀for฀an฀average฀village฀(roughly฀ 250฀households).฀To฀estimate฀power฀consumption฀from฀specific฀applications,฀we฀ have฀used฀a฀case฀study฀by฀NREL฀(1998).฀The฀applications฀are: Refrigerator฀ Vaporizer Vaccine฀refrigerator/freezer฀ Oxygen฀concentrator Lights฀(10)฀ Overhead฀fan฀(4) VHF฀Radio฀(2)฀ Water฀pumps Centrifuge฀ TV฀(one฀big,฀one฀small) VCR฀฀ AM/FM฀stereo This฀includes฀both฀the฀essential฀equipment฀for฀a฀clinic,฀lighting฀and฀entertainment฀for฀a฀community฀center,฀and฀pumping฀for฀the฀village’s฀domestic฀water฀ demand.฀The฀total฀demand฀for฀these฀amounts฀to฀5.47฀TWh฀per฀year฀and฀is฀ assumed฀to฀be฀constant฀across฀all฀the฀household฀demand฀scenarios.฀These฀communal฀facilities฀constitute฀between฀5฀and฀30฀percent฀of฀the฀electricity฀demand฀in฀ an฀average-size฀village,฀depending฀on฀the฀household฀demand฀scenarios. PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 75 2.3฀ Productive฀use฀demand A฀third,฀and฀vital฀element฀of฀electricity฀demand฀in฀rural฀ villages฀is฀the฀use฀of฀electricity฀for฀productive฀applications.฀ By฀far฀the฀most฀important฀of฀these฀is฀water฀pumping฀for฀ agriculture,฀which฀remains฀the฀underpinning฀of฀the฀rural฀ economy,฀but฀other฀applications฀include฀rice฀and฀flour฀ milling,฀metal฀working,฀machine฀tools,฀and฀large-scale฀ refrigeration. One฀reason฀that฀productive฀use฀is฀important฀to฀these฀ scenarios,฀as฀well฀as฀to฀the฀development฀of฀rural฀electrification฀in฀general,฀is฀that฀the฀growing฀use฀of฀electricity฀in฀ households฀and฀villages฀presupposes฀a฀greater฀ability฀to฀pay฀ for฀the฀power,฀and฀thus฀increasing฀economic฀growth.฀Much฀ of฀the฀growth฀in฀rural฀economic฀activity฀will฀require฀power. This฀is฀an฀area฀in฀which฀data฀are฀scarce฀and฀difficult฀to฀ compare฀across฀states.฀The฀range฀of฀different฀applications฀ and฀the฀different฀economic฀conditions฀in฀different฀parts฀of฀ the฀country฀make฀it฀difficult฀to฀extrapolate฀from฀existing฀ case฀studies. For฀tractability,฀we฀base฀our฀productive฀demand฀ estimate฀solely฀on฀the฀use฀of฀electric฀pumping฀for฀agriculture.฀This฀is฀by฀far฀the฀most฀significant฀productive฀use฀of฀ electricity฀in฀rural฀areas;฀in฀states฀where฀mechanical฀pumps฀ are฀widely฀used,฀they฀are฀a฀major฀source฀of฀energy฀demand.฀ There฀are฀few฀studies฀of฀agricultural฀pumping฀that฀offer฀ comparable฀data฀and฀methodologies฀across฀multiple฀states.฀ The฀broadest฀of฀these฀(ESMAP,฀2002)฀covers฀six฀of฀India’s฀ 25฀states,฀although฀pumping฀data฀was฀only฀available฀for฀ five฀states,฀and฀these฀states฀differ฀widely฀in฀their฀use฀of฀ pumped฀irrigation.11฀We฀adopted฀the฀figures฀from฀this฀ study฀as฀the฀basis฀for฀our฀estimates,฀but฀we฀avoid฀drawing฀ detailed฀conclusions฀about฀precise฀demand฀levels.12฀ In฀the฀sample,฀an฀average฀of฀14฀percent฀of฀farming฀ households฀use฀electric฀pumps,฀and฀these฀consume฀an฀ average฀of฀4,579฀kWh฀of฀electricity฀each฀year.฀In฀addition,฀ about฀10฀percent฀of฀households฀on฀average฀own฀a฀diesel฀ pump฀for฀irrigation,฀mostly฀because฀of฀lack฀of฀availability฀ of฀electricity.฀Assuming฀that฀at฀least฀half฀of฀these฀would฀ switch฀to฀electricity฀pumps฀with฀lower฀running฀costs฀if฀the฀ option฀were฀available,฀we฀assume฀that฀20฀percent฀of฀households฀are฀likely฀to฀own฀electric฀pumps฀for฀irrigation.฀Based฀ on฀these฀assumptions,฀each฀rural฀household฀can฀be฀said฀to฀ demand฀on฀average฀918฀kWh฀per฀year.฀ 76 This฀estimate฀may฀be฀high฀for฀newly฀electrified฀areas฀ for฀at฀least฀two฀reasons.฀First,฀investment฀in฀new฀wells฀and฀ irrigation฀equipment฀follows฀the฀availability฀of฀electricity฀ with฀a฀time฀lag.฀Hence฀the฀demand฀in฀newly฀electrified฀ areas฀will฀take฀some฀time฀to฀build฀up฀to฀levels฀comparable฀ to฀the฀areas฀surveyed฀by฀ESMAP.฀Second,฀many฀areas฀ where฀electricity฀has฀long฀been฀available฀have฀suffered฀ from฀falling฀water฀tables,฀which฀requires฀extracting฀water฀ from฀greater฀depth฀and฀therefore฀higher฀energy฀demand฀ (Dubash,฀2002).฀Newly฀electrified฀areas฀will฀likely฀have฀ more฀shallow฀water฀levels฀and฀lower฀demand฀per฀unit฀water฀consumer.฀To฀account฀for฀these฀factors,฀here฀we฀assume฀ that฀electricity฀demand฀for฀irrigation฀in฀newly฀electrified฀ areas฀will฀be฀about฀half฀that฀in฀areas฀with฀long-standing฀access฀to฀electricity,฀or฀about฀457kWh/household-yr.฀Given฀ the฀enormous฀variability฀in฀economic,฀hydrologic,฀and฀ agronomic฀conditions฀across฀states,฀this฀estimate฀should฀be฀ seen฀at฀best฀as฀an฀order-of-magnitude฀approximation. In฀summary,฀Table฀1฀shows฀the฀average฀household฀ demand฀predictions฀used฀for฀this฀study.฀None฀of฀these฀is฀ intended฀to฀be฀predictive,฀but฀rather฀to฀provide฀a฀reasonable฀indication฀of฀the฀scale฀of฀the฀new฀demand฀that฀will฀ have฀to฀be฀met.฀ Table฀1.฀฀Summary฀of฀the฀Demand฀Scenarios ฀ ฀ Scenario฀ Low฀฀ Demand฀ kWh/yr฀ Medium฀ ฀Demand฀ kWh/yr฀ High ฀Demand kWh/yr Household฀Demand฀ 182.5฀ 365฀ 1250 Communal฀Demand฀ 34฀ 34฀ 34 ฀ ฀ 457฀ 216.5฀ 409฀ 1741 Productive฀use฀ Total฀ 3.฀MEETING฀THE฀DEMAND This฀section฀will฀consider฀and฀describe฀three฀broad฀฀ approaches฀to฀satisfying฀demand฀for฀rural฀electricity: Grid฀First:฀Extension฀of฀the฀grid,฀and฀expansion฀฀ of฀on-grid฀generating฀capacity The฀first฀scenario฀takes฀as฀its฀starting฀point฀the฀ Ministry฀of฀Power’s฀approach,฀which฀aims฀to฀provide฀ electrification฀on฀the฀grid฀except฀where฀the฀remoteness฀of฀ the฀community฀or฀the฀low฀population฀density฀make฀this฀ infeasible.฀The฀Ministry฀estimates฀that฀78฀percent฀of฀the฀ remaining฀village฀electrification฀can฀be฀achieved฀on฀the฀ grid.13฀We฀assume฀that฀for฀off-grid฀electrification,฀the฀balance฀between฀diesel฀and฀renewable฀energy-based฀generation฀remains฀constant฀at฀today’s฀level฀of฀77฀percent฀diesel฀ and฀23฀percent฀renewable.14 ฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Diesel฀First:฀Off-grid฀generation฀based฀on฀diesel฀ The฀second฀scenario฀is฀based฀on฀a฀much฀more฀rapid฀ penetration฀of฀off-grid฀diesel฀generation฀in฀response฀to฀ the฀removal฀of฀licensing฀requirements฀under฀the฀Electricity฀Act฀2003.฀Since฀inexpensive฀diesel฀gensets฀are฀a฀ readily฀available฀and฀well-known฀technology,฀if฀electricity฀is฀to฀be฀privately฀supplied฀in฀rural฀areas฀with฀minimal฀ further฀government฀intervention,฀it฀is฀likely฀to฀be฀based฀ on฀diesel฀technology.฀Indeed,฀there฀is฀some฀evidence฀that฀ entrepreneurs฀are฀already฀operating฀diesel-based฀electricity฀ provision฀in฀small฀towns฀as฀a฀back-up฀supply฀to฀the฀grid฀ (Kishore,฀2003).฀This฀market฀may฀well฀expand฀to฀larger฀ villages฀before฀long.฀We฀assume฀therefore฀that฀the฀assumptions฀of฀the฀Ministry฀of฀Power฀are฀reversed,฀and฀that฀78฀ percent฀of฀household฀electrification฀takes฀place฀off฀the฀ grid.฀We฀further฀assume฀that฀80฀percent฀of฀this฀off-grid฀ generation฀is฀based฀on฀diesel฀technology฀and฀the฀remainder฀on฀renewable฀energy฀in฀communities฀where฀remoteness฀prevents฀diesel฀supply฀at฀acceptable฀cost. Renewables฀First:฀Off-grid฀generation฀based฀฀ on฀a฀range฀of฀renewable฀energy฀sources The฀third฀scenario฀presents฀an฀option฀that฀favors฀ renewable฀energy฀technologies.฀Implicit฀in฀this฀scenario฀are฀ policies฀and฀other฀measures฀that฀help฀jump-start฀the฀use฀of฀ renewable฀energy฀in฀off-grid฀applications.฀The฀assumption฀ for฀the฀use฀of฀off-grid฀generation฀is฀78฀percent,฀as฀in฀Diesel฀ First.฀But฀in฀this฀instance฀80฀percent฀of฀the฀off-grid฀power฀ is฀generated฀from฀renewable฀sources฀and฀only฀20฀percent฀ from฀diesel. Each฀of฀these฀cases฀considers฀a฀technology฀mix฀rather฀ than฀an฀institutional฀or฀financial฀model฀for฀delivering฀฀ the฀power฀systems.฀Finding฀and฀deploying฀such฀models฀is฀฀ essential฀for฀the฀success฀of฀any฀of฀the฀technology฀mixes฀฀ discussed฀in฀this฀section,฀but฀the฀question฀is฀beyond฀the฀ scope฀of฀this฀report.฀The฀range฀of฀approaches฀is฀briefly฀ discussed฀in฀Box฀4. 3.1฀ Quantitative฀and฀qualitative฀฀ aspects฀of฀options 3.1.1฀฀Grid฀electricity India’s฀grid฀electricity฀system฀is฀in฀a฀chaotic฀state฀and฀ seemingly฀defies฀a฀range฀of฀different฀strategies฀adopted฀ over฀the฀years฀to฀fix฀it.15฀By฀1999–2000,฀revenues฀generated฀by฀state฀electricity฀boards฀were฀26฀percent฀lower฀than฀ their฀costs,฀and฀in฀2000–01฀accounted฀for฀23฀percent฀of฀ the฀combined฀fiscal฀deficit฀of฀state฀governments฀(Planning฀ Commission,฀2002b).฀ The฀problem฀manifests฀itself฀in฀periodic฀electricity฀crises฀ in฀state฀after฀state.฀A฀recent฀example฀is฀India’฀s฀most฀heavily฀industrialized฀state,฀Maharashtra,฀and฀its฀commercial฀ Box฀4.฀฀Institutional฀and฀Business฀Models฀for฀Rural฀Electrification It฀is฀beyond฀the฀scope฀of฀this฀report฀to฀consider฀in฀detail฀the฀implementation฀ of฀rural฀electrification฀projects฀and฀systems,฀but฀it฀is฀worth฀bearing฀in฀mind฀the฀ variety฀of฀available฀approaches.฀These฀approaches฀can฀be฀broadly฀categorized฀ according฀to฀two฀factors:฀(1)฀the฀amount฀of฀government฀involvement,฀and฀(2)฀ the฀degree฀of฀centralization.฀Like฀any฀categorization,฀this฀risks฀being฀simplistic— for฀instance,฀the฀central฀government฀might฀apply฀a฀subsidy฀to฀equipment฀that฀ is฀then฀bought฀and฀installed฀by฀individuals฀on฀a฀cash฀basis.฀But฀it฀is฀a฀reasonable฀ way฀to฀look฀at฀some฀institutional฀structures. A฀centralized,฀governmental฀approach฀involves฀support฀from฀either฀national฀or฀ state฀governments.฀This฀support฀can฀be฀passive,฀providing฀subsidies,฀tax฀incentives฀or฀technical฀support฀and฀leaving฀project฀implementation฀to฀other฀actors,฀ as฀in฀many฀countries.฀It฀can฀also฀be฀more฀active,฀with฀the฀central฀government฀a฀ major฀partner฀in฀project฀implementation;฀an฀example฀is฀the฀Chinese฀Township฀ Electrification฀Program. India฀has฀a฀number฀of฀centralized฀governmental฀initiatives:฀the฀Ministry฀of฀ New฀Energy฀Sources฀(MNES)฀is฀involved฀in฀both฀grid-connected฀and฀off-grid฀ renewable฀energy,฀as฀well฀as฀the฀Rural฀Electrification฀Corporation฀and฀the฀Indian฀ Renewable฀Energy฀Development฀Agency.฀ Centralized,฀nongovernmental฀actions฀are฀less฀prevalent฀in฀India.฀This฀category฀ might฀include฀regional฀concessions,฀under฀which฀(sometimes฀in฀exchange฀for฀ given฀levels฀of฀subsidy)฀private฀companies,฀cooperatives,฀or฀other฀operators฀are฀ awarded฀the฀provision฀of฀electricity฀for฀everyone฀within฀their฀concession฀area.฀In฀ Brazil,฀for฀instance,฀dispersed฀off-grid฀diesel฀generators฀are฀owned฀and฀operated฀ centrally฀by฀regional฀concessionaires.฀Similar฀models฀have฀been฀applied฀in฀the฀ United฀States,฀Argentina,฀and฀South฀Africa. Decentralized,฀governmental฀models฀are฀common฀in฀many฀countries.฀Local฀governments,฀municipal฀councils,฀and฀panchayats฀often฀play฀a฀crucial฀role฀in฀either฀ supporting฀electrification฀projects฀or฀even฀implementing฀and฀managing฀them.฀ Many฀early฀electrification฀projects฀in฀China฀fall฀under฀this฀model฀(see฀Box฀1).฀ In฀decentralized,฀nongovernmental฀models฀the฀main฀actors฀can฀be฀highly฀varied,฀ including฀cooperatives,฀private฀sector฀entrepreneurs,฀and฀nonprofit฀associations.฀ India’s฀Electricity฀Act฀of฀2003฀created฀significant฀new฀opportunities฀for฀this฀kind฀ of฀structure.฀The฀opportunity฀has฀been฀opened฀up฀for฀small-scale฀enterprises฀ that฀provide฀energy฀services.฀Examples฀include฀the฀diesel฀generators฀discussed฀in฀ Box฀5,฀but฀India฀already฀has฀some฀small฀enterprises฀providing฀renewable฀energy฀ systems฀and฀mini-grid฀installations.฀Cooperatives฀are฀equally฀important฀in฀providing฀these฀kinds฀of฀services,฀both฀in฀India฀and฀elsewhere฀such฀as฀the฀United฀ States฀and฀the฀Philippines. Just฀as฀the฀institutional฀approach฀varies,฀a฀range฀of฀financial฀models฀are฀used.฀A฀ surprising฀number฀of฀energy฀markets฀operate฀on฀a฀cash฀basis฀without฀subsidies:฀ PV฀systems฀sales฀in฀Africa฀and฀Western฀China฀are฀good฀examples:฀consumers฀ purchase฀equipment฀outright฀and฀install฀it฀themselves.฀In฀some฀cases฀consumers฀ purchase฀energy฀equipment฀with฀low-interest฀financing.฀In฀other฀models,฀some฀ companies฀offer฀lease฀finance,฀and฀some฀act฀as฀mini-utilities,฀owning฀and฀operating฀generation฀equipment฀and฀financing฀through฀power฀sales฀on฀a฀local฀level. None฀of฀these฀categories฀is฀exclusive.฀Entrepreneurs฀will฀frequently฀take฀ advantage฀of฀central฀government฀subsidies,฀local฀government฀initiatives฀may฀ use฀private฀sector฀turnkey฀operators,฀and฀so฀on.฀The฀important฀point฀in฀India,฀ particularly฀following฀the฀Electricity฀Act,฀is฀that฀we฀are฀likely฀to฀see฀considerably฀ more฀variety฀in฀the฀business฀models฀employed. Source:฀Based฀on฀Zerriffi฀&฀Victor฀(2005) PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 77 capital,฀Mumbai.฀In฀May฀2005,฀advertisers฀across฀Mumbai฀ were฀instructed฀to฀turn฀off฀their฀neon฀billboards฀as฀a฀small฀ gesture฀of฀electricity฀conservation฀(Hindustan฀Times,฀ 2005).฀Meanwhile,฀its฀heavily฀industrialized฀hinterland฀ was฀suffering฀rolling฀blackouts฀of฀3฀to฀12฀hours฀per฀day.฀ Small฀businesses฀were฀devastated.฀Large฀ones,฀generally,฀ were฀not;฀major฀companies฀increasingly฀generate฀their฀own฀ power฀on฀site.฀As฀the฀Maharashtra฀experience฀testifies,฀the฀ Indian฀grid฀system฀has฀not฀come฀close฀to฀providing฀quality฀ and฀reliable฀power฀to฀citizens. In฀Indian฀debates฀over฀rural฀electrification,฀it฀is฀commonly฀assumed฀that฀centralized฀electricity฀provided฀ through฀the฀grid฀is฀the฀first฀choice,฀and฀that฀decentralized,฀ or฀distributed,฀generation฀is฀suitable฀only฀for฀remote฀areas.฀ Yet฀the฀electricity฀grid฀throughout฀India฀promises฀more฀ than฀it฀delivers.฀According฀to฀the฀IEA฀(2002b),฀“the฀duration฀and฀number฀of฀blackouts฀and฀brownouts฀are฀beyond฀ acceptable฀limits,฀leading฀to฀shortfalls฀of฀up฀to฀15฀percent฀ of฀demand.”฀ The฀grid฀is฀also฀prone฀to฀losses.฀With฀technical฀and,฀ more฀important,฀commercial฀losses฀(or฀theft)฀accounting฀ for฀about฀25฀percent฀of฀generated฀electricity,฀India฀has฀฀ one฀of฀the฀highest฀rates฀of฀electricity฀losses฀in฀the฀world฀ (Figure฀3).฀Indeed,฀recent฀estimates,฀including฀those฀by฀ State฀Electricity฀Regulatory฀Commissions,฀suggest฀the฀ actual฀loss฀levels,฀including฀theft,฀could฀be฀even฀higher,฀ in฀the฀range฀of฀30฀to฀40฀percent.฀This฀means฀that฀if฀this฀ 78 dismal฀performance฀continues,฀to฀meet฀a฀rural฀demand฀of฀ 100฀terawatt฀hours฀(TWh)฀on฀the฀grid฀India฀would฀have฀ to฀generate฀some฀143฀to฀167฀TWh.฀ Fixing฀the฀technical฀losses฀and฀quality฀problems฀in฀the฀ grid฀will฀take฀money—after฀being฀relatively฀neglected฀in฀ public฀spending,฀transmission฀now฀requires,฀though฀it฀ does฀not฀receive,฀as฀much฀public฀investment฀as฀generation฀ (IEA,฀2002a;฀Planning฀Commission,฀2001).฀Fixing฀the฀ nontechnical฀losses,฀which฀make฀up฀the฀bulk฀of฀the฀losses฀ from฀the฀grid,฀requires฀more฀fundamental฀reform.฀The฀ greatest฀losses฀come฀from฀theft฀by฀those฀who฀have฀no฀legal฀ electricity฀supply,฀and฀from฀farmers฀and฀others฀that฀are฀not฀ billed฀(Ministry฀of฀Power,฀2003).16฀Enforcing฀bill฀payment,฀ charging฀farmers฀for฀power,฀and฀stopping฀physical฀theft฀are฀ all฀high฀priorities,฀but฀politically฀daunting. The฀necessary฀changes฀to฀India’s฀grid฀system฀need฀to฀be฀ viewed฀in฀the฀political฀context฀framed฀by฀the฀new฀Electricity฀Act.฀A฀plausible฀interpretation฀of฀the฀likely฀impact฀of฀ the฀incentives฀embedded฀in฀the฀act฀is฀that฀it฀will฀result฀ in฀a฀fragmentation฀into฀four฀consumer฀classes฀(Prayas,฀ 2004).฀First,฀large฀industrial฀and฀commercial฀consumers,฀ who฀tend฀to฀bear฀high฀electricity฀costs฀due฀to฀a฀cross-subsidy฀to฀household฀and฀rural฀consumers,฀will฀likely฀gain฀ from฀the฀benefits฀of฀shopping฀around฀for฀electricity฀and฀ from฀efforts฀to฀reduce฀the฀cross-subsidy.฀Second,฀urban฀ high฀consumption฀and฀wealthy฀consumers฀are฀likely฀to฀ be฀taken฀over฀by฀dedicated฀urban฀utilities฀and฀will฀also฀be฀ gainers.฀Third,฀existing฀consumers฀from฀small฀towns฀and฀ rural฀areas฀will฀continue฀to฀be฀captive฀consumers,฀but฀will฀ be฀starved฀of฀resources฀as฀the฀cross-subsidy฀tap฀is฀turned฀ off.฀With฀no฀replacement฀sources฀of฀revenue,฀they฀may฀ fall฀deeper฀into฀a฀spiral฀of฀low฀quality,฀low฀revenue,฀no฀ investment,฀and฀bad฀performance฀leading฀to฀ever-lower฀ revenue.฀The฀fourth฀category฀are฀those฀who฀are฀unserved;฀ under฀current฀conditions,฀they฀are฀most฀likely฀to฀move฀ into฀the฀third฀category฀of฀electrified฀users฀with฀declining฀ prospects.฀It฀remains฀to฀be฀seen฀whether฀the฀effect฀of฀new฀ market฀entrants,฀and฀possibly฀re-targeted฀subsidies,฀can฀ alter฀this฀gloomy฀scenario. It฀is฀worth฀looking฀in฀more฀detail฀at฀the฀third฀category.฀ Across฀India,฀farmers฀and฀rural฀areas฀receive฀electricity฀at฀ a฀price฀well฀below฀average฀cost,฀although฀they฀pay฀for฀this฀ with฀poor฀quality฀electricity,฀often฀for฀only฀a฀few฀hours฀a฀ day฀and฀often฀in฀the฀middle฀of฀the฀night.฀Nonetheless,฀the฀ policy฀of฀cheap฀or฀even฀free฀power฀to฀farmers฀is฀jealously฀ defended฀by฀politically฀powerful฀farmer฀lobbies.฀While฀ many฀consider฀this฀a฀necessary฀subsidy,฀it฀is฀also฀true฀that฀ the฀form฀and฀administration฀of฀this฀subsidy—through฀ cross-subsidies฀rather฀than฀transparent฀allocations—has฀ negative฀spill-over฀effects฀for฀the฀sector฀as฀a฀whole.฀For฀ these฀reasons,฀the฀provision฀of฀electricity฀to฀farmers฀is฀a฀ political฀hot฀potato฀in฀India,฀and฀for฀many฀is฀the฀single฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST biggest฀obstacle฀in฀the฀way฀of฀reforming฀the฀power฀sector.฀ Notwithstanding฀the฀rhetoric฀about฀rural฀electrification,฀ many฀are฀quietly฀leery฀about฀a฀dramatic฀effort฀to฀expand฀ the฀grid฀to฀rural฀areas,฀since฀it฀will฀expand฀the฀number฀of฀ low-paying฀customers฀without฀bringing฀more฀revenue,฀ placing฀an฀even฀greater฀fiscal฀burden฀on฀states฀(Godbole,฀ 2002).฀This฀conundrum฀seldom฀gets฀openly฀discussed฀in฀ the฀recent฀feel-good฀climate฀of฀India’s฀rural฀electrification฀ efforts. Figure฀3.฀฀Losses฀from฀the฀Electricity฀Grid฀by฀Country฀ 3.1.2฀฀Off-grid฀electricity Given฀the฀chronic฀problems฀of฀grid-based฀electricity฀in฀ India,฀off-grid฀solutions฀are฀increasingly฀attractive.฀By฀generating฀electricity฀close฀to฀its฀point฀of฀use,฀distributed฀generation฀eliminates฀transmission฀losses.฀The฀scope฀for฀theft฀ may฀also฀be฀reduced,฀particularly฀if฀small-scale฀generation฀ is฀mated฀with฀local-level฀distribution฀through฀panchayats฀ or฀franchisees,฀although฀this฀proposition฀is฀yet฀to฀be฀tested.฀ Finally,฀given฀the฀poor฀state฀of฀the฀grid,฀distributed฀generation฀may฀actually฀lead฀to฀more฀reliable฀and฀dependable฀ supply฀than฀grid-connected฀supply. The฀Electricity฀Act฀of฀2003฀opens฀the฀door฀to฀off-grid฀ generation฀to฀a฀much฀greater฀extent฀than฀before.฀Some฀of฀ the฀most฀significant฀changes฀from฀this฀viewpoint฀are: ■ ฀฀Most฀licensing฀requirements฀for฀generation฀are฀removed฀(the฀one฀exception฀is฀for฀hydropower).฀ ■ ฀฀Licensing฀requirements฀are฀also฀removed฀for฀entities฀ such฀as฀cooperatives,฀rural฀distributors,฀and฀nonprofit฀ associations,฀which฀are฀allowed฀to฀directly฀purchase฀ power฀in฀bulk. ■ ฀฀Provision฀of฀electricity฀to฀“notified”฀rural฀areas,฀from฀ generation฀through฀to฀distribution,฀is฀allowed฀with฀no฀ prior฀need฀for฀a฀license,฀opening฀the฀door฀to฀dedicated฀rural฀electricity฀businesses.฀ The฀term฀“off-grid฀generation”฀is฀taken฀here฀to฀mean฀ any฀power฀generation฀that฀does฀not฀depend฀on฀connection฀to฀the฀high-voltage฀transmission฀network.฀This฀may฀ include฀mini-grids฀set฀up฀to฀serve฀isolated฀communities฀ as฀well฀as฀single฀installations฀to฀serve฀individual฀buildings,฀ such฀as฀domestic฀photovoltaic฀systems. A฀range฀of฀technologies฀can฀be฀used฀for฀off-grid฀generation.฀In฀keeping฀with฀our฀scenarios,฀here฀we฀will฀consider฀ two฀main฀groups฀of฀technologies:฀diesel฀engines,฀and฀ distributed฀renewable฀energy฀sources. Philipines Diesel฀generation Diesel฀generation฀sets฀are฀in฀widespread฀use฀for฀off-grid฀ power฀around฀the฀world.฀They฀offer฀some฀important฀ advantages: ■ ฀฀The฀technology฀is฀a฀familiar฀one,฀with฀large฀established฀vendors฀for฀both฀the฀generators฀and฀the฀fuel. OECD China Ethiopia Indonesia Egypt Sudan Algeria Eritrea Cameroon Zimbabwe Kenya Togo India Nigeria 0% 5% 10% 15% 20% 25% 30% Percent of Electricity Lost from Grid Source:฀IEA฀(2002b) ฀฀Compared฀with฀alternatives฀such฀a฀renewables,฀a฀฀ relatively฀low฀proportion฀of฀the฀life฀cycle฀cost฀is฀upfront฀capital. ■ ฀฀Maintenance฀and฀repair฀skills฀are฀widely฀available฀in฀ both฀cities฀and฀rural฀communities. ■ ฀฀They฀can฀provide฀high-quality฀AC฀power฀on฀demand. To฀weigh฀against฀this,฀diesel฀presents฀a฀number฀of฀ challenges: ■ ฀฀The฀fuel฀is฀increasingly฀expensive,฀particularly฀in฀cases฀ where฀it฀must฀be฀transported฀long฀distances,฀as฀in฀ much฀of฀rural฀India,฀leading฀to฀higher฀life-cycle฀costs฀ in฀many฀cases. ■ ฀฀Large-scale฀use฀adds฀to฀India’s฀growing฀dependency฀ on฀oil฀imports. ■ ฀฀Diesel฀engines฀emit฀noxious฀fumes,฀as฀well฀as฀CO . 2 There฀is฀some฀preliminary฀evidence฀that฀small-scale฀ diesel-based฀power฀systems฀are฀expanding฀rapidly฀in฀small฀ towns,฀particularly฀in฀states฀where฀grid฀power฀is฀unreliable฀ and฀poor฀(Box฀5). ฀ ■ PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 79 35% Box฀5.฀฀The฀Diesel฀Entrepreneurs In฀the฀small฀town฀of฀Muzaffarpur฀in฀the฀northern฀state฀of฀Bihar,฀private฀entrepreneurs฀have฀seized฀on฀consumer฀discontent฀as฀a฀massive฀business฀opportunity.฀ Starting฀with฀generators฀purchased฀to฀supply฀power฀to฀parties฀during฀the฀“marriage฀season”฀but฀that฀otherwise฀lie฀idle,฀entrepreneurs฀have฀expanded฀to฀full฀ backup฀and฀even฀24-hour฀supply฀to฀hotels฀and฀other฀commercial฀establishments.฀ Old฀generators฀phased฀out฀from฀industrial฀units฀provide฀a฀cheap฀and฀ready,฀if฀ inefficient฀and฀dirty,฀supply฀of฀capacity.฀Kishore฀reports฀generators฀striving฀to฀ capture฀enough฀of฀the฀market฀to฀reach฀scale.฀Electricity฀is฀often฀distributed฀ using฀the฀poles฀and฀lines฀of฀the฀SEB,฀with฀SEB฀employees฀receiving฀a฀cut฀of฀the฀ profit.฀There฀is฀evidence฀of฀further฀collusion,฀with฀private฀entrepreneurs฀paying฀ SEB฀employees฀to฀keep฀the฀lights฀off฀for฀as฀long฀as฀possible฀to฀maximize฀their฀ market!฀Prices฀are฀as฀high฀as฀Rs.฀7฀to฀10฀per฀kWh฀(US฀cents฀15฀to฀22),฀more฀than฀ double฀rates฀paid฀by฀households฀and฀considerably฀higher฀than฀commercial฀rates.฀ While฀rural฀areas฀offer฀a฀smaller฀and฀less฀dense฀market,฀the฀rapid฀saturation฀of฀ the฀small฀urban฀market฀could฀see฀an฀expansion฀to฀at฀least฀the฀larger฀villages.฀ Muzaffarpur฀could฀be฀the฀shape฀of฀things฀to฀come฀in฀rural฀India.฀ Source:฀฀Kishore฀(2003) Renewable฀energy The฀term฀“renewable฀energy”฀covers฀a฀wide฀range฀of฀ technologies฀and฀applications.฀Four฀seem฀particularly฀ promising฀for฀rural฀electrification฀in฀India:฀small฀hydropower,฀wind,฀solar,฀and฀biomass.฀These฀will฀be฀discussed฀ individually฀below,฀but฀they฀share฀several฀characteristics: ■ ฀฀They฀are฀capital-intensive,฀with฀low฀running฀costs.฀ Relatively฀high฀capital฀requirements฀are฀a฀major฀obstacle฀in฀India,฀where฀finance฀is฀expensive.฀All฀except฀ biomass฀have฀no฀fuel฀costs฀at฀all,฀so฀running฀costs฀ are฀essentially฀just฀maintenance.฀While฀biomass฀does฀ require฀fuel,฀much฀of฀this฀is฀available฀on฀a฀non-cash฀ basis฀(see฀below).฀ ■ ฀฀They฀are฀relatively฀unfamiliar฀technologies.฀While฀ many฀of฀the฀technologies,฀particularly฀in฀the฀case฀of฀ hydro,฀have฀existed฀for฀a฀long฀time,฀they฀tend฀to฀be฀ less฀familiar฀and฀are฀thus฀seen฀as฀more฀risky.฀In฀addition,฀this฀lack฀of฀familiarity฀means฀that฀the฀relevant฀ maintenance฀skills฀are฀less฀common. ■ ฀฀They฀do฀not฀rely฀on฀outside฀fuel฀supply.฀While฀ perhaps฀obvious,฀this฀is฀an฀important฀advantage,฀ especially฀for฀more฀remote฀applications. ■ ฀฀In฀some฀cases฀they฀are฀relatively฀benign฀in฀terms฀of฀฀ local฀impacts฀on฀the฀environment,฀though฀some฀฀ hydro฀and฀biomass฀use฀can฀have฀significant฀impacts. ■ ฀฀They฀produce฀very฀low฀GHG฀emissions,฀even฀฀ considered฀over฀the฀whole฀life฀cycle.17฀ 80 Renewable฀energy฀sources฀have฀tended฀to฀be฀more฀฀ expensive฀on฀a฀per฀kilowatt฀hour฀(kWh)฀basis฀than฀conventional฀energy฀sources.฀However,฀technology฀improvement฀and฀economies฀of฀scale฀have฀brought฀costs฀down฀ dramatically฀over฀recent฀decades฀(WEA,฀2000;฀G8,฀2001).฀ India฀may฀be฀the฀only฀country฀to฀have฀a฀ministry฀ specifically฀dedicated฀to฀renewable฀energy฀promotion—the฀ Ministry฀for฀Non-Conventional฀Energy฀Sources฀(MNES).฀ Unless฀stated฀otherwise,฀information฀on฀renewable฀energy฀ in฀India฀below฀is฀derived฀from฀MNES฀(2005). Small-scale฀hydropower Hydropower฀as฀a฀whole฀plays฀a฀significant฀role฀in฀India’s฀ electricity฀mix,฀at฀around฀11฀percent฀of฀power฀generation.฀ The฀great฀majority฀of฀this฀comes฀from฀large฀dams.฀However,฀small฀hydropower—defined฀in฀India฀as฀installations฀ rated฀at฀under฀25฀megawatts฀(MW)—accounts฀for฀some฀ 1,519฀MW฀in฀total,฀with฀just฀over฀55฀MW฀more฀under฀ construction.฀MNES฀estimates฀an฀economic฀potential฀for฀ 15,000฀MW฀of฀small฀hydropower,฀and฀offers฀incentives฀to฀ encourage฀their฀development.฀In฀China,฀about฀20฀percent฀ of฀rural฀electricity฀is฀provided฀from฀small฀hydropower฀installations,฀amounting฀to฀28,500฀MW฀of฀installed฀capacity฀ in฀2002฀(Tong,฀2004).฀ Hydropower฀can฀be฀used฀to฀support฀mini-grids฀covering฀one฀or฀more฀villages,฀as฀well฀as฀working฀well฀at฀a฀ small฀scale. Biomass Biomass฀can฀be฀converted฀to฀electricity฀with฀a฀range฀ of฀technologies.฀These฀can฀involve฀gasification,฀charcoal฀ production,฀or฀simple฀combustion.฀Biomass฀power฀offers฀a฀ number฀of฀advantages฀in฀many฀parts฀of฀rural฀India. First,฀unlike฀some฀renewable฀sources฀it฀does฀not฀suffer฀ from฀intermittency฀and฀can฀therefore฀be฀used฀as฀a฀basis฀for฀ power฀on฀demand฀without฀need฀for฀additional฀storage฀or฀ backup฀technology.฀ Perhaps฀more฀importantly,฀it฀offers฀substantial฀advantages฀for฀rural฀communities,฀which฀are฀mainly฀engaged฀in฀฀ agriculture.฀Most฀villages฀have฀a฀ready฀supply฀of฀agricultural฀residue฀that฀can฀be฀used฀as฀fuel,฀although฀there฀are฀ complex฀social฀questions฀of฀ownership฀of฀this฀resource,฀฀ particularly฀where฀village฀commons฀are฀involved.฀Agricultural฀residue฀can฀be฀traded฀on฀part-barter฀basis฀for฀ electricity:฀an฀important฀advantage฀over฀commercial฀fuels฀฀ in฀communities฀that฀are฀poor฀in฀cash.฀By฀adding฀value฀to฀ rural฀farming,฀this฀also฀creates฀economic฀opportunity.฀฀ The฀Indian฀Planning฀Commission฀(2002)฀notes฀that฀ biomass฀has฀“the฀added฀advantage฀of฀potentially฀creating฀ millions฀of฀rural฀employment฀opportunities฀and฀contributing฀to฀higher฀rural฀incomes,฀rather฀than฀higher฀outflows฀of฀ foreign฀exchange.” GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST MNES฀(2005)฀estimates฀the฀potential฀for฀power฀generation฀from฀fuel฀wood,฀crop฀residues,฀wood฀waste,฀and฀ bagasse฀at฀about฀19,500฀MW.฀The฀Planning฀Commission฀ goes฀further฀and฀estimates฀that฀“establishment฀of฀40฀million฀hectares฀of฀energy฀plantation฀would฀be฀sufficient฀to฀ generate฀100,000฀MW฀of฀power฀and฀provide฀year-round฀ employment฀for฀30฀million฀people.”฀As฀of฀March฀2003,฀ India฀had฀just฀under฀500฀MW฀of฀biomass฀power฀generation฀capacity,฀so฀this฀resource฀is฀clearly฀at฀an฀early฀stage฀ of฀exploitation. Wind฀power Wind฀energy฀development฀is฀a฀significant฀domestic฀ industry฀in฀India,฀which฀is฀currently฀the฀world’s฀fifth฀largest฀wind฀market.18฀Viable฀potential฀for฀power฀generation฀ is฀estimated฀at฀around฀13,000฀MW฀(Bakshi,฀2002),฀of฀ which฀around฀3,000฀MW฀(Global฀Wind฀Energy฀Council,฀2005)฀have฀been฀exploited฀to฀date฀both฀on฀and฀off฀ the฀grid.฀Over฀half฀of฀the฀current฀total฀is฀in฀Tamil฀Nadu.฀ Small฀systems฀can฀use฀battery฀storage฀to฀provide฀power฀ on฀demand,฀but฀larger฀applications฀off-grid฀will฀use฀some฀ combination฀of฀solar,฀biomass,฀and/or฀diesel฀to฀ensure฀a฀ more฀consistent฀output. One฀appeal฀of฀wind฀power฀is฀the฀high฀level฀of฀productive฀capacity฀within฀India.฀An฀estimated฀80฀percent฀of฀the฀ value฀chain฀is฀located฀in฀the฀country,฀and฀the฀Indian฀wind฀ industry฀has฀an฀annual฀production฀capacity฀of฀about฀500฀ MW฀per฀year,฀including฀all฀but฀the฀largest฀turbine฀sizes฀ (MNES,฀2005). areas,฀this฀becomes฀cost-competitive.฀Their฀lack฀of฀moving฀ parts฀also฀means฀that฀they฀require฀little฀maintenance,฀ though฀they฀do฀require฀batteries฀in฀order฀to฀deliver฀power฀ on฀demand. 3.2฀฀What฀are฀the฀impacts฀of฀the฀rural฀฀ electrification฀scenarios? Here฀we฀examine฀the฀impacts฀of฀the฀scenarios฀in฀terms฀ of฀the฀four฀criteria฀discussed฀in฀section฀1.4:฀(1)฀the฀speed฀ at฀which฀access฀is฀provided;฀(2)฀the฀quality฀of฀supply,฀ including฀availability,฀reliability,฀and฀consistency;฀(3)฀฀ affordability฀or฀cost฀criteria;฀and฀(4)฀security฀of฀supply. In฀addition,฀we฀examine฀the฀implications฀for฀GHG฀ emissions฀of฀each฀scenario.฀ Table฀2฀summarizes฀the฀additional฀electricity฀consumption฀from฀rural฀electrification฀under฀the฀three฀scenarios. 3.2.1฀฀Speed฀at฀which฀access฀is฀provided฀ The฀Indian฀government฀has฀set฀hugely฀ambitious฀goals฀ for฀accelerating฀the฀rate฀of฀new฀electricity฀connections.฀฀ If฀the฀timeframes฀recently฀being฀discussed฀are฀to฀be฀taken฀ seriously,฀grid-connected฀electricity฀will฀face฀formidable฀ challenges.฀These฀are฀in฀two฀areas:฀(1)฀generation,฀and฀(2)฀ transmission฀and฀distribution฀(T&D).฀ Generation The฀requirement฀for฀new฀generation฀capacity฀is฀enormous.฀Our฀scenarios฀suggest฀that฀grid-dominated฀rural฀ electrification฀will฀require฀the฀delivery฀of฀23฀to฀157฀TWh฀฀ of฀power฀to฀newly฀electrified฀rural฀areas.฀According฀฀ to฀India’s฀Planning฀Commission,฀capacity฀utilization฀for฀ thermal฀plants฀is฀70฀percent฀(Planning฀Commission,฀ 2002b),฀but฀rural฀power฀is฀“peaky”฀(that฀is,฀demand฀is฀ concentrated฀in฀small฀time฀periods฀during฀the฀day),฀and฀ thus฀capacity฀factors19฀are฀much฀lower.฀Using฀a฀rate฀of฀30฀ to฀50฀percent,฀between฀6฀and฀65฀gigawatts฀(GW)฀of฀new฀ Solar฀photovoltaics PV฀cells,฀which฀produce฀DC฀power฀directly฀from฀ sunlight,฀have฀an฀obvious฀appeal฀in฀a฀country฀as฀drenched฀ in฀sunshine฀as฀India.฀The฀power฀they฀produce฀is฀relatively฀ expensive฀(typically฀20฀to฀24฀US฀cents฀per฀kWh).฀However,฀for฀small-scale฀applications,฀particularly฀in฀remote฀ Table฀2.฀฀The฀Three฀Scenarios฀under฀Different฀Demand฀Assumptions Scenario฀ Grid฀First฀ Diesel฀First฀ Renewables฀First Demand฀ Low฀ Medium฀ High฀ Low฀ Medium฀ High฀ Low฀ Medium฀ Grid฀elec.฀consumption฀(TWh)฀ 22฀ 38฀ 157฀ 6฀ 11฀ 44฀ 6฀ 11฀ High Diesel฀elec.฀consumption฀(TWh)฀ 4฀ 7฀ 27฀ 14฀ 24฀ 100฀ 4฀ 6฀ 26 Renewables฀Consumption฀(TWh)฀ 1฀ 2฀ 8฀ 4฀ 6฀ 26฀ 14฀ 24฀ 100 44 Note:฀Grid฀losses฀are฀assumed฀to฀fall฀to฀20฀percent.฀The฀CEA฀estimates฀that฀technical฀losses฀can฀be฀reduced฀to฀10฀to฀15฀percent.฀Given฀that฀this฀does฀not฀include฀฀ losses฀from฀theft฀and฀non-billing,฀this฀means฀that฀our฀20฀percent฀estimate฀for฀total฀losses฀assumes฀considerable฀reduction฀in฀grid฀losses฀of฀all฀types. PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 81 capacity฀will฀need฀to฀be฀built฀to฀supply฀the฀grid.฀At฀an฀approximate฀capital฀cost฀of฀$1฀million฀per฀MW,฀this฀means฀ from฀$6฀billion฀to฀$65฀billion,฀and฀may฀be฀significantly฀ higher฀depending฀on฀the฀technologies฀used. Traditional฀generation฀technologies฀have฀long฀gestation฀ times—three฀to฀five฀years฀for฀a฀coal-fired฀plant฀and฀10฀ to฀15฀years฀for฀a฀hydro฀plant฀(see฀Table฀3).฀Smaller-scale฀ power฀plants฀are฀generally฀less฀challenging฀in฀terms฀of฀ their฀local฀impacts,฀and฀require฀shorter฀lead฀times.฀Most฀ distributed฀generation฀technologies฀operate฀on฀much฀ shorter฀time-scales฀of฀one฀to฀two฀years,฀bringing฀realization฀of฀ambitious฀political฀targets฀closer฀to฀the฀bounds฀ of฀reality.฀Transmission฀lines฀are฀obviously฀not฀necessary,฀ though฀low-voltage฀distribution฀infrastructure฀may฀be.฀It฀is฀ important฀to฀note฀that฀the฀implementation฀rate฀of฀generation฀capacity฀is฀driven฀by฀a฀range฀of฀factors,฀which฀may฀ vary฀over฀time.฀These฀include฀the฀institutional฀capacity฀for฀ delivery฀(which฀we฀discuss฀briefly฀below)฀and฀the฀ability฀ to฀mobilize฀capital.฀While฀a฀full฀treatment฀of฀these฀issues฀ is฀beyond฀the฀scope฀of฀this฀study,฀it฀is฀reasonable฀to฀expect฀ that฀introducing฀new฀types฀of฀providers฀in฀addition฀to฀the฀ SEBs฀will฀increase฀the฀overall฀institutional฀capacity฀for฀ delivery.฀Although฀new฀market฀entrants฀often฀have฀a฀hard฀ time฀accessing฀capital,฀their฀freedom฀from฀the฀chronic฀ financial฀problems฀of฀the฀SEBs฀may฀even฀give฀them฀an฀ advantage฀in฀this฀area. There฀is฀a฀question,฀however,฀regarding฀whether฀the฀ respective฀industries฀would฀be฀able฀to฀respond฀quickly฀ enough฀to฀such฀a฀rapid฀increase฀in฀demand.฀Assuming฀a฀ capacity฀factor฀of฀30฀to฀50฀percent฀for฀off-grid฀diesel,฀generating฀100฀TWh฀per฀year฀implies฀new฀installed฀capacity฀ of฀some฀23฀to฀38฀GW฀by฀2020,฀or฀roughly฀1,500–2,500฀ MW฀per฀year.฀This฀is฀equivalent฀to฀adding฀15฀to฀25฀ percent฀of฀India’s฀present฀installed฀capacity฀of฀distributed฀ diesel฀generation฀each฀year.฀This฀is฀significant฀growth,฀but฀ the฀rapid฀response฀of฀entrepreneurs฀to฀the฀Electricity฀Act฀ and฀the฀relative฀abundance฀of฀diesel฀engine฀suppliers฀give฀ some฀reason฀to฀think฀that฀it฀is฀plausible. Table฀3.฀฀฀Typical฀Unit฀Size฀and฀Construction฀Time฀for฀Selected฀ Technologies฀ Type฀ Typical฀unit฀capacity฀(MW)฀ Construction฀time฀(years) Large฀Hydro฀ 30–250฀ 10–15 Micro฀Hydro฀ 0.01–1฀ 3–5 Coal฀ 60–700฀ 3–5 Gas฀combined฀cycle฀ 100–300฀ 1–2฀ Diesel฀ 0.5–10฀ 1–2 Wind฀ 0.25–1฀ 1–2 Source:฀Prayas฀(2004) 82 For฀renewable฀energy฀the฀picture฀is฀not฀quite฀so฀clear.฀ Using฀a฀generalized฀load฀factor฀for฀renewable฀energy฀ systems฀is฀difficult,฀since฀the฀various฀technologies฀this฀ includes฀vary฀widely—from฀a฀typical฀capacity฀factor฀of฀ 25฀percent฀for฀solar฀PV฀to฀around฀70฀percent฀for฀many฀ biomass฀applications฀(Banerjee,฀2006).฀Assuming฀an฀average฀capacity฀factor฀of฀30฀to฀40฀percent,฀meeting฀demand฀ of฀100฀TWh฀per฀year฀in฀2020฀would฀imply฀installing฀some฀ 29฀to฀38฀GW฀over฀15฀years,฀or฀1,900฀to฀2,500฀MW฀of฀offgrid฀renewable฀energy฀capacity฀per฀year.฀While฀this฀is฀not฀ overwhelming฀in฀terms฀of฀the฀technology—Spain฀alone฀ installs฀almost฀twice฀that฀amount฀every฀year—further฀work฀ needs฀to฀be฀done฀to฀evaluate฀the฀potential฀to฀install฀large฀ numbers฀of฀dispersed฀renewable฀energy฀projects.฀India฀has฀ a฀significant฀domestic฀manufacturing฀base฀in฀most฀of฀the฀ renewable฀energy฀technologies,฀but฀an฀expansion฀of฀this฀ scale฀would฀almost฀certainly฀require฀the฀active฀involvement฀ of฀international฀providers฀as฀well.฀ Transmission฀and฀distribution India’s฀T&D฀infrastructure฀already฀suffers฀from฀underinvestment,฀with฀blackouts฀and฀brownouts฀common฀across฀ the฀country.฀Rural฀electrification,฀which฀by฀definition฀ means฀less฀dense฀populations฀and฀thus฀greater฀T&D฀needs,฀ may฀well฀place฀too฀much฀demand฀on฀India’s฀creaking฀grid. Exactly฀how฀much฀transmission฀infrastructure฀investment฀will฀be฀needed฀will฀depend฀on฀a฀range฀of฀factors,฀but฀ we฀can฀consider฀the฀scale฀of฀the฀challenge฀with฀some฀rough฀ calculations.฀ A฀general฀rule฀for฀capital฀investment฀in฀India’s฀power฀ infrastructure฀holds฀that฀investment฀in฀transmission฀and฀ distribution฀should฀roughly฀equal฀that฀in฀generation฀(IEA,฀ 2002a;฀Planning฀Commission,฀2001).฀Assuming฀this฀ratio฀ holds฀for฀rural฀electrification,฀and฀assuming฀an฀optimistic฀ load฀factor฀of฀50฀percent,฀we฀would฀expect฀to฀see฀a฀$5฀ billion฀to฀$36฀billion฀investment฀in฀T&D฀over฀15฀years฀in฀ addition฀to฀investment฀needed฀to฀strengthen฀the฀grid฀and฀ improve฀reliability฀in฀existing฀demand฀centers.฀ This฀is฀a฀tall฀order.฀For฀purposes฀of฀comparison,฀the฀9th฀฀ ten-year฀plan฀invested฀$1.2฀billion฀in฀T&D฀over฀five฀years.฀฀ Even฀under฀the฀lowest฀of฀our฀demand฀scenarios,฀India฀ would฀need฀to฀maintain฀its฀recent฀level฀of฀T&D฀investment฀ just฀to฀support฀rural฀electrification฀(see฀Figure฀4)—without฀ counting฀any฀further฀investment฀in฀its฀urban฀and฀other฀ areas฀that฀already฀have฀some฀grid฀connection.฀At฀the฀high฀ level฀of฀demand,฀annual฀investment฀in฀T&D฀would฀need฀ to฀increase฀almost฀sixfold. Based฀on฀the฀above,฀we฀make฀a฀qualitative฀appraisal฀of฀ the฀scenarios฀in฀terms฀of฀the฀speed฀of฀provision฀of฀electricity฀(Table฀4).฀Note฀that฀these฀assessments฀are฀based฀mainly฀ on฀the฀capacity฀of฀the฀institutional฀and฀delivery฀frameworks฀in฀India,฀rather฀than฀on฀technology.฀There฀are฀some฀ technological฀constraints—for฀instance฀the฀need฀for฀T&D฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST ฀ ฀ ฀ ฀฀ ฀ Grid฀First฀ ฀ Diesel฀First฀ Renewables฀ First ฀ Speed฀ Low฀ High฀ Medium infrastructure฀often฀adds฀to฀the฀time฀needed฀to฀provide฀ new฀connections—but฀these฀are฀generally฀much฀less฀significant฀than฀those฀of฀institutional฀and฀delivery฀models. 3.2.2฀฀Quality฀of฀supply,฀including฀availability,฀฀ reliability฀and฀consistency The฀grid-based฀approach฀is฀in฀some฀ways฀the฀most฀ difficult฀to฀assess,฀since฀much฀depends฀on฀recent฀efforts฀ to฀reform฀and฀fix฀India’s฀grid-based฀supply.฀A฀grid฀can฀in฀ principle฀be฀well-suited฀to฀the฀delivery฀of฀power฀with฀high฀ levels฀of฀availability,฀reliability,฀and฀quality.฀With฀sufficient฀improvement,฀a฀grid฀connection฀offers฀the฀potential฀ for฀“scalability”—that฀is,฀the฀ability฀to฀match฀increased฀ demand฀with฀ready฀supply.฀ As฀discussed฀in฀3.1.1,฀however,฀the฀obstacles฀that฀lie฀ in฀the฀way฀of฀better฀grid฀electricity฀are฀formidable.฀The฀ potential฀for฀cash-strapped฀SEBs฀to฀simultaneously฀expand฀ connections฀and฀improve฀quality฀for฀the฀bottom฀two฀segments฀of฀the฀electricity฀market—current฀rural฀consumers฀ and฀anticipated฀future฀rural฀consumers—is฀remote.฀ Only฀if฀serving฀the฀rural฀poor฀is฀no฀longer฀a฀loss-making฀฀ proposition฀can฀this฀outcome฀be฀reversed.฀To฀do฀so฀will฀ either฀require฀a฀steep฀increase฀in฀transparent฀subsidies฀ from฀the฀state,฀or฀a฀steep฀increase฀in฀price,฀along฀with฀far฀ greater฀collection฀efficiency.฀Neither฀seems฀likely.฀State฀ governments฀are฀struggling฀to฀cover฀existing฀subsidies,฀let฀ alone฀enhanced฀subsidies฀from฀an฀additional฀161฀million฀ households.฀Since฀existing฀rural฀consumers฀are฀organized฀ to฀prevent฀price฀hikes฀and฀are฀remarkably฀effective฀at฀ avoiding฀collection,฀there฀is฀no฀reason฀to฀expect฀new,฀and฀ likely฀poorer,฀users฀to฀be฀noticeably฀more฀pliant.฀These฀ arguments฀suggest฀that฀for฀perhaps฀several฀decades,฀gridbased฀rural฀electrification฀will฀most฀likely฀be฀poor฀quality฀ and฀unreliable฀electrification. By฀contrast,฀distributed฀generation฀has฀the฀potential฀to฀ break฀out฀of฀this฀cycle฀for฀at฀least฀two฀reasons.฀First,฀studies฀suggest฀that฀rural฀populations฀are฀willing฀to฀pay฀more฀ if฀quality฀improves฀commensurately฀(World฀Bank,฀2001).฀ This฀leads฀to฀a฀chicken-and-egg฀situation,฀where฀rural฀ users฀wait฀for฀service฀quality฀to฀increase,฀and฀the฀SEBs฀ seek฀higher฀prices฀before฀investing฀in฀service฀quality.฀New฀ distributed฀generation฀providers฀have฀the฀opportunity฀to฀ establish฀greater฀trust฀and฀credibility฀than฀the฀SEBs.฀If฀they฀ provide฀adequate฀quality฀and฀reliability,฀they฀may฀well฀be฀ able฀to฀charge฀remunerative฀prices.฀Second,฀by฀introducing฀more฀knowledge฀of฀local฀context,฀decentralization฀in฀ Figure฀4.฀฀฀Indicative฀Annual฀T&D฀Investment฀Needs฀under฀the฀฀ Grid-Dominated฀Scenario฀Compared฀to฀the฀9th฀5-Year฀Plan฀ 2.5 T&D Investment per Year (US$ billion) Table฀4.฀฀฀Qualitative฀Assessment฀of฀the฀Speed฀of฀฀ Electricity฀Provision฀under฀each฀Scenario 2.0 1.5 1.0 0.5 0.0 9th 5-year plan Low demand Medium demand High demand Source:฀Authors,฀based฀on฀parity฀with฀required฀generation฀investment. collection฀in฀conjunction฀with฀distributed฀generation฀may฀ well฀help฀solve฀the฀collection฀problem.฀Although฀decentralized฀collection฀has฀been฀attempted฀for฀central฀grid฀ power฀as฀well,฀notably฀in฀the฀state฀of฀Orissa,฀preliminary฀ reports฀suggest฀that฀since฀the฀chain฀of฀command฀between฀ local฀collection฀agents฀and฀the฀utility฀was฀unduly฀long,฀ local฀collectors฀did฀not฀have฀the฀ability฀to฀provide฀quick฀ solutions฀to฀local฀problems,฀undercutting฀the฀benefit฀of฀ local฀knowledge฀(Mishra,฀no฀date).฀An฀integrated฀small-฀ scale฀provider—whether฀using฀diesel฀or฀renewable฀technologies—would฀not฀have฀the฀same฀problem฀and฀may฀well฀฀ be฀able฀to฀provide฀better฀service฀and฀extract฀a฀higher฀price.฀ From฀a฀technological฀point฀of฀view,฀diesel฀and฀renewable฀energy฀projects฀both฀offer฀potentially฀higher฀quality฀ and฀reliability฀than฀the฀present฀Indian฀grid.฀However,฀this฀ will฀depend฀in฀both฀cases฀on฀the฀existence฀of฀a฀sufficient฀ workforce฀of฀competent฀project฀developers฀and฀associated฀ experts.฀In฀general,฀diesel฀generators฀have฀the฀advantage฀of฀ being฀familiar฀technology฀with฀a฀ready฀supply฀of฀mechanics฀to฀maintain฀and฀repair฀the฀generators.฀However,฀some฀ field฀experience฀in฀China฀suggests฀that฀rural฀consumers฀ prefer฀renewable฀energy฀systems฀for฀their฀greater฀reliability฀ (Byrne฀et฀al.,฀1998). PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 83 Wind฀and฀solar฀technologies฀both฀depend฀on฀a฀variable฀ resource,฀which฀adds฀an฀obvious฀challenge฀in฀providing฀ a฀consistent฀and฀high฀quality฀supply.฀The฀solution฀to฀this฀ problem฀varies฀with฀the฀scale฀of฀the฀generation.฀Small฀ systems,฀particularly฀solar฀PV,฀tend฀to฀use฀batteries฀(WEA,฀ 2000).฀For฀larger฀systems,฀to฀power฀mini-grids฀for฀instance,฀batteries฀can฀be฀uneconomic,฀and฀typically฀hybrid฀ systems฀are฀used.฀These฀pair฀wind฀and/or฀solar฀technologies฀with฀diesel฀or฀biomass฀back-up฀supply.฀The฀solar฀and฀ wind฀equipment,฀not฀requiring฀fuel,฀is฀used฀when฀the฀sun฀ or฀wind฀is฀available;฀at฀other฀times฀the฀backup฀technology฀ kicks฀in.฀Project฀experience฀suggests฀that฀well-designed฀ systems฀can฀rely฀on฀the฀backup฀for฀as฀little฀as฀20฀percent฀of฀ the฀power฀demand฀(Goldemberg฀and฀Johansson,฀2004). Based฀on฀the฀above,฀we฀make฀a฀qualitative฀appraisal฀ of฀the฀scenarios฀in฀terms฀of฀quality฀of฀supply฀(Table฀5).฀ As฀in฀the฀case฀of฀speed฀of฀delivery฀(see฀preceding฀section)฀ this฀appraisal฀is฀based฀on฀institutional฀factors.฀There฀is฀ no฀technological฀reason฀why฀grid฀electricity฀should฀be฀of฀ lower฀quality.฀฀฀฀------฀Table฀5฀---remove฀this฀later Table฀5.฀฀฀Qualitative฀Assessment฀of฀the฀Quality฀of฀฀ ฀Electricity฀under฀each฀Scenario ฀ ฀ ฀ ฀฀ ฀ Grid฀First฀ ฀ Diesel฀First฀ Renewables ฀First ฀ Quality฀ Low฀ High฀ Medium 3.2.3฀฀Affordability A฀persistent฀criticism฀of฀off-grid฀electrification฀in฀ general,฀and฀renewable฀energy฀technologies฀in฀particular,฀ is฀that฀they฀deliver฀power฀at฀a฀considerably฀higher฀cost฀ than฀the฀grid.฀In฀Cambodia,฀for฀instance,฀off-grid฀schemes฀ charge฀an฀average฀tariff฀three฀times฀higher฀than฀that฀paid฀ by฀customers฀on฀the฀grid฀(World฀Bank,฀2004).฀ However,฀such฀comparisons฀can฀be฀misleading.฀Comparing฀costs฀on฀a฀per฀kWh฀basis฀between฀such฀different฀ technologies฀and฀delivery฀structures฀as฀are฀considered฀here฀ is฀not฀straightforward,฀since฀tariffs฀will฀depend฀on฀a฀wide฀ range฀of฀technology฀factors฀or฀complex฀cross-subsidies.฀ Whatever฀approach฀is฀used,฀providing฀electrification฀to฀ dispersed฀rural฀populations฀is฀inherently฀more฀expensive฀ than฀to฀concentrated฀urban฀populations.฀Conversely,฀urban฀ populations฀are฀often฀richer฀than฀their฀rural฀counterparts.฀ This฀provides฀a฀strong฀political฀rationale฀to฀subsidize฀rural฀ electricity฀in฀the฀interest฀of฀equity.฀ Subsidies฀for฀grid-based฀technologies—which฀could฀just฀฀ as฀feasibly฀be฀used฀for฀off-grid฀electrification—can฀be฀ complex฀and฀hidden.฀Figure฀5฀shows฀the฀difference฀between฀ the฀cost฀of฀providing฀power,฀the฀price฀set฀by฀the฀Regulatory฀ Commission฀(RC),฀and฀the฀price฀after฀government฀subsidy฀฀ for฀power฀to฀a฀range฀of฀sectors฀in฀the฀State฀of฀Andhra฀Pradesh. In฀2002,฀the฀average฀cost฀of฀supply฀from฀the฀grid฀was฀ 3.5฀rupees฀per฀kWh฀(7฀cents),฀but฀the฀average฀tariff฀was฀ 2.4฀Rs฀(4.8฀cents).฀The฀customer฀thus฀paid฀on฀average฀ about฀two-thirds฀of฀the฀cost฀of฀supply—considerably฀less฀ than฀this฀for฀rural฀customers.฀(Prayas,฀2004).฀ Nor฀do฀these฀“cost฀of฀supply”฀figures฀properly฀reflect฀ the฀total฀costs฀involved.฀The฀somewhat฀counter-intuitive฀ figures฀above฀suggest฀that฀the฀cost฀per฀kWh฀of฀serving฀a฀ large฀industrial฀consumer฀is฀higher฀than฀serving฀rural฀consumers—something฀that,฀if฀true,฀would฀stand฀in฀marked฀ contrast฀to฀the฀experience฀in฀other฀electricity฀markets.฀The฀ discrepancy฀seems฀to฀be฀due฀to฀the฀fact฀that฀commercial฀ and฀industrial฀users฀require฀reasonably฀high฀levels฀of฀quality฀ in฀the฀power฀they฀consume.฀Rural฀costs฀seem฀low฀because฀ they฀reflect฀the฀cost฀of฀delivering฀low-quality,฀intermittent฀ power.฀The฀true฀cost฀of฀rural฀electrification฀that฀meets฀the฀ government’s฀quality฀criteria฀would฀be฀far฀higher. The฀cost฀estimates฀for฀off-grid฀sources฀vary฀widely฀ across฀sources,฀and฀within฀each฀source฀because฀of฀location-specific฀factors฀(Table฀6).฀Solar฀is฀the฀most฀expensive฀ because฀of฀its฀significant฀capital฀investment.฀For฀this฀reason,฀it฀tends฀to฀be฀used฀largely฀for฀low-load฀applications,฀ where฀it฀is฀better฀able฀to฀compete฀with฀other฀technologies.฀ India฀has฀invested฀heavily฀in฀wind฀capacity,฀and฀has฀the฀ 5th฀largest฀installed฀wind฀capacity฀in฀the฀world฀(European฀ Wind฀Energy฀Association,฀2003).฀Because฀of฀India’s฀agrarian฀base,฀biomass฀is฀perhaps฀the฀most฀promising฀source฀ for฀India฀(Pathak,฀2004).฀Finally,฀diesel฀is฀the฀most฀tried฀ and฀tested฀of฀the฀off-grid฀technologies.฀However,฀the฀cost฀ depends฀considerably฀on฀the฀distance฀over฀which฀fuel฀has฀ to฀be฀delivered.20฀ A฀first฀glance฀at฀Table฀6฀suggests฀that฀off-grid฀power฀ sources฀deliver฀power฀at฀a฀higher฀price฀per฀kWh฀than฀ grid฀power.฀However,฀this฀may฀well฀not฀be฀the฀case฀for฀ at฀least฀three฀reasons.฀First,฀because฀of฀the฀heavy฀capital฀ and฀operating฀subsidies฀for฀grid฀power,฀direct฀comparisons฀between฀these฀unsubsidized฀generation฀costs฀and฀ subsidized฀grid฀prices฀are฀not฀meaningful.฀Second,฀much฀ depends฀on฀the฀characteristics฀of฀the฀site.฀Variables฀such฀as฀ remoteness฀(from฀the฀grid฀or฀fuel฀supply),฀availability฀of฀ an฀appropriate฀renewable฀resource,฀and฀suitable฀operation฀ and฀maintenance฀capabilities฀can฀all฀materially฀alter฀cost฀ Table฀6.฀฀Indicative฀Prices฀for฀Off-grid฀Technologies ฀ 20-9421฀ Wind฀ 3.6-11.722฀ Biomass฀ Diesel฀ 84 Price฀per฀kWh฀(US฀cents) Solar฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST 4-1023฀ 1024฀ Table฀7.฀฀฀Qualitative฀Assessment฀of฀the฀Affordability฀ of฀Electricity฀under฀each฀Scenario ฀ ฀ ฀ ฀฀ ฀ Grid฀First฀ ฀ Diesel฀First฀ Renewables ฀First ฀ Affordability฀ Medium฀ Medium฀ Low/Medium ability฀of฀rural฀households฀to฀pay฀for฀power฀is฀likely฀to฀be฀฀ limited฀in฀all฀cases.฀Note฀also฀that฀the฀application฀of฀ subsidies฀is฀likely฀to฀be฀the฀dominant฀factor฀in฀ensuring฀ affordability,฀and฀these฀subsidies฀may฀be฀applied฀to฀any฀of฀ the฀technology฀mixes฀considered฀here.฀------฀Table฀7฀--3.2.4฀฀Energy฀import฀dependence฀and฀฀ security฀of฀supply The฀phrase฀“security฀of฀supply”฀as฀often฀used฀conflates฀ two฀distinct฀concerns฀for฀an฀energy-importing฀state.฀The฀ first฀of฀these฀is฀import฀dependence.฀Large-scale฀dependence฀on฀imported฀fuels฀imposes฀a฀burden฀on฀a฀country’s฀ foreign฀currency฀reserves฀and฀balance฀of฀payments,฀and฀฀ the฀volatility฀of฀international฀oil฀prices฀presents฀an฀unpredictable฀economic฀cost.฀This฀applies฀to฀all฀fuels฀that฀have฀ to฀be฀imported.฀The฀second,฀security฀of฀supply,฀refers฀to฀ Figure฀5.฀฀฀฀Price฀per฀kWh฀for฀Power฀to฀Various฀Sectors฀in฀฀ Andhra฀Pradesh฀ 7 Cost to serve 6 RC Tariff Tariff after subsidy 5 US cents per kWh 4 3 2 Railway Industry, High voltage Industry, Low voltage Commercial Rural Co-op 0 Agriculture 1 Residential comparisons฀of฀specific฀off-grid฀technologies฀with฀gridbased฀power.฀Third,฀the฀cost฀of฀relatively฀new฀renewable฀ off-grid฀technologies,฀and฀wind฀energy฀in฀particular,฀has฀ been฀steadily฀declining฀over฀time,฀and฀is฀likely฀to฀decline฀ even฀further฀as฀scale฀economies฀of฀manufacture฀are฀realized.฀Over฀time,฀therefore,฀off-grid฀renewable฀technologies฀ are฀likely฀to฀be฀ever฀more฀competitive฀(Goldemberg฀and฀ Johanssen,฀2004). In฀sum,฀it฀is฀extremely฀hard฀to฀make฀general฀statements฀ about฀cost฀comparisons฀across฀generation฀technologies.฀ The฀economics฀of฀grid฀generation฀and฀transmission฀are฀ extremely฀murky฀in฀India,฀and฀it฀is฀by฀no฀means฀clear฀that฀ future฀rural฀users฀will฀have฀access฀to฀electricity฀at฀the฀costs฀ that฀current฀users฀enjoy,฀especially฀if฀cost-recovery฀discipline฀is฀imposed฀in฀the฀sector.฀Among฀off-grid฀technologies,฀diesel฀generators฀are฀the฀most฀established,฀but฀costs฀ depend฀on฀fuel฀availability฀and฀transport฀costs.฀Off-grid฀ renewable฀energy฀sources฀range฀from฀high฀cost฀to฀costs฀ that฀are฀competitive฀with฀grid฀sources,฀in฀the฀case฀of฀wind.฀ In฀practice,฀there฀is฀unlikely฀to฀be฀a฀single฀winner฀from฀ among฀sources.฀Instead,฀each฀of฀these฀technologies฀may฀be฀ used,฀alone฀or฀in฀conjunction฀with฀other฀technologies฀(for฀ example,฀wind-diesel),฀where฀conditions฀are฀ripe. Based฀on฀this฀discussion,฀we฀make฀a฀qualitative฀appraisal฀ of฀the฀scenarios฀in฀terms฀of฀affordability฀(Table฀7).฀Note฀ that฀no฀option฀is฀very฀affordable—in฀other฀words,฀the฀฀ Source:฀Prayas฀(2004) a฀physical฀and฀political฀risk฀that฀supplies฀at฀bearable฀cost฀ might฀become฀unavailable.฀Given฀the฀vital฀importance฀ of฀energy฀supplies฀for฀all฀economies,฀the฀dependence฀on฀ politically฀vulnerable฀or฀unstable฀regions฀for฀these฀supplies฀ is฀worrying.฀This฀second฀consideration฀applies฀more฀to฀ fuels฀such฀as฀oil฀and฀natural฀gas,฀which฀are฀generally฀found฀ in฀less฀stable฀regions,฀than฀to฀coal,฀which฀comes฀from฀ countries฀that฀present฀less฀political฀risk. As฀governments฀become฀more฀concerned฀about฀the฀ economic฀and฀political฀consequences฀of฀dependence฀฀ on฀imports,฀embarking฀on฀an฀approach฀sure฀to฀increase฀ that฀dependence฀looks฀imprudent.฀India฀is฀increasingly฀ dependent฀on฀foreign฀supplies฀of฀oil,฀and฀this฀concern,฀฀ as฀in฀many฀other฀countries,฀is฀growing.฀฀------฀Table฀8฀--It฀is฀not฀clear฀to฀what฀extent฀India฀would฀depend฀on฀ importing฀refined฀diesel.฀At฀present,฀some฀diesel฀products฀are฀imported,฀though฀India฀has฀significant฀refining฀ PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 85 Table฀8.฀฀Oil฀and฀Oil฀Product฀Import฀Increases฀from฀the฀Scenarios,฀2020 Scenario฀ Grid฀First฀ Demand฀ Diesel฀First฀ Renewables฀First Low฀ Medium฀ High฀ Low฀ Medium฀ High฀ Low฀ Medium฀ Diesel฀consumption฀(million฀barrels/year)฀ 9฀ 16฀ 68฀ 34฀ 60฀ 251฀ 9฀ 16฀ 65 Percentage฀increase฀over฀2003-4฀imports฀ 2%฀ 3%฀ 11%฀ 6%฀ 10%฀ 41%฀ 1%฀ 3%฀ 11%฀ Oil฀import฀increase฀(billion฀US$/year)฀at฀ $30/barrel฀crude 0.4฀ 0.7฀ 3.1฀ 1.5฀ ฀2.7฀ 11.3฀ 0.4฀ 0.7฀ 2.9฀ ฀฀฀฀฀฀฀฀฀฀0.8฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀1.4฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀5.8฀฀ ฀฀฀฀฀฀฀฀฀2.9฀฀ ฀฀฀฀฀฀฀฀฀฀5.1฀฀฀฀฀฀฀฀฀฀฀฀21.3฀฀ ฀฀฀฀฀฀฀0.8฀฀ At฀$70/barrel฀crude฀ capacity฀of฀its฀own.฀However,฀its฀oil฀resources฀are฀small฀ and฀unlikely฀to฀rise฀significantly.฀Thus,฀the฀rise฀in฀diesel฀ consumption฀will฀lead฀to฀increased฀imports,฀whether฀of฀ crude฀oil฀or฀refined฀diesel.฀Here฀we฀assume฀for฀simplicity฀ that฀the฀additional฀diesel฀demand฀is฀met฀with฀imports฀of฀ refined฀diesel.฀As฀Table฀8฀shows,฀depending฀on฀the฀level฀ of฀demand฀the฀Diesel฀First฀scenario฀raises฀India’s฀imports฀ by฀the฀equivalent฀of฀between฀6฀percent฀and฀41฀percent฀of฀ those฀in฀2003/4.25฀By฀contrast,฀the฀Grid฀First฀and฀Renewables฀First฀scenarios฀raise฀diesel฀imports฀by฀barely฀a฀quarter฀ as฀much. Such฀an฀increase฀in฀imports฀represents฀a฀significant฀ financial฀burden,฀particularly฀as฀oil฀prices฀seem฀likely฀to฀ remain฀high.฀Predicting฀oil฀prices฀is฀notoriously฀difficult,฀ but฀to฀indicate฀a฀plausible฀range฀in฀Table฀8฀we฀consider฀the฀ effects฀of฀the฀increase฀at฀crude฀oil฀prices฀of฀$30฀per฀barrel฀ and฀$70฀per฀barrel.26฀฀ At฀$30฀per฀barrel,฀the฀Diesel฀First฀scenario฀implies฀an฀ increase฀in฀the฀import฀bill฀of฀$1.5฀to฀$11.3฀billion฀per฀ year฀(depending฀on฀the฀assumed฀demand)฀over฀a฀200304฀import฀bill฀of฀about฀$17.4฀billion.฀The฀Renewables฀ First฀scenario฀(using฀the฀same฀oil฀price)฀raises฀imports฀by฀ $0.4฀to฀$2.9฀billion,฀thus฀saving฀the฀country฀a฀net฀$0.9฀to฀ $8.4฀billion฀per฀year.฀At฀$70฀per฀barrel,฀this฀saving฀rises฀to฀ between฀$2.1฀and฀$15.8฀billion.฀In฀terms฀of฀impact฀on฀oil฀ imports฀there฀is฀little฀difference฀between฀the฀Grid฀First฀and฀ Renewables฀First฀scenarios. The฀import฀figures฀represent฀potentially฀significant฀ costs.฀At฀the฀high฀end฀of฀this฀range฀(oil฀prices฀of฀$70฀a฀ barrel),฀$15.8฀billion฀is฀equivalent฀to฀90฀percent฀of฀India’s฀ current฀import฀bill฀for฀oil฀and฀refined฀products,฀and฀14฀ percent฀of฀the฀national฀external฀debt.27฀ High ฀฀฀฀฀฀฀1.3฀฀ ฀฀฀฀฀฀฀฀฀฀5.5฀ In฀addition฀to฀the฀purely฀financial฀burden,฀another฀ issue฀is฀the฀dependence฀on฀potentially฀volatile฀suppliers.฀ While฀Indian฀refiners฀also฀buy฀on฀the฀spot฀market,฀their฀ main฀sources฀of฀crude฀under฀term฀contracts฀are฀Saudi฀ Arabia,฀Kuwait,฀UAE,฀and฀Iran฀(Ministry฀of฀Petroleum฀ and฀Natural฀Gas,฀2005).฀This฀concentration฀of฀suppliers฀ in฀a฀politically฀volatile฀region฀leaves฀India฀more฀exposed฀to฀ potential฀supply฀disruptions฀than฀it฀might฀wish. Oil฀raises฀troubling฀dependency฀issues฀for฀India฀due฀ to฀the฀sensitive฀security฀concerns฀it฀raises.฀However,฀coal฀ imports฀may฀also฀have฀to฀rise.฀In฀the฀calculations฀presented฀here,฀we฀assume฀that฀the฀generation฀mix—that฀is,฀the฀ share฀of฀the฀different฀power฀technologies฀on฀the฀grid— will฀remain฀broadly฀constant.฀However,฀“peaky”฀loads฀ such฀as฀those฀in฀rural฀areas฀are฀not฀well฀served฀by฀baseload฀ plants฀such฀as฀the฀large฀thermal฀generators฀in฀wide฀use฀ in฀India.฀Hydropower฀and฀natural฀gas฀technologies฀are฀ common฀for฀dealing฀with฀peak฀loads,฀but฀neither฀has฀ large฀medium-term฀potential฀for฀expansion.฀This฀leaves฀ the฀possibility฀that฀smaller฀coal฀plants฀will฀come฀online฀to฀ deal฀with฀the฀more฀variable฀grid฀load.฀These฀smaller฀plants฀ tend฀to฀be฀less฀efficient฀and฀more฀polluting,฀and฀will฀฀ of฀course฀demand฀coal.฀India’s฀coal฀industry฀faces฀major฀ constraints฀in฀its฀ability฀to฀increase฀either฀production฀or฀ transport฀of฀coal.฀However,฀even฀a฀doubling฀of฀India’s฀ coal฀output฀will฀not฀allow฀it฀to฀keep฀pace฀with฀spiraling฀ projected฀demand฀for฀power฀on฀the฀existing฀grid฀(Planning฀ Commission,฀2002a).฀This฀raises฀the฀possibility฀that฀India,฀which฀has฀a฀large฀domestic฀coal฀resource,฀will฀become฀ increasingly฀dependent฀on฀coal฀imports.฀This฀possibility฀ is฀reflected฀in฀our฀qualitative฀assessment฀of฀energy฀security฀ implications฀(Table฀9).฀Table฀9฀--Table฀9.฀฀฀Qualitative฀Assessment฀of฀the฀Protection฀฀ of฀India’s฀Domestic฀Energy฀Security฀under฀฀ each฀Scenario ฀ ฀ ฀ ฀฀ ฀ Energy฀security฀ 86 ฀ Grid฀First฀ ฀ Diesel฀First฀ Renewables ฀First Medium฀ Low฀ High GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Table฀10.฀฀CO2฀Emissions฀Arising฀from฀the฀Scenarios Scenario฀ Grid฀First฀ Diesel฀First฀ Renewables฀First Demand฀ Low฀ Medium฀ High฀ Low฀ Medium฀ High฀ Low฀ Medium฀ CO2฀emissions฀(Mt)฀ 23฀ 40฀ 167฀ 19฀ 33฀ 137฀ 9฀ 16฀ 65 Figure฀6.฀฀CO2฀Emissions฀under฀the฀Scenarios 200 Low Medium High 150 CO2 emissions (Mt/year) 3.2.5฀฀Greenhouse฀gases As฀illustrated฀in฀Table฀10,฀the฀three฀scenarios฀show฀ marked฀differences฀in฀their฀resulting฀GHG฀emissions. High฀dependency฀on฀the฀grid฀produces฀the฀highest฀levels฀ of฀GHG฀emissions.28฀The฀Diesel฀First฀scenario฀produces฀ slightly฀lower฀emissions,฀largely฀through฀reducing฀grid฀ losses฀and฀thus฀lowering฀total฀generation฀required. The฀Renewables฀First฀scenario฀leads฀to฀emissions฀ roughly฀60฀percent฀lower฀than฀Grid฀First:฀a฀difference฀of฀ 14฀to฀100฀million฀metric฀tons฀of฀CO2฀per฀year฀depending฀ on฀the฀demand฀level.฀The฀middle฀of฀this฀range฀is฀equivalent฀to฀almost฀twice฀as฀much฀as฀the฀yearly฀CO2฀emissions฀ of฀Bangladesh. The฀near-term฀significance฀of฀this฀impact฀should฀not฀be฀ overstated.฀Even฀under฀the฀Grid฀First฀scenario,฀the฀impact฀ of฀500฀million฀Indians฀gaining฀access฀to฀electricity฀for฀the฀ first฀time฀leads฀to฀the฀equivalent฀of฀1฀to฀5฀percent฀of฀U.S.฀ GHG฀emissions.฀This฀is฀hardly฀trivial,฀but฀it฀does฀not฀ make฀rural฀electrification฀an฀obvious฀place฀to฀focus฀efforts฀ at฀lower-carbon฀growth.฀฀฀-----------฀Figure฀6฀-------A฀potentially฀more฀important฀issue฀is฀the฀extent฀to฀ which฀the฀technology฀and฀institutional฀choices฀made฀ now฀will฀persist.฀For฀instance,฀high฀investment฀in฀grid฀ infrastructure฀in฀the฀coming฀decade฀may฀make฀grid-based฀ electricity฀delivery฀the฀norm฀and฀ensure฀the฀use฀of฀large,฀ centralized฀thermal฀plants฀well฀into฀the฀future.฀In฀the฀case฀ of฀large-scale฀T&D฀infrastructure฀and฀on-grid฀generation,฀ the฀technologies฀themselves฀have฀long฀lifetimes.฀A฀large฀ thermal฀generation฀plant฀can฀have฀a฀life฀of฀50฀years฀or฀ more฀and,฀once฀the฀capital฀has฀been฀depreciated,฀can฀be฀ hard฀to฀replace฀economically.฀Investments฀made฀now฀may฀ last฀well฀into฀the฀second฀half฀of฀the฀century.฀This฀might฀be฀ described฀as฀a฀technological,฀or฀infrastructure฀“lock-in.”฀ Conversely,฀distributed฀or฀off-grid฀energy฀systems฀entail฀ a฀set฀of฀institutional฀and฀business฀structures฀such฀as฀marketing,฀installation,฀maintenance,฀and฀repair฀networks฀that฀ take฀time฀to฀develop.฀In฀addition,฀users฀need฀to฀accustom฀ themselves฀to฀the฀idea฀of฀generating฀their฀power฀locally.฀ A฀large-scale฀adoption฀of฀off-grid฀electricity฀technologies฀ now฀by฀communities฀that฀are฀new฀power฀users฀might฀be฀ expected฀to฀build฀a฀lasting฀set฀of฀institutional฀structures฀ that฀will฀continue฀to฀facilitate฀the฀introduction฀of฀other฀ off-grid฀generation฀in฀the฀future.฀Since฀these฀systems฀do฀ not฀rely฀on฀large฀discrete฀capital฀investments,฀they฀allow฀ new฀technologies฀to฀penetrate฀the฀market฀as฀they฀are฀developed.฀Thus฀the฀“lock-in”฀effect฀in฀this฀case฀is฀institutional฀ rather฀than฀technological. High 100 50 0 High Grid High Diesel High Renewables Even฀after฀the฀heroic฀efforts฀needed฀to฀electrify฀all฀ households฀by฀2020,฀demand฀can฀be฀expected฀to฀grow฀ substantially.฀There฀is฀some฀evidence฀of฀a฀substantial฀technological฀inertia฀in฀energy฀systems.29฀This฀inertial฀effect฀is฀ an฀interesting฀area฀for฀further฀research,฀which฀is฀beyond฀ the฀scope฀of฀this฀study.฀The฀salient฀point฀here฀is฀that฀the฀ longer-term฀climate฀impacts฀of฀today’s฀choices฀may฀be฀significant,฀and฀the฀interest฀in฀finding฀lower-carbon฀options฀ is฀stronger฀than฀only฀the฀near-term฀emission฀reductions฀ would฀suggest.฀Based฀on฀this฀discussion,฀we฀qualitatively฀ score฀the฀various฀scenarios฀in฀Table฀11.฀฀--฀Table฀11฀--Table฀11.฀฀฀Qualitative฀Assessment฀of฀the฀Level฀of฀Climate฀฀ Protection฀under฀each฀Scenario฀ ฀ ฀฀ ฀Climate฀protection฀ Grid฀First฀ Diesel฀First฀ Renewables฀First Low฀ Low/Medium฀ High PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 87 4.฀CONCLUSIONS This฀chapter฀has฀attempted฀to฀put฀some฀realistic฀contours฀on฀the฀task฀ahead฀for฀rural฀electrification฀in฀India,฀to฀ construct฀three฀plausible฀pathways฀toward฀this฀goal,฀and฀฀ to฀assess฀the฀pathways฀against฀five฀criteria฀for฀success—four฀ development฀criteria฀of฀national฀interest฀and฀one฀global฀ criterion฀of฀climate฀change.฀Such฀an฀exercise฀is฀intended฀ to฀inform฀and฀stimulate฀debate฀rather฀than฀provide฀any฀ definitive฀conclusions.฀In฀addition฀to฀the฀issues฀discussed฀ here,฀there฀are฀important฀questions฀of฀institutional฀form฀of฀ service฀delivery,฀local฀environmental฀impacts,฀and฀end-use฀ efficiency฀that฀only฀receive฀cursory฀treatment฀here,฀but฀are฀ deserving฀of฀further฀attention.฀Table฀12฀briefly฀summarizes฀ the฀relative฀performance฀of฀our฀three฀scenarios฀against฀ these฀performance฀criteria. Table฀12.฀฀Summary฀of฀Scenarios฀by฀Performance฀Criteria Approach฀฀ Grid฀First฀ Diesel฀First฀ Speed฀of฀provision฀ Low฀ High฀ Renewables฀First Medium Quality฀of฀supply฀ Low฀ High฀ Medium Affordability฀ Medium฀ Medium฀ Low/Medium Security฀of฀supply฀ Medium฀ Low฀ High Climate฀protection฀ Low฀ Low/Medium฀ High Rural฀Electrification฀and฀National฀฀ Development฀Goals Grid-dominated฀rural฀electrification฀in฀India฀is฀likely฀to฀ suffer฀the฀scars฀of฀Indian฀electricity’s฀recent฀past.฀It฀is฀likely฀ to฀take฀a฀long฀time,฀provide฀inadequate฀quality฀electricity,฀ and฀while฀it฀may฀deliver฀cheaper฀electricity฀per฀kWh฀to฀ existing฀users,฀it฀is฀not฀clear฀that฀the฀overall฀cost฀of฀the฀infrastructure฀involved฀makes฀this฀the฀cheapest฀approach.฀It฀ may฀also฀exacerbate฀some฀intractable฀issues฀of฀coal฀supply.฀ Diesel-based฀electrification,฀helped฀by฀the฀Electricity฀ Act฀2003,฀appears฀to฀have฀considerable฀promise฀when฀ viewed฀through฀the฀lens฀of฀speed฀and฀quality฀of฀supply.฀ However,฀diesel-based฀electrification฀has฀one฀considerable฀ flaw:฀it฀will฀almost฀certainly฀exacerbate฀India’s฀long-term฀ dependence฀on฀oil฀imports,฀increasing฀these฀imports฀in฀ 88 volume฀terms฀by฀6฀to฀41฀percent฀of฀current฀levels.฀This฀is฀a฀ significant฀finding฀of฀the฀study,฀and฀potentially฀disqualifies฀ diesel-based฀supply฀as฀the฀spearhead฀of฀a฀rural฀electrification฀strategy. The฀third฀option,฀renewable฀energy-based฀supply,฀ promises฀reasonable฀speed฀of฀installation฀and฀reasonably฀ good฀quality.฀Both฀criteria฀are฀likely฀to฀be฀ever฀more฀comprehensively฀met฀as฀the฀technologies฀mature.฀However,฀in฀ the฀short฀run฀renewable฀energy฀will฀be฀unlikely฀to฀provide฀ electricity฀as฀fast฀as฀diesel฀and,฀depending฀on฀the฀specific฀ technology,฀perhaps฀not฀as฀well฀as฀diesel.฀Compared฀to฀ the฀other฀options,฀however,฀renewable฀energy฀dramatically฀ strengthens฀India’s฀energy฀security. In฀the฀short฀run,฀the฀cost฀criterion฀is฀likely฀to฀have฀the฀ heaviest฀weight฀in฀decision฀making.฀However,฀it฀is฀also฀the฀ hardest฀to฀assess,฀because฀of฀differences฀in฀the฀technologies฀and฀the฀complexity฀of฀the฀underlying฀assumptions.฀ Clearly,฀more฀detailed฀work฀needs฀to฀be฀done฀on฀this฀issue.฀ Moreover,฀the฀discussion฀here฀suggests฀that฀a฀decision฀ based฀on฀cost฀alone฀would฀be฀shortsighted.฀At฀minimum,฀ an฀Integrated฀Resource฀Planning฀(IRP)฀approach฀that฀ assesses฀the฀full฀lifecycle฀costs฀of฀alternatives,฀including฀ end-use฀efficiency,฀and฀factors฀in฀real฀rather฀than฀subsidized฀prices฀would฀yield฀more฀complete฀results.฀Ideally,฀ we฀suggest฀that฀considering฀a฀full฀range฀of฀criteria฀such฀as฀ those฀described฀here,฀in฀addition฀to฀cost,฀yields฀valuable฀ additional฀insights฀for฀policy฀makers฀to฀consider. To฀summarize฀our฀results,฀we฀find฀strong฀reasons฀to฀ doubt฀the฀success฀of฀a฀Grid฀First฀strategy฀on฀various฀criteria,฀notably฀speed฀and฀quality.฀It฀is฀also฀the฀most฀problematic฀from฀a฀climate฀perspective.฀A฀Diesel฀First฀strategy฀ promises฀the฀best฀short-run฀outcomes,฀but฀exposes฀the฀ country฀to฀a฀potentially฀crippling฀energy฀security฀threat.฀ The฀Renewable฀First฀strategy฀is฀the฀most฀unknown,฀but฀ on฀current฀evidence฀promises฀moderate฀results฀in฀the฀short฀ run,฀while฀coming฀out฀strongest฀on฀long-term฀considerations฀such฀as฀security฀and฀climate฀protection. This฀exercise฀does฀not฀anoint฀a฀clear฀winner,฀which฀is฀ an฀argument฀for฀a฀more฀even-handed฀treatment฀across฀ different฀rural฀electrification฀pathways฀than฀exists฀at฀present.฀Specifically,฀the฀analysis฀suggests฀there฀are฀convincing฀ benefits฀to฀off-grid฀renewable฀energy฀within฀such฀an฀IRP฀ approach฀that฀have฀not฀been฀explored฀in฀recent฀planning.฀ At฀the฀moment,฀the฀Government฀of฀India’s฀policy฀is฀based฀ on฀an฀a฀priori฀judgment฀that฀renewable฀energy฀should฀ be฀reserved฀for฀marginal฀areas฀where฀grid฀extension฀is฀a฀ challenge.฀This฀runs฀counter฀to฀the฀findings฀of฀this฀study,฀ which฀suggest฀that฀from฀the฀broader฀perspective฀of฀the฀ four฀national฀development฀criteria฀examined฀here—speed,฀ quality,฀cost,฀and฀security—renewable฀energy฀should฀be฀ integral฀and฀not฀marginal฀to฀India’s฀rural฀electrification. GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Rural฀Electrification฀and฀Global฀Climate฀Goals We฀turn฀now฀to฀the฀fifth฀criteria฀of฀global฀climate฀ change,฀which฀we฀deliberately฀separated฀from฀the฀four฀ national฀criteria.฀The฀decision฀on฀rural฀electrification฀ should฀be฀based฀on฀national฀criteria;฀international฀criteria฀ should฀play฀a฀role฀only฀if฀they฀can฀provide฀an฀additional฀ strategic฀impetus฀for฀one฀pathway,฀and฀possible฀national฀ benefits.฀That฀renewable฀energy฀is฀the฀clear฀winner฀from฀a฀ climate฀perspective฀provides฀such฀an฀impetus.฀In฀the฀nearterm—until฀2020—GHG฀emissions฀from฀India’s฀rural฀ electrification฀are฀likely฀to฀be฀on฀the฀order฀of฀magnitude฀of฀ 1฀to฀5฀percent฀of฀U.S.฀emissions.฀However,฀the฀“lock-in”฀ effect—the฀impact฀of฀near-term฀technological฀choices฀on฀ future฀emissions—has฀the฀potential฀to฀contribute฀significantly฀to฀GHG฀emissions฀in฀the฀longer฀term,฀particularly฀ if฀India’s฀expectations฀of฀becoming฀a฀major฀economic฀ power฀later฀this฀century฀are฀realized.฀ The฀importance฀of฀this฀“lock-in”฀will฀depend฀on฀the฀ future฀evolution฀of฀India’s฀power฀market฀and฀of฀energy฀ technologies.฀Experience฀in฀OECD฀countries฀suggests฀that฀ both฀generation฀and฀T&D฀infrastructure฀remains฀in฀place฀ for฀many฀decades.฀Off-grid฀generation,฀which฀uses฀smaller฀ generating฀units,฀may฀show฀less฀inertia.฀The฀security฀and฀ climate฀implications฀of฀a฀grid-based฀approach฀may฀also฀be฀ mitigated฀if฀on-grid฀renewable฀energy฀is฀rapidly฀adopted฀ and฀accounts฀for฀the฀bulk฀of฀future฀growth฀past฀2020. Despite฀these฀imponderables,฀the฀discussion฀here฀suggests฀that฀the฀Government฀of฀India฀has฀an฀opportunity฀to฀ seek฀international฀support฀for฀a฀more฀renewable฀energyintensive฀pathway฀to฀rural฀electrification.฀To฀do฀so,฀the฀ government฀will฀have฀to฀work฀to฀shape฀the฀next฀phase฀of฀ international฀climate฀negotiations฀to฀better฀provide฀instruments฀for฀such฀climate฀friendly฀policy฀(rather฀than฀only฀ project)฀choices. To฀date,฀the฀Government฀of฀India฀has฀been฀a฀reluctant฀ partner฀in฀these฀discussions,฀justifiably฀concerned฀that฀ India฀might฀be฀saddled฀with฀emission฀limits฀that฀threaten฀ its฀economic฀growth.฀But฀if฀more฀attention฀to฀renewable฀ energy฀for฀rural฀electrification฀is฀in฀the฀national฀interest฀ for฀domestic฀purposes,฀as฀this฀chapter฀suggests฀is฀possible,฀ then฀Indian฀policy฀makers฀may฀be฀missing฀an฀opportunity฀to฀obtain฀broader฀international฀support฀for฀its฀rural฀ electrification฀program.฀Given฀the฀potential฀advantages฀ to฀both฀India’s฀national฀interests฀and฀the฀broader฀concern฀ of฀combating฀climate฀change,฀there฀is฀considerable฀ scope฀to฀explore฀how—through฀political,฀technical,฀and฀ financial฀means—India’s฀ambitious฀electrification฀goals฀ could฀be฀supported฀by฀sustainable฀development฀policies฀ and฀measures฀aimed฀at฀increasing฀the฀role฀of฀distributed฀ renewable฀energy.฀ PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 89 ENDNOTES ฀฀฀See฀Reddy฀(1999)฀for฀a฀larger฀conceptual฀framework฀within฀which฀ to฀understand฀rural฀energy฀needs.฀See฀Das฀(2004)฀for฀a฀discussion฀of฀ various฀linkages฀between฀electricity฀and฀rural฀development. ฀ 2฀฀฀This฀slowdown฀in฀pace฀may฀also฀be฀partially฀explained฀by฀the฀ government’s฀insistence,฀based฀on฀a฀very฀limited฀definition฀of฀rural฀ electrification,฀that฀the฀task฀of฀village฀electrification฀is฀almost฀done,฀ leaving฀only฀the฀most฀remote฀and฀inaccessible฀villages.฀As฀of฀March฀ 2003,฀87฀percent฀of฀villages฀have฀been฀declared฀electrified฀(Ministry฀of฀ Power,฀2003).฀ ฀ 3฀฀฀For฀a฀detailed฀political฀analysis฀of฀the฀2004฀general฀election฀see฀the฀ collection฀of฀articles฀contained฀in฀the฀Economic฀and฀Political฀Weekly,฀ Dec.฀18,฀2004. ฀ 4฀฀฀For฀a฀snapshot฀of฀the฀contemporary฀debates฀on฀rural฀electrification,฀ see฀Ministry฀of฀Power฀(2003),฀World฀Bank฀(2004),฀Dubash฀(2004).฀ For฀a฀discussion฀of฀institutional฀issues,฀see฀Rejikumar฀(2004)฀and฀ Namashivayam฀et฀al฀(2004). ฀ 5฀฀฀See฀for฀instance฀IPCC฀(2001)฀Chapter฀11. ฀ 6฀฀฀See฀for฀instance฀World฀Bank฀(2004). ฀ 7฀฀฀See฀for฀example฀Tuan฀and฀Lefevre฀(1996)฀for฀a฀breakdown฀of฀rural฀ household฀demand฀in฀Vietnam. ฀ 8฀฀฀The฀Indian฀government’s฀stated฀aim฀is฀to฀have฀an฀average฀available฀ electricity฀supply฀of฀1000฀kWh฀per฀person฀by฀2012,฀though฀it฀is฀ reasonable฀to฀assume฀that฀this฀average฀includes฀higher฀consumption฀ by฀urban฀individuals฀and฀lower฀in฀rural฀areas฀(Government฀of฀India,฀ 2005). ฀ 9฀฀฀In฀2001฀(Census฀of฀India,฀2001)฀India฀had฀a฀rural฀population฀of฀ 737,283,492฀living฀in฀137,235,518฀households,฀at฀a฀mean฀of฀5.37฀ people฀per฀household. ฀10฀฀฀Population฀and฀household฀size฀projections฀from฀the฀United฀Nations฀ Human฀Settlements฀Programme฀(UN-HABITAT,฀2005).฀There฀is฀ considerable฀uncertainty฀in฀such฀projections.฀The฀World฀Bank฀(2004)฀ estimates฀157฀million฀rural฀households฀in฀2012.฀This฀is฀broadly฀ consistent฀with฀the฀UN-HABITAT฀projection,฀which฀has฀India’s฀rural฀ population฀declining฀from฀2015฀onwards฀as฀urbanization฀outstrips฀ population฀growth. ฀11฀฀฀The฀six฀states฀are฀Andhra฀Pradesh,฀Himachal฀Pradesh,฀Maharashtra,฀ Punjab,฀Rajasthan฀and฀West฀Bengal;฀no฀data฀was฀available฀for฀Himachal฀Pradesh. ฀12฀฀฀Other฀studies฀that฀document฀groundwater฀use฀and฀that฀we฀have฀ used฀as฀a฀basis฀to฀cross-check฀the฀ESMAP฀study฀include฀World฀Bank฀ (2001),฀Dubash฀(2002),฀and฀Dossani฀and฀Ranganathan฀(2004). ฀13฀฀฀The฀Ministry,฀using฀the฀old฀definition฀of฀village฀“electrification,”฀ estimates฀80,000฀villages฀remain฀to฀be฀electrified,฀of฀which฀62,000฀฀ can฀be฀provided฀with฀connection฀to฀the฀grid฀(MoP,฀2005c;฀Planning฀ Commission,฀2002a) ฀14฀฀฀Off-grid฀capacity฀in฀India฀today฀is฀around฀13,000฀MW,฀of฀which฀ 10,000฀MW฀is฀diesel฀and฀3,000฀MW฀is฀renewable฀energy฀(Banerjee,฀ 2006). ฀ 1 90 ฀฀฀The฀recent฀literature฀on฀the฀Indian฀power฀sector฀is฀voluminous.฀See฀ SL฀Rao฀(2004).฀For฀a฀comprehensive฀assessment฀of฀options,฀see฀Ruet฀ (2003฀and฀2005).฀For฀a฀historical฀review฀of฀the฀political฀economy฀of฀ the฀sector฀in฀the฀1990s,฀see฀Dubash฀and฀Chella฀Rajan฀(2000). ฀16฀฀฀Recent฀studies฀suggest฀that฀agriculture฀consumes฀less฀than฀previously฀ thought.฀Consequently,฀consumption฀formerly฀accounted฀for฀as฀agricultural฀use฀is฀most฀likely฀theft,฀which฀pushes฀up฀the฀real฀estimates฀of฀ losses.฀For฀a฀review฀of฀studies฀by฀Electricity฀Regulatory฀Commissions,฀ see฀Honihal฀(2004).฀Other฀studies฀of฀loss฀levels฀include฀Reddy฀and฀ Simithra฀(1997),฀Dixit฀and฀Sant฀(1997),฀and฀World฀Bank฀(2001). ฀17฀฀฀The฀lifecycle฀GHG฀emissions฀associated฀with฀various฀energy฀technologies฀vary฀widely฀according฀to฀manufacture,฀location,฀and฀technology฀ type.฀Some฀renewable฀energy฀sources฀can฀cause฀significant฀GHG฀ emissions—฀for฀instance,฀biomass฀that฀is฀not฀replaced฀by฀new฀growth.฀ However,฀if฀managed฀appropriately฀renewable฀energy฀sources฀have฀ negligible฀lifecycle฀GHG฀emissions฀compared฀to฀their฀fossil฀fuel฀฀ counterparts.฀Here฀we฀consider฀GHG฀emissions฀from฀renewable฀ energy฀to฀be฀zero. ฀18฀฀฀By฀the฀end฀of฀the฀1990s,฀70฀percent฀of฀wind฀turbines฀installed฀in฀India฀ were฀manufactured฀domestically฀(European฀Wind฀Energy฀Association,฀ 2003). ฀19฀฀฀Capacity฀factor฀represents฀the฀output฀of฀a฀plant฀as฀a฀proportion฀of฀ what฀its฀output฀would฀have฀been฀if฀it฀had฀operated฀constantly฀at฀full฀ capacity.฀Wind฀turbines฀(which฀only฀operate฀at฀full฀capacity฀when฀the฀ wind฀is฀blowing฀at฀optimal฀speed)฀have฀relatively฀low฀capacity฀factors,฀ fossil฀fuel฀and฀biomass฀relatively฀high.฀However,฀if฀the฀demand฀is฀ highly฀intermittent฀all฀plants฀will฀have฀low฀capacity฀factors. ฀20฀฀฀One฀study฀of฀rural฀electrification฀in฀three฀western฀Chinese฀provinces฀ found฀that฀the฀cost฀per฀kWh฀from฀diesel฀generators฀was฀$1.09฀to฀ $1.19,฀leading฀to฀the฀conclusion฀that฀in฀these฀regions฀renewable฀energy฀systems฀offered฀superior฀economic฀performance,฀without฀taking฀ environmental฀or฀social฀benefits฀into฀account฀(Zhou฀&฀Byrne,฀2002). ฀21฀฀฀The฀exact฀cost฀within฀the฀range฀depends฀on฀capital฀cost฀and฀load฀฀ factor;฀range฀taken฀from฀Arizona฀Solar฀Center฀(2005),฀Banerjee฀ (2006),฀Byrne฀et฀al฀(1998),฀Zhou฀&฀Byrne฀(2002). ฀22฀฀฀For฀wind฀regimes฀that฀allow฀capacity฀factors฀of฀30฀percent;฀price฀also฀ varies฀depending฀on฀size฀and฀capital฀cost฀(Banerjee,฀2006). ฀23฀฀฀Depending฀on฀the฀resource฀and฀technology฀(MNES,฀2002).฀The฀cost฀ is฀lower฀where฀there฀is฀cogeneration฀of฀heat฀and฀power. ฀24฀฀฀(Banerjee,฀2006).฀This฀figure฀varies฀greatly฀depending฀on฀load฀factor,฀ fuel฀price,฀and฀remoteness.฀ ฀25฀฀฀In฀2003–04฀,฀India’s฀net฀imports฀of฀crude฀and฀oil฀products฀totaled฀614฀ million฀barrels,฀valued฀at฀$17.4฀billion฀(MoPNG,฀2005). ฀26฀฀฀Diesel฀(whether฀imported฀or฀domestic)฀costs฀approximately฀$15฀per฀ barrel฀more฀than฀crude.฀Assuming฀a฀medium-term฀oil฀price฀of฀$30฀to฀ 70฀per฀barrel฀therefore,฀diesel฀costs฀$45฀to$฀85. ฀27฀฀฀India’s฀external฀debt฀in฀April-June฀2004฀was฀$112฀billion฀(Ministry฀of฀ Finance,฀2005). ฀28฀฀฀This฀might฀be฀reduced฀by฀a฀decline฀in฀the฀emissions฀intensity฀of฀the฀ electricity฀mix,฀for฀instance฀by฀a฀rising฀share฀of฀natural฀gas฀for฀power฀ generation.฀Conversely,฀the฀result฀presented฀here฀assumes฀a฀reduction฀ in฀grid฀losses—if฀this฀does฀not฀take฀place,฀then฀emissions฀would฀be฀ higher฀still. ฀29฀฀฀See฀for฀example฀Lloyd฀(2001),฀who฀suggests฀that฀household฀conservatism฀is฀keeping฀South฀African฀users฀of฀kerosene฀from฀switching฀to฀ demonstrably฀better฀alternatives. ฀15 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST REFERENCES Arizona฀Solar฀Center.฀2005. Arizona฀Solar฀Center. 2005.฀Available฀at:฀http://฀ www.azsolarcenter.com.฀(Sept.฀29,฀2005). Banerjee,฀Rangan.฀2006.฀“Comparison฀of฀Options฀for฀฀ Banerjee,฀Rangan.฀2006. Distributed฀Generation฀in฀India.”฀Energy฀Policy฀34:฀101-111. Byrne,฀J.,฀B.฀Shen,฀and฀W.฀Wallace. 1998.฀“The฀Economics฀of฀ Byrne,฀J.,฀B.฀Shen,฀and฀W.฀Wallace.฀1998.฀ Sustainable฀Energy฀for฀Rural฀Development:฀a฀Study฀of฀Renewable฀Electricity฀in฀Rural฀China.”฀Energy฀Policy฀26฀(1):฀45-54. Census฀of฀India.฀2001. Census฀of฀India.฀2001.฀Available฀at:฀http://www.censusindia. net/results/hh_series/web/HH1_India.pdf.฀ Chaury,฀Akanshka,฀Malini฀Ranganathan,฀and฀Parimita฀Mohanty. Chaury,฀Akanshka,฀Malini฀Ranganathan,฀and฀Parimita฀Mohanty.฀ 2004.฀“Electricity฀Access฀for฀Geographically฀Disadvantaged฀Rural฀ 2004. Communities฀–฀Technology฀and฀Policy฀Insights.”฀Energy฀Policy฀ 32:฀1693-1705. Das,฀Keshab.฀2004.฀“Electricity฀and฀Rural฀Development฀฀ Das,฀Keshab.฀2004. Linkage.”฀Paper฀presented฀at฀Institute฀of฀Rural฀Management,฀฀ Silver฀Jubilee฀Symposium฀on฀Governance฀in฀Development,฀ Anand,฀Dec.฀14–19. Dharmendra,฀Jore.฀2005. Dharmendra,฀Jore.฀2005.฀“Lights฀Out฀in฀India’s฀Powerhouse:฀ Part-II:฀In฀Summer฀of฀Discontent,฀Mumbai฀Faces฀State฀Ire,”฀฀ The฀Indian฀Express,฀May฀2.฀ Dixit,฀Shantanu,฀and฀Girish฀Sant. 1997.฀“How฀Reliable฀are฀฀ Dixit,฀Shantanu,฀and฀Girish฀Sant.฀1997. Agricultural฀Power฀Use฀Data?”฀Economic฀and฀Political฀Weekly฀ April฀12-18. Dossani,฀Rafiq฀and฀V.฀Ranganathan.฀2004. Dossani,฀Rafiq฀and฀V.฀Ranganathan.฀2004.฀“Farmers’฀Willingness฀ to฀Pay฀for฀Power฀in฀India:฀Conceptual฀Issues,฀Survey฀Results,฀and฀ Implications฀for฀Pricing.”฀Energy฀Economics฀26:฀359-369. Dubash,฀Navroz฀K.฀2004. Dubash,฀Navroz฀K.฀2004.฀“Electrifying฀Rural฀India:฀The฀Search฀ for฀a฀Viable฀and฀Sustainable฀Approach.”฀Paper฀presented฀at฀ Institute฀of฀Rural฀Management,฀Silver฀Jubilee฀Symposium฀on฀ Governance฀in฀Development,฀Anand,฀Dec.฀14–19,฀2004. Gabler,฀Hansjoerg.฀2004. Gabler,฀Hansjoerg.฀2004.฀“Off-grid฀Electricity฀Supply฀with฀฀ Photovoltaic฀Solar฀Energy฀–฀Current฀Trends฀in฀Household฀ Electrification”฀International฀PVSEC-14,฀Bangkok,฀Thailand.฀ Jan.฀26–30. Dubash,฀Navroz฀K.฀2002.฀ Dubash,฀Navroz฀K.฀2002.฀Tubewell฀Capitalism:฀Groundwater฀฀ Development฀and฀Agrarian฀Change฀in฀Gujarat.฀New฀Delhi:฀฀ Oxford฀University฀Press. Godbole,฀Madhav.฀2002. Godbole,฀Madhav. 2002.฀“Power฀Sector฀Reforms:฀If฀Wishes฀Were฀ Horses.”฀Economic฀and฀Political฀Weekly.฀37฀(7).฀Feb.฀16. Dubash,฀Navroz฀K.฀and฀Sudhir฀Chella฀Rajan.฀2000. Dubash,฀Navroz฀K.฀and฀Sudhir฀Chella฀Rajan.฀2000.฀“Power฀ Politics:฀Process฀of฀India’s฀Power฀Sector฀Reform.”฀Economic฀and฀ Political฀Weekly฀36฀(35):฀3367-3390.฀ ESMAP฀(Energy฀Sector฀Management฀Assistance฀Programme). ESMAP฀(Energy฀Sector฀Management฀Assistance฀Programme).฀ 2000.฀Energy฀Services฀for฀the฀World’s฀Poor.฀Washington,฀DC:฀฀ 2000. The฀World฀Bank. ESMAP.฀2002. ESMAP.฀2002.฀“Energy฀Strategy฀for฀Rural฀India:฀Evidence฀from฀฀ Six฀States.”฀Available฀at:฀http://www-wds.worldbank.org/฀ servlet/WDS_IBank_Servlet?pcont=details&eid=000094946_ 03012304145641. Goldemberg,฀José฀and฀Thomas฀B.฀Johansson,฀eds.฀2004. Goldemberg,฀José฀and฀Thomas฀B.฀Johansson,฀eds.฀2004.฀“World฀ Energy฀Assessment฀Overview—2004฀Update.”฀New฀York:฀United฀ Nations฀Development฀Programme.฀ Government฀of฀India.฀2003. Government฀of฀India.฀2003.฀“The฀Electricity฀Act฀2003.”฀฀ Available฀at:฀http://www.฀powermin.nic.in/JSP_SERVLETS/฀ internal.jsp. Government฀of฀India.฀2005. Government฀of฀India.฀2005.฀“National฀Electricity฀Policy.”฀฀ Gazette฀of฀India.฀No.฀23/40/2004-R&R฀(Vol.฀II),฀Feb.฀12.฀฀ Available฀at:฀http://powermin.nic.in.฀(Sept.฀29,฀2005). European฀Wind฀Energy฀Association.฀2003. European฀Wind฀Energy฀Association.฀2003.฀“Wind฀Energy:฀the฀ Facts.”฀Available฀at:฀http://www.ewea.org.฀ G8.฀2001.฀“Final฀Report฀of฀the฀G8฀Renewable฀Energy฀Task฀ G8.฀2001.฀ Force.”฀Presented฀to฀the฀G8฀Summit฀in฀Genoa,฀June. PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 91 GWEC฀(Global฀Wind฀Energy฀Council).฀2005. GWEC฀(Global฀Wind฀Energy฀Council).฀2005.฀“Global฀Wind฀ Power฀Continues฀Expansion.”฀Press฀release.฀Available฀at:฀฀ http://www.ewea.org/.฀(Sept.฀29,฀2005).฀ Mishra,฀Sudhakar. Mishra,฀Sudhakar.฀No฀date.฀“Alternative฀Institutions฀of฀฀ Electricity฀Retailing:฀Assessment฀of฀Orissa฀Experiments.”฀฀ Unpublished฀manuscript. Hindustan฀Times.฀2005.฀“Unrest฀in฀Maharashtra฀as฀Power฀฀ Hindustan฀Times.฀2005. Crisis฀Worsens.”฀May฀2. MNES฀(Ministry฀of฀Non-Conventional฀Energy฀Sources).฀2005. MNES฀(Ministry฀of฀Non-Conventional฀Energy฀Sources).฀2005.฀ Data฀from฀MNES฀web฀site.฀Available฀at:฀http://mnes.nic. in/business%20oppertunity/pgtsh.htm.฀ Hoff,฀Thomas฀E.฀1997.฀“Using฀Distributed฀Resources฀to฀฀ Hoff,฀Thomas฀E.฀1997. Manage฀Risks฀Caused฀by฀Demand฀Uncertainty,”฀in฀Yves฀Smeers฀ and฀Adonis฀Yatchew,฀eds.฀“Distributed฀Resources:฀Toward฀a฀฀ New฀Paradigm฀of฀the฀Electricity฀Business.”฀Special฀Issue฀of฀฀ The฀Energy฀Journal. Honnihal,฀Siddharth.฀2004. Honnihal,฀Siddharth. 2004.฀“Estimating฀Power฀Consumption฀in฀ Agriculture.”฀Economic฀and฀Political฀Weekly฀39฀(8):790-792. IEA฀(International฀Energy฀Agency).฀2002a. IEA฀(International฀Energy฀Agency).฀2002a.฀Electricity฀in฀India:฀ Providing฀Power฀to฀the฀Millions.฀Paris:฀International฀Energy฀ Agency. IEA.฀2002b. IEA.฀2002b.฀World฀Energy฀Outlook฀2002.฀Paris:฀International฀ Energy฀Agency. IPCC฀(Intergovernmental฀Panel฀on฀Climate฀Change).฀2001.฀ Climate฀Change฀2001:฀Impacts,฀Adaptation฀and฀Vulnerability.฀ Cambridge,฀UK:฀Cambridge฀University฀Press. Kishore,฀Avinash.฀2003. Kishore,฀Avinash.฀2003.฀“Private฀Provisioning฀in฀State฀Failure:฀ A฀Case฀Study฀of฀Private฀Power฀Suppliers฀in฀Muzaffarpur,฀Bihar.”฀ Anand:฀International฀Water฀Management฀Institute฀(IWMI). Lloyd,฀P.J.D. 2001.฀Market฀Obstacles฀to฀Household฀Energy฀&฀ Lloyd,฀P.J.D.฀2001. Technology฀for฀Improved฀Indoor฀Air฀Quality฀in฀South฀Africa.฀Cape฀ Town:฀Energy฀Research฀Institute,฀University฀of฀Cape฀Town.฀ Mathur,฀Jaskiran฀Kaur,฀and฀Dhiraj฀Mathur.฀2005. Mathur,฀Jaskiran฀Kaur,฀and฀Dhiraj฀Mathur.฀2005.฀฀ “Dark฀Homes฀and฀Smoky฀Hearths.”Economic฀and฀Political฀ Weekly.฀40฀(7).฀Feb.฀12.฀ MNES.฀2002. MNES. 2002.฀Annual฀Report฀2001–2.฀New฀Delhi:฀Ministry฀of฀ Non-Conventional฀Energy฀Sources. Navashivayam,฀V,฀Chandrasekhar฀Iyer฀and฀Manisha฀Misri. 2004.฀ Navashivayam,฀V,฀Chandrasekhar฀Iyer฀and฀Manisha฀Misri.฀2004. “Existing฀Institutions฀and฀Institutional฀Mechanisms฀for฀Rural฀ Electricity฀in฀India.”฀Paper฀presented฀at฀Institute฀of฀Rural฀฀ Management,฀Silver฀Jubilee฀Symposium฀on฀Governance฀in฀฀ Development,฀Anand,฀Dec.฀14–19. Pathak,฀B.S. 2004.฀“Technological฀Options฀and฀Cost฀of฀SupplyPathak,฀B.S.฀2004. ing฀Electricity฀to฀Rural฀Areas.”฀Paper฀presented฀at฀Institute฀of฀ Rural฀Management,฀Silver฀Jubilee฀Symposium฀on฀Governance฀in฀ Development,฀Anand,฀Dec.฀14–19. Planning฀Commission. 2001.฀Annual฀Report฀on฀the฀Working฀of฀ Planning฀Commission.฀2001. State฀Electricity฀Boards฀&฀Electric฀Departments.฀New฀Delhi:฀฀ Planning฀Commission. Planning฀Commission. 2002a.฀Tenth฀Five฀Year฀Plan฀(2002-2007).฀ Planning฀Commission.฀2002a. New฀Delhi:฀Government฀of฀India. Planning฀Commission. 2002b.฀Annual฀Report฀(2001-02)฀on฀the฀ Planning฀Commission.฀2002b. Working฀of฀State฀Electricity฀Boards฀and฀Electricity฀Departments.฀ New฀Delhi:฀Government฀of฀India.฀ Prayas.฀2004. Prayas.฀2004.฀Know฀your฀Power:฀a฀Citizen’s฀Primer฀on฀the฀฀ Electricity฀Sector.฀Pune,฀India:฀Prayas. Rao,฀S.L.฀2004.฀ Rao,฀S.L.฀2004.฀Governing฀Power.฀New฀Delhi:฀TERI฀฀ Publications. Ministry฀of฀Finance฀2005.฀“National฀Summary฀Data฀Page.”฀฀ Ministry฀of฀Finance฀2005. Available฀at:฀http://finmin.nic.in/stats_data/nsdp_sdds/index. html.฀(Sept.฀23฀2005). Reddy,฀Amulya฀K.N.฀and฀Gladys฀D.฀Sumithra.฀1997.฀฀ Reddy,฀Amulya฀K.N.฀and฀Gladys฀D.฀Sumithra.฀1997.฀฀ “Karnataka’s฀Power฀Sector฀-฀Some฀Revelations.”฀Economic฀and฀ Political฀Weekly฀32฀(12):฀585-600. Ministry฀of฀Petroleum฀and฀Natural฀Gas,฀2005. Ministry฀of฀Petroleum฀and฀Natural฀Gas,฀2005.฀Annual฀Report฀ 2005.฀New฀Delhi:฀Government฀of฀India. Rejikumar,฀R.฀2005.฀“National฀Electricity฀Policy฀and฀Plan:฀฀ Rejikumar,฀R.฀2005.฀ A฀Critical฀Examination.”฀Economic฀and฀Political฀Weekly.฀฀ 40฀(20)฀May฀14. Ministry฀of฀Power.฀2003.฀“Discussion฀Paper฀on฀Rural฀฀ Ministry฀of฀Power.฀2003. Electrification฀Policies.”฀New฀Delhi:฀Ministry฀of฀Power.฀ Ministry฀of฀Power.฀2005a. Ministry฀of฀Power. 2005a.฀“Rajiv฀Gandhi฀Grameen฀Vidytikaran฀Yojana.”฀Press฀release.฀Available฀at:฀http://powermin.nic. in/whats_new/pdf/Rajiv_gandhi.pdf.฀(Sept.฀28,฀2005). Ministry฀of฀Power.฀2005b. Ministry฀of฀Power.฀2005b.฀“About฀Rural฀Electrification.”฀฀ Available฀at:฀http://powermin.nic.in.฀(Sept.฀29,฀2005). Ministry฀of฀Power.฀2005c.฀“Blueprint฀for฀Power฀Sector฀DevelopMinistry฀of฀Power.฀2005c.฀ ment.”฀Available฀at:฀http://powermin.nic.in.฀(Sept.฀29,฀2005). Rejikumar,฀R.฀2004.฀“Institutional฀Framework฀for฀Effectively฀ Rejikumar,฀R.฀2004. Meeting฀the฀Electricity฀Needs฀of฀Rural฀Population.”฀Paper฀฀ presented฀at฀Institute฀of฀Rural฀Management,฀Silver฀Jubilee฀Symposium฀on฀Governance฀in฀Development,฀Anand,฀Dec.฀14–19. Ruet,฀Joel.฀2005. Ruet,฀Joel.฀2005.฀Privatising฀Power฀Cuts?฀Ownership฀and฀฀ Reform฀of฀State฀Electricity฀Boards฀in฀India.฀New฀Delhi:฀Academic฀ Foundation. Ruet,฀Joel.฀2003. Ruet,฀Joel.฀2003.฀Against฀the฀Current:฀Organizational฀Restructuring฀of฀State฀Electricity฀Boards.฀New฀Delhi:฀Manohar฀Publishers. Saghir,฀Jamal.฀2004.฀“Energy฀and฀Poverty.”฀Paper฀presented฀to฀ Saghir,฀Jamal.฀2004.฀ the฀International฀Energy฀Forum,฀Amsterdam,฀May. Singha,฀Ashok฀Kumar,฀N.V.฀Ramana,฀and฀Vijay฀Mahajan. 2004.฀ Singha,฀Ashok฀Kumar,฀N.V.฀Ramana,฀and฀Vijay฀Mahajan.฀2004. “Experiences฀of฀Power฀Sector฀Reform:฀Strategies฀for฀Including฀ the฀Poor.”฀Paper฀presented฀at฀Institute฀of฀Rural฀Management,฀฀ Silver฀Jubilee฀Symposium฀on฀Governance฀in฀Development,฀ Anand,฀Dec.฀14–19. 92 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Sinha,฀S.฀2005. Sinha,฀S. 2005.฀“Reaching฀the฀Un-reached—Energy฀Sector฀฀ Reforms฀and฀Rural฀Energy฀in฀India:฀Alleviating฀or฀฀ Aggravating฀Energy฀Poverty?”฀Enschede:฀University฀of฀฀ Twente฀(thesis฀in฀progress). Sudipta,฀Datta฀and฀Kartyk฀Venkatraman.฀2005. Sudipta,฀Datta฀and฀Kartyk฀Venkatraman.฀2005.฀“Lights฀Out฀฀ in฀India’s฀Powerhouse,฀Part-I:฀Hello฀Darkness.”฀The฀Indian฀ Express,฀May฀1.฀ Tong฀Jiandong.฀2004. Tong฀Jiandong.฀2004.฀Small฀Hydro฀Power:฀China’s฀Practice.฀฀ Beijing:฀China฀Waterpower฀Press. Tongia,฀R. 2003.฀“The฀Political฀Economy฀of฀Indian฀Power฀฀ Tongia,฀R.฀2003. Sector฀Reforms.”฀Program฀on฀Energy฀and฀Sustainable฀฀ Development฀Working฀Paper฀#4,฀December.฀Available฀at:฀฀ http://iis-db.stanford.edu/pubs/20192/India,_10_May_04.pdf.฀ UNDP.฀2003.฀“Rural฀Energy฀Programme฀Support.”฀฀ UNDP.฀2003. Available฀at:฀http://www.undp.org.in/programme/rrlenrgy/default.htm.฀ UN-HABITAT.฀2005. UN-HABITAT.฀2005.฀“United฀Nations฀Human฀Settlements฀ Programme.”฀India฀Demographic฀data.฀Available฀at:฀http://฀ www.unhabitat.org/habrdd/conditions/socentasia/india.htm.฀฀ (Sept.฀28). Victor,฀D.฀2002.฀“A฀Vision฀for฀Global฀Electrification.”฀Program฀ Victor,฀D.฀2002. on฀Energy฀and฀Sustainable฀Development฀Working฀Paper฀#7.฀ Available฀at:฀http://siis.stanford.edu/publications/20184/.฀ World฀Bank.฀2001.฀ World฀Bank.฀2001.฀India:฀Power฀Supply฀to฀Agriculture.฀฀ Washington,฀DC:฀The฀World฀Bank. World฀Bank.฀2002. World฀Bank.฀2002.฀India:฀Power฀Sector฀Reforms฀and฀the฀Poor.฀ Washington,฀DC:฀The฀World฀Bank.฀ World฀Bank.฀2004. World฀Bank.฀2004.฀Rural฀Access฀to฀Electricity:฀Strategy฀Options฀for฀ India.฀Washington,฀DC:฀The฀World฀Bank. Yao,฀Xiangjun฀and฀Douglas฀F.฀Barnes.฀2005.฀ Yao,฀Xiangjun฀and฀Douglas฀F.฀Barnes.฀2005.฀“National฀Support฀ for฀Decentralized฀Electricity฀Growth฀in฀Rural฀China.”฀in฀Meeting฀ the฀Challenge฀of฀Rural฀Electrification฀in฀Developing฀Nations:฀the฀ Experience฀of฀Successful฀Programs:฀247-282฀Washington,฀DC:฀฀ The฀World฀Bank. Zerriffi,฀Hisham,฀and฀David฀Victor.฀2005. Zerriffi,฀Hisham,฀and฀David฀Victor.฀2005.฀“Business฀Models฀for฀ Distributed฀Rural฀Electrification:฀Introduction฀and฀Research฀ Methods.”฀Working฀Paper.฀Program฀on฀Energy฀and฀Sustainable฀Development.฀Palo฀Alto,฀California:฀Stanford฀University฀ (forthcoming). Zhou,฀Aiming฀and฀John฀Byrne.฀2002. Zhou,฀Aiming฀and฀John฀Byrne.฀2002.฀“Renewable฀Energy฀for฀ Rural฀Sustainability:฀Lessons฀from฀China.”฀Bulletin฀of฀Science,฀ Technology฀&฀Society฀22:฀123–131. PATH WAYS฀ TO฀ R U R A L฀ ELEC TR IFIC ATION ฀ IN ฀ IN D IA 93 Editor's฀Note S outh฀Africa฀has฀several฀features฀ that฀it฀shares฀with฀countries฀ such฀as฀India฀and฀China:฀it฀ is฀poor฀but฀growing;฀it฀faces฀rising฀ demand฀for฀energy฀and฀in฀particular฀ electricity;฀and฀it฀is฀naturally฀endowed฀ with฀large฀coal฀supplies฀that฀dominate฀ its฀power฀generation฀mix.฀ The฀dominance฀of฀King฀Coal฀in฀ the฀United฀States฀and฀parts฀of฀Europe฀ has฀given฀rise฀to฀an฀interest฀in฀carbon฀ capture฀and฀storage฀(CCS)—the฀ capture฀of฀CO2฀emissions฀from฀power฀ plants฀or฀industrial฀processes฀and฀ its฀long-term฀disposal฀in฀geological฀ formations.฀For฀countries฀looking฀to฀ make฀deep฀cuts฀in฀emissions฀without฀ fundamental฀changes฀to฀their฀energy฀ systems,฀it฀offers฀an฀important฀technology฀option.฀Often฀this฀attractiveness฀to฀ Annex฀I฀countries฀is฀assumed฀to฀mean฀ that฀it฀will฀be฀equally฀appropriate฀in฀ developing฀countries. Here฀we฀reach฀one฀of฀the฀limitations฀of฀the฀SD-PAMs฀approach.฀ True,฀the฀authors฀find฀that฀South฀ Africa฀has฀a฀large฀potential฀for฀carbon฀ storage฀(20฀gigatons).฀But฀with฀the฀ exception฀of฀a฀few฀installations฀(see฀ below)฀these฀entail฀prohibitive฀costs.฀ CCS฀brings฀few฀sustainable฀development฀benefits,฀and฀indeed฀may฀work฀ against฀sustainable฀development฀goals.฀ If฀South฀African฀resources฀were฀to฀ be฀diverted฀towards฀CCS฀it฀would฀ increase฀the฀cost฀of฀power฀significantly,฀ slowing฀the฀increase฀in฀electrification฀ (and฀the฀provision฀of฀some฀free฀power฀ 94 to฀households)฀that฀is฀a฀central฀aim฀of฀ government฀policy.฀Although฀CCS฀may฀ reduce฀some฀pollution฀from฀coal฀use฀by฀ encouraging฀the฀use฀of฀more฀modern฀ coal฀plants,฀it฀will฀also฀increase฀total฀ coal฀demand,฀with฀a฀corresponding฀ increase฀in฀the฀life-cycle฀impacts฀of฀coal฀ use.฀In฀short,฀there฀seems฀little฀chance฀ of฀making฀this฀approach฀work฀in฀the฀ absence฀of฀explicit฀mitigation฀commitments.฀These฀mitigation฀commitments฀ would฀not฀need฀to฀be฀on฀the฀part฀of฀ South฀Africa:฀it฀would฀be฀possible฀for฀ donor฀countries฀to฀finance฀the฀future฀ capture฀and฀storage฀of฀South฀African฀ emissions.฀But฀the฀amounts฀of฀money฀ involved฀would฀be฀a฀step฀change฀in฀the฀ willingness฀to฀pay฀for฀GHG฀mitigation.฀And฀were฀this฀approach฀to฀be฀ applied฀in฀much฀larger฀countries฀such฀ as฀China฀and฀India,฀the฀cost฀would฀ be฀far฀higher.฀Since฀other฀sustainable฀ development฀goals฀are฀not฀being฀met,฀ using฀traditional฀sources฀of฀funding฀ such฀as฀official฀development฀assistance฀ would฀not฀be฀appropriate. So฀where฀does฀this฀leave฀us?฀First,฀ there฀is฀potential฀for฀some฀relatively฀ low-cost฀emission฀abatement฀with฀ CCS฀from฀specific฀installations฀ which฀are฀well-suited฀to฀the฀technology.฀These฀include฀mainly฀plants฀for฀ gasifying฀coal฀for฀the฀production฀of฀ liquid฀fuels฀and฀synthetic฀chemicals—installations฀that฀may฀represent฀ 30฀million฀tons฀of฀CO2฀per฀year฀that฀ could฀be฀sequestered฀for฀around฀$20฀ per฀ton.฀This฀would฀not฀strictly฀be฀ an฀SD-PAMs฀activity฀as฀it฀would฀be฀ a฀“pure”฀mitigation฀measure,฀but฀is฀ an฀important฀finding฀nonetheless.฀It฀ is฀not฀impossible฀that฀in฀the฀future฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST there฀will฀be฀sufficient฀international฀concern฀about฀runaway฀GHG฀ emissions฀that฀developing฀countries,฀ donor฀countries฀or฀both฀will฀find฀the฀ resources฀needed฀to฀implement฀CCS฀ in฀emerging฀economies.฀South฀Africa฀ is฀a฀good฀example฀of฀an฀advanced฀ developing฀country฀that฀may฀in฀time฀ adopt฀CCS฀technologies,฀with฀or฀ without฀international฀support,฀though฀ it฀should฀be฀stressed฀that฀that฀time฀still฀ looks฀far฀off.฀The฀authors฀identify฀a฀ number฀of฀factors฀that฀mark฀important฀differences฀between฀developed฀ and฀developing฀countries฀in฀the฀way฀ that฀this฀implementation฀might฀take฀ place,฀in฀particular฀in฀questions฀of฀ safety฀standards฀and฀institutional฀capacity—though฀possibly฀South฀Africa฀ is฀not฀a฀representative฀example฀of฀a฀ developing฀country฀in฀this฀regard. Nevertheless,฀the฀final฀conclusion฀is฀ that,฀for฀the฀time฀being,฀CCS฀does฀not฀ seems฀to฀support฀the฀central฀sustainable฀development฀aims฀of฀South฀ Africa฀in฀a฀way฀that฀other฀options฀ such฀as฀gas฀and฀renewable฀energy฀ supplies฀may,฀and฀CCS฀may฀even฀ conflict฀with฀national฀development฀ goals.฀While฀the฀dominance฀of฀coal฀in฀ South฀Africa,฀China,฀and฀India฀has฀ led฀some฀commentators฀and฀policymakers฀to฀put฀their฀hopes฀in฀CCS,฀the฀ particular฀circumstances฀of฀developing฀countries฀may฀make฀other฀options฀ more฀realistic. chapter฀vi Carbon฀Capture฀and฀฀ Carbon฀Capture฀and฀฀ Storage฀in฀South฀Africa฀ Stanford฀Mwakasonda฀ ■ ฀Harald฀Winkler 1.฀INTRODUCTION฀ Some฀three-quarters฀of฀South฀Africa’s฀primary฀energy฀ supply฀and฀93฀percent฀of฀its฀electricity฀are฀derived฀from฀ coal฀(NER,฀2002;฀DME,฀2003b).฀Even฀in฀more฀optimistic฀energy฀policy฀scenarios฀(De฀Villiers฀and฀others,฀1999;฀ EDRC,฀2003;฀Banks฀&฀Schäffler,฀2005),฀coal฀continues฀ to฀provide฀for฀the฀majority฀of฀South฀Africa’s฀energy฀needs฀ over฀the฀next฀20฀to฀30฀years.฀Almost฀80฀percent฀of฀GHG฀ emissions฀come฀from฀the฀energy฀sector—both฀supply฀and฀ use—and฀most฀of฀these฀are฀in฀the฀form฀of฀carbon฀dioxide฀ (Van฀der฀Merwe฀&฀Scholes,฀1998;฀RSA,฀2004).฀ Making฀South฀Africa’s฀energy฀system฀more฀sustainable฀is฀a฀transition฀that฀will฀take฀decades.฀Making฀energy฀ development฀in฀South฀Africa฀more฀sustainable฀will฀require฀ attention฀to฀solutions฀that฀deal฀with฀CO2฀emissions฀from฀ coal.฀Together,฀these฀factors฀mean฀that฀an฀evaluation฀of฀฀ the฀sustainability฀of฀carbon฀capture฀and฀storage฀(CCS)฀ technologies฀is฀an฀important฀element฀of฀climate฀policy.฀ 1.1฀ Context:฀climate฀change฀and฀฀ sustainable฀development฀in฀South฀Africa South฀Africa’s฀development฀objectives฀have฀been฀shaped฀ deeply฀by฀Apartheid—a฀history฀of฀racial฀oppression฀and฀ patterns฀of฀economic฀exploitation.฀Apartheid฀systematically฀underdeveloped฀black฀working-class฀communities฀ and฀left฀a฀deep฀legacy฀of฀backlogs฀of฀basic฀services฀in฀rural฀ and฀urban฀areas.฀A฀central฀driver฀for฀policy฀since฀1994฀has฀ been฀the฀redress฀of฀the฀imbalance฀of฀Apartheid฀and฀the฀ promotion฀of฀the฀socioeconomic฀development฀of฀poor฀ communities.฀A฀core฀document฀capturing฀the฀major฀objectives฀is฀the฀Reconstruction฀and฀Development฀Programme฀ (RDP).฀However,฀the฀imperatives฀of฀reconstruction฀and฀ development฀have฀been฀in฀tension฀with฀a฀macroeconomic฀ framework฀that฀emphasizes฀economic฀growth฀as฀the฀driver฀ C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 95 of฀development—the฀Growth,฀Employment฀and฀Redistribution฀(GEAR)฀strategy฀(2002).฀The฀main฀feature฀of฀the฀ vision฀of฀GEAR฀was฀a฀competitive฀fast-growing฀economy฀ that฀creates฀sufficient฀jobs฀for฀all฀work-seekers.฀To฀achieve฀ the฀GEAR฀employment฀goal,฀a฀minimum฀growth฀rate฀of฀฀ 3฀percent฀per฀year฀would฀have฀to฀be฀met.฀ Many฀of฀the฀detailed฀socioeconomic฀development฀ objectives฀were฀set฀in฀the฀African฀National฀Congress’฀RDP฀ (ANC,฀1994).฀It฀outlined฀job฀creation฀through฀public฀ works฀and฀meeting฀a฀range฀of฀basic฀needs฀as฀key฀priorities.฀ Quantified฀goals฀were฀set฀for฀delivery฀of฀basic฀services,฀ including฀(a)฀building฀300,000฀housing฀units฀each฀year฀ for฀the฀first฀five฀years฀(to฀address฀a฀housing฀backlog฀of฀ some฀2–3฀million฀houses);฀(b)฀redistributing฀30฀percent฀ of฀the฀land;฀(c)฀providing฀25฀liters฀of฀water฀per฀person฀per฀ day;฀and฀(d)฀providing฀electricity฀to฀250,000฀households฀ per฀year฀(this฀target฀has฀actually฀been฀exceeded)฀(Borchers฀ et฀al.,฀2001). Relative฀to฀other฀sectors,฀the฀energy฀sector฀has฀performed฀well฀in฀meeting฀such฀targets.฀Significant฀progress฀ has฀been฀made฀in฀extending฀access฀to฀electricity฀in฀parti-฀ cular,฀although฀affordability฀and฀productive฀use฀remain฀ issues.฀Yet฀more฀remains฀to฀be฀done,฀and฀the฀challenge฀of฀ delivering฀energy฀in฀a฀sustainable฀manner฀remains.฀ Energy฀makes฀a฀critical฀contribution฀to฀sustainable฀ development฀by฀providing฀households฀with฀access฀to฀ affordable฀energy฀services฀and฀contributing฀to฀economic฀ development.฀However,฀it฀is฀important฀to฀manage฀the฀ environmental฀impacts฀of฀energy฀supply฀and฀use.฀South฀ Africa’s฀national฀climate฀change฀response฀strategy,฀approved฀by฀the฀Cabinet฀in฀October฀2004,฀is฀built฀around฀ sustainable฀development;฀its฀point฀of฀departure฀is฀the฀ achievement฀of฀national฀and฀sustainable฀development฀฀ objectives฀while฀simultaneously฀responding฀to฀climate฀ change฀(DEAT,฀2004).฀Any฀technological฀option,฀฀ including฀CCS,฀needs฀to฀fit฀within฀the฀broader฀South฀ African฀approach฀to฀climate฀policy.฀ 1.2฀ CCS฀and฀South฀Africa’s฀฀ commitments฀under฀UNFCCC South฀Africa’s฀climate฀policy฀is฀rooted฀in฀a฀firm฀commitment฀to฀the฀multilateral฀process฀under฀the฀United฀ Nations฀Framework฀Convention฀on฀Climate฀Change฀ (UNFCCC)฀and฀its฀Kyoto฀Protocol.฀South฀Africa฀is฀a฀ signatory฀to฀both฀the฀UNFCCC฀and฀the฀Protocol.1฀ Being฀a฀signatory฀to฀the฀UNFCCC,฀South฀Africa฀has฀฀ a฀general฀commitment฀to฀“implement฀…฀measures฀to฀ mitigate฀climate฀change”฀(UNFCCC,฀1992:฀Article฀4.1b).฀ As฀a฀non-Annex฀I฀country,฀however,฀it฀does฀not฀have฀a฀ quantified฀emissions฀limitation฀or฀reduction฀target฀under฀ the฀Kyoto฀Protocol.฀Nonetheless,฀the฀climate฀change฀ response฀strategy฀recognizes฀that฀the฀country฀can฀benefit฀ from฀moving฀to฀a฀cleaner฀development฀path.฀For฀example,฀ one฀of฀the฀major฀objectives฀of฀the฀White฀Paper฀on฀Energy฀ Policy฀is฀to฀secure฀the฀nation’s฀energy฀supply฀through฀ diversity฀(DME,฀1998).฀The฀Clean฀Development฀Mechanism฀(CDM)฀and฀other฀climate฀funding฀opportunities฀are฀ seen฀as฀key฀in฀driving฀this฀development.฀Domestic฀policy฀ has฀also฀recently฀resulted฀in฀a฀voluntary฀renewable฀energy฀ target฀of฀10,000฀GWh฀by฀2013฀(DME,฀2003c).฀ At฀least฀in฀principle,฀CCS฀offers฀an฀option฀to฀use฀coal฀ with฀lower฀GHG฀emissions฀than฀under฀a฀business-as-usual฀ approach.฀Initial฀research฀into฀the฀potential฀of฀CCS฀(Engelbrecht฀et฀al.,฀2004)฀has฀focused฀on฀Sasol,฀the฀chemicals฀ and฀synthetic฀fuels฀producing฀company,฀and฀the฀existence฀ of฀pure฀CO2฀streams฀in฀the฀coal-to-liquids฀process,฀as฀ the฀most฀promising฀option฀for฀capture.฀The฀potential฀to฀ generate฀credits฀under฀the฀CDM฀has฀been฀highlighted:฀“At฀ $10฀per฀ton฀[of฀carbon฀CDM฀credit฀price],฀the฀sequestration฀of฀this฀30฀million฀tons฀per฀year฀could฀be฀worth฀$300฀ million฀per฀year”฀(Surridge,฀2004).฀This฀assumes฀that฀ suitable฀storage฀sites฀can฀be฀found฀at฀reasonable฀cost฀in฀ environmentally฀acceptable฀conditions.฀A฀further฀question฀ is฀how฀long฀this฀carbon฀storage฀avenue฀will฀exist,฀since฀ Sasol฀is฀switching฀its฀feedstock฀from฀coal฀to฀gas฀piped฀from฀ Mozambique฀(Poggiolini,฀2001;฀ECON,฀2004).฀The฀key฀ sources฀of฀CO2฀in฀South฀Africa฀are฀shown฀in฀Table฀1. Any฀proposal฀to฀capture฀CO2฀for฀storage฀must฀take฀into฀ account฀the฀fact฀that฀a฀number฀of฀sources—for฀instance,฀ those฀involving฀transportation—are฀unlikely฀to฀be฀suited฀ to฀the฀capture฀of฀their฀emissions,฀because฀they฀are฀generally฀ too฀distributed.฀Table฀1฀provides฀the฀breakdown฀of฀sources฀ of฀carbon฀dioxide฀in฀South฀Africa.฀Based฀on฀the฀source฀ category฀technologies฀amenable฀to฀capture฀processes,฀the฀ hypothetical฀maximum฀amount฀of฀capturable฀carbon฀฀ dioxide฀in฀South฀Africa฀is฀about฀212฀Mt/a,฀or฀58฀percent฀ of฀all฀anthropogenic฀CO2฀released฀(Lloyd,฀2004).฀The฀ distribution฀of฀sources฀is฀discussed฀further฀in฀section฀3. 1.3฀ Purpose฀of฀this฀chapter฀ South฀Africa,฀a฀developing฀country฀with฀an฀energy฀ economy฀dominated฀by฀coal,฀has฀potential฀for฀carbon฀ capture฀and฀storage฀(CCS).฀Given฀its฀strong฀commitment฀ to฀sustainable฀development,฀the฀country฀may฀want฀to฀฀ 96 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST understand฀the฀implications฀of฀this฀climate฀change฀mitigation฀option฀for฀local฀development—in฀its฀economic,฀ social,฀and฀environmental฀dimensions.฀ South฀Africa฀is฀expected฀to฀remain฀dependent฀on฀coal฀ for฀decades฀to฀come฀(DME,฀2003a),฀but฀will฀increasingly฀ be฀challenged฀to฀contribute฀to฀the฀global฀effort฀of฀climate฀ change฀mitigation,฀or฀reducing฀emissions฀of฀greenhouse฀ gases฀(GHGs).฀In฀this฀context,฀CCS฀might฀be฀attractive฀to฀South฀Africa’s฀minerals฀and฀energy฀sector,฀with฀its฀ high฀reliance฀on฀coal฀and฀the฀existence฀of฀pure฀carbon฀ dioxide฀(CO2)฀streams฀in฀the฀coal-to-liquid฀fuel฀process.฀ Its฀“minerals-energy฀complex”฀(Fine฀&฀Rustomjee,฀1996)฀ has฀already฀become฀involved฀in฀exploring฀CCS2฀through฀ participation฀in฀the฀Carbon฀Sequestration฀Leadership฀ Forum฀(CSLF)฀and฀the฀Intergovernmental฀Panel฀on฀ Climate฀Change฀(IPCC)฀processes.฀This฀report฀seeks฀to฀ understand฀the฀broader฀implications฀of฀CCS฀for฀sustainable฀development,฀and฀how฀it฀compares฀to฀alternatives:฀ CCS฀might฀make฀sense฀as฀pure฀climate฀policy,฀but฀how฀ does฀CCS฀line฀up฀alongside฀other฀mitigation฀options฀with฀ respect฀to฀development? The฀report฀considers฀the฀political,฀technological,฀and฀ institutional฀prerequisites฀for฀making฀CCS฀work฀in฀a฀ developing฀country,฀and฀the฀discussion฀of฀its฀potential฀to฀ become฀an฀important฀component฀of฀a฀coherent฀climate฀ strategy.฀Given฀that฀climate฀policy฀has฀low฀priority฀relative฀ to฀development฀for฀basic฀human฀needs,฀the฀report฀tries฀to฀ address฀the฀question฀of฀whether฀(and฀to฀what฀extent)฀CCS฀ can฀contribute฀to฀local฀sustainable฀development. Research฀on฀CCS฀has฀been฀receiving฀much฀attention฀฀ recently;฀for฀example,฀the฀IPCC฀is฀preparing฀a฀special฀ report฀on฀the฀subject.฀While฀there฀has฀been฀increasing฀ Table฀1.฀฀Sources฀of฀Carbon฀Dioxide฀in฀South฀Africa,฀1990฀ ฀฀ CO2,฀Mt/a฀ Likely฀to฀be฀capturable฀ Electricity฀generation฀ Industry฀ Other฀energy฀production฀ Manufacturing฀ ฀ Total฀capturable฀ 137฀ 24฀ 26฀ 26฀ ฀ 212฀ CO2,฀Mt/a Unlikely฀to฀be฀capturable฀ Waste฀ Agriculture฀ Fugitive฀ Transport฀ Heat฀production฀ Total฀non-capturable฀ 9 41 36 34 32 152 Total฀Emissions฀(capturable฀&฀non-capturable)฀฀฀฀364฀Mt/a฀ Source:฀Lloyd฀(2004),฀drawing฀on฀Engelbrecht฀et฀al.฀(2004) interest฀in฀CCS฀in฀the฀developed฀world,฀its฀only฀serious฀ consideration฀in฀developing฀countries฀has฀been฀in฀locations฀ where฀international฀energy฀companies฀are฀active.฀ 2.฀WHAT฀IS฀CARBON฀CAPTURE฀฀ 2.฀WHAT฀IS฀CARBON฀CAPTURE฀฀ AND฀STORAGE฀ Carbon฀capture฀and฀storage฀is฀a฀technology฀envisaged฀ to฀mitigate฀GHG฀emissions฀by฀producing฀a฀concentrated฀ stream฀of฀CO2฀that฀can฀be฀transported฀to฀a฀storage฀site.฀It฀ is฀most฀likely฀to฀be฀applicable฀in฀large฀centralized฀sources,฀ including฀power฀plants,฀other฀energy฀industries฀(oil฀ refineries,฀synthetic฀fuel฀plants),฀and฀fossil-fuel-intensive฀ industries฀(iron฀&฀steel,฀cement,฀chemicals).฀Four฀stages฀of฀ the฀process฀are฀identified฀in฀Figure฀1.฀After฀initial฀capture฀ of฀the฀gas,฀the฀CO2฀needs฀to฀be฀transported฀to฀a฀suitable฀ storage฀site฀for฀injection.฀Monitoring฀CO2฀after฀injecting฀it฀ into฀a฀storage฀area฀(geological฀formations)฀is฀important฀to฀ ensure฀permanent฀storage฀and฀safety฀for฀human฀health฀and฀ the฀environment. Figure฀1.฀฀Process฀of฀Carbon฀Capture฀and฀Storage฀ CO2 SOURCE Industrial source of CO2, e.g.: Power station ~ 12% CO2 Sasol synfuel ~ 95% CO2 CAPTURE CO2 separation from other gaseous effluents by chemical or physical techniques TRANSPORT Pipelines Tanker Ship INJECTION Injection of CO2 into geological long-term storage, e.g.: Depleted Oil & gas Underground saline Coal seams CO2 SOURCE Long-term storage security and closure Source:฀Surridge฀(2004) C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 97 “energy฀penalty”฀(Bolland฀&฀Undrum,฀1999).฀International฀reviews฀suggest฀that฀the฀efficiency฀of฀pulverized฀ coal฀declines฀from฀46฀percent฀to฀33฀percent฀for฀pulverized฀ coal฀and฀from฀56฀percent฀to฀47฀percent฀for฀natural฀gas฀ combined฀cycle฀power฀plants฀(Lloyd,฀2004).฀In฀the฀South฀ African฀case,฀therefore,฀the฀large฀Eskom฀(South฀Africa฀ power฀utility)฀power฀stations,฀with฀units฀on฀the฀order฀of฀ 600฀MWe,฀would฀not฀be฀able฀to฀retrofit฀proven฀systems฀for฀ post-combustion฀CO2฀capture฀(Lloyd,฀2004). 2.2฀ Carbon฀storage฀ 2.1฀ Carbon฀capture In฀some฀existing฀processes,฀CO2฀is฀separated฀from฀ other฀gases฀routinely,฀such฀as฀in฀natural฀gas฀processing฀and฀ ammonia฀production฀(Kohl฀&฀Nielsen,฀1997).฀In฀South฀ Africa,฀Sasol฀produces฀pure฀streams฀of฀CO2฀in฀the฀process฀ of฀gasifying฀coal.3฀These฀streams฀of฀CO2฀can฀be฀captured฀ at฀minimal฀additional฀cost,฀although฀they฀still฀need฀to฀be฀ transported฀and฀stored฀appropriately.฀ Alternatively,฀capture฀of฀CO2฀will฀depend฀on฀the฀combustion฀technology.฀There฀are฀three฀classes฀of฀combustion฀ technologies฀under฀consideration.฀First,฀the฀oxy-fuel฀combustion฀technology,฀in฀which฀a฀hydrocarbon฀or฀carbonaceous฀fuel฀is฀combusted฀in฀either฀pure฀oxygen฀or฀a฀mixture฀ of฀pure฀oxygen฀and฀an฀inert฀gas฀rather฀than฀in฀air฀(which฀is฀ 79฀percent฀nitrogen)฀(Lloyd,฀2004).฀The฀major฀drawback฀ to฀oxy-fuel฀combustion฀is฀the฀cost฀of฀oxygen฀separation. Secondly,฀separation฀can฀be฀carried฀out฀before฀combustion.฀Pre-combustion฀processing฀of฀the฀primary฀fuel฀ in฀a฀shift฀reaction4฀could฀separate฀CO2฀and฀H2,฀with฀the฀ former฀stored฀and฀the฀latter฀used฀as฀fuel.฀South฀Africa’s฀ extensive฀experience฀with฀gasification฀and฀re-forming฀for฀ both฀syngas฀and฀hydrogen฀production฀have฀given฀it฀an฀ excellent฀knowledge฀base฀from฀which฀to฀contribute฀to฀ pre-combustion฀technologies฀generally. Thirdly,฀CO2฀can฀be฀captured฀using฀post-combustion฀ technologies.฀In฀post-combustion฀technology,฀CO2฀is฀ separated฀from฀flue฀gas฀after฀the฀fuel฀has฀been฀burned฀(IEA฀ GHG,฀2000).฀The฀best฀proven฀technique฀to฀separate฀the฀ CO2฀from฀flue฀gas฀is฀to฀scrub฀it฀with฀mono-ethanol฀amine฀ (MEA)฀solution฀(Engelbrecht฀et฀al.,฀2004).฀The฀disadvantages฀of฀post-combustion฀capture฀are฀that฀the฀equipment฀ sizes฀are฀large฀due฀to฀the฀large฀flue฀gas฀volumes฀and฀the฀ low฀CO2฀concentration฀in฀the฀flue฀gas฀(10–15฀percent)฀ (Engelbrecht฀et฀al.,฀2004).฀The฀energy฀requirements฀of฀ CCS฀reduce฀the฀efficiency฀of฀power฀plants,฀imposing฀an฀ 98 Once฀captured,฀CO2฀can฀be฀kept฀in฀storage฀areas฀such฀ as฀geological฀formations.฀The฀CO2฀can฀be฀trapped฀physically฀below฀impermeable฀rock,฀dissolved฀or฀ionized฀in฀ groundwater,฀retained฀in฀pore฀spaces,฀or฀adsorbed฀onto฀ organic฀matter฀in฀coal฀and฀oil฀shale฀(Hitchon,฀1996).฀All฀ these฀forms฀of฀storage฀have฀long฀residence฀times฀(thousands฀to฀millions฀of฀years).฀Possible฀types฀of฀storage฀sites฀ include฀depleted฀oil฀and฀gas฀fields฀and฀deep฀underground฀ formations฀filled฀with฀saline฀water. Existing฀technology฀required฀to฀inject฀carbon฀in฀deep฀ geologic฀formations฀has฀been฀developed฀by฀the฀oil฀and฀gas฀ exploration฀industry฀(Bajura,฀2001).฀Projects฀specifically฀ designed฀to฀store฀CO2฀have฀started฀to฀develop฀experience฀ with฀storage฀for฀CCS฀specifically,฀although฀the฀scale฀is฀ still฀small฀relative฀to฀the฀future฀requirements.฀Costs฀are฀ variable฀and฀are฀location-specific฀(Knauss฀et฀al.,฀2001).฀ Environmental฀concerns฀relate฀to฀the฀permanence฀of฀the฀ storage฀and฀the฀health฀and฀safety฀implications฀of฀possible฀ concentrated฀releases฀in฀the฀future.฀Criteria฀for฀site฀selection฀include฀the฀storage฀capacity฀(related฀to฀its฀porosity),฀ permeability,฀any฀physical฀or฀hydrological฀barriers฀to฀CO2฀ storage,฀and฀the฀stability฀of฀the฀geological฀formation.฀ Oceans฀can฀also฀be฀used฀for฀carbon฀dioxide฀storage฀by฀ releasing฀CO2฀to฀the฀deeper฀ocean฀water฀layers,฀at฀least฀ 1,000฀meters฀below฀sea฀level.฀Ocean฀storage฀of฀CO2฀is฀ made฀possible฀by฀the฀fact฀that฀the฀cold฀deep฀sea฀waters฀of฀ the฀oceans฀are฀unsaturated฀with฀CO2฀and฀therefore฀have฀a฀ significant฀potential฀to฀dissolve฀it.฀Ocean฀storage฀relies฀on฀ the฀fact฀that฀below฀a฀certain฀depth,฀CO2฀becomes฀“supercritical,”฀with฀liquid-like฀densities,฀and฀being฀less฀buoyant฀ than฀water,฀will฀not฀rise฀(Gunter,฀2001).฀However,฀slow฀ turnover฀in฀the฀ocean’s฀layers,฀even฀at฀great฀depths,฀means฀ eventual฀release฀on฀the฀timescale฀of฀centuries. 3.฀THE฀POTENTIAL฀FOR฀CCS฀฀ 3.฀THE฀POTENTIAL฀FOR฀CCS฀฀ IN฀SOUTH฀AFRICA฀ A฀report฀(Engelbrecht฀et฀al.,฀2004)฀by฀the฀Council฀for฀ Scientific฀and฀Industrial฀Research,฀CSIR,฀commissioned฀by฀ the฀Department฀of฀Minerals฀and฀Energy,฀made฀a฀preliminary฀assessment฀regarding฀the฀potential฀for฀CO2฀sequestration฀in฀South฀Africa฀(Surridge,฀2004).฀Unsurprisingly,฀the฀ major฀potential฀for฀capture฀lies฀in฀the฀major฀point฀sources฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST of฀CO2฀emissions—electricity฀generation,฀synfuels฀(Sasol),฀ oil฀refineries,฀and฀energy-intensive฀industries฀such฀as฀iron฀ and฀steel,฀nonferrous฀metals,฀pulp฀and฀paper,฀and฀cement฀ (Engelbrecht฀et฀al.,฀2004).฀ 3.1฀ The฀potential฀for฀carbon฀capture฀฀ in฀South฀Africa’s฀energy฀sector฀ This฀first฀scoping฀report฀identified฀the฀Sasol฀coal-to-฀ liquids฀process฀as฀well-suited฀for฀CO2฀sequestration.฀In฀ their฀coal฀gasification฀process,฀there฀are฀reportedly฀CO2฀ streams฀of฀90฀to฀98฀percent฀purity,฀meaning฀that฀minimal฀ capture฀is฀needed฀(only฀pressurizing).฀Since฀capture฀costs฀ dominate฀the฀overall฀costs฀of฀CCS,฀this฀is฀a฀substantial฀advantage฀(see฀section฀4.1).฀Slightly฀lower฀concentrations฀(80฀ to฀90฀percent)฀are฀reported฀at฀Mossel฀Bay฀(Engelbrecht฀et฀ al.,฀2004),฀where฀PetroSA฀generates฀synthetic฀fuel฀from฀gas.฀ The฀other฀potentially฀large฀source฀is฀coal-fired฀electricity฀generation,฀which฀provides฀93฀percent฀of฀electricity฀ supply฀(NER,฀2002)฀through฀the฀publicly฀owned฀company฀Eskom.฀However,฀the฀flue฀gases฀contain฀much฀lower฀ concentrations฀of฀CO2฀at฀10-15฀percent,5฀implying฀that฀ the฀costs฀of฀capture฀will฀be฀significant.฀Coal฀provides฀some฀ three-quarters฀of฀total฀primary฀energy฀supply฀(DME,฀ 2002),฀and฀industry฀uses฀large฀amounts฀of฀coal฀as฀the฀other฀ major฀energy฀carrier฀next฀to฀electricity.฀ The฀electricity฀sector฀contributes฀almost฀half฀(47.4฀฀ percent)6฀of฀CO2฀emissions฀in฀South฀Africa฀(Van฀der฀ Merwe฀&฀Scholes,฀1998;฀RSA,฀2004).฀CO2฀emissions฀in฀ South฀Africa฀are฀concentrated฀in฀the฀central฀industrial฀area. 1.4฀billion฀m3/y.฀Discounting฀this฀figure฀by฀50฀percent฀ after฀some฀allowances฀produces฀a฀CO2฀storage฀capacity฀of฀ about฀0.7฀billion฀m3/y฀(approximated฀at฀one฀million฀ton฀of฀ CO2฀per฀year)฀at฀80฀bar฀pressure฀(Lloyd,฀2004).฀ Abandoned฀coal฀and฀gold฀mines฀in฀South฀Africa฀offer฀ another฀potential฀for฀CO2฀storage.฀Storage฀capacity฀of฀ CO2฀in฀abandoned฀mines฀was฀based฀on฀production฀rates.฀ Abandoned฀coal฀mines฀have฀previously฀been฀used฀as฀storage฀ facilities฀for฀oil฀(Engelbrecht฀et฀al.,฀2004),฀but฀appeared฀to฀ offer฀little฀CO2฀storage฀capacity.฀No฀figures฀were฀available฀ when฀the฀CSIR฀study฀was฀conducted.฀For฀abandoned฀gold฀ mines,฀assuming฀production฀of฀390฀tons฀of฀gold฀annually,฀ 20฀million฀m3฀of฀ore฀removed฀annually,฀and฀the฀number฀ of฀exhausted฀gold฀mines฀available฀in฀South฀Africa,฀a฀yearly฀ CO2฀storage฀figure฀of฀more฀than฀10฀million฀m3฀would฀be฀ possible฀at฀80฀bars฀of฀pressure฀(Lloyd,฀2004).฀ Another฀potential฀area฀of฀geological฀CO2฀storage฀in฀ South฀Africa฀is฀deep฀saline฀reservoirs฀(Figure฀2).฀The฀฀ Karoo฀Supergroup฀Sediments฀offer฀the฀highest฀potential฀ compared฀to฀other฀sediment฀zones฀in฀the฀country,฀which฀ lack฀a฀trapping฀or฀sealing฀mechanism.฀Two฀major฀areas฀in฀฀ the฀Karoo฀sediments฀are฀the฀Vryheid฀Formation฀and฀ Katberg฀Formation.฀These฀two฀formations฀are฀relatively฀ old฀and฀highly฀consolidated.฀The฀Vryheid฀formation฀has฀ an฀estimated฀CO2฀storage฀capacity฀of฀183,750฀million฀m3฀ (approximately฀183,750฀million฀tons฀at฀80฀bar฀pressure)฀ (Engelbrecht฀et฀al.,฀2004).฀The฀CSIR฀study฀found,฀฀ Figure฀2.฀฀Southern฀Africa’s฀Geological฀Zones฀for฀CO2฀Storage 3.2฀ Review฀of฀potential฀for฀฀ geological฀and฀ocean฀storage฀ 3.2.1฀฀Geological฀storage Geological฀sequestration฀of฀CO2฀involves฀the฀use฀of฀ geological฀formations฀like฀depleted฀oil฀and฀gas฀reservoirs,฀ abandoned฀gold฀mines,฀deep฀saline฀aquifers,฀or฀unminable฀ coal฀seams.฀Such฀storage฀of฀CO2฀would฀involve฀injection฀ into฀the฀formations฀after฀capturing฀it฀at฀source฀points.฀Geological฀gas฀and฀oil฀reservoirs฀can฀be฀ideal฀for฀CO2฀storage฀ because฀the฀injected฀CO2฀can฀be฀used฀to฀restore฀the฀reservoir฀ to฀its฀original฀pressure,฀thereby฀reducing฀the฀risk฀of฀possible฀ collapse.฀Further,฀the฀natural฀sealing฀mechanism฀that฀retained฀the฀hydrocarbon฀in฀the฀first฀place฀offers฀a฀significant฀ advantage฀in฀ensuring฀that฀the฀CO2฀does฀not฀escape฀to฀the฀ surface.฀However,฀oil฀or฀gas฀development฀activities฀might฀be฀ a฀potential฀source฀of฀risks฀due฀to฀reservoir฀fractures. For฀South฀Africa,฀the฀potential฀for฀using฀depleted฀oil฀ and฀gas฀fields฀for฀CO2฀storage฀is฀not฀significant฀because฀of฀฀ the฀low฀prevalence฀of฀oil฀and฀gas฀activities฀in฀the฀country฀฀ (Lloyd,฀2004).฀In฀the฀CSIR฀study฀(Engelbrecht฀et฀al.,฀2004),฀฀ the฀storage฀capacity฀of฀oil฀and฀gas฀fields฀in฀South฀Africa฀ has฀been฀based฀on฀their฀current฀production฀rate฀of฀about฀ 0฀ 100฀ 200฀ 300 KILOMETRES Source:฀Engelbrecht฀et฀al.฀(2004).฀Shaded฀areas฀are฀those฀suitable฀for฀CO2฀storage. C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 99 however,฀that฀“these฀sandstones฀are฀characterized฀by฀฀ low฀porosity฀(3฀to฀5฀percent)฀and฀poor฀permeability”฀฀ (Engelbrecht฀et฀al.,฀2004).฀Making฀allowances฀for฀poor฀ permeability฀of฀the฀sediments฀and฀other฀factors,฀a฀storage฀ capacity฀figure฀of฀18,375฀million฀tons฀was฀estimated.฀ The฀Katberg฀Formation฀was฀estimated฀with฀a฀CO2฀ potential฀storage฀capacity฀of฀8฀billion฀m3.฀This฀figure฀was฀ discounted฀to฀approximately฀1.6฀billion฀m3฀(1,600฀million฀ tons฀of฀CO2฀at฀80฀bar฀pressure)฀to฀allow฀for฀poor฀storage฀ capacity฀as฀well฀as฀geological฀and฀other฀constraints.฀ The฀combined฀CO2฀storage฀capacity฀for฀the฀two฀formations,฀given฀the฀low฀porosity฀and฀permeability,฀comes฀to฀ about฀20Gt฀CO2,฀sufficient฀to฀store฀virtually฀all฀the฀capturable฀CO2฀produced฀in฀the฀next฀100฀years฀(Lloyd,฀2004). For฀South฀Africa,฀it฀would฀probably฀be฀reasonable฀to฀฀ assume฀a฀distance฀of฀about฀250km฀between฀source฀and฀ sink,฀although฀this฀would฀clearly฀depend฀on฀improved฀ source-sink฀matching. Ocean฀storage Deep฀ocean฀storage฀is฀“nearly฀unlimited,”฀but฀South฀ African฀storage฀potential฀has฀not฀been฀quantified,฀nor฀has฀ that฀that฀from฀ocean฀fertilization฀to฀increase฀the฀uptake฀of฀ CO2฀(Engelbrecht฀et฀al.,฀2004).฀The฀CSIR฀study฀concluded฀that฀“deep฀ocean฀sequestration฀of฀CO2฀is฀potentially฀ possible;฀however,฀environmental฀and฀legal฀consequences฀ are฀poorly฀understood.”฀In฀order฀to฀understand฀the฀potential฀of฀ocean฀storage฀of฀CO2฀in฀South฀Africa,฀one฀would฀ need฀to฀study฀the฀seabed฀profile฀of฀submarine฀contours฀ adjacent฀to฀major฀sources฀of฀CO2.฀ Total฀theoretical฀CO2฀storage฀potential Table฀2฀summarizes฀the฀theoretical฀potential฀geological฀and฀ocean฀storage฀for฀carbon฀dioxide฀sequestration฀in฀ South฀Africa. Table฀2.฀฀Potential฀for฀Geological฀and฀Ocean฀CO2฀Storage฀in฀South฀Africa ฀ Potential฀sink฀ Oil฀and฀Gas฀ reservoirs฀ Gold฀mines฀ Vryheid฀Formation฀ ฀ ฀ Katberg฀Formation฀ ฀ ฀ Deep฀ocean฀฀ (Atlantic฀and฀Indian)฀ ฀ ฀ Tonnage฀ (MtCO2/y)฀ Potential฀Storage฀ Duration฀(years)฀ Comments 1฀ ฀ 10฀or฀more฀ 18,373฀฀฀ million฀total฀ ฀ 1,600฀฀ million฀total฀ ฀ Nearly฀฀ unlimited฀ Very฀long฀฀ (millions฀of฀years)฀ Site฀specific฀ Very฀long฀ (millions฀of฀years)฀ ฀ Very฀long฀฀ (millions฀of฀years)฀ ฀ Several฀hundred฀ years฀ ฀ ฀ There฀may฀be฀enhanced฀฀฀ gas฀recovery More฀study฀required Relatively฀poor฀porosity฀and permeability,฀more฀study฀ required Relatively฀poor฀porosity฀and฀ permeability,฀more฀study฀ required Deep฀ocean฀ecosystems poorly฀understood;฀impacts฀ of฀CO2฀a฀potential฀cause฀for฀ concern ฀ ฀ Table฀2฀shows฀that฀South฀Africa฀has฀potentially฀large฀ geological฀storage,฀particularly฀in฀saline฀reservoirs.฀The฀ potential฀for฀CO2฀sequestration฀in฀exhausted฀gas฀fields฀at฀ Mossel฀Bay฀needs฀more฀study,฀also฀because฀it฀may฀enhance฀ gas฀recovery.฀There฀is฀also฀a฀potential฀to฀use฀exhausted฀gold฀ mines฀for฀CO2฀sequestration,฀but฀this฀area฀needs฀more฀ study฀as฀mining฀activities฀might฀have฀reduced฀the฀sealing฀ effect฀for฀carbon฀storage.฀On฀geological฀formation฀storage,฀ it฀appears฀that฀the฀porosity฀and฀permeability฀is฀rather฀low,฀ but฀the฀potential฀for฀CO2฀sequestration฀is฀large฀and฀therefore฀further฀study฀is฀required. Ocean฀storage฀in฀the฀country฀is฀potentially฀large,฀but฀ quantified฀estimates฀are฀unknown.฀Ocean฀storage฀also฀ raises฀environmental฀and฀legal฀issues฀that฀have฀led฀to฀widespread฀opposition฀internationally,฀and฀to฀the฀suspension฀฀ of฀some฀high-profile฀research฀activities.฀ ฀ 4.฀CCS฀AND฀SUSTAINABLE฀DEVELOPMENT฀ CCS฀needs฀to฀be฀assessed฀against฀the฀various฀dimensions฀ of฀sustainable฀development.฀The฀indicators฀used฀by฀the฀ Designated฀National฀Authority฀for฀the฀CDM฀in฀South฀ Africa฀are฀shown฀in฀Table฀3.฀Sustainable฀development฀is฀ defined฀in฀three฀dimensions—ecological,฀economic,฀and฀ social.฀The฀ecological฀dimension฀considers฀impacts฀on฀local฀ environmental฀quality,฀natural฀resource฀use,฀and฀impacts฀ on฀ecosystems.฀Economics฀considers฀not฀only฀cost,฀foreign฀ exchange,฀and฀local฀economic฀development,฀but฀also฀ includes฀appropriate฀technology฀transfer.฀The฀detail฀of฀the฀ social฀indicators฀reveals฀an฀emphasis฀on฀delivery฀of฀services฀ at฀a฀local฀community฀level฀and฀the฀alleviation฀of฀poverty.฀ While฀no฀set฀of฀indicators฀is฀perfect,฀the฀indicators฀ reflect฀the฀broad฀priorities฀of฀the฀RDP฀outlined฀in฀section฀ 1.1.฀Not฀only฀are฀these฀particular฀indicators฀used฀operationally฀in฀mitigation฀projects฀in฀South฀Africa,฀but฀they฀ were฀informed฀by฀some฀stakeholder฀consultation.฀In฀our฀ analysis฀the฀implications฀of฀CCS฀for฀sustainable฀development฀are฀evaluated฀very฀simply,฀as฀positive,฀negative,฀or฀ neutral.฀Key฀impacts฀have฀been฀highlighted฀in฀bold.฀ The฀key฀positive฀implications฀for฀CCS฀are฀the฀reduction฀of฀GHG฀emissions,฀making฀production฀cleaner,฀and฀ introducing฀new฀technology.฀The฀need฀to฀import฀significant฀components฀of฀new฀technology฀(and฀the฀negative฀ impact฀on฀foreign฀exchange฀requirements)฀offsets฀the฀ latter฀benefit.฀Negative฀implications฀that฀stand฀out฀are฀the฀ increased฀cost฀of฀energy฀and฀other฀services.฀The฀economic,฀ social,฀and฀environmental฀implications฀of฀CCS฀are฀described฀in฀more฀detail฀in฀the฀following฀sections.฀ Source:฀Engelbrecht฀et฀al.฀(2004) 100 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Table฀3.฀฀Review฀of฀CCS฀and฀Sustainable฀Development฀in฀South฀Africa฀ ฀ ฀ ฀ ฀฀ Criterion฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ Reference฀to฀CCS฀ ฀ Indicator฀ Positive฀or negative฀฀ contribution฀to ฀local฀sustainable฀ development Ecological Impact฀on฀local฀ ฀฀฀ ฀฀environmental฀ quality ฀ •฀Will฀the฀project฀increase฀air฀pollution฀in฀the฀area?฀฀ No฀ •฀Will฀the฀project฀increase฀water฀pollution฀in฀the฀area?฀฀ Possible฀ Negative •฀Will฀the฀project฀increase฀solid฀waste฀in฀the฀area?฀ No฀ Positive ฀ ฀ ฀ •฀Will฀the฀project฀have฀any฀other฀negative฀environmental฀impacts฀฀ ฀ (such฀as฀noise,฀safety,฀property,฀value,฀visual฀impacts,฀traffic)?฀ ฀ ฀ ฀ ฀ Possible,฀in฀case฀of฀ pipeline฀construction,฀ abrupt฀leakage฀ Negative฀ Change฀in฀usage฀of฀ ฀฀฀ ฀฀natural฀resources •฀Will฀the฀project฀reduce฀community฀access฀to฀resources?฀ No฀ Positive ฀ •฀Will฀the฀project฀increase฀the฀sustainability฀of฀usage฀of฀water,฀฀ ฀ ฀minerals,฀or฀other฀nonrenewable฀natural฀resources?฀ No฀ ฀฀ Negative ฀฀ ฀ ฀ •฀Will฀the฀project฀achieve฀more฀efficient฀resource฀utilization?฀ Not฀applicable฀ Neutral Impacts฀on฀biodiversity฀ ฀฀฀ and฀ecosystems ฀ •฀Will฀the฀project฀result฀in฀a฀loss฀of฀local฀or฀regional฀biodiversity?฀ Possible฀ Negative Positive ฀ Economic Economic฀impacts฀ •฀Will฀the฀project฀substantially฀increase฀foreign฀exchange฀requirements?฀ Yes฀ Negative ฀ ฀ •฀Will฀the฀project฀have฀a฀negative฀impact฀on฀existing฀economic฀฀฀ ฀ activity฀in฀the฀area? Unlikely฀ Neutral ฀ •฀Will฀the฀project฀increase฀the฀cost฀of฀energy?฀ Yes฀ Negative ฀฀฀ Appropriate฀฀ ฀฀technology฀transfer •฀Will฀the฀project฀result฀in฀the฀introduction฀of฀appropriate฀฀ ฀ technology฀into฀South฀Africa? Yes฀ Positive ฀ •฀Will฀the฀project฀result฀in฀local฀skills฀development?฀ Yes฀ Positive ฀ •฀Will฀the฀project฀provide฀demonstration฀&฀replication฀potential?฀ Limited฀ Positive ฀ •฀Will฀the฀project฀incorporate฀cleaner฀production฀technology?฀ Yes฀ Positive ฀Alignment฀with฀ ฀national,฀provincial,฀ and฀local฀฀ ฀development฀ ฀priorities ฀ ฀ •฀Will฀the฀project฀undermine฀other฀government฀objectives?฀฀ No฀ Positive •฀Will฀the฀project฀increase฀the฀cost฀of฀other฀services?฀฀ Yes฀ Negative •฀Will฀the฀project฀result฀in฀relocation฀of฀communities?฀ ฀ ฀ ฀ ฀ Possible,฀in฀case฀of฀฀ pipelines฀ Negative •฀Will฀the฀project฀provide฀infrastructure฀or฀essential฀services฀to฀฀ ฀ the฀area฀(such฀as฀increased฀access฀to฀energy)?฀ No฀ Negative ฀ •฀Will฀the฀project฀complement฀other฀development฀objectives฀in฀the฀area?฀ No฀ Negative ฀ ฀ •฀Will฀the฀project฀contribute฀to฀a฀specific฀sectoral฀objective?฀฀ ฀ Example:฀to฀increase฀access฀to฀renewable฀energy.฀ No฀ Negative ฀Social฀equity฀and฀฀ ฀poverty฀alleviation •฀Will฀the฀project฀result฀in฀the฀creation฀of฀jobs?฀(provide฀details฀as฀above)฀฀ Possible,฀high฀skills฀ Positive Unlikely฀ Neutral ฀ •฀Will฀the฀project฀provide฀any฀social฀amenities฀to฀the฀community฀in฀฀฀ ฀ which฀it฀is฀situated? ฀ ฀ •฀Will฀the฀project฀contribute฀to฀the฀development฀of฀a฀previously฀฀ ฀ underdeveloped฀area? No฀ Negative ฀ Social ฀ Source:฀Adapted฀from฀those฀published฀by฀the฀Designated฀National฀Authority,฀DME฀(2004).฀Key฀positive฀or฀negative฀impacts฀are฀highlighted฀in฀bold. C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 101 4.1฀฀Economic฀ 4.1.1฀฀Comparing฀CCS฀to฀alternative฀฀ mitigation฀options Compared฀to฀alternative฀mitigation฀options,฀the฀initial฀ costs฀for฀CCS฀storage฀technologies฀are฀likely฀to฀be฀high,฀ with฀expectations฀of฀a฀decrease฀when฀they฀become฀more฀ widespread฀and฀popular.฀This฀is฀the฀general฀trend฀for฀all฀ new฀technologies.฀It฀has฀been฀argued฀that฀CCS,฀compared฀to฀most฀other฀mitigation฀or฀sequestration฀projects,฀ does฀not฀offer฀other฀sustainable฀development฀benefits,฀ apart฀from฀the฀reduction฀of฀GHGs฀in฀the฀atmosphere.฀ The฀sustainable฀development฀aspect฀will฀be฀discussed฀in฀฀ a฀later฀section. CCS฀technology฀transfer฀elements฀become฀relevant฀to฀ South฀Africa฀when฀considering฀the฀envisaged฀development฀of฀the฀natural฀gas฀industry.฀South฀Africa฀has฀small฀ reserves฀of฀natural฀gas฀and฀coalbed฀methane—not฀enough฀ to฀justify฀an฀extensive฀pipeline฀infrastructure.฀The฀existing฀ pipeline฀system฀links฀Gauteng,฀Durban,฀and฀Secunda,฀ where฀Sasol฀plants฀are฀located.฀An฀extensive฀pipeline฀ infrastructure฀will฀be฀necessary฀to฀access฀gas฀fields฀in฀ neighboring฀countries,฀including฀Angola,฀Namibia,฀and฀ Mozambique.฀Angola฀has฀large฀gas฀fields;฀in฀the฀future,฀ gas฀could฀be฀piped฀to฀South฀Africa฀from฀there.฀Since฀CO2฀ transport฀by฀pipeline฀has฀similarities฀to฀that฀of฀natural฀gas,฀ this฀is฀where฀the฀relevance฀of฀CCS฀technology฀transfer฀ comes฀into฀play.฀Similarities฀include฀the฀need฀for฀pipeline฀ construction฀that฀is฀not฀intrusive฀to฀communities,฀as฀well฀ as฀issues฀like฀safety,฀efficiency฀of฀pipeline฀operations,฀and฀ improving฀telecommunications฀and฀computer฀systems฀for฀ monitoring฀and฀remote฀control฀of฀pipelines.฀Other฀areas฀ include฀developing฀tools฀and฀technologies฀that฀detect฀areas฀ of฀potential฀deterioration฀from฀dents,฀corrosion,฀metal฀ loss,฀and฀pipeline฀cracks. 4.1.2฀฀International฀cost฀estimates฀and฀฀ first฀South฀African฀estimates฀ CCS฀would฀clearly฀impose฀additional฀costs฀for฀Eskom’s฀ generation฀of฀electricity฀or฀producing฀synfuel฀at฀Sasol.฀ The฀other฀cost฀components฀relate฀to฀transport฀and฀storage฀ costs.฀There฀have฀been฀few฀attempts฀to฀quantify฀monitoring฀costs฀in฀existing฀studies. 102 International฀cost฀estimates With฀no฀local฀CCS฀experience,฀most฀of฀the฀studies฀฀ are฀based฀on฀international฀experience.฀Table฀4฀shows฀ increased฀costs฀of฀electricity฀in฀the฀United฀States.฀With฀ post-combustion฀capture,฀the฀increase฀in฀electricity฀cost฀฀ to฀capture฀CO2฀is฀87฀percent.฀For฀integrated฀gasification-฀ combined-cycle฀(IGCC)฀plants฀with฀pre-combustion฀ capture,฀the฀increase฀in฀electricity฀cost฀is฀52฀percent.฀For฀ in-combustion฀capture,฀the฀cost฀increase฀is฀estimated฀at฀฀ 34฀percent.฀For฀South฀Africa,฀some฀initial฀indications฀of฀ the฀cost฀patterns฀in฀South฀Africa฀emerge฀(Lloyd,฀2004). Costs฀of฀CCS฀in฀coal-to-liquids฀plant฀and฀industry The฀lowest฀costs฀for฀capture฀are฀those฀where฀there฀are฀ already฀high฀concentrations฀of฀carbon฀dioxide฀present.฀In฀ the฀case฀of฀pure฀CO2฀streams,฀such฀as฀those฀available฀at฀ Sasol’s฀Secunda฀plant฀and฀PetroSA,฀there฀are฀only฀compression฀costs.฀Since฀capture฀costs฀typically฀dominate฀total฀ costs฀of฀CCS,฀these฀options฀are฀being฀investigated฀for฀their฀ potential฀(Surridge,฀2004).฀Furthermore,฀a฀number฀of฀฀ industrial฀processes฀such฀as฀iron฀and฀steel฀and฀cement฀ probably฀lend฀themselves฀to฀low-cost฀capture฀(Lloyd,฀2004).฀ Costs฀for฀CCS฀from฀electricity฀generation฀ For฀post-combustion฀systems฀on฀new฀300–500฀MW฀ units฀of฀electric฀generating฀capacity,฀the฀capital฀cost฀is฀ likely฀to฀increase฀by฀65฀to฀90฀percent.฀The฀cost฀of฀electricity฀sent฀out฀increases฀by฀60฀to฀85฀percent,฀and฀the฀cost฀ of฀CO2฀emissions฀avoided฀is฀$40฀to฀$55฀per฀ton฀($/t).฀ Retrofitting฀increases฀these฀further฀by฀about฀10฀percent;฀ that฀is,฀the฀cost฀of฀CO2฀emissions฀avoided฀is฀about฀$45฀ to฀$60/t.฀These฀costs฀are฀similar฀for฀both฀coal-fired฀and฀ natural-gas-fired฀stations,฀although฀the฀natural-gas-fired฀ stations฀report฀somewhat฀lower฀costs,฀particularly฀in฀the฀ combined-cycle฀mode฀(Lloyd,฀2004). In฀the฀case฀of฀new฀IGCC฀power฀stations,฀CO2฀recovery฀ adds฀about฀20฀to฀60฀percent฀to฀the฀sent-out฀power฀cost฀ and฀gives฀a฀CO2฀emissions-avoided฀cost฀of฀between฀$15฀ and฀$40/t.฀Retrofitting฀an฀existing฀power฀station฀with฀an฀ IGCC฀is฀about฀20฀percent฀cheaper฀than฀retrofitting฀the฀ same฀station฀with฀post-combustion฀capture.฀ It฀is฀unlikely฀that฀the฀lowest฀cost฀option,฀pre-combustion,฀ can฀be฀available฀for฀at฀least฀10฀to฀15฀years,฀as฀most฀new฀ generating฀capacity฀will฀probably฀be฀conventional฀powdered฀ fuel฀combustion,฀for฀which,฀even฀on฀new฀stations,฀a฀cost฀ penalty฀of฀at฀least฀$40/t฀CO2฀avoided฀is฀likely.฀ For฀post-combustion฀carbon฀capture฀on฀operating฀ plants,฀current฀generation฀produces฀about฀190฀MtCO2฀ annually฀in฀producing฀about฀190฀TWh฀(Lloyd฀&฀Trikam,฀ 2004).฀Present฀electricity฀prices฀are฀about฀R150,000/ GWh.฀The฀cost฀penalty฀for฀capturing฀one฀ton฀CO2฀would฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Table฀4.฀฀Cost฀of฀CO2฀Capture฀in฀the฀United฀States฀ ฀฀ Capture฀฀ ฀ technology฀ Technology฀ ฀status฀ Electricity฀cost฀ USc/kWh฀ ฀ US$/ton+CO2฀ Capture฀cost฀ ฀US$/ton฀CO2฀ Total฀cost฀ ฀US$/ton฀CO2฀฀ Increase฀in electricity฀cost฀(%) Post-combustion฀ Current฀ ฀ 3.1฀ 30.3฀ 26.4฀ 56.8฀ 87 Pre-combustion฀ Demo฀plants฀ 4.2฀ 41.2฀ 21.5฀ 62.7฀ 52 In-combustion฀ Pilot฀plants*฀ 3.5฀ 34.3฀ 11.7฀ 46.0฀ 34 *฀Estimated฀cost. + ฀Electricity฀cost฀based฀on฀CO2฀emitted. Source:฀Engelbrecht฀(2004)฀(Citing฀Canmet฀Energy฀Technology฀Centre.) be฀about฀$40,฀or฀R265—a฀175฀percent฀increase฀in฀present฀ prices.฀Thus฀post-combustion฀capture฀of฀CO2฀from฀the฀ generation฀industry฀does฀not฀seem฀likely฀for฀many฀years฀ (Lloyd,฀2004). Transport฀costs Transport฀of฀CO2฀is฀the฀second฀major฀step฀in฀the฀process,฀as฀shown฀in฀Figure฀1.฀After฀initial฀capture฀of฀the฀gas,฀ the฀CO2฀needs฀to฀be฀transported฀to฀a฀suitable฀storage฀site฀ for฀injection.฀ The฀technology฀to฀transport฀CO2฀is฀well-developed฀ and฀fully฀proven.฀Typically฀it฀involves฀drying฀the฀gas฀and฀ ensuring฀it฀meets฀the฀required฀composition฀(typically฀>95฀ percent฀CO2฀and฀<5ppm฀water);฀compressing฀the฀gas฀to฀ above฀6฀Mpa฀(a฀pressure฀similar฀to฀that฀used฀to฀transport฀ natural฀gas);฀and฀passing฀it฀down฀a฀pipeline฀(Lloyd,฀2004).฀ Costs฀of฀transport฀of฀the฀CO2฀from฀the฀point฀of฀capture฀ to฀the฀point฀of฀storage฀are฀difficult฀to฀estimate,฀as฀they฀ are฀determined฀by฀the฀tonnage฀being฀transported฀and฀the฀ distance฀between฀source฀and฀sink.฀Assuming฀a฀distance฀of฀ about฀250km฀between฀source฀and฀sink฀in฀South฀Africa,฀ from฀Figure฀4,฀this฀would฀suggest฀a฀transport฀cost฀of฀ around฀$1.50/t฀CO2฀transported฀(Lloyd,฀2004). Storage฀costs Storage฀costs฀are฀difficult฀to฀determine฀in฀the฀absence฀ of฀site-specific฀information,฀but฀it฀seems฀reasonable฀to฀ suppose฀that,฀given฀the฀rather฀impermeable฀nature฀of฀ much฀of฀South฀Africa’s฀sedimentary฀rocks,฀the฀costs฀would฀ be฀at฀the฀upper฀end฀of฀those฀found฀elsewhere,฀that฀is,฀ about฀$10/t฀CO2. The฀costs฀of฀capture,฀transport,฀and฀storage฀have฀to฀be฀ added฀together฀to฀provide฀the฀overall฀costs฀of฀CCS,฀even฀ before฀monitoring฀costs฀are฀quantified.฀Given฀the฀range฀of฀ costs฀for฀different฀aspects,฀there฀is฀no฀single฀cost฀for฀CCS฀ as฀a฀mitigation฀option.฀ As฀shown฀in฀Table฀4,฀capture฀costs฀are฀the฀largest฀component฀of฀total฀costs.฀Pre-combustion฀options฀in฀the฀iron฀ and฀steel฀and฀cement฀sectors฀may฀provide฀further฀options,฀ at฀total฀costs฀around฀$20/t฀CO2.฀Costs฀of฀carbon฀capture฀ in฀electricity฀generation,฀the฀largest฀source฀of฀CO2฀in฀South฀ Africa,฀are฀still฀much฀higher฀than฀current฀market฀prices฀of฀ carbon฀(around฀$5฀to฀$10/t฀CO2).฀New฀plants฀would฀add฀ $50฀to฀$65/t฀CO2฀(capture฀plus฀storage฀costs),฀which฀is฀ high.฀This฀would฀more฀than฀double฀electricity฀prices,฀and฀ therefore฀does฀not฀seem฀likely฀for฀quite฀some฀time. In฀sum,฀therefore,฀it฀seems฀entirely฀possible฀that฀as฀ much฀as฀20฀percent฀of฀South฀Africa’s฀capturable฀CO2฀ emissions,฀or฀12฀percent฀of฀its฀total฀emissions,฀could฀be฀ captured,฀transported฀and฀stored฀for฀about฀$70/t,฀based฀ on฀maximum฀cost฀estimates.฀These฀are฀important฀figures,฀ because฀a฀12฀percent฀reduction฀in฀emissions฀is฀large฀in฀ comparison฀with฀the฀reductions฀accepted฀by฀the฀countries฀ in฀Annex฀I฀to฀the฀Kyoto฀Protocol,฀and฀because฀$70/t฀CO2฀ is฀between฀fourteen฀and฀seven฀times฀the฀price฀offered฀for฀ CDM฀and฀JI฀credits฀at฀present.฀The฀carbon฀emissions฀ credits฀being฀traded฀at฀present฀are฀the฀low-hanging฀fruit,฀ where฀simple฀benefits฀are฀being฀bought฀cheaply,฀but฀it฀is฀ still฀unlikely฀that฀in฀the฀long฀run฀the฀price฀of฀carbon฀will฀ rise฀closer฀to฀the฀level฀at฀which฀significant฀quantities฀can฀ be฀captured฀and฀stored.฀However,฀the฀coal-to-liquid,฀iron฀ &฀steel,฀and฀cement฀industries฀offer฀a฀better฀chance฀for฀ carbon฀credits,฀since฀in฀this฀area฀capture฀costs฀are฀signifi- Overall฀costs฀of฀CCS The฀patterns฀of฀likely฀costs฀of฀CCS฀in฀South฀Africa฀are฀ broadly฀apparent.฀Even฀without฀knowing฀exact฀costs,฀it฀฀ is฀apparent฀that฀the฀Sasol฀plant฀would฀be฀the฀most฀cost-฀ effective,฀since฀it฀avoids฀the฀largest฀portion฀of฀costs,฀namely฀ capture.฀Important฀gaps฀remain฀in฀understanding฀the฀costs฀ of฀monitoring฀CO2฀to฀ensure฀it฀remains฀stored฀in฀geological฀formations฀or฀under฀the฀ocean. C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 103 cantly฀lower,฀at฀a฀maximum฀of฀$10/t฀CO2฀(Table฀5).฀This฀ implies฀a฀total฀of฀$20/t฀for฀capturing,฀transportation,฀and฀ storage.฀This฀is฀low฀compared฀to฀the฀$70/t฀given฀above,฀ but฀still฀out฀of฀range฀of฀the฀current฀carbon฀price฀of฀$5฀to฀ $10/t฀CO2. 1.6 8 1.4 7 1.2 6 4.2฀ Social 1 5 0.8 4 0.6 3 0.4 2 0.2 1 The฀social฀benefits฀of฀CCS฀in฀South฀Africa฀can฀be฀ viewed฀in฀terms฀of฀the฀government฀priorities฀in฀the฀area฀ of฀social฀development฀and฀standard฀of฀living.฀Generically,฀ CCS฀is฀an฀option฀in฀addressing฀climate฀change฀issues,฀an฀ initiative฀with฀global฀dimensions.฀The฀social฀benefits฀that฀ will฀accrue฀to฀South฀Africa฀as฀a฀result฀of฀following฀this฀ sequestration฀option฀are฀principally฀the฀same฀as฀those฀that฀ would฀result฀in฀any฀other฀initiative฀to฀reduce฀CO2฀in฀the฀ atmosphere.฀At฀ground฀level,฀however,฀CCS฀has฀the฀disadvantage฀that฀it฀does฀not฀have฀direct฀social฀benefits฀to฀communities,฀which฀may฀be฀the฀case฀in฀other฀climate฀change฀ mitigation฀or฀sequestration฀projects฀that฀would฀have฀some฀ or฀all฀the฀ingredients฀of฀CDM฀projects.฀ For฀South฀Africa,฀where฀government฀policy฀has฀sought฀ to฀keep฀increases฀in฀retail฀electricity฀prices฀below฀inflation,฀ increased฀prices฀due฀to฀CCS฀would฀add฀significant฀pressure฀ on฀social฀delivery.฀In฀the฀next฀few฀years,฀as฀new฀power฀stations฀will฀be฀needed,฀the฀price฀of฀electricity฀is฀expected฀to฀ rise฀anyway.฀Adding฀CCS฀would฀add฀to฀the฀cost฀burden.฀If฀ implemented,฀special฀measures฀to฀protect฀poor฀households฀ from฀such฀increases฀would฀be฀needed.฀Currently,฀the฀government฀has฀a฀policy฀on฀providing฀free฀electricity฀to฀the฀ poor,฀an฀initiative฀called฀“poverty฀tariff ”฀in฀which฀a฀range฀ of฀20฀to฀50฀Kwh฀per฀month฀of฀free฀electricity฀is฀provided฀ to฀poor฀households. 0 Opex, US$ per ton Capex, US$M per km Figure฀4.฀฀฀฀Ranges฀of฀Capital฀and฀Operating฀Costs฀for฀High-pressure฀ CO2฀Pipelines฀(based฀on฀distance฀of฀250฀km) 0 0 0.2 0.4 0.6 0.8 1 1.2 Diameter, m Low capex High capex Low opex High opex Source:฀Engelbrecht฀et฀al.฀(2004) Table฀5.฀฀Summary฀of฀Cost฀Estimates฀for฀Carbon฀Capture฀and฀Storage ฀ Cost฀estimates฀ Capture฀ ฀ ฀ Coal-to-liquid฀plants฀ ฀ ฀ ฀ Iron฀&฀steel,฀cement฀ ฀ Electricity฀–฀new฀plant฀ ฀ ฀ ฀ Retro-fit฀ ฀ IGCC฀ ฀ ฀ Transport฀ ฀ ฀ ฀ ฀ Storage฀ Monitoring฀ Very฀low฀฀ ฀ <฀$10/t฀CO2฀฀ $40-55/t฀CO2฀ ฀ $45-60/t฀CO2฀ $15-40/t฀CO2฀ ฀ $1.50฀per฀250฀km฀ ฀ ฀ $10/t฀CO2฀ ฀ 104 Considerations Very฀pure฀CO2฀stream,฀only฀฀฀ compression฀costs฀ Similar฀for฀pulverised฀coal฀and฀simple฀ gas;฀less฀for฀natural฀gas฀combined฀cycle Adds฀about฀10%฀ Not฀likely฀in฀SA฀for฀the฀next฀couple฀฀ of฀decades Cost฀rises฀with฀distance฀of฀storage฀site฀ from฀sources;฀best฀storage฀options฀may฀ be฀outside฀of฀SA฀or฀in฀ocean Not฀quantified฀yet Co-benefits฀for฀local฀sustainable฀development The฀aspirational฀goals฀of฀the฀RDP฀(see฀section฀1.1)฀ serve฀to฀illustrate฀the฀importance฀of฀socioeconomic฀development,฀conceived฀around฀delivery฀of฀basic฀services,฀in฀the฀ broader฀context฀of฀South฀African฀policy.฀While฀the฀status฀ of฀RDP฀has฀become฀uncertain฀and฀lives฀in฀tension฀with฀ macroeconomic฀policy,฀these฀overall฀development฀objectives฀continue฀to฀provide฀an฀important฀context฀for฀energy฀ policy฀as฀well.฀ CCS฀poses฀a฀conflict฀in฀terms฀of฀energy฀policy.฀On฀the฀ one฀hand,฀it฀offers฀a฀potential฀to฀reduce฀the฀environmental฀ impacts฀of฀coal,฀particularly฀in฀the฀synfuel฀industry.฀On฀ the฀other฀hand,฀at฀current฀costs฀(see฀section฀4.1),฀implementing฀CCS฀would฀raise฀prices฀of฀electricity฀and฀liquid฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST fuels.฀Affordable฀access฀to฀modern฀energy฀services฀is฀an฀ important฀energy฀policy฀objective฀(DME,฀2004,฀1998).฀ The฀success฀in฀raising฀rates฀of฀electrification฀of฀households฀ from฀about฀one-third฀in฀the฀early฀1990s฀to฀67.9฀percent฀ by฀2002฀(NER,฀2002)฀was฀made฀possible฀in฀part฀by฀cheap฀ coal-fired฀generating฀capacity.฀Given฀that฀alternative฀supply฀options฀are฀not฀yet฀cost-competitive฀with฀coal-fired฀ power,฀there฀is฀a฀tension฀between฀the฀goals฀of฀universal฀ access฀to฀electricity฀and฀moving฀toward฀a฀cleaner฀fuel฀mix.฀ As฀shown฀in฀Table฀3,฀the฀key฀area฀where฀CCS,฀in฀accordance฀with฀sustainable฀development฀criteria฀for฀South฀ Africa,฀plays฀a฀significant฀role฀is฀in฀the฀area฀of฀technology฀ transfer.฀Direct฀social฀benefits฀to฀communities฀are฀quite฀ low.฀As฀a฀mitigation฀option฀focused฀exclusively฀on฀climate฀ change,฀CCS฀would฀need฀to฀be฀motivated฀only฀on฀the฀ basis฀of฀the฀global฀benefits฀accrued฀from฀the฀reduction฀of฀ CO2฀in฀the฀atmosphere.฀Impacts฀on฀environmental฀quality,฀ equity,฀and฀poverty฀alleviation฀are฀mixed,฀some฀positive฀ and฀negative. The฀key฀negative฀impact฀appears฀likely฀to฀be฀socio-฀ economic.฀At฀current฀prices฀in฀the฀carbon฀market,฀฀ the฀revenues฀from฀selling฀carbon฀credits฀would฀not฀be฀ sufficient฀to฀offset฀the฀costs฀of฀CCS.฀If฀a฀CCS฀program฀ were฀to฀be฀reviewed฀under฀the฀dual฀advantages฀typical฀ of฀CDM฀projects,฀then฀it฀would฀be฀quite฀unlikely฀to฀get฀ government฀approval,฀since฀it฀offers฀little฀in฀terms฀of฀direct฀local฀or฀even฀regional฀benefits.฀In฀fact,฀CCS฀is฀likely฀ to฀be฀seen฀as฀a฀disadvantage฀to฀communities฀since,฀as฀ shown฀above,฀they฀can฀result฀in฀increased฀costs฀of฀energy฀ services.฀Presumably,฀the฀cost฀of฀CCS฀will฀eventually฀be฀ relayed฀to฀the฀energy฀service฀customers.฀It฀is฀possible,฀ however,฀that฀customers฀could฀be฀cushioned฀from฀such฀ added฀operation฀costs฀if฀CCS฀projects฀were฀to฀be฀eligible฀ for฀CDM.฀This฀might฀require฀making฀some฀allowances฀ in฀the฀sustainable฀development฀criteria฀for฀CCS฀CDM฀ projects฀to฀be฀approved. CCS฀might฀play฀a฀role฀in฀slowing฀the฀transition฀of฀ South฀Africa’s฀energy฀economy฀to฀a฀more฀diverse฀fuel฀mix.฀ Coal฀accounts฀for฀about฀three-quarters฀of฀total฀primary฀ energy฀supply฀in฀South฀Africa฀(DME,฀2002),฀and฀93฀percent฀of฀electricity฀generation฀(NER,฀2002).฀In฀the฀context฀ of฀the฀climate฀change฀debate,฀a฀key฀energy฀development฀ objective฀has฀to฀be฀borne฀in฀mind—increasing฀access฀to฀฀ affordable฀energy฀services.฀This฀policy฀goal฀has฀assumed฀ the฀status฀of฀a฀“non-negotiable”฀issue฀in฀South฀Africa฀ energy฀policy.฀However,฀if฀extending฀access฀to฀electricity฀ continues฀to฀rely฀on฀coal-fired฀generation฀capacity,฀the฀ environmental฀implications฀are฀considerable.฀Concerns฀ about฀job฀losses฀in฀both฀the฀electricity฀and฀coal฀mining฀ sectors฀are฀additional฀arguments฀in฀favor฀of฀a฀gradual฀ transition฀to฀a฀lower-carbon฀energy฀economy,฀although฀ these฀should฀be฀weighed฀against฀the฀employment฀potential฀ of฀other฀options฀(AGAMA,฀2003).฀CCS฀might฀mitigate฀ the฀GHG฀effects฀on฀continued฀use฀of฀coal,฀and฀hence฀ dilute฀motivation฀for฀diversion฀to฀other฀energy฀sources฀in฀ addition฀to฀coal. This฀argument฀raises฀a฀number฀of฀other฀issues฀concerning฀the฀implications฀of฀a฀global฀CCS.฀Would฀it฀mean฀a฀con-฀ tinuation฀or฀a฀business-as-usual฀scenario฀for฀CO2-emitting฀ technologies฀simply฀because฀there฀is฀a฀huge฀potential฀for฀ capturing฀and฀storing฀the฀emitted฀CO2?฀Would฀it฀be฀at฀the฀ cost฀of฀other฀carbon-saving฀technologies฀like฀renewable฀ energy?฀South฀Africa’s฀sustainable฀development฀criteria฀ put฀significant฀weight฀on฀social฀issues฀like฀job฀availability.฀ A฀CCS฀initiative฀that฀maintains฀the฀status฀quo฀of฀the฀coal฀ industry฀in฀terms฀of฀exports฀and฀job฀availability฀might฀find฀ considerable฀favor฀among฀decision฀makers฀in฀South฀Africa.฀ Institutional฀capacity฀ A฀solid฀institutional฀framework฀in฀South฀Africa฀would฀ be฀necessary฀for฀effective฀implementation฀of฀CCS฀mitigation฀options.฀The฀environmental฀implications฀of฀CCS฀and฀ infrastructure฀requirements฀will฀necessitate฀key฀players฀becoming฀involved.฀For฀example,฀organizations฀dealing฀with฀ environmental฀monitoring฀and฀regulation฀of฀pipelines฀may฀ need฀to฀be฀strengthened.฀ Where฀pipeline฀transportation฀infrastructure฀is฀in฀ place,฀then฀issues฀of฀access฀by฀different฀players฀to฀the฀ pipeline฀network฀would฀have฀to฀be฀considered,฀just฀as฀ in฀natural฀gas฀pipeline฀transportation.฀The฀same฀issues฀ would฀be฀relevant฀to฀CO2฀storage฀area฀access.฀A฀decision฀ would฀have฀to฀be฀made฀to฀either฀use฀existing฀regulatory฀organs,฀such฀as฀the฀Gas฀Regulator,฀and฀redefine฀its฀ mandate.฀Further฀functions฀would฀need฀to฀be฀integrated฀ into฀a฀National฀Energy฀Regulatory฀Authority,฀which฀is฀ expected฀to฀combine฀electricity,฀gas,฀and฀petroleum฀฀ regulators฀in฀South฀Africa฀within฀five฀years.฀ South฀Africa฀would฀probably฀have฀the฀institutional฀ capacity฀to฀implement฀a฀CCS฀project.฀However,฀CCS฀ would฀still฀present฀new฀areas฀in฀which฀capacity฀development฀would฀be฀required.฀An฀important฀concern฀is฀whether฀ C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 105 there฀would฀be฀sufficient฀capacity฀to฀monitor฀and/or฀ independently฀verify฀the฀long-term฀storage฀of฀CCS.฀These฀ institutional฀issues฀are฀likely฀to฀have฀implications฀for฀the฀ overall฀cost฀of฀implementing฀CCS฀initiatives฀in฀SA. It฀will฀also฀be฀necessary฀to฀enact฀legislation฀that฀will฀not฀ only฀explicitly฀consider฀transportation฀and฀storage฀of฀CO2,฀ but฀also฀consider฀liability฀and฀environmental฀requirements.฀The฀Department฀of฀Environmental฀Affairs฀and฀ Tourism฀(DEAT)฀and฀the฀Department฀of฀Minerals฀and฀ Energy฀(DME)฀would฀naturally฀be฀important฀players. ฀ 4.3฀ Environmental฀and฀safety฀concerns Safety฀issues Carbon฀dioxide฀occurs฀naturally฀in฀the฀air;฀at฀atmospheric฀concentrations,฀it฀is฀nontoxic.฀Being฀a฀nonflammable฀gas,฀the฀most฀probable฀concern฀for฀humans,฀plants฀ and฀animals฀would฀be฀exposure฀to฀high฀concentrations฀of฀ carbon฀dioxide.฀With฀CCS,฀risks฀from฀CO2฀would฀occur฀ where฀there฀is฀the฀possibility฀of฀high฀concentrations฀due฀to฀ leakage,฀either฀acute฀or฀long-term,฀or฀due฀to฀the฀forms฀in฀ which฀it฀would฀be฀transported฀or฀stored.฀In฀the฀atmo- 106 sphere,฀the฀concentration฀of฀CO2฀is฀around฀0.3฀percent.฀At฀ high฀concentration,฀above฀10฀percent,฀CO2฀is฀quite฀lethal,฀ causing฀death฀due฀to฀asphyxiation.฀It฀is฀1.5฀times฀as฀dense฀ as฀air,฀and฀if฀atmospheric฀oxygen฀is฀displaced฀such฀that฀ oxygen฀concentration฀is฀15฀to฀16฀percent,฀signs฀of฀asphyxia฀ will฀be฀noted.฀If฀CO2฀leaks฀into฀surface฀soils,฀displacement฀ of฀oxygen฀can฀be฀lethal฀for฀plant฀life. In฀most฀cases,฀CO2฀would฀be฀handled฀under฀high฀pressure,฀whether฀in฀transportation฀or฀storage.฀The฀safety฀risks฀ here฀would฀mainly฀be฀those฀associated฀with฀process,฀structural฀engineering,฀or฀transport฀infrastructure฀failure.฀Some฀ intermediate฀storage฀of฀CO2฀will฀be฀needed฀to฀cope฀with฀ variability฀in฀supply,฀transport,฀and฀storage,฀particularly฀if฀ CO2฀is฀transported฀by฀rail,฀road,฀or฀ship.฀The฀highest฀exposure฀is฀likely฀to฀result฀from฀failure฀of฀transport฀pipelines,฀ causing฀a฀large฀release฀of฀CO2฀in฀gaseous฀form.฀It฀is฀possible฀ that฀such฀releases฀could฀endanger฀human฀life฀and฀other฀ biodiversity.฀The฀risk฀of฀problems฀from฀pipe฀leakage฀is฀very฀ small;฀to฀minimize฀risks,฀CO2฀pipelines฀could฀be฀routed฀ away฀from฀large฀population฀centers.฀Generally฀speaking,฀ handling฀of฀CO2฀should฀be฀relatively฀safe,฀especially฀when฀ we฀consider฀that฀other฀potentially฀hazardous฀gases฀such฀฀ as฀natural฀gas,฀ethylene,฀and฀LPG฀are฀already฀being฀transported฀and฀stored฀with฀relatively฀few฀problems.฀ An฀extreme฀example฀of฀the฀hazards฀of฀CO2฀is฀that฀of฀ Lake฀Nyos,฀a฀volcanic฀crater฀lake฀in฀Cameroon,฀which฀ emitted฀large฀quantities฀(estimated฀at฀80฀million฀cubic฀ meters)฀of฀CO2,฀causing฀1,700฀deaths฀and฀loss฀of฀livestock฀ up฀to฀25km฀from฀the฀crater฀(Johnston฀and฀Santillo,฀2002).฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST This฀natural฀phenomenon,฀while฀illustrative฀of฀the฀dangers฀ of฀high฀concentrations฀of฀CO2฀in฀low-lying฀areas,฀is฀unlikely฀to฀be฀reflective฀of฀the฀risks฀posed฀by฀CCS. While฀aboveground฀equipment฀for฀handling฀CO2฀ would฀be฀subject฀to฀the฀same฀processes฀and฀standards฀for฀ handling฀gaseous฀products฀under฀high฀pressure,฀monitoring฀of฀CO2฀levels฀would฀still฀be฀important.฀This฀can฀be฀ done฀by฀placing฀sensors฀at฀selected฀locations฀that฀would฀ measure฀the฀amount฀of฀CO2฀in฀the฀atmosphere.฀The฀ monitoring฀systems฀should฀be฀able฀to฀sound฀an฀alarm฀siren฀ if฀CO2฀gas฀concentrations฀in฀the฀air฀around฀large฀volume฀ storage฀points฀reach฀dangerous฀levels.฀For฀people฀living฀ near฀CCS฀infrastructure,฀it฀would฀be฀critically฀important฀ to฀provide฀awareness-raising฀programs฀regarding฀possible฀ hazards฀and฀how฀to฀respond฀to฀hazardous฀situations. Geological฀storage฀concerns With฀geological฀reservoirs,฀the฀assumption฀is฀generally฀ made฀that฀such฀formations฀have฀held฀hydrocarbons฀or฀ liquids฀for฀considerable฀durations฀of฀time,฀and฀thus฀injection฀of฀CO2฀into฀the฀reservoirs฀and฀properly฀sealing฀them฀ is฀likely฀to฀maintain฀the฀original฀conditions.฀However,฀ the฀pressure฀at฀which฀CO2฀would฀be฀stored฀in฀the฀reservoirs฀would฀be฀an฀important฀factor฀to฀consider,฀albeit฀in฀ maintaining฀similar฀conditions฀as฀the฀case฀might฀have฀ been฀before฀depletion฀of฀gas฀or฀oil.฀Injection฀of฀natural฀gas฀ into฀depleted฀oil฀or฀gas฀fields฀is฀a฀common฀practice฀in฀the฀ petroleum฀industry,฀and฀a฀number฀of฀oil฀and฀gas฀reservoirs฀ have฀been฀successfully฀used฀to฀store฀natural฀gas.฀CO2฀storage฀would฀therefore฀present฀a฀similar฀practice,฀and฀experience฀on฀natural฀gas฀storage฀can฀provide฀a฀useful฀example฀ for฀development฀of฀CO2฀storage฀in฀oil฀and฀gas฀reservoirs. With฀abandoned฀gold฀or฀coal฀mines,฀however,฀more฀ attention฀would฀be฀needed,฀since฀mining฀processes฀in฀this฀ case฀usually฀involved฀use฀of฀explosive฀and฀other฀equipment฀that฀causes฀considerable฀vibrations.฀Mines฀in฀South฀ Africa฀have฀created฀areas฀of฀seismic฀activity฀associated฀with฀ mining฀processes.฀There฀is฀thus฀a฀strong฀likelihood฀that฀ subsidence฀will฀have฀induced฀fractures฀in฀the฀rocks,฀which฀ would฀create฀a฀poor฀sealing฀of฀the฀rock฀and฀a฀possible฀ route฀for฀CO2฀to฀escape฀to฀the฀atmosphere฀by฀slow฀leakage฀ or฀abrupt฀eruption. Research,฀development,฀and฀demonstration฀projects฀examining฀environmental฀concerns฀of฀CO2฀storage฀are฀under฀ way฀in฀Canada,฀Europe,฀and฀Japan.฀There฀are฀still฀a฀lot฀of฀ uncertainties฀and฀informational฀gaps฀related฀to฀ocean฀and฀ geological฀storage฀of฀CO2.฀The฀environmental฀concerns฀of฀ CCS฀would฀thus฀need฀to฀include฀an฀understanding฀of฀both฀ exposure฀and฀effects฀of฀carbon฀dioxide฀in฀various฀situations฀ associated฀with฀carbon฀dioxide฀transportation,฀injection฀ into฀storage฀points,฀or฀leakage฀from฀storage฀points.฀ 5.฀CONCLUSION It฀is฀clear฀that฀South฀Africa฀has฀a฀potential฀for฀CCS.฀ The฀major฀potential฀for฀capture฀lies฀in฀the฀major฀point฀ sources฀of฀CO2฀emissions—electricity฀generation,฀synfuels,฀oil฀refineries,฀and฀energy-intensive฀industries฀such฀ as฀iron฀and฀steel,฀nonferrous฀metals,฀pulp฀and฀paper,฀and฀ cement.฀The฀highest฀quantified฀storage฀potential฀is฀in฀ geological฀formations.฀There฀is฀limited฀storage฀potential฀in฀ abandoned฀mines,฀ocean฀storage,฀and฀in฀oil฀and฀gas฀fields.฀ Major฀issues฀of฀concern฀include฀porosity฀and฀permeability฀ of฀the฀geological฀formations,฀as฀well฀as฀environmental,฀ safety,฀and฀legal฀issues. In฀pursuing฀the฀CCS฀initiative฀in฀South฀Africa,฀major฀ obstacles฀include฀the฀high฀cost฀of฀capture฀and฀storage,฀ which฀would฀increase฀the฀cost฀of฀energy฀services.฀The฀benefits฀from฀international฀carbon฀trade฀are฀highly฀unlikely฀to฀ offset฀the฀costs฀of฀CCS,฀even฀in฀the฀long฀run.฀In฀terms฀of฀ South฀Africa’s฀sustainable฀development฀criteria,฀CCS฀could฀ have฀a฀number฀of฀positive฀elements,฀the฀most฀outstanding฀being฀technology฀transfer.฀Social฀benefits฀appear฀to฀be฀ quite฀low. CCS,฀in฀the฀context฀of฀South฀Africa’s฀climate฀change฀ strategy,฀could฀be฀part฀of฀an฀agenda฀to฀facilitate฀the฀฀ transition฀from฀a฀coal-dependent฀energy฀system฀to฀a฀more฀฀ diversified฀one,฀making฀the฀coal฀“cleaner,”฀but฀there฀is฀a฀ need฀to฀conduct฀further฀studies฀on฀how฀CCS฀compares฀ to฀other฀mitigation฀and฀sequestration฀options฀in฀terms฀of฀ costs฀and฀long-term฀sustainable฀development฀benefits. C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 107 ENDNOTES ฀ ฀SA฀ratified฀the฀UNFCCC฀in฀August฀1997฀and฀the฀Kyoto฀Protocol฀฀ in฀2003. ฀2฀฀฀The฀Department฀of฀Minerals฀&฀Energy฀and฀Eskom฀participate฀in฀the฀ CSLF’s฀policy฀group.฀The฀participants฀in฀the฀technical฀group฀are฀from฀ Sasol฀and฀AngloCoal฀(Surridge,฀2004).฀Together฀with฀other฀researchers,฀ Eskom฀and฀Sasol฀are฀also฀involved฀in฀the฀preparation฀of฀the฀IPCC฀฀ special฀report฀on฀CCS. ฀3฀฀ ฀ Sasol฀is,฀however,฀switching฀feedstock฀from฀coal฀to฀gas฀over฀a฀period฀฀ of฀time;฀a฀gas฀pipeline฀from฀Mozambique฀started฀to฀deliver฀gas฀in฀ February฀2004.฀ ฀4฀฀฀React฀the฀fuel฀with฀oxygen฀or฀steam,฀create฀syngas฀(CO฀and฀H );฀shift฀ 2 reaction฀to฀CO2฀and฀H2;฀CO2฀separated฀by฀chemical฀absorption. ฀5฀฀฀The฀range฀depends฀inter฀alia฀on฀load฀factors,฀excess฀air฀supply฀and฀ similar฀factors;฀some฀measurements฀have฀been฀conducted฀by฀Lloyd฀&฀ Trikam฀(2004).฀ ฀6฀฀฀CO ฀emissions฀dominate฀South฀Africa’s฀total฀GHG฀emissions.฀Electric2 ity฀CO2฀emissions฀constituted฀37฀percent฀of฀total฀GHG฀emissions฀ in฀the฀1994฀inventory.฀However,฀since฀this฀report฀considers฀capture฀ of฀CO2฀rather฀than฀other฀GHGs,฀the฀comparison฀to฀total฀CO2฀is฀the฀ relevant฀one. ฀1 REFERENCES AGAMA฀Energy.฀2003.฀“Employment฀Potential฀of฀Renewable฀ AGAMA฀Energy.฀2003. Energy฀in฀South฀Africa.”฀A฀study฀commissioned฀by฀Sustainable฀ Energy฀and฀Climate฀Change฀Partnership,฀a฀project฀of฀฀ Earthlife฀Africa฀Johannesburg,฀in฀partnership฀with฀WWF฀฀ (World฀Wildlife฀Fund),฀Denmark.฀Johannesburg:฀SECCP. ANC฀(African฀National฀Congress).฀1994. ANC฀(African฀National฀Congress).฀1994.฀The฀Reconstruction฀฀ and฀Development฀Programme:฀A฀Policy฀Framework.฀฀ Johannesburg:฀Umanyano. Bajura,฀R.A.฀2001. Bajura,฀R.A.฀2001.฀“Technological฀Options฀to฀Address฀฀ Global฀Climate฀Change.”฀First฀National฀Conference฀on฀฀ Carbon฀Sequestration.฀Available฀at:฀http://www.netl.doe.gov/฀ publications/proceedings/01/carbon_seq/ps1a.pdf. Banks,฀D.฀and฀J.L.฀Schäffler.฀2005.฀ Banks,฀D.฀and฀J.L.฀Schäffler.฀2005.฀“The฀potential฀contribution฀ of฀renewable฀energy฀in฀South฀Africa.”฀Prepared฀for฀the฀Sustainable฀Energy฀&฀Climate฀Change฀Partnership,฀Earthlife฀Africa.฀ Pretoria:฀RAPS฀Consulting฀&฀Nano฀Energy. Bolland,฀O.฀and฀H.฀Undrum.฀1999.฀“Removal฀of฀CO2฀from฀Gas฀ Bolland,฀O.฀and฀H.฀Undrum.฀1999. Turbine฀Power฀Plants:฀Evaluation฀of฀Pre-and฀Post-combustion฀ Methods.”฀GHGT-4,฀Interlaken,฀Switzerland,฀Aug.฀30฀–฀Sept.฀2.฀ Available฀at:฀http://www.ieagreen.org.uk/sessions.htm. Borchers,฀M.,฀N.฀Qase,฀T.฀Gaunt,฀J.฀Mavhungu,฀H.฀Winkler,฀฀ Borchers,฀M.,฀N.฀Qase,฀T.฀Gaunt,฀J.฀Mavhungu,฀H.฀Winkler,฀฀ Y.฀Afrane-Okese,฀and฀C.฀Thom.฀2001.฀“National฀Electrification฀ Y.฀Afrane-Okese,฀and฀C.฀Thom.฀2001. Programme฀Evaluation:฀Summary฀Report.”฀Evaluation฀฀ commissioned฀by฀the฀Department฀of฀Minerals฀&฀Energy฀and฀฀ the฀Development฀Bank฀of฀Southern฀Africa.฀Cape฀Town:฀Energy฀ &฀Development฀Research฀Centre,฀University฀of฀Cape฀Town. 108 De฀Villiers,฀M.,฀M.฀Howells,฀and฀A.฀Kenny.฀1999. De฀Villiers,฀M.,฀M.฀Howells,฀and฀A.฀Kenny.฀1999.฀“Sustainable฀ Energy฀for฀South฀Africa:฀Energy฀Scenarios฀from฀1995฀to฀2025.”฀ Report฀for฀Eskom฀and฀National฀Research฀Foundation.฀Cape฀ Town:฀Energy฀Research฀Institute,฀University฀of฀Cape฀Town. DEAT฀(Department฀of฀Environmental฀Affairs฀and฀Tourism).฀ 2004.฀“A฀National฀Climate฀Change฀Response฀Strategy.”฀Pretoria. 2004. DME฀(Department฀of฀Minerals฀and฀Energy).฀1998. DME฀(Department฀of฀Minerals฀and฀Energy).฀1998.฀“White฀ Paper฀on฀Energy฀Policy฀for฀South฀Africa.”฀Pretoria:฀DME. DME฀(Department฀of฀Minerals฀and฀Energy).฀2002. DME฀(Department฀of฀Minerals฀and฀Energy).฀2002.฀฀ “South฀Africa฀National฀Energy฀Balance฀2000.”฀Pretoria:฀DME. DME฀(Department฀of฀Minerals฀and฀Energy).฀2003a. DME฀(Department฀of฀Minerals฀and฀Energy).฀2003a.฀฀ “Integrated฀Energy฀Plan฀for฀the฀Republic฀of฀South฀Africa.”฀฀ Pretoria.฀Available฀at:฀www.dme.gov.za. DME฀(Department฀of฀Minerals฀and฀Energy).฀2003b.฀฀ DME฀(Department฀of฀Minerals฀and฀Energy).฀2003b. “South฀Africa฀National฀Energy฀Balance฀2001.”฀Pretoria:฀DME. DME฀(Department฀of฀Minerals฀and฀Energy).฀2003c. DME฀(Department฀of฀Minerals฀and฀Energy).฀2003c.฀฀ “White฀Paper฀on฀Renewable฀Energy.”฀Pretoria.฀Available฀at:฀ www.dme.gov.za. DME฀(Department฀of฀Minerals฀&฀Energy).฀2004. DME฀(Department฀of฀Minerals฀&฀Energy).฀2004.฀“Sustainable฀Development฀Criteria฀for฀Approval฀of฀Clean฀Development฀ Mechanism฀Projects฀by฀the฀Designated฀National฀Authority฀of฀the฀ CDM.”฀Pretoria.฀Available฀at:฀www.dme.gov.za. ECON฀(ECON฀Centre฀for฀Economic฀Analysis).฀2004.฀ ECON฀(ECON฀Centre฀for฀Economic฀Analysis).฀2004.฀“The฀ Potential฀for฀Carbon฀Finance฀to฀Support฀the฀Introduction฀of฀ Natural฀Gas฀into฀Mozambique.”฀Draft.฀Report฀2004-077.฀Oslo. EDRC฀(Energy฀&฀Development฀Research฀Centre).฀2003.฀฀ EDRC฀(Energy฀&฀Development฀Research฀Centre).฀2003. “Policies฀and฀Measures฀for฀Renewable฀Energy฀and฀Energy฀฀ Efficiency฀in฀South฀Africa.”฀Prepared฀for฀the฀Sustainable฀Energy฀ &฀Climate฀Change฀Partnership.฀Cape฀Town:฀EDRC,฀University฀ of฀Cape฀Town. Engelbrecht,฀A,฀A.฀Golding,฀S.฀Hietkamp,฀and฀R.J.฀Scholes.฀ 2004.฀“The฀Potential฀for฀Sequestration฀of฀Carbon฀Dioxide฀in฀ 2004. South฀Africa.”฀Report฀for฀the฀Department฀of฀Minerals฀&฀Energy.฀ Pretoria:฀Council฀for฀Scientific฀and฀Industrial฀Research. Fine,฀B.฀and฀Z.฀Rustomjee.฀1996. Fine,฀B.฀and฀Z.฀Rustomjee.฀1996.฀The฀Political฀Economy฀of฀฀ South฀Africa:฀from฀Minerals-energy฀Complex฀to฀Industrialization.฀ London:฀C.฀Hurst. Gunter,฀W.D.฀2001.฀ Gunter,฀W.D.฀2001.฀“Role฀of฀Hydrodynamic฀and฀Geochemical฀฀ Trapping฀in฀Secure฀Geological฀Storage฀of฀Carbon฀Dioxide.”฀฀ First฀National฀Conference฀on฀Carbon฀Sequestration.฀Available฀at:฀ http://www.netl.doe.gov/publications/proceedings/01/฀ carbon_seq_wksp/4aAquifers.PDF. Hitchon,฀B.,฀ed.฀1996. Hitchon,฀B.,฀ed.฀1996.฀Aquifer฀Disposal฀of฀Carbon฀Dioxide:฀ Hydrodynamic฀and฀Mineral฀Trapping-Proof฀of฀Concept.฀Alberta,฀ Canada:฀Geoscience฀Publishing. IEA฀GHG฀(International฀Energy฀Agency฀Greenhouse฀Gas฀R&D฀ Programme).฀2000.฀“Leading฀Options฀for฀the฀Capture฀of฀CO2฀ Programme).฀2000. Emissions฀at฀Power฀Stations.”฀Report฀PH3/14.฀Cheltenham.฀ Available฀at:฀www.ieagreen.org.uk/. GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Johnston,฀P.฀and฀D.฀Santillo.฀2002. Johnston,฀P.฀and฀D.฀Santillo.฀2002.฀“Carbon฀Capture฀and฀ Sequestration:฀Potential฀Environmental฀Impacts.”฀Greenpeace฀ Research฀Laboratories,฀for฀IPCC฀Workshop฀for฀Carbon฀Capture฀ and฀Storage.฀Exeter,฀UK:฀University฀of฀Exeter. Knauss,฀K.G.,฀J.W.฀Johnson,฀C.I.฀Steefel,฀and฀J.J.฀Nitao.฀2001.฀ “Evaluation฀of฀the฀Impact฀of฀CO2,฀Aqueous฀Fluid,฀and฀฀ Reservoir฀Rock฀Interactions฀on฀the฀Geologic฀Sequestration฀of฀ CO2,฀with฀Special฀Emphasis฀on฀Economic฀Implications.”฀฀ First฀National฀Conference฀on฀Carbon฀Sequestration.฀฀ Available฀at:฀http://www.carbonsequestration.us/Websites/฀฀ htm/NETL-conf-carbon_seq01.html. Kohl,฀A.L.฀and฀R.B.฀Nielsen.฀1997.฀Gas฀Purification.฀Houston:฀ Kohl,฀A.L.฀and฀R.B.฀Nielsen.฀1997. Gulf฀Publishing฀Co. Lloyd,฀P.J.D.฀2004. Lloyd,฀P.J.D.฀2004.฀“Carbon฀Capture฀and฀Storage฀in฀South฀฀ Africa:฀Development฀and฀Climate฀Change.”฀Technical฀input.฀ Cape฀Town:฀Energy฀Research฀Centre,฀University฀of฀Cape฀Town. Lloyd,฀P.J.D.฀and฀A.฀Trikam.฀2004. Lloyd,฀P.J.D.฀and฀A.฀Trikam.฀2004.฀“The฀Determination฀of฀ Emission฀Factors฀for฀South฀African฀Power฀Stations.”฀Eskom฀ Contract฀1RE-000046.฀Cape฀Town:฀Energy฀Research฀Centre,฀ University฀of฀Cape฀Town. NER฀(National฀Electricity฀Regulator).฀2002. NER฀(National฀Electricity฀Regulator).฀2002.฀Electricity฀Supply฀ Statistics฀for฀South฀Africa฀2002.฀Pretoria:฀NER.฀Available฀at:฀฀ www.ner.org.za/publs.htm. Poggiolini,฀D.฀2001. Poggiolini,฀D.฀2001.฀“SA฀Laying฀Gas฀Pipeline฀in฀Mozambique.”฀ Engineering฀News฀(June฀29-July฀5,฀2001). RSA฀(Republic฀of฀South฀Africa)฀2004. RSA฀(Republic฀of฀South฀Africa)฀2004.฀“South฀Africa:฀Initial฀ National฀Communication฀under฀the฀United฀Nations฀Framework฀ Convention฀on฀Climate฀Change.”฀Submitted฀at฀COP-9.฀Pretoria.฀ Available฀at:฀unfccc.int/resource/docs/natc/zafnc01.pdf. Surridge,฀A.D.฀2004. Surridge,฀A.D.฀2004.฀“Carbon฀Sequestration฀Leadership฀Forum:฀ South฀Africa฀Status฀Report.”฀Report฀to฀the฀National฀Committee฀ on฀Climate฀Change,฀August฀27,฀Pretoria. UCT฀(University฀of฀Cape฀Town).฀2002. UCT฀(University฀of฀Cape฀Town).฀2002.฀Options฀for฀a฀Basic฀฀ Electricity฀Support฀Tariff:฀Analysis,฀Issues฀and฀Recommendations฀฀ for฀the฀Department฀of฀Minerals฀&฀Energy฀and฀Eskom.฀฀ Cape฀Town:฀UCT. UNFCCC.฀1992. UNFCCC.฀1992.฀United฀Nations฀Framework฀Convention฀฀ on฀Climate฀Change.฀New฀York:฀United฀Nations.฀Available฀at:฀฀ http://unfccc.int/resource/conv/index.html. Van฀der฀Merwe,฀M.R.฀and฀R.J.฀Scholes.฀1998. Van฀der฀Merwe,฀M.R.฀and฀R.J.฀Scholes.฀1998.฀South฀African฀ Greenhouse฀Gas฀Emissions฀Inventory฀for฀the฀Years฀1990฀and฀1994.฀ Pretoria:฀National฀Committee฀on฀Climate฀Change. C A R B ON ฀ C A PTU R E฀ A N D ฀ STOR A GE฀ IN ฀ SOU TH ฀ A FR IC A 109 chapter฀vii Conclusion Rob฀Bradley฀ ■ ฀Jonathan฀Pershing Sustainable฀development฀policies฀and฀measures฀(SDPAMs)฀are฀at฀once฀both฀an฀old฀and฀a฀new฀idea.฀While฀the฀ Climate฀Change฀Convention฀lays฀out฀the฀basic฀contours฀of฀ the฀concept,฀it฀is฀only฀recently฀that฀concrete฀proposals฀have฀ emerged฀that฀explain฀how฀to฀integrate฀basic฀development฀ needs฀with฀climate฀protection.฀This฀report฀reviews฀the฀ SD-PAMs฀concepts,฀evaluates฀how฀they฀fit฀into฀a฀formal฀ greenhouse฀gas฀(GHG)฀mitigation฀framework,฀and฀reviews฀ specific฀cases฀of฀how฀the฀concepts฀apply฀in฀the฀real฀world.฀ It฀makes฀clear฀that฀we฀can฀move฀from฀concept฀to฀reality,฀ and฀that฀SD-PAMs฀can฀indeed฀be฀a฀stepping฀stone฀to฀a฀ better฀climate฀future Climate฀policy฀in฀the฀real฀world The฀SD-PAMs฀approach฀has฀a฀number฀of฀potential฀ shortcomings,฀which฀will฀be฀summarized฀below,฀but฀it฀has฀ one฀overriding฀virtue:฀it฀roots฀climate฀policy฀in฀practical฀ reality.฀A฀fuller฀engagement฀of฀key฀developing฀countries฀ in฀emerging฀climate฀policy฀is฀by฀no฀means฀a฀sufficient฀ condition฀for฀stronger฀climate฀protection—the฀leadership฀ of฀industrialized฀countries฀remains฀essential—but฀it฀is฀a฀ necessary฀one.฀ The฀fact฀remains฀that฀most฀developing฀countries฀are฀ unlikely฀to฀accept฀commitments฀formulated฀as฀emissions฀ limits฀for฀the฀foreseeable฀future.฀Their฀reasons฀for฀doing฀so฀ are฀not฀arbitrary฀or฀unreasonable,฀but฀are฀again฀rooted฀in฀ their฀own฀realities—large฀populations฀in฀need฀of฀economic฀ development.฀It฀is฀only฀by฀keeping฀the฀focus฀on฀development฀that฀we฀can฀start฀to฀leverage฀the฀major฀climate฀gains฀ that฀are฀achievable฀by฀steering฀that฀development฀down฀ a฀more฀sustainable฀path.฀The฀task฀in฀front฀of฀those฀that฀ believe฀that฀GHG฀emission฀reductions฀are฀important฀for฀ the฀future฀well-being฀of฀humanity฀is฀to฀make฀these฀cuts฀a฀ political฀priority.฀This฀means฀looking฀outside฀the฀narrow฀ confines฀of฀the฀traditional฀climate฀policy฀arena,฀which฀lacks฀ political฀prominence฀relative฀to฀energy฀services,฀transportation฀infrastructure,฀and฀other฀issues฀more฀directly฀connected฀to฀economic฀development฀and฀poverty฀alleviation. This฀report฀argues฀that฀in฀some฀important฀cases฀policy฀ and฀technology฀options฀exist฀to฀help฀limit฀emissions฀while฀ furthering฀these฀development฀goals.฀Brazil’s฀experience฀ has฀shown฀that฀determined฀government฀policy฀can฀make฀ major฀difference฀to฀the฀energy฀mix,฀and฀thus฀to฀GHG฀ emissions.฀Brazil฀has฀benefited฀enormously฀in฀non-climate฀ terms฀from฀its฀ethanol฀use:฀its฀external฀debt฀would฀be฀$100฀ billion฀higher฀if฀it฀had฀relied฀exclusively฀on฀gasoline฀for฀ transport,฀as฀almost฀all฀other฀countries฀have฀done.฀ Not฀all฀climate฀policies฀have฀a฀counterpart฀in฀development฀needs.฀As฀the฀case฀studies฀in฀this฀report฀show,฀some฀ initiatives—carbon฀capture฀and฀storage฀(CCS)฀is฀a฀good฀ example—are฀unlikely฀to฀work฀under฀this฀model.฀In฀฀ C ON C LU SION 111 essence,฀the฀sustainable฀development฀benefits฀of฀a฀policy฀or฀ measure,฀seen฀from฀the฀point฀of฀view฀of฀the฀host฀country,฀฀ need฀to฀provide฀a฀significant฀(though฀not฀necessarily฀ complete)฀part฀of฀the฀reason฀to฀implement฀it.฀The฀climate฀ benefits฀may฀be฀reason฀for฀the฀international฀community฀ to฀assist฀to฀an฀appropriate฀degree.฀Where฀these฀sustainable฀ development฀benefits฀are฀small฀or฀zero,฀more฀traditional฀ measures฀aimed฀exclusively฀at฀paying฀the฀incremental฀cost฀ of฀carbon฀abatement฀are฀more฀appropriate.฀This฀reinforces฀ the฀point฀that฀SD-PAMs฀will฀complement,฀rather฀than฀ replace,฀existing฀mechanisms.฀SD-PAMs฀are฀not฀a฀panacea,฀ but฀an฀additional฀tool฀of฀climate฀policy. The฀potential฀climate฀gains฀are฀real฀ The฀country฀studies฀presented฀in฀this฀volume฀illustrate฀ the฀potential฀for฀major฀reductions฀in฀GHG฀emissions,฀ depending฀on฀the฀development฀choices฀made.฀These฀are฀ generally฀made฀without฀climate฀considerations฀playing฀a฀ role.฀However,฀where฀climate฀and฀domestic฀goals฀are฀mutually฀reinforcing฀there฀is฀real฀potential฀for฀international฀ cooperation฀to฀enhance฀both฀sets฀of฀goals. Brazil’s฀biofuels฀program฀has฀saved฀the฀equivalent฀ of฀10฀percent฀of฀Brazil’s฀CO2฀emissions฀over฀the฀period฀ 1975-2004฀due฀to฀displaced฀oil฀consumption.฀This฀saving,฀equivalent฀to฀taking฀all฀of฀Sweden’s฀cars฀off฀the฀road฀ during฀that฀time,฀was฀achieved฀without฀climate฀protection฀ being฀an฀overt฀aim,฀but฀is฀nevertheless฀one฀of฀the฀world’s฀ most฀effective฀policy฀regimes฀for฀reducing฀GHG฀emissions.฀The฀studies฀in฀this฀volume฀suggest฀that฀considerable฀ scope฀exists฀for฀similar฀“incidental”฀climate฀wins.฀The฀ China฀study฀(Chapter฀4),฀calculates฀that฀a฀suite฀of฀policies฀ and฀measures฀aimed฀at฀managing฀oil฀demand฀can฀reduce฀ China’s฀forecasted฀oil฀demand฀for฀transport฀in฀2020฀by฀50฀ percent฀below฀a฀business-as-usual฀scenario.฀When฀policies฀ to฀reduce฀the฀stress฀on฀overcrowded฀urban฀infrastructure฀ are฀added,฀this฀saving฀rises฀to฀79%.฀And฀while฀the฀effective฀ reduction฀in฀CO2฀emissions฀in฀2020฀would฀be฀of฀187฀and฀ 295฀MtCO2฀per฀year฀respectively฀under฀these฀scenarios,฀ this฀benefit฀would฀be฀entirely฀independent฀of฀climate฀ policy฀per฀se.฀For฀China฀the฀policy฀goals฀are฀to฀reduce฀oil฀ import฀demand฀and฀stress฀on฀overburdened฀urban฀infrastructure,฀while฀improving฀mobility฀for฀the฀masses. The฀examples฀in฀this฀volume฀are฀illustrative,฀chosen฀ because฀they฀addressed฀important฀sectors฀and฀development฀issues.฀The฀power฀and฀transport฀sectors฀are฀among฀ the฀fastest฀growing฀in฀each฀of฀the฀countries฀included฀in฀ this฀report,฀and฀among฀the฀most฀critical฀for฀development.฀More฀needs฀to฀be฀done฀to฀identify฀opportunities฀ for฀applying฀these฀lessons฀more฀widely,฀and฀for฀a฀more฀ 112 systematic฀method฀of฀identifying฀SD-PAM฀opportunities.฀ But฀a฀crucial฀requirement฀will฀remain฀the฀leadership฀of฀the฀ host฀country฀itself฀in฀identifying฀its฀policy฀priorities฀and฀ providing฀the฀political฀will฀to฀implement฀them. SD-PAMs฀build฀on,฀rather฀than฀replace,฀฀ existing฀policy The฀UNFCCC,฀the฀Kyoto฀Protocol,฀and฀the฀plethora฀of฀ implementing฀measures฀by฀Parties฀represent฀a฀substantial฀ investment฀in฀climate฀policy.฀For฀many฀Parties฀this฀will฀ remain฀the฀core฀of฀future฀policy:฀for฀countries฀that฀have฀ accepted฀the฀need฀to฀reduce฀their฀emissions฀as฀an฀explicit฀ policy฀goal,฀emission฀caps฀combined฀with฀trading฀and฀project฀mechanisms฀represent฀an฀efficient฀and฀effective฀means฀ of฀implementing฀this฀goal.฀SD-PAMs,฀by฀helping฀to฀engage฀ countries฀that฀are฀not฀yet฀ready฀to฀undertake฀explicit฀฀ emissions฀commitments,฀complements฀these฀mechanisms. Particularly฀important฀in฀this฀context฀will฀be฀the฀relationship฀between฀SD-PAMs฀and฀the฀Clean฀Development฀ Mechanism฀(CDM).฀Both฀developing฀countries฀(hoping฀ for฀more฀investment)฀and฀industrialized฀countries฀(looking฀for฀lower฀emission฀abatement฀costs)฀have฀placed฀great฀ hopes฀on฀the฀CDM.฀The฀CDM฀has฀demonstrated฀some฀ effectiveness฀in฀finding฀low-cost฀abatement฀options,฀but฀ there฀are฀limits฀to฀the฀potential฀for฀such฀a฀project฀mechanism฀to฀make฀the฀policy-based,฀systemic฀changes฀considered฀in฀this฀volume.฀SD-PAMs฀thus฀fill฀a฀void,฀rather฀than฀ competing฀directly฀with฀the฀CDM.฀ A฀strength฀of฀SD-PAMs฀is฀that฀they฀also฀build฀on฀existing฀development฀policy฀in฀each฀country.฀In฀developing฀ countries,฀climate฀change฀as฀such฀has฀little฀standing฀as฀a฀ political฀priority,฀while฀development฀objectives฀suitable฀for฀ SD-PAMs฀have฀much฀greater฀prominence฀for฀policymakers.฀In฀the฀case฀of฀India,฀discussed฀in฀Chapter฀5,฀the฀authors฀ derive฀their฀electrification฀scenarios฀from฀the฀Indian฀ government’s฀own฀priorities.฀Their฀study฀demonstrates฀that฀ even฀when฀discussing฀alternative฀ways฀of฀meeting฀a฀predefined฀policy฀goal,฀the฀choices฀made฀can฀have฀profound฀ impacts฀on฀both฀national฀development฀and฀emission฀levels.฀ While฀they฀start฀from฀existing฀policy฀objectives,฀the฀ purpose฀of฀SD-PAMs฀is฀of฀course฀to฀achieve฀more,฀in฀both฀ climate฀and฀development฀terms,฀than฀might฀have฀been฀ done฀otherwise.฀“Achieving฀more”฀can฀take฀a฀number฀of฀ forms.฀Building฀on฀the฀case฀of฀Brazil’s฀ethanol฀program,฀ which฀has฀been฀a฀considerable฀success,฀future฀SD-PAMs฀ could฀lead฀to฀more฀countries฀adopting฀similar฀approaches.฀ In฀the฀Chinese฀case฀the฀government฀is฀already฀taking฀initial฀steps฀towards฀improving฀the฀efficiency฀of฀its฀transport฀ systems.฀Here฀“achieving฀more”฀with฀SD-PAMs฀might฀ focus฀on฀pushing฀that฀process฀faster฀and฀further.฀In฀some฀ cases,฀such฀as฀the฀Indian฀example,฀international฀institutions฀or฀other฀donors฀may฀have฀a฀role฀in฀improving฀access฀ GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST to฀capital฀for฀renewable฀energy฀programs.฀In฀others,฀such฀ as฀the฀markets฀for฀biofuels฀and฀efficient฀cars,฀it฀is฀rather฀ a฀question฀of฀pooling฀developed฀and฀developing฀country฀ efforts.฀The฀key฀in฀each฀case฀is฀to฀start฀with฀the฀existing฀development฀priority,฀and฀seek฀to฀add฀to฀it฀elements฀ that฀both฀more฀effectively฀address฀that฀issue฀and฀that฀also฀ reduce฀emissions. Financing฀remains฀a฀problem,฀but฀SD-PAMs฀฀ offer฀the฀potential฀to฀move฀beyond฀a฀battle฀over฀฀ “climate฀change฀money” If฀money฀for฀SD-PAMs฀is฀not฀to฀come฀(primarily)฀฀ from฀generating฀emission฀reduction฀credits,฀then฀where฀ will฀it฀come฀from?฀This฀question฀is฀bound฀to฀be฀near฀the฀ top฀of฀any฀negotiator’s฀list.฀The฀crucial,฀unresolved฀issue฀is฀ that,฀to฀date,฀the฀funds฀that฀Parties฀are฀willing฀to฀commit฀ to฀fighting฀climate฀change฀are฀out฀of฀all฀proportion฀to฀฀ the฀scale฀of฀the฀challenge.฀Resources฀put฀to฀emissions฀ reductions฀amount฀at฀best฀to฀a฀few฀billions฀dollars;฀too฀ little฀to฀transform฀the฀$16฀trillion฀of฀(largely฀private)฀ capital฀needed฀in฀the฀energy฀sector฀over฀the฀next฀25฀years฀ (IEA,฀2004).฀To฀date,฀no฀proposal฀with฀significant฀traction฀ in฀negotiations฀comes฀close฀to฀generating฀the฀resources฀ needed.฀The฀important฀question฀therefore฀is฀how฀to฀ influence฀existing฀financial฀flows.฀The฀Global฀Environment฀Facility,฀established฀under฀the฀UNFCCC฀as฀the฀ mechanism฀to฀provide฀for฀the฀incremental฀costs฀of฀climate฀ mitigation,฀provided฀less฀than฀$2฀billion฀from฀1991–2004฀ (UNFCCC,฀2004).฀Overseas฀Development฀Assistance,฀ while฀considerably฀larger,฀is฀not฀likely฀to฀be฀enough:฀total฀ resources฀in฀2003฀were฀only฀$69฀billion,฀and฀little฀of฀this฀ goes฀to฀climate฀protection฀efforts฀(World฀Bank,฀2005).฀ Private฀sector฀financial฀flows฀are฀considerably฀higher:฀net฀ flows฀of฀equity฀and฀foreign฀direct฀investment฀were฀$192฀ billion฀in฀2004฀(World฀Bank,฀2005),฀heavily฀concentrated฀ in฀large฀countries฀such฀as฀those฀considered฀here.฀Export฀ credit฀agencies฀leverage฀substantial฀parts฀of฀these฀private฀ financial฀flows—some฀$81฀billion฀of฀investment฀flows฀in฀ 2003฀were฀supported฀with฀investment฀insurance฀or฀export฀ credit฀insurance—and฀these฀are฀subject฀to฀the฀policy฀constraints฀of฀the฀lending฀countries฀(Harmon฀et฀al.,฀2005). A฀vital฀point฀to฀remember฀is฀that฀the฀role฀of฀international฀support฀and฀investment฀can฀only฀be฀to฀help฀leverage฀ the฀far฀greater฀domestic฀investment฀flows.฀In฀all฀the฀four฀ countries฀we฀consider฀in฀this฀volume,฀domestic฀capital฀is฀ overwhelmingly฀dominant฀in฀energy฀and฀transport฀sector฀ investment.฀Thus฀the฀commitment฀of฀the฀host฀country฀government฀and฀the฀implementation฀of฀domestic฀policies฀and฀ measures฀are฀the฀key฀factors฀for฀the฀success฀of฀an฀SD-PAM.฀ SD-PAMs฀by฀no฀means฀provide฀a฀full฀answer฀to฀the฀ problem฀of฀providing฀finance฀for฀cleaner฀energy฀on฀the฀ scale฀needed,฀but฀then฀nothing฀does.฀The฀question฀is฀ whether฀an฀SD-PAMs฀approach฀makes฀it฀more฀or฀less฀฀ likely฀that฀these฀resources฀can฀be฀leveraged.฀In฀this฀volume฀฀ we฀argue฀that฀SD-PAMs฀improve฀the฀outlook฀for฀฀ resources฀for฀two฀reasons. First,฀by฀integrating฀climate฀considerations฀into฀what฀ are฀generally฀(for฀the฀host฀country)฀larger฀development฀ concerns,฀it฀aims฀more฀to฀improve฀the฀climate฀performance฀of฀existing฀investment฀flows฀than฀to฀generate฀new฀ funds.฀This฀is฀a฀major฀advantage:฀experience฀under฀the฀ UNFCCC฀gives฀little฀cause฀for฀optimism฀that฀funds฀aimed฀ at฀climate฀mitigation฀will฀be฀large฀enough.฀By฀aiming฀at฀ broader฀development฀efforts,฀SD-PAMs฀offer฀at฀least฀the฀ potential฀to฀leverage฀both฀domestic฀and฀international฀ investment฀flows.฀The฀case฀of฀carbon฀capture฀and฀storage฀is฀one฀for฀which฀little฀such฀leveraging฀will฀be฀possible,฀ and฀thus฀major฀new฀resources฀would฀have฀to฀be฀provided฀ for฀an฀exclusively฀climate-related฀benefit.฀In฀the฀Indian฀ example฀however,฀rural฀electrification฀is฀inevitably฀going฀to฀ be฀financed฀from฀domestic฀sources.฀The฀role฀of฀SD-PAMs฀ can฀be฀to฀make฀a฀renewable฀energy฀approach—already฀ attractive฀for฀domestic฀policy฀reasons—the฀first฀choice฀for฀ Indian฀policymakers.฀ Second,฀and฀perhaps฀more฀importantly,฀countries฀ are฀more฀likely฀to฀provide฀funds฀for฀a฀known฀policy฀ or฀technology฀objective.฀Numerous฀proposals฀posit฀an฀ emission฀trading฀regime฀in฀which฀developing฀countries฀ take฀growth฀targets,฀such฀that฀developed฀countries฀make฀ large-scale฀financial฀transfers฀of฀purchase฀emission฀rights.฀ The฀notion฀that฀rich-world฀governments฀(and฀voters)฀ will฀provide฀such฀a฀blank฀check฀is฀one฀that,฀in฀the฀words฀ of฀Thomas฀Schelling฀(2002),฀“requires฀a฀sense฀of฀humor฀ to฀appreciate.”฀Experience฀with฀development฀assistance฀ suggests฀rather฀that฀countries฀will฀be฀more฀willing฀to฀put฀ resources฀into฀activities฀that฀can฀be฀mutually฀agreed฀with฀ the฀recipient. It฀is฀important฀to฀stress฀that฀supporting฀SD-PAMs฀need฀ not฀be฀exclusively฀about฀financial฀flows.฀To฀take฀one฀example,฀developed฀and฀developing฀countries฀might฀collaborate฀in฀promoting฀biofuels฀through฀a฀combination฀of฀trade฀ agreements,฀sharing฀intellectual฀property,฀collaborating฀on฀ research฀and฀development฀and฀other฀such฀measures,฀as฀฀ well฀as฀straightforward฀financial฀support฀where฀appropriate.฀ One฀“free”฀encouragement฀for฀SD-PAMs฀is฀recognition.฀ Though฀this฀might฀seem฀trivial,฀the฀acknowledgement฀ of฀the฀efforts฀being฀made฀in฀developing฀countries฀will฀do฀ much฀to฀debunk฀the฀myth฀that฀industrialized฀countries฀are฀ shouldering฀the฀burden฀of฀mitigation฀alone. C ON C LU SION 113 How฀might฀SD-PAMs฀be฀established? Chapter฀2฀discusses฀ways฀in฀which฀SD-PAMs฀might฀ be฀pledged฀or฀agreed.฀An฀important฀question฀is฀whether฀ SD-PAMs฀will฀be฀negotiated,฀with฀an฀effort฀by฀Parties฀to฀ ensure฀that฀they฀are฀each฀taking฀a฀mutually฀acceptable฀level฀ of฀effort;฀or฀simply฀pledged,฀with฀each฀Party฀presenting฀its฀ own฀SD-PAM฀proposals฀as฀it฀sees฀fit.฀In฀practice฀the฀distinction฀between฀these฀approaches฀may฀not฀be฀so฀clear-cut.฀ First,฀the฀possibility฀of฀sectoral฀agreements,฀particularly฀in฀ industries฀exposed฀to฀significant฀international฀trade,฀means฀ that฀some฀types฀of฀SD-PAMs฀may฀require฀more฀negotiation฀than฀others.฀Second,฀some฀groups฀of฀countries฀with฀ similar฀national฀circumstances฀might฀choose฀to฀negotiate฀ similar฀SD-PAMs฀to฀more฀efficiently฀meet฀their฀goals—for฀ instance,฀establishing฀a฀renewable฀energy฀market,฀or฀developing฀and฀deploying฀new฀technology.฀Third,฀an฀SD-PAM฀ may฀entail฀a฀mutual฀commitment,฀for฀instance฀engaging฀ a฀donor฀to฀provide฀assistance฀to฀a฀developing฀country,฀on฀ condition฀that฀certain฀policy฀conditions฀are฀met. The฀eclectic฀nature฀of฀SD-PAMs,฀and฀the฀fact฀that฀they฀ are฀shaped฀by฀the฀sustainable฀development฀priorities฀of฀the฀ host฀country,฀means฀that฀they฀are฀difficult฀to฀compare,฀and฀ no฀attempt฀is฀made฀here฀to฀describe฀a฀standard฀of฀comparison.฀An฀important฀distinction฀between฀SD-PAMs฀and฀ most฀other฀forms฀of฀climate฀commitment฀is฀that฀the฀country฀undertakes฀to฀implement฀certain฀policies฀and฀measures,฀ not฀to฀meet฀a฀specific฀target฀or฀result.฀The฀commitment฀is฀ not฀expressed฀in฀terms฀of฀emission฀reductions.฀ ฀Unlike฀emissions฀targets,฀which฀at฀least฀in฀principle฀ can฀be฀set฀so฀as฀to฀entail฀a฀“comparable฀effort”฀between฀ countries฀(or,฀just฀as฀important,฀to฀create฀that฀impression),฀comparing฀effort฀in฀the฀case฀of฀SD-PAMs฀is฀highly฀ subjective.฀There฀can฀be฀no฀simple฀formula,฀and฀the฀ SD-PAMs฀approach฀will฀likely฀entail฀some฀level฀of฀mutual฀ scrutiny฀and฀negotiation฀among฀Parties.฀However,฀various฀fora฀exist฀for฀reviewing฀and฀evaluating฀the฀efficacy฀of฀ such฀policies.฀Analogs฀exist฀in฀the฀realm฀of฀trade฀negotiations,฀in฀the฀context฀regional฀organizations฀(such฀as฀the฀ OECD),฀and฀within฀the฀World฀Bank.฀Additional฀opportunities฀exist฀to฀expand฀discussions฀within฀the฀international฀climate฀change฀framework.฀ While฀an฀agreement฀on฀an฀SD-PAMs฀framework฀is฀ likely฀to฀be฀challenging,฀it฀may฀be฀substantially฀more฀ plausible฀than฀alternative฀negotiations฀involving฀emissions฀ or฀intensity฀targets,฀which฀are฀problematic฀for฀developing฀countries฀and฀which฀present฀tricky฀framing฀problems.฀ Rather฀than฀foment฀perennial฀North-South฀acrimony,฀ SD-PAMs฀have฀the฀potential฀to฀open฀up฀new฀space฀for฀international฀cooperation฀on฀climate฀change฀and฀sustainable฀ development,฀including฀cooperative฀funding฀arrangements,฀ harmonized฀actions฀at฀the฀sector฀level,฀and฀unique฀countryspecific฀approaches฀that฀are฀reflective฀of฀different฀national฀ circumstances. The฀way฀forward This฀report฀seeks฀to฀further฀develop฀the฀SD-PAMs฀฀ concept,฀but฀it฀is฀by฀no฀means฀definitive.฀Several฀issues฀ need฀further฀investigation฀including: ■ ฀฀The฀application฀of฀SD-PAMs฀in฀sectors฀other฀than฀ power฀and฀transport.฀Agriculture,฀water฀management,฀ forestry฀and฀building฀efficiency฀are฀all฀areas฀central฀to฀ development฀priorities฀that฀also฀offer฀large฀potentials฀ for฀emission฀reductions. ■ ฀฀Elaboration฀on฀the฀link฀between฀SD-PAMs฀and฀energy฀ security.฀It฀is฀noteworthy฀that฀energy฀security฀has฀ emerged฀as฀an฀important฀issue฀in฀every฀case฀evaluated฀ in฀this฀volume,฀and฀offers฀obvious฀scope฀for฀international฀cooperation.฀ ■ ฀฀Further฀examination฀of฀financing฀of฀SD-PAMs,฀and฀ how฀mutual฀commitments฀might฀work฀in฀practice. ■ ฀฀Interaction฀between฀SD-PAMs฀and฀other฀instruments,฀particularly฀the฀project฀mechanisms฀such฀as฀ the฀CDM. The฀world฀is฀in฀sore฀need฀of฀some฀way฀to฀jointly฀engage฀ developed฀and฀developing฀countries฀more฀constructively฀to฀ tackle฀the฀twin฀(and฀intertwined)฀challenges฀of฀promoting฀ human฀development฀and฀preventing฀dangerous฀climate฀ change.฀The฀evolving฀concept฀of฀SD-PAMs฀may฀just฀provide฀that฀opportunity. REFERENCES Harmon,฀James,฀Crescencia฀Maurer,฀Jon฀Sohn,฀and฀Thomas฀ Carbonell.฀2005.฀Diverging฀Paths:฀What฀Future฀for฀Export฀Credit฀ Carbonell.฀2005. Agencies฀in฀Development฀Finance?฀Washington,฀DC.฀World฀ Resources฀Institute. IEA฀(International฀Energy฀Agency).฀2004. IEA฀(International฀Energy฀Agency).฀2004.฀World฀Energy฀฀ Outlook.฀Paris. Schelling,฀Thomas.฀2002. Schelling,฀Thomas.฀2002.฀“What฀Makes฀Greenhouse฀Sense?”฀ Foreign฀Affairs,฀May/June฀2002.฀Washington,฀DC. UNFCCC.฀2004. UNFCCC.฀2004.฀Report฀of฀the฀Global฀Environment฀Facility฀to฀ the฀Conference฀of฀the฀Parties.฀Note฀by฀the฀Secretariat.฀Document฀ FCCC/CP/2004/6.฀Available฀at:฀http://unfccc.int/resource/docs/ cop10/06.pdf. World฀Bank.฀2005. World฀Bank.฀2005.฀Global฀Development฀Finance฀2005:฀Analysis฀ and฀Summary฀Tables.฀Washington,฀DC. 114 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST Glossary฀and฀Abbreviations Note:฀All฀tons฀are฀metric฀tons.฀Unless฀otherwise฀noted,฀all฀dollars฀are฀U.S.฀dollars. Annex฀I฀Countries฀ Developed฀Countries฀ The฀industrialized฀and฀transition฀countries฀listed฀in฀this฀Annex฀ to฀the฀Climate฀Convention.฀These฀countries฀include฀Australia,฀ Austria,฀Belarus,฀Belgium,฀Bulgaria,฀Canada,฀Croatia,฀Czech฀ Republic,฀Denmark,฀Estonia,฀Finland,฀France,฀Germany,฀Greece,฀ Hungary,฀Iceland,฀Ireland,฀Italy,฀Japan,฀Latvia,฀Lithuania,฀฀ Luxembourg,฀Netherlands,฀New฀Zealand,฀Norway,฀Poland,฀ Portugal,฀Romania,฀Russia,฀Slovakia,฀Slovenia,฀Spain,฀Sweden,฀ Switzerland,฀Turkey,฀Ukraine,฀United฀Kingdom,฀United฀States฀฀ of฀America. See฀Annex฀I฀Countries.฀Where฀noted,฀the฀term฀“developing฀ countries”฀instead฀denotes฀the฀collective฀member฀states฀of฀the฀ OECD. Bagasse฀ The฀refuse฀of฀sugar฀cane;฀the฀crushed฀outer฀stalk฀material฀that฀ remains฀after฀the฀juice฀is฀extracted.฀฀ Biofuel฀ A฀renewable฀energy฀source฀that฀includes฀any฀fuel฀derived฀from฀ recently฀living฀organisms฀or฀their฀byproducts.฀ CCS฀ Carbon฀Capture฀and฀Storage.฀The฀capture,฀separation฀and฀ compression฀of฀carbon฀dioxide฀from฀fuel฀combustion,฀industrial฀ processes฀or฀natural฀gas,฀and฀its฀permanent฀removal฀from฀the฀ atmosphere฀by฀injection฀into฀a฀geological฀formation. CDM฀ Clean฀Development฀Mechanism.฀A฀project-based฀emissions฀ trading฀system฀under฀the฀Kyoto฀Protocol฀that฀allows฀industrialized฀countries฀to฀use฀emission฀reduction฀credits฀from฀projects฀in฀ developing฀countries฀that฀both฀reduce฀greenhouse฀gas฀emissions฀ and฀promote฀sustainable฀development. Climate฀Change฀Convention.฀ See฀UNFCCC. CO2฀ Carbon฀dioxide.฀A฀naturally฀occurring฀gas฀that฀is฀also฀a฀byproduct฀ of฀burning฀fossil฀fuels฀and฀biomass,฀other฀industrial฀processes,฀ and฀land-use฀changes.฀CO2฀is฀the฀principal฀anthropogenic฀greenhouse฀gas฀affecting฀the฀Earth’s฀temperature.฀ CO2฀equivalent฀ The฀amount฀of฀CO2฀by฀weight฀emitted฀into฀the฀atmosphere฀that฀฀ would฀produce฀the฀same฀estimated฀radiative฀forcing฀as฀a฀given฀ weight฀of฀another฀GHG.฀Carbon฀dioxide฀equivalents฀are฀computed฀by฀multiplying฀the฀weight฀of฀the฀gas฀being฀measured฀(for฀ example,฀methane)฀by฀its฀estimated฀global฀warming฀potential฀฀ (see฀GWP).฀One฀unit฀of฀carbon฀is฀equivalent฀to฀3.664฀units฀of฀ carbon฀dioxide. Developing฀Countries฀ Those฀countries฀not฀designated฀in฀Annex฀I฀of฀the฀Convention.฀ See฀Annex฀I.฀This฀group,฀as฀used฀in฀this฀report,฀includes฀some฀ countries฀that฀may฀be฀considered฀industrialized฀or฀transitional.฀฀ EIA฀ Energy฀Information฀Administration.฀An฀independent฀statistical฀ agency฀of฀the฀U.S.฀Department฀of฀Energy.฀See:฀http://www.eia. doe.gov.฀ Energy฀Use฀(Consumption)฀ Energy฀use฀refers฀to฀apparent฀consumption,฀which฀is฀equal฀to฀ indigenous฀production฀plus฀imports฀and฀stock฀changes,฀minus฀ exports฀and฀fuels฀supplied฀to฀ships฀and฀aircraft฀engaged฀in฀ international฀transport.฀Energy฀use฀may฀also฀be฀referred฀to฀as฀ energy฀supply. Energy฀Production฀ Production฀of฀primary฀energy;฀that฀is,฀petroleum฀(crude฀oil,฀ natural฀gas฀liquids,฀and฀oil฀from฀nonconventional฀sources),฀ natural฀gas,฀solid฀fuels฀(coal,฀lignite,฀and฀other฀derived฀fuels),฀and฀ combustible฀renewables฀and฀waste฀as฀well฀as฀primary฀electricity฀ production฀(nuclear,฀hydro,฀renewables).฀Production฀is฀usually฀ converted฀into฀units฀of฀oil฀equivalents. EPA฀ U.S.฀Environmental฀Protection฀Agency.฀See:฀http://www.epa.gov.฀ Ethanol฀ A฀clean-burning,฀high-octane฀fuel฀that฀is฀produced฀from฀renewable฀sources฀such฀as฀corn,฀sugar฀cane,฀wheat,฀barley,฀or฀potatoes฀ and฀can฀be฀mixed฀with฀unleaded฀gasoline฀for฀motor฀fuel.฀Ethanol฀ is฀grain฀alcohol,฀produced฀by฀the฀fermentation฀and฀distillation฀of฀ the฀feedstock.฀ EU฀ European฀Union.฀Includes฀either฀15฀member฀states฀(EU-15)฀or฀ 25฀member฀states฀(EU-25).฀For฀a฀listing฀of฀member฀countries,฀see฀ http://cait.wri.org/cait.php?page=notes&chapt=4.฀ FAO฀ Food฀and฀Agricultural฀Organization฀of฀the฀United฀Nations.฀฀ See:฀http://www.fao.org. Coal฀ Includes฀primary฀coal฀products฀(for฀example,฀hard฀coal฀and฀ lignite)฀and฀derived฀fuels฀such฀as฀patent฀fuel,฀coke฀oven฀coke,฀ gas฀coke,฀BKB,฀coke฀oven฀gas,฀and฀blast฀furnace฀gas.฀Peat฀is฀also฀ included฀in฀this฀category.฀ GLOSSA RY฀ A N D ฀ A B B R EVIATION S 115 Fossil฀Fuels฀ Non-Annex฀I฀Countries Natural฀resources,฀such฀as฀coal,฀oil฀and฀natural฀gas,฀containing฀ hydrocarbons.฀The฀burning฀of฀these฀resources฀feeds฀industrial฀ development฀and฀fuels฀motor฀vehicles฀but฀also฀contributes฀to฀the฀ emission฀of฀carbon฀dioxide฀into฀the฀atmosphere. Those฀countries฀that฀are฀not฀listed฀in฀Annex฀I฀of฀the฀Climate฀ Change฀Convention฀(see฀Annex฀I฀Parties).฀This฀group฀consists฀ primarily฀of฀developing฀countries.฀For฀a฀listing฀of฀members,฀see:฀ http://cait.wri.org/cait.php?page=notes&chapt=4. GDP Natural฀Gas Gross฀Domestic฀Product.฀The฀total฀value฀of฀goods฀and฀services฀ produced฀by฀labor฀and฀property฀located฀in฀a฀given฀country. A฀gaseous฀mixture฀of฀hydrocarbon฀compounds,฀consisting฀ mainly฀of฀methane.฀ GHG OECD Greenhouse฀Gas.฀Any฀gas฀that฀absorbs฀and฀re-emits฀infrared฀฀ radiation฀into฀the฀atmosphere.฀The฀main฀greenhouse฀gases฀฀ include฀water฀vapor฀(H2O),฀carbon฀dioxide฀(CO2),฀methane฀ (CH4),฀and฀nitrous฀oxide฀(N2O). Organisation฀for฀Economic฀Co-operation฀and฀Development.฀An฀ international฀organization฀consisting฀of฀the฀major฀industrialized฀ countries.฀Member฀states฀include:฀Australia,฀Austria,฀Belgium,฀ Canada,฀Czech฀Republic,฀Denmark,฀Finland,฀France,฀Germany,฀ Greece,฀Hungary,฀Iceland,฀Ireland,฀Italy,฀Japan,฀South฀Korea,฀ Luxembourg,฀Mexico,฀the฀Netherlands,฀New฀Zealand,฀Norway,฀ Poland,฀Portugal,฀Slovakia,฀Spain,฀Sweden,฀Switzerland,฀฀ Turkey,฀the฀United฀Kingdom,฀and฀the฀United฀States.฀See:฀฀ http://www.oecd.org.฀ IEA International฀Energy฀Agency.฀See:฀http://www.iea.org.฀ Industrialized฀Countries Those฀countries฀designated฀in฀Annex฀II฀of฀the฀Convention;฀ namely,฀members฀of฀the฀OECD,฀but฀excluding฀Mexico฀and฀ South฀Korea.฀See฀OECD. IPCC Intergovernmental฀Panel฀on฀Climate฀Change.฀An฀organization฀ established฀in฀1988฀by฀the฀World฀Meteorological฀Organization฀ and฀the฀United฀Nations฀Environment฀Programme.฀It฀conducts฀ rigorous฀surveys฀of฀the฀worldwide฀technical฀and฀scientific฀literature฀and฀publishes฀assessment฀reports฀widely฀recognized฀as฀the฀ most฀credible฀existing฀sources฀on฀climate฀change. Kyoto฀Protocol An฀international฀agreement฀adopted฀by฀Parties฀to฀the฀Climate฀ Convention฀in฀Kyoto,฀Japan,฀in฀December฀1997.฀The฀Protocol฀ entered฀into฀force฀in฀2005.฀See:฀http://unfccc.int.฀ MtCO2฀ Million฀metric฀tons฀of฀carbon฀dioxide฀equivalent.฀This฀measure฀ can฀aggregate฀different฀GHGs฀into฀a฀single฀measure,฀using฀global฀ warming฀potentials฀(see฀GWP).฀One฀unit฀of฀carbon฀is฀equivalent฀ to฀3.664฀units฀of฀carbon฀dioxide.฀MtC฀denotes฀one฀million฀tons฀ of฀carbon,฀or฀3.664฀MtCO2. OPEC Organization฀of฀Petroleum฀Exporting฀Countries.฀An฀international฀organization฀made฀up฀of฀oil-producing฀countries฀that฀aim฀to฀ influence฀world฀oil฀prices.฀Member฀states฀include:฀Algeria,฀Indonesia,฀Iran,฀Iraq,฀Kuwait,฀Libya,฀Nigeria,฀Qatar,฀Saudi฀Arabia,฀the฀ United฀Arab฀Emirates,฀and฀Venezuela.฀See:฀http://www.opec.org. Oil A฀mixture฀of฀hydrocarbons฀usually฀existing฀in฀the฀liquid฀state฀in฀ natural฀underground฀pools฀or฀reservoirs. PPP.฀Purchasing฀Power฀Parity.฀An฀international฀dollar฀“currency”฀ for฀GDP฀that฀has฀the฀same฀purchasing฀power฀over฀local฀GDP฀as฀ a฀U.S.฀dollar฀has฀in฀the฀United฀States. Reserves฀(or฀proved฀reserves) Estimated฀quantities฀of฀energy฀sources฀that฀analysis฀of฀geologic฀ and฀engineering฀data฀demonstrates฀with฀reasonable฀certainty฀are฀ recoverable฀under฀existing฀economic฀and฀operating฀conditions.฀ The฀location,฀quantity,฀and฀grade฀of฀the฀energy฀source฀are฀usually฀ considered฀to฀be฀well฀established฀in฀such฀reserves. SD-PAMs Sustainable฀Development฀Policies฀and฀Measures.฀An฀approach฀ to฀climate฀protection฀that฀builds฀on฀sustainable฀development฀ priorities.฀ UNFCCC United฀Nations฀Framework฀Convention฀on฀Climate฀Change฀฀ (Climate฀Convention,฀or฀Convention).฀A฀treaty฀signed฀at฀the฀ 1992฀Earth฀Summit฀in฀Rio฀de฀Janeiro฀to฀which฀nearly฀all฀฀ countries฀of฀the฀world฀have฀joined.฀See:฀http://unfccc.int.฀ WRI World฀Resources฀Institute.฀See:฀http://www.wri.org.฀ 116 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST About฀the฀Authors Kevin฀A.฀Baumert฀is฀a฀Senior฀Associate฀in฀WRI’s฀Climate,฀Energy฀and฀Pollution฀(CEP)฀program.฀His฀research฀ focuses฀on฀the฀Kyoto฀Protocol฀and฀climate฀change฀policy฀instruments.฀Mr.฀Baumert’s฀areas฀of฀expertise฀include฀international฀emissions฀trading,฀the฀Clean฀Development฀Mechanism,฀international฀investment฀law,฀public฀participation,฀ climate฀policy฀in฀Central฀and฀Eastern฀Europe,฀and฀greenhouse฀gas฀emissions฀data.฀He฀was฀lead฀editor฀of฀Building฀on฀฀ the฀Kyoto฀Protocol:฀Options฀for฀Protecting฀the฀Climate,฀published฀in฀2002.฀Prior฀to฀joining฀WRI฀in฀1998,฀he฀received฀a฀ B.A.฀in฀Economics฀from฀the฀University฀of฀Notre฀Dame฀and฀a฀Masters฀degree฀from฀Columbia฀University’s฀School฀of฀ International฀and฀Public฀Affairs. Rob฀Bradley฀is฀a฀Senior฀Associate฀in฀WRI’s฀Climate,฀Energy฀and฀Pollution฀(CEP)฀program.฀His฀research฀focuses฀ on฀climate฀policy฀instruments฀and฀the฀relationship฀between฀climate฀change฀and฀development.฀Mr.฀Bradley’s฀areas฀of฀ expertise฀include฀international฀emission฀trading,฀clean฀energy฀technologies,฀and฀European฀climate฀and฀energy฀policy.฀ Mr.฀Bradley฀has฀been฀a฀regular฀participant฀in฀the฀U.N.฀Conferences฀of฀the฀Parties฀to฀the฀UNFCCC฀since฀1998,฀and฀ has฀been฀active฀in฀EU฀climate฀and฀energy฀formulation,฀as฀a฀member฀of฀the฀European฀Commission’s฀European฀Climate฀ Change฀Programme฀Working฀Groups฀and฀as฀an฀advocate.฀He฀has฀spoken฀publicly฀and฀published฀articles฀and฀reports฀ on฀subjects฀such฀as฀emissions฀trading,฀renewable฀energy฀finance,฀climate฀change฀and฀health,฀and฀East-West฀European฀ energy฀collaboration.฀Prior฀to฀joining฀WRI฀in฀2004฀he฀worked฀as฀a฀consultant฀on฀energy฀and฀environment฀policy฀issues.฀ He฀has฀a฀BSc฀in฀Physical฀Sciences฀from฀University฀College฀London฀and฀a฀Masters฀degree฀in฀Environmental฀Sciences฀ from฀the฀University฀of฀East฀Anglia. Navroz฀K.฀Dubash฀is฀IDFC฀Chair฀Professor฀of฀Governance฀and฀Public฀Policy฀at฀the฀National฀Institute฀of฀Public฀ Finance฀and฀Policy฀(New฀Delhi).฀His฀work฀focuses฀on฀the฀development฀of฀institutions฀and฀the฀design฀of฀governance฀ mechanisms฀with฀particular฀relevance฀to฀electricity฀and฀water฀infrastructure.฀Prior฀to฀joining฀NIPFP,฀he฀worked฀as฀a฀ Senior฀Associate฀at฀the฀World฀Resources฀Institute฀(WRI)฀in฀Washington฀DC,฀co-directing฀WRI’s฀International฀Financial฀Flows฀and฀the฀Environment฀(IFFE)฀project.฀His฀areas฀of฀publication฀and฀expertise฀include฀the฀political฀economy฀ of฀electricity฀restructuring,฀international฀financial฀institutions฀and฀development฀assistance,฀the฀implications฀of฀a฀global฀ investment฀agreement฀for฀domestic฀policy฀in฀developing฀countries,฀climate฀change฀policy,฀mechanisms฀for฀democratic฀ global฀governance,฀and฀local฀institutions฀for฀groundwater฀management.฀Dr.฀Dubash฀holds฀Ph.D.฀and฀M.A.฀degrees฀in฀ Energy฀and฀Resources฀from฀the฀University฀of฀California,฀Berkeley,฀and฀an฀A.B.฀in฀Public฀and฀International฀Affairs฀from฀ Princeton฀University. José฀Roberto฀Moreira฀is฀a฀retired฀professor฀of฀physics฀and฀energy฀from฀the฀University฀of฀São฀Paulo.฀Presently฀he฀ is฀Chairman฀of฀National฀Reference฀Center฀on฀Biomass฀in฀Brazil,฀a฀consultant฀of฀the฀Secretariat฀of฀Environment฀for฀the฀ government฀of฀the฀State฀of฀São฀Paulo,฀and฀a฀member฀of฀the฀Scientific฀Committee฀of฀the฀Industrial฀Transation฀group,฀one฀ of฀the฀activities฀of฀the฀International฀Human฀Development฀Program.฀He฀is฀also฀a฀lead฀author฀of฀the฀IPCC฀Assessment฀ Report฀and฀Special฀Reports. Stanford฀Mwakasonda฀is฀a฀Senior฀Researcher฀at฀the฀Energy฀Research฀Centre฀of฀the฀University฀of฀Cape฀Town฀ in฀South฀Africa.฀He฀holds฀a฀Masters฀in฀Business฀Administration฀(MBA)฀and฀B.฀Sc.฀Engineering.฀His฀research฀interests฀ include฀energy,฀climate฀change฀and฀sustainable฀development. Wei-Shiuen฀Ng฀is฀the฀Research฀Analyst฀for฀EMBARQ,฀the฀World฀Resources฀Institute฀(WRI)฀Center฀for฀Transport฀ and฀the฀Environment฀and฀is฀engaged฀in฀the฀management฀of฀EMBARQ’s฀Asia฀and฀China฀projects,฀including฀the฀Shanghai฀ Sustainable฀Transport฀Project฀(SSTP)฀and฀the฀Partnership฀for฀Sustainable฀Urban฀Transport฀in฀Asia฀(PSUTA).฀She฀conducts฀transport฀and฀energy฀research,฀data฀and฀policy฀analyses,฀and฀focuses฀on฀the฀environmental฀and฀social฀consequences฀ of฀motorization฀and฀mitigation฀measures.฀Wei-Shiuen฀holds฀a฀Masters฀in฀Environmental฀Science฀from฀Yale฀University฀ School฀of฀Forestry฀and฀Environmental฀Studies.฀She฀received฀her฀Bachelor฀of฀Science฀in฀Environmental฀Economics฀and฀ Environmental฀Management฀from฀the฀University฀of฀York฀in฀the฀United฀Kingdom. A B OU T฀ TH E฀ A U TH OR S 117 Luiz฀Augusto฀Horta฀Nogueira,฀is฀a฀professor฀at฀Itajubá฀Federal฀University฀in฀Brazil.฀He฀is฀a฀mechanical฀฀ engineer,฀with฀MSc฀and฀PhD฀degrees฀from฀Campinas฀State฀University,฀Brazil.฀He฀has฀been฀working฀with฀bioenergy฀for฀ the฀last฀two฀decades,฀with฀FAO/United฀Nations,฀PNUD/United฀Nations฀and฀other฀private,฀national฀and฀multilateral฀ institutions,฀doing฀technical฀and฀economical฀studies฀for฀ethanol฀and฀bioelectricity.฀ Virginia฀Parente฀is฀an฀assistant฀professor฀at฀the฀Energy฀Program฀of฀the฀University฀of฀Sao฀Paulo฀in฀Brazil.฀฀She฀has฀฀ a฀PhD฀in฀Finance฀and฀Economics฀from฀the฀Fudação฀Getúlio฀Vargas,฀Brazil.฀Her฀research฀interests฀include฀regulation฀฀ applied฀to฀energy฀and฀the฀environment,฀infrastructure฀and฀development,฀and฀scenario฀analysis. Jonathan฀Pershing฀is฀Director฀of฀the฀Climate,฀Energy฀and฀Pollution฀Program฀(CEP)฀at฀the฀World฀Resources฀ Institute.฀He฀is฀active฀in฀work฀on฀domestic฀and฀international฀climate฀and฀energy฀policy,฀including฀emissions฀trading,฀ energy฀technology฀and฀the฀evolving฀architecture฀of฀international฀climate฀agreements.฀Prior฀to฀his฀move฀to฀WRI,฀he฀ served฀for฀five฀years฀as฀the฀Head฀of฀the฀Energy฀and฀Environment฀Division฀at฀the฀International฀Energy฀Agency฀in฀Paris.฀ From฀1990฀to฀1998,฀Dr.฀Pershing฀served฀in฀the฀US฀Department฀of฀State,฀where฀he฀was฀both฀Deputy฀Director฀and฀฀ Science฀Advisor฀for฀the฀Office฀of฀Global฀Change,฀and฀a฀US฀negotiator฀for฀the฀UN฀climate฀change฀convention฀and฀฀ its฀Kyoto฀Protocol.฀Dr.฀Pershing฀is฀the฀author฀of฀several฀books฀and฀numerous฀articles฀on฀climate฀change,฀energy,฀and฀฀ environmental฀policy,฀and฀has฀served฀as฀a฀Review฀Editor฀and฀lead฀author฀for฀the฀IPCC.฀He฀holds฀a฀doctorate฀in฀฀ geology฀and฀geophysics฀from฀the฀University฀of฀Minnesota. Lee฀Schipper฀is฀Chief฀of฀Research฀of฀EMBARQ,฀WRI’s฀Center฀for฀Transport฀and฀Environment.฀Dr.฀Schipper฀฀ obtained฀his฀BA฀in฀Music฀from฀Berkeley฀and฀earned฀his฀PhD฀in฀astrophysics฀but฀has฀devoted฀his฀career฀to฀earthly฀฀ problems฀of฀energy฀and฀environment฀as฀an฀energy฀economist.฀He฀came฀to฀EMBARQ฀at฀its฀founding฀in฀April฀2002.฀฀ His฀current฀projects฀at฀EMBARQ฀include฀testing฀of฀clean฀fuels฀in฀Mexico฀and฀the฀development฀of฀indicators฀of฀฀ sustainable฀transportation฀in฀a฀number฀of฀Asian฀cities.฀Dr.฀Schipper฀has฀authored฀over฀100฀technical฀papers฀and฀a฀฀ number฀of฀books฀on฀energy฀economics,฀use,฀and฀conservation฀around฀the฀world.฀He฀has฀been฀a฀guest฀researcher฀at฀฀ the฀OECD฀Development฀Centre฀in฀Paris,฀transport฀advisor฀to฀the฀Shell฀Foundation,฀and฀staff฀senior฀scientist฀at฀the฀ Lawrence฀Berkeley฀Laboratory.฀He฀was฀a฀member฀of฀the฀Swedish฀Board฀for฀Transportation฀and฀Communications฀฀ Research฀and฀is฀currently฀part฀of฀the฀US฀Transportation฀Research฀Board’s฀Committee฀on฀Sustainable฀Transport.฀฀ He฀takes฀part฀in฀numerous฀prestigious฀international฀panels฀and฀studies฀on฀energy฀and฀transportation฀and฀is฀on฀the฀ editorial฀boards฀of฀five฀major฀journals฀in฀the฀fields.฀ Harald฀Winkler฀is฀a฀Senior฀Researcher฀at฀the฀Energy฀Research฀Centre฀at฀the฀University฀of฀Cape฀Town.฀His฀research฀ interests฀focus฀on฀energy฀and฀environment,฀in฀particular฀climate฀change฀and฀the฀economics฀of฀mitigation.฀Recent฀work฀has฀ addressed฀the฀future฀commitments฀to฀climate฀action;฀energy฀scenarios฀for฀South฀Africa฀and฀Cape฀Town;฀the฀links฀between฀ sustainable฀development฀and฀climate฀change;฀policies฀and฀measures฀for฀renewable฀energy฀and฀energy฀efficiency;฀CDM฀ project฀baselines;฀and฀valuation฀of฀climate฀change฀impacts.฀Harald฀has฀served฀as฀a฀member฀of฀the฀Methodologies฀Panel฀ to฀the฀CDM฀Executive฀Board,฀the฀SA฀delegation฀to฀the฀negotiations฀under฀the฀UN฀Framework฀Convention฀on฀Climate฀ Change,฀and฀is฀a฀lead฀author฀for฀the฀Intergovernmental฀Panel฀on฀Climate฀Change’s฀Working฀Group฀III฀on฀mitigation. 118 GR OWIN G฀ IN ฀ T H E ฀ GR E E N H OU S E : ฀ P R OT E CT IN G฀ T H E฀ CLIM ATE฀ BY฀ PU TTIN G฀ D EVELOPM EN T฀ FIR ST About฀WRI World฀Resources฀Institute฀is฀an฀environmental฀research฀and฀policy฀organization฀that฀creates฀solutions฀to฀฀ protect฀the฀Earth฀and฀improve฀people’s฀lives. Our฀work฀is฀concentrated฀on฀achieving฀progress฀toward฀four฀key฀goals: ■ ฀Protect฀Earth’s฀living฀systems ■ ฀Increase฀access฀to฀information ■ ฀Create฀sustainable฀enterprise฀and฀opportunity ■ ฀Reverse฀global฀warming Our฀strength฀is฀our฀ability฀to฀catalyze฀permanent฀change฀through฀partnerships฀that฀implement฀innovative,฀฀ incentive-based฀solutions฀that฀are฀founded฀upon฀hard,฀objective฀data.฀฀We฀know฀that฀harnessing฀the฀power฀of฀฀ markets฀will฀ensure฀real,฀not฀cosmetic,฀change. We฀are฀an฀independent,฀non-partisan฀organization.฀฀Yet,฀we฀work฀closely฀with฀governments,฀the฀private฀฀ sector,฀and฀civil฀society฀groups฀around฀the฀world,฀because฀that฀guarantees฀ownership฀of฀solutions฀and฀yields฀far฀ greater฀impact฀than฀any฀other฀way฀of฀operating. A B OU T฀ WR I 119