Mobilizing Business for the Low Carbon Economy

1. Mobilizing Business for the Low Carbon Economy Robert Yang at Making Norms Work for the Environment IFRI, Paris France March 29, 2010

2. Government’s Responsibilityon Climate Change Mitigation • To the world • to lead the country to play a significant role in the global effort to reduce GHG emissions • To the country • to achieve GHG reduction goals with least impact on the wellbeing of its citizens, while maximizing investment and employment • Greening the Industry: to ensure the country’s businesses will stay relevant in the global transition toward the low carbon economy • Developing Green Industries: to build the country’s own green energy industries that are globally competitive

3. GHG Reduction Coststhe Other Side of the Coin • The huge costs of climate change mitigation • International Energy Agency (IEA): 0.5 to 1.1 percent of world GDP in the next 20 years • The huge market opportunity • HSBC: to grow from $ 500 billion to 2 trillion annually in the next 10 years • UK government: global market for low carbon and environmental goods and services (LCEGS) already ￡ 3 trillion a year • How to manage this “cost-opportunity relationship” is, by far, the most significant factor for the reduction of GHG and the attainment of the low carbon economy.

4. Examples of Best Practice: Korea • Policy level: established Green Growth Task Force led by the President in2009 to formulate and execute action plans on green energy industry development . • Set aggressive GHG reduction targets:commit to the peaking of GHG emissions before 2020. • Deploy aggressive GHG reduction actions: allocating 79 percent of its stimulus spending toward clean energy – the highest proportion among all countries of the world. Committing 2 percent of GDP each year for the next 5 years, while planning to absorb a reduction of 0.49 percent on growth rates for these purposes. • Detailed planning: targeting to become the seventh largest green energy nation of the world in 2020 with 8 percent of world market shares. • Early win: KEPCO won the landmark $ 43 billion United Arab Emirates nuclear project in January 2010.

5. Examples of Best Practice: China • Investment: invest 34 percent of stimulus funding, or $ 586 billion on green energy, the highest among all nations on earth. • Wind: surpassing US to become both the world’s largest market and producer of wind energy in 2009, reaching 2020 target (30 GW) by 2010; new 2020 target 100 GW. • Solar: the world’s largest producer at close to 50 percent of world market share; grew from 2 to 46 percent in California installations in the last 3 years. • Nuclear: to build 22 units by 2012, planning for additional 122 units. • Electricity demand:growing at 15 percent a year – by far the world’s largest market for power plants. • Efficiency: energy intensity decreased by 10 percent between2006 ~ 2008; further reduction of 5 percent in the first half of 2009; targeting 40 to 45 percent reductions by 2020. • Policy level: formed National Energy Committee led by the Premier earlier this year.

6. Lessens from the Best PracticeNations • To them, the huge costs of GHG reduction are huge “business opportunities ”. • They treat these business opportunities as valuable “resources” for the development of their green energy industries. • With that they are able to set very aggressive targets for GHG reductions. • This kind of strategies allow them to achieve effective GHG reductions and build world-competitive green energy industries at the same time.

7. Business Opportunity Cases:Korean Smart Grid Project • Korea has announced plans to invest 27.5 trillion Won ($ 24 billion) to build an economy-wide smart grid infrastructure over the next 20 years. • Total industry investment estimated at 24.8 trillion Won (90 percent); eight large corporations already participating in the test bed project at Jeju Island. • Far reaching project contents including smart metering, smart consumers, smart renewables, smart transportation and smart electricity services. • Estimated to reduce 150 million tons of GHG emissions and save 30 trillion Won on energy imports.

8. Business Opportunity Cases:UK Offshore Wind Project • UK Prime Minister Brown announced in January that UK will launch a major green energy project to build 25 GW of offshore wind power by 2020 as a part of the government’s ambitious goals to generate 40 percent of its electricity with renewables by 2020. The total cost of the project is estimated at ￡100 billion. • The project consists of nine development zones going out for bids. Some of the largest energy and engineering companies of the world such as RWE、Vattenfall、Statkraft、StatoilHydro、EDP 、Siemens are already involved. Construction is expected to start in 2015. • The largest of the development zones is Dogger Bank, located 100miles from shore, with a total of 10 GW’s installed capacity (five times the total offshore wind generated today). Hundreds of miles of undersea cables are to be installed to bring the energy to shore. • According to the British Wind Energy Association (BWEA),2008was the first year investment in wind surpassed that for fossil fuels.

9. Ocean Energy:Prime Opportunities for Taiwan • Shallow offshore wind (＜ 20 m depth) • 1.2 GW estimated potential at a cost of ￠13/kWh (approx. ￠8/kWh for “conventional” electricity); total business opportunity $ 4.5 billion • Semi-shallow offshore wind (20 ~ 50 m depth) • 10 GW estimated potential at a cost of ￠17.5/kWh; total business opportunity $ 56 billion • Wave • 2 ~ 4 GW estimated potential at a cost of ￠30/kWh; total business opportunity $ 12 ~ 24 billion • Kuroshio currents • 5 GW estimated potential at a cost of ￠28/kWh; total business opportunity $ 37.5 billion • Total potential • installed capacity: 20 GW (more than the grid could absorb for 20 years) • business opportunity: $ 70 to 120 billion over the next 20 years

10. Other Business Opportunitiesand How the Government Can Help • Other large-scale programs for Taiwan • Smart grid infrastructure • Building energy efficiency (emphasis: existing buildings) • State energy utilities transition to “green energy service companies” • Carbon capture and storage (CCS) • Large scale solar electricity facilities • Biofuels … • Government actions essential to business-driven strategies • Provide sticks (GHG related emission rules and regulations) and carrots (feed-in-tariffs, decoupling, demand side management incentives, etc.) to enable business and financing models • Proactively identify and design business opportunities, and induce industry to pursue them.

11. Taiwan’s Low Energy PricesA Unique GHG Reduction Resource • Carbon prices (internalizing the carbon externalities) are a major precondition for GHG reductions. • Taiwan’s energy prices are very low (typically two to several times lower compared to OECD countries) • As most of the business opportunities described above are to be financed by increased energy prices resulting from mechanisms such as feed-in-tariffs (and 20-year contracts) … • the low energy prices (and thus more room to raise them) represent a unique “resource” for Taiwan to enable GHG reduction and develop green energy industries.

12. Business:the Central Consideration for the Execution of Sustainability • We may deploy all kinds of laws, pricing policies, market mechanisms, regulations for the purposes of GHG reduction. • If, however, we fail to effectively mobilize the businesses of the world … • GHG reduction would just be either too expensive or too impossible.

13. Thank You