Climate Changeand the Responses of Private Firms Robert Yang IFRI Conference, Taipei November 8, 2010
Industry in Climate Change Mitigation:How Do We View Them? • On the one hand, they are a main source of GHG emissions, therefore successful mitigation policies and actions must get enough reductions out of them … we tend to focus on this aspect quite a lot. • On the other, they are where the bulk of society’s execution capabilities lie, therefore we must mobilize them not only to reduce their own emissions but also to drive the changes we need to arrest global warming in general … we tend to focus on this aspect not nearly enough.
Industry in Climate Change Mitigation:Important Things to Recognize • Industry is the biggest battlefront for climate change mitigation, and the hardest sector to decarbonize. • An effective national climate change strategy needs to be based on a national “low carbon industrial policy”. • The majority of the well-run industrial enterprises are willing to commit to GHG reduction (their future competitiveness actually depends on it), what they really need is policy clarity on the national and international levels. 3
Industry:The Hardest Sector to Decarbonize Potential for Energy Demand Reduction at Various Marginal Cost Levels: Source: IEA Energy Technology Perspectives 2008 4 4 4
Industry:the Biggest Battlefront for Climate Change Mitigation Source: World – IEA Key World Energy Statistics 2008, Page 37, 39 Taiwan – ITRI2006 • IEA: If the world is to meet the 50 percent reduction target for 2050, 70 • percent of the reductions will have to come from developing economies. • … and many of them will resemble the end-use characteristics of Taiwan’s today. 5 5 5
Successful Execution of Climate Change MitigationRequires That We Look at Industry Differently • Climate change mitigation is both huge cost and huge business opportunity • We need aggressive GHG reduction goals to build green industries … and we need strong green industries to make GHG reduction affordable • there certainly will be winners and losers among nations … it’s “strategic” • Successful mitigation depends significantly on technological advances • Without new and ever newer technologies we will never be able to afford mitigation … • and industry is the only place where technologies could come from • Without industry moving in the right directions, mitigation has almost no chance of being actually executed. 6
Low Carbon Industrial Policy: Korea • Set aggressive GHG reduction targets:commit to the peaking of GHG emissions before 2020. • Deploy aggressive GHG reduction actions • allocating 79 percent of stimulus spending on clean energy • investing 2 percent of GDP each year for the next 5 years on green energy and plan to absorb a 0.49 percent reduction in growth • Announced plans to invest $ 36 billion on renewable energy in the next 5 years ($30 billion by industry) • Announced plans to invest $ 9 billion on 2.5 GW Yellow Sea offshore wind farm • Announced plans to invest $ 24 billion to build national smart grid infrastructure (90 percent by industry) • Ambitious goals and early win • targeting to export renewable energy at $ 36.2 billion annually in 2015 • early win: KEPCO won the landmark $ 43 billion United Arab Emirates nuclear power project in January 2010 7
How to Mobilize Industryfor the Execution of Climate Change Mitigation • Establish a market for green energy • Market for green energy is almost entirely “policy made” (no government policy, no green energy market) • Moreover, governments need to systematically create business opportunities from aggressive GHG reduction plans • Tax (or cap & trade) revenues as enablers • Energy price elasticity too low to be cost effective: how tax revenues are spent crucial to mitigation success • Direct rebates seven-plus times more cost effective than pricing effects alone (LBL, ACEEE) • RGGI allocate 60 percent of revenues to incentivize consumer efficiency and 10 percent to rooftop solar • Major public/private commitment to clean tech RD&D • Energy technology advances much slower than ICT • Cost effective technologies the real key to whether we win or lose the climate change battle