Aligning SD with LCS

Raekwon Chung
UN ESCAPKey Issues of SD & LCS¾How to make LCS compatible withGrowth? Æ Quality & Pattern of Growth¾How to engage Developing Countries inpost-2012
post2012 climate regime?
Æ Not Target but Market Mechanism

PParadigm
diShift from
¾Quantity of GDP toQUALITY of GDP

Ecological
El i lQ
Qualitylit
Economic Quality
Qy
Social Quality

Current Paradigm: ME¾Market Price < Ecological Price¾Market Cost Efficiency (ME)< Ecological Cost Efficiency (EE)

¾closing gap between
ME & EEÆ Ecological Quality of GrowthÆ Green Growth based on EE

E l i l Efficiency
EcologicalEffi i¾Maximizing Resource Efficiency¾Minimizing Pollution Impact¾By Internalizing Ecological Costs
9Not Just Environmental Idea
9Economic Condition for GrowthWho should be the driver of EE ?

¾Market Efficiency : Market & Price¾Ecological Efficiency (EE): No Driver¾Government: should be the main driverBy improving
1 Price-structure: to close Gap
1.
between Market and Ecological prices* IInvisiblei ibl IInfraf off SSocietyi tprovide eco2. Infra-structure: to p
efficient physical foundation for economic
performance* Visible Infra of Society

¾ Price structure change: Eco-Tax
Eco Tax Reform,(CC Levy of UK)¾Infrastructure: Public Transport, Energy
Efficiency, apply EE in infra design

EE Patterns of Growth¾¾

Pattern of using ecologicalresources in achieving
same level of GDP
Ratio of the ecological footprint
divided by GDP

Global Hectares per capita
capita, 2002
Ecological Deficit,

Bio-capacity,

Eco-footprint¾Japan- 3.5 (0.8 / 4.3)
¾UK- 4.0 ((1.6 / 5.6))¾France- 2.6 (3.0 / 5.6)
¾US- 4.8
4 8 (4(4.66/99.7)7)¾Rep. of Korea - 3.8 (0.6 / 4.4)
¾China- 0.8 (0.8 / 1.6)
¾Viet Nam
0.0 ((0.8 / 0.8))

Patterns of Growth¾Japan > Europe > US
¾Pattern: replicable (Korea=US)¾Replicate EE pattern: CityCit ddesign,iconsumption and production pattern, Rail, PublicTransport

Climate Change¾ MarketM k tF
Failureil(MF):(MF) SternStReviewR i¾ Eco-efficiency Failure: RK Chung¾ Changing Growth Pattern to Green by
9 Minimizing MF by Internalizing Ecological Costs
9 Improving Eco-efficiency¾ GG Æ Ultimate
Ulti t answer tto Climate
Cli t ChangeChMyth of Despair
Climate Action (CA): Bad for Economy
Target: only way for Emission Reduction
Not Enough Money/Technology for CA

Story of Vision
C ate Action:Climate
ct o Good foro Economy
co o yE R: Possible without Target
g Money/Technologyygy for CAEnoughCA Good for Economy ?
¾Internalize Ecological Costs ÆImproves Energy Efficiency ÆStrengthen Competitiveness ÆEncourage R&D, Create New Market,Employment,p y, Growth¾Countries with High Energy Price ÆHigh Energy Efficiency

Then Why Resist ?
¾Positive Results: LongLong-TermTerm¾Afraid of Short-Term Burden/Costs¾P li Support¾Policy
St tot Bridge
B idLong-term/Short-Term Gap Æ
9 by Providing Policy Options
to Minimize Short
Short-Term
Term Burden
to Maximize Long-Term Gains

Target Only Option ?
¾For Developed Countries: YES¾For Developing
p g Countries (DCs):()¾ Not Applicable¾ Difficult to Predict Future Emission¾ Hot Air, Growth Capping¾Any Other Option ? Yes. Market Mechanism,

Making Investment for¾ER in DC commercially viable : critical¾By removing political ideology ofsupplementarity & expand project
scope of CDM¾Th reform¾Thus
f
CDM tot ffunction
ti as fullf llfledged market mechanism¾Then Money and Technology will flow
to ER projects in DCs

Cost of CO2 reduction per ton¾234 U$ in Japan, 153 U$ in USA,
198 U$ in Europe.
¾a few dollars to 20 or 30 U$ per ton inp g countries (less(than 20 U$developingin China) Asia-Pacific Integrated Model (AIM), Japan¾Cost Differential can make ER
investment in DC commercially viable:
drive market mechanism

Reform CDM to function¾As Incentive Mechanism for ERbyy removingg Project
jAdd. Criteria
while maintaining Tech Add Criteria
Any ER project should qualify¾CDM now supply less than 1% of Annex 1ddemandd due
d tot restrictiont i tiMarket based CC Regime¾Annex 1: Deep Target,
Target Demand for CER¾Non-Annex 1: Supply of CER¾ MarketM k t Mechanism
M h if ERfor9 CDM Reform 9 CER Discounting¾ Recognition of Domestic Economic
Action/Voluntary Target
as Climate Action (China 20% EE)

Turn Climate Crisis into
Economic Opportunities¾By making ER investment in DC profitable¾By internalizing ecological costs into market
price of energy,
pgy Byy Eco-Tax Reform¾By recognizing voluntary energy efficiency
target as CA; China 20% is CA target

VER (Voluntary Emission Reduction)¾Recognize voluntary energy efficiency
target & allow VER as carbon credit¾Countries are alreadyy set voluntaryytargets for their energy security¾VER: incentive & linkage to create winwin
win synergy between CC & Economy

Eco-Tax Reform: Redress Market Failureby Changing Tax Base
From IncomeTo Pollution

Income Tax

Income Tax

P ll• ti Tax
Pollution
TP ll ti Tax
Pollution
TRevenue Neutralityy9 Not Increasing Tax Burden
9 Reducing Income Tax
9 Increasing Pollution Tax

Double Dividend¾1 stonet
2 bibirds
d¾Reducing GHG Emissions¾Promoting Growth

Can we generate Net Reduction from DCs
without imposing target ?
¾ YES.
YES CER Discounting can generate
Net Global Emission Reduction &stabilize CER price¾ Without imposing any target onp g countries
developing
9Removing the most serious deadlockgfor Post-2012 Climate Regime
9DCs can Proactively take CA without
fearing capping of their growth

CER Discounting
Sold
CarbonCredit

NoReduction

UnsoldCarbonCreditNet GlobalReductionDifferentiation of Discounting Ratio¾According to Income Level
Level,
Kind of GHG,
Level of CER Volume
Geography¾Multiply CER from Renewable Energy,
then Solar/Wind,
Solar/Wind commercially viable¾CER manipulation: solve many problems

A/P can nott repeatt

Quantity ofGrowthMarket Cost Efficiency

Grow First,Clean UpLater

New ParadigmgQuality ofGrowthEco-efficiency

GreenGrowthPolicy Direction¾Paradigm shift: Quality of Growth¾Promote Eco-Efficient Growth Pattern¾Closing Gap between ME & EE
¾Design Market Mechanism based CCregime: harness ER cost differential¾M k ER iinvestment¾Makett iin DC commercially
i llviableSpecific Policy Tools¾Promote Eco-Tax Reform¾Promote Sustainable Infra¾Reform CDM: expand project scope,consider CER discounting¾Recognize voluntary energy efficiency
ttargett off DC as CC ttarget:t VER

Virtuous Cycle of Green Growth