Tag Archives: green
South Korea May Launch World’s Most Ambitious Cap And Trade Market
With roughly 18 months until launch, South Korea appears ready to create the world’s most ambitious cap and trade market, with the highest global price on carbon. South Korea historical and forecast emissions image via BNEF These findings jump from a Bloomberg New Energy Finance (BNEF) white paper analyzing how potential market designs could affect the nation’s carbon price and market efficiency, and are a reminder that global cap and trade could still be integral to combating climate change. South Korea’s government is finalizing system design, set to launch in January 2015 , but BNEF predicts it could ultimately cover 70% of national emissions and reach $90 per ton of carbon. Ambitious Goals Would Force Tough Cuts Criticism of the EU emissions trading scheme (ETS) centers on if it actually forces industry to cut pollution, but that won’t be the case in South Korea. “If the government implements the scheme without any changes, it will have major implications for Korean companies,” said Richard Chatterton of BNEF. Over 450 entities participate in the country’s existing greenhouse gas inventory, covering more than 60% of South Korea’s emissions. These entities are all large-scale emitters, and submit annual emissions and energy consumption data to the government, which then sets reduction targets for the subsequent year. BNEF’s projections assume the same entities would be covered by the ETS, and are based on South Korea’s emissions reductions target of 30% below current trends by 2020. This goal will require a 19% reduction from 2010 levels, and compared to Australia’s 14% and the EU’s 5% reduction target, make the Korean system without equal. South Korea emissions abatement forecast image via BNEF In order to meet its goal, BNEF predicts South Korea would need to cut its emissions by 836 million tons (Mt) of carbon relative to business-as-usual between 2015 and 2020. Demand for emission reductions would thus rise to 200 million metric tons per year (Mt/yr) by 2020 – almost double demand projected for the EU ETS, even though South Korea’s program is only 20% its size. But Reducing Those Emissions Won’t Be Easy However, BNEF expects South Korea will face challenges meeting these goals. The proposed system design restricts the use of carbon offsets to 28% of reduction requirements up to 2020, and starting in 2021 only offsets from domestic projects would be eligible for polluters. South Korea emissions abatement demand forecast image via BNEF This tight offset market means South Korea’s ETS could be painful for the country’s industrial sector as they’re forced to buy permits or cut emissions. 598Mt of emissions reductions – nearly 75% of total cuts – will need to come from the industrial and power sector, meaning the cost of electricity and manufactured goods would rise. Further complicating matters, South Korea’s industrial sector is already fairly energy efficient as a result of historically high energy prices, exposure to international fuel price shocks, and national investment in energy efficiency programs. Clean Energy Is A Clear Solution…But Not Short-Term So if offsets are going to be at a premium, and much of the country’s energy efficiency potential has already been realized, where will South Korea’s emissions reductions come from? The clearest solution, as in most cases, is cutting coal-fired electricity generation. BNEF sees the power sector offering the most abatement opportunities both short and long term. Short-term, the white paper estimates South Korea could reduce emissions in 2020 by up to 64Mt/yr by substituting natural gas for coal-fired power. This assumes natural gas generation utilization capacity rises from current projections of 27% in 2020 to 70% South Korea has traditionally relied upon imported liquefied natural gas (LNG), but tight supply and volatile price swings lead BNEF to predict electricity generation will shift toward higher-efficiency fossil fuel or renewable generation , and overall energy efficiency measures will rise outside of the industrial sector. In fact, BNEF predicts the ETS will feed into South Korea’s renewable portfolio standard to expand demand and boost renewable generation to 55 gigawatt-hours (GWh) in 2020 – a 700% increase from 2010. Toward A Global Carbon Market Via South Korea But the best way for South Korean polluters to comply with the ambitious reduction goals may not be within its borders – BNEF recommends linking to other functional carbon markets with an abundance of low-cost abatement options. Two other mature markets will be operating in 2015 when South Korea’s system launches: the EU-Australian, and California-Quebec linked programs. BNEF predicts EU-Australian allowance prices will be below $40 per ton, and California-Quebec around $50 per ton in 2020. Global cap and trade allocation demand forecast image via BNEF Linking to these two systems would benefit all parties. South Korea’s ETS will create demand four times greater than California’s system , and 60% higher than the EU-Australia scheme. Thus, South Korea reduces abatement prices by accessing cheaper permits from other systems, while boosting demand and whittling away surplus permit supply in other carbon markets. Perhaps most promising in this equation, BNEF’s estimates don’t even consider China’s fledgling market. Seven regional pilot programs began rolling out this year, and they will cover up to 1 billion tons of emissions by 2015 before the country launches its own national system in 2020. Remember China is by far the planet’s biggest emitter of carbon. Oh Wait, Industry May Have Its Day Of course, these rosy scenarios hinge on the ETS unfolding as originally proposed, and that’s far from a certainty. South Korea’s government is consulting with large emitters this month, and they have called for many revisions to loosen the strict allowance, offset, and reduction policies. South Korea cap and trade timeline image via BNEF The ETS “Master Plan” is due to be published in December 2013, and it will provide the legal basis for emissions reductions until 2018. So South Korea, it’s decision time. Stay on your ambitious path, and cut emissions 30% while helping create a truly global carbon market . Or, water down the system proposal, and watch your national emissions climb 28% by 2020, according to BNEF – no pressure. Continue reading
South Korea To Launch Ambitious Carbon Trading Scheme, Says Report
South Korea is preparing to introduce the world’s most ambitious emissions trading scheme, potentially paving the way for carbon costs as high as $90 a tonne for many of the country’s key industries. That is the stark conclusion of a major new report from Bloomberg New Energy Finance (BNEF) and Ernst & Young, which hails the proposed scheme as the world’s most ambitious carbon-pricing policy but warns that changes to the proposals may be required before the scheme is introduced in 2015 to avoid “punitive” costs on industry. “If the government implements the scheme without any changes, it will have major implications for Korean companies,” said Richard Chatterton, lead analyst for carbon markets at BNEF, in a statement. “A carbon price will lead to higher power prices and impose additional costs on industrial firms. The government is mitigating the impact for covered entities by handing out most allowances for free, but costs could still rise quickly.” The report calculates that if South Korea adheres to its national target of cutting emissions to 30 per cent below business-as-usual levels by 2020 emissions reductions delivered through the planned emissions trading scheme would have to reach 836 million tonnes between 2015 and 2020. But it also predicts the “need to reduce emissions will, however, exceed the options available within industrial companies and from the country’s current fleet of gas fired power stations”, meaning that the target is likely to be missed and the price of carbon in the scheme will effectively be set by a $90 a tonne penalty price for company’s exceeding their emissions cap. The government hopes that businesses will be able to comply with the cap by accelerating the shift toward lower carbon energy sources, such as gas, renewables, and carbon capture and storage plants. But the BNEF report warns that the cost of such technologies is likely to be significantly higher than the penalty price, meaning many firms are likely to opt to exceed their targets. It recommends that the government consider a number of options to improve the proposed scheme, including relaxing the number of offset credits companies can use to count towards their carbon target or loosening the over-arching cap on emissions. “The challenge is to put in place a carbon price high enough to impact investment decisions, but low enough to transition smoothly towards a carbon-constrained economy,” said Milo Sjardin, head of Asia research for BNEF, in a statement. “With the proposed design, demand and supply within the ETS are not well-matched and will lead to unnecessarily high carbon prices. Policy-makers will need to look at cost containment measures closely while not compromising the ambitions of the scheme.” However, Yoon Joo-Hoon, senior manager at Ernst & Young, warned that while changes to the proposals could be made businesses still needed to be preparing now to the likely impact of the scheme, arguing that firms should be looking at carbon mitigation options and developing a plan for operating effectively under an emissions trading scheme. Continue reading
Analysis: Indonesia Renews Moratorium On Logging, Palm Plantations
Commentary/Analysis by Kemen Austin, Fred Stolle and Ariana Alisjahbana, WRI May 16, 2013 Editor’s note: This commentary is an analysis by three experts from the World Resources Institute (WRI). The post originally appeared at Indonesia Extends Its Forest Moratorium: What Comes Next? . Indonesia’s President Susilo Bambang Yudhoyono made a bold and courageous decision this week to extend the country’s forest moratorium . With this decision, which aims to prevent new clearing of primary forests and peat lands for another two years, the government could help protect valuable forests and drive sustainable development. Enacted two years ago, Indonesia’s forest moratorium has already made some progress in improving forest management. However, much more can be done . The extension offers Indonesia a tremendous opportunity: a chance to reduce emissions, curb deforestation, and greatly strengthen forest governance in a country that holds some of the world’s most diverse ecosystems. Boosting Achievements from Indonesia’s Forest Moratorium Indonesia ranks as one of world’s biggest greenhouse gas emitters, largely due to the clearing of forest and peat lands. The forest moratorium aims to address this problem by prohibiting any new licenses to log, clear, convert, or otherwise alter pristine forest and peat lands, an area encompassing more than 43 million hectares of land. Forest users with existing licenses are still allowed to operate in these regions, and there are several exceptions to the rule. The biggest achievement of the moratorium thus far is that it created a much-needed window of opportunity to begin developing critical forest governance reforms. Now that the government has extended the moratorium, it’s important that these reforms are not only implemented, but strengthened to truly benefit Indonesia’s forests and the people who depend on them. Deforestation in Indonesian Borneo. Photo by Rhett A. Butler A few opportunities for further reforms include: Tracking Forest Permits : Currently, national agencies and local government offices oftentimes do not share information with each other on permits for logging, mining, palm oil development, and other forest uses. As a result, multiple forest users may operate in the same area, creating confusion and conflict. Indonesia’s REDD+ Task Force , the government body in charge of coordinating all REDD+-related activities , is currently capitalizing on the moratorium to develop an online, publicly accessible database of all forest licenses in the country. The team aims to publicize all permits from one province, Central Kalimantan, by June 2013. The Task Force should expand this process to Indonesia’s remaining 33 provinces after the pilot project. Strengthening the Permit Review Process : Before the moratorium, government agencies lacked technical guidance on how to review a permit’s compliance with Indonesian regulations—such as the limits on converting peat lands and the steps required to obtain a forest license. The REDD+ Task Force is currently piloting a new review process in three districts in Central Kalimantan and evaluating how permits comply with Indonesian rules and regulations. However, it is unclear if or how this assessment will impact illegal permits. If successful, this initiative should give rise to a stronger national policy on granting and reviewing forest permits. Designating Forest Area : Indonesia, like many nations, designates “official” Forest Estate ( Kawasan Hutan ) through zoning. The designation of forest area provides the foundation for deciding what types of forest use can occur and where. It’s a critical first step for improving land-use planning and forest management. However, due to conflicts between national and subnational governments, Indonesia’s forest delineation process is only 14 percent complete . The moratorium allows the REDD+ Task Force, in close collaboration with the Ministry of Forestry and local governments, to pilot measures to overcome conflicts and accelerate delineation. The Task Force has begun this work in one district, South Barito in Central Kalimantan, but it still needs to be completed and then applied to the rest of the country. Accelerating Spatial Planning : A slow Forest Estate delineation process has stalled the development of district and provincial land use plans, which help direct public and private investments. Only 45 percent of Indonesian provinces and 56 percent of districts had finalized their spatial plans as of April 2013. The moratorium prompted creation of an agency to guide this process, but it has not yet accelerated spatial planning to the degree necessary. Formalizing Community Plans : Regions occupied by local, traditional communities, known as adat areas, have historically been left out of Indonesia’s formal spatial planning system, the Rencana Tata Ruang Wilayah (RTRW). Ignoring adat communities’ land rights spurs poverty, hinders economic development, and deters environmental stewardship. During the moratorium, the REDD+ Task Force invited civil society to submit community maps and land use plans. However, because the moratorium doesn’t require full recognition of adat lands, government ministries must provide further clarity on how community plans will be incorporated into the formal spatial planning process. Peat forest clearing for an oil palm plantation in Indonesian Borneo. Photo by Rhett A. Butler 3 Ways to Strengthen Indonesia’s Forest Moratorium Extending the forest moratorium can help ensure that ongoing governance reforms reach their full potential. But to really capitalize on the extension and improve the forest sector, the government should also pursue new reforms, such as: Evaluating Greenhouse Gas Emissions During Permitting : Authorities who issue forest use permits lack the tools they need to evaluate the proposed activity’s potential greenhouse gas emissions. The new online permit database should be combined with data on forest cover, peat land extent, and carbon stocks to account for emissions risks. This review process could also support efforts to shift agricultural expansion from forested land to non-forested , “degraded land.” WRI estimates that there are more than 14 million hectares of low-carbon, degraded land in the four Kalimantan Provinces alone. Disseminating Technical Guidance at the Local Level : WRI and partners recently interviewed forest agency officials in eight districts to assess the level of local understanding of the moratorium. While all respondents were aware of the moratorium, just five out of eight knew the types of land protected, while only three had accessed the map delineating these areas. Ensuring a basic level of understanding at the district level will be a critical next step for boosting the moratorium’s application. Better Monitoring and Enforcement : The same forthcoming study revealed that half of district forest service respondents did not know who was responsible for monitoring the moratorium. Many said there were no mandated monitoring activities, and if there had been violations, they did not know where to report them. A robust monitoring and enforcement system is essential to ensuring an effective moratorium . Curbing deforestation, reducing emissions, and improving quality of life for millions of Indonesian citizens all hinge on sound forest governance. Extending the moratorium for two more years does not guarantee more emissions reductions or better forest management, but it’s a critical starting point. Now it’s time to capitalize on this opportunity and move forward with forest sector reforms. Read more at http://news.mongabay…D8Rytbh7EFur.99 Continue reading
