Energy Revolution: Policies for a Sustainable Future

1. Energy Revolution: Policies for a Sustainable Future Chapter 7: International Policies and Institutions Author: Howard Geller Summary by Alvin Tran Critique by Gene Park

2. Summary Outline • International Clean Energy Cooperation • Fostering Clean Energy Innovation in Developing Countries • Bilateral Assistance, the Global Environmental Facility, and the United Nations • Multilateral Development Banks • The Climate Treaty • Enhancing International Technology and Policy Cooperation

3. International Clean Energy Cooperation • International cooperation in research, development, and demonstration (RD&D) on new energy technologies can balance resources and increase the pace of technological innovation among countries. • The worldwide energy technology cooperation is controlled by the International Energy Agency (IEA). Established in 1973 because of the oil crisis and has 26 member countries from Europe, North America, and the Pacific Region. • IEA’s main goal is to promote the effective operation of international energy markets as well as maintaining a system for coping with oil supply disruptions. • IEA hosts the Climate Technology Initiative, which helps developing countries with the adoption of new energy technology and practices. Unfortunately their budget is quite small. • International Clean Energy Cooperation faces challenges because countries are focused in promoting their own industries rather than supporting manufacturing and distribution of clean energy technologies in other nation.

4. Fostering Clean Energy Innovation in Developing Countries • Developing countries have features that enable them to be leaders in the transition to a clean energy future. • Plentiful renewable energy resources • Growing industrial, transport, buildings, and power infrastructures. • As developing countries progress economically and socially, there is the potential to leapfrog over the inefficient, fossil fuel-based, and polluting energy production found in industrialized nations. • Policies that encourage energy technology innovation and leadership in developing countries include: • RD&D emphasizes clean energy supply and use technology innovation • Development of new industries and introduction of new technologies through international joint ventures and other technology transfer mechanism. • Adopting and enforcing strong energy efficiency and environmental standards so that new infrastructure is state-of-the-art rather than technologically outdated. • Technology transfer between industrialized and developing countries can be an important component of clean energy development worldwide. • Investment by private companies represents a large and growing share of total financial flows to developing countries. • He suggested using women to produce and sale energy efficiency and renewable energy technologies in developing countries.

5. Bilateral Assistance, the Global Environmental Facility, and the United Nations • Most industrialized countries support clean energy development and deployment in Third World countries through their bilateral assistance programs. • Bilateral energy assistance is not always helpful. The distinction between development assistance and export promotion is often blurred. • Author’s Suggestion: Donor-supported programs need to be carefully designed and driven by local technological, socioeconomic, and institutional needs. Donor support should contribute to a long-term strategy to build sustainable markets for clean energy technologies in developing countries. Developing countries should insist on these conditions when negotiating projects with potential funders. • The Global Environmental Facility (GEF) was created with funding from industrialized nations to help developing countries implement global environmental treaties. • GEF projects are implemented by the World Bank, the United Nations Development Programme, and the United Nations Environment Programme. • Some GEF projects help to leverage larger-scale loans from the World Bank for energy efficiency and renewable energy development. • GEF is moving away from funding discrete technology-oriented projects and is increasing support for efforts aimed at removing market barriers and establishing self-sustaining energy efficiency and renewable energy markets in developing countries.

6. Bilateral Assistance, the Global Environmental Facility, and the United Nations Cont. • The United Nations Development Programme (UNDP) promotes innovative energy policies and funds capacity building, training activities, and feasibility studies in developing countries. • Its overall objective is to foster human development through greater energy efficiency, renewable energy use, and introduction of other modern, clean energy technologies. • The United Nations Environment Programme (UNEP) hosts a Collaborating Centre on Energy and Environment. • The Centre focuses on helping developing countries integrate environmental considerations into energy planning and policy making.

7. Multilateral Development Banks • The World Bank and regional development banks (known collectively as the multilateral development banks, or MDBs) are important lenders for energy projects in developing and transition countries • In the past very little financing went to energy efficiency or smaller-scale renewable energy projects. • Recently the development banks have begun to improve on this record. The World Bank indicating that between 1994 and 1998 it approved $1.2 billion in loans for end-use energy efficiency projects, efficiency improvements in district heating system, and nontraditional renewable energy projects. • The World Bank approved 17 projects with renewable energy components totaling about $700 million between 1992 and 1999, and the Global Environment Facility provided $230 million in grants for these projects. • The Author suggested that the World Bank and other MDBs could do more to encourage a clean energy revolution in developing countries. • MDBs could allocated all of their resources to energy efficiency, renewable energy, and natural gas projects. • If developing countries prefer conventional energy technologies, project developers could obtain financing from commercial banks or other sources of capital

8. The Climate Treaty • The United Nations Framework Convention on Climate Change was adopted by over 150 nations at the Rio de Janeiro “Earth Summit” in 1992. • It was ratified by the United States and other countries, and entered into force in 1994. • The ultimate objective of the Convention is to stabilize the concentration of greenhouse gases in the atmosphere at a level that would prevent dangerous interference with the world’s climate. • The Climate Change Convention include a nonbinding provision that industrialized countries attempt to return their greenhouse gas emission to 1990 levels by the end of 2000. • Understanding the devastating impact of global warming during the 90s, nations came together to negotiate the Kyoto Protocol to the Climate Change Convention. • The Kyoto Protocol established concrete and binding emissions reduction targets for the Annex I nations starting in the period from 2008 to 2012. • The target for all Annex I countries is a 5.2 percent reduction relative to emissions in 1990 • In early 2001, the Bush Administration announced that the U.S. will not ratify the Kyoto Protocol even though they are responsible for 25 - 30% of current CO2 emissions. They later announced an alternative CO2 emissions reduction strategy in early 2002, but this strategy appeal for voluntary action and was widely criticized. • The Kyoto Protocol includes flexible mechanisms that aim to allow greenhouse gas emission reductions to take place and emissions reductions targets to be met at the lowest overall cost. But it is this that limits the effectiveness of the Protocol due to the so-called hot air trading allowance

9. The Climate Treaty • Joint Implementation • Article 6 of the Kyoto Protocol allows joint implementation (JI) between Annex I nations that have fixed emissions limits. This provision allows Western nations to invest in and receive emissions credits from energy efficiency projects in Eastern Europe and the former Soviet Union. • Western nations can also purchase excess emissions credits that the transition countries will have due to their economic contraction since 1990 (“hot air trading”). • Clean Development Mechanism • Article 12 of the Kyoto Protocol provides for a Clean Development Mechanism (CDM) that allows parties in Western nations to receive emission credits for investing in projects that reduce greenhouse gas emission in non-Annex I countries, as long as the project advance sustainable development within the host country. • Implications of the U.S. Withdrawal • Without the U.S. participation in the Kyoto Protocol, studies show that Annex I countries would reduce their emission by 3 percent between 2008 and 2012, compared to 17 percent annual reduction with the United States included • One hope is that when other nations move ahead with Kyoto Protocol implementation in spite of the U.S. withdrawal, it will increase pressure for the U.S. to act responsibly and join other nations in limiting the risk of potentially catastrophic climate change.

10. Enhancing International Technology and Policy Cooperation • There are a number of limitations to the current set of activities and institutions • The IEA is not a truly global agency because developing countries and other nonmember are not involved in defining the goals or setting the priorities of the IEA. The IEA only has about 10 staff and a relatively modest budget devoted to promoting greater energy efficiency and renewable energy use. • United Nations has energy programs scattered throughout a number of its agencies. No individual United Nations agency has a “critical mass” or strong mandate to advance a clean energy transition. • The GEF is helping developing countries acquire and build sustainable markets for clean energy technologies. But GEF has been criticized for being too closely linked to and dominated by the World Bank. They prefer the GEF to be an organization operating under the Climate Change Convention • Bilateral assistance is often self-serving and/or driven by political concerns. Their assistance is uncoordinated and frequently not responsive to the need of developing countries

11. Enhancing International Technology and Policy Cooperation Cont. • International Energy Efficiency and Renewable Energy Agency (IEEREA) • provide support and strengthen national and private sector initiatives through technology and policy cooperation, capacity building, and so on. • serves as a forum for discussing and negotiating global energy efficiency and renewable energy targets on an ongoing basis. But it would not substitute for national, state, and local action. • should be form from the combined efforts of the large number of bilateral and multilateral organization working on clean energy development today. The IEEREA could be assigned a primary role for clean energy technology cooperation under the United Nation Framework Convention on Climate Change. • Initial funding and staff for the IEEREA could come from combining some or all of the programs listed here. Additional funding could be obtain by having a small carbon tax in all OECD nations could generate substantial new resources ( a tax of just $.10 per metric ton of carbon would generate about $400 million per year). An IEEREA could also be funded by having nations pledge a portion of savings to governments from reducing subsidies for conventional fossil fuel and nuclear energy. • A well-funded IEEREA need a headquarter, but it could also have branches on each continent. These branches could coordinate activities in their region, working closely with individual countries.

12. Conclusion Current international efforts supporting a clean energy transition worldwide are fragmented and suffer from a number of problems. There is not one single institution that can lead the transition. The author suggests that a new institution is needed. One that is truly global in nature and has a clear mandate to nurture a clean energy transition. He proposed the IEEREA Agency to lead the world in this energy revolution.

13. Critique Chapter 7: International Policies and Institutions

14. Objectives • Author’s Background • Sources • Overall Article • Author’s idea for an international energy agency

15. Author’s Background • Education • M.S. in Mechanical Engineering from Princeton University • PhD in Energy Policy from University of Sao Paulo • Executive Director of American Council for an Energy Efficient Economy (1981-2001) • Founder and Director of Southwest Energy Efficiency Project • Author/Co-author of four books

16. Sources • Number: 36 • Dates: 1995-2002 • Majority (67%) are recent • Data Presentation • Tables used are clear • No graphs

17. Overall Article • Logical Organization • Current institutions and policies • Pros and cons of each • Idea for international energy agency • Examples given to support each major claim • Brazil’s ethanol fuel program • China’s more efficient power plants

18. Suggested Solution • Vague Ideas • No firm solutions given, not enough detail • How implement ideas? • Policies need to be customized • Flat quotas won’t work for every country • Social, economic issues • Regulation Enforcement

19. Geller’s Idea • Energy Tax • Does it matter if energy source is renewable? • How to separate between renewable/non-renewable energy? • Financially disadvantaged people may cut back on important energy usage

20. Conclusion • Well-organized chapter • Ideas supported by examples • Author’s energy agency idea is not specific enough

21. Questions?