Sectoral Approaches for post-2012 framework

1. Sectoral Approaches for post-2012 framework Yoshinori TANAKA First Secretary Mission of Japan to the EU Support of Shaping the Post Kyoto Climate Regime Regional Environmental Center March 5-6, 2009 Szentendre, Hungary

2. Contents • Ⅰ．Need to assess global mitigation potential and Sectoral Approach • Ⅱ．Japan’sMid-term Target setting • Ⅲ．Fair and comparable commitments by developed • country Parties • Ⅳ．Promotion of mitigation actions ｂｙ developing • country Parties • Ⅵ．Summary 2

3. Ⅰ．Need to assess global mitigation potential and Sectoral Approach • To peak out global emissions in 10-20 years and to achieve Long-term Goals, it needs to assess global emission reduction potentials based on the scientific and technical estimates. • In considering Annex I targets, the vision on how to pave the way to reduce global emissions by 2050 should be shared. Business as Usual Mitigation PotentialEstimate Required reduction level Long-term Goals Reducing 50% Emissions by 2050 Peak Outin 10-20 years Global GHGemissions 3 2050 Present Mid-term

4. Sectoral Approaches as methodology to assess mitigation potential • Sectoral Approachis useful because it enables countries to… • evaluate efforts in each sector, • identify the vision on how to pave the way to reduce emissions, • promote cooperation through technology transfer and address leakage issues. • With limited number of sectors, large share in the global CO2 emissions can be covered. 4 Source：IEA, “CO2 Emissions from Fuel combustion 1971-2005,” etc.

5. Through analyzing reduction potentials and setting indicators, • Sectoral Approaches • helps to compare the developed countries’ targets • helps to set MRV mitigation actions (intensity targets) of major developing countries • accelerates global emissions reduction by supporting developing countries through transfer of technologies and practices Automobiles etc. coal-fired power generation etc. Compare the efforts CO2 emission reduction target Major Developing Countries Z Developed Country Y Developed CountryX Aggregate Residential Residential MRV actions (e.g. based on efficiency indicators) Infrastructure Infrastructure Infrastructure Energy policy Energy policy Energy policy International Cooperative Actions e.g. APP, IISI, IAI and CSI of WBCSD Iron and Steel Cement Aluminum

6. JPN JPN Japan Japan CHN CHN China China IND IND India India IDN IDN Indonesia Indonesia KOR KOR Korea Korea THA THA Thailand Thailand XSE XSE Other South Other South - - east Asia east Asia XSA XSA Other South Asia Other South Asia XME XME Middle East Middle East AUS AUS Australia Australia NZL NZL New Zealand New Zealand CAN CAN Canada Canada USA USA USA USA XE15 XE15 Western Europe(15) Western Europe(15) XE10 XE10 Eastern Europe(10) Eastern Europe(10) RUS RUS Russia Russia ARG ARG Argentine Argentine BRZ BRZ Brazil Brazil MEX Mexico XLM XLM Other Latin America Other Latin America ZAF South Africa XAF XAF Other Africa XRW XRW Rest of the World Rest of the World Mitigation potentials by sector in 2020 (NIES Japan) mitigation potentials under 100 US$/tCO2 at a 5%/year discount rate • In developed countries, it is important to undertake measures in the industry and power generation sectors, but potentials in transport, residential and commercial sectors are also large. • In China and India with high economic growth, mitigation measures in industry and power generation sectors are significant. In developing countries, it is also effective to reduce emissions from agriculture and waste sectors. 6

7. Regional Emission Reduction Potentials in 2020 Reduction Potentials from Sectoral Technology-frozen Case Marginal costs Emission reduction levels Note: emission reduction potentials of CCS excluded • There are large potentials for emission reductions at negative costs and relatively low-costs (<20$/tCO2) in the world regions. • Reduction potentials of United States at marginal costs of below 20$/tCO2 account for a large share (33%) of those in Annex I & OECD. • Reduction potentials of China and India at marginal costs of below 20$/tCO2 account for a large share (92%) in those of Major developing countries. 7

8. Ⅱ．Japan’s Ｍｉｄ-ｔｅｒｍ Ｔａｒｇｅｔ setting • Japan set its Long-term target as 60-80% reduction from the current level by 2050. • Japan will set its quantified national Mid-term target by June 2009. • The Mid-term Target Committee under cabinet office is; • conductingseveral global models analysis based onSectoral Approachesespecially focus on comparability of efforts among developed countries • assessing economical impacts by several models • Members of the committee will place plural targets temporarily, and offer them to the public as options. • Thegovernment will decide Japan’s Mid-term Target based on those options. Target will be announced taking into consideration of the progress of international negotiations and the trend of domestic public opinion. 8

9. Emission Reduction of Annex 1 countries in 2020 based on reduction targets Source: UNFCCC (GHG emissions excluding LULUCF) • Adding up the emission reduction targets committed by major Annex-I countries (see right table), the total GHG emissions of Annex-I countries in 2020 will be around 15% below 1990 level. 9

10. Marginal costs for Annex I countries in 2020 • Marginal abatement cost (MAC) curves are different in each country. • MAC for Japan is relatively high due to high energy efficiencies of coal power plants and in most of the energy intensive sectors. • In the case of equal MAC, 15%, 20%, and 25% reduction compared to 1990 level in Annex-I countries will cost $67, $87, and $142/t-CO2, respectively. 10

11. future work at the Mid-term Target Committee • The committee will analyze options for Japan’s target by 2020 • which higher limit is about ＋5% compared to 1990 (or about ±0% compared to 2005) • which lower limit is about －25% compared to 1990 (or about －30% compared to 2005) under following 6 cases. cf ; above figures include neither carbon sink nor CDM. • Case1: the equipments and facilities were improved efficiency as an extension of existing technology and replaced at their life period • ［＋6% compared to 1990 or －5% compared to 2005］ • Case2: Equal Marginal Abatement Costs(MAC) for targets announced by other developed countries • ［equal MAC for EU－20% (if it’s 1/3 would be achieved by CDM): • ±0～＋7% compared to 1990 or 11～－5% compared to 2005］ • ［equal MAC for US±0% : • －2～＋7% compared to 1990 or －13～－5% compared to 2005］ 11

12. Case3: maximum introduction of most advanced technology • which would be achievable by voluntary measures • ［－4% compared to 1990 or －14% compared to 2005］ • Case4:－25% compared to 1990 by total advanced countries • and each developed countries would do equal efforts ①equal Marginal Abatement Costs for each developed countries • ［－12～－1％ compared to 1990 or －22%～－12% compared to 2005］ • ②equal costs per GDP for reduction measures for each developed countries • ［－17～－16% compared to 1990 or －27～－26 compared to 2005］ • ③-25% compared to 1990 for Japan’s targets (as well as other developed countries) • ［－25% compared to 1990 or －30% compared to 2005 for all GHG • reduction］ cf ; The figures in brackets represent tentative estimates as presented at Mid-Term target Committee on January 23rd. These estimates will be updated. (energy-related CO2 of 2020－energy-related CO2 of 1990)／GHG of 1990 or (energy-related CO2 of 2020－energy-related CO2 of 2005)／GHG of 2005 12

13. Ⅲ．Fair and comparable commitments by developed country Parties • ● a quantified national emission reduction commitment of each developed country Party should be indicated as the total volume of its GHG emissions along with reduction rates from plural base years to understand each Party’s mitigation efforts in a more appropriate way. • ●Commitments: to be set in a manner which ensures comparability based on • analysis on mitigation potentials • indicators: sectoral energy efficiency and GHG intensity • due consideration to • the marginal abatement costs • total abatement costs as percentage of GDP • ●Adequancy of commitments: to be evaluated with regard to domestic mitigation efforts, separately from mitigation by utilizing flexibility mechanisms. 13

14. Reduction target of each developed country should be set on the basis of each country to ensures comparability of its mitigation efforts of each country. (Countries may, individually or jointly, fulfill their agreed reduction targets.) 14

15. Ⅳ．Promotion of mitigation actions ｂｙ developing country Parties ● • develop its voluntary national action plan including policies and measures. • major developing country Parties: • ensure that • economy-wide GHG emissions or energy consumption per GDP • GHG emissions or energy consumption per unit in major sectors • from 2013 to 20XX do not exceed their respective assigned amount. • provide a prospect of total volume of its emissions as a reference. • are verified their MRV data and information by Experts. 15

16. Sectoral Crediting Mechanism for major developing countries • Specify the figures “GHG emissions per unit” or　“energy consumption per unit” in major sectors (e.g. power generation, iron and steel, cement, aluminum) . In order to reduce uncertainties of the projection as much as possible, intensity should be used as a target in principle. • major developing countries should be obliged to achieve intensity targets and the nature of targets should bebinding. • DCs will receive credits in case they achieve a higher efficiency than their targets. 16

17. Establishment of an Advisory Group for Sectoral Technology Cooperation (AGSTC) APP or other regional or sectoral P-P partnership • AGSTC COP • Power generation • Iron and Steel • Cement • Aluminum • Transport etc. Global Industrial initiativeWSA, IAI, WBCSD SBI SBSTA AGSTC can contribute to both transfer and development of the key technologies. • Consists of representatives of industrial community and experts (IEA, etc) by each sector • Analyze the current situation of development and transfer of the technologies by each sector. • For development: government R&D budget, international roadmaps for key tech., latest development outcomes, international cooperation activities • For transfer: the BAT, the BP, reduction potentials, barriers and solutions • Formulate advice for further actions by each sectorbased on the analysis • Regularly report on outcomes to the COP/equivalent body 17

18. Ⅵ．Summary In order to achieve a global long-term goal, it is necessary to assess global mitigation potentials, taking into account emission reduction opportunities and mitigation costs. Comparability of efforts among all developed country Parties should be ensured with indicators such as GHG/energy intensity, marginal abatement costs and total abatement costs as percentage of GDP. Sectoral approaches can support national efforts of developing countries through identifying BAT/BP and promoting effective transfer of them through analyzing reduction potentials. Japan, jointly with the EC and Poland, will hold an international workshop on mitigation potentials, comparability of efforts and sectoral approaches on 23-25th March before the AWGs in Bonn and it is expected to discuss mitigation potentials and indicators for ensuring comparability of efforts among developed country Parties. 18