Climate Change and Development: Challenges and Opportunities and the role of the Private Sector

1. Climate Change and Development: Challenges and Opportunities and the role of the Private Sector Dra. Bárbara Oliveira British Institute of International and Comparative Law 17 October 2008

2. 1 – Climate Change and Development • Climate Change will prevent many countries from achieving the Millennium Development Goals and from improving human development indicators. • Article 3.4 UNFCCC – Right to sustainable development. • Climate policies may impact – positively and negatively – on development. • Development policies may have the same effect on climate change. • Both developing and developing countries need to seek a low carbon development path, urgently. • Mainstreaming climate change concerns into development policies: Integrated approach to economical, social and environmental issues. • Climate Change as a Risk, an economic problem and a horizontal issue.

3. 2 – Development First Policies • Developing countries consumption and emissions per captaare low. Non-climate polices may be more effective, such as population control, poverty eradication, pollution reductions, and energy security. • Energy and Energy Efficiency: 2.5 billion people in a situation of energy precariousness. • Transportation: Public Policy may influence technology and costs for transportation and reduce travel distances and GHG emissions. • Agriculture and Forestry: Agriculture intensification policies may increase the productivity of cultivated land thus lowering the pressure on forests. Migration and increased deforestation can notwithstanding take place.

4. 3 – Climate First Policies • Energy Efficiency: Energy efficiency can be achieved in every sector - industry, buildings, fuels, transportation. • Transportation: Fuel switch (to a lower carbon option, eg. biofuels) is both an energy and a transportation policy. • Agriculture and Forestry: Afforestation and avoided deforestation may promote local communities, reduce wasteland and soil degradation and contribute to water management. Cropland, grazing land, and livestock management may promote the environmental health of ecosystems and water quality, and reduce desertification and improve wellbeing.

5. 4 - Global cost curve of GHG reduction opportunities Cost of abatement EUR/tCO2e AvoiddeforestationAsia Coal-to-gas shift Industrial feedstock substitution CCS; coal retrofit Soil Forestation Waste Livestock/soils Wind;lowpen. CCS EOR;New coal 40 Smart transit Solar Small hydro Forestation Nuclear Industrial non-CO2 20 Airplane efficiency Stand-by losses 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Co-firingbiomass CCS;new coal Avoided deforestationAmerica Industrial motorsystems Industrial CCS -20 Celluloseethanol Industrialnon-CO2 Sugarcanebiofuel -40 Fuel efficient vehicles -60 Water heating Abatement potential by 2030 GtCO2e/year -80 Air Conditioning Lighting systems -100 Fuel efficient commercial vehicles -120 -140 Insulation improvements Source: McKensey -160

6. 5 – Mainstreming ClimateConcerns "… changing development paths will be critical to addressing mitigation and the scale of effort required is unlikely to be forthcoming from the environmental sector on its own. If climate policy on its own will not solve the climate problem, future research on climate change mitigation and sustainable development will need to focus increasingly on development sectors. A better understanding is needed of how countries might get from current development trajectories onto lower-carbon development paths - how to make development more sustainable“ (AR4 IPCC)

7. 6 – Challenges • Proving to the private sector that costs of abatement are sometimes negative • Forestry projects and developing countries – What is the space for voluntary projects and other non-CDM initiatives? Ex. Brazil • Energy efficiency standards, energy policies and national security. Incentives for first comers, followers and laggards?

8. 7 – The Private Sector • The private sector objective: - Make profit at whatever cost? OR - Create value for shareholders? AND - Remain in the market for as long as possible? • What incentives exist for clean investment in developing countries? Negative incentives provided by Kyoto (CDM), Investment Rules, Trade rules. • Assessing risks to businesses derived from climate change • Importance of Sectoral Benchmarks.

9. 8 – Case Studies: Brazil • 33 Asset Management – Private Equity Fund: Investment in electricity generation from biomass (crop residues), biogas generation from biodigestors, with other byproducts such as fertilizers and carbon credits. Importance for developing countries: Projects which a strong business model, which promote development and environmental protection, energy security and may be fairly easily replicated.

10. 9 – Future Prospectives • What can be expected in terms of regulation: locally, regionally, internationally? (level of coordination X level of commitment – high x low) • What incentives will be put in place by/in developing countries to foster a development lower in carbon for its industries and productive sectors? • How to improve transparency and knowledge sharing at developing countries national level so that consensus building can be firstly developed at home? • What are the main barriers: cultural, economic and regulatory to be faced by developing countries and their industries regarding climate change?

11. Thank You! ECOSYNERGY Consultancy and Training in Sustainability boliveira@ecosynergy.com.br Pça. Osvaldo Cruz, 124 – Cj 181-A São Paulo – SP 011 8202-1826