Climate Change, Asian Economy, Energy and Policy
By Taishi Sugiyama
In this section, we describe three background issues. First, we share the context of international climate policy. Although the Kyoto Protocol has entered into force, the effectiveness and future prospects of the Protocol are uncertain; major innovation in international climate policy is needed. Second, we discuss how international relationships in East Asia are changing. The rapid growth of the region translates to a greater need for improvements in energy efficiency. Also, rapid change implies that the appropriate modality for international cooperation would change accordingly. Third, we would like to share the concepts of “policy development,” and international coordination or assistance to enhance policy development. Such coordination, sometimes referred to as harmonization, is sometimes misunderstood as intrusive and prescriptive, but it does not necessarily have to be so.
1.1 Global Climate Policy at a Crossroads
The Kyoto Protocol under the United Nations Framework Convention on Climate Change (UNFCCC) is an important first step in the development of a truly global climate regime. Through the Kyoto Protocol the climate regime covers a range of gases, as well as emissions from all economic sectors, leading to linkages of multilateral discussions on energy, transportation, forestry, agriculture, and broader issues related to trade and investment. Furthermore, after coming into force in 2005, the importance of Kyoto over the long term is not necessarily the designation of specific emission targets or the expansion of the number of Annex B Parties in the agreement, but that it has set the stage for international discussions regarding emissions.
That said, it must also be recognized that the regime will look markedly different from what was originally intended, mainly due to the decision of the U.S. to opt out. Moreover, there is no indication that the U.S. is willing to return to the Kyoto fold anytime soon. For future negotiations, views are sharply divided between, and among, developed and developing countries on how best to share the burden of achieving targets. While the Kyoto Protocol calls for another negotiation round beginning from 2005 to set further targets beyond 2012, countries may consider developing alternatives to the current framework, particularly if the world’s largest emitters refuse to re-engage in the Kyoto process.
Against this backdrop, a distinct opportunity lies in international cooperation on energy efficiency. If we can successfully reframe the climate issue as the promotion of energy efficiency, there may be more chances for countries to mobilize a large amount of resources towards preventing climate change. While the emission cap is a divisive approach, as observed in the UNFCCC negotiation, there are strong common interests and a consensus to promote energy efficiency in most countries. The current U.S. administration, for example, has made it clear that it will emphasize energy-efficient technology, and has initiated a number of voluntary, technology-centered bilateral and multilateral partnerships including the Asia-Pacific Partnership on Clean Development and Climate (APP).
In a much broader context, Sugiyama, Ueno and Sinton (2005) developed a scenario in which nations sign mutually-beneficial treaties with regional or like-minded partners that guide their cooperation on climate technologies. Their technological choices, however, may differ depending on their respective resource endowments and individual political concerns, such as national security. Examples include cooperation on energy conservation among China, Japan and other Asian countries; geological carbon storage among major fossil-fuel producers such as the U.S., Canada, Norway, Australia, Russia and Saudi Arabia; and wind power among European Union (EU) nations and other countries. Once technologies are developed in niche markets and their costs are brought down, they have the potential to diffuse to the rest of world through the international interplay of technologies and institutions. A complementary global framework may play a role in legitimizing these activities; in letting them become aware of each other; in maintaining high political salience; and, potentially, in linking them to climate-related commitments.
A distinctive feature of the paper is that nations typically put emphasis on niche market creations and market transformations (deployment activities), rather than on the basic Research, development, and demonstration (RD&D) projects that have been popular, and which have been most closely associated with the term “technology cooperation.” There are certain areas where basic RD&D works, but they do not represent the full range of possible technology cooperation. The creation of international niche markets for the development of nascent technologies for renewable energy, carbon sequestration and cutting-edge energy-conservation technologies (e.g., hybrid cars and heat pumps) could lead to rapid technological change. For energy conservation in transportation and residential sectors, transforming markets by implementing energy efficiency standards and labeling programs has proven to be effective.
A political debate had been initiated in Japan prior to international negotiations in 2005. Japanese views, like any other country’s, are divided—there are optimists as well as pessimists on the matter of continuing with a Kyoto-style binding cap regime. However, there seems to be a broad consensus that the binding cap approach is not very promising for developing countries in the near future, and that the CDM is not going to be a major driver for massive energy savings and CO2 reductions in developing countries. The Industrial Structure Council, for which METI serves as the secretariat, published a report on technology cooperation and sectoral approaches—with an emphasis on energy efficiency—but the details are still to be determined.
It should be noted that this book’s proposal is flexible vis-a-vis the overarching regime. This means that our research findings, and the proposal itself, can be housed either with the UNFCCC/Kyoto Protocol regime, APP or other regimes, as long as key conditions—of which being cooperative rather than coercive is crucial—are met. This will be discussed further in Chapter 6.
1.2 Changing International Relationships in Asia: Economic Development, International Cooperation and Technology Transfer
East Asia has been the growth center of the world for a couple of decades already, with national circumstances and cooperation priorities changing over time. There have been large amounts of ODA flows to the region but they are currently in decline. Demonstration projects of new technologies funded by donor countries have been highly effective in training engineers in the recipient countries in the past. However, these activities are getting dwarfed by private activities including FDI, joint ventures and domestic enterprises. As the economies “take off,” some international cooperation activities are becoming outdated. Still, there is high potential for energy efficiency improvements that do not prohibit economic benefits. The challenge for policy-makers is to identify an effective mode of international cooperation, given such significant changes in national conditions.
The term “technology transfer” is prominent in such policy debates, but this term is often a source of confusion. Defining the term serves to clarify the perspective of our work in this book. There are two ways to define “technology transfer”:
A. Narrow definition: an action by which developed countries provide technology (hardware equipment, intellectual property rights, etc.) to developing countries at no or low cost.
B. Broad definition: a broad set of processes covering the flows of know-how, experience and equipment for mitigating and adapting to climate change among different stakeholders (IPCC 2000).
The latter definition is rather broad. The term “transfer” is defined to “encompass diffusion of technologies and technology cooperation across and within countries.” Further, it “comprises the process of learning to understand, utilize and replicate the technology, including the capacity to choose and adapt to local conditions and integrate it with indigenous technologies” (IPCC 2000). In this definition, there are many roles for governments to create an “enabling environment” for technology transfer including education, training, infrastructure development, policy development, law enforcement and so forth.
While the broad definition (B) captures the meaning of technology transfer better than the narrow one (A), and is frequently used in scientific literature including IPCC, we must be careful that the narrow definition is neither consciously nor unconsciously adopted by the large majority of engineers and policy-makers when we communicate with these audiences. To avoid confusion in this text, we carefully distinguish between the two definitions.
The potential for technology transfer is limited in its narrow definition (A). However, there are a lot of opportunities and mutual benefits for technology transfer as defined by its broad definition (B). In other words, if a country is asked to pass on certain technologies for free, the volume of potential activities would be limited. However, if countries cooperate to create an appropriate “enabling environment” for the diffusion of energy efficiency technologies, the implications of such a coordination system could be substantial.
1.3 Policy Development and Regulatory Harmonization: Opportunities
To some extent, energy efficiency improvements take place without policy intervention in order to save energy costs. However, there is evidence that efficiency improvements will not happen without a policy to support them. In other words, energy efficiency improvements will not happen quickly without top-down policies. This is different from traditional energy development aid that goes to specific infrastructure developments.
Despite relatively high energy prices since the 1970s, many energy (and cost) saving opportunities have remained untapped. Even investment opportunities with a short pay-back time of less than two years are not undertaken because of many barriers to energy efficiency investments. As one example of these barriers, macroeconomic conditions may not allow financing for energy efficiency improvement. Other barriers include: distorted or incomplete price signals; lack of accessible information for facility owners; lifestyle behavior and consumption patterns; and lack of attention to energy efficiency in conventional methods of policy development. Policies are often necessary to overcome these barriers, and that is why there are various energy efficiency policies implemented in all countries on top of energy pricing policy. Policy tools include: information sharing; energy standards and labeling of efficiency performance for appliances, automobiles and boilers; voluntary agreements; and so forth.
International coordination of such domestic policies is generally beneficial to individual countries for two reasons. First, individual domestic policies are stable with legitimization at the international level. Second, countries can learn lessons from each other regarding institutional designs, implementation practice, success stories and failures. For example, a small and less-developed country can benefit from joining internationally coordinated efforts by adopting an internationally established regulatory system with minor modifications to adapt it to the local context.
The last example is sometimes referred to as “regulatory harmonization.” A problem here is that the term “regulatory harmonization,” like “technology transfer,” can mean different things to different people, and it may be misinterpreted and sound intrusive. For some, harmonization has a legal meaning, which implies that countries will be forced to follow the same procedures. The authors are of the view that harmonization is not a threatening process, but that it refers to internationally coordinated efforts to promote energy efficiency policy. Internationally coordinated efforts might include the adoption of the same test procedure, energy efficiency performance standard or regulatory framework. National participation in such efforts are voluntary by nature.
Countries’ willingness or reluctance depends on the level of harmonization among historical, political, economic and climatic characteristics. For globally traded equipment such as computers, willingness is high by all countries as evidenced by the widespread use of the Energy Star labeling system. For equipment whose specifications are dependent on lifestyle and climate, such as refrigerators and cooking heaters, the willingness is generally low. Even in the latter case, governments in Asian developing countries, whose national markets and administrative capacities are limited, recognize the merits of saving regulatory costs and promoting international trade by adopting international standards with appropriate modifications. Alignment with international standards, including identification of appropriate levels of harmonization for each nation, is on the agenda for all countries and the authors are of the view that there is neither a single front-runner nor a notable laggard.
- ^ For comprehensive discussions of barriers to energy efficiency improvement, see IPCC 2001 p348.
This is a chapter from Cooperative Climate: Energy Efficiency Action in East Asia (e-book).
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