|Project Rationale and Linkage to Country/Regional Strategy
Climate change is emerging as a key development challenge in the region. A growing body of scientific evidence indicates that increases in greenhouse gases (GHGs) caused by human activities are predominantly responsible for rapid ongoing climate change. In its fourth assessment report in 2007, the Intergovernmental Panel on Climate Change (IPCC) highlighted the need to halve energy-related carbon dioxide (CO2) emissions by 2050, if global temperature increases are to be kept below 2 to 3 degrees Celsius; such increases correspond to stabilization scenarios that limit atmospheric CO2 to concentrations of 450 and 550 parts per million (ppm), respectively. A global-scale assessment by the International Energy Agency (IEA) has found that CCS technologies have the potential to reduce overall climate change mitigation costs and increase flexibility in reducing GHG emissions. CCS is an integral part of all GHG emission reduction strategies proposed by IPCC and IEA.
Globally, electricity generation accounts for 29% of CO2 emissions. CCS provides the second-largest potential for CO2 emission reductions (after energy efficiency). However, CCS is in the early stages of development and urgent actions are required to undertake demonstration projects. IEA, in its report to the Group of 8 summit in Hokkaido, Japan in July 2008, recommended that at least 20 fully integrated industrial-scale demonstration power plants with CCS be committed and new generation stock be prepared for future CCS retrofit. The Group of 8 summit strongly supported the launching of 20 large-scale CCS demonstration projects globally by 2010, taking into account various national circumstances, with a view to beginning broad deployment of CCS by 2020. At the moment, there is no industrial-scale coal-based power plant with CCS. Based on IEA's World Energy Outlook 2008, a total of about 1,000 gigawatts of new coal-based capacity will be added in the People?s Republic of China (PRC) and India over the next 20?25 years. In general, Asia is expected to continue to be the largest user of coal.
The CSLF seeks to make CCS commercially competitive and environmentally safe. It is an international effort largely supported by ADB member countries and is expected to result in technology transfer and rapid diffusion of CCS in developing member countries. CSLF members are national governmental entities that are significant producers or users of fossil fuels and have committed to the investment of resources in CCS technology research, development and demonstration activities. Among ADB?s developing member countries, the PRC and India are CSLF member countries. The activities of the CSLF are conducted by a policy group, which governs the overall framework and policies, and a technical group, which reviews the progress of collaborative projects and makes recommendations to the policy group on any needed actions. The United States Department of Energy is the secretariat for the CSLF. India is the vice chair of the CSLF technical group.
CCS is particularly relevant to future decoupling of the growing energy needs of large, coal-based economies (such as those of the PRC and India) from rising CO2 emissions. Both the PRC and India have taken a keen interest in CCS development. The CSLF is one of the few forums that brings together large fossil fuel-based developing and developed economies to discuss and collaboratively work on the early development of this key technology. Participation by both the PRC and India in CSLF also strengthens regional cooperation in this area. Financing of CCS is proving to be a challenge in both developed and developing countries, due to the high costs and risks associated with CCS. The challenge is more pronounced in developing countries due to the absence of regulatory requirements and economic incentives. The task force (para. 1) was set up under the CSLF policy group to formulate policy recommendations to overcome costs and associated barriers in the early stages of demonstration projects in developing countries. The task force recognizes that multilateral development banks (MDBs) have a crucial role to play in identifying appropriate policy recommendations and formulating low-cost funding mechanisms, due to the MDB?s (i) perceived balance and neutral approach on the critical issue of transfer of technology, and (ii) long-term engagement with developing countries. The task force aims to analyze key policy issues and barriers and help accelerate formulation of creative policy recommendations, which can then be submitted to the policy group for further consideration and possible inclusion in the CSLF ministerial meeting in October 2009.
Recognizing the direct relevance of CCS, both in coal-based power plants in the PRC and India and more generally in Asia and the Pacific, ADB is already ahead of other MDBs in formulating suitable interventions in the region, particularly in the PRC. India has shown strong interest in CCS-related activities, as illustrated by its active and prominent role in CSLF. The proposed TA strongly supports the energy sector policies and climate change agenda of ADB.
The timing of CCS deployment is critical, and demonstration of CCS in major coal-consuming developing countries such as the PRC and India will need to be brought forward so that the time lag between proving CCS in developed countries and its uptake in developing countries can be minimized. The global CCS community recognizes that appropriate low-cost financing and rapid transfer of technology to developing countries are critical issues in moving forward with CCS. In particular, there is an urgent need to strengthen the analysis of CCS-related global issues such as (i) intellectual property rights (IPRs)-related policies and incentive mechanisms to bring CCS technologies to market in developing countries; (ii) the rationale for additional investments in new capture-ready power plants to avoid carbon lock out, and assessment of elements of additional capture-ready costs and their estimation in developing countries; (iii) estimates of the need for financing concessions, (and their level and makeup, if needed) for with-CCS and capture-ready projects, and assessment of existing and emerging MDB clean energy funds and their direct relevance in providing low-cost funding and risk sharing for CCS demonstration; (iv) assessment of ways to reduce trade barriers surrounding CCS technology in international trade negotiations, and to assess possibilities and ways of classifying CCS in the World Trade Organization in order to benefit from the proposed reduction in tariffs for environmental products; (v) an assessment of the interest by MDBs in investments in CCS demonstrations; and (vi) evaluation of policies needed to seek private investments in CCS projects.
While suitable in-country interventions are being designed to address capacity issues and country-specific barriers (para. 6; footnote 10), there is an urgent need to address the global issues in parallel to keep the CCS agenda on target. The proposed regional policy and advisory TA will analyze these issues in greater depth and in the perspectives of developing countries, and make recommendations to an international body such as CSLF. It is expected that lowering these critical barriers may provide opportunities to accelerate CCS deployment in the PRC and India.