1 Synergies Between Climate Change Financing Mechanisms: Options for China The PCF/CC Synergy Workshop

2 Objectives of Presentation Identify potential synergies among climate change financial mechanisms In support of clean energy, renewable energy and energy efficiency Suggest how China can use GEF and PCF to facilitate climate change investments to meet strategic objectives

3 China’s Development Priorities Economic Growth Stimulate scientific and technological progress Enhance traditional industries with new technologies 7.0% real annual GDP growth Expand employment Source: China’s Tenth Five Year Plan Priorities of the Tenth Five-Year Plan

4 China’s Development Priorities: Energy Demand Growth in electricity consumption is projected at 5.5% per year through 2020 However… 7 of the world's 10 most polluted cities are in China (Source: World Health Organization) High costs of pollution (3-7% of GDP?) By 2020, China may be #2 contributor to GHG emissions At almost 20% of world’s total GHG = Green House Gases

5 China – Energy Policy GoC Strategy - Reduce the environmental impacts of coal-fired generation by: Diversifying the fuel mix Promoting energy efficiency & clean coal technologies Promoting renewable energy Climate change financing mechanisms can support all 3 objectives

6 Renewable Energy Strategy Objectives in Renewable Energy 10 th FYP Establish Mandated Market Share (MMS) Support local manufacture Better financial mechanisms Improve agency cooperation

Untapped Renewable & Energy Efficiency Potential Renewable Energy PotentialDeveloped Small Hydro (<25 MW) 75 MW23 GW Wind160 GW240+ MW Biomass125 GW?? MW Geothermal6.7 GW30MW SolarAbundant Source: CRESP & EIA BTU/GDP (1990 $US) Energy Efficiency China India USA Netherlands 7

8 Major Opportunities to Leverage Additional Resources Global Environment FacilityGlobal Environment Facility (GEF) - Climate Change Operational Programs Lowers costs Promotes commercialization & technology transfer Prototype Carbon FundPrototype Carbon Fund (PCF) Learn carbon trading by doing Both of which can enhance the potential for … Leveraging additional climate change funding such as… Clean Development MechanismClean Development Mechanism (CDM)

9 Global Environmental Facility Four Climate Change Operational Programs: OP 5. Removal of Barriers to Energy Efficiency and Energy Conservation OP 6. Promoting the Adoption of Renewable Energy by Removing Barriers and Reducing Implementation Costs OP 7. Reducing the Long-Term Costs of Low Greenhouse Gas Emitting Energy Technologies OP 11. Promoting Environmentally Sustainable Transport

10 GEF Climate Change Investments Already in China Efficiency & Conservation: $66 Million Efficient Coal Boilers Energy Conservation in Village Enterprises ESCO Commercialization/Barrier Removal Renewables: $50 Million Renewable Energy Development Capacity Building for Commercialization Methane Recovery Short Term Response Measures: $20 Million Coalbed Methane Gas Transmission and Distribution

11 And More to Come… Potential GEF Investments Energy Efficiency & Conservation: $25-30 Million Building Heat Efficiency Capacity Building Program Renewables: up to $150 Million Renewable Energy Scale-Up Program Agricultural Residue Power Generation

12 China Renewable Energy Scale- Up Program (CRESP) Long-term Program Supports: Introduction of MMS policy to increase markets, create conducive environment “Market infrastructure”: resource assessment, pre-investment studies, financing Cost reduction and quality improvement of local equipment Aims to develop additional 14 TWh/yr, about 8 GW additional by 2010

13 Global Environmental Facility What can it do? Remove policy barriers Facilitate RE Mandated Market System Promote sound energy prices Create business capacity/reduce transaction costs Project feasibility studies Technical skills Reduce cost of clean energy (renewables & clean coal) technologies Transfer of technologies Domestic production of equipment

14 Prototype Carbon Fund (PCF) What is it? Pilot fund to create a global market in carbon credits Principal objectives: GHG emission reductions through project based financing Promote sustainable development consistent with national priorities

15 Prototype Carbon Fund (PCF) What can it do? Not much $$Not much $$ (US$145 Million) Limited in the number and types of projects Learn by doingLearn by doing For GHG reduction projects Carbon trading … future CDM

16 Potential of the CDM Strategic Opportunities with GEF/PCF Huge potential market for carbon credits: By 2012 ≤ $1 Billion After 2012 ≥ $$ many Billions But initial credit price is low Currently 0-3 US$ per Ton CO2Eq PCF and GEF position recipients to fully capitalize on CDM Ability to meet market (CDM buyer) needs

17 CDM – Project Demand What will CDM Buyers Want? High probability of being accepted by CDM: Validation, monitoring, verification capability Ownership of emission reductions is clear Least-cost GHG mitigation opportunities Supportive policy framework

18 Likely Early Stage Projects Methane capture projects Fugitive gas capture from landfills, gas flaring reduction, etc… Fuel switching and co-generation Renewables Small Hydro & Hydro rehabilitation Biomass Landfill gas Fossil Natural gas development – depending on baseline Energy efficiency & conservation

19 CDM Constraints How Can GEF/PCF Help? Policy framework GEFRenewables Mandated Market Share (MMS) & Appropriate energy pricing  GEF Clean technology costs GEFProject development/Tech transfer  GEF Capacity & high transaction costs PCFLearn carbon trading by doing  PCF Baselines and standards PCFLearn carbon market/CDM by doing  PCF

20 Concluding Thoughts  GEF, PCF & CDM are complements not substitutes  Potential for synergies is large, if China wants to enter CDM trade