1. Sectoral Approaches, Trade and Competitiveness
Peter Wooders
Senior Economist, Climate Change, Energy & Trade

2. Focus: Trade & Competitiveness, Cement Sector
Open Questions
What options are under serious consideration?
How would Sectoral Approaches impact Trade & Competitiveness?
Are there other Benefits?
What is needed for their implementation?
Focus: Trade & Competitiveness, Cement Sector

3. Options under serious consideration
If International Agreement
Worldwide sector acting as a single entity - with full cap & trade within it - EXCLUDED
Sectoral Crediting Mechanism [SCM]
sector in a developing country would generate credits for sale if it emitted less than its target
form of extended CDM
“no lose” condition would mean no non-compliance penalty
Sectoral Cooperation – Technology; PAMs
e.g. Asia-Pacific Partnership (APP) Programme

4. Impact on Competitiveness
Carbon cost
Transport cost to Annex I market
Production Cost
($ / tonne)
Profit
Investment
Variable cost
Annex I
Non-Annex I
Sectoral Approaches don’t reduce Carbon Cost Difference

5. Import Value with Carbon Cost
Impact on Trade
Import Value with Carbon Cost
Trade with Carbon cost
Price
($ / tonne)
Export Price
Import Value
Trade
Trade (tonnes)
Key Drivers: Transport Cost, Carbon Price, Price Fragmentation

6. Other Benefits of Sectoral Approaches
Allows countries to progressively engage
Concentrate on key, measurable sectors
Develop data, understanding, capacity
May be more appropriate than Cap & Trade
Links into Technology & Financing debates
Better technology gives a range of benefits
Production cost reduction
Higher energy security of supply
Local Air Quality improvements

7. Implementation Needs Enough political support to drive negotiations
Including time in the UNFCCC agenda
Detailed scheme to negotiate on
Proposed by Industry and/or Government(s)
Access to Market for any Credits generated
Always (contentious) issues re: boundaries
Cement or clinker (semi-finished) production?
Include indirect emissions?
Data and Benchmarking are onerous

8. Current Status - Cement
Led by Cement Sustainability Initiative
18 companies, 30% of world production
CSI has been active since 1999
Exploration of Sustainability Issues
“Getting the Numbers Right” database
700 plants – 30% of world production
New CDM Methodology
Currently undertaking a major modeling study
Results driven by Blending, AFR, Transport Costs

9. Conclusions Few options under serious consideration
Sectoral Crediting Mechanisms
Sectoral Cooperation – Technology; PAMs
Limited impact on Trade & Competitiveness
Benefits: flexible engagement; reduced fuel use
Major Implementation Requirements
Political Support
Detailed Scheme Design
Data