Opportunities and Challenges in Promoting Energy Efficiency Under the

Clean Development Mechanism

by

Lando Velasco

Experts Group Meeting on Industrial Energy Efficiency, Cogeneration and Climate Change

Vienna, Austria, 2-3 December 1999

COP1 decision recognized energy efficiency as immediate and short-term measure to limit GHG emissions.

‘No regrets’ measure for rapidly growing developing countries.

CDM provides opportunity for private sector participation in GHG mitigation

There is a need to set in place enabling institutions and policies for CDM to take place.

BackgroundBackground

Energy Development ObjectiveEnergy Development Objective

Energy policies will be geared to support the market-friendly and pro-poor policy of the government and the restructuring of the energy sector. The objective for the energy and sector is to ensure the availability of competitive, affordable, and reasonably priced energy supply through socially and environmentally compatible energy infrastructure.-Medium-Term Philippine Development Plan, 1999-2004-

Energy Mix, 1999-2004Energy Mix, 1999-2004(in million barrels of fuel oil equivalent, MMBFOE)(in million barrels of fuel oil equivalent, MMBFOE)

0

20

40

60

80

100

120

140

160

1999 2000 2001 2002 2003 2004

Oil

Coal

Gas

Hydro

Geo

NRE

Cumulative Installed Generation Capacity Cumulative Installed Generation Capacity 1999-2004 (in Megawatts, MW)1999-2004 (in Megawatts, MW)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Others

NRE

Nat. Gas

Geo

Hydro

coal

oil

Source: Philippine Energy Plan (1999-2004), DOE

1994 Philippine GHG Inventory1994 Philippine GHG InventorySECTOR CO2 Emissions

(Gg)Energy 53,482Industry 10,603Agriculture 33,482Waste 7,198

TOTAL 104,765

Waste7%

Agriculture32% Industry

10%

Energy51%

Source: Manila Observatory,1999

GHG Emissions in the Energy SectorGHG Emissions in the Energy Sector

Sub Sector CO2 Emissions(Gg)

Power Generation 14,199Residential 5,260Industries 13,072Agri/Fishing/Forestry 789Transport 15,720Commercial 455Others 3,752Fugitive Emissions 234

TOTAL 53,482

Manila Observatory, 1999

Fugitive Emissions

0%

Others7%

Power Generation

27%

Commercial1%

Transport30%

Agri/Fishing/Forestry

1%

Residential10%Industries

24%

Manila Observatory,1999

Climate Mitigation OptionsClimate Mitigation Options

Implementation TimeFrame

GHG AbatementInitiative

Potential GHGEmissions

Reduction (milliontons of CO2equivalent)

Cost ofReduction

(US$ per ton ofCO2)

Energy Supply Side:Short to Medium Term System Loss Reduction 69.7 (-) 17.20Short to Medium Term Heat Rate Improvement 157.7 (-) 5.10Short to Long Term New and Renewable

Energy Wind 7.3 (-) 1.64 Solar 3.7 1.36 Biomass 3.7 0.27

Medium to Long Term Natural Gas 55 2.40

Energy Demand SideShort term Use of CFL 33 (-) 26.30Short to Medium Term Hi-eff Air Con System 44 (-) 6.10Short to Medium Term Hi-eff Refrigerators 11 (-) 5.40Short To Medium Term Hi- Industrial Motors 7.3 (-) 13.70Short to Medium Term Hi-eff Boilers 11 (-) 26.00

TransportMedium to Long Term Hi-eff Transport System 40.3 (-) 2.90

Portal, UNDP-CDM Study, 1999

OpportunitiesOpportunities Legislative and policy measures are in place

- Demand-Side Management Regulatory Framework

- Passage of Clean Air Act

- Proposed Electric Power Industry Restructuring

- Proposed Energy Conservation Act

Climate change provides additional (global) benefits to national development priorities.

Promote energy efficiency in rapidly growing cities and rural areas

- Integrate energy efficiency in local development planning process

- Establish energy efficiency standards for mass housing projects

Accelerate transfer of climate-benign technologies and in-flux of investments

- projected investment requirement for energy efficiency (1999-2004)

is US$150 million.

ChallengesChallenges Excess capacity (abt. 2000 MW) until 2004

Institutional arrangements

Enabling policies

- e.g. green pricing, subsidy removal, incentives, etc.

Bureaucratic process in approving CDM applications

- Flexibility to achieve balance in project development timeframe and consensus-building within the government.

Monitoring, evaluation, reporting and verification

- transparency

- capacity-building

- rules and procedures