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Sectoral Approaches, Trade and Competitiveness

Sectoral Approaches, Trade and Competitiveness. Peter Wooders Senior Economist, Climate Change, Energy & Trade. Open Questions. What options are under serious consideration? How would Sectoral Approaches impact Trade & Competitiveness? Are there other Benefits?

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Sectoral Approaches, Trade and Competitiveness

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

  2. 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. Impact on Trade Trade with Carbon cost Price ($ / tonne) Export Price Import Value with Carbon Cost Trade Import Value 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

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