Private Sector Perspective on GHG Market: role and its potentials of Korean Industry Prepared for the 5 th UNCTAD Climate Change Workshop August 29-31, 2001, Rio de Janeiro Hyo-Sun Kim, Korea Gas Corporation
Status of Korea in 3E(economy, electricity, and emissions) GNP ENERGY/ELEC. CO2 EMISSIONS Billion$ % Quad. btu Bill. kwh mtc Mtc/$1990 Mtc/pop CHINA 1130 7.5-8.0 31.8 1178 668.7 0.72 0.53 JAPAN 4800 1.5-2.0 21.7 1018 306.6 0.09 2.4 S. KOREA 406.7 8.2-10 7.4 221 107.5 0.25 2.3 N. KOREA 21.8 6.2 1.5 32 33.4 1.7 1.5 593.4 RUSSIA 3.2-5.0 26.0 772 400.1 1.1 2.7 Source: www.eia.doe.gov, International Energy Trend 2000
Emission trends in power sector 1990 1995 1996 1997 1998 1999 billion kwh 500000 CO2(mtc) 400000 CH4(mtc) 300000 N2O(mtc) 200000 Total(mtc) 100000 10,332 5 33 10,370 22,398 11 74 22,483 26,601 12 90 26,703 28,935 12 100 29,047 25,282 8 98 25,387 0.14 27,932 0.12 0.1 0.08 0.06 0.04 9 107 28,048 0.02 kg/kwh 0 Kg/kWh 0.0963 0.1218 0.1230 0..1294 0.1179 1995 2000 2005 2010 0 0.1172 year total electricity CO2 intensity
Korean primary energy consumption toe 1997 % toe 1998 % 1999 toe % Growth rate (%) COAL 34,799 19.3 36,039 21.7 38,155 21.0 5.9 OIL 109,080 60.4 90,582 54.6 97,270 53.6 7.4 GAS 14,792 8.2 13,838 8.3 16,849 9.3 21.8 HYDRO dominates 9.3% 1,351share 0.7in primary 1,525energy 0.9consumption 1,517 0.8-0.5 NUKE is expected 19,272 to be 49.8toe(=14.9% 10.7 22,422share 13.5in primary 25,766 energy) 14.2 in 2020 14.9 RENEW 1,344 0.7 1,526 0.9 1,806 1.0 18.4 Source: keei(2000)
Expectations - as an exporter - as an investor
Role allocation BY PUBLIC SECTOR Policy efficiency Options on the table Global environmental issues BY PRIVATE SECTOR Market efficiency Reality check Business interests offset exporter, potential investor
Expectations from getting involved with KP implication process as an exporter To lessen financial burden on venturous projects Capacity building for sustainable development: Integration of Energy-environment policy framework by internalising externalities(taxes, trading scheme, etc) Technology transfer with risk sharing Lessons from the experience
What to expect from participation in GHG market as an investor To provide another business option To utilize financial instruments for risk management of energy commodities To obtain learning by doing experience To ease north-south economic cooperation: especially on infra development in North Korea
How to formulate market participation within Kyoto frame Bilateral arrangement with private sector involvement - Design bilateral Clean Development Mechanism Multilateral commitment in accordance with national registry - Participate in multilateral carbon fund with financial instruments - Coordinate public-private partnership(ios, NGOs, academia) - Build electricity-emission trading platform in Northeast Asia
potentials
Evaluating CDM potential in Korea volume tech finance econ OVERALL ENERGY EFFICIENCY RENEWABLE ENERGY LANDFILL GAS FOREST / REFOREST INDUSTRY ESCO WIND SOLAR WASTE SEQUES TRATION + + ++ + ++ +++ +++ ++ + ++ ++ + ++ + +++ + ++ +++ ++ ++ + ++ + + challenging great moderate moderate great moderate Source: BeSeTo-Korea and KEI, 2000
Projects under consideration by Korean gas industry Irkutsk long-distance gas pipeline project Kaesung-Seoul gas pipeline project Fugitive gas related project natural gas vehicle
Barriers vs. requirements
Barriers for being competitive in GHG market High share of energy-related GHG emissions: most of long-term energy projects are considered as BAU Small room for offset creation due to the significant energy efficiency improvement in industry over the last decade Relatively high abatement costs Uncertainty in status of government: non-annex I for 1 st commitment period and beyond? Lack of incentives for early action for industry
Market and institutional requirements to be more aggressive in the market Access to multilateral CDM(including south-south) Clearness on right to claim the offset credit and liability (investor on energy network? Or power company?)
Non-market requirements Being realistic to definition of baseline and additionality Building partnership between south and north with local experts involved Ensuring governance with legal foundations in national and international framework: Northeast Asia needs attentions
Conclusions Risks and opportunities surrounding GHG offset market coexist Rule should support global participation under strong compliance regime CDM potential in Korea seems to be moderate in quantity, but high in quality Market activities of Korea as an investor are expected to increase market liquidity