Accelerating technology transfer through new market mechanisms and

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Accelerating technology transfer through new market mechanisms and services to help close the pre

Accelerating technology transfer through new market mechanisms and services to help close the pre -2020 gap Latin American & the Caribbean Carbon Forum Colombia, Bogotà 03 -05 September 2014 Sébastien Raoux, President & CEO Transcarbon International

The 2020 Emissions Gap • 60 Business as usual: 59 Gt. CO 2 e

The 2020 Emissions Gap • 60 Business as usual: 59 Gt. CO 2 e The remaining gap to stay within the 2°C limit by 2020 is 8 -12 Gt. CO 2 e/yr. Annual Global Total Greenhouse Gas Emissions (Gt. CO 2 e) Ø Case 1: 12 Gt. CO 2 e Case 2: 11 Gt. CO 2 e Case 3: 10 Gt. CO 2 e • Case 4: 8 Gt. CO 2 e Remaining gap to stay within 2°C limit: 8 to 12 Gt. CO 2 e 2°C range Median estimate of level consistent with 2°C: 44 Gt. CO 2 e 40 2010 Time (years) There is a disconnect between political ambition and practical reality. Ø • It is more likely than not that the gap in 2020 will be at the high end of the range. Technologies to reduce the gap are available but implementation is lacking dramatically. A ten year delay in starting emissions reduction leads to more than doubling the probability of exceeding the 2°C target. Ø After such a delay, energy-related CO 2 reduction rates until 2050 need to be on average 2. 4% per year (of 2010 levels), rather than 1. 5% per year. 2020 Source: The Emissions Gap Report 2013, a UNEP Synthesis Report

Options to Close the Gap • • In principle: Ø Adopting strict accounting rules.

Options to Close the Gap • • In principle: Ø Adopting strict accounting rules. Ø Moving towards unconditional pledges. Ø Increasing the scope of current pledges. Ø Furthering national and international action. In reality: Ø Options to reduce the gap under least-cost paths are closing. Ø Locking-in to carbon-intensive infrastructure will narrow the range of future options. Ø The transfer and implementation of low-carbon technologies is insufficient. Sources: Wedging the gap (Block et al. , 2012), UNFCCC technical paper (2013), IEA energy / climate map (2013)

The Technology Transfer (TT) Gap • Existing market mechanisms have limited efficiency in promoting

The Technology Transfer (TT) Gap • Existing market mechanisms have limited efficiency in promoting technology transfer, even for readily-known solutions. Ø Ø • Barriers to technology transfer are numerous: Ø Ø Ø • Limited scope of CDM project types involving technology transfer. The creation of capacity, in a recipient country, to adapt, produce or further develop low-carbon technologies is rare. Information and awareness. Capacity, network, and human skills. Policy, legal, and regulatory. Ø Ø Ø Technical (technology readiness level). Financial (capital costs). Economic (abatement costs). Transfer of breakthrough technologies must be accelerated Ø Innovation must be supported by national and international policies and effective carbon market mechanisms to overcome key barriers to technology transfer. Sources: Technology transfer in the CDM: an updated analysis (Murphy et al. , 2013), Technology transfer under the Clean Development Mechanism (Das, 2011)

Intrinsic Barriers to Technology Transfer • Two intrinsic barriers of (many) low-carbon technologies: Ø

Intrinsic Barriers to Technology Transfer • Two intrinsic barriers of (many) low-carbon technologies: Ø High upfront capital costs. • Even for some technologies with negative abatement costs. Ø 40$/t. CO 2 e 10$/t. CO 2 e High abatement costs. • Cost of ownership. • Innovation can help bring the marginal cost curve downwards and expand the pool of available low-carbon technologies. Ø Reallocation of financial resources (R&D) and strong carbon price signals are required. Source: Pathway to a Low-Carbon Economy, Mc. Kinsey & Company (2009)

Carbon Markets & Breakthrough LCTs • Carbon markets should stimulate innovation and diffusion of

Carbon Markets & Breakthrough LCTs • Carbon markets should stimulate innovation and diffusion of technologies to lower marginal abatement costs… €/t. CO 2 ICE Certified Emissions Reduction (CER) futures front contract Source: www. quandl. com/c/futures/ice-cer-emissions-futures

Carbon Markets & Breakthrough LCTs • Carbon markets should stimulate innovation and diffusion of

Carbon Markets & Breakthrough LCTs • Carbon markets should stimulate innovation and diffusion of technologies to lower marginal abatement costs… Ø but most carbon instruments are priced at <40$/t. CO 2 e or even <10$/t. CO 2 e. . . Ø … at insufficient prices to offset abatement costs and provide incentives for research and development (R&D) and diffusion of breakthrough technologies. Because the development of technologies involves sunk costs, uncertainty and high price volatility further delay investments. Ø • <40$/t. CO 2 e < 10$/t. CO 2 e A next generation of carbon mechanisms is required to bridge the technology transfer gap. Source: State and trends of carbon pricing, World Bank Group / Ecofys (2014)

Carbon Markets & Breakthrough LCTs • Carbon markets should stimulate innovation and diffusion of

Carbon Markets & Breakthrough LCTs • Carbon markets should stimulate innovation and diffusion of technologies to lower marginal abatement costs… Ø Sectoral crediting mechanisms can be effective to spur industry-specific solutions. Ø Technology-specific crediting mechanism could be more effective in stimulating breakthrough LCTs. U. S. compliance market SREC weighted average price August 2009 to August 2013 • Example of Solar Renewable Energy Credits (SRECs). • Homogeneous carbon prices is not the solution in the short term to spur the development and implementation of breakthrough Low-Carbon Technologies. • While a ton of CO 2 e should always be a ton, not all tons should be born equal. Ø Carbon instruments for priority breakthrough technologies should be priced commensurately with their abatement costs and their long-term benefits. Source for SREC historical price curve: SRECTrade (2013)

Bridging the Technology Transfer Gap Intellectual Property Market Technology Holder (IP) Transfer the ability

Bridging the Technology Transfer Gap Intellectual Property Market Technology Holder (IP) Transfer the ability to produce the good or service Technology manufacturer or service provider Crossing the “Valley of Death” End-User Market Technology end-users Transfer the good or service itself LOW CARBON TECHNOLOGY MARKETPLACE &BROKERAGE SERVICES • • • Provide knowledge of the IP and End-User markets Identify and pitch promising technology transfer transactions Support structuring of transactions Provide financing & risk mitigation The private sector can help bridge the technology transfer gap by providing services to connect the Intellectual Property (IP) and end-user markets for breakthrough LCTs. Source: Asian Development Bank (2013)

Priority Low-Carbon Technologies • Priorities for breakthrough LCTs: Renewable energy Ø • • •

Priority Low-Carbon Technologies • Priorities for breakthrough LCTs: Renewable energy Ø • • • Solar Wind Hydro / tidal Ø Energy storage Ø Waste to energy Ø Energy efficiency Ø Biomass/biogas/biofuels Ø Agriculture • • Transportation Ø • • Ø Biotechnologies agricultural practices Fuel switching Energy efficiency Water technologies Source: Third synthesis report on technology needs identified by Parties not included in Annex I to the Convention (FCCC/SBSTA/2013/INF. 7)

Conclusion • The 2020 gap is not closing. Ø Ø • Technical options exist

Conclusion • The 2020 gap is not closing. Ø Ø • Technical options exist but political ambition is lacking. Existing measures do not sufficiently stimulate innovation and low-carbon technology transfer. New market mechanisms and policy instruments must be implemented to support the emergence of breakthrough technologies. Ø Ø Ø Sectoral crediting mechanisms. Technology-specific crediting mechanisms (e. g. SRECs). Specific policies aimed at boosting climate-friendly technologies. • • Ø • Increase public R&D spending in priority areas, better international collaboration. Removing subsidies for fossil fuels. Increasing competition in energy markets. Use of innovation prizes. A STRONG CARBON PRICE SIGNAL IS REQUIRED. The private sector can help bridge the technology transfer gap by providing services to connect the Intellectual Property (IP) and End-user markets to facilitate implementation of breakthrough LCTs.