No agreement yet on climate change

"In Asia the policy framework for renewables is almost the reverse of Europe where fossil fuel energy is discouraged with more incentives for renewable energy. In Asia fossil fuel is subsidized with less incentives for renewable energy."
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By Terry Lacey

(July 17, Jakarta, Sri Lanka Guardian) India and China did not agree to halve greenhouse gas emissions by 2050 at the G8 recent meetings in Italy. Will new donors in the Gulf and the G20 support climate change with real additional money while the West recycles aid commitments? What does this mean for funding renewable energy in ASEAN and Asia?

UK Prime Minister Gordon Brown wants a $100 billion climate change adaptation fund at the Copenhagen summit in December. The UK Conservative leader David Cameron says the UK Department for International Development (DFID) should help spend this. (Independent 11.10.09).

Aid experts like Kevin Watkins, a director at UNESCO, says this could mean a big drop in conventional aid, especially for Africa. Meanwhile the Abu Dhabi Fund for Development will commit $50 millions a year for 7 years to the new International Renewable Energy Agency (ARENA) which it will host. (Khaleej Times 10.07.09).

President Obama tried to use the G8 Summit in L´Aquila Italy to try and push for a deal on global warming at the December climate change summit in Copenhagen. The two groups of states which met in Italy were essentially the richest countries and the fastest growing countries, but they clearly had different interests.

The G8 comprise the US, UK, Canada, France, Germany, Italy, Japan and Russia. The G8 opened up talks on climate change targets with Brazil, China, India, Mexico, South Africa and Egypt. The Major Economies Forum will then also include Australia, Indonesia and South Korea.

Guy Caruso, Energy Advisor of the Washington based Centre for Strategic and International Studies recognized that “The bottom line is that the industrialized countries will need to provide the incentives to the emerging countries”.

The emerging countries are refusing to commit to specific emission reduction targets because they want the richer G8 to also make commitments to emission reduction targets and to make pledges to finance and transfer technologies to the developing world.

Meanwhile ARENA now being set up in the zero-carbon-waste Masdar City in Abu Dhabi is one of a new generation of international agencies set up to promote Renewable Energy internationally. Its Director General Helena Pelosse intends to globally network universities, NGOs and government ministries among plus 130 countries. But ARENA will not be a funding agency, focusing on “capacity building and policy advice”.

In Asia the policy framework for renewables is almost the reverse of Europe where fossil fuel energy is discouraged with more incentives for renewable energy. In Asia fossil fuel is subsidized with less incentives for renewable energy.

The big problem in Asia and developing countries is the lack of capacity on financial deal structuring and practical turnkey management. This is holding up development of small and medium renewable energy projects, whose high start-up and transaction costs discourage investors and developers.

Two new practical initiatives have been announced recently in Asian and ASEAN countries to try and fill the gap between renewable energy projects and investors.

One is the Private Financing Advisory Network (PFAN) backed by USAID, targeting the Philippines, Thailand, Indonesia and China, essentially proving consultancy services and business links to try and make sure that projects will happen.

Another is a Finnish initiative based on the successful Central American Energy and Environment Partnership (which helped fund 178 environmental energy projects in Central America between 2003 and 2008) now being extended to the Greater Mekong States and possibly the Indonesian provinces.

By the time of the Copenhagen Summit both sides have to put their cards on the table.

But in Asia as in the UK and Europe, as implied recently by Paul Golby the Chief Executive of mega-utility Eon, industry-wide planning delays, supply chain bottlenecks and weak carbon prices all put pressure on time-scales and targets for renewables, whilst coal and nuclear power look more reliable ways of meeting a large and growing energy gap.

In Asia energy security is more pressing than clean energy arguments and energy projects must be commercially viable and implemented faster.

The West will need to put more money into climate change policies and renewables in the Asian economic powerhouse if it wants environmental gains and trade benefits, and not at the expense of the poorest in Africa and Latin America.

Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.

-Sri Lanka Guardian