An International Newsletter On Energy Efficiency Issues In The Developing Countries

July 1997 - Volume 4/5, Nº 2/1


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CONTENTS

1) Papers & Reports

2) Literature Reviews

3) Events

ENEWS is published with financial support from the International Energy Initiative - IEI and the State University of Campinas, UNICAMP, Brazil.
Founding Editor: Dr. Gilberto M. Jannuzzi, UNICAMP.
Founding Co-Editor: Dr. Ashok Gadgil, Lawrence Berkeley Lab..
Co-Editors: Koshy Cherail, Centre for Science and Environment, New Delhi, Otavio Mielnic, IEI and Mr. Geoff Stiles, SADC Industrial Energy Management Project, Zimbabwe.
Information Officer: Dr. Mario O. Cencig (cencig@cesar.unicamp.br), UNICAMP
Sergio Almeida Pacca (sapacca@fem.unicamp.br)., NIPE
Computing Assistant: F.P. Cardoso (fpc@fem.unicamp.br).
Please see additional information at the end.

Risk seen in wheeling rural power deregulating electricity will make remote areas pay more.

Rural Kansas electric cooperatives aren't afraid of competition - they just want competition with a conscience, three executives said Friday in a tour of the state. Pointing to what he called the warning signs of deregulation - the virtual disappearance of airline and bus service in western Kansas - Lester Murphy said, "Deregulation of everything else hasn't treated the rural areas well at all."

Murphy, executive vice president of the Kansas Electric Cooperatives in Topeka, was in Wichita with Stephen Parr, his company's vice president and chief executive officer, and Christian Hauck, president and chief executive officer of Sunflower Electric Power Corp. in Hays. They distributed and discussed a study done at Fort Hays State University, indicating that retail wheeling of electricity will have a negative impact on rural Kansas.

Retail wheeling opens the traditional monopoly electric industry, giving consumers the ability to pick and choose their power company. It draws its name from the industry's term - wheeling - for moving power from one company's grid to that of another.

In effect, wheeling gives every utility the right to use another utility's transmission lines to reach customers outside of their service area, and charge market rates. Kansans, presumably, could buy power from the Pacific Northwest in the most far-reaching scenario.

Rural Kansas hasn't changed since the 1930s in one respect, said Hauck: It is still a sparsely settled, rural countryside that doesn't have sufficient customer base to support its own electrical service, which led to the birth of the rural electrification system.

The study shows what electric rates could go up from between 35 percent and 85 percent under wheeling as it is proposed today, Parr said. There is a need for fairness and vision, he said.

"We've had to put together a system that wasn't cost-effective 50 to 60 years ago, and still isn't cost-effective," he said. "Given the unbridled competition without consideration to rural areas, rural areas are going to be hurt."

The investor-owned cooperatives are exploring various ideas to become competitive, such as selling excess power, consolidating facilities and cutting costs.

Deregulation in other industries has brought mixed results, Hauck said, pointing to sharp spikes last winter in the price of natural gas and propane.

The three cooperatives commissioned the study, led by Ralph Gamble, a professor of economics and finance at Fort Hays.

The study confirmed their fears of a negative impact on rural areas, Hauck said. The main problem is that the price of electricity goes up under any scenario studied.

All three utility executives are members of a retail wheeling task force set up by the Kansas Legislature. It is scheduled to issue a report in August.

If wheeling comes, Parr said, "We will work with it. But we believe that if wheeling comes in the form it is in today, it will hurt rural areas.

"And not only just rural area, but small urban areas. Towns like Wichita and Topeka aren't guaranteed they're going to see a benefit. The whole idea is being pursued by the big industrials, and they for sure will see a benefit."

Dennis Pearce
Fort Hays State University

Deregulation regarding the local level

Local governments should start preparing for electric deregulation, even if they don't operate a municipal utility.

Robert Muller, a managing director at J.P. Morgan Securities Inc., said local governments will have an expanded role in a deregulated market. They will need to ensure that all of their residents - not just large industrial users - receive power at competitive rates. To do this, communities have a number of options.

One would be "municipalization," in which a community takes over a distribution system or meter from an investor-owned utility. This could be problematic, however, because tax-exempt bonds cannot be issued for such an endeavor and investor-owned utilities will fight the move, making it very expensive.

A community could also aggregate, which involves banding a large base of users together to buy power. Generally, retail users such as grocery store chains employ this method, but local governments could also use the technique.

"The reason that governments seem so interesting as aggregators is that they seem the best-suited to serve the needs of small commercial customers," Muller said.

A third option would have local governments become "overseers," in which they would screen all electric companies vying for customers, guaranteeing reliability of service and a "safety net" for residents, which is not high on a utility's service list.

In addition to representing the smaller users, local governments will also probably have to contend with changes in tax laws - particularly those regarding generation facilities - and the recovery of stranded costs, which are fixed costs that remain after customers have left.

Last year, the Michigan Public Service Commission released a plan that could become the blueprint for deregulation in the state. It calls for the state to issue more than $2 billion of revenue bonds through a trust to help the state's two largest investor-owned utilities recover their stranded costs. The bonds would be repaid through a fixed charge to those customers on their utility bills.

Standard & Poor's has since reviewed its ratings and determined that the plan "will have little immediate effect" on the ratings of nine public utilities in Michigan, associate director Mark Glotfelty said. But down the road, the issuers will encounter many challenges if they want to stay competitive.

"We're not saying that public power can't compete, but it's going to be challenged in providing what the investor-owned utilities can provide," Glotfelty said.

By Aaron Baar

Evaluation of some efficient energy use programs in the Colombian residential sector.

1. Introduction

The country energy efficiency programs have been centered on three main points:

In 1996, other reasons were added to these ones (climatic aspects and the decrease of economical development), taking to a increase of electricity demand smaller than the expected projection.

Even though, this situation could changes in short term and therefore it is necessary to pursue energy efficiency patterns to grant the energy demand growth.

This document shows some results from the work carried out by Universidad Nacional de Colombia and Unidad de Planeacion Minero Energética. The target was the evaluation of some efficient energy use programs in Colombia by applying a model based on Systems Dynamics developed by the Facultad de Minas de la Universidad Nacional. The most influential electricity customers in the various economical sectors and energy end uses were studied and some scenarios have been built to find out the impacts of different actions.

In the second part of this document there is an introduction to Systems Dynamics application on energy systems and some general characteristics of the model are described. Furthermore, there is a description of the demand model with the results obtained for the 1996-2010 period. Finally the energy achievable potential is analyzed according to the following scenarios:

1. changing the energy price elasticity
2. replacement by natural gas
3. efficient lighting program for the residential sector
4. increasing the efficiency of end use equipments

2. Systems Dynamics application in energy systems

Since the sixties Systems Dynamics occupies an important role in forecast analyses, in general at a global level.

By means of this tool processes could be simulated through complex mathematical models or processes could be analysed when their behavior is unknown after the introduction of changes.

Systems Dynamics deals with two fundamental concepts: feedback and delay. Feedback monitors the system continuously and updates the information from the organizational dynamics. The delay concerns the information and material delays in the system. Systems dynamics deals with endogenous variables (level, flux, and parameters) and exogenous variables(from calculations or external models). Modeling deals with causal diagrams (cause and effect) influence diagrams (cause and effect in systems dynamics) and flux diagrams (software).

The developed model combines the energy supply (natural gas, electricity), the residential sector demand and some industrial and commercial end uses. The main characteristics of the model are:

Sectors modeling:

The residential sector is separated from uses of the commercial, public and industrial sectors.

Uses modeling

The main end uses in the residential sector are separated (heating, lighting, cooking, refrigerating, etc.), as well as in the commercial sector (electricity and thermal) and in the industry (lighting).

Sources modeling:

The model recognizes electricity, woodfuel, natural gas and LPG.

Replacement modeling:

There are many possibilities of replacements to the residential sector using more efficient equipment and thermal processes.

Financial modeling:

It is possible to find out ,through model simulations, financial effects from policies or DSM programs, such as rebates, subsidies and their effects on the energy demand.

Supply model:

The model finds out political effects regarding energy efficient uses and the natural gas development plan.

3. The Colombian case

3.1. The national aggregate model

To develop the aggregate model the residential sector was studied in detail taking into account its rural and urban components. In the industrial, commercial and public sectors the model has focused on lighting, freezing and air conditioning. The model considers electricity, natural gas, LPG, woodfuel and in part solar energy, as supply sources.

3.2. The Aggregate model case:

a. Socio-economical variables:

These variables were modeled based on the number of houses built and their increase. GNP per capita and investments were based on information from the Departamento Nacional de Planeación.

b. Energy demand:

The energy demand is calculated based on the demand of the installed equipments. For example, if the amount of dryers is quantified it is possible to simulate the entrance of new equipments , energy-efficient appliances and machinery to replace less efficient devices and old ones, once the energy demand can be determined. The model identifies the required energy for the operation of each equipment and the way they can be replaced by more efficient ones.

An important task of this modeling exercise is to identify the energy demand behavior over different energy price elasticities and investments.

c.Energy supply:

On the supply side the model manages the electricity generation, the natural gas development plan, and the pipeline expansion through the residential sector. In order to model the energy supply and demand a set of factors was taken into account for each scenery:

3.3. The regional model case:

The goal of a regional model is to evaluate easily the effect of national policies in the various regions and in different economical layers. The advantages of such model are clear when considering regions with different consumption patterns, per capita income and energy supply.

Four regions have been analyzed separately: Bogota, Medellin, Cali and Barranquilla.

a) macroeconomical variables

The source for this information was the Departamento Nacional de Planeación and data used to predict demand by UPME.

b) energy demand

The modeling of this variable is similar to the aggregate model. It is necessary to take into account that the model deals with regional and stratified patterns.

c) energy supply

The model takes the information from the natural gas spread plan, and from the pipeline expansion plan. The information is compared with the model results obtained by the end use equipments demand, specially in the case of electricity.

3.4. Projection Scenery:

Different efficient end use programs are compared with the high demand scenery proposed by UPME. This scenery supposes strong economical activity, low energy prices and minimal gas substitution. Additionally the scenery takes into account efficient lighthing and household appliance normalization.

4 Evaluated sceneries for the efficient energy use program

4.1. Introduction

Many analyses have been applied aiming to define efficient energy use programs and determine their effect on the energy demand growth. Among the most important of them there is the Estudio de Eficiencia Energética en los Sectores Residencial Comercial y Oficial held by Comision Nacional de Energía. Moreover to prepare Documento COMPES 2801 Estratégias para la Formulacion de un Programa de Uso Racional de Energia some forecasts showing the penetration of efficient energy use programs were set up.

4.2. Efficient energy use supporting strategies in Colombia

The main sceneries are discussed according to the efficient energy use programs, showing the benefits and the possible effects on energy demand.

The National model

  • The target was to identify effects from: financing, programs penetration, replacement, pricing.
  • Special programs may be discussed, like: lamps replacement in the residential sector, lamps replacement in the public sector, energy service companies.
  • 4.3. Efficient energy sceneries from COMPES 2801

    4.3.1. Energy demand direction

    residential sector lighting

    According to the directions of COMPES 2801, from August, 1995, there were different situations concerned with lamps replacement. Therefore the following sceneries exist:

    1. incandescent lamps replaced by fluorescent lamps
    2. different financing schemes for the lamps program according to decisions from the Comite Evaluador de la Situacion Electrica.
    3. rebate program for buying efficient lamps.

    4.3.2. Energy sources replacement

    Replacement by natural gas in the residential sector

    Regarding to the electricity replacement by natural gas, calculations have been made regarding the use of subsides and gas financing. In this case the evaluation refers to the financing of pipelines, internal equipments or both. The financing of gas appliances was also evaluated.

    4.3.3. Support Actions

    Normalization, certification and labeling

    To evaluate normalization, certification and labeling potential efficient forecasts were made as conceived, at first, by INEA, supported by Instituto de Investigaciones Elétricas de México.

    5. Results from the efficient energy use policies

    Different measures towards the efficient energy use, based on the model, where undertaken: I)energy elasticity price, II)replacement by natural gas, III)efficient lighting programs, IV)increase in the efficiency of end use equipment.

    5.1. Energy elasticity price analysis

    The first analysis that has been made with the demand model, was based on changes in the energy elasticity price. There were cases with constant elasticity (-0.27, -0.41, -0.47), these values were obtained from earlier studies.

    With constant elasticity in time, there was a variation from 1,730 MW with a -0.27 elasticity up to 2,720 MW with a -0.47 elasticity for the year 2,000

    There are some ways to increase the sensitivity (elasticity) to the energy price, such as: i)increase in the tariff. For example measures focusing innovative rates: time-of-day pricing, load management, etc. ii) keeping the costs of replacement, iii) supporting replacement by advertising campaigns.

    5.2. Natural gas program sensitivity analysis

    In the last months there was a concern towards the expansion velocity of the natural gas development plan and the condition offered to new customers (Workshop "Strategies for natural gas penetration" UPME, October, 1996). As result of this concern the Financiera Energética Nacional launched a credit program allowing the natural gas enterprises to obtain resources to finance the first investments of interested residential users. Under this scheme many situations, reflecting different proposals regarding pipeline expansion and internal installations financing were set up. As it could be observed applied policies related to the pipeline expansion have a high impact on the urban residential sector.

    From the results obtained it is possible to arrive to the following results: i) a financing for 3 or more years is recommended to get a rapid plan penetration. ii) if any rebate program is applied outcomes should be low.

    Regarding rebate programs 100% financing has the same effect as a 5 years loan. Best results are obtained (more replacements) with a 50% rebate and a 3 years payback period. Load forecasts from natural gas development program range from 300 GWh to 900 GWh in the year 2,000, and from 340 to 1,100 GWh in 2,010, depending on the chosen payback period.

    5.3. Residential lighting program sensitivity analysis.

    The Comite Evaluador de la Situation Electrica, created by the Presidency, suggested two strategies to execute the lamps replacement depending on the customer level. Rebate programs for the low income and a sales marketing for the high income.

    The process evaluation shows benefits from the residential lighting replacement. The main results are: i)Any option taken towards increasing efficient lamps installation and rebates, achieves potential. ii) estimated potential considering the replacement of one or two lamps ranges from 1,350 GWh to 1,500 GWh in the year 2,010.(1,700~2,000 GWh with 3 lamps).

    5.4. More efficient electricity equipment program sensitivity analysis.

    Energy savings based on more efficient appliances were accomplished. To verify general effects that standardization, labeling and certification programs reach, energy demand forecasts where applied by increasing the efficiency of electrical process.

    The potential considered means an increase of 10 or 20% for each equipment. This goal may be reached by the adoption of a certification plus a labeling program. The achievable potential ranges from 1,400 GWh with the 20% basis to 600 GWh with 10%.

    5.5. Analysis of the end of subsidy in the residential sector.

    A long term end of subsidies until 2,000 or a short term end of subsidies were considered and the second one shows a meaningless potential.

    5.6. Regional performance of the development gas program

    Piping systems financing encourages the use of natural gas in all the main cities in all layers.

    Regarding to rural areas, best penetrations are observed in low income customers, like in Bogota and Barranquilla, but there is no difference in terms of potential at the seaside region, where a considerable grid was installed.

    The potential of a high income layer is higher than that of a low income layer. Bogota presents a potential compared to Cali plus Medellin and Barranquilla.

    5.7. Results compared to the reference scenery

    Here the results to the aggregate residential sector are shown. It is necessary take into account that even if different sceneries were observed for each program, only the feasible ones where chosen. The table below shows the sceneries and the chosen options.

     
    Program Sceneries
    Energy elasticity price analysis  
    variable
    -0.27
    -0.41
    -0.50
    -047
    Natural gas program sensitivity analysis
    5 years
    4 years
    3 yerars
    2 years
    without financ.
    Residential lighting program sensitivity analysis
    2 without financ.
    3 without financ.
    1 with financ.
    2 with financ.
    3 with financ.
    More efficient electricity equipment program sensitivity analysis
    10%
    20%
     

    6.Policies options

    1.Rates programs: tariff reflecting real energy costs influence customers energy use.

    2.Efficient lighting programs: efficient lamps program in residential sector besides presenting a considerable potential are good opportunities for efficient use marketing.

    3.Natural gas development plan: 3 years loans have to be pursued to piping expansion in the residential sector. The program accomplishes considerable potential and financing is a good decision.

    4.enhancing efficiency program: any normative action expresses significant energy potential, therefore a labeling, certification and normalization program should be established.

    Camilo Sandoval
    camilo@iee.usp.br

    Renewables & Energy efficiency

    EU Commission gives backing to energy tax proposals

    EUROPE - The European Commission is giving its backing to a controversial plan for the imposition of minimum energy taxes on a range of fuels. The Commission believes that such measures are required in order to improve energy-efficiency, but is likely to face considerable opposition from a number of member states which believe the taxes will simply increase the burden on business.

    Wall Street Journal, Europe. 13/03/97 - Les Echos, France. 13/03/97

    Labour to halve windfall tax

    UK - The Labour party has scaled back the scope of its planned windfall tax on the privatized utilities, which the party planned to use to raise between 5bn stg and 10bn stg to fund projects to create employment for young people. Labour is now resigned to raising only about 3bn stg from the levy, which will fall on gas, water and electricity companies. British Telecom and BAA, formerly the British Airports Authority, will not be hit by the levy.

    All papers, UK. 19/03/97

    Pressure on utilities to sell capacity

    UK - A report from the cross-party Commons trade and industry committee has suggested that the government should consider forcing National Power and PowerGen to sell generating capacity unless there is a significant increase in competition in power generation. The committee said it was not convinced that 'sufficiently robust competition exists to guarantee that consumers will obtain the best possible prices'. Separately, the committee also expressed concern that the Offer, the electricity regulator, could not intervene in the conduct of the Electricity Pool.

    Financial Times, UK. 19/03/97

    Brazilian electric utility companies to control energy consumption

    Brazilian electric utility companies will set up household power consumption control equipment and raise fares at specific period of time. Bahia-based Coelba will invest R$2.6mil to purchase 13,000 units, while Rio Grande do Sul-based CEEE will invest R$1.4mil to purchase 5, 000 units. Both investments will be financed by Eletrobras. In June of 1997, Eletrobras authorized investments of R$12mil for local electric utility companies to purchase 44,800 units. Cesp and CPFL (Sao Paulo) purchased 8,000 units each; Eletropaulo (Sao Paulo) purchased 3,600; Celg (Goias) purchased 5,000; Light (Rio de Janeiro) purchased 4,000; Cemig (Minas Gerais) purchased 15,000, while Escelsa (Espirito Santo) purchased 1,200.

    Gazeta Mercantil, Brazil. 10/07/1997

    Import lobby prevents reform of the natural gas market

    E EUROPE - The government of Ukraine is gradually beginning to realise that the country's energy resources are being wasted. President Leonid Kutschma would like to put an end to the regional monopolies, which fight over natural gas, for example. Essen-based Ruhrgas AG is a possible partner. The German gas giant has been working for years on the modernisation of the infrastructure in order to make transit more efficient. In 1992, Ruhrgas formed an agreement with the state owned gas group AT Ukrgazprom and now trains managers and helps with maintenance.

    Handelsblatt, Germany. 18/03/97

    Greenhouse Gas Emissions Under Developing Countries Point of View

    The role of Less Developed Countries regarding the emissions problem is analyzed. Despite, some divergences among specialists on climate changes, the existence of the greenhouse effect is quite evident, as well as the increase of atmospheric concentration, through anthropogenic emissions. LDC are supposed to increase energy efficiency through technological improvements keeping the expansion of per capita energy consumption.
    Facing deregulation, utilities are choosing fossil fuels to achieve potential instead of renewable energy sources. This behavior is also supported by the lack of large investments in the countries. Even then, in Brazil for example, emissions from the energy system are less important than CO2 emissions from deforestation.
    The increase of energy consumption, in order to meet LDC´s development, has to be supplied by the use of efficient energy alternatives and renewable sources. To prevent CO2 emissions growth in LDC, large investments are necessary. Thus, transfer of financial resources from industrialized countries is expected, moreover the incremental costs to avoid emissions are small in developing countries.
    Greenhouse Gas Emissions Under Developing Countries Point of View
    PINGUELLI ROSA, L & SANTOS, M. A.
    COPPE/UFRJ - Rio de Janeiro, Brazil - 1996.

    Wind Power in China

    "Fresh and Clean: One Answer to China's Power Needs is Blowing in The Wind."

    China's air quality is being ruined by coal, which fuels 75% of the country's energy needs, and the need for energy -- from whatever source -- is overwhelming. The need for coal is expected to overtake its coal production target of 1,400 million metric tons by 2000. China has announced plans to stabilize sulfur dioxide emissions, but this goal does not seem realistic in view of the rate of increase of coal production.

    No wonder, then, that Chinese planners are considering clean wind energy as a supplemental source. It's now a little more costly than conven- tional power. But technological progress is lowering the cost of wind energy. Moreover, costs are going down as foreign countries compete for China's business. Danish and German wind-generator manufacturers offer soft loans to China for buying their equipment. U.S. manufacturers can- not compete in this arena because their efforts would not be subsidized by their government. Among all countries, only India has a larger market for large-scale wind turbines. But China is convinced that their country must move toward making their own wind turbines.

    Trish Saywell, 1997.

    Far Eastern Economic Review, volume 160, no. 15 (10 April), pages 53-54

    HIDROENERGIA

    5th International Conference and Exhibition
    29 September - 1 October 1997

    Small energy-generating hydropower plants are of undisputed importance for their economic and social role. They exploit a renewable, non-polluting and locally avaiable resource. Notwithstanding the ecological constraints, small hydropower most often has a positive effect on the environment. It is therefore necessary to foster this resource whenever it is available, including in developing countries, and provide adequate funding. In some cases, and in some regions, the development of small hydropower plants could also contribute to solving serious conflicts between man and the environment. As a result, it is important to support and develop this sector further.

    Against this background, the European Commission-Directorate General for Energy, within the framework of the Alterner programme, is promoting, in conjunction wish ESHA (the European Association for small hydropower plants), the 5th international hydroenergy conference.

    In addition to presenting the current state of small hydropower in Europe and the rest of the world, HIDROENERGIA '97 aims to closely review the prospects in this field, focusing on a number of different aspects:

  • Economical and political issues
  • Technology and engineering
  • Environmental impact
  • European programmes and international co-operation
  • Financing
  • Papers will be given by international experts in the field and by representatives of major international institutions. This will provide a valuable opportunity to stimulate economic and market development, while fostering international exchange and greater use of this renewable resource.
  • The study tours scheduled for October 2 and 3 1997, will ofer conference participants the opportunity to visit a number of hydropower plants located in South-western Ireland, Northern Ireland, Scotland and Wales.

    Running concurrently with the conference will be an exhibition, offering a wide-ranging and up to date overwiew of the tecnologies linked to small hydropower.

    Organising secretariat:
    Incentive Conference Ireland
    Noel Mitchell
    1 Pembroke Place
    Dublin 4
    Ireland
    Tel: 353-1-6671711
    Fax: 353-1-6671713 hidro@incentive-conf.ie

    Windpower 98, the American Wind Energy Association's annual conference, will be held in Bakersfield, California 27 April to 1 May 1998. Put it on your calendar. Bakersfield is at the Southern end of the San Joaquin Valley and is one hour (50 miles) west of the Tehachapi Pass. (Bakersfield is also 100 miles north of Los Angeles but locals don't like to admit that.) The 5,000 wind turbines near Tehachapi generate about 1 Terawatt-hour (1,000 million kWh) annually.

    The Kern-Kaweah chapter of the Sierra Club will sponsor a hike on the Pacific Crest Trail among Tehachapi's wind turbines either the Saturday before the conference (25 April) or the Saturday after the conference (2 May) depending upon interest. (We could do both weekends if there's sufficient interest.) The Sierra Club is an environmental and hiking group.

    Bakersfield is a city of some 250,000 and is a center of oil extraction (California's largest producing fields) and agriculture (as much cotton as Texas and the nations biggest producer of carrots). A large part of the Anglo population are descendants of the "Okies" who migrated here during the Dust Bowl to work in the fields. (Steinbeck's "Grapes of Wrath" was banned in Kern County.)

    Paul Gipe
    Paul Gipe & Assoc.; 208 S. Green St., #5; Tehachapi, CA 93561; ph: +805 822 9150; fax: +805 822 8452; pgipe@igc.org. Author of Wind Power for Home & >Business (Chelsea Green Publishing, 1993), and Wind Energy Comes of Age
    (John Wiley & Sons, 1995). http://rotor.fb12.tu-berlin.de/gwindenergy.html.

    Vancouver JI meeting in May:

    Press conference with Dr. David Suzuki & Climate change workshop presented by the Canadian Gas Association
    Global Climate Change and Joint Implementation Industry Enters the Fray John Palmisano from Enron's European office summed up industry's attitude toward Joint Implementation. He said: "Only one thing will make Joint Implementation happen, if there is a problem, regulate!" The corollary being, of course, that if there is no problem or government doesn't regulate, then industry isn't going to get involved in Joint Implementation.

    Those following the climate change issue will know that Joint Implementation (JI) (or Activities Implemented Jointly (AIJ) as it is called during the 1995-2000 pilot phase) refers to a climate change mechanism. This mechanism allows companies or agencies in industrialized countries such as Canada to invest in projects that take place in developing countries and that reduce emissions or increase uptake of greenhouse gases.

    JI or AIJ has been controversial. Some developing countries, like Costa Rica, see it as a good opportunity to combine foreign investment, technology transfer and environmental protection. Others, however, are suspicious of the mechanism, believing it is yet another way for the rich to get richer. Between industrialized countries there is also a difference of opinion and a resulting difference in approach. And even further down the pike, there has been mixed response from the private sector. Overall, investment in AIJ projects has been patchy at best.

    Late in May, at a week long meeting, about 200 delegates from over 40 countries met in Vancouver to talk about JI. They asked: Are legally binding targets and schedules going to be agreed to in Kyoto, Japan in December (at the next meeting of the Conference of Parties negotiating the Climate Change Convention)? Will JI be supported? What about credits? Will the JI pilot phase (AIJ) be deemed a success? All of these unanswerable questions were left largely unanswered and the discussion moved quickly to more concrete topics.

    We learned that of 25 JI projects approved by the US Initiative on Joint Implementation, less than ten are fully funded. There was talk about the decision by Canada's Joint Implementation office to not send a delegate to the Vancouver meeting. It was recognized that the audience included only a handful of industry representatives (major emitters of greenhouse gases and potential carbon buyers). Then there was acknowledgement that only two countries in the world plan to live up to their commitment to stabilize emissions of greenhouse gases at 1990 levels by the year 2000 (Britain and Germany). Yet those involved in JI have almost a zealous fascination with the clim ate change topic. After the first day of sessions one industry representative, Joe Kostler from Alberta Power, was taken by the passion with which project proponents from Brazil or India spoke about their efforts to alleviate poverty, to protect their environment and by descriptions of how the JI mechanism can help solve what are often life and death problems.

    Kostler and others like him began to understand that the JI mechanism is more than just an investment opportunity. And this trend seems to be taking increasing hold. Industry is talking about the issue with an improving level of understanding. Projects are better designed. Reducing emissions of greenhouse gases or of increasing their uptake is becoming less expensive.

    The range of energy efficient products has expanded. Fuel cells and other changes to our basic energy supply have made gains. In a recent announcement, British Petroleum sent a buzz through industry circles by formally recognizing the seriousness of climate change by stating it will invest heavily in non-fossil energy.

    In the June 9 issue of the prestigious Wall Street Journal, 130 CEOs in the US took out a two page advertisement to talk about their approach to the climate change issue. And agencies in Norway and the US kicked of a global trade in carbon emission credits by purchasing over $1-million worth of Costa Rica's government-backed Certifiable Tradable Offsets.

    But the public's level of understanding of the potential consequences of rising levels of greenhouse gases in our atmosphere remains low. In an opinion poll carried out by Insight Canada for Environment Canada late last year, the majority of Canadians said they believe the earth's climate is warming. However, only 38% of Canadians said they are "very concerned" and 48% were "somewhat concerned" that Canada will miss its stabilization target.

    The same poll found that 36% of Canadians finger private industry for Canada's shortcoming. A further 21% put this blame on individuals and 23% say it is the federal and provincial governments' fault. "What we need," says the Canadian Forest Service's Dr. Michael Apps, "is a perceived benefit at the local level." Industry representatives, generally, concur. As long as people buy our fossil fuel-based products, for example, we will keep producing them, was the general industry message. If society doesn't have a problem with climate change then why should industry make an investment to reduce emissions and why would governments regulate carbon?

    Yet this viewpoint is not proven out by Telecom Canada. This Canadian leader took the gamble and decided to phase out ozone-depleting CFCs irrespective of government or international initiatives. Not only did the company reap huge public relations kudos as a result, it also became a leader in CFC replacement technology. So where is the climate change leader, was the question posed by Dr. David Suzuki at a press conference dealing with what he believes is the most important issue facing society.

    Although they fall short of Telecom's example, a number of Canadian corporations, TransAlta Corporation and Ontario Hydro in particular, have made a foray into climate change. Their investments will help Canada reach its goal of stabilization. In fact, Ontario Hydro will more than meet the target of stabilization at 1990 levels by 2000. Furthermore, some government schemes are being changed to recognize the importance of reducing emissions of greenhouse gases. For example, the Ontario Energy Utility Board is expected to end its practice of setting pricing to encourage ever increasing sales of energy.

    In British Columbia, the BC Offset Pilot Project could get going in earl y 1998. This greenhouse gas emission trading program will be a first in Canada. Its flexible approach is intended to try out the concept. Expectations of a "couple of million dollars" of investments by a few BC companies may expand since Albertan companies have expressed an interest in getting involved with this BC pilot and both BC and Alberta players want to invite Ontario to table.

    The Intergovernmental Panel on Climate Change (IPCC) makes its opinion of how to deal with climate change clear. The IPCC's four recent conclusions are that human actions are affecting climate; action is economically justified; current commitments are inadequate; and a portfolio of actions to combat climate change should be implemented. With the IPCC's conclusions in hand, the David Suzuki Foundation, in conjunction with a US counterpart, has succeeded in having 2,800 leading American and Canadian economists, including eight Nobel Laureates, support action on climate change. These economists have signed a statement that says climate change is a risk; that total benefits of reduction policies exceed total costs; and that "there are policy options that would slow climate change without harming North American living standards, and these measures may, in fact, improve productivity in the longer run."

    Currently, the Joint Implementation mechanism is only a minor aspect of climate change. But it is likely to receive greater consideration as the effects of climate change become more apparent. Dr. Stowell from the US Department of Energy explained to the audience in Vancouver that her department's studies indicate that the financial cost of lowering emissions of greenhouse gases is reduced by 70% when US companies are allowed to take necessary actions anywhere in the world and are not limited to taking them on home territory.

    The US understands that if it agrees to legally binding targets and schedules, then it wants access to the JI mechanism as a cost effective solution. Staff from the US Initiative on Joint Implementation have, not surprisingly, been instructed to "beat the bushes" for JI projects. Enron's John Palmisano states that if governments were to implement flexible schemes for compliance, then countries, companies and citizens would discover cost effective means to meet targets. Now governments need to have the courage to put these schemes into place.

    Nicola Ross

    Woodrising Consulting Inc. 132 Main Street Erin, Ontario N0B 1T0 Canada Tel.: (519) 833-1031 Fax.: (519) 833-2195 email: nross@woodrising.com homepage: http://www.woodrising.com
    This story was published in EnviroLine on June 20, 1997.
    EnviroLine covers environmental issues of interest to Canada's energy and forestry sectors.
    For a sample copy of EnviroLine write: 222 Riverfront Avenue S.W., Calgary, Alberta, Canada, T2P 0A2,
    Tel: 403-263-3272, Fax: 403-263-3280, email: enviroca@cadvision.com.


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