Opening Remarks at Asia-Pacific Climate Week High Level Opening
Delivered at Asia-Pacific Climate Week High Level Opening in Bangkok, Thailand
Honourable Inia Seruiratu, High Level Climate Champion for Global Climate Action,
Mr. Dirk Forrister,
Ladies and Gentlemen,
Welcome to the High-Level Segment of the first Asia-Pacific Climate Week. I am pleased there is such an appetite for governments and private sector representatives to meet and work together to accelerate climate action in Asia and the Pacific. As the regional arm of the United Nations in the Asia-Pacific region, ESCAP is pleased to work with UNFCCC, UNEP DTU, UNDP, ADB and other regional partners to contribute to raising the region’s ambition for climate action.
Over the past two days, we have heard about the potential carbon pricing has in the region. Countries clearly recognize this is a cost-effective instrument to achieve their emissions reduction plans. Some are forging ahead to create new carbon markets, while others are strengthening their existing systems. Japan has two subnational and linked schemes, the Tokyo and Saitama ETS, which together cover about two-fifths of emissions. India experimented with subnational schemes. It has piloted an innovative emission trading scheme related to respiratory solid particulate matter (RSPM) in three polluting states (Gujarat, Maharashtra and Tamilnadu) and its Perform Achieve and Trade (PAT) scheme is a flagship which involves trading in energy saving certificates between energy intensive industrial production units. South Korea launched its national ETS in January 2015 which cover over two-thirds of its emissions. New Zealand has had a national ETS in place since 2008, covering nearly half of its emissions.
China, the world’s largest emitter of carbon dioxide, views its impending emissions trading system as a key policy tool to control its greenhouse gas emissions, covering some 10,000 enterprises in the power generation and key industrial sectors. Much is to be said for China’s gradual approach to establish its national system through an initial pilot which allows for adjustments to legislation, methods to value the permits in the pilot exchanges, and data accuracy to ensure a smooth launch.
Many more countries across the region are taking preparatory steps to harmonise their monitoring, reporting and verification systems and to increase transparency around their emissions reduction projects. This will be important for implementing the co-operative mechanisms of Article 6 of the Paris Agreement, which involve the transboundary transfers of carbon emissions reductions. If countries get it right, and succeed in creating a regionally linked carbon market, estimates suggest they could benefit from cost-savings in the region of 30 to 50 per cent over the coming decades to realise their emissions reductions goals. Many corporates in the region are applying carbon shadow pricing to shift investment decisions and take into account the beliefs they hold about the anticipated future path of global carbon prices1.
This is encouraging progress. Yet, to achieve the deep emissions cuts needed to stay within the globally agreed temperature limits, experts remind us that carbon prices must increase to at least US$40/tonne by 2030. This will be a medium-term agenda for the region.
More immediately, effective action on the ground will depend on access to finance. Many countries in the region have very limited domestic resources and will require greater access to finance. That is why today’s focus will be on finance and how to move beyond stand-alone climate finance grants and concessional lending to tap into the much larger universe of international capital markets to promote the transition to low-carbon and climate-resilient societies in our region.
Several countries represented here do not have developed capital markets. The small island development States and the least-developed countries are the most vulnerable to the climate change threat. Yet they are also the ones least able to tap these markets. Typically, these countries cannot independently raise finance through channels such as green bonds, due to their low credit quality and perceived risks, small size, underdeveloped local capital markets, gaps in capacity and knowledge to identify suitable project pipeline or to create suitable instruments.
Fiji has succeeded. It has issued a green bond and raised US$ 50m for climate change mitigation and resilience investments. Philippines has issued a US$ 225m green bond by a clean energy producer last year. Other countries in the region, notably China and increasingly India, are emerging as green bond giants.
I believe greater regional co-operation in this area and targeted public-private initiatives and innovative solutions can indeed offer other countries, which like Fiji are vulnerable to climate change, viable interim solutions to much needed finance. These would involve blending climate grants to unleash larger amounts of private capital towards the common aim, as well as credit enhancement and de-risking instruments, and greater transparency and data about climate risks and opportunities in line with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures recommendations.
We believe these Climate Weeks provide are a useful platform for public and private climate action stakeholders from across our region to exchange the knowledge and best practices needed to move forward on this important agenda. ESCAP is building the requisite network of State and private-sector actors to scale up climate action; evolving regional action agendas covering the interface between public and private sectors; and facilitating and strengthening climate partnerships from the global South.
ESCAP could support carbon pricing initiatives in the region. It is the obvious platform to share experiences and knowledge between the countries that already have compliance systems in place with those considering their next steps. Areas for greater harmonisation of systems across the region for cost-saving mitigation measures could also be discussed. Our energy work could support complementary policy measures to carbon pricing such as eliminating inefficient fossil fuel subsidies, promote energy efficiency and renewable energy. The region needs support to strengthen the provision of quality data to facilitate transboundary trades of carbon reduction units through facility-level monitoring, reporting and verification. In the area of statistics, ESCAP could support member States implement the upcoming CORSIA aviation scheme as many national authorities lack this capacity. Our trade and investment work could help increase understanding about international competitiveness concerns of energy- and carbon-intensive industries arising from carbon pricing schemes. Finally, our Tax Expert Group could further explore how to achieve greater political buy-in for carbon pricing, especially how to recycle revenues back to consumers or use them to finance sustainable development.
Our discussions today will culminate in a Regional Climate Action Agenda that will provide guidance on the region’s climate priorities at the interface between public and private sectors. It will identify areas where immediate action is feasible to achieve higher ambition. We are the first region to develop such an Action Agenda. I am pleased that our Action Agenda will be entrusted to our High-Level Climate Champion to take it forward to the September 2018 upcoming Global Climate Action summit in California and lead the way for other regions to follow suit.
1Carbon Disclosure Project (2017). Putting a Price on Carbon: Integrating Climate Risk into Business Planning. Their recent study found that in China, Japan, and South Korea, 359 large companies are already applying shadow pricing.