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Climate ChangeClimate Change
Connection to ProfitabilityConnection to Profitability
Net Impact Bangkok Professional Chap...
2
What is Climate Change ?What is Climate Change ?
What is Climate Change ?What is Climate Change ?
Climate change (UNFCCC...
3
CC in ThailandCC in Thailand
1994: baseline of 286 million t CO1994: baseline of 286 million t CO22--eq/yreq/yr
19991999...
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Impacts of CC in ThailandImpacts of CC in Thailand
Impact: Sea levelImpact: Sea level
Effect:Effect: More inundationMore...
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Responses To DateResponses To Date
Tenth Five Year Plan includes CC;Tenth Five Year Plan includes CC;
New Institutions: ...
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Profitability Dimensions:Profitability Dimensions:
Difficult Balancing Act?Difficult Balancing Act?
Net Profit
1
2
3
4
5...
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Think Big, Take Small Steps:Think Big, Take Small Steps:
1.1. Optimize existing assetsOptimize existing assets
2.2. Look...
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Example of BusinessExample of Business
Opportunities in Asian Countries:Opportunities in Asian Countries:
Solar EnergySo...
9
Example of BusinessExample of Business
Opportunities in Asian Countries:Opportunities in Asian Countries:
ESCosESCos
Ene...
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Example of BusinessExample of Business
Opportunities in Asian Countries:Opportunities in Asian Countries:
Clean Develop...
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What was sold?What was sold?
Source: State and Trends of the Carbon Market 2008, www.carbonfinance.org
The 1970s oil em...
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ExampleExample of Benefits in Asianof Benefits in Asian
CountriesCountries -- IndiaIndia
USEPA Integrated Environmental...
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Example of Benefits in Thailand:Example of Benefits in Thailand:
SomboonSomboon Advance Technology PLCAdvance Technolog...
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Role of the International Agencies:Role of the International Agencies:
Time
Social and Institutional Realities
Technolo...
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……but Huge Remaining Challengesbut Huge Remaining Challenges
Policy frameworks (e.g. pricing and taxPolicy frameworks (...
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CC is a realityCC is a reality
Thailand is going to be affectedThailand is going to be affected
Think Big, Take Small S...
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Climate Change Connection to Profitability

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Luncheon Talk 21 Aug 2008

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Climate Change Connection to Profitability

  1. 1. 1 Climate ChangeClimate Change Connection to ProfitabilityConnection to Profitability Net Impact Bangkok Professional ChapterNet Impact Bangkok Professional Chapter JitendraJitendra ((JituJitu) Shah, World Bank) Shah, World Bank 21 August 200821 August 2008 OutlineOutline Climate ChangeClimate Change What is CCWhat is CC Why should Thailand and You careWhy should Thailand and You care Profitability AnglesProfitability Angles •• Financial,Financial, Social Responsibility,Social Responsibility, Environmental,Environmental, Sustainability, etc.Sustainability, etc. ExamplesExamples •• What has been done: success and profitsWhat has been done: success and profits Role of the World BankRole of the World Bank •• How can we helpHow can we help ConclusionsConclusions
  2. 2. 2 What is Climate Change ?What is Climate Change ? What is Climate Change ?What is Climate Change ? Climate change (UNFCCC definition):Climate change (UNFCCC definition): ““A change of climate which is attributed directly or indirectly tA change of climate which is attributed directly or indirectly too human activity that alters the composition of the globalhuman activity that alters the composition of the global atmosphere and which is in addition to natural climateatmosphere and which is in addition to natural climate variability observed over comparable time periods.variability observed over comparable time periods.”” Empirical Evidence:Empirical Evidence: •• Average temperature has risen by 0.74Average temperature has risen by 0.74°° C since 1900.C since 1900. •• Expected to increase 1.8Expected to increase 1.8--44°° C by 2100 if we donC by 2100 if we don’’t act now.t act now. •• Even the smaller prediction would be the most rapid centuryEven the smaller prediction would be the most rapid century-- long variation since the last Ice Age (in 10,000 years).long variation since the last Ice Age (in 10,000 years). •• Recent events in Myanmar, China and Mekong DeltaRecent events in Myanmar, China and Mekong Delta Awareness to CC is a business realityAwareness to CC is a business reality (whether you believe in the science or not)(whether you believe in the science or not)
  3. 3. 3 CC in ThailandCC in Thailand 1994: baseline of 286 million t CO1994: baseline of 286 million t CO22--eq/yreq/yr 19991999--2004: GHG emissions grew by 30%2004: GHG emissions grew by 30% 2008: Thailand ranks 242008: Thailand ranks 24thth emitter countryemitter country 2030 Projections: 840 million t CO2030 Projections: 840 million t CO22--eq/yreq/yr (50% power, 50% industry and transport)(50% power, 50% industry and transport) Countries with Largest Percentage Increase in Emissions: 1994-2004 0 10 20 30 40 50 60 70 Malaysia Thailand China Iran Spain India Saudi Arabia Turkey Egypt United Arab Emirates Indonesia Percent 1994-1999 1999-2004
  4. 4. 4 Impacts of CC in ThailandImpacts of CC in Thailand Impact: Sea levelImpact: Sea level Effect:Effect: More inundationMore inundation Impact: Sea temperatureImpact: Sea temperature Effect: MEffect: More acidificationore acidification Impact: PrecipitationImpact: Precipitation Effect:Effect: More floodingMore flooding Impact: DroughtsImpact: Droughts Effect:Effect: Bad harvestsBad harvests Impact: EcosystemImpact: Ecosystem changeschanges Effect:Effect: SubSub--tropical lifetropical life zones disappearzones disappear Truth: No obligation for ThailandTruth: No obligation for Thailand Reality:Reality: Thailand should be prepared for socioThailand should be prepared for socio-- economic and environmental adaptationeconomic and environmental adaptation Thailand could be a CC leader for SEAThailand could be a CC leader for SEA Immense opportunities for private sectorImmense opportunities for private sector (new markets, new technologies, and new(new markets, new technologies, and new business models will appear)business models will appear) Why Should Thailand Do Anything?Why Should Thailand Do Anything?
  5. 5. 5 Responses To DateResponses To Date Tenth Five Year Plan includes CC;Tenth Five Year Plan includes CC; New Institutions: Climate CoordinatingNew Institutions: Climate Coordinating Committee, Thailand Greenhouse GasCommittee, Thailand Greenhouse Gas Management Organization (TGO);Management Organization (TGO); Energy conservation measures;Energy conservation measures; Promotion of alternative energy;Promotion of alternative energy; Stabilized forest cover;Stabilized forest cover; Research on methane emissions;Research on methane emissions; CDM projects (7 registered, 20+ submitted,CDM projects (7 registered, 20+ submitted, 38 approved by TGO)38 approved by TGO) Policies MatterPolicies Matter
  6. 6. 6 Profitability Dimensions:Profitability Dimensions: Difficult Balancing Act?Difficult Balancing Act? Net Profit 1 2 3 4 5 6 Political viability 1 3 2 4 5 6 Financial feasibility 1 2 3 4 5 6 Social Responsibility 1 2 3 4 5 6 Climate Pollution Reduction ProfitorEffectiveness Costs of Action & InactionCosts of Action & Inaction –– ““Wait and SeeWait and See”” is not Sensibleis not Sensible InactionInaction •• Loss from 3% up to 20% of GDP (Stern 2007).Loss from 3% up to 20% of GDP (Stern 2007). •• Global losses of $160Global losses of $160--330 billion, projected to330 billion, projected to $850$850--1,350 billion by 2030 (UNFCCC, 2008).1,350 billion by 2030 (UNFCCC, 2008). ActionAction •• Stabilization of emissions would cost 0Stabilization of emissions would cost 0--3% of3% of global GDP by 2050 (IPCC, 2007).global GDP by 2050 (IPCC, 2007). •• Additional $200Additional $200--210 billion in 2030 to return210 billion in 2030 to return global emissions to current levels.global emissions to current levels. •• Costs of adaptation in developing countriesCosts of adaptation in developing countries around $9around $9--41 billion per year (World Bank, 2007).41 billion per year (World Bank, 2007).
  7. 7. 7 Think Big, Take Small Steps:Think Big, Take Small Steps: 1.1. Optimize existing assetsOptimize existing assets 2.2. Look for new lowLook for new low--carboncarbon solutionssolutions 3.3. Be ahead of regulation andBe ahead of regulation and energy pricesenergy prices CC as a Business OpportunityCC as a Business Opportunity Benefits of curbing CC emissions:Benefits of curbing CC emissions: •• First mover advantageFirst mover advantage (doing it now will be cheaper and more effective)(doing it now will be cheaper and more effective) •• Cost reductionsCost reductions (doing it will save you money)(doing it will save you money) •• Improved brand positioning and corporate imageImproved brand positioning and corporate image (doing it will be good for your business)(doing it will be good for your business) Business Opportunities in AsiaBusiness Opportunities in Asia Clean mass transport systemsClean mass transport systems Solar energySolar energy Wind energyWind energy HydroHydro--electricityelectricity Green buildingsGreen buildings Energy Service CompaniesEnergy Service Companies Climate proofed infrastructureClimate proofed infrastructure Climate adapted crops and livestockClimate adapted crops and livestock Methane capture from landfills and livestock operationsMethane capture from landfills and livestock operations Recycling and reRecycling and re--useuse EtcEtc……....
  8. 8. 8 Example of BusinessExample of Business Opportunities in Asian Countries:Opportunities in Asian Countries: Solar EnergySolar Energy SuntechSuntech Solar was founded in 2001 in Wuxi (China)Solar was founded in 2001 in Wuxi (China) ItIt’’s already a worldwide leader in solar energy:s already a worldwide leader in solar energy: •• Sales offices in North America, Europe, Asia, and AustraliaSales offices in North America, Europe, Asia, and Australia •• 4 production sites4 production sites •• 8,000 global employees8,000 global employees •• Employees: nearly 8,000Employees: nearly 8,000 •• Revenues: USD 1,348 millionRevenues: USD 1,348 million •• Net Income: USD 171.3 millionNet Income: USD 171.3 million •• Net margin: 12,7%Net margin: 12,7% •• Total Assets: USD 1,957 millionTotal Assets: USD 1,957 million •• 364 MW installed, good forecast364 MW installed, good forecast Example of BusinessExample of Business Opportunities in Asian Countries:Opportunities in Asian Countries: Wind EnergyWind Energy SuzlonSuzlon began in 1995 with just 20 people.began in 1995 with just 20 people. In a little over a decade has become a global leader:In a little over a decade has become a global leader: •• 5th World turbine manufacturer (market share of 10.5%)5th World turbine manufacturer (market share of 10.5%) •• Asian leader (50+% market share in India).Asian leader (50+% market share in India). •• Operations in 20 countries andOperations in 20 countries and manufacturing units acrossmanufacturing units across America, Asia, Australia and EuropeAmerica, Asia, Australia and Europe •• Order book of $4,304 million (equivalent to 3,454 MW)Order book of $4,304 million (equivalent to 3,454 MW) •• Employees: nearly 14,000Employees: nearly 14,000 •• Revenues: USD 2,808 millionRevenues: USD 2,808 million •• Net Profit: USD 291.3 millionNet Profit: USD 291.3 million •• Net worth: USD 479.8 millionNet worth: USD 479.8 million
  9. 9. 9 Example of BusinessExample of Business Opportunities in Asian Countries:Opportunities in Asian Countries: ESCosESCos Energy Service Companies (Energy Service Companies (ESCoESCo) help clients to) help clients to improve their Energy Efficiency (EE) using marketimprove their Energy Efficiency (EE) using market based financing strategiesbased financing strategies Identify and evaluate energyIdentify and evaluate energy --saving opportunities;saving opportunities; Develop engineering designsDevelop engineering designs and specifications;and specifications; Manage the project;Manage the project; Arrange for financing;Arrange for financing; Train staff and provideTrain staff and provide maintenance services;maintenance services; Guarantee that savings willGuarantee that savings will cover all project costs;cover all project costs; If savings do not materialize,If savings do not materialize, the ESCO pays the difference.the ESCO pays the difference. Example of BusinessExample of Business Opportunities in Asian Countries:Opportunities in Asian Countries: Carbon OffsetsCarbon Offsets Carbon offsets enable individuals and businesses toCarbon offsets enable individuals and businesses to reduce thereduce the COCO22 emissions they are responsible foremissions they are responsible for by offsetting, reducing or displacing theby offsetting, reducing or displacing the COCO22 inin another place, where it is more economical.another place, where it is more economical. Carbon offsets typically include renewable energy,Carbon offsets typically include renewable energy, energy efficiency and reforestation projects.energy efficiency and reforestation projects. A wellA well--known example is the purchasing of offsets toknown example is the purchasing of offsets to compensate forcompensate for COCO22 emissions from air travel.emissions from air travel. Intermediary business agents play an importantIntermediary business agents play an important role by acting for obtaining carbon credits (such asrole by acting for obtaining carbon credits (such as Certified Emission Reduction, CER).Certified Emission Reduction, CER). For example,For example, MallesonsMallesons StephenStephen JaquesJaques has advisedhas advised Cathay Pacific Airways andCathay Pacific Airways and DragonairDragonair..
  10. 10. 10 Example of BusinessExample of Business Opportunities in Asian Countries:Opportunities in Asian Countries: Clean Development MechanismClean Development Mechanism The Dutch government has a binding emissionThe Dutch government has a binding emission reduction target of 6%. They decided to purchasereduction target of 6%. They decided to purchase Certified Emissions Reduction units (Certified Emissions Reduction units (CERsCERs) by) by issuing a public procurement tender in 2001.issuing a public procurement tender in 2001. Already purchased 3 millionAlready purchased 3 million CERsCERs from CDM projects infrom CDM projects in developing countries.developing countries. CERsCERs prices are around USDprices are around USD 2525--35, and usually follow35, and usually follow the oil price trends.the oil price trends. CERsCERs can be of many typescan be of many types (CDM, JI, voluntary credits)(CDM, JI, voluntary credits) All these constituteAll these constitute CarbonCarbon Finance (CF).Finance (CF). Carbon Compliance MarketsCarbon Compliance Markets Source: State and Trends of the Carbon Market 2008, www.carbonfinance.org 2008 Up 56%
  11. 11. 11 What was sold?What was sold? Source: State and Trends of the Carbon Market 2008, www.carbonfinance.org The 1970s oil embargo led Japan to focus onThe 1970s oil embargo led Japan to focus on energy efficiency (EE), resulting in anenergy efficiency (EE), resulting in an energyenergy conservation law in 1979conservation law in 1979.. •• In 1999, Japan adopted a Top Runner Program to pushIn 1999, Japan adopted a Top Runner Program to push manufacturers to meet EE standards and evaluating themanufacturers to meet EE standards and evaluating the potential for further EE improvement;potential for further EE improvement; Results:Results: 1616--25%25% eexpected reductions in GHGxpected reductions in GHG emissions by 2010:emissions by 2010: •• About 29 million tCOAbout 29 million tCO22e/yr, more than $700 million/yr ate/yr, more than $700 million/yr at current carbon prices (around $25current carbon prices (around $25--35 per tCO35 per tCO22e).e). Example of Benefits in AsianExample of Benefits in Asian CountriesCountries -- JapanJapan
  12. 12. 12 ExampleExample of Benefits in Asianof Benefits in Asian CountriesCountries -- IndiaIndia USEPA Integrated Environmental Strategies projectUSEPA Integrated Environmental Strategies project in Hyderabad, India focused on analyzingin Hyderabad, India focused on analyzing coco-- benefitsbenefits of transportation and industrial policies toof transportation and industrial policies to reduce GHG emissions and improve local air quality.reduce GHG emissions and improve local air quality. Results: 46% reduction in COResults: 46% reduction in CO22 by 2021by 2021 :: •• 29,096 fewer deaths and 17,401 fewer hospital admissions.29,096 fewer deaths and 17,401 fewer hospital admissions. •• CoCo--benefits valued at $50 million (lowest estimate), forbenefits valued at $50 million (lowest estimate), for health benefits in the metropolitan area only.health benefits in the metropolitan area only. •• Including nonIncluding non--health cohealth co--benefits (energy security,benefits (energy security, technological development, etc.) would yield much highertechnological development, etc.) would yield much higher benefits.benefits. Example of Benefits in Thailand:Example of Benefits in Thailand: Electricity Generating Public CompanyElectricity Generating Public Company Limited (EGCO)Limited (EGCO) EGCOEGCO’’ss CESR plan has an environmental focusCESR plan has an environmental focus strongly interrelated with Climate Change:strongly interrelated with Climate Change: Promotion of Alternative EnergyPromotion of Alternative Energy Energy Efficient Building Program (Thailand Energy AwardEnergy Efficient Building Program (Thailand Energy Award for Energy Efficient Building)for Energy Efficient Building) Environmental program at NamEnvironmental program at Nam TheunTheun II project in LaoII project in Lao PDRPDR Member of Thailand Business CouncilMember of Thailand Business Council for Sustainable Development (TBCSD)for Sustainable Development (TBCSD) Best Corporate Governance Report AwardBest Corporate Governance Report Award Top ten listed company in terms of GoodTop ten listed company in terms of Good Corporate GovernanceCorporate Governance
  13. 13. 13 Example of Benefits in Thailand:Example of Benefits in Thailand: SomboonSomboon Advance Technology PLCAdvance Technology PLC Obtained QS 9000 and ISO 140001Obtained QS 9000 and ISO 140001 certificationcertification 2003: Quality Improvement Award2003: Quality Improvement Award (Zero Claim) and Quality Excellence(Zero Claim) and Quality Excellence Pursuing CESR activities throughPursuing CESR activities through Stakeholder EngagementStakeholder Engagement SomboonSomboon Group planned several activities with aGroup planned several activities with a strong impact on Climate Change:strong impact on Climate Change: Energy saving programEnergy saving program Green School programGreen School program ––Integrated environment andIntegrated environment and community conceptcommunity concept World Bank RoleWorld Bank Role MultiMulti--sectoralsectoral perspective;perspective; Financial resources and leveraging powerFinancial resources and leveraging power;; Working with the private sector through IFCWorking with the private sector through IFC;; Building partnerships with a wide range ofBuilding partnerships with a wide range of institutions and stakeholders;institutions and stakeholders; Knowledge base and policy adviceKnowledge base and policy advice;; Convening power, global reach, and localConvening power, global reach, and local presencepresence; and; and Fiduciary, environment, and social safeguards.Fiduciary, environment, and social safeguards.
  14. 14. 14 Role of the International Agencies:Role of the International Agencies: Time Social and Institutional Realities Technology Ladder Inefficiency Gap Evolving New FinancialEvolving New Financial ArchitectureArchitecture CurrentCurrent •• IBRD, IDA, Investment GuaranteesIBRD, IDA, Investment Guarantees •• Global financing mechanisms: GEF, CFGlobal financing mechanisms: GEF, CF •• BilateralBilateral TFsTFs: e.g.: e.g. AUSAidAUSAid –– Infrastructure for Growth TF;Infrastructure for Growth TF; PHRD Climate Change Window, TFESSD, ESMAP, EASTEPHRD Climate Change Window, TFESSD, ESMAP, EASTE…… New/plannedNew/planned •• Climate Investment Funds (under discussion)Climate Investment Funds (under discussion) –– UK, US, JapanUK, US, Japan likely contributors, >$5 billion total capital) for Cleanlikely contributors, >$5 billion total capital) for Clean Technology FundTechnology Fund •• Carbon Partnership Facility ($5b/5yrs)Carbon Partnership Facility ($5b/5yrs)——programmatic CFprogrammatic CF investmentsinvestments •• Forest Carbon Partnership Facility ($300m initially)Forest Carbon Partnership Facility ($300m initially)——TA andTA and CF for REDDCF for REDD UNFCCC Process (approved in Bali)UNFCCC Process (approved in Bali)-- funds in GEF:funds in GEF: •• Technology Transformation FundTechnology Transformation Fund—— focus infocus in MICsMICs, support of, support of low carbon economy strategies)low carbon economy strategies) •• Adaptation Fund ($80Adaptation Fund ($80--300m)300m)—— from 2% tax on CDM dealsfrom 2% tax on CDM deals
  15. 15. 15 ……but Huge Remaining Challengesbut Huge Remaining Challenges Policy frameworks (e.g. pricing and taxPolicy frameworks (e.g. pricing and tax policies) do not encourage shift to low carbonpolicies) do not encourage shift to low carbon growthgrowth World Bank is small source of financing forWorld Bank is small source of financing for energy investmentsenergy investments GEF has helped pilots, but scaleGEF has helped pilots, but scale--up and speedup and speed are a challengeare a challenge CF has helped (e.g., CMM, CDM Fund), but stillCF has helped (e.g., CMM, CDM Fund), but still a boutique funding sourcea boutique funding source Significant need for improved information,Significant need for improved information, awareness, and mechanisms to protectawareness, and mechanisms to protect vulnerable populationsvulnerable populations World Bank CC InterventionsWorld Bank CC Interventions Impact of climate change on megaImpact of climate change on mega--cities,cities, including Bangkok (with JBIC and ADB);including Bangkok (with JBIC and ADB); Regional cities climate alliance in Asia;Regional cities climate alliance in Asia; Regional Energy Flagship to provide aRegional Energy Flagship to provide a platform for energy strategies and regionalplatform for energy strategies and regional partnerships;partnerships; Carbon Finance;Carbon Finance; ThaiThai--Lao High Level Hydropower Forum;Lao High Level Hydropower Forum; Thai chiller replacement project; phaseThai chiller replacement project; phase--outout of ODS under the Montreal Protocol andof ODS under the Montreal Protocol and significant energy efficiency gainssignificant energy efficiency gains
  16. 16. 16 CC is a realityCC is a reality Thailand is going to be affectedThailand is going to be affected Think Big, Take Small StepsThink Big, Take Small Steps Fighting CC can be profitable businessFighting CC can be profitable business Concluding RemarksConcluding Remarks The World Bank can helpThe World Bank can help We have to act now: theWe have to act now: the Green Planet is in ourGreen Planet is in our handshands Thank YouThank You For further information and suggestionsFor further information and suggestions contact:contact: Jitendra (Jitu) ShahJitendra (Jitu) Shah Country Sector Coordinator, EASES, SE AsiaCountry Sector Coordinator, EASES, SE Asia The World BankThe World Bank 30th Floor Siam Tower,30th Floor Siam Tower, 989 Rama I Rd, Pathumwan,989 Rama I Rd, Pathumwan, Bangkok Thailand 10330Bangkok Thailand 10330 ' DIRECT LINE ++ 66 2 686 8360' DIRECT LINE ++ 66 2 686 8360 ' Cell phone ++ 6689 9214223' Cell phone ++ 6689 9214223 7 ++66 2 686 83017 ++66 2 686 8301 jshah@worldbank.orgjshah@worldbank.org www.worldbank.org/eapenvironmentwww.worldbank.org/eapenvironment

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