Distinguished Speaker Seminar: Bindu N. Lohani - The Challenge of Climate Change: What are the Priority Actions for Policy Makers in Asia? What is the Asian Development Bank Doing?

Bindu N. Lohani*, ADB's Vice-President of Finance and Administration delivered a speech on "The Challenge of Climate Change: What are the Priority Actions for Policy Makers in Asia? What is the Asian Development Bank Doing?” at a distinguished speaker seminar on 19 February 2009.

Dr. Lohani started with a brief outline of ADB's long-term strategic framework 2008-2020 (Strategy 2020) under the three themes—inclusive growth, environmentally sustainable growth, and regional integration—as well as ADB's five core areas of operation for lending purposes: namely infrastructure, regional cooperation and integration, financial sector development, education, environment, and other areas such as health, agriculture, and disaster and emergency assistance. Clean energy and environment is a core area of operations under Strategy 2020. Even at this time of financial crisis, when environmental issues may be relegated to the background, ADB has expressed its continued commitment to environmentally sustainable economic recovery. Lohani's presentation discussed climate change issues as a backdrop to what ADB has been doing about them, and more importantly, policy recommendations at this time of financial crisis that take into account the state of the environment.

Lohani proceeded by providing the growth scenario in the region, currently a modest 5.8%, but this is expected to be revised downwards as the crisis unfolds. Prior to the current global crisis, the rapid economic growth in the region had tripled Asia's energy requirements in the last three decades. Energy security is now a main concern in the region. In fact, energy investment needs in the Asia-Pacific have become the largest, at 36% of the world's requirements. Developing countries in Asia alone require roughly $6.3 trillion for new energy structures from now to 2030. However, according to Dr. Lohani, current efforts still focused on expanding fossil fuel supplies, which are neither environmentally sustainable nor economical to fulfill the world's energy needs. At present, the Asian region now accounts for nearly 29% of the world's total greenhouse gas (GHG) emissions and could rise to 39% in 2030. The People's Republic of China (PRC), currently emitting 14.7% of global GHG emission, is expected to replace the United States as the largest emitter by 2050.

While skeptics of climate change still abound, Dr. Lohani pointed out the hard science provided by the Intergovernmental Panel on Climate Change that global average temperature will rise between 1.4 to 5.8 degrees celsius by 2100. As it is, the world is already experiencing the impacts of climate change and will likely worsen in the future. He noted that natural calamities such as floods, droughts, cyclones, hurricanes, and tidal surges occur more often and at higher intensities. Other environmental damages include melting of the glaciers, river bank erosion, rising sea levels, waterlogging, and increased soil salinity. The poor are already bearing most of the brunt of these environmental catastrophes. In the Asia-Pacific, several island states will be acutely affected, agricultural outputs will be greatly decreased, and new health issues will emerge.

Essential to arresting climate change, Dr. Lohani mentioned two key priority actions. First, priority policy actions on energy efficiency must be put in place by national and local governments. Second, a shift to a low carbon economy by putting in place policies that puts a price on carbon is necessary. He also added key priority actions for policy makers, such as efficient energy utilization and conservation, new technologies and renewable energy, efficient utilization of coal, utilization of the growing carbon market, access to energy and regional economic cooperation; and integrating adaptation to climate change.

In support of these policy goals, he advised policy makers to implement regulations that enforce efficient utilization of energy, particularly in the construction and transportation sectors. Governments must be creative in crafting their policies, taking into account the existing state of infrastructure. One measure Dr, Lohani proposed was the promotion of efficiency power plant (EPPs). EPPs can reduce carbon emissions, use less coal, and cheaper than conventional coal-fired power plant. Governments can provide support for EPPs through tax incentives, and multilaterals can assist by providing long-term funding. Moreover, he advised developing countries to actively participate in carbon trading, which has a fast growing market worth €62.6 billion in 2008. Developing countries should seek to receive benefits of carbon reduction credits and look beyond the arrangements under the Kyoto Protocol. Currently, the PRC accounts for over half of total credits sold. He added that if the US were to introduce carbon trading, the market value would surge to $3 trillion by 2030, thus emerging countries should consider this future opportunity in their current strategies.

The last section of his presentation was on ADB's Clean Energy and Environment Program. ADB's energy strategy has seven components namely:

1. energy efficiency initiative,
2. carbon market initiative,
3. energy for all program,
4. sustainable transport initiative,
5. four funds for clean energy,
6. knowledge hubs, and
7. adaptation.

Signifying ADB's environmental commitment, it has met its Energy Efficiency Initiative goal of clean energy investment target of $1 billion per year starting in 2008. ADB also supports the development of carbon trading—its Asia Pacific Carbon Fund has over $151 million for upfront co-financing of future carbon credits. Another fund called Future Carbon Fund, targeted at $200 million, is the first to offer upfront payment for post-2012 carbon credits. In addition, ADB through its Climate Change Fund of $40 million can provide clean energy financing partnerships to fund climate change projects to support mitigation and adaptation activities.

Dr. Lohani concluded by highlighting the potential of technological innovations to retard the process of climate change. He posed three grand engineering challenges in making clean energy affordable and efficient. One is the capture of solar power using more efficient technologies. Another is fusion power, which can be a major source of sustainable clean energy. Finally, improved technologies can improve carbon capture and sequestration greatly reducing GHG in the atmosphere. It is evident that technology could be a solution to the challenges of climate change and should be adequately explored in efforts to address climate change.

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