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Climate Action South Asia: Information Update No. 2 (Economics of Reducing Greenhouse Gas Emissions in South Asia)

Climate Action South Asia: Information Update No. 2 (Economics of Reducing Greenhouse Gas Emissions in South Asia)

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This update explores the study, Economics of Reducing Greenhouse Gas Emissions in South Asia and examines low-carbon growth opportunities, GHG abatement potential, energy supply and demand activities, and non-energy activities focused on the three major kinds of greenhouse gases within the region.
This update explores the study, Economics of Reducing Greenhouse Gas Emissions in South Asia and examines low-carbon growth opportunities, GHG abatement potential, energy supply and demand activities, and non-energy activities focused on the three major kinds of greenhouse gases within the region.

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Published by: Asian Development Bank on Jan 23, 2014
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Economics of Reducing Greenhouse Gas Emissions in South Asia:
The study Economics of Reducing Greenhouse Gas Emissions: Options and Costs in Bangladesh, Bhutan, the Maldives, Nepal, and Sri Lanka reveals excellent opportunities in low-carbon green growth by pursuing resource- and energy-
efficient technologies that would lower emissions of greenhouse gases at low cost (≤ $10 per ton) or even cost saving (benefits). These technologies range from solar cooking utensils to electric and more efficient diesel vehicles and use of solid waste for fuel. They could reduce greenhouse gas (GHG) emissions by a fifth by 2020, relative to base case for that year. Introduction of a climate policy based on stabilizing global GHG concentrations through a carbon tax  would further lower emissions, for example, by more than 22% at a carbon price of $41 per ton by 2030. Policy
and regulatory barriers, perverse subsidies on conventional fossil fuels, and uncertain future carbon price currently
reduce incentives to invest in GHG emission-reducing technologies. However, these barriers can be overcomed
 through various enabling policies and measures, such as: promoting research and development; building capacity;
establishing a sound regulatory framework for renewable energy (RE); providing incentives to clean technology and RE
users and producers; promoting industry self-regulation and voluntary arrangements; and enhancing regional energy
development and trade.
Options and Costs
BACKGROUND
South Asia is expected to bear a signicant share of the consequences of global impacts associated with climate change. Sustained and rapid economic growth is necessary for the region to achieve signicant poverty reduction, uplift the economic well-being of its people, and increase its resilience to environmental shocks and natural disasters, including those associated with climate change. However, Asian Development Bank (ADB) developing member countries in South Asia may be following resource- and energy-intensive paths of economic development that are not sustainable in the long term. These countries need a new look at their resource and energy options in order to develop a low-carbon path that can provide sustained, high economic growth and simultaneously abate emissions of greenhouse gases (GHGs) at low or even negative costs (benets). Already, increased use of cost-effective, clean, and energy-efcient technologies is foreseen in India, as seen in the projected rate of energy-related GHG emissions per unit of its gross domestic product (GDP) over the next 2 decades
(Figure 1).
CO
2
e = carbon dioxide equivalent, GDP = gross domestic product, Kg = kilogram, PPP = purchasing power parity Source: ADB Regional Economics of Climate Change in South Asia (RECCSA) study (unpublished); The Energy Research Institute and Government of India-Ministry of Environment and Forests simulations
Figure 1: CO2e Intensity of GDP (Kg per dollar of GDP at PPP, 2005 US$)
0.70.60.50.40.30.20.10.02005 2010 2020
    k   g   C   O
   2
   e    /    $   G   D   P
2025 20302015Bangladesh Bhutan IndiaSri LankaMaldives Nepal
SOUTH ASIA 
Steering Economies Toward Low-Carbon and Climate-Resilient Development
CASA Information Update No.2 February 2013
Climate Action
 
 
Given the large energy and infrastructure investments being planned in the region over the coming decade, an investigation into the feasibility of designing energy, transport, water, industrial, residential, and agricultural infrastructure systems and processes consistent with green growth principles is very timely. This will allow the countries to assess economy- and sector-wide mitigation options and their costs and benets, and identify appropriate policies.
THE STUDY
The study, Economics of Reducing Greenhouse Gas Emissions in South Asia: Options and Costs,
1
 was carried out for Bangladesh, Bhutan, the Maldives, Nepal, and Sri Lanka
2
 to examine low-carbon growth opportunities and GHG abatement potential. Information on India was obtained from existing literature. The study covered energy supply and demand activities as well as non-energy activities in sectors focused on three major kinds of GHGs (carbon dioxide, methane and nitrous oxide).
Energy Supply and Demand Activities
GHG abatement options and costs for energy generation and consumption sectors—power, industrial, residential, commercial, transport, and agriculture—were analyzed using a MARKAL (MARKet ALlocation) model.
3
 The
MARKAL model selects the least-cost technology and energy resource options to meet the service demands in various sectors in each country during the study period. It includes constraints related to the fulllment of each type of service demand, availability of energy resources, and limit on power supply capacity. The model was used to analyze energy development and GHG emissions in two scenarios for the period 2005–2030, as well as to estimate incremental abatement cost (IAC) of various cleaner and energy-efcient options in 2020.The two scenarios were: 
Base Case
. The base case was energy development without climate policy interventions during 2005–2030. The penetration of cleaner technology options was set to not exceed 50% of the corresponding total service demand in 2030.
Carbon Tax
. This scenario included a climate policy (in the form of carbon tax) to achieve the target
GHG = greenhouse gas, IAC = incremental abatement cost
Abatement potential, tCO
2
e
Figure 2: Example of GHG Abatement Cost Curve
Figure 2 shows a typical IACC, where the width of a block in the horizontal axis is the GHG mitigation (emission reduction) potential of the corresponding option, and the height of the block (vertical axis) shows the option’s IAC. For example, in Figure 2, technology option 1 (T1) has the lowest IAC, while technology option 8 (T8) has the highest IAC. The GHG abatement potential of option T8 is given by E
8
*-E
7
* (the horizontal width of the T8 block), while the option’s IAC is given by block height IAC
8
.
1
 
ADB. 2009.
Regional Economics of Climate Change in South Asia Part 1: Cleaner Technologies and Options
 (a subproject funded under RETA 6337: Development Partnership Program for South Asia financed by the Government of Australia through the Australian – ADB South Asia Development Partnership Facility). Manila.
2
 
The five countries covered in the study, unless otherwise stated.
3
 
Seebregts, A.J., Goldstein, G.A. and K. Smekens. Undated. Energy/Environmental Modeling with the MARKAL Family of Models. http://www.gerad.ca/fichierspdf/rx01039.pdf
4
 Abatement costs are calculated by (i) identifying the sources of GHG emissions in the economy and ways in which these emissions can be reduced, (ii) computing the emission reductions from the measures identified, and (iii) computing the costs of these measures, which may be negative when the measures eliminate waste and save money.
of stabilizing global GHGs concentration at 550 parts per million by volume (ppmv) of carbon dioxide equivalent (CO
2
e).
Incremental Abatement Costs
 
Abatement costs
4
 per unit of GHG emission were estimated for each of the technology options along with the total GHG emission reduction potential of the
corresponding option
(Figure 2)
. Cleaner technologies with zero or negative IACs (i.e., “no-regret” or win-win options) were identied for each country.
Activities Not Requiring Energy
GHG emissions from activities not using energy were estimated following the Revised 1996 Guidelines of the Intergovernmental Panel on Climate Change (IPCC) for National Greenhouse Gas Inventories. GHG abatement costs of major options for non-energy activities in agriculture, forestry, municipal solid waste, and industrial processes in Bangladesh, Bhutan, Nepal, and Sri Lanka were examined for 2020 using such factors as land-use data, GHG emission factors, non-energy-related activity data, and technology data.
IAC, $/tCO
2
e
 
RESULTS
Energy Supply and Demand Sectors
 
GHG Emissions
Base Case Scenario
. Energy-related GHG emissions are estimated to increase by four- to sixfold, from 58 million tons of carbon dioxide equivalent (CO
2
e) in 2005 to 245 million tons of CO
2
e in 2030 in the ve countries as a whole
(Figure 3)
.
CO
2
e = carbon dioxide equivalent, GHG = greenhouse gasCO
2
e = carbon dioxide equivalent, GHG = greenhouse gas
Figure 3: Total GHG Emissions by Country, 2005 to 2030Figure 4: Total GHG Emissions in Five Countries by Sector, 2005 to 2030Figure 5: Sectoral GHG Emissions under the Base and Carbon-tax Cases
CO
2
e = carbon dioxide equivalent, GHG = greenhouse gas
Box 1: Stabilization Targets
 The stabilization target of 450 parts per million by volume (ppmv) is for carbon dioxide (CO
2
) concentration only. In terms of total greenhouse gas (GHG) concentration (i.e., CO
2
 as well as other GHGs), the carbon price profile corresponds to the stabilization  target of 550 ppmv carbon dioxide equivalent (CO
2
e). In the present study, this carbon price profile is reflected in the model by considering carbon tax values of the same amount as the carbon price.
Carbon-tax Scenario.
A carbon price prole was included, corresponding to a global GHG concentration stabilization target at 550 ppmv starting at $15 per ton CO
2
 (at constant 2005 prices) in 2010 and attaining a value of $41 per ton CO
2
 by 2030. Under the carbon-tax scenario, total GHG emissions would be 131 and 191 million tons of CO
2
e in the ve countries in 2020 and 2030, showing a decrease by 6% and 22%, respectively, compared to their corresponding base case. In 2030, the power sector would have the biggest share of these reductions
(Figure 5).
Total GHG emissions are progressively increasing from 2005, with the power sector constituting the biggest share at 47%, followed by industry (22%) and transport (19%) sectors in 2030
(Figure 4)
.
Abatement Costs and Benets
Many GHG mitigation options can be implemented in each country at no or negative costs (“no-regret” options). In aggregate, no-regret options would reduce GHG emissions by about 13.5 million tons of CO
2
e in
2020 across the ve countries, a reduction of about 9.71% relative to the base case. The potential for GHG emissions reduction appears highest in Bangladesh and Sri Lanka
(Figure 6)
. It should be noted that across all the countries, most reduction would be provided by the residential sector (50%).
2005 2010 2020 2025 20302015250,000200,000150,000100,00050,0000
   1   0
   3 
   t   o   n   s   C   O
   2
   e
250,0002005 2010 2020 2025 20302015200,000150,000100,00050,0000BangladeshBhutanMaldivesNepalSri Lanka
   1   0
   3
   t   o   n   s   C   O
   2
   e
47%19%8%22%2%2%
AgricultureCommercialIndustry
Residenal
TransportPower
   1   0
   3 
   t   o   n   s   C   O
   2
   e
2005
Base Case Base Case Base CaseCarbon-tax CaseCarbon-tax Case
2020 2030250,000200,000150,000100,00050,0000AgricultureCommercialIndustry
Residenal
TransportPower

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