Thailand Environment Institute 1996 Annual Conference : “Linking Local Solutions to Global Needs : Thailand’s Environment Agenda in the 21st Century” mate Change - Local Solutions fo 1 Problems Thailand’s Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Sitanon Jesdapipat ‘TEL 363.7387 seer v2 ‘Volume IT 26 Central Plaza Hotel &3840 Thailand’s Policy Responses to Climate Change Crises: an Analysis of Critical Sectors R 363, 7387 SB6T Nid Sitanon Jesdapipat, Ph.D. od ws wnibaoorsde (Referee) wa » wa » Voseuana wuz anrecou'lne ies » WisWesHHVanioIaya Thailand Environment Institute Bangkok, Thailand 39]3)3840 Acknowledgments Twish to thank Dr. W. Wangwatcharakul of Kasetsart University and Mr. Sameer Shrestha, Research Associate for their assistance in preparing this report. Also, I have benefited from critique of Dr. Dhira Phantumvanit; Mr. David Katz and Dr. Janet Earl who have also helped with the editorial work. I also wish to thank Ms Phornphan Phrayalaw for her secretarial work. wistiadtaBa (Referenced ars woorumanahieawradoallne vinnireamxentiosayaGLOBAL WARMING, or climate change, is a new human-caused threat that can seriously alter basic conditions for life on this planet. Although not all scientists agree on the ature or exact consequences of this new threat, its potential damage is high, Theoretically, the problem can be handled by human initiatives, however, achieving such a goal has been difficult thus far. Because the carth’s atmosphere is common property, the economic benefits of continued emissions of green-house gases (GHGs) ate enjoyed by each individual polluting country, while the environmental costs of such action are shared by all nations. Conversely, while each individual nation must bear the full economic costs of restraining its GHG emissions, the environmental benefits of such sacrifice are dissipated among all nations. Nations can choose to do nothing to avoid bearing any immediate direct costs. Financially (at least in the short term), this approach is far superior to taking action of some kind, However, the potential consequences of inaction outweigh the short term benefits of continued unrestrained emissions, thus justifying a precautionary policy. Because of the disincentive for major individual efforts, any potential solution must be based on international cooperation, Arranging this has been complicated by the fact that historical emission levels, potential damages (and possible benefits), and additional costs for limiting greenhouse gas emissions are not shared equally between and within nations. Thus, agreement upon an ‘equitable allocation of responsibility for ‘mitigating emission levels has been elusive, ‘The United Nations Framework Convention ‘on Climate Change (FCCC) encourages a proactive solution based on the principle of “common but differentiated responsibilities” between developed and developing countries. Executive Summary How different? Developed countries have committed to freeze their GHG emissions by the year 2000 to 1990 levels, independently or jointly. Developing countries have no specific commitments, but are encouraged to take Active measures to mitigate climate change. There are a few problems with these arrangements, most importantly enforcement and equity. Questions remain as to how to deal with development aspirations of developing countries, and about inter- generational and intra-national equity. For ‘an individual country, no-regret options (those with economic or other benefits, associated with them, in addition to mitigating climate change) are steps which ‘can be implemented immediately. After these are exhausted, market-based options should be adopted because increased costs can be Gissipated among concertied agents in an economically efficient, least cost, manner. While international negotiation — must. continue to assure fulfillment of commitments to FCCC, other mechanisms should be explored to move the stalled process and to help implement the written obligations. In response to the global warming threat, Thailand has formed 2 national committee fon climate change and has advanced its studies on inventory and mitigation of GHGs. It has also conducted a preliminary vulnerability and adaptation study, which has revealed potential shifts in seasons, average temperature, precipitation, and forest patterns which may threaten the future development of the kingdom. Specific projects and policies in Thailand related to climate change place special emphasis on the Kingdom’s major = GHG emitters: transportation, power production, and rice production. In addition, the present report suggests that carbon sinks in the form of standing forests, can provide the basis for aThailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors ‘unique market based option. Policy recommendations for critical sectors until now emphasize no-regret options. Specific preliminary recommendations are as follows: © In the transport sector, 2 fare reform of Bangkok's transportation system is proposed. Cross subsidies leading to differentiated fares are suggested to encourage user shifts to “greence” modes of wansportation. Mass transit alternatives which use clean fuels will be made most competitive through government fare subsidies. For example, electric rail systems and more ‘climate friendly” buses which use natural gases could successfully out-compete use of private automobiles, which would be priced most heavily. Projects in the energy sector, such as the ‘existing “Demand Side Management and Independent Power Producers’, will not, in and of themselves, produce significant benefits in terms of reducing climate change, even in combination, However, their contribution in reducing CO2 shows a positive trend as the projects progress, and the projects are beneficial in many regards aside from climate change. This finding reemphasizes that both projects are no-tegret options which deserve further support from consumers and energy planners. In the agricultural sector, Thailand's declining comparative advantage in tice production, triggered by rising labor costs coupled with declining world prices, leaves little room for Thailand to continue producing rice at its present level. Acreage formerly used for rice cultivation has been setaside, It has been proposed to use this land for growing trees, a proposal which seeks to remedy the slow progress in reforestation in Thailand. A calculation of net benefits indicates thar this restructuring of agricultural production is a no-tegret option. Analysis shows that economic incentives, and the distribution of these incentives, are the key to successful implementation. ‘A market-based option, which combines tradable permits and carbon offset founded on carbon sinks, is proposed to ‘compensate for GHG emissions, Under this scheme, developers whose projects emit CO will be required to offset their carbon emissions. Tree growers will be given extra incentives for planting trees, which will serve as carbon sinks, and a system of carbon credits will be based on these sinks. These credits will be traded in a market which operates like, a stock exchange market, with a regulatory body acting also as a clearing house. Using cost estimates from a study in northeastern Thailand, an initial carbon credit value of 124 Baht per rai per year is calculated. Hence, if Thailand is to reforest 34.8 million rai as planned about 43 billion Baht worth of carbon credits would be traded annually. This is a significant amount for tree growers, but small when compared to the benefits Thailand stands to gain from reforesting the areas. In sum, Thailand has been active in addressing the climate change challenge. Even without definite obligations under FCCC, Thailand has initiated many projects related to energy saving, fuel switching, research and development for new, alternative energy, and improving its transportation systems. Most of these initiatives are rational responses to a variety of associated challenges. Therefore, they are no-regret options. Thailand is also considering other initiatives, such as joint implementation, which will assist other parties in implementing theic own climate change policies. There remain other challenges. impacting upon climate change, such as deforestation, waste management, and proper land-use, which Thailand still needs to address.CONTENTS 1, WHY CLIMATE CHANGE?.. 2. SCIENCE DEBATE ON CLIMATE CHANGE .... 3, POLICY DISCUSSION ON CLIMATE CHANGE. 3.1 Tae NorTH-SouTH DiaLooue. 3.2 EFACIENCY AND EQUITY ISSUES 4, THAILAND AND CLIMATE CHANGE .esosos «2. Carbon Dioxide Emission b. Methane emission 4.1 NO-REGRET OPTIONS IN CRITICAL SECTORS 4. Transportation Sector. . Power Sector... 1.1 Demand: side Management (DSM) as GHG Mitig 1.2 Independent Power Producers (IPP)... 6. Agriculture and Land-use..nsn.unnnn 5. MARKET-BASED OPTION IN REFORESTATION IN THAILAND 5.1 "NO-REGRET” FOLICY AND MARKET-BASED OPTIONS 4. Structure of the option : b. Operation wm ¢. Instrument. 4. Additional Considerations 5.2 TRADE POLICY TO ACCOMMODATE CLIMATE CHANGE... 6. CONCLUSION... ‘SELECTED REFERENCES APPENDICESList of Tables Table 1 Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9 Table 10: Table 11: Table 12: Table 13: Table 14 Table 15: Table 16 : Table 17 Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Predicted changes in crop yields, prices, and number of people at risk of hunger in 2060...1..3 Inventory of Thailand's Greenhouse Gas Emissions, 1989 3 Inventory of Thailand's Greenhouse Gas Emissions, 1990. cere] Number of Motor Vehicle Registration Under Motor Car Aet and Land Transport Act, 1990 ~ 1994. 18 Population, number of vehicles and ownership rate for Bangkok, 1990 - 1994...... 18 Ratio of petroleum product consumption in BMR to whole kingdom in transportation sector..18 Ambient Air Concentration in 16 Curbside Stations in Bangkok, 19 ‘Annual vehicles check-ups by registered private inspectors, July 1, 1994- July 31,1995 ....23, Number of buses and routes in Bangkok, 1996. 23 ‘Summary of Technical and Financial Potential for Cogeneration in Thailand 25 Estimated Energy Saving and Greenhouse Gas Reduction for DSM Program... 29 Saving of energy from Thailand's DSM. 29 Impact of DSM Measures on Emission Reduction... 29 Forecast of peak generation 30 Long Term Profile of Power Development Plan (1995+ 2011). 31 Reduction in CO; emission under the IPPs .. 33 Second rice: area, production and yield. 35 Jasmine rice production, crop year 1992/1993, 36 Jasmine rice production in provinces of Thailand, 1992/1993. eer Estimated returns from rice acreage set-aside, first annual crop. 38 Net GHG emission from Agricultural Restructuring Project, 1994- 1996 40 Returns on crops, by houschold, 1991/ 1992. ee eal Enimated Net Present Value (NPV) of benefits, compared 43 ‘Amount of Carton Sequesvation and Cost Estimates for Six Foesty Projets in Developing Countries. snintineninnnennList of Figures Fig. 1. Global CO, emissions from fossil fuel burning, cement production, and gas flaring for 1950-91.3 Fig. 2; Global per capita CO; emission estimates i 4 Fig. 3: Global monthly concentrations of atmospheric CH... 3 Fig. 3b: Share of fossil energy related CO; emissions by 13 world regions in 1988... sesnnnenad Fig. 4: CO; emission in Thailand in 1989 by sector. 14 Fig. 5: Total CO; emission in Thailand in 1990.... 16 Fig. 6: Potential contribution to CO, reduction by various means... 7 Fig. 7: Final energy consumption by economic sectors, averaged 1985. 1994. eeaaldThailand’s Policy Responses to Climate Change Crises: an Analysis of Critical Sectors 1. Why Climate Change? About 65 million years ago, before man walked on this planet, it is believed that a giant asteroid hit the earth. It destabilised che climate and, as a result, wiped out many species, including the dinosaurs. That was indeed unfortunate but there was not much fone could have done to prevent it from happening. Some scientists have now warned us of @ potential new man-made calamity that may have a comparable impact if not sufficiently prevented or defused. “There is growing concer that by the middle or the end of next century human activities will have changed the basic conditions that have allowed life to thrive on earth” (UNEP 1995). One such “condition” is the earth’s general climate, which is the world’s common property. Industrialization and other economic activities produce greenhouse gases (GHGs)! that trap heat within the atmosphere. Since emissions coming from any country eventually contribute to GHG concentration, it is a global “externality”. In contrast to the giant asteroid, however, this latter potential threat can effectively be controlled by human. beings’ own initiatives. However, national responses for limiting GHGs may impair Identified greenhouse gases inelude: carbon dioxide, carbon monoxide, methane, "nitrous ‘oxide, —_chlorofluorocarbons (CEC), —_hydrofluorocartons (HFC), perfluorinated carbons (PEC) and non-methane volatile organic compounds (NMVOCS). major economic development, making climate change one of the most difficult challenges to overcome. The general objective of this chapter is to discuss the contribution of existing specific no-regret policy options to reducing COx, and to propose potential policy options to reduce GHGs and to increase carbon sinks in Thailand. It has three major specific objectives: 1. In the energy sector, it presents results of estimated CO: reduction through the Demand-Side Management (DSM) Project and the Independent Power Producer (IPP) Project, administered by Electricity Generating Authority of Thailand (EGAT); 2. In the land-use sector, the discussion focuses on restructuring agricultural production, in an attempt to diversify crops away from paddy acreage into other activities, including least cost reforestation options, and, 3. It proposes the establishment of a tradable carbon offset system, which ‘Thailand can pursue to enhance its no- regret policy in the forestry sector. To fulfil these objectives, the paper first present information on science and policy debates related to climate change. These presentations will serve as a basis for understanding subsequent discussions on specific policy initiatives in major sectors that emit GHG and reforestation which acts as carbon sinks.Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors 2. Science Debate on Climate Change At the Earth Summit in Rio in June 1992, it was officially brought to light that some hhuman activities may have altered the Earth's climate balance in such a way that it may result in a major calamity for the human race in the near future. Natural disasters such as storms, floods and droughts have become prevalent and damaging as population density has increased. Potentially serious changes such as extreme temperatures, sudden floods and long droughts have become normal for many parts of the world? Global mean surface air temperature has increased by between about 0.3 and 0.6°C Since the late 19th century, the additional daca available since 1990 and the re-analyses since then have not significantly changed this range of estimated increase. s+ Global sea level has risen by between 10 ‘and 25 em over the past 100 years and much of the rise may be related to the increase in global mean temperature... The 1990 to mid-1995 persistent warm- phase of the El NinoSouthem Oscillation (which causes droughts and floods in. many ‘areas) was unusual in the context of the last 120 years. (hetp://www.unep.ch/ipec/ snug. hem emphasis added). Vulnerable climatic ‘hot spots” such as Bangladesh and floodplains in China have had to prepare for such annual disaster. Human and physical damage is often ‘Climate change could also be beneficial for come activities. A futures trader, for example, can uuse climate change to predict ‘rain price movement to obtain ‘opportunistic economic returns from the market. Agriculture in the temperate zone may also benefic from a warmer climate. Finland, for instance, is one of ‘many countries that may be a net sainer from global warming. ‘unmeasurable. Global economic damage has been estimated at 1.5 percent of world product which is equivalent to one year ‘economic growth. Different models predicted different levels of impacts, but all share the same trend: lower crop yield in developing countries and higher world market prices for commodities. (See Pittock 1995 and Table 1 below), Why have such phenomena _ become counmont Climate change “believers” say that they are the result of humans tampering with natural climatic balance. Such human activities as burning of fossil fuels, land-use change, agriculture, industrialization, waste and waste treatment and destruction of forests are increasing the atmospheric concentration of GHGs (Figure 1), which tend to warm the atmosphere (see Box | below}, and in some regions, aerosols (microscopic airborne particles), which tend to cool the atmosphere.’ Increases in. greenhouse gas concentrations since pre-industrial times (Le. since about 1750) have led to a positive radiative forcing of climate, tending to warm the surface and to produce other changes of climate... Aherpe/ funn unep ch/ pec! sumuug. hem) *Charlson et al. (1992) found that the estimated -1 to -2 watts per square meter of the radiative forcing coming from aerosols, averaged globally, is ofa ‘magnitude comparable to current anthropogenic greenhouse gas forcing, but different in sign.Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Table 1: Predicted changes in crop yields, prices, and number of people at risk of hunger in 2060. Parameters/ Models: GISS__GEDL | UKMO Percent change in crop yields World 09 . Developed countries Ba «Developing countries 32 Percent change in world market prices 20 Change in number of people at risk of hunger : Millions 38 a 300 Percent { 6 4 a Note: This table shows the changes (om baveline projections) predicted by three global climate models from an ‘assumed doubling of atmospheric carbon dioxide by 2060. The three models ae chose of the Goddard TInstiate for Space Studies (GISS), the Geophysical Fluid Dynamics Laboratory (GFDL), and the U.K. Meteorological Office (UKMO). The changes shown reflect an estimaced change in yields dve to the increases in carbon dioxide as well as modes adaprations ro farming practices, ‘Source: G. Ficher, K. Frohberg, M.L. Parry, and C. Rosenzweig, “Climate Change and World Food Supply, Demand, and Trade: Who Benefits, Who Loses!” Global Environmenzal Change 4, No, 1 (1954), tables 9,10 and 12, cited by Pitock 1995: 26. 6100 Solids Liquids Gases Flaring Cement, Total = —— 4800 3200 1600 Million Metric Tons of Carbon 1950 1960 1970 1900 1990 2000 Fig. 1. Global CO: emissions from fossil fuel burning, cement production, and gas flaring for 1950-91. Source : Marland et al. 1994.Thailand?s Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Box 1: Global Warming Potential Ferensge Atmospheric Preindustrial Present comebulon Lifetime Time Horizon (yrs) forcing 1980- On) 1390 JcHGs ne) ‘con 1 i 10 (ppaw) 353 pm 5 020 cH 8 9 OB ippM) LZ gpa) 5 1) NO 270. 0 190, 280 (ppbv), 310 (ppbv) 6 150) crc. 450035001500 0280 (ppev) 4 65 CFC-12 7100 7300 4500 0 484 ipprv) uM 130) HCFC 4101500510 - Na ‘Source : Data from PCC Working Group 1, cted by 1PIECA and UNEP 1991: 43, Over half of the contribution to man-made GHGs comes from carbon dioxide alone (55 percent). Given its lifetime (Box 1), COz becomes a major target for reduction. On a global scale, estimates of per capita CO: emissions climbing steadily until around the 1980s before they leveled off (See Figure 2). Atmospheric CH+ — global _—_monthiy concentrations have been rapidly rising since the 1980s (Figure 3). By 1992, {cthe atmospheric concentrations of greenhouse ‘gases, inter alia, carbon dioxide (CO:), methane (CH) and nitrous oxide (N:O) have grown significantly: by about 30%, 145% and 15%, respectively. (hetp://umvw.uinep.ch/ipec/ susmuug, hem) These changes taken together have been projected to alter regional and global climate and climate-elated parameters such as temperature, soil moisture, precipitation, and sea level in such a way that they threaten people’s current development and living conditions (Table 1). Climate Change is politically sensitive, controversial, nebulous, abstract and rather remote from a layman's understanding. Why? There are several reasons for this. Firstly, science itself offers no clear-cut conclusions as to the certainty and the extent of the potential impacts of climate change. In academic discussions on Climate Change, speculations, hypotheses have been offered rather than the concrete facts normally provided by “hard sciences.” For example, the 2000 © Se 16 wg 12 22 ae ell ee eee on OF Ee 00 i 1950 1960 1970 1980 1990 = Year Fig, 2: Global per capita CO: emission estimates. Marland et al. 1994.Thailand's Policy Responses to Climate Change Crises: 1750. 1700 1850 1600 CH, Concentration (ppbv) 1580 1900 1989 1986 Year Fig. Source: Khalil and Rasmussen 1994 Intergovernmental Panel on Climate Change 's (PCC) 1995 summary gives conflicting information on global mean temperature vis ‘avis the figure provided by NASA. IPCC reported a current warmer trend of 0.3 to 0.6° C during the past century (or 0.2°C per decade), using the sophisticated computerized General Circulation Model (GCM), whereas NASA data, available since 1979 and regarded as a truly global measurement, shows no indication of warming at all, but actually indicates a slight cooling tend (ECOAL 1996). The potential warming shift may be counterbalanced by aerosols influence (ee Charlson 1992). However, *(clomputer models of something as complicated as the planet ’s climate system are not far enough advanced yet to give clear and unambiguous answers” (UNEP 1995: 8). The picture of climate change is, therefore, abstract and debatable. This uncertainty has a serious implication, as one scientist noted: “Wich climate models lacking an Analysis of Critical Sectors 1989 1992 Global monthly concentrations of atmospheric CHs. validation, why chen should we eust any of the forecasts about future warming, sea level vise, and other claimed impacts - o use them as a basis for costly policies” (ECOAL 1996: 2). Secondly, point sources are related to all crucial human activities, indispensable for modern development: energy production and land-use, for examples. Implementation, in fact, even negotiation for implementation per se, is therefore politically sensitive. For exemple, the efficient EU steel mills, which have already cut emissions per ton as much as 37% between 1980 and 1990, have argued against a carbon tax that they said will not only cost EU its comparative advantage, but also asa result, will increase global CO: emissions, as steel production willbe relocated to those countries inwhich there is no carbon tax and/or which have lower environmental standards than in the EU, Thus, the industries in the EU argued that they “... should not be asked to bear an unfairThailand?’s Policy Responses to Climate Change Crises: an Analysis of Critical Sectors share of the [global warming] burden? (ECOAL 1996: 4). Thirdly, alternatives or options for change are rather limited both by advancements in technology and politically sensitive consequences both at the national and the international levels. Some countries use theit massive emissions as a bargaining chip in international negotiations, which has only resulted in slowing the implementation of mitigation options. Most political decision making - which is generally rather short- sighted and responds more to immediate concerns than long-term ones - is contradictory to the objectives of the Convention. Lastly, the predicted calamity seems distant - as far as a century away. It makes little sense to individuals to talk about things, the consequences of which they will not be around to bear (if those consequences ever ‘occur at all), unless, of course, they truly put a high value on the future costs which their offspring may be forced to bear. Even if they do, gainers and losers from climate change may co-exist, making it difficult to get full cooperation from every country. 3. Policy Discussion Climate Change on Some scientists perceive a risk that the calamity from climate change will be rapid and dramatic. Others do not totally agree, viewing its impacts as more gradual and adaptable. The United Nations Framework Convention on Climate Change (FCCC) represents the latest, boldest step ever taken by modern society to recognize and prepare for that situation. Given the uncertainty in climate change impacts, the issue in policy formulation is the question of belief (Chart 1). To be rational, even in the face of uncertainty, a “Precautionary Approach” should be chosen, but not one which includes “premature, economically damaging decisions” (ECOAL 1996: 3). The precautionary approach (by choosing a no-tegret policy, for instance) to a problem implies assessed positive contributions, no matter how small, that will be achieved by doing something as opposed to doing nothing. A no-regret policy ‘option is therefore a wise choice, and any policy prescription based on this option will at least make economic sense. Most importantly, although the consequences of the potential disaster are uncertain, we do know which activities contribute to the ‘emission of GHGs. The real challenge, hence, is to determine how concerted efforts can be implemented by parties to the Convention. Commitment to the climate change mitigation program, although national, always has international implications. Two concerns have been debated in putting signed commitments into action by parties to the Convention. 3.1 The North-South Dialogue Most outstanding is the argument made mostly by developing countries (the South) that pre-existing accumulation of GHGs, a by-product of the —North’s early industrialization, is the sole responsibility of the North.’ The South should not be forced to bear or share such responsibility. This argument sounds rather political, but is there substance to the argument itself? Existing historical data on CO, CO2, CHs and NOx reveal that such a claim is true. Figure 3b, for instance, shows that North America, Japan and Western Europe together emitted 45.96 percent of the global CO: emission in 1988, while the rest of the world emitted the other half. These elites are industrial pioneers in the Organisation for Economic Cooperation and Development (OECD) which still enjoy today’s highest standard of living. Evidence “The Annex 1 countries (developed countries) are committed by the FOOC to reduce their GHGs to 1990 levels by the year 2000.of such a “premium?” life style is the use of inefficient modes of transport, which rely heavily on fossil fuel, especially in the United States, where public transport is poorly developed. The most prevalent mode is personal automobiles that were designed more for comfort than for fuel efficiency. More critically, OECD countries’ per capita energy consumption has not been in line with the projected depletion of non-renewable energy resources. The South has modeled its industrialisation and living patterns after the North, Fearing that its development aspirations may be prematurely disrupted if it is forced to start reducing GHG emissions, the South maintains to a defensive position. Although the Convention recognizes that poorer nations have a right to economic development, implying that they have the right to improve the social and. economic welfare of their citizens, poorer nations are Thailand's Policy Responses to Climate Change Crises: an Analysis of Ceitical Sectors faced with less options in terms of technology and finance. Thus, “common but differentiated responsibilities and respective capabilities and social and economic conditions” - as stipulated in the Convention - have to be taken into account in policy formulation and implementation (UNEP 1995). Even though the North is committed to reduce its GHG emissions, the Convention hhas not been strict and it lacks enforcement measures. As a result of economic wealth, the bargaining power of the two factions are not compatible and the North has so far made Tittle progeess in fulfilling its commitment. In many instances, industry itself tries to resist such measures as carbon tax in order to avoid losing competitiveness (See ECOAL 1996). How long can this dialogue go on, and what will it lead to? So far this confrontation has not been normalized and in effect, it has stalled the whole process of implementing the Convention. Rest of Brazil / Africa 0.99% / 2.08% Ex-USSR N. America 25.91% 18.99% | E. Europe | \ 633% | Rest of Latin [sagan need aaa 415% 4.16% 4 N.Altica & Australia & NY : M. Est Zealand aoe 4.26% 1.29% | China W. Europe 10.68% \ IndiaRest of Asia 14.84% 297% 2.97% Fig 3b. Share of fossil energy related CO2 emissions by 13 world regions in 1988. Source: Energy 1993.Thailand’ Policy Responses to Climate Change Crises: an Analysis of Critical Sectors 3.2 Efficiency and Equity Issues In addition to the above-mentioned North- South Dialogue, another critical consideration is the scale or size of emissions, Should negotiation be based on per capita emissions or the absolute size of emissions? One consideration may be to give smaller countries (smaller economies or lower level emitters) more “breathing room.” In particular, low per capita emission Non- Annex I countries should be allowed to increase their emissions at rates that will not hamper their economic progress. The reduction already committed to by the Annex I countries (if implemented) should more than offset these increases.® This will promote higher efficiency in the Annex I countries,’ while the issue of equity can be accommodated. Equity issues also cut across intranational economic groups. High income people are responsible for larger amounts of GHG emissions (e.g., owners of private automobiles or factories), while lower income people emit less but are exposed to more (eg., taking public buses). How can a policy be designed ‘to address this? More importantly, there is also an intergeneration equity question, “The market fails to address this issue as climate is a global common property. The future generation will have fewer alternatives to reduce GHGs if the current trend in emissions continues. This is simply a result of the cumulative effects of GHGs. Options will be exhausted quickly unless a relatively economical technology is developed at reasonably quick pace. The critical question 'This has to be verified ‘quantitatively. "Increased efficiency in the North may, however, be offset by efficiency gap in the South, ‘but may not be necessarily 30 if there isa concurrent technological improvement in the South 2s wel. is the relative amount of wealth being generated in the meantime and bequeathed to descendants, and the marginal cost of GHG reduction in the future, Policy should also consider these issues: a. The greenhouse effect is a global, not national, issue. Which means, even if one small emitter of GHGs successfully reduces GHGs emissions, the country may still be required to face climate change consequences because other countries might be freely releasing GHGs (free riders). Thus, one ‘country cannot be sure that its investment in reducing such gases will bring benefit at all, since emissions from free riders could very well offset reductions by others. A commitment from every country to assume responsibility for its emission amount, and a mitigation strategy is therefore important for global GHG reduction. b, The impact of climate change will not be visible until sometime later (as much as 100 years). At the moment we lack sufficient scientific knowledge, and many uncertainties are encountered when one tries to evaluate possible occurrences during such a span of time. In short, there is a high level of ‘uncertainty or risk involved. So one may not care much of what will happen that far down the road. ¢. Despite appreciable success by the United Nations Environment Programme (UNEP) in bringing over 165 nations to negotiate and sign the United Nations Framework Convention on Climate Change (FCCC), subsequent responses have so far revealed many political difficulties. The carbon tax initiative among the EU, for instance, has been faced with much resistance for fear of _ losing competitiveness. Implementation guidelines laid out by the Convention also face the question of efficiency and equity, besides other considerations. Negotiations between the South and the North, now deadlocked, should be facilitated so that the danger of doing nothing can be avoided.‘Thailand?’s Policy Responses to Climate Change Crises: In making policies for climate change, the following questions are relevant and should be considered: © What amount of GHGs are emitted currently and what will be the situation in the future? Answers to this question are already available to some extent via national inventories, but simulation of future scenarios is difficult because, among other reasons, sources of GHG emissions are both man-made and natural. © By how much should emissions of GHG be reduced? The rule of thumb in global reduction, based on zero economic growth, is zero emission rate change. But it is not feasible or relevant. So, one should perhaps talk about “optimum emission rates” instead. This is not known and has not been studied yet. @ When should emissions be reduced? This is another difficult question, but given climate as change potential consequences: the sooner the better. How soon depends on a number of factors: the most significant of which is the development needs of a country. ‘© How should emissions be reduced? Work under ALGAS? tries to answer this question by applying least cost options. Options for each sector are identified and associated costs are estimated. However, these sectoral costs may not be sufficient for decision making because we need cross-sectoral costs to decide on options. At the global level, comparable costs from nations are also needed to decide on policy at that level. These costs are also required for cquity reasons, if for "Asian Least-cost Greenhouse Gas Abatement Strategy Project, funded by Asian Development Bank. an Analysis of Critical Sectors instance, joint implementati*on is to be negotiated. © How should responsibilities for mitigation be shared among economic groups, social classes, and nations, while kkeoping efficiency and equity in balancet Answering this question requires a holistic approach to analysis of mitigation ‘options and it is the task of future esearch in climate change. Economics is certainly not the only aspect of policy making in climate change; neither is science. Most important, perhaps, are the political aspects of climate change, which affect negotiation between signatories of the Convention (known as a Conference of Parties (COP)) and implementation of mitigation options. Economists have approached the climate change challenge by proposing a world carbon tax scheme, which promises to be one of the most effective measures to stabilize GHG emissions (Nordhaus 1992 and U.S. Department of Energy 1991). It aims to bring ‘emission levels toward an optimal transition path for slowing climate change, so that more ambitious goals can be addressed later on. The same scheme has been proposed by 1] EC members (excluding the UK which openly opposed it - Warren 1993: 29-30). To date, however, no country in the world has seriously implemented the idea. An. explanation for that is rather simple: tax is too sensitive a political issue, although it has been surmised not to be development inhibitive.? "Countries may collaberate in reducing GHGs, "Using a partial-equilibrium non- Walrasian model, Mimaphun (1996) estimated carbon tax on ‘Thailand’s CO: emission. He found that limiting COs emissions in the year 2000 to 1990 levels would require 30 percent of the base-year fossil fuel price, which in turn would ‘change consumption patterns,Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors But, a carbon tax could be very difficult and complex to devise, mainly because of the question of redistribution of tax revenue. Whalley and Wigle (1996), for example, ran a multiregional, —multi-commodity general equilibrium model, based on different tax schemes (namely, national production-based, national consumption-based and global) over, a single 40-year projection period of 1990- 2030. Based on various carbon-based products the model applies differential tax rates, They found that all regions, except oil exporting countries and = Japan, will experience a net loss in GDP if production and consumption of carbon-based energy are taxed. The only gain for developing countries, is when global carbon tax is applied and the collected tax revenue is redistributed on a per capita basis. The loser-gainer situation, or the sorcalled Pareto equilibrium, makes it difficult to introduce any kind of tax, unless the losers are compensated. The FCCC is a framework within which further negotiation will be conducted. But at the same time, nations can follow no-regret policies to stabilize emissions for the time being without incurring unnecessary additional costs. Thus, a no-regret policy can be used as a guiding principle for immediate actions to reduce emissions until such options are exhausted. Negotiations, in the mean time, will produce other policy options which are likely to increase costs and are therefore more difficult to implement (assuming no technological change). but have no significant effect on GDP. One complication is that consumers. will subsititute one type of fuel for others, making it lengthy to actually observe end results, In most cases, high rates of such tax are required, thus, effective application is not easy. (Gee for example, Whalley and Wigle 1996 and US. Department of Energy 1991). Moreover, the ‘question of equity and free riders still remain if such a tax scheme is not uniformly adopted. 10 One of the dangers in tackling the climate change criss is that “doing nothing options” incur no immediate direct cost. Thus, in the short term doing nothing is superior or more attractive than other alternatives, whether they be. stabilizing emissions or the world climate." There are some’ conditions which limit ‘mitigation options for Thailand at present: 1, The political economy of climate change dictates that Thailand choose a no-regret policy as a precautionary approach before other options. A no-regret policy entails no additional costs for climate change. It is also reasonable to integrate policy options whenever possible. 2. Given the unrestrictive nature of the Convention and limited resources, Thailand should, at the moment, concentrate on sectors that are high emitters of GHGs (cefer to Tables 2 and 3). Until now, only least costs in the forestry sector have been estimated. Lack of cost data in all sectors investigated limits the analysis to partial examination of only some sectors, Thus, one cannot compare reforestation options with an energy tax option, for instance. 3. The trade-off between efficiency and equity could limit the options to be taken, depending on social preferences. Strategically speaking, however, the equity concern may be more important in the long run than efficiency. For instance, the currently debated. joint implementation (jl) or activity implemented jointly (AlJ) between the North and the South may increase overall efficiency, but it has raised the question of equity, if carbon is credited for the North, or if the been estimated that stabilizing world emissions would result in an addicional cost of 1.6 percent of world product, while stabilizing the climate would cost nine percent of world product Wale Jorgenson, personal communication). The future cost of doing nothing may, however, be infinite.Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors increased efficiency is not shared by the because Thailand will be able to do so South. Thus, Thailand may not want to unilaterally, through commercial technology participate in any agreement which may transfer. Promote efficiency at the expense of equity Natural esarences ‘oonomiestvites ‘ o wer slnventory Magan won Vane “Adapation wont sSeaeay Policy Projet * Working Group] Scientific assessment; Working Group I Impacts of climate change; Working Group Ill Policy response to climate change. Chart 1: Conceptual framework for climate change policy responses. "Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors 4, Thailand and Climate Change Thailand, which ratified the FCCC in December 1994 to become a full party to the Convention, has been active in inventory and mitigation option studies. The national inventory work is intended to identify sources of GHGs, and to estimate levels of emissions from each source. Work on inventory of GHGs under the IPCC initiatives for Thailand has resulted in identifying sources and amount of emissions in major sectors covering energy, cement production, changing land-use, rice fields, livestock, and waste management. Table 2 contains results of the study which was conducted using IPCC emission factors for 1989, whereas Table 3 presents estimates for 1990, using local emission factors in the recent calculation. Numbers in these respective tables have been translated into Figures 4 and 5 for easy reference. Out of the studied sectors, the first three major sectors emit CO2, the others CHa.” a. Carbon Dioxide Emission The emission of carbon dioxide resulting from energy consumption represented. the largest share in the estimated 112 million tons of COn emitted by Thailand in 1989. Higher amount was emitted in 1990. In both 1989 and 1990 estimates, transportation represented the largest source of CO2 emissions in the energy consumption sector, followed by power production. Land-use change became most important emitters of "CEC and HCFC compounds ‘come under the separate protocol called “Montreal Protocol” to be dealt with directly because these compounds have significant industrial and commercial applications. Their _ global warming potentials (see Box 1) are high compared to COs, although CO2 has much higher emission rates. 2 COx: 35.5 million tons in 1989, representing 31.7 percent of 1989 total CO2 emissions. Forest clearing was the largest” source, emitting 23.1 percent of the land use change category, followed by shifting cultivation. The situation of CO2 emissions from the land use change stayed relatively the same in 1990 estimate, but over half of the total CO? emissions came from land-use change. Emissions from industrial energy consumption ranked third in both years. On the average, Thailand’s industrial sector is found to be neatly twice as energy intensive as those of Japan, Australia and New Zealand. This suggests that Thailand's industrial sector has a significant potential for efficiency improvements (Lim et al. 1995) b. Methane emission One of the most important GHGs for Thailand is methane, mostly emitted from rice production. Of total methane production in 1989, 88.7 percent (or 6.3 of the total 7.4 million tons) was emitted by rice cultivation alone. The revised figure for 1990, using local emission coefficients, was 4.4 million tons, significantly lower than the 1989 estimate. Animal husbandry emitted only a fraction of the total emissions, although this source, along with waste management, will become ‘more prominent as economic development progresses. Another important category in the energy sector is cement production, which emitted 5.8 million tons of carbon dioxide in 1989, representing 5.2 percent of total COz emissions. This amount was relatively small and compatible with emissions from agriculture (4.5 percent) in the same year. Emissions from this source may grow rapidly in the future as a result of economic growth and urbanization. The 1990 calculation did not produce figures for this category, however. Using the General Circulation Model (GCM), a vulnerability study being conducted by TEI reveals the following mainconsequences of climate change in the next five decades for Thailand: © Average temperature will increase by about 2.5:3.5° Cy © Annual precipitation will increase about 20-40 percent; © There will be perceivable seasonality changes as a result of magnitude and patterns of precipitation changes such that the North and the Northeast will be rier and the South will be wetter; Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors © Forest patterns in the north and the northeast will change toward dry species. In conjunction with these, potential threats, ‘opportunities also arise. More efficient resource utilization can be introduced, for ‘example. More carbon sinks can be created for climate change as well as other benefits. Thailand cannot mitigate the potential impacts of climate change alone, but it can contribute positively to the challenge by choosing no-regret options, at no cost to its own economic development. Table 2: Inventory of Thailand's Greenhouse Gas Emissions, 1989 ‘Source Categories 0, CH, N,O NO, 1. Energy Combustion AGiviien 1} TOS 120, NA S202, 10m NA ‘A. Energy and transformation industries wm 12 NA 1047 75 NA B.Industey ASIC) USO 04 NA O57 NA C. Transport 3060 9S NA 241022 2228 D. Commercial & Residential 246 G1 NA 20 NA E. Agriculture 502 08 NA O7 587 m7 F. Other a a 7 7 : z TL Energy Production, Tranamisnon, [NANA NA Storage, And Distribution (Psd), i eae Ti, Orker India Proweies (SIO Seep ‘A. Cement production 7 : : IV. Agricubeure 030) PAB # ‘A. Animal husbandry 7 2 B. Animal wases i a C. Rice cultivation c D. Agriculeural soils + 06 7 - E. Agricultural waste burning NA #4 06 78478 : V. Land Ue Changs sass ner ROS TLS ‘A. Forest daring, 258823 879 08 Ih 2,115.0 : B, Abandonment of managed lands 2687.2 i é : . Plantation 2000 : . : : D. Logging S34 : : E. Shifting culivation tiger 36902226465 - Tol T2485 70098) 2 S672 AOD NA Note: Gg = 109 grams ‘Source: TE1 1993 3Thailand?s Policy Responses to Climate Change Crises: aan Analysis of Critical Sectors, 1 es | Power 1 managed tands ‘Logaing [] ‘Shifting exltfation | (a Forster Zeeman Prodicton eee (Commarialand i resdeiat i i Agere [=] i i ‘industry \ \ =e EE] : Fig. 4: CO: emission in Thailand in 1989 by sector. Source: Data from Table 2 4.1 No-regret Options in Critical Sectors GHG emission results from both the consumption and the production of fossil fuels. Both consumption and the production of fossil fuels are the most critical categories, emitting 63.3 percent of total CO2 emissions in 1989 (using IPCC emission factors - see Table 2) and 39.7 percent of the total in 1990 (using local emission factors - sce Table 3), respectively. Transportation and energy production are two main emittors in the energy sector, while land-use change is the largest source in the non-energy sector. Specifically, by 1990 land-use change and forestry emitted CO2 1.4 times greater than that emitted by the energy consumption activities." These top two sectors will be "This is also due to a change in calculation using local “4 briefly discussed in light of their potential contribution to GHGs." “The modern industrial sector in Thailand is energy intens relying heavily on electricity consumption. Thailand's current climate change research is still too early to make any conclusive suggestions, bur general options from other countries have pointed to energy efficiency and fuel switching Gee U.S. Department of Energy 1989, for example). The case of Thailand is fairly challenging because there are numerous firms in the non- formal sector, and they are not uniform in the same industry, which makes it rather difficule to suggest a general blue- print policy.Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Table 3: Inventory of Thailand's Greenhouse Gas Emissions, 1990. Gp [Greenhouse Gas Source and Sink 00; co] CHT ON NO] NM\ |Categories Emissions| Removals [Toral National Emissions and, roaar7e] 26.5086) 5,608.54] 39.91] 1,252.05) 1,873.52] 850.40) [Removals an ‘Energy (Fuel Combustion + |” 82,783.34] 0.00] 493.55] 0.83] 474.76) 1,095.85] 880.23] ugitive) ‘A. Fuel Combustion 2,703.34 0. nis 83] 474.26) 1,095.85] 246 T Energy & Transformation 78,033.48 ral mal 8, industries 2 Industry (TSIC) 12,207.52] oa] [865] 164 3 Transport HAI6.6 942} 0.56] 190.90] _i,0n1.70] 727.65] 4 Small Combustion 8,005.70 oso] og) 113.03] 63. 1931] IB. Fugitive Emissions from Fuels 0.09) Om) 481.65). Oo] 0.00) 633.25) 1 Solid Fuels 16.657 2 Oil and National Gas 464.98] @3.5| 2 Industrial Processes 9,839.65 03] 0.17 3 Solvent and Other Product Use 4 Aericulcure 0.09) Ooo] 4.89077] 18:10 18.90] SiO 0. ‘A_Enceric Fermentation 318,39] B Macure Management 154.) CC Rice Culkivation 4398.0 D Agricultural Soils 1756 E Prescribed Burning of Savannas F Field Burning of Agricultural 1945) on! 1890 S10. Residues G Other 5 Land Use Change & Forestry | 115,854.63] 26,908 3052] 20981 vase! 267.00 01 ‘A Changesin Forest and Other [90,5110] 812 Woody Biomass Stocks |B Fore and Grand 25,348.) 3052] 20.96) 75838) 257.0 C Abandonment of Managed 26,056.1) Lands D Other 6 Waste 000] 14559] ono] a 0.00 A Solid Waste Disposal on Land 121k B Wastewater Treatment 24a (Waste Incineration D Other Wasce 7 Orher 0 0 175, 00 0. a ‘A Wetland 47.75 ‘Source: TEI 1996, 15Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Teandongcer] Managed Lands Forest and Grassland Conversion Changes in Forgrame] Other Woody Biomass Indust Processes Fy satlConbustion fy Tarspon F< tedusty 316) fy Energy & Transformation —— Land recramprey Forestry Industries ro te AllEnergy (Fuel Combustion + Fognive) [=== ‘Total Natio and Remora 100.000 $0.60 ° 0.000 100000 150,000 20n.000 280,000, C02 Ga) Fig. 5: Total COzemission in Thailand in 1990. Source: Data from Table 3. Given the estimated CO: reduction potentials by various means (see Figure 6), the overall strategy for GHG reduction in Thailand should focus on strategies with the highest potential, at the same time taking specific constraints which pertain to Thailand into account. Thus, in the energy sector, energy efficiency should be addressed before fuel switching, while changed land-use will be devoted toward reducing methane emissions from rice production. A policy response can be designed to integrate methane reduction with an increased carbon sink through reforestation, which has become a pressing issue for Thailand, 16 a. Transportation Sector Transportation becomes a necessary function in a modern society, to transfer people and goods from one place to another. As urbanisation increases, people often have to travel longer distances from their homes to their workplaces simply because higher property values introduce changes in land- use. Higher property value allows businesses and services to take over the most valuable quarter of the city, forcing people to live farther away from the city center. Unplanned urbanisation will tend to escalate per unit ‘transport costs unless mass transit systems are provided.Energy Efficiency Fuel Switching Nuclear Power Renewable Energy New Transport Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Remainder ‘Cannot be met with present day technology ‘Scrubbing CO2 from Power Plant (forestation Utilization of Waste Fuel Fig. 6 : Potential contribution to CO: reduction by various means. ‘Source: IPECA and UNEP 1991: 57. It is not too surprising thatthe ‘transportation sector turns out to be the largest consumer of fossil fuel and one of the largest emitters of GHGs at the same time ables 2, 3, and Figure 7). Most of other nion-COr gases are emitted mainly from stationary sources. Many major cities in the country are now suffering from affic congestion as a result of either poor planning and uncontrolled expansion of personal automobiles in the face of inadequate public mass transportation. The lack of a mass transit system encourages people to depend ‘on passenger cars as Thailand's major mode of transportation. Bangkok alone consumes a large share of almost all kinds of carbon energy to fuel its large number of vehicles Cable 6). The growing number of vehicles hhas not been matched by expansion of the road system (Tables 4 and 5). Due to lack of urban planning, average traffic speed in Bangkok is about 10 kro/ hr, resulting in a notable amount of unnecessary emissions! ‘With the large number of vehicles in the BMR, it is not Fig, 7: Final energy consumption by economic sectors, averaged 1985- 1994. ‘Source: Thailand Energy Situation 1994 DEDP. surprising, that ait pollution problems have been acute and ‘cause health risks in many areas of the city (Table 7). v7‘Thailand’s Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Table 4: Number of Motor Vehicle Registration Under Motor Car Act and Land Transport Act, 1990 - 1994. Moror Car Act] Land Transpo Aa] Tora] Kingdom! Bangkol) Kingdon! Kingdom Bangke| 1990) 7,117,928) 1,942,713 424,512, 7,542,440 7,031,622) 1991 7,964,969," 2,008,91 462,117) 8,427,086 2,111,284] 1992 9,057,741, 2,264,335] 500,150, 9557891 2,372,057 1993 10,529,400)” 2.340453] 544,396) 114423) 11,073,796. 2,654,876 1994 11,974,342{ 2,854,423) 561,545, 107 12,535,887, 2,962,412} [Area (km) 5135 15,652 Road length Cem)” 4545 3,800) JAvg. growth 10% % sx} Be 10%) IBKK Share 25%] 21x) 2556] "Notes Types of vehicle under the Motor Car Act includes sedan, pickup, taxi and service car, motorcycle, tractor, farm vehiele and others. © Types of vehicle under land transport act includes buses and trucks. Source: The Department of Land Transport, Ministry of Transport and Communication. Table 5: Population, number of vehicles and ownership rate for Bangkok, 1990 - ae 1980 length. 1994. Population No. of Vehicles (Ownership Rate] Kingdom BKK Kingdoms BKK Kingdom BKK| 190 —-56303,273 5,546,937 702,031,622 13% 37%) 1991 56,961,030 5,620,591 84270085 2,111,284 15%) 38%] 1992 52,788,965 5,562,141 9,557,891 2,372,057 11%) 43%] 1993 58336072 SS7,T12 11,073,796 2,654,876 19%, 48%] 1994 $9,095,000 ___5,584,000__—_—12,535,887 2,962,412 21% 53%] average ST696863 5.577.276 9,827,420 2,426,450 17 #3) “Source: Department of Land Transport and Thailand Statistical Year Book, 1994. Table 6: Ratio of petroleum product consumption in BMR to whole kingdom in transportation sector. Yea T?O]Premium Gasoline | Regular Gasoline] HSD¢|_—_LSDee]|_ FaelOal]_——Toval a a a a a c V 1587| 0.56 0.64) 0.28] 0.34 08) 0.71] 0.40) 158 oa 3) on a4 oa 7 oa 15%5| 056) oa oa 037 x on oa 1950] 050) fr) oa 034 0x9 Rr) oa 1 3 oa 031 0 9 i) oa] a 057| 05 02 ox om 055] 0.9 i) 05] 057 02 ox oa] 2 7 1554 04 ox 027 on 2 O55 0.34 ‘Sourae 1 Departnenc of Energy Development and Promotion, Minky of Sdence, Technology and Environment High speed diesel: ® Low speed diesel. 18Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Table 7: Ambient Air Concentration in 16 Curbside Stations in Bangkok. ‘Station Max. TSP Max. Pb Max. CO 2 High (4 he) Gigi?) o 9 (ho cow hy Yaovara} Lanluang Banglampoo Sapankwai Silom Si Praya Rama 1 Bangkhen Prannok CCharensanidwong Ban Somdej Phraya Thai Taksin Sarsen ‘Standard* sii i : Proposed Standard 330 125 10.00 10.00 ‘Source: TEI Quarterly Environment Journal., Vol. 2 No.3, July-Sep, 1994, Note: * Standard set by Office of the National Environment Board. ++ Proposed interim national ambient aie quality xandards for Thalland set by Pollution Control Deparement Although the oil crises in the early 70s and The first national climate change study late 80s prompted a few cars (especially taxis) (TDRI and TEL 1993) computed CO: to switch to natural gas, there are still too few emissions under two scenarios:'” Liquid Petroleum Gas (LPG) and 5 Scemario 1. Without Mass. Transit, ‘Compressed Natural Gas (CNG)"* powered uusing only personal automobiles. The vehicles in the country. Such conversions are number of trips generated in Bangkok now less popular as people adjust to the new ia acral spe ta gueat gore Ae price regime. The recent stabilization of oil prices in the world market reduces the need to adapt as well, " Constraints of the study: But if the mass transit system in Bangkok is eee ee complered, how much will its contribution ro {nPeyiaien modes pasenger mitigating climate change be? And in that However, there exist many other regard, is it worth the financial investment? transportation modes, such as trucks, buses, railways, aidlines, “By-product of petroleum The study is limited to Bangkok refinery. only, but should be expanded to ‘Natural gas in compressed form other areas as well by applying high pressure; when The passenger source assumption the gas is liquified by maintening for Mass Transit is not reliable low temperature by refrigeration, because passengers might switch it is called Liauified Natural Gas from other modes such as buses. or LNG. 19Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Seventh Plan Urban and Regional Transport Study. © Scenario 2. With Mass Transit. Ten to fifty percent of Mass Transit passengers are assumed to come from car passengers mentioned above. Thus a reduction in trips estimated in the above case is accomplished and, based on that, COz emission reduction is calculated Tt was found that CO: reduction benefits from mass transit systems are not attractively Targe. The study estimates reduction of 100,000 tons of carbon by 2006 in the highest case, which is about 0.4% of total carbon release from the mobile sources. This implies that introducing mass transit only for the sake of climate change is not worth the investment. Having a mass transit system such as electric trains in service does not necessarily mean that CO: emissions will be drastically reduced, as confirmed by the above calculation; in fact, CO> emissions may even increase, because they use electricity generated from power plants burning fossil fuel. That will be the case if power generation is not efficient or if it relies on low-quality high carbon coal, for example. Neither will COr emissions be reduced if such a mass transit system cannot attract passengers away from other modes of transport, such as personal cars and buses run on fossil fuels. V3 Consumer see V3 Boviroament Fund Us ndrest (Government & Co) (rut Price) fore Privatiaed nes Government Lines o Cleanap 8 Others (Chart 2: Transportation Reform Scheme.Thailand's Policy Responses co Climate Change Crises: The key to CO: emission reduction, hence, is to change the mode of transport as effectively as possible so that more people will switch to public transport services, and wherever possible, to switch public modes of transport to the cleaner fuels, such as CNG or LPG. For the mass transit being developed in Bangkok, it may become necessary to initiate a program of cross subsidy. For instance (see Chart 2), one third of the electric train fare could be subsidized indirectly by the government and corporations through corporate tax incentives (i., corporations paying their employees’ monthly travel cost (eg., unlimited ride monthly ticket, flat fare) and receiving in return a corporate tax break from the government and one third could be directly subsidised by using a portion of the tax revenue from Bangkok itsel* or from the Environmental Fund- into which the Energy Conservation Promotion Fund (ECPF) or “the Oil Fund” contributes 0.07 Baht/liter (NEPO 1994). A part of this may come from the oil companies’ marketing charge, which currently goes to their own accounts.” Consumers will pay, the other one-third of the fare. Given the preestimate of 15 Baht for a ride on either of the three trains (Hopewell, Metro by Tanayong, and Electric Train, see Phandee 1994), paying five Baht or even double thereof, is very attractive, compared with such 30-Baht air-conditioned buses or the 3.50 Baht on the regular express" buses (ced buses) currently charged. Those who take public buses will be fully charged at cost, which may be marginally “It should be emphasized that Bangkokians must not expect a poor farmer in Sisaket Province to pay for their daily bus fare, at thas been the cate in the past. ‘Ina recent negotiation between fishermen and the government over subsidized gasoline, oil companies agreed to have as much as 1.0. Bahtlt “squeered” out of their coffer This shows that the source of funding is available, if so needed. an Analysis of Critical Sectors higher than the trains that run on the same route. But given the fact that average current fares on municipal buses are 2.50 and 3.50 Baht per route and that private operators with much higher fares are still in business, ‘one could easily come to the conclusion that bus operation in Bangkok is a profitable Dusiness despite the accumulated losses in the BMTA.™ If deemed necessary, the gasoline tax can be designed (especially on leaded gas) so that those who drive their own cars will be subsidizing public transport.” The major question is what are the responsive rates for buses and electric trains? In presence of all the alternatives, consumers have to be able to make a decision based on such discriminatory fares. The number of people who drive cars may still be large if tariff rates have been marginally different, but if, in effect, streets become more vacant as a result of the policy, people may even travel longer distances. All these changes may not reduce fossil fuel consumption. One other way to reduce fuel consumption is improving engine efficiency through annual inspection (Table 8) (which is now privatized ) and make private car drivers pay the price (e.g, increased licence plate fee and/or car purchase fee charged through a car company and chaneled into the Fund), a portion of which can be used to subsidize other more publicly-preferred modes of transportation. So, the fare should be sufficiently discriminatory to encourage people to change their prefered mode of travel to mass transit and “greener” buses, which are converted to natural gas fuels such as CNG or LPG. * In that respect, the losses reflect management’ and corruption problems within BMPA itself, for any private ‘operation cannot thrive without making positive profit, at least in the long-run, Using the Environmental Fund to subsidize the scheme means that car drivers will have already done this unknowingly. aThailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors The bus system itself has to be reformed. Its accumulated 17 billion Baht debt (as of February 1996), and the coexistence of private joint-operation buses (see Table 9) indicate that privatization may indeed be an indispensable option in the reform, mainly because of the chronic management problems in the Bangkok Mass Transit Authority (BMTA). After privatizing the profitable bus lines, the BMTA is left with less profitable ‘ones, which may have to be subsidized. In that case, BMTA itself will have to be improved as well - either reengineered or transfer its operation to the Bangkok Metropolitan. Better route design and market discriminating fares charged for different types of buses have to come in the reform package as well, with the “true” cost internalized in the fares." We should perhaps caution that such a reform may in fact contribute marginally in reducing COz. For Bangkok, such a move is a pure no-regret option, which will improve both efficiency and equity, as less COr and other GHGs will be emitted and resources are transfer from higher income to lower income groups. Other fringe benefits, such as lightened traffic congestion, improved air quality and reduced travel time, (even improved mental health!) become major benefits and should more than outweigh the incremental costs of carbon dioxide reduction. Given the scale of negative economic impacts * resulting from traffic problems in Bangkok "One may argue for internalizing environmental (climate change, included) cost into the fare, but this portion of cost can also be subsidized by the proposed scheme $0 that the actual fare will not be s0 excessively costly ‘that marginal fare of buses is too minimal to attract passengers away from private mode of transportation. *Potential business ventures have ‘been discouraged by this problem 2 and other major cities, transportation should be the prime target for change. This problem is also an ideal arena for no-regret climate change policy. This obvious rationale, however has niot been realized mostly because of political hurdles. The final say seems to rest at the doorstep of Parliament. There are many other no-regret mitigation options in the transport sector. Box 2: Other No-Regret options - Fue substitution: LPG in automobiles and CNG in public buses; |- Improving transportation systems: Mass transit and improved roads, and speeding up| the construction of approved mass transit systems; - Planning new urban development: To| disperse. population, density from_ congested city areas; - Eliminating subsidies for energy consumption, or promoting cleaner fuels (eg., unleaded gas) via cross subsidy, which may use differential and regressive rates; }- Substituting energy taxes for a part of| income. tax, such, asa tax for ouning romobiles, which may utilize a progressive structures - Increasing engine and fuel efficiency; - Excessively taxing or banning imports of old] engines and used automobiles. alone, not by political instability which has become a norm.Thailand's Policy Responses to Climate Change Crises: ‘an Analysis of Critical Sectors Table 8: Annual vehicles check-ups by registered private inspectors, July 1, 1994- July 31, 1995, Type Total number Passed Percent (6) Cars 756,728 21,67 02 Motorcycles 97.425 90,312 92.7 “Total, (average) ln S415 [on 52,49. (GOS) ‘Source: The Department of Land Transport, cited in Matichon Weekend, 21 May 1996, Vol. 16, No.822. ‘Table 9: Number of buses and routes in Bangkok, 1996. Type ‘Number of routes ‘Number of buses BMTA| _ others® woral | BMTA| others* total 1. Ordinary 1.1 Blue color $31 BB 1,269 120 a 1st 1.2 Red color 1,934 36. 3,670 Total (1) 120 7 157, 3465 Lat 4539 2. Air Con. 2.1 Ordinary 30 2 a7 1164 393 1,503 2.2 Micro. : 2 20 - a0. 840 Total (2) 30 32 114 1,179 2,343 Toral (1)+(2) 150. co 219, 4,629 2,658 2,282 3. Minibus 3.1 Ordinary - 39 9 - 1,763 1,763 3.2 Lanes - 3 n3 - 2477 2,477 Total (3) - m 1m - 4240 4.240 Tora ()+@)+6) 150, 241 S91 ff 4.69 ‘6793 | 111,522] ‘Source: I. BMPA, ted by Panikabutr (1999), 2. Asof February, 1996, “Others denore private operat Those chat run in small roads. in chat provide the services under BMPA bannersThailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors b. Power Sector Energy production is an _ indispensable activity which makes living more comfortable, and keeps development and business alive. In the past, Electricity Generating Authority of Thailand EGAT) has met the increasing demand for electricity by supply management. Construction of hydroelectric generation systems increases atmospheric COz by deforestation, and the burning of gas and oil for the generation of electricity also releases a sizable amount of COh into the atmosphere. In Thailand power generation is the second largest COz emitter in the energy consumption category exceeded only by transportation. In this section, the DSM and the IPP schemes will be assessed for their contribution to reducing GHGs. Lets first explore mitigation options for the sector. In general, mitigation options available in the energy sector can include: 1, Efficiency improvements in industrial ‘processes. The increased efficiency implies lower energy consumption for the same amount of output, which entails less emissions. 2. Use of efficient motors (now a part of Demand Side Management DSM, discussed below). 3. Expanding cogeneration. A simultaneous production of heat and power, cogeneration is an effective means for increasing energy efficiency and reducing energy costs. Table 10 estimates that Thailand's technical potential for expanding cogeneration as 3100 MW. However, the current generating capacity is 876 MW only. Thus there is a huge potential that is yet to be exploited. The Thai government is also promoting industrial cogeneration. Current policy now allows industrial cogenerators to sell their excess power back to the grid, at a fair price, based on a long run marginal cost. 24 4. Improving energy markets by pricing efficiency through market deregulation. Petroleum Authority of Thailand (PTT) monopolizes the Thai natural gas market. Theoretically speaking, monopoly prices may not necessarily reflect the full cost of the resource. There is a need for deregulation to promote a more competitive gas market. The same thing is true for energy production: Independent Power Producers (IPP) make the energy market more competitive. Expected increases in price will correctly reflect the ‘crue’ cost of energy production, thus bringing consumption more in line with the new price regime. As already suggested in the new Eighth Economic and _— Social Development Plan, energy prices should be redesigned to also reflect seasonal demands and resource scarcity in power production: 1. External costs should be imposed using tariffs such as a carbon tax. This is an initial policy’ option which is too politically sensitive to implement. The estimated 30 percent of price increase for 1990 level reduction in the year 2000 (Mimaphun 1996) is too expensive to sell to the public, especially when the local benefits of such a reduction are not clearly accountable. 2. Promotion of _ hydroelectricity and nuclear power alternatives. The former option is now eliminated, especially large- scale hydropower projects, mainly due to local protests. Even smaller ones are facing water supply —_ uncertainty. Vulnerability of such a supply implies the probability of high risks. Do future options open for nuclear power? At the moment it seems difficult to get a concensus on this question, since very much depends on a large number of factors, such as costs, social acceptance, understanding, safety measures and development, and availability of future energy options. At present, the economic cost of a nuclear option, may not be cheap by comparison, and the social (and environmental) costs are even higher. It is notThailand's Policy Responses to Climate Change Crises: ‘an Analysis of Critical Sectors ‘Table 10: Summary of Technical and Financial Potential for Cogeneration in Thailand “Types of Industry Conent] Operating] Technical] Financial] Under Generating] Capacty| Potential] Potential | Consera Capacity ion Cement ignite, HEO Chemical 8a] 68 os 236 Food 153 120 al 116 Industral exate na 7 “Municipal Waste 8 3B Municipal Wase i refinery no 16s ut 29} nal Fact Oi, Crude Or Palm oil mill 60 40 x 32] na] Spene fibre, Sat and Branches Peerochemical a1 399 168 268} 54] Ful Oi, Fue Gases Palp and paper a4 399 az 13] 93] Fuel Oi, Lignite, Black Liquor Large rice mills uu | 9 u 358) 358 6 155 298 Rice hu Saw mills 7 Excess Bagasse Sugar mills 430 20 81 Bagasse and Cane Trash 200 28 9 Texte 82 ™ 52] 15] Fuel Ol, Ligne Fora USE ers 66 3,098] ETSI] SEES E Source: KMITT and Monenco 1992 feasible in the next couples of decade. There Understanding and acceptance of nuclear is a need, however, to plan and implement options, unless more reasonable options steps which will lead to increased popular become available. o: ion foots in Promotion’ of energy efficiency and ciiseevatign!: © Carbon Tax asa fiscal policy and Jo Altermative eneray (e.g sola, Wi supplementary.Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors b.1 Demand: side Management (DSM) as GHG Mitigation Option. In Thailand, potential exists to improve efficiency in energy use that also results in lower bills. The Thai DSM project costs 1.45 Baht/kWh which is lower than the 1.56 Baht/kWh for electricity generated from a new power plant. Thus the DSM option is a no-tegret option for mitigation of GHG in Thailand. The US$ 189 million Demand Side Management project was launched in Thailand in September 1993 for a five year period (1993-1997), in response to Thailand's National Energy Conservation Act. Its implementation is administered by EGAT in cooperation with the Metropolitan Electricity Authority and the Provincial Electricity Authority. It was modified in March, 1995 after two years of successful implementation. The revised plan now projects a total energy saving of 4,873 GWh by 1998. DSM of Thailand focuses mainly on reducing energy use through efficiency improvement in end use. Program priorities and implementation strategies have been designed and implemented to achieve demand saving goal of 311 MW and an energy saving of 1,826 GWh per year by the end of 1997. By 1995 the High Efficiency Fluorescent Tube Program was completed satisfactorily and three additional programs have been cucrently pursued: High Efficiency Refrigerator Program, Air Conditioner Program, and the Green Building Program. In the near future two more programs, namely, the Compact Fluorescent Lamp Program and the Motor Program, will be implemented. These are to be followed by the Low Income Lighting Program and the High Efficiency Street Light Program." "See EGAT 1995 for more details fon DSM Project. The present DSM Programs description with implementation strategy and its current progress are summarized in next page. Each of these activities saves energy and reduces GHG. By 1995 and estimate of 50 MW was saved, with 179,947 ton of CO2 reduced. The cost of reduction per ton is much more expensive than that of reforestration, however, which is estimated as US$ 1.28 per tC (see section 6.6).Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Programs High Efficiency Fluorescent Program was designed to transform production of standard efficiency tubes (20 watt/40watt) to high efficiency tubes (18 watt/36 watt) - The transformation was successfully accomplished through direct negotiations with five major tube manufacturers accounting for over 90% of the fluorescent tube market, - Program was completed in 1995 with estimated peak load reduction of 46 MW and energy saving of 215 GWh. - The total budget for this program was $9.31 million. High Efficiency Refrigerator‘ Launched in February 1995. Program = Through appliance labeling system, 5-6 cubic feet energy-efficiency refrigerator has been promoted in the market which resulted in an increasing of market share for high efficiency refrigerator from 57% to 94%. ~ At the end of 1995, estimated peak load saving was 4 MW and energy saving was 25 GWh. - DSM Office has recently expanded the program to include large refrigerators and an anticipated 36 MW of peak demand reduction and 315 GWh energy saving by 1998. cen Building - This program promoted the existing and new ee naa oat commercial premises such as hotels, office butldings, shopping malls and department stores, hospitals, and government buildings to use energy-efficient products such as high efficiency fluorescent lighting, compact Auorescent lamp, low-loss ballast, reflector, high efficiency air conditioners and building envelope ‘measures (e.g. window shading films). ~ Customer incentives are offered in the form of zero- interest loans for energy efficiency investments repayable in 3-5 years. ~ Peak demand saving of 48 MW and energy savings of 1.378 GWh is projected by 1998. ~ Similar to refrigerator program, labeling and zero- interest loans are utilized for promotional incentives. ~ 350 MW of demand savings and 1,022 GWh energy saving is projected by 1998. Air Conditioner Program aThailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Compact Fluorescent Lamp Program (CFL) High Efficiency Motor Program (HEM) Low Income Fluorescent Tube Program High Efficiency Street Lights Program ~ Program is under preparation to begin in mid-1996. where 1.5 million CFLs will be distributed to residential and commercial customers at a discounted price ~ Aggregate technical potential saving of 62 MW and 170 GWh by 1998. - Program is also to begin in mid-1996 to promote the purchase of imported 3-Phase HEMs of 7.5 HP-500 HP (motors under 7.5 HP account for 40% of all motors sold and produced in Thailand) - A financial incentive in the form of no interest loan repayable in three years will be provided for the incremental cost of HEMs. - A motor testing laboratory will be established. - DSMO is considering the free distribution of energy- efficiency 18 watt fluorescent tubes to low income customers (monthly energy consumption less than 35 kWh). - An investment of $24 million would be required. - Saving potential of 140 MW by 1998 is estimated. - Program concept is under development. Source EGAT 1996,Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors ‘Table 11: Estimated Energy Saving and Greenhouse Gas Reduction for DSM Program. Parameters HE, Tube] Refrigera | Motor] CFL A/C] Green] TES] Ballat| Toral to Bide. MW Saved 6 aa] al afl al nal aval 30 (1995) | GWh Saved 7216| 7] alla nal val aval nal 24 995) Project MW 159] 36] 4] el 50°43] aval val or saving (198) Projected GWh 1.508] —«315] 460) —170*]~—,o0z| 1378] wal nal 873] Saving (1998) (CO: Réduction 179,947 Achieved iq ehrough 1995 feonsy Projected CO: Reduction through 1996, 126,933 3,638,513 ‘Total Program Budget ($1000) iat [Cost of CO: [Becher ion) a4 Technical Potential Source EGAT 1996, The DSM Office is setting up the long-term DSM program of Thailand up to the fiscal year 2011. The potential savings of long-term DSM, which includes a conservation program, load management program and awareness creation program are given in Table 11 PDP, EGAT 1995), ‘Table 12: Saving of energy from Thailand DSM programs resule in energy saving. The projected energy savings from DSM can be used to estimate COr emission reduction, Such estimates are presented in Table 13 for five year intervals. ‘Table 13: Impact of DSM Measures on Emission Reduction? Unit: Thousand tone ’s DSM” 2010] 2020| 2030] OO} Saving 1 "13,6861 13,517] 125,214] = Sao ee se oon] Ga] ee ae SE zi] Pes Sein | 708] 47 PSS | BSR em ar] ame] | BSS 7] 5s | 80 | 8 2002-2006 3,525, 9,670 ‘Capacity 272 | 1,932 | 4,883] 9,933] 16,203 wor] ——enst err] [SE* aan Source: PDP, EGAT 1993, *Current estimates are very close to these figures. ‘Source: TEI 1995, New estimates by EGAT are closely inline with these figures. *Current estimates are very close to these figuees. 2»Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Most of the capacity savings arising from DSM measures were assumed to reduce the need for additional LNG-Combined Cycle plants, thus emission reductions were based on that assumption. b.2 Independent Power Producers ape). In Thailand, power generation is the second largest. COz emitter in the energy consumption category after the transportation sector. In the near future, it may even surpass the transportation sector, due to Thailand's increasing demand for electricity (see Table 14). Thus the construction of new power plants and the expansion of generating capacity at the existing facilities will be inevitable for many decades. For Thailand to mect the demand, new plants with capacity exceeding 1,200 MW will be required each year. their own use and surplus is sold to EGAT. Under the present IPP scheme, EGAT will buy power from these IPPs as follows: Capacity) Xr 1,380 MW 1996 to 2000 1,400 2001 1,400 2002 [Box 4 Evaluation Scoring Model and Scoring] | Assumptions (EMSA) for IPP by EGAT 1. Price factors (60% point marks}, based on ievelized generation cost; 2, Non-prie.facrors. 40%, point marks, based on the following: * level of development (13%) # financial assistance (7%) = experience of bidders (756) © fue supply and fue ype (4). * location and site (6%) # excrptions to model PPA (58) ‘Table 14: Forecast of peak generation. ‘Economic and Peak Social Growth MW_ Demand Development rate(%) increase Growth Plan 7TH sen) STHPlan (1997- 2001) STH Plan (2002- 2006) 10TH Plan (2007- 2011) rate 59% 551 5.9% Source: EGAT 1996. To fulfill the country’s hunger for power, as shown above, Thailand needs to find ever increasing financial resources. Owing to the constraints on future funding, EGAT has launched a privatization project in the power sector. In Thailand, privatization is currently taking place in two forms: © Independent Power producers (PP): generate electricity and sell to EGAT. © Small Power Producers (SPP) : usually cogeneration types, produce power for 30 ‘Source: EGAT 1996. While potential fuels for IPPs include natural 25, imported high quality coal and Liquefied Natural Gas (LNG), EGAT has influenced fuel choice by breaking its investment promotion into two phases. In the first phase, ‘only those IPPs who usc natural gas will be selected for support. The main reason is time constraint, but the choice happens to promote reduction of GHGs. From the GHG perspective, gas is better than coal because it produces only half the COr that coal produces, From an economic point of view, electricity production from gas is cheaper, because coal plants need costly control equipment to limit sulfur emissions. Gas is environmentally attractive, but it is currently available in very limited amounts within the country; thus very much depends upon a strategy of importing supplies from neighboring countries like Malaysia or Myanmar. Malaysia is a problem because of high price and Myanmar is problematic because of risk due to security and political factors. LNG is an option, though it is capital intensive.Thailand's Policy Responses to Climate Change Crises: an Analysis of Ceitical Sectors Thailand’s long term power production need the Power Development Plan (1995-2011) as (which includes IPP) has been projected in follows Table 15: Long Term Profile of Power Development Plan (1995-2011). Power Plant Fuel Type Unite Rating Total Commission Date aw) aw) Khanom CC 1ST) - 1 26 «16 February 195) Sirkic Hydro 4 mous March 1995 Mae Moh Lignite 12 300300 May 1995 Nong Chok GT Diesel = 14 122488 May 1995 Aug 1995 Sai Noi GT Die! 12 1224 May 1995 Jun 1995 Mae Moh Lignte 3 300-300 November 1995 Bhumibol Pumped-Scorage Hydeo 8 168168 December 1995 ‘Wang Noi CC1(GD, Gas 12 23446 Mar 1996 May 1995 ‘Wang Noi CC2 (GD. Gs 12 23446 July 1996- Aug 1996 South Bangkok CC2 (GT) Gas 12 202 FOr 1996-—Now 1996 EGAT-TNB Stage Ml 7 - 300300 April 197 Interconnection ‘Wang Noi CC1 (ST) - 1 205205, Apel 1997 ‘Wang Noi CC2 (ST) - 1 205 7205, July 1997 South Bangkok CC2 (ST) 1 219119 August 1997 Lam Takhong Pumped- Hydro 12 250 $00 February 2000 Nov 1997- Dee 1997 eidamian YLT Rarchaburi CCI ( 200400. July 1998- Aug 1958 Ratchaburi CC2 (GN) Gs 12 200 400 Sept 1998- Cer 1988 ‘Wang Noi CC Stage 2 (ST) : 1 200 200 November 1958 Ratchanuri CC3 (GT) Dec 1998, pe eee £8300"s a Ratcheburi Thermal 1999 Ratcheburi CCI (ST) Ratchaburi Thermal Ratchabusi CC2 (ST) bre a Ratehabusi CC1 (ST) vp : Keabi/Surat Thani Thermal Ratchaburt Thermal Ratchaburi Thermal PP ie Southern Region Thermal we : we : : Lam Tathong Pumped [ie ‘Source: EGAT 1996. aThailand?’s Policy Responses to Climate Change Crisess an Analysis of Critical Sectors The second phase of EGAT’s investment promotion allows more flexibility for investors to choose technologies; they have fewer time constraints. Although natural gas is less expensive, the time available allows for more flexibility to switch to other even less expensive fuels which may not be as clean as gas. Indeed, if the IPPs choose coal, which is readily available in Australia and Indonesia, then Thailand's carbon emissions will increase. So far, out of the 38 interest groups that have submitted 50 investment portfolios, 37 based their projects on natural gas, 12 on imported low sulfur coal and one on orimulsion (bituminous coal) (See Box 5). If these projects are approved, the future production of electricity of Thailand will be cleaner and less damaging to the global climate. Roughly, cumulative carbon dioxide reduction from the planned IPPs will be about cumulative 283.824 million tons of CO: relative to conventional coal-fired sources (Table 16). [Box 5: Investment portfolios in IPP, 1996 Phase 1: Total megawatt proposed: 11,100] MW Interested party... 17, Bh Proposals a of which gas a of which coal 1 Phase 2: Toral megawate proposed: 26,400 MW .. Interested party. a Proposals 28 of which gas 16 of which coal ul cof which orimulsion 1 ‘Source EGAT 1996. CO: emission reduction “savings” from IPP and DSM projects Table 16 presents COr emission reductions due to IPPs under the optimistic assumption that IPPs will use natural gas only as source of fuel to replace imported coal, This assumption is based on the fact that IPPs are forced to keep the emission of pollutants 2 within the legal standards as required by the government's regulations for new power plants, The assumed use of natural gas is also due to the fact that the per unit cost of power generation from natural gas becomes comparatively cheaper when externality costs are added. Natural gas will also be a choice of fuel if the government adopts a policy of encouraging low carbon content fuels in order to reduce GHGs emission of the country. The IPP's installed capacities used for calculation are based on the EGAT Power Development Plan (EGAT 1995). As Table 16 illustrates, COz emission reduction due to IPPs will be 4.05 million tons for the year 2000 and will rise to 37.66 million tons by the year 2010. This will make total COr reductions from DSM (from Table 13) and IPP together 8.26 million tons and 51.34 million tons for years 2000 and 2010, respectively. This amounts to 14.68% and 39.58% of total CO emission from the power sector, compared with the amount under the base line scenario (TEI 1995). It indicates that both DSM and IPP are no-regret options, which, given the future energy needs of the country and Thailand’s commitment to the Convention, should be promoted strongly. Their success in Thailand can be examples for others to follow. Thus, the next step in promoting energy efficiency will secure Thailand energy sufficiency, and will be good for the environment as well.an Analysis of Critical Sectors Thailand's Policy Responses to Climate Change Crises: ur ‘19, $66 SUNG SHH" SyaNAL/TARW £7016 = se ‘S661 TAL PUE S661 QOdT ‘40 area ae posh suopdumnsse pur 8102121}}200 | 'go = 402g AapedeD Ho Fr9E = mquM HE sucomo} J women x Goi worms vp (ain &! vones9uag jenvuy) ¥ (2181 209}) = andar (jeabysay opt'a) x (COOT/PAUBHY AW = HAND * dans asayp FUMAOTO) UP Us9q Fey OT 2IqE. UI INR 20) OLTETAI,ED 24. | (21/99) X worsen uogen = UOHIW? OD 4 3 T10e : 102: | et ‘6002 lecore 002 love's 2002 leortt1 9002 ee'sa 002 j96t's9 voor We 002 zo. 1098 joor -=:- oo0e joor 6st lreoo joor 661 lio 60 sso loor 856% ‘UO BORO) wor uo) voy uorSSIUIa “uorSIUa dat uononpas §— (QQ ogeD. uote OI UoNPUL meu, andy mo. | s3pun *OO wr uop=npa: wy voponpa| “uUy UoSNg = (9 — Mqua ss fo mqww uopesusg| mW aapepamg enuuy—nuuy | jIOL —enuuy wimduy pommboy | rio, — nvuy uw Mduy_payndoy _fenuuy | pamfesuy sR 52D TEN R90 panodary Sdall 2p 29pun vOHsTUD ZOO UF VORDMPaY # 91 AIqeLThailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors, c. Agriculture and Land-use Given the vulnerability and adaptation outcomes which predict extreme climate change, it is possible that rainfed agriculture will be hard hit. In addition higher temperatures coupled with drier climate will shift dry forests towards the North and the Northeast regions of the country.’ This change will not only have serious implications for possible decline in biological growth rates of trees and timber values (a result of species mix), but it may also affect the richness of biodiversity in the forest. A key strategy for coping with that predicament is to combine reduction of CH emissions from rice production with reforestation, to be done on land that is taken out of rice production. The main reason for this integrated policy is the pressing need to reforest Thailand for economic and ecological reasons and the declining world market price of rice which necessitates Thailand either gradually phase out of rice production or concentrate on high quality rice such as jasmine rice (TDRI 1994). © Rice Cultivation Rice cultivation and tade have been crucial for Thailand in both social and economic contexts. Despite the fact that Thailand has made much progress in industrializtion, rice still ranks as one of the leading commodity exports. Many rural communities also depend critically on rice cultivation and trade. Rice, however, is a ‘bad guy’ in terms of climate change. In agriculture, rice production emerges as the most crucial sector in methane (CH) emissions. In 1989, over 88 percent of annual methane emissions came from rice production alone (See Tables 2 and 3). A practical way to reduce emissions of methane from rice production, therefore, is to “For example, evergreen forests ‘may change to mixed deciduous forests and likewise, mixed deciduous forests can change to deciduous dipterocarps forests. Ey consider reducing planted areas and/or changing cultivation techniques. Research and development is sorely needed to identify additional solutions to this problem. The last options may not be no-regret ‘options. For example, changing cultivation practices and research and development in rice cultivars which emit less CH may unnecessarily incur additional costs because these options yield no (or too little) local benefits, if reduction of methane is not valued. Internalizing this additionat cost into the price of rice may severely impair Thailand 's competitiveness. Whether consumers are prepared to pay for the higher price of rice in such a competitive market is questionable. A few points should be made to clarify the issues. At the moment there are two popular rice cultivation practices in Thailand transplanting seedlings and direct seeding (or broadcast). Transplanting and ‘wet direct broadcast, called in Thai na-wan-nam-tom, requite a lot of water for weed control but result in higher yields. The “dry” broadcast, called na-wan-sam-ruay, is water efficient but generally produces lower yields. A policy to change these cultural practices will inevitably introduce a trade-off between productivity and CH« emissions. The trade-off may not be feasible in some-areas, such as the highlands and regions of the South and the Northeast (sce Table 17) because of the existing low level of productivity. Neither will it be popular as emission reductions are not valued. Compensation may be required in such areas as the highlands where alternatives are limited and poverty characterizes most of the population.an Analysis of Critical Sectors Thailand's Policy Responses to Climate Change Crises: {$661 PUP 466] SkwOURDG [BRUTY Jo IYO smog ‘spine aze sasaynuaied Uy NB 2206+ Teen 9065 966-2 | 6eh'st0's wpiers't_|ezs'ons'z _|se'zer'e Hen ON 661 (ores) vane panera vosey PPK pur uononpord ‘woze sors puooeg +21 21481 35Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Table 18: Jasmine rice production, crop year 1992/1993. [Region Planted] Harvested) Production] Yield per rai (Kes) Percent®| CS ons] Planted) Harvested] Planted) Production] IKingdom. |. 11,320,888)_1 2781,967] 246) 2 20. 16.08) [Northeast | 10,451,976) 9,887,212) 2,528,841] 241] 256 32, 3 [North 572,461] 563,18] 190,33 332] 3 481] 4.35) [Central rasnl 215, 55,353] 202] 2si 2 1.38) ISouth 22,080] 194 7.434] 337] 333] 077) 0.84] “of al types of rice grown in the regions. Source : Office of Agricultural Economics 1994: 60- 63, Table 19: Jasmine rice production in provinces of Thailand, 1992/1993 Province Planted area ‘Output Percentage? Yield (1,000 ra} (1,000 ton) [Planted area Ourput | _(Keirai) ‘Nakormpanom 143.1 396) 15.41 16.279 308 ‘Sekolnakorn 124.5 31S 721 7.03 93, Nongkhai 866 207, 7.35 135 289) (Udorn Trani i917 476) 7.00 687, 261 Lei 3.0 08 0.88 0.55) 295 ‘Mukdaharn 275 67, 9.76 870) 259 ‘Yasothorn, 507.7 1469 45.35, 8 289, ‘Ubon Rat Thani 1,403.10 335.7 40001 088 26 Kalasin 709 122 5.57 453 310 Kornkae 155.10 27 8.50 7.00) 239) Mahasarakarm 291.1 667 18.13 16.02 26 Roiet 1263.4 353 #16 46.19 282 Buriram 1460.9 317 56.64 232 220 ‘Srisaker 1,645.10 ‘a7 | S885 a 257, Surin 2,004.3 5013 7A 7120, 256 Chaiyapar 199.9 528 13.83 13.7 288. Nakora Ratchsima 8555 149.7 79.86 26.39 24 ‘Nakron Sawan TAZ 323 629 642 22 Phetchbum 95.2 318) 9.74 10.02 35 Usaithani 181 35 3.56 3.52 17 ‘Khampaenphet 156 48 Lat 120 304 Tek 302 49 15.44 15336 rc Pichite 304 25 2.04 2.08) 40 Pisanulok 307 84 7.86 2.93 2 Phrse 08 4 036) 036) E7 Lampang 99 40 2.3 2.50 410 ‘Sukhothat 308 110. 6.05, 6.13 218 Usraradit 344 B4 721 730) 395Table 19 (...contd) Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Province Planted area ‘Ourpur Percentage” Yield G,000 ra | _(1,000 ton) [Planted area | Output (Kea) (Chiangmai 234 7.56 178) 52 ‘Chiangrai 109) 12 134 105 us ‘Mae Hong Son 329 2 3428 34.64 353 Lamphun 145 35 837 aH 389 Prayao 15.1 22 444 32 180, Lopbuti 38.0 30 6.2 1H 260 Sarabur BA 38 35) 3.29 286 (Chainst my 51 1.69 18 38 Nakorn Nayok 2 3 2.80 2.80 00 ‘Sing Buri 28 L O73 0.20) 37 ‘Angthong 25 i 063 065 38, ‘Kernchansburt 42 108 1256] 12.46 251 Prachuap Kirikarn 18 08 3.45 30 295; Ratchaburi Ba 25 334 2.82 233, ‘Chacheongsa0 454 26 5.0 4a 312 Prachin Busi 61d 78 5a 5.20 ie ‘Chonburi 03 on ol 0.18 27 Rayong, 2 on O51 03 316 Chantabur 43 18 531 5336 418 Teed os oz 130, 13 28 (Chumporn, 04 i oat 033 24 Nakorn 85 26 054 094 32 Srithammarat Songkhla ia aA 064 ale ais Surat Thani 8 39. 2.56 2.85 496 Krabi 03 0.05 51 0.54) 197 Trang. 8 03 0.75 078 361 Satun, 08 25 0.75 076) 312 ‘Narathiwat 2 0.08 0.19 019) 328 Pareani Or 02 031 O31 20 Source: Ofice of Agricaltural Economics 1994: 64-50 Note: a/s = non-significant Acreage teduction is a no-regret policy for a number of reasons. Most significant is the projected furure downward trend of world market price. In addition to the slow growth of demand because of its inelasticity, mew competitors such as Vietnam and, other irregular buyers such as Indonesia and China, have destabilized the rice market and have at times loaded the market with low quality rice. These factors hint that Thailand should perhaps retreat from the rice market, especially in low quality rice, or move to fully exploit markets of high quality rice.’ These economic considerations are sufficient to support removing acreage from rice production in Thailand. Several questions remain to be examined. Specifically, where "Notably, jasmine rice which jum price in the 7Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors ;poyoods se saoznos snouea wou eep Buysn ‘parewRrez9pUn aq pyneD Tro | see 7 | @ E 78°70 Hee 7 | @ S886 | LYSE 7 | @ 2056 9S TL. 7 @ 0°26, LF" z 2) ow (re T - sros | 1609) WSL 1695 IL 1095 z $699 | 90°¢5 z * souny | o¥N:| otf | ouN | ouf | uN] ouf |oun| oul | un| uf | uN OR oredr) wal%) opreua.s we (vor “TTF) Ores (yes “Trn) (rex Tru) uoponper suppeeg | Tres) anyea prio | andmoymoy | /y) prix | s8eamexN | sdeone yenioy | wore poruvig sdoso penuue 1859 ‘opyse-1as aBeasse aos w03y sues pareUTsy 207 IIqEL, 38should rice acreage be taken out of production? What should we do with those areas? How should farmers be compensated? For the Northeast, compensation per se ‘may not be sufficient and it can be counter productive because jasmine rice is grown i most of those areas (Table 18). The trade: off there will not only be between rice and productivity, but between limited ‘opportunities to produce high quality rice, which has had few price and marketing problems, and productivity limits. Policy options, hence, should first -foais..on removing inappropriately used land, from nnon-jasmine rice production. “The solution for eeloresatiog anid dttisne reduction should then be to take upland and salinated.areas out of rice production and plant trees on them. Tree planting in salinated areas can significantly reduce the salinity as well, as confirmed by the on- going 5-year research project on the subject at Thailand Institute for Scientific and. Technological Research. A careful selection of tree species for these areas is also crucial (Vantasath et al. 1992). The conservative estimates in Table 20 above suggest that comparable levels of income from jasmine and regular non- fragrant rices can be assured under a well- planned setaside program. At the least, the former gross income from the rice sector (calculated for the whole Kingdom as demonstrated in Table 20) will be sustained under the new set-aside program. This helps assure that it is a no-regeet option if income from tree planting is also factored in. Some portions of the land areas in the North and the Northeast regions have been devoted to glutenaus rice production. It is a subsistence crop for local people. Productivity from remaining crops should ‘Thailand Environment Institute Thailand's Policy Responses to Climate Change Crises: ‘an Analysis of Critical Sectors therefore be investigated to find out levels* + Mecessary to assure subsistence levels. It also. shows that reforestation on set-aside rice land has to be approached in a systematic manner. Research and development on ‘better’ cultivars is time-consuming and costly. This shows, all the more, that reforestation of set-aside rice acreage is more reasonable ‘option in terms of taking advantage of market force, An example of integrating tree planting into agricultural production can be seen from the Ministry of Agriculture and Cooperatives’ agricultural restructuring program. It has launched a three-year program to restructure _preduction from tive agricultural sxctor. tes major feature is to diversify agricultucal production away from rice dominance to indude frutt, fas growing. timber, out flowers and livestock in all regions, covering 4.912 million rai. Crops to be reduced are second crop paddy, inappropriate land-use for rice production, cassava, coffee, and peppers. Economic analysis. of the production restructuring program shows a benefit cost ratio of 2.8:1.* This scheme makes sure not only for its economic benefit, but for its reduction of GHGs as well (see Table 21). ‘The example demonstrates how a no-regret policy in agriculture like this one example turns into a win-win policy. chemical fertilizer application may escalate emissions of GHGs. “Tt was not clear, however, if government expenditures of 32,068 million Baht (namely, operation costs of 780 million Baht; subsidies of 22,126 million Baht for cheap credit) and direct transfer of 9,162 million Baht) ‘were included. If not, one can calculate net gains as follows: 10,132 million Baht = 66,500 ‘million Baht (for calculated grows returns) - 23,700 million Baht (for ‘private cost) - 32,068 million Baht (for government expenditures).Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors ‘Table 21: Net GHG emission from Agricultural Restructuring Project, 1994- 1996 ‘Crop CH C]_ Emision KeiRai | (MiLKgI¥e) | (Mil Kg Ye) (Headh/¥r. ‘Second Rice 2050 61.0688 5.191 ‘Other 1450 17.856 25.8912 Dairy cae 30 Feed 3.58 2.2194 Manure 5.108 o.r7iae Beef cate 185 Feed 61.19 10.31052, Manure 0.533 ‘0.089611 Fav-gowing 80 Ba 5.58 rest (Mitton) Fruit erees 754 83376 6.18655 (ikon) Notes Emission rates of second:crop rice are 3.67 kgs/ha/d X 104 d/6.25 rai, other is 0.93 kgs/ha/d X 120 (46.25 rai (TE! 1996) b, Other “inappropriate” rice elds, such as uplands and unsuitable lands for rice production, as defined by the Land Development Department. Emission rates of cate ae fom TEI (1996. 4. Carbon sequestration from fast-growing tees is averages 17.37 tons dry biomass/ha/eX 0.5 tons Citons dry biomass /6.25 rai X'10 ys of life cycle of trees (TEI 1993) ‘Source: Calculated from Ministry of Agriculture and Cooperatives n.d. © Agroforestry There are only two approaches to enhancing the role of forestry in combating climate change: preventing or minimizing deforestation through forest protection, and creating carbon sinks by replanting, The first approach emphasizes forest conservation and the latter teforestation. Which option is more ‘economical and effective in coping with the climate change challenge? Estimated cost of forest protection is about 50 Baht per rai per year.’ This is considerably lower than the reforestation cost paid by the Royal Forest Department, *This is the average official budget cost per ral for forest protection, but generally each forest unit will bave Its own extra revenue, raised from fees and charges, that 1s used for forest protection. 0 ‘one thousand Baht per year per rai.® One may jump immediately to the conclusion that forest protection is preferable to reforestation. However, taking into account the effectiveness of the projects, one should hesitate to make such a conclusion, Despite the logging ban and continued forest protection efforts, Thailand keeps losing about 1.5 million rai of forest a year. Forest lands have continued to decline in all regions (Tables 1-5 and Figures 1-5 in Appendix). This shows that current forest protection costs could be underestimated and under funded. If so, budger increases may or may not assure more successful forest protection. Forest clearing is one of the most damaging sources of CO: The reforestation budget of RED fs 1,000 Babt per ral per year, plus 150 Babt per ral for ‘annus! care-toking.emissions in Thailand. However, but it is also in the national interest to protect and create more forest resources on other grounds such as biodiversity and watershed protection. Forest resources, therefore, are worth paying for, but how much? The answer depends on much how society values the resources. That value will direct whether an area will be protected, degraded, or reforested. This nominal value for forest resources will reflect holistic worth, intrinsic and non-intrinsic, that decision makers can use to choose courses of action, As this has been covered in more detail elsewhere (see Tongpan and Puntasen 1996), wwe shall only emphasize a few points relevant to the current discussion on the need for reforestation in Thailand. Firstly, the incentives for reforestation are insufficient and not financially attractive. Secondly, there is an element of uncertainty for growers. when calculating expected timber benefits. Existing laws impose red-tape and give way to unpleasant practices by law enforcers and foresters. Significant to this are local pressure and an element of distrust in the society. Thirdly, tee species currently being promoted are rather limited and too restrictively controlled. Fourthly, there is no more room for large private investors to plant trees for commercial purposes, although the demand for such activities has been estimated as high as 38.4 million rai (TDRI 1989b). For a reforestation project to get off the ground and succeed, all of the above mentioned constraints have to be removed, or relaxed. Much more financial ceward has to be given as additional incentives to growers, How much more? Bluntly speaking, the relative returns should not be less than the next best alternative crops, but that depends on where reforestation takes place (See Table 22 below). In the Northeast, for example, Eucalyptus will have to compete fiercely with sugarcane, which yields 3,032 Baht per rai in 1991/ 1992 crop year. Indeed, in many areas Thailand's Policy Responses to Climate Change Crises: aan Analysis of Critical Sectors of the region (for instance, in some districts ‘of | Udornthani) Eucalyptus replaces sugarcane, The incentive should be enough not only for farmers to plant trees, but also for them to nurture them until they can be harvested. Tt was estimated that of all the trees, which were planted on 5 million rai designated by the Royal Forest Department to celebrate the King’s 50 years accession to the throne, only 40 percentsurvived the first year of planting. A stable stream of income is therefore crucial for reforestation, not only the amount of cash handed out initially. It is apparent that reforestation as well as forest protection brings other timber and non-timber benefits in addition to providing carbon sinks. The promotion and implementation of decisions on reforestation cor forest protection therefore depend on computation of all benefits and their contribution to a project. To adopt reforestation as a no-regret policy option, one cannot isolate these additional benefits because forests yield both timber and non- timber products. Based on this concept, but assuming zero non-timber benefits for simplicity,’ the current study assesses greenhouse gas mitigation options in the forestry sector of ‘Thailand under four scenarios: 1, Current Trend Scenario (CTS). This scenario assumes the continuance of existing forest policy, namely, forest protection and reforestation,and the current rate of deforestation. "Detailed calculation of non- timber benefits has not been attempted because of complexity in valuating them. However, total benefits with sero non: timber value already yield positive net benefits over associated costs aThailand’s Policy Responses to Climate Change Crises: an Analysis of Critical Sectors ‘Table 22: Returns on crops, by household, 1991! 1992 Gree] Guhincome | Farm ste] Aver " tf oo household) Northeast | Ist op long-arain rice 3687 36 1 Ist crop rice® (4.058) tapioca 3.302 % 27 41832) Eee ‘sugar cane 186 | 26 8 Spree eee i. pete eters ee Ist rop glueenous rice 1,089 % 2 0.058) com ns % 38 i North | let op long-grain rice TT B 3 4st erop rice? as9y) om 2.787 B aa 169, Sy a as oy ai 1,840 B sarc 1499 23 Central Plain | — Ise cop long grain vce 14494 @ 1s crop rice? |. a. sugar eane [9585] Find crop tongarain rice Ind crop rce® tapioca 3.78 32 (824) com 3,536 32 m (1300) South ang rubber ig245 2 a9 Ise ezop longegrain rice 1,265) feagrant coconut 1,266 2 38 si) ‘coffee, di 2 fee st Saececee HBicaiseste 15, ‘ambuean 6 2 B Notes: ()- denotes crop income per unspecified types of paddy vce. Source: Calculated from Office of Agricultural Economics 1996: 251- 232; 217; 24-25; 30-31; 36-37; 64-65; 84-85, 293. a2. Master Plan Scenario (MPS). The scenario assumes a change in forest policy according to the Master Plan, which features more local participation in five types of forests: national forest, community forest, agroforestry, industrial forestry (which aims at self sufficiency by 2010) and urban forestry. Alternative management. strategies address the import of timber and wood products to meet national demand. 3. Self-sufficiency Scenario (SSS). Under this scenario, self- sufficiency in timber and other forest products is targeted at all costs. 4. The Additional Five Million Rai Plantation to MPS Scenario (AMPS). This is an additional scenario which combines the second (MPS) with an additional five million rai to celebrate the 50th year of the King's accession to the throne. Using Comprehensive Mitigation Assessment Process (COMAP) computer model to simulate these options yields the results presented in Table 23 below. The figures represent net present value of — marginal benefits for each option over the current trend option. It can be seen that in verms of carbon sequestration, the master plan scenario (MPS) is marginally preferable than the AMPS. That is, relying on CTS as numeraire, the MPS yields the highest benefits compared to the other two options. On the other hand, in terms of net returns to land area, AMPS is the best option because fone hectare under this option yields the highest value. These results reconfirm that a no-regret option represents a win-win policy and, with the inclusion of carbon value, the ‘option becomes even more attractive, ‘Table 23: Estimated Net Present Value (NPV) of benefits, compared to the CTS NPV MPS] SSS] AMP 8 SC 1i6| 1312] 1763 ‘S/he 34] 0+ [i a4st Source: TEI 1996, Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors © Bilateral initiatives through joint implementation (JI) In addition to unilateral actions to mitigate GHG emission, there are other activities in which members can cooperate. Similar to other multilateral approaches dealing with environmental agenda, FCCC has called for multilateral collaboration ftom its members. A. special characteristic of FCCC, which differs from other multilateral environmental agreements (MEAs), is bilateral action to reduce GHGs. Joint Implementation (1) or Activities Implemented Jointly (Al) have been suggested.” Joint Implementation (Jl) _is a concept introduced under Article 4.2 (a) and (b) of the UN Framework Convention on Climate Change (FCCC), which reads in part (UNEP n.d.: 8-9): Each of these Parties shall adope national policies and take corresponding ‘measures on the mitigation of climate change, by limiting its anthropogenic emissions of greenhouse ‘gases... These Parties may implement such policies and measures jointly with ocher Parties ‘and mary assist other Parties in contributing to the achievement of the objective of the Convention... ... withthe aim = of returning individually or jointly to their 1990 levels these anthropogenic emissions of carbon dioxide and other greenhouse gases not controlled by the Montreal Protocol. One of the difficulties that obstruct the tealization of Ji is the question of credit. Developing countries, represented by G77, argue strongly that developed countries must not get the sole financial benefits of financing Jl and that the saved costs must be shared. Despite the tug of war between developed and developing countries, the private sector TAI is taken to denote JI between developed and developing countries, the latter are not in Annex I, and thus are not required to do anything specifically to reduce GHGs. *Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors in Canada has been active in promoting bilateral JI projects that have promising financial returns. In this light, a credit from the government, a unilateral response to JI, will be helpful in promoting the investment initiatives.” One possible application of Jl is reforestation, which can also increase biological diversity (Sampson et al. 1995 and Trexler n.d.) Having outlined this strategy, the FCCC sets 3st December 1998 to be deadline by which the second review of this strategy will be completed. TEI’s study (Markopoulos 1996) is an initial step which surveys potential for carbon offsets under Jl. This provides a framework for negotiation and implementation, already adopted by the Thai Government. However, there is a specific strategic problem regarding reforestation or forest protection under JI. Carbon sequestration under Jl is a “once and for all” project; only a maximum amount of carbon will be fixed on given land area. Questions arise regarding the sustainability of the amount of carbon sequested and whether the terresterial biosphere can actually be a carbon sink (Kcistiansen 1993). The answer is that forests ‘can serve as carbon sinks, but only as limited ‘ones because of changing land-use pressure.* Te is therefore important for developing ‘countries to carefully choose their activities to be promoted under Jl. The question is not efficiency but equity, which requires considerable international negotiations. Conclusion Greenhouse gas emissions from Thailand are a small share of global totals. But as an >The same rationale will be discussed in the next section under ‘market-based options’. “Another option is the ocean, whose function for carbon sequestration is little known and studied, “4 emerging economy that holds one of the world’s economic growth records, Thailand has potential future emissions which may put it in the spotlight. soon. The inventory and mitigation studies completed so far have helped Thailand identify and list options for GHG reduction in some sectors. In the broad perspective, it is in Thailand’s ‘own interests to increase the efficiency of carbon-based energy utilization, which would concurrently reduces GHG emissions. The first part of this report emphasizes potential benefits of no-regeet policies to reduce GHGs. Examples show that no-tegret options can indeed lead to win-win policies. Whenever possible, complementary activities, such as growing trees on setaside rice cultivation land, should be implemented as they increase overall capacity to reduce GHGs. All these activities can be undertaken jointly between two countries or unilaterally by one country. The most crucial point for developing countries is not the question of efficiency, because a no-regret option is an efficiency option, but the problem of long- term equity. Such is the case of JI in reforestation, What if Thailand exhausts its no-regret options? No-tegret_ options may not necessarily be least-cost options, but if they were the country will be forced to move up to the higher cost options. What can it do? The next section will propose a market-based option as a supplement to the existing no- regret options and/or as the next alternative to the least-cost option.5. Market-based Option in Reforestation in Thailand 5.1 “No-regeet” policy and market- based options Shall mitigation options be limited to ‘no- regret” opportunities only? The answer is no. The “no-regret” policy option is certainly not the only option available to hedge risks involved in climate change. As risks involved in global warming are highly uncertain and unpredictable at the moment, the premium pat on them is also high. No-regret options are themselves least-cost options. Once these options are exhausted, implementation of next higher cost will be unavoidable, if further GHG reductions are required. One alternative to hedge risks, through such higher cost options, is to create a market for consequences of mitigation under climate change. This may be called the “aarket. based option”. The basic tenet of this option is to create a market for the risk, and make it tradable. The idea behind this mechanism is a combination of tradable permits and carbon emissions offset. The measurable risk can be guaged by the carbon reduction and thus, price can be attached to it in the market. Futures options can also be introduced in the trading of carbon offset.' Market- based optio: The main idea of this option is to provide "Panayotou, Rosenfeld and Kouju (1994) demonstrate a “successful” case involving a US power utility conducted a carbon offset with tree planting in Malaysia, though such a scheme is slightly different. from that discussed here. In this scheme, the carbon offset is made tradable, which in effect creates market opportunities through financing the offset, with more popular (broad-based) articipitation. Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors tree growers more financial incentive to actively plant more trees - almost any kind of trees. It is also important that such an incentive is systematically self-reliant and sustainable.” Premises for this option: Reforestation by the private sector (individual growers, corporate investors, and communities) in Thailand has faced at least three difficulties in getting a project off the ground: © Financial compensation from the government is insufficient to cover project costs. The amount of 3,000 baht per rai per three years given by the RFD to tree growers is not enough for planting trees and taking care of them until they can be harvested, especially when other competing crops yield higher financial returns. In addition, future returns from tree planting are highly uncertain, due to reasons such as harvest rights, price risk and others; Poor farmers often do not have sufficient income to get by unti! they can harvest the trees. Even if they do plant some ‘other intercrops, income is often inadequate and short-term (eg., two years during which trees are small) Existing laws and regulations do not facilitate reforestation by the private sector. There are too many out-of-date, unrealistic regulations and laws, which in effect discourage, instead of encourage, tree planting @Puntasen and Tongpan 1996). For instance, at the moment only ‘two species (teak and Yang) can be planted on project land, but a permit to. log the planted tree is required by the *A good example is the double incentive in pararubber industry. Originally, only latex was valued, but with che increased demand for wood, the lumber market created additional financial benefits for para-rubber wood growers. 48Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors time of logging, even on private land. ‘Why would one want to grow something when he is not assured of the right to harvest? The need to plant more trees, to replace the forest area currently being denuded at the tate of 1.5 percent annually in Thailand? is obvious. The primary goal is to have more trees planted, especially on denuded land and in watershed areas. At the same time, Thailand also has a commitment under the Climate Change Convention to reduce carbon dioxide emissions, although no specific responsibilities have been imposed on Thailand, which is currently classified as a non-Annex I country. If Thailand’s goal is to plant more acreage of forest without increasing its financial burden, assuming effective protection of standing forests, the market-based measure to be proposed here can be promoted to fulfill that goal. a. Structure of the option Key components of the market-based option are carbon credit, government participation, conditional development rights (CDRs), and the domestic (Thai) insurance companies (See Char 3). Others may include foreign developers, governments, or overseas insurance companies. b. Operation The market based option is implemented by an integrated operational system, which can be explained as follows: Farmers are paid a deficiency payment * ((nitial target price minus per unit cost of > Table 3 revenls that deforestation Is the largest source of carbon dioxide emisslons in Thalland. “Defined as rights to conduct activities that must be balanced by compensation commitments, such 28, linking carbon emitting practices to carbon offset by planting trees or supporting. community forestry. 6 production time output) so that they will get two sources of benefits from growing trees.? First, they will receive the harvest value of the timber itself and other benefits which come with tree growing. Secondly, a carbon credit®can be assigned, a valuation based on carbon content in the tree species. The whole idea is to put a price on the carbon content of the trees in addition to the log or product value, fi, The carbon credit is valid as long as trees are still standing, similar to the gold that backs up a currency’. A monitoring process and clearing house can be established for this by the government or those who own the credit. iii, Money for carbon credit can be paid annually to farmers so that they have income to feed themselves while participating in the project. It will help lighten their financial burden for daily subsistence. *Other benefits such as restored soil nutrients, non-timber benefits, biodiversity, climatic, benefits, ete are not considered for the sake of simplicity. In fact, all of these benefits can also be factored in, but on a different list. ‘This can be calculated precisely for any species of trees, based on carbon content is measured by scientific methods. The average figure for carbon content from Finland is 0.52, or 52 percent of the dey biomass. The exact figure depends on biomass which in turn, is affected by many other factors, such as tree species, density, growth or maturity, etc. Table 28 shows examples of carbon values in different countries, including a project site in northeastern ‘Thailand. *To prevent premature logging, the deficiency payment can be manipulated and! or a contract must be signed to have a legally binding effect on keeping those trees standing. Farmers may opt 10 be paid in cash andlor carbon credit, so that they can alto participate in the carbon market.Thailand's Policy Responses to Climate Change Crises: ‘an Analysis of Critical Sectors = 1 = J = i | crea } I ere | $ = = = ma Chart 3: Market-base option scheme. iv. The government can pay for the credit or get a developer to pay for it in exchange for development rights." Development activities/projects (especially those which ‘emit carbon) are now made conditional, that is they require some form of offset plan. Options available to the developer include carbon credit participation (see Box 6, for example), or planting trees, or supporting community forestry projects. In addition, insurance companies can participate in the market and hedge on the credit. They can bid to buy the credit in the market visc-vis other companies, developers, or the government. Later on even individuals (including growers themselves who hold credits) may also trade credits in this market. v. The carbon credit purchased will nor necessarily add to the developer's cost of production, although in certain cases it may. The developer can avoid bearing the for those activites that are obligated to offset carbon can be prepared by the government or agencies reponsible for the scheme. tal additional cost by trading the carbon credit in the carbon credit market. When added cost is passed on to consumers (i.e., electricity users), it is full cost pricing which means that scarce resources are now correctly priced and consumers have been given the correct signal for resource use. c. Instrument The instrument for this market base doption is the calculated carbon credit, which is now made tradable. But how is carbon credit priced and who will price it? The government can just stipulate a figure as the initial value of the credit. In fact, the government should be the one to initiate its price. The initial value can be a deficiency payment that allows subsistence farmers to stay above the poverty line, for example. It can also be calculated in other ways, based on different criteria such as minimum income guarantees. Once the initial price for carbon credit is designated started, market operation will determine the price. What happens to the market price if more forest is grown? Naturally, the price will tend aThailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors to fall. Buc trees as a credit backup will keep i from falling. Hence, when a forest is logged, the amount of carbon credit that it backs will automatically be nullified.” This relation between carbon credit and standing trees will discourage logging. Also, rising demand for conditional development rights will bar the price of credit from falling. In the future, there will be increasing demand for development, which means higher demand for a fixed amount of carbon credit being traded. In fact, if that happens, the market price will tend to rise, not fall, because there will be more demand for the credit than the supply of credit. One other crucial question, if carbon credit is nullified, is what impact that will have on the market, farmers, and the holders of the credit? These are potential impacts that can be absorbed by the market itself. There will bea lower number of carbon credits available in the market, assuming other things being equal. That will create economic rents for existing credits in the market. There will not be any direct impact on farmers, but if the holder of that credit wants to extend the credit value to the expiring credit he has on hand, he can negotiate with farmers to grow trees to back up his credit. As a result, a farmer may have the chance to bid out his carbon credit and he may get more return "1 is possible that the value of the present carbon credits can be restored after logging, by encouraging reforestation. The number of new credits will only increase by getting more trees planted. Therefore, the question of what to do with the nullified carbon credit is taken care of. One other advantage that arises from remaining full credit value is economic rent. Thus, there will be an upward pressure on existing “price” of the credit. Also, as development takes some forest land out of conservation, fewer of carbon credits will only ur upward pressure on the on- soing price. from his crop, if he accepts credit value from the government. In addition to the abovementioned alternative, the credit holders can also dispose of their credit before its “death”, to avoid bearing the costs. If they end up zrero-value carbon credits, they will shoulder additional development costs, which may be passed on to consizmers of their products ot services. But if they choose to dispose of zero- valued credits in the marker, the one who buys it will bear the cost. Who will buy expiring credits? The government or the agency that ‘operates’ the carbon credit market could. Others buyers may be those who wish to hedge on it by buying it at “salvage price’, and then sell it back to the government, or increase its value by entering into a new carbon contract with farmers. Now, what can the government do with the “dead” carbon credit? One of the many things it can do is to find a new carbon backup for a national ‘carbon graveyard”, It could assign a patch of national reserved forest to back up its value, and sell this “special carbon credit” in the world market. The credit is similar to a premium bond because of the firm backup. In the case of Thailand, for example, it could also finance conservation of forests in Laos for instance and use that as a national credit to back its nullified carbon credit. Thus, an activity implemented jointly (AJ) can be tated between Thailand and Laos as well. Most of the above discussion shows how the local market operates. However, if carbon credit is recognized in the international market, then there willbe greater opportunity for trading the credit in that new market. Purchasers from the EU, for instance, may come into the market to buy carbon credits from Thailand. Funding for joint implementation (I) can also be channeled to invest in carbon credits. The premium price (che difference between Thai market value and the overseas market value) would reflect handling costs, risk, and profit margin. Some of this margin will trickle down to local‘Thailand's Policy Responses to Climate Change Crises: growers, as demand for credit rises faster than the supply. d. Additional Considerations There are a few remaining questions. That is, who will do the monitoring to make sure that the forest is still there to back up the carbon credit? What is the reporting system, and who will pay for the expense? A committee can be set up, as in the case of the stock exchange, to adminster the scheme and act as a clearing house. Funding may be mobilized initially from the government budget (or from the environmental fund) and used as a revolving fund for this proposed scheme. The market-based option proposed here exploits market mechanisms to regulate and promote reforestation by the private sector. It bypasses the obstacles raised as premises early in this section. I accommodates both local challenges and international issues. Increased reforestation will, in turn, give Thailand a better bargaining position when negotiating in the international forum. A calculation of the carbon credit value using data provided in Box 6 below reveals that the credit is worth, at project cost, about 124 Baht per rai per year. It will require 4.3 billion Baht per year to keep the planned 34.8 million rai reforested (TDRI 1989a and 1989b). This is a low estimate, which assures ‘an Analysis of Critical Sectors that even if the government shoulders the additional cost, thay are not unmanageable. ‘been increasing part| sith Source: Faeth; Cort and Livenash 1994. 3336 Table 24: Amount of Carbon Sequestration and Cost Estimates for Six Forestry Projects in Developing Countries NGO! Tota] Request] Total] Spertonof| dollars] Request country or region! carbon | (million | Budget Carbon ver] Qvof criss (000 t0ns)| —dollors) | (million | (requested/total | dollar ‘otal Ss) >| leverage | _budgen) CARE/Guatemala/3 39,000 2.00 880) 0057023 | 3.40 2B ippAsPhaikénare 82) aso [TTT ig en hen | a varios] Ose, ae "ANCON/Panama/5 7,400) 2.60 18.00 035/243 5m. 4 UCEFO/Mexico/6 2,700 2.86 3.25 106120 [ 0.14 & KMINC/Nepal/7 70, 096 LB] 6viel | 018 Oxfarn/Amazon/8 75,000 255 +5 0.037006] 0.76 37 ‘Source: Source: Faeth; Cort and Livernash 1994 7. 0Thailand’ Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Least cost can be an option for mitigation, but it may not be the only option given technological change. Least cost, measured by present net worth of options, is limited by fixed technology chosen. There is, however, a likelihood of better technology coming onto the market, thus making present optimum ‘options no longer the best option in the long run. The deterministic nature of option selection must, therefore, take into account this clement of uncertainty in the form of assessed risk. Higher premium should be attached to options that have higher future options. 5.2 Trade Policy to Accommodate Climate Change Trade policy can also be a powerful measure to accommodate implementation of climate change efforts. Trade has been used effectively to control and mitigate negative environmental impacts. One such initiative is the Montreal Protocol to protect the Ozone layer. Thailand's successful phaseout program for ozone-depleting substances (ODSS) is also positive contribution to reducing climate change. Although that policy is not a no- regret option by itself, the financial assistance that is provided by the GEF (administered by the World Bank) has made the project a no- regret option for Thailand. In addition, trade in cleaner technology, including clean fuels, can greatly enhance nations’ efforts to slow down accumulation of greenhouse gases. More specific protocols and pacts need to be negotiated. Another possibility is to facilitate more active transfer of cleaner technology by initiating limited subsidies for such transfers. (For more details, see NRE 1996). 6. Conclusion Mankind is now facing a new self-inflicted danger: global warming, a result of rapid and continuous accumulation of GHGs, which may produce net negative consequences that could put lives at risk, Negative impacts of 50. climate change, to be effectively reverted, require that nations - all nations- participate, directly or indirectly in reducing emissions and creating carbon sinks. Direct approaches to the climate change challenge, however, are rather difficult to implement for many countries, whether they be parties to FCCC or not, more because of the issue of ‘equity, then because of efficiency. Theoretically speaking, the Coase Theorem suggests that efficiency can be gained, while the problems of externality can be sustained. But the problem is not the concept. It is the coming together of parties to negotiate acceptable terms and courses of action to be taken such that there will be as few free riders as possible. The tangled international negotiations under FCCC will not move forward unless something is done quickly to prevent the current international ‘footdragging’ that is frustrating all attempts to reduce risks from global warming. There are three questions which invariably emerge in the due course of international negotiations on climate change: © Why do we have to make the first move? © Whar will we ger out of doing something that contributes positively to reducing climate change risks? © Who will pay the price, and how much more benefit will we receive if we start doing something now rather than later? Indeed, these are rational questions, but for Annex I countries the answers are obvious: because of their long history emissions, and then the high per capita emission levels, they are the first group of countries that are obligated to bring their emisisons, both current and future, down to a equitable limit. For developing countries or countries with generally low.per capita emissions, these queries raise even more difficult questions related to equity and fairness. Not surprisingly, since the FCCC has been writen in such a flexible way, without specific measures to enforce it, little progress, if any, has been achieved to satisfythe spirit of the Convention. That is not surprising because doing nothing incurs no present direct cost and a country will be better off as a free rider. But is there actually a “true” free rider? The answer is “No, there isn’t”. A country cannot choose to do nothing in practice. In reality it produces and mitigates GHGs at the same time through activities it does. There are always incentives to increase efficiency in energy consumption, even without climate chanege consideration, fopr example. While specific global strategies are needed to convince and induce countries to be more pro-active, countries can embark on theit own efforts to reduce the causes of global warming without bearing the additional cost by choosing no-regret options. Once no regret options are exhausted, however, what alternatives are available? This report recommends no-regret and market-based options as policies to mitigate GHG emissions. The market-based option presented in the last part of this report provides a beginning, at the national level, of momentum which can initiate effective responses to the climate change challenge. This concept can be the next step, after no- regret options are exhausted, or it can be applied in coordination with existing no- regret options. Thus formulated, the market- based option, as applied to reforestation in Thailand, can be exploited as a viable package to implement a pilot project which will reduce risks from climate change. Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors st‘Thailand's Policy Responses to Climate Change Crises: an Analysis of Critical Sectors Selected References Barrett, Scott. 1995. The strategy of joint implementation in the Framework convention on Climate Change. UNCTAD/GID/10. Boonyubol, C. and Chamchoy, C. 1994. ‘Role of technology transfer in limiting COz emissions: Thailand’s case for cogeneration and energy efficent lighting”, in. Pachauri, R.K. and Bhandari, Preety. Climate change in Asia and Brazil: The role of technology transfer. Delhi: Tata Energy Research Instituce: 154- 161. Charlson, RJ.i Schwartz, S.E.; Hales, J.M.; Cess, R.D.; Coakley, J.A., Jr.; Hansen, J.E. and Hofmann, D.J. 1992. *Climate forcing by anthropogenic aerosols", Science. 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