deliverable 4.1 ripples - final · imo international maritime organization cop 21 ... iswa...

,Horizon2020Societalchallenge5:Climateaction,

environment,resourceefficiencyandrawmaterials

COP21RIPPLESCOP21:ResultsandImplicationsforPathwaysandPoliciesforLow

EmissionsEuropeanSocieties

GAnumber:730427,Fundingtype:RIA

Deliverablenumber(relativeinWP)

D4.1

Deliverablename: Keyconcepts,corechallengesandgovernancefunctionsofinternationalclimategovernance

WP/WPnumber: WP4:AssessmentoftheadequacyofCOP21outcomesforeffectiveinternationalclimategovernanceandtheEU’srole

Deliveryduedate: Projectmonth10(30/09/2017)

Actualdateofsubmission: 29/09/2017

Disseminationlevel: public

Leadbeneficiary: IES-VUB

Responsiblescientist/administrator: SebastianOberthür

Estimatedeffort(PM): 3

Contributor(s): Lukas Hermwille (WI), Gauri Khandekar (IES-VUB),Wolfgang Obergassel (WI),TimRayner(UEA),TomasWyns(IES-VUB),FlorianMersmann(WI),DamonJones(CA),BiancaKretschmer(CA),MahletMelkie(CA)

Estimatedeffortcontributor(s)(PM): 16.5

Internalreviewer: TimRayner(UEA)

COP21RIPPLES–D4.1–GovernanceFunctions–Final–30September2017 2

1. ChangeswithrespecttotheDoANochangesweremade.

2. Disseminationanduptake

ThisdeliverablewillprovidethebasisforthefurtherworkunderWorkPackage4oftheproject. Inparticular,Task4.2willusetheframeworkdevelopedtoidentifygapsandopportunitieswithrespectto international climate governance in a sectoral perspective. The deliverable also provides usefulbackgroundfortheworkunderWorkPackages2and3oftheproject.Outsidetheproject,thedeliverablecouldbeusedandconsultedbythebroadcommunityofexpertsandpolicymakersinterestedintheinternationalgovernanceofclimatechange.Itprovidesabasisforidentifyingthechallenges,barriersandopportunitiesthatinternationalclimategovernancefacesandpresentsbytakingasectoralperspectiveandtherebyenablingamoretargetedapproachtoaddress-ingtheclimatechangechallengeinternationally.

3. ShortSummaryofresults(<250words)

Takingasectoralperspective,thisreport(1)identifiesthekeygovernancechallengesthatexistinter-nationallytowardsthedeeptransformationsrequiredforlow-carbonsocietiesand(2)specifiestheresultingkeygovernancefunctionstobefulfilledbymeansofinternationalcooperation(internationalinstitutions).Tothisend,thereportfirstclarifiesanumberofkeyconcepts, including international(climate)governance, internationalandtransnational institutions, institutionalcomplexesandpoly-centricity,andpresentsoursectoralperspective.Itthenderivesanumberoffunctionsthatinterna-tionalinstitutionscanfulfilfromtherelevanttheoreticalandconceptualliterature.Thisprovidesthebasisforaninvestigationintothekeygovernancechallengesandthepotentialofinternationalgov-ernancein14keysectoralsystems.Oursectoralapproachenablesasectorallydifferentiatedanddetailedanalysisofthevaryingdemandforinternationalinstitutions’performanceofgovernancefunctions.Thedemandfortheperformanceofmostgovernancefunctionsvariessignificantlyinaccordancewiththespecificconditionsandcir-cumstancesprevailingineachsystem.Incontrasttoanoverallaggregateperspectiveoninternationalclimategovernancethattreatsitasoneintegratedproblem,ouranalysisadvancestowardstakingintoaccountthemultifacetednatureofthischallengeinvariousrelevantsectorsandcontexts.Italsoleadsustorealisethatvarioussectoralsystemsneedtobefurtherdisaggregatedtogetagripontheunder-lyingproblemstructuresandrelateddemandsforinternationalgovernance;differentsectoralsystemsanddifferentpartsofsectoralsystemsrequireappropriatelyadaptedresponsesandcreatevaryingdemandsforinternationalgovernance.

4. EvidenceofaccomplishmentTheresultsoftheworkareevidentfromthereportenclosed.


TableofContents

Abbreviations.................................................................................................................................6

FiguresandTables..........................................................................................................................8

1. Introduction.....................................................................................................................9

2. KeyConcepts.................................................................................................................11

2.1 InternationalGovernanceandtheClimateChallenge...........................................................11

2.2 InternationalandTransnationalInstitutions.........................................................................12

2.3 InstitutionalComplexesandPolycentricity...........................................................................13

2.4 ASectoralPerspective...........................................................................................................15

3. FunctionsofInternationalGovernanceInstitutions........................................................16

3.1 GuidanceandSignalFunction................................................................................................16

3.2 SettingRulestoFacilitateCollectiveAction..........................................................................17

3.3 TransparencyandAccountability..........................................................................................17

3.4 CapacityBuilding,TechnologyandFinance(meansofimplementation)..............................19

3.5 KnowledgeandLearning.......................................................................................................19

3.6 Conclusion.............................................................................................................................20

4. SectoralAnalysis............................................................................................................22

4.0 Theselectionofsectors.........................................................................................................22

4.1 Agriculture.............................................................................................................................23

4.1.1 Currentstatusandprospect............................................................................................23

4.1.2 Mainchallengesandbarrierstowarddecarbonisation..................................................25

4.1.3 Thepromiseandpotentialofinternationalcooperation................................................25

4.2 LULUCF...................................................................................................................................27


4.2.2 Mainchallengesandbarrierstowarddecarbonisation...................................................28


4.3 Waste.....................................................................................................................................31





4.4 CircularEconomy...................................................................................................................35




4.5 Power.....................................................................................................................................38




4.6 Energy-intensiveindustries...................................................................................................44


4.6.2 ChallengesandBarrierstowardsdeepDecarbonisation................................................48

4.6.3 ThePromiseandPotentialofInternationalCooperation...............................................49

4.7 Extractiveindustries(‘losers’)................................................................................................51


4.7.2 Challengesandbarrierstowarddecarbonisation...........................................................55

4.7.3 Promiseandpotentialofinternationalcooperation......................................................56

4.8 Transport...............................................................................................................................59




4.9 Internationaltransport(aviationandmaritime)...................................................................64




4.10 UrbanSystems/Settlements..................................................................................................70




4.11 Buildings................................................................................................................................74





4.12 Appliances..............................................................................................................................78




4.13 Financialsector......................................................................................................................82




4.14 FluorinatedGHGs...................................................................................................................89




5. Conclusions....................................................................................................................92

References.................................................................................................................................107


Abbreviations

AC AlternatingCurrent

APEC AsiaPacificEconomicCooperation

ATAG AirTransportActionGroup

BECCS Bio-energycarboncaptureandstorage

CFCs Chlorofluorocarbons

CO2 Carbondioxide

CH4 Methane

CAP CommonAgriculturalPolicy

CAPEX CapitalExpenditure

CCS CarbonCaptureandStorage

COP ConferenceoftheParties

DC DirectCurrent

EU EuropeanUnion

F-gases FluorinatedGHGs

FAO FoodandAgricultureOrganization

FFS FossilFuelSubsidies

FSB FinancialStabilityBoard

G7 GroupofSeven

G20 GroupofTwenty

GDP GrossDomesticProduct

GHG GreenhouseGas

GtCO2eq GigatonnesofCO2equivalent

HCFCs Hydrochlorofluorocarbons

HFCs Hydrofluorocarbons

HFOs Hydrofluoroolefins

IATA InternationalAirTransportAssociation

ICAO InternationalCivilAviationOrganisation

ICLEI LocalGovernmentsforSustainability

ICT InformationandCommunicationTechnology

IEA InternationalEnergyAgency

IMF InternationalMonetaryFund

IMO InternationalMaritimeOrganization


IPCC IntergovernmentalPanelonClimateChange

IRENA InternationalRenewableEnergyAgency

ISWA InternationalSolidWasteAssociation

LED LightEmittingDiode

LNG LiquefiedNaturalGas

LULUCF Landuse,land-usechangeandforestry

MDBs MultilateralDevelopmentBanks

MENA MiddleEastandNorthAfrica

MEPS MinimumEnergyPerformanceStandards

MRV Measuring,reportingandverification

MSW Municipalsolidwaste

N2O Nitrousoxide

NF3 NitrogenTrifluoride

NZEBs Net-ZeroEnergyBuildings

OECD OrganizationforEconomicCooperationandDevelopment

OPEC OrganizationofPetroleumExportingCountries

PFCs Perfluorocarbons

PV Photovoltaics

R&D ResearchandDevelopment

SF6 SulphurHexafluoride

SO2 Sulphurdioxide

SWM Solidwastemanagement

TVs Televisions

TWh TerawattHours

UNEP UnitedNationsEnvironmentProgramme

UNFCCC UnitedNationsFrameworkConventiononClimateChange

WtE WastetoEnergy

WTO WorldTradeOrganization


FiguresandTables

Table3.1:OverviewofMainFunctionsofInternationalGovernanceInstitutions..............................20

Figure4.1:AnnualForestAreaNetChangebyClimaticDomain,1990-2015......................................27

Figure4.2:GlobalForestCover............................................................................................................28

Table4.1:GHGEmissionsOverviewofEnergy-IntensiveIndustriesin2010......................................45

Table4.2:DeepDecarbonisationOptions............................................................................................47

Figure4.3:‘Unburnable’FossilFuelstoRemainwithin2°CCarbonBudget........................................52

Figure4.4:Top5CoalProducers(billionshorttonnes).......................................................................52

Figure4.5:WorldEnergyConsumptionbySource,1990–2040.........................................................53

SectoralGovernanceMatrix5.1:BarriersandChallengestoDecarbonisation...................................98

SectoralGovernanceMatrix5.2:SignificanceofGovernanceFunctions...........................................101

SectoralGovernanceMatrix5.3:MainPotentialContributionsofInternationalInstitutions...........102


1. IntroductionClimatechangeconstitutesalong-term,transformationalchallenge.Phasingoutgreenhousegas(GHG)emissionsandadapting to theevolving impactsof climatechange requirea fundamental transfor-mationofoureconomiesandsocietiesataglobalscale.Thisglobaltransformationentailsasimulta-neousconversionanddeepchangeofvarioussectoralsystems,1includingenergy,industry,transport,housing,andagriculture,thatarekeytothefunctioningofoureconomiesandsocieties.Duetotheinertiaofthesocio-technicalsectoralsystemsinvolved,thenecessarytransformationimpliesalong-termtransition2overaperiodofseveraldecades.Theindividualstepstakeninthisprocesshenceneedtobealignedwiththelong-termtargetandvision.TheParisAgreementestablishessuchalong-termvisionofachievingclimateresilience,holdingglobal temperature increasetobelow2/1.5°CabovepreindustriallevelsandphasingoutGHGemission(Arts.2and4)(e.g.Scoonesetal.2015;Incropera2015;Bulkeley&Newell2015;Levinetal.2012).

Thisreportinvestigatesthecorechallengesandfunctionsoftheinternationalgovernanceofclimatemitigationtothisend.Whileacknowledgingthecrucialimportanceofthechallengeofadaptationtobuildclimateresilience,wefocus–inlinewiththeoverallproject–onthechallengeofphasingoutGHGemissionsinthesecondhalfofthiscentury(hereafteralsoreferredtoas“decarbonisation”).Indoingso,wezoominoninternationalclimategovernance.Whilemuch,ifnotmost,actiontomitigateclimatechangeisandneedstobetakenatnationalandlocal levels,suchactionmayrequire,oratleastbenefitfrom,internationalcooperation–beittoaddressbarrierstoactionrootedininterna-tionalinterdependenceortoenable,facilitateandpromoteactionatotherlevels(e.g.Luterbacher&Sprinz,2001;Stavinsetal.,2014).

Wegobeyondexistinganalysesbydisentanglingtheoverallissueintoseveralconstituentparts.Tra-ditionaltextbookanalysesofinternationalclimategovernancethatpresentclimatechangeasacol-lective-actionproblempronetofree-ridingatthelevelofstates(Barrett,2011;Keohane&Victor,2016;Luterbacher&Sprinz,2001)donotcommonlyreflectthatconditionsindifferentsectorsandsocietalsub-systemsdifferconsiderably.Aswillbe furthersubstantiatedbelow,energy-intensive industriesdifferstarklyfrominternationalfinanceandinvestmentorthebuildingssectorwhenitcomestobar-riers to decarbonisation and related opportunities. Such differences should be taken into accountwhenthinkingabouttheneedforandpotentialofinternationalcooperation.Andsuchamorediffer-entiatedanalysispromisesconsiderableinsightsintohowthe“complex”ofinternationalinstitutionsrelevantforthefightagainstclimatechangecouldandshouldbefurtherdeveloped.

Inundertakingouranalysis,wewishtoacknowledgeupfrontthatthe(internationalandnational)gov-ernanceoftransformativeandlong-termtransitionsisnotastraight-forwardendeavour.Inlinewiththeliteratureontransitionmanagement(e.g.Grinetal.2010),thegovernanceoflong-termtransitionsrequiresregularreview,adjustmentandadaptationinlinewithevolvingconditions.Thus,ratherthansimply“steering”thetransformationprocess,thegovernanceofthetransitionisaboutexperimenting,searchingandlearning(Rotmans,Kemp,&VanAsselt,2001).

Againstthisbackdrop,thisreport–takingasectoralperspective–hasatwofoldfocusandpurpose.First,weaimto identify thekeygovernancechallenges thatexist internationally towards thedeeptransformationsrequiredfor low-carbonsocieties indifferentsectoralsystems.Second,wewishtodistillandspecifyresultingkeygovernancefunctionstobefulfilledinandforthesesectoralsystemsbymeansofinternationalcooperation(internationalinstitutions).

1 Inthefollowing,weusetheterms“sector”and“sectoralsystem”interchangeably;seealsodiscussion

insection2.4.2 Inthefollowing,theterm“transition”isusedinthistransformativesense.


Tothisend,thisreportproceedsalongthefollowingmainsteps.Insection2,wefirstintroduceandclarifyanumberofkeyconcepts,includinginternational(climate)governance,internationalandtrans-nationalinstitutions,institutionalcomplexesandpolycentricity,andpresentoursectoralperspective.Inthesubsequentsection3,wederiveanumberoffunctionsthatinternationalinstitutionscanfulfilfromtherelevanttheoreticalandconceptualliterature.Section4thenintroducesthesectoralsystemswedistinguishandincludeinouranalysis,beforeinvestigatingthekeygovernancechallengesandthepotentialofinternationalgovernanceforeachofthem.Finally,section5synthesisestheresults,in-cludingacomparisonofthekeyfunctionsandpotentialsofinternationalgovernanceofthedifferentsectoralsystems.

Theapplicationofourframingofthegovernancefunctionsofinternationalinstitutionsinthesectoralanalysisenablesamoretargeted,differentiatedanddetailedanalysisofthevaryingdemandfortheperformanceofcertaingovernancefunctionsbyinternationalinstitutionsinspecificsectoralsystems.Whereasdemandforguidanceandsignalseemstobegenerallyhighacrosssectoralsystems,thescoreofother functionsvaries significantly inaccordancewith the specific conditionsandcircumstancesprevailingineachsystem.Ouranalysisthereforeadvancesfromanoverallaggregateperspectiveoninternationalclimategovernancethattreatsitasoneintegratedproblem,towardstakingintoaccountthemultifacetednatureofthischallengeinvariousrelevantsectorsandcontexts.Italsoleadsustorealisethatvarioussectoralsystemsneedtobefurtherdisaggregatedtogetagripontheunderlyingproblemstructuresandrelateddemandsforinternationalgovernance;differentpartsofthesectoralsystemsrequireappropriatelyadaptedresponsesandcreatevaryingdemandsforinternationalgov-ernance.

ThisreportlaysthebasisforWorkPackage4oftheCOP21RIPPLESprojectasawhole,inparticularforTask4.2.Thesectoraldifferentiationwill structureandguide themappingof internationalandtransnationalinstitutionsinTask4.2.Also,thesectoralanalysisofthepromiseofinternationalcoop-erationwillprovidethepointofreferencefortheassessmentofrelated internationalcooperation,includingtheidentificationofscopeforitsfurtherdevelopment.Asisusualinsuchresearch,theuse-fulnessoftheanalyticalframeworkdevelopedherewillhavetobeproveninitsapplicationinlaterpartsoftheproject,especiallyinTask4.2,andsuchapplicationmaywellleadtotheidentificationofscopeforfurtherimprovementoftheframework.


2. KeyConcepts

2.1 InternationalGovernanceandtheClimateChallenge

Governance can be understood as the steering of actions/behaviour through the setting of rules,standards,orotherkindsofguidelines,orthroughtargetedsupport(capacity-building,technicalassis-tanceorfinance)towardsanexplicitly“public”goal(Roger,Hale,&Andonova,2017,pp.5–6).Suchanunderstandingofgovernanceisgenericinthatitisnotlinkedtoanyparticulartypesofactors.Itdoesnotconstituteanoppositeto“government”,asgovernancemayemanatefromgovernmentsaswellasother formsof rule-setting,etc.Wewilluse the term“governance” in thisgeneric sense in thisreport.

Internationalgovernanceconsequentlyentailsthesettingofrulesandstandardsandtheprovisionofsupportattheinternationallevel.Itcanbepursuedbyvariousactors,includingstategovernments,(associationsof)non-stateactors(bothbusiness/firmsandcivilsocietyactors),localauthorities(cities,municipalitiesandregions)andothers.Itisnottheactorsthatmakegovernanceinternational,butthefactthatthesettingofrulesandstandardsortheprovisionofsupporttranscendnationalboundaries.Internationalinstitutionsareprobablythemainplatformsofinternationalgovernance(asfurtherdis-cussedinsection2.2).

Governingtheclimatetransitionposesfar-reachingchallenges.Itwouldgobeyondthescopeofthissectiontoaspiretocharacterisethesechallengestoanexhaustiveextent(seee.g.Bulkeley&Newell,2015; Incropera,2015;Levinetal.,2012;Scoonesetal.,2015). Instead,wehighlighta fewcentralfeaturesoftheoverallchallengeofgoverningtheclimatetransition.Notleast,theclimatetransitionrequiresawidearrayofsectoralsystemstofundamentallyshifttowardslow/zero-emissiontechnolo-giesandpractices(seebelow).Mostmodelsevenrequirenegativeemissions,usuallygeneratedbymeansofnetafforestationandcarboncaptureand storage (CCS) fromtheburningofbiomass forelectricitygeneration(seesections4.2and4.5).Inlinewiththeoverallproject,wefocushereonthechallengeofdecarbonisation(ratherthanthechallengeofmovingtowardnegativeemissions).

This shift itself frequentlyentails findingand introducingnewtechnologiesand innovativewaysofsatisfyingneeds.Moreoftenthannot,theseinnovationsalsoimplybreakingwithexistingparadigmsand replacing long-established andengrained structures, including large-scale and long-term infra-structures(e.g.transport,energy/power,etc.)androutines.Hence,theclimatetransitionrequiresawidespectrumofpoliciestobeadaptedinfar-reachingways(“policyintegration”)to,interalia,de-carbonisethebuildings,transport,industryandpowersectorsandtogreenfinanceandinvestment(Dupont,2016;A.Jordan&Lenschow,2010).

WeinthisWorkPackageaimtoassesstheadequacyofinternationalgovernancearrangementsforaddressingthisgovernancechallenge.Ourfocusoninternationalgovernanceimpliesthatwecannotaspiretobringthecentralsolutiontotheclimatechallenge.Whileinternationalgovernancehasim-portantcontributionstomaketothisend,itremainsonelevelinthemulti-levelgovernancesystem,whichcannotbeexpectedtobringthesolutiononitsown.Rather,weaimtoidentifythecontributioninternationalgovernancecanmakebyelaboratingonthepotentialofinternationalgovernanceinsti-tutionsingeneralandwithrespecttothesectoralsystemsinfocus.Asinternationalgovernanceinter-actswithothergovernance levels,deficienciesof internationalgovernancedonotnecessarilyspelldoomfortheclimatetransition,andeffective/adequateinternationalgovernancedoesnotnecessarilyensurethatthe2/1.5°Cgoalwillbeachieved.Butinternationalgovernancecanattimesbenecessaryorat leastcreatesignificantaddedvalue. Internationalgovernanceoftheclimatetransitioncanbeconsideredadequatetotheextentthatitexploitsthepotentialofthisgovernancelevel.


Thebenchmarkof“adequacy”assuchencompassestwointerlinkedcriteria.Firstofall,internationalgovernanceoftheclimatetransitioncanbeconsideredadequateifitasfullyaspossibleexploitsthepotentialof thisgovernance level tocontribute toclimatemitigation, in linewith literatureon the“problem-solvingeffectiveness”ofinternationalinstitutions(e.g.Young1999;Stokke2012;Milesetal.2002).Thisrequiresamoredetailedanalysisofthepotentialcontributionofinternationalgovern-anceinindividualcasesandforparticularsub-problems,asappropriate.ItisworthnotingthatinthecontextoftheobjectivesoftheParisAgreement,problem-solvingeffectivenessshouldnotonlycoverthemitigationperspective(1.5/2°Cgoal),whichisourfocushere,butalsoadaptation(Art.2.1(b))andfinancialflowsconsistentwithlow-GHGandclimate-resilientdevelopment(Art.2.1(c)).Theachieve-mentofthe2/1.5°Cgoalisnotselectedasanappropriatebenchmark,sincethiswouldbetheresultoftheinteractionandcombinedcontributionsofdifferentlevelsofgovernance(andvariouselementsoperatingattheselevels).

Moreover,Article2.1oftheParisAgreementpositsthattheglobalresponsetoclimatechangehastobe strengthened “in the context of sustainable development and efforts to eradicate poverty”. Ittherebyhighlightsthesecondaspectoftheadequacyofinternationalgovernance,namelythatitbeconsidered fair and socially acceptable. This requirement can partially be justified on normativegrounds,basedoncriteriaofgoodgovernance.Itcanalsobederivedfromtheeffectivenessobjectivesincegovernancearrangementsthatarenotconsideredfairandacceptablemaynotbestableandeffective.Moreover,internationalgovernancemayestablishorenshrinerelatednormativeprinciplesasis,forexample,thecasefortheprincipleofequityand“commonbutdifferentiatedresponsibilitiesandrespectivecapabilities(inthelightofdifferentnationalcircumstances)”(Art.3UNFCCCandArt.2ParisAgreement)intheclimateregime(cf.LukasHermwille,Obergassel,Ott,&Beuermann,2017).Thetwointerlinkedadequacycriteriawillespeciallycomeintoplayintheassessmentofexistinggov-ernancestructuresinTask4.2.

2.2 InternationalandTransnationalInstitutions

Internationalinstitutionscanbeunderstoodasnegotiated,dynamic,sectoralnormativesystemscon-sistingofrulesandpractices,includingdecision-makingprocedures,thatprescribebehaviouralroles,constrainactivityandshapeactorexpectations(Young1982;Young1989;Keohane1989;North1991;Simmons&Martin2002).Wefocusonnegotiated,purposefullycreatedinternationalinstitutionsbe-causeweareinterestedinthemasgovernanceinstruments.Wehenceexplicitlydonotincludewhathasbeencalled“spontaneousinstitutions”thatemergefromtheuncoordinatedbehaviourofactorsintheinternationalsystem(Young,1982).Suchnegotiatedinstitutionsusuallyhavetwoprincipalcom-ponents,namely(1)substantiverulesaddressingtheissueatstake(climatechange,worldtrade,etc.)and (2) procedural rules for making and implementing decisions, which may include develop-ment/changeofthesubstantiverules(Gehring,1994;Young,1980).Asmentioned,theycanbecon-sideredmainplatformsofinternationalgovernance.

Therelevantliteratureinparticulardistinguishesthreetypesofnegotiatedinternationalinstitutions.Firstamongtheseareformalinternationalorganisations(suchastheWorldTradeOrganization–WTO,theFoodandAgricultureOrganization–FAO,ortheInternationalMonetaryFund–IMF).Internationalorganisationsareusuallyestablishedbystatesthroughintergovernmentalagreementscontainingthestatutesoftheorganisation.Internationalorganisationspossessthemselvesactorqualities,includingaphysicallocation(“aseat”),astaffofemployeesandusuallylegalpersonality(Young,1986).

Second,internationalregimesservetogovernspecificissueareasusuallyonthebasisofintergovern-mentaltreaties,asfurtherdevelopedthroughsubsequentdecision-making(frequentlybytheConfer-enceoftheParties–COP).Hence,theclimatechangeregimerestsontheUnitedNationsFrameworkConventiononClimateChange(UNFCCC),theKyotoProtocolandtheParisAgreement–whichhave


beenfleshedoutbydecisionsoftheCOPs.Internationalregimesareusuallyservedbyasecretariat,whichmayitselfbeprovidedbyaninternationalorganisation(butcanalsobeself-standingasisthecaseoftheUNFCCCsecretariat)(Levy,Young,&Zürn,1995).

Third,weincludeinouranalysistwotypesoftransnationalinstitutions/regimesthatfeaturenon-stateactorsastheirmembers:privatetransnationalinstitutionsfeatureonlynon-stateactorsastheirmem-bersandhybridtransnationalinstitutionshavebothnon-stateandstateactors/governmentsastheirmembers.Theemergenceandriseoftransnationalinstitutionsreflecttheemergenceandriseofnon-stateactorsininternationalpoliticsmoregenerally,includingfirms,civilsocietyorganisationsandlocalauthorities (cities,municipalities, regions). In climategovernance, transnational institutions includethegrowingnumberof“internationalcooperativeinitiatives”andtransnationalnetworks(suchasvar-iouscitynetworks,privatecertificationinitiatives,etc.)(Abbott,2012;Bulkeleyetal.,2014;Sanderink,Widerberg,Kristensen,&Pattberg,2017;Widerberg&Stripple,2016).

Inviewoftheproliferationofinternationalfora,coalitionsandnetworks,itseemsimportanttoclarifywhichofthesedoordonotqualifyasinternationalinstitutionsforthepurposesofourresearch.Asmentionedabove,weareinterestedininternationalgovernanceinstitutions.Assuch,theinstitutionsshouldconsistofidentifiablerulesandpractices(aimedataffectingbehaviour),becapableofcollec-tivedecision-makingandfulfilrelevantfunctionssuchasrule-setting,provisionsofmeansofimple-mentationorgenerationofknowledgeinpursuitofapublicgood(seealsosection3ongovernancefunctions).Soft-lawinstitutionssuchastheGroupofSeven(G7)orGroupofTwenty(G20)wouldap-peartobecoveredbysuchanunderstanding,whereaspureassociationsoffirms(suchastheInterna-tionalChamberofCommerce)wouldratherconstitutealobbythananinternationalgovernanceinsti-tution.Whileborderlinecaseswillcertainlyexist,thisunderstandingshouldenableustoavoidcon-fusing international coalitions and lobby groups with international governance institutions. Whilethereisnotnecessarilyaminimumrequirementregardingthefunctionstobefulfilled,itshouldbeusefultokeepinmindthegeneralrequirementofaconsequentialnormativecorethatformspartofthegeneraldefinitionofinstitutionsintroducedabove.

Wewillinthefollowinganalysisusetheterm“internationalinstitutions”torefertoallthreeafore-mentionedcategories,namelyinternationalorganisations,internationalregimes(bothconstitutingin-tergovernmentalinstitutions)andtransnationalinstitutions/regimes.

2.3 InstitutionalComplexesandPolycentricity

Researchoverthepasttwodecadesorsohasincreasinglyhighlightedthatinternationalgovernanceinstitutions do not operate in isolation but form so-called “institutional complexes” (Oberthür &SchramStokke,2011;Orsini,Morin,&Young,2013;Raustiala&Victor,2004).Aninstitutionalcomplexcaningeneralbeunderstoodasanetworkofthreeormoreinternationalinstitutionsthatrelatetoacommonsubjectmatter;exhibitoverlappingmembership;andgeneratesubstantive,normative,oroperativeinteractions(Orsinietal.,2013).Forexample,KeohaneandVictorhaveidentifiedaregimecomplexonclimatechangeincludingahostofprimarilyintergovernmentalfora(suchastheMontrealProtocoladdressingfluorinatedGHGs,variousminilateralforaandothers)(Keohane&Victor,2011).Suchinstitutionalcomplexesmayalsobesubdividedindifferentways,asvarioussubgroupsofinsti-tutionsmayaddressparticularsectorsorspecificgovernance functions(Oberthür&Justyna,2013;Orsinietal.,2013).

Althoughcomposedofformallyunconnected,non-hierarchicalanddifferentiatedgovernanceinstitu-tions,institutionalcomplexesarenotnecessarilycharacterisedbyregimecollisionsandconflicts.Ra-ther,a“patchwork”(Biermann,Pattberg,VanAsselt,&Zelli,2009),of institutionscancomplementeachotherratherthancollideandhenceformaninter-institutionalorder.Suchaninter-institutionalordermaybemoreorlesseffectiveandefficientandcanbecharacterisedbytensionsbetweenthe


relevantinstitutions.Accordingly,existingresearchsuggeststhattherelationshipbetweendifferentoverlappinginstitutionsmaybebestunderstoodasaninter-institutionalequilibriumthat,overtime,formsanddeepensspecific“divisionsoflabour”(Gehring&Faude,2014;Oberthür&SchramStokke,2011).Theemergenceofsuchinter-institutionaldivisionsoflabourisnotleastdrivenbythedesireofactorswhoaremembersofseveralinstitutionstopreventopenconflictandtobeabletosustaintheseinstitutions.Asaresult,enhancingandgoverninginstitutionalcomplexesdoesusuallynotentailcre-atingorder,butchangingordeepeningit(Oberthür,2016).

Howcouldanexistingorderordivisionoflabourininstitutionalcomplexesbesteeredorgoverned?Thepossibilityofsuchgovernanceisimmanentintheconceptsof“interplaymanagement”(Oberthür,2009)and“orchestration” (Abbott,Genschel,Snidal,&Zangl,2015).Accordingly, it is important torealisethatinstitutionalcomplexesandtheirstructuresresultfromcollectivedecision-makinginthevariouscomponentinstitutionsinthefirstplace.Hence,theycanalsobechangedandshapedthroughthecollectivedecision-makinginthevariousinstitutionsthatformthecomplex.Inaddition,onecouldconsidercollectivegovernanceofinstitutionalcomplexesthroughoverarchinginstitutionsand/orco-ordinationbetweenthecomponentinstitutions,whichhas,however,remainedtheexceptiontodate.Actionintheindividualinstitutionsthatmakeupaninstitutionalcomplexhasremainedthemajorformoftheirgovernance(Oberthür,2016).Insomecases,centralinstitutionsmayspecificallyperformanorchestratingfunctioninthisrespect.

Theconceptof“polycentricity”or“polycentricgovernance”tosomeextentoverlapswiththenotionof institutional complexes,but italsogoesbeyond it.3Bothconceptsarebasedon thenotion thatgovernanceoccursthroughmultipleunits(institutions).Whileresearchoninstitutionalcomplexeshastraditionallyfocusedoninternationalregimesandorganisations,polycentricgovernancecaststhewebevenwiderbyincludingtransnationalarrangements(includingprivate/sub-stateactors)andinstitu-tionalarrangementsbelowthethresholdofformalregimes/organisations(suchaspartnershipsandinternationalcooperative initiatives) (Bulkeleyetal.,2014;A. J. Jordanetal.,2015;Ostrom,2010).Polycentricgovernanceeveninprincipleincorporatesamulti-levelperspectiveandhencetranscendsafocusoncooperationacrossborders.Whileourfocusisoninternationalandtransnationalcoopera-tion,wedoincludethewiderangeofinstitutionalarrangementsintoournotionofinstitutionalcom-plexes,inlinewithresearchonpolycentricgovernance.

Overall,thereisawiderangeofconceptsandtermsinuseinrelevantliteraturetorefertotherealitythat internationalgovernance invirtuallyall issueareasof internationalrelations, includingclimatechange, occurs through various fora and arrangements. Relevant catchwords include “institutionalfragmentation”,“governancearchitectures”andothers. Inthisproject,we interchangeablyemploy“institutionalcomplexes”or“governancelandscapes”asdenotingthisphenomenon.

Inconclusion,wewillanalyseinternationalgovernanceasbeingadvancedthroughvariousinstitutionalarrangements,includinginternationalorganisations,internationalregimesandtransnationalinstitu-tionsandarrangementsthatinteractwitheachotherinspecificways.Itfollowsthatwe(especiallyinTask4.2)havetolookatallinstitutions/institutionalarrangementsthatarerelevantforaspecificchal-lenge/functioninordertoassessachievementsandshortcomings(andtoidentifypossiblevenuesforenhancinggovernance).

3 Italsohasastrongnormativecomponentaspolycentricityisconsideredaspotentiallysuperiorinterms

ofeffectiveness(andlegitimacy),somethingthatwouldneedtobeinvestigatedempirically.


2.4 ASectoralPerspective

Inthisreport,wetakeasectoralperspective.Wetherebyreflectthat,overrecentyears,ithasbecomeincreasinglyacknowledgedthatconditionsfordecarbonisationvaryconsiderablyacrossdifferentsec-torswhichhencerequirespecifictargetedapproachesandpolicies(e.g.Dupont&Oberthür2015),asalsoimmanentintheconceptofclimatestabilizationwedges(Pacala&Socolow,2004).Accordingly,thenumberofinternationalinstitutionsandinitiativesthataddressparticularsectorsandsub-sectors–differentaspectsofthechallengeofclimatechange–hasthusbeenincreasing.Whileclimatechangeadmittedlyconstitutesachallengethatcutsacrossdifferentsectorsandisthusoverarching,thereisthereforegoodreasontoanalysetheconditionsfordecarbonisationandthepossiblecontributionofinternationalgovernancetothisendfromasectoralperspective.

Thisraisesthequestionhow“sectors”shouldbedefined:howshouldwegoaboutdelimitingsectorsfor thepurposesofouranalysis?Variousemissionsectorsas reflected inemission inventoriesanddatabasesmaynotnecessarilybesuitableforourpurposesifthedelimitationdoesnotcorrespondtousefulunitsforgovernanceefforts(e.g.whereindustrialemissionsareseparatedintodirectenergy-relatedemissionsandprocessemissions).Similarly,variouseconomicsectorsdistinguishedinthelit-eraturemaynotnecessarilybesuitable.Becauseofourgovernanceperspective,weaimatidentifyingsystemsofrelatedactors,technologies,infrastructures,institutionsandideasthatfulfilspecificiden-tifiablesocietalfunctionsandmayhenceprovideforsuitableunitsforpoliticalgovernance/steering(Schot&Laur2016,p.18;seealsoBorrás&Edler2014).Becausesuch“sectors”formsocio-technicalorsocialsystems,werefertotheminthefollowingas“sectoralsystems”.

Weunderstandsuchcomplex“sectoralsystems”asopensystems.Assuch,theyarenotstrictlysepa-ratedfromothersectoralsystems,butmayevenoverlapandbecloselyrelatedtothem.Definingthesystemboundaries foranalyticalpurposes is thereforenecessarilyarbitrarytosomeextentandre-quiresresearcherstomakeinformedchoices.Wethereforewishtoacknowledgethatalargenumberofoverlapping“sectoralsystems”couldprincipallybeidentified,alsobecausesystemsfrequentlycanbesubdividedintofurthersub-systems,dependingonthepreferencesandchoicesoftheanalyst.

Underthesecircumstances,itseemsparticularlywarrantedtoprovidefulltransparencyofthechoicesmadeand theguidingcriteria. In identifyingour sectoral systems,wepragmatically started fromanumberofestablished,widelyrecognisedsectordistinctions(asforexamplereflectedinreportingtotheUNFCCC,theEuropeanCommission,Eurostat,theUSEnvironmentalProtectionAgency,andsectordivisionsoftheIPCC).Wethenadaptedandcomplementedtheseinaccordancewithouraforemen-tionedconceptualisationofsectoralsystemsguidedbythefollowingconsiderations:(1)coverageofGHGemissions;(2)apragmaticpreferenceforlargersystems(soastokeepthenumberofsectoralsystemsmanageable);and(3)the inclusionofkeyemergingconceptsandfieldsofaction(seealsobelowsection4).


3. FunctionsofInternationalGovernanceInstitutions

Thereisarichliteratureelaboratingonthefunctionsandeffectsofinternationalinstitutionsandin-ternational governance/cooperation (Bulkeley et al., 2014; De Búrca, Keohane, & Sabel, 2014;Loorbach,2010;Simmons&Martin,2002;Stokke,2012;Young,1999).Wetakeinspirationfromthisliteraturefordistillingfivekeyfunctionsthatinternationalgovernanceinstitutionscanfulfil.Thepur-poseistospecifyhowinternationalinstitutionsmayhelpadvancetheclimatetransition.Identifyingtheircoregovernancefunctionsshouldallowustopinpointthepotentialofinternationalinstitutionsinthisrespect.Whiletheaforementionedliteraturemaycutthefieldinvaryingways(e.g.Young&MarcA.Levy1999),webelievethatourcategoriescoverthemainfunctionsofinternationalinstitu-tionsasdiscussedintheliterature.

Allthegovernancefunctionsderivefromthefactthatdynamicinternationalgovernanceinstitutionsconstitutebothnormativesystemsanddecision-makingprocesses (Gehring,1994).Hence, interna-tionalinstitutionsfirstofallentailrulesandnormsthatcanprescribe,proscribe,permitordirectrele-vantbehaviourofstatesandotheractors.Butbeyondsuchrulesandnorms,aninternationalcommu-nicationanddecision-makingprocessisalsousuallyconstitutiveofinternationalgovernanceinstitu-tions.Suchinstitutionsprovideforaforexchange,deliberationanddecision-makingthatallowactorstointeractandlearn.Theytherebyhelpsynchronisediscoursesacrosslevelsofgovernance,frametheissueathand,shapeparties’interestsandenablethedevelopmentoftheinstitution.Thefunctionsdistinguishedinthefollowingcantovaryingdegreesbetracedbacktotheseconstitutivecharacteris-ticsofinternationalgovernanceinstitutions.

3.1 GuidanceandSignalFunction

Theguidanceandsignalfunctionofinternationalinstitutionsderivesmainlyfromtheprinciplesandobjectivesonwhichtheyarecommonlybased(andhencefromthenormativedimensionofinterna-tionalinstitutions).Whilenotnecessarilyhighlightedininstitutionalandregimetheory,internationalinstitutionsareregularlyestablishedforaspecificpurpose(advancingfreetrade,protectinghumanrights,limitingclimatechange,etc.).Thispurposeiscommonlyvisiblefromprinciplesandobjectivesenshrinedintheunderlyingtreatyorstatutesand/orcanbefurtherdevelopedandspecifiedthroughsubsequentinstitutionaldecision-making.Accordingly,especiallytheobjectivescontainedintheParisAgreementhavebeenfoundtoentailstrongguidanceastheysignaltheresolveofgovernmentsacrossthe world to take far-reaching action on climate change (Bodansky, 2017; Falkner, 2016; LukasHermwilleetal.,2017;Morseletto,Biermann,&Pattberg,2016).

Thepotential,reachandsignificanceofthissignalfunctionofcontemporaryinternationalinstitutionsgoesmuchbeyondtherespectiveinternationalinstitutionperseandtheinternationallevelingeneral.Theprinciplesandobjectivesenshrined inan international institution firstof all reflect agreementamongitsmembersandestablishcollectiveexpectationsandacommitmenttothedevelopmentoftheinstitutionamongthesememberscooperatingattheinternationallevel.Withincreasedtranspar-encyandmeansofcommunicationaswellagrowingparticipationbyvariousnon-stateactorsinpro-cessesof internationalgovernanceover thepastdecades,suchagreementreachedwithin interna-tionalinstitutionscangenerateeffectsfarbeyondtheprocessofinternationalcooperationitself(evenshortofformalimplementingactivities).Itsignalstheresolveofgovernments(orothermembersofinternationalinstitutions)topursueacertaincourseofactionandhenceindicateslikelypolicytrajec-toriestobusiness,investorsandotheractorsoperatingatalllevelsofgovernance.Assuch,thesignalanddirectionprovidedhasthepotentialtohelpsynchroniseandaligndevelopmentsacrosslevelsofgovernanceandacrosstheboundariesofdifferentcountries(Kanie&Biermann,2017).Accordingly,it


canbearguedthattheParisAgreementgenerallyprovidesanimportant(thoughimperfect)signaltobusinesstoinvestinlow-orzero-carbondevelopment(Falkner,2016).

3.2 SettingRulestoFacilitateCollectiveAction

Oneof thebest-known functionsof internationalgovernance institutions is setting rules toenablecollectiveactionontheissueathand.Theprimarytooltowardsthisendisestablishingobligationsandstandardsofbehaviourtowhichpartiessubscribe.Partiestointernationalinstitutionsthusagreetocertainreciprocalobligations,whichcanbeofmoreprocedural(“obligationsofconduct”)orofmoresubstantivenature(“obligationsofresult”)(seediscussioninOberthürandBodle2016).Theimple-mentationofsuchobligationsbyindividualpartiesisthenexpectedtoleadtobehaviouraleffectsthatcontributetotheresolutionoftheproblemathand(andtoachievingtherelatedobjectives;seepre-vioussection).

Obligationsandstandardsofbehaviourdirectedataddressing the issueathandcan takedifferentforms(dependingonproblemcharacteristicsandthepoliticalchoiceofparties).Theymayprohibitorprescribecertainbehaviour.Theymayalsoharmonise (technical) standards– implyingbehaviouraladaptationsofactors.Prescriptionscoulddirectlyaddressthebehaviourcausingtheproblemorcouldtrytoprovideincentivesforadaptingthisbehaviour(e.g.whendeterminingrulesforthelabellingofproductstofacilitateconsumerchoice).Inshort,internationalobligationsandstandardsofbehavioursmayspanthewholerangeof(environmental)policyinstrumentsandapproachesfrom“commandandcontrol”overmarket instruments to informational instruments (A. Jordan,Benson,Wurzel,&Zito,2012;Sterner&Coria,2013;Wurzel,Zito,&Jordan,2013).

Differentproblemsmaygeneratevaryingdemandsforinternationalrules.Infact,someproblemsmaynotrequiresuchcollectiveactionatall(e.g.reformoflocalpublicadministrations).Addressingotherproblemsmayimplystrongerorweakerlevelsofinternationalinterdependencesothatoneactor’sbehaviourmaybecontingentonanotheractor’sbehaviourtovaryingdegrees.Forexample,onecoun-try’srestrictionsonGHGemissionsofcertainindustriesmayimplydirectcoststhatimmediatelyaffecttheinternationalcompetitivenessofthisindustry.Inothercases,suchcostsmayarisemoreindirectly(e.g.becauseofregulatoryburden).Undersuchcircumstances,internationalinstitutionsallowactorstocodifyobligationstoenableandfacilitatecollectiveaction.

Thedifficultyofachievingagreementonrelatedobligationsnotleastarisesbecauseofthedistribu-tionalconflictsinvolved.Agreementonrulesrequiresagreementonthecontributionofeachindivid-ualpartyandhenceonaburden-sharing.Itnotonlyrequiresanunderstandingthatcollectiveactionisrequiredorbeneficialbutalsowhateachindividualactor’sfaircontributionshouldbe.Asaresult,individualpartieswillnotonlytryhardtogetthebestdealforthem,butissuesofequityandfairnessalsolurk(withconsiderablepotentialfordivergingviewsonwhatthesemaymeaninpractice).

Theirprocessdimensionimpliesthatnegotiateddynamicinternationalinstitutionscanmakethein-frastructureavailableforreachingagreementonrules–andfordevelopingthemfurther.Theyprovideforumsfordiscussionsandaframeworkforthepreparationandmakingofcollectivedecisions.Hence,theyprovidetheopportunitytosynchronisediscoursesanddevelopcommonunderstandingsandtofurtherdeveloprulesandobligationsovertime.

3.3 TransparencyandAccountability

Internationalinstitutionsfrequentlycontributetoenhancingthetransparencyofactionsoftheirpar-ties,collectingandanalysingrelevantdataandidentifyingandaddressingproblemsinimplementation


(hereinafterreferredtoas“transparencyandaccountability”).They(i.e.theirbureaucracies/secretar-iats)maythemselvescollectandaggregaterelevantdataormayrelyonreportingbyindividualpartiestotheinstitution,withthelatterprovidingarationaleforreview/verificationinordertoensuredataqualityandcomparability (Gupta&vanAsselt,2017).Such“measuring, reportingandverification”(MRV)alsoprovidesforaformofimplementationreviewasabasisforidentifyingpossibleimplemen-tationproblems.Internationalinstitutionscanfurthermoreentailspecificmechanismsforaddressingsuchimplementationproblems.Notleast,modernmultilateralenvironmentalagreementscommonlyincludecomplianceprocedures/mechanismstothisend(Bulmer,2012;Trevesetal.,2009)andinter-nationaltreatiesgenerallyforeseemechanismsforthesettlementofdisputesbetweenparties.

Thetransparencyatstakehererelatesspecificallytotheimplementationofagreedrulesbytheparties.Itshouldnotbeconfusedwithbroadernotionsoftransparency.Forexample,labellingrulesandotherinformationalpolicyinstrumentsmaysupporttransparencyofcertainproductcharacteristicsforcon-sumers.Whilethismayqualifyasaspecificpolicyapproachunderthefunctionof“settingrules”,thefunctionof“transparencyandaccountability” inthiscasewouldrelatetowhethermembersoftheinstitutionhadproperlyimplementedthelabellingscheme/informationalinstrument.

Thelevelofdemandforspecificmechanismstoenhance/ensuretransparencyandaccountabilityde-pendsontheproblemathand.Forexample,“coordinationproblems”requirelessoversightandveri-ficationsinceallpartieshaveanincentivetoimplementtheinternationalrulesoncetheyareagreed.Incontrast,“cooperationproblems”involvemixedmotivesofactorsandconsequentlyanincentivetotakea“freeride”.Hence,theyareconsideredtoentailastrongdemandformechanismstoensuretransparency and accountability (Snidal, 1985). Furthermore, some activities are intrinsicallymoretransparentthanotherssothattheneedforspecificmechanismstoensuretransparencyvaries.Forexample,itisfarmoredifficulttoestablishwhetheranoiltankerreleasedoilatseathanwhetherithassegregatedballasttanksthatreducetheincentiveforreleasingoilatsea(Mitchell,1994).Finally,thedemandforspecificmechanismsforaddressingimplementationproblems(andrelatedconflicts)dependsontheincentivestructurerelevantactorsarefacing.Insomeinstances,ensuringtranspar-encymaybesufficienttoensureeffectiveimplementation.Forexample, long-standingnon-compli-ancebySovietwhalingboats inAntarcticwaterswithcatch limitsunder the InternationalWhalingConventionceasedinthe1970swhennewinspectionarrangementsensuredthatsuchnon-compli-ancewouldbedetected(Oberthür,2000).Putpositively,mechanismsensuringtransparencyandac-countabilityalsohavethepotentialthateffectiveimplementationreceivesvisibilityandacknowledge-mentandistherebyencouraged(onthebasisofpublicsupportfortheobjectivespursued).

Overall,highlevelsoftransparencyandaccountabilityaregenerallyconsideredtosupporttrustamongpartiesaswellaseffectiveimplementation.Thisdoesneitherimplythattheywouldbeeasilyachievednorthattherecouldnotbeproblematicimplications.Devisingappropriatemechanismsfrequentlyismarredwithsimilarconflictsasdiscussingtheactualsubstantiveobligations.Moreover,ithasbeenarguedthatbeingheldtoaccountmaylimittheambitiousnessofthetargetsactorsarewillingtoadopt(Bodansky,2012).Onbalance,however,transparencyandaccountabilityarewidelyheldtoenhancetrust,providecertaintytoactorsthatotherswillreciprocateandpromotelearningandcommonun-derstanding(Bodansky,2010;Mitchell,1998).

WhereastransparencyandaccountabilityareknowntoconstitutemajorissuesintheUNnegotiationsonclimatechange(sincetheyrequireagreementonrelatedrules),lessisknownabouttheirrolewithrespecttospecificsectoralsystems.Reporting,reviewandverificationandcompliancehavebeenma-jorissuesinthecontextoftheUNFCCC,theKyotoProtocolandtheParisAgreement.HowtomeasureandaccountforGHGemissionsandsinkshasmajorimplicationsfortheamountofemissionsandtheachievementofrelatedtargets.Appropriatedatacollectionandreportingisfundamentaltoanyat-temptataddressingclimatechangeandgoverningtheclimatetransition.Inthecontextof interna-tionalclimateagreements,theyenabletoaddressandremedythedangeroflackofimplementation


(“freeriding”)byindividualcountries.Lessisknownabouthowthedemandfortransparencyandac-countability(and,byimplication,theneedtofacilitatecollectiveaction–seeabove)inasectoralper-spectiveputcentralhere.

3.4 CapacityBuilding,TechnologyandFinance(meansofimplementation)

Theprovisionofcapacitybuilding,technology(transfer),andfinancialresourcesisespeciallyrelevantinaNorth-Southcontext.Itisbasedontheinsightthatfrequentlyimplementationisdeficientbecauseofalackofthesemeansofimplementation,especiallyindevelopingcountries(Chayes&Chayes,1993).Amorerecentadditionalrationaleforprovidingsuchmeansconcerns“compensation”for lossanddamagessufferedasaresultofenvironmentallydetrimentalbehaviour.Accordingly,variousmultilat-eralenvironmentalagreementsdoengage in relevantprogrammesandhave financialmechanismsandvariousinternationalfinancialinstitutionsexisttothisend,includingtheWorldBank,severalMul-tilateral Development Banks, the Global Environment Facility, the Green Climate Fund and others(Bodansky,2010;Keohane&Levy,1996).

Therationaleforprovidingsuchmeansofimplementationthroughinternationalinstitutionsisindirect.Onemayquestionwhycapacitybuilding,technologyandfinanceshouldbeprovidedthroughinterna-tionalinstitutions–andother(bilateral)channelsdoindeedexist.However,internationalcooperationbringsatleasttwoimportantadvantages.First,itallowsdonorstocoordinateandtherebyaddressthesecond-ordercollective-actionproblemofwho isgoing toprovidehowmuch to theoveralleffort.Second,itallowstoreapefficiencygainsrootedinthefactthatsimilarissuesneedtobeandcanbeaddressedinvariouscountriesandcontextsdrawingonsimilarexpertiseandlessons(therebyreduc-ing “transaction costs”). Resources can thereby be pooled and duplication of effort minimised(Keohane&Levy,1996).

3.5 KnowledgeandLearning

Finally,internationalgovernanceinstitutionscancreateknowledgeandprovideplatformsforindivid-ualandsociallearning.Knowledgecanrelatetoscientific,economic,technicalandpolicyaspects.Itcanconcerntheunderstandingoftheproblemathandorpossiblesolutionstothisproblem(includingtechnologicaldevelopmentorotherkindsofsolutions).Learningcanemanatefromsuchinformationanditsexchangeattheinternationallevel,forexampleonbestpractices.Thefunctionofknowledgeandlearningincludesawarenessraisingandmaycontributetoachangeofvaluesandculturalpredis-positions(Haas1990;Young&Levy1999;Hasencleveretal.1997).

Internationalinstitutionscanenhanceknowledgeandinformationaswellaslearninginvariousways,primarily in their process dimension. They may collect and aggregate relevant data and otherknowledge(e.g.theWorldEnergyOutlookpublishedannuallybytheInternationalEnergyAgency,IEA).Actorsmayalsoestablishcertaininternationalinstitutionsmainlyforthepurposeofacollectiveap-praisalofavailableknowledge(e.g.theIntergovernmentalPanelonClimateChange, IPCC).Ortheymayestablishparticularprocessesandbodiestothisendintheframeworkofabroaderinstitution(Parson,2003).Asmentionedabove,mechanismstoprovidefortransparencymayalsogeneraterel-evantknowledge.Whiletheseprocessesallowindividualactorstolearn,policylearningmaybepro-motedbyexchangeanddiscussionofrelevantinformationinthecontextofsuchinternationalinstitu-tions.

Theeffectivenessandinfluenceofthisknowledgeandinformationnotleastdependsonitsacceptancebyindividualactors.Thisacceptanceisnotleastsupportedthroughtheprocessofcollectiveappraisalthatallowspartiestostriveforconsensualknowledge(seealsoMitchelletal.2006).Itmayalsobefurtheredbythegeneralauthorityoftheinstitutioninquestion(suchastheIEAonmattersofenergy).


Actorsmayespeciallybeopentolearningwhichpoliciesworkiftheyareinterestedinaddressingtheissuetargetedbythesepolicies.

Theeffectsofknowledgecreationandlearningmaybefeltbothintheinternationalprocessandintheimplementationbyindividualactors.Consensualknowledgehasthepotentialtohelpadvanceinter-nationaldiscussionsoncollectiveaction/settingrulessinceitprovidesacommonbasisandframesandlimitspolicyoptionsconsidered(Gehring,2007). Itmayalsohelpshapeimplementingbehaviourofindividualactorsbyaffectinghowtheyperceivetheirinterests,andpolicylearningmayhelpdevelopactors’policies.

3.6 Conclusion

Wehaveherederivedfivemainfunctionsofinternationalgovernanceinstitutionsfromthegeneralliterature on international (environmental) institutions and cooperation. Accordingly, internationalgovernanceinstitutionscanprovideimportantguidanceandsignalstobothpublicandprivateactors.Theycanalsosetrulestofacilitatecollectiveactionacrossborders.Transparencyandaccountabilityprovisionscanenhancemutualtrustandensureagainst“freeriding”.Internationalinstitutionsalsoallowtoenhanceassistancetocountriesandactorsinneedbypermittingdonorstocoordinateandreducetransactioncosts.Andtheycancontributetoan improvedandcollectivelyappreciatedandacceptedunderstandingoftheproblemanditspossiblesolutionsaswellastolearningabouteffectivepolicies.Table3.1presentsthekeyfeaturesandpotentialaddedvalueoftheperformanceofthesefunctionsbyinternationalinstitutions.

Table3.1: OverviewofMainFunctionsofInternationalGovernanceInstitutions

Functions Keyfeatures Mainaddedvalue

GuidanceandSignal

• Resultsfromoverallagreement,includingtargets/objectives • Alignsactorsacrosscountries

SettingRules • Variousformsofobligationsandstandards

• Harmonises/alignsobligationsforactorstherebyaddressinginter-dependence&competitiveness

TransparencyandAccountability

• Reporting,review/verification,compliance

• Contributestoeffectivereciproc-ityandimplementation(address-ingfreeriding)&mutualtrust

MeansofImplementation

• Capacitybuilding,technologytransferandfinance(North-South)

• Enhancingcapabilitiesbycoordi-natingdonorsandreducingtrans-actioncosts

KnowledgeandLearning

• Generationandcollectiveappre-ciationofinfor-mation/knowledge

• Scienceandpolicylearning

• Improvedandsharedunderstand-ing(authoritativeknowledge)

• Improvedpolicies(learning)

Source:authors’owncompilation.


Whileouranalysisismeanttocoverthemainfunctionsinternationalinstitutionscanperform,notallinstitutionsnecessarilyfulfilallofthesefunctions.Rather,differentinstitutionsmayperformvaryingmixesofthesefunctionsdependingonthespecificissuetheyaddressandthewayinwhichmembersdesignedtheinstitutioninresponse.Forexample,insuranceagainstfree-ridingwillonlyberequiredincasesof“cooperation”problems(asopposedto“coordination”problems).Also,transparencyandaccountabilitymechanismswillmost likelyrequireobligations in the firstplace (eventhoughthesecouldemanatefrombroadlyacceptedsocialnormsratherthantheexplicitprovisionsoftheinstitu-tion).Hence,theneedanddemandfortheprovisionofthesefunctionsdependsonthegovernancechallengesandconditionsfacedwithrespecttotheparticularcooperativeprojectpursued.Thisalsoimplies thatgovernance in international institutionscantakedifferent formsandvary in itsdepth,rangingfrom“shallow”exchangesofnationalexperiencestothesetting/harmonisationofcommonbindingstandards.Thereisnominimumofcorefunctionsanarrangementneedstofulfilinordertoqualifyasaninstitution.However,itmightbeworthremindingthattheoveralldefinitionofinterna-tionalgovernanceinstitutionsimpliesthattheyderivefromnegotiatednormativesystemsthatincludedecision-makingproceduresandshapeactors’behaviourand/orexpectations.

Thefivemainfunctionsofinternationalgovernanceinstitutionsintroducedherewillguideouranalysisofthesectoralsystemsinthenextsection.Asaresult,thenextsectionwillinvestigatetowhatextentthereisdemandandscopeforsuchfunctionsinthesectoralsystemconsideredandtowhatextentthefunctionsthatinternationalgovernanceinstitutionsmayperformmaypromiseaddedbenefitsintermsofadvancingtodecarbonisationinthesectoralsystem.


4. SectoralAnalysis

4.0 Theselectionofsectors

As indicated in section2.4above,oureffort involves identifyingandselectinga limitednumberofsectoralsystemsforfurtheranalysis.Startingfromanumberofestablished,widelyrecognisedsectordistinctions(asforexamplereflectedinreportingtotheUNFCCC,theEuropeanCommission,Eurostat,theUSEnvironmentalProtectionAgency,andsectordivisionsoftheIPCC),wepragmaticallyidentifiedanumberofopensectoralsystemsof interactingand inter-relatedactors, technologies, infrastruc-tures,institutionsandideasthatfulfilspecificidentifiablesocietalfunctions.

Asalargenumberofsectoralsystemscouldpotentiallybedistinguishedonthisbasis,wealsopaidattentiontothefollowingconsiderations.First,weattemptedtocovertheanthropogenicsourcesandsinksofGHGemissionsascomprehensivelyaspossible.Second,weratheroptedforlargersystems(e.g.forenergy–intensiveindustriestogetherratherthanindividualsuchindustriessuchasthesteel,cement,chemicaletc.industries)forpragmaticreasonsoffeasibility(i.e.tokeepthenumberofsec-toralsystemsmanageable).Finally,westrovetocaptureimportantemergingconceptsandperspec-tives(namely“wedges”)withasignificantpotentialforaddressingGHGemissions(e.g.circularecon-omy,urbansettlements/systems).

Onthisbasis,weincludethefollowing14sectoralsystemsinouranalysis:

• Agriculture(animalhusbandryandcultivationofplants);

• Landuse,land-usechangeandforestry(LULUCF-includingdeforestation,afforestation,de-forestation,cropland,grasslandetc.);

• Waste(wastetreatmentanddisposal);

• Thecirculareconomy(especiallyproductdesign,recycling,reuse,etc.–closelyrelatedtothewastesector);

• Powersector;

• Energy-intensiveindustry(withafocusonironandsteel,aluminium,cement,andchemicals);

• Extractiveindustries(‘losers’–especiallymining,fossilfuelproduction,phasedownofcoal,fossilfuels,etc.,subsidies);

• Transport(carmanufacturing;passengerandfreighttransport,includinginfrastructure);

• Internationaltransport(aviationandmaritime);

• Urbansystems/settlements;

• Buildings(especiallyspatialheatingandcooling);

• Productsandappliances;

• Financeandinvestment;

• FluorinatedGHGs(productionandconsumption).

Wewishtoacknowledgethatthisselectionisinescapablytosomeextentarbitraryandlimited.Sec-toralsystemscouldhavebeendefinedindifferentways(includingdistinctionofsubsystemsassystems)andotherareasofactivitymighthavebeenincluded(e.g.wedidnotincludeclimategeoengineering).However,weareconfidentthatwearecapturingsectoralsystemsthatareimportanttoaddressforthemovetowarddecarbonisation,ascalledforbytheParisAgreement.


Foreachofthesectoralsystems,theanalysisinthefollowingproceedsinthreesteps.WefirstprovideimportantbackgroundinformationonthestructureofthesectoralsystemanditsrelevanceforGHGemissionsandemissionreductions,includingexistingoptionsfordecarbonisation.Subsequently,themaintechnological,economic,politicalandsocialchallengesandbarrierstowarddecarbonisationareexplored.Finally,theanalysisattemptstopinpointthepromiseandpotentialofinternationalcooper-ationbyinvestigatingwhichoftheidentifiedfivekeyfunctionsofinternationalgovernancecouldcon-tributetoadvancingtowarddecarbonisationandinwhatway.Inordertoavoidareductionistpiece-mealapproach,linkageswithothersectoralsystemsarealsoidentified.

4.1 Agriculture

4.1.1 Currentstatusandprospect

In2010,theagriculturesectoraccountedforapproximately13percent ofglobalGHGemissionswhichincludesprincipallymethane(CH4)andnitrousoxide(N2O)(Searchinger,2013).Emissionsfromcropandlivestockproductionstoodatover5.3billiontonnesin2011,growing14percentfrom4.7billiontonnesofCO2equivalentin2001(FAO,2014).

Entericfermentation(CH4productionbylivestockduringdigestion),theapplicationofsyntheticferti-lizersandbiologicalprocessesinricepaddiesaccountformorethan60percentofthesector’sGHGemissions.Entericfermentationaccountedfor39percentoftotalsectoralemissionsin2011(plus11percentsince2011).Emissionsgeneratedduringtheapplicationofsyntheticfertilisersaccountedfor13percentofagriculturalemissionsin2011,andarethefastestgrowingemissionssourceinthesector,havingincreasedsome37percentsince2001.GHGsresultingfrombiologicalprocessesinricepaddiesemitCH4whichconstitutestenpercentoftotalagriculturalemissions,whiletheburningofsavannahsaccountsforfivepercentoftotalagriculturalemissions(FAO,2014).In2014agricultureaccountedfor9.5percentofworldtradewithavalueofUSD1,765billion(WTO,2017b).Thetoptenimportersandexportersofagriculturalproductsaccountforaround70percentoftrade(WTO,2017a).TheEuropeanUnion(EU)isboththebiggestexporterandimporterofagriculturalproducts.China,India,Brazil,andtheUSaccountedfor39percentofglobalnon-carbondioxide(CO2)agriculturalemissionsin2015,whereasallEuropeancountriestogethermadeup11-13percentofglobalnon-CO2agriculturalemis-sions(Richards,Gluck,&Wollenberg,2015).

Themaindriversofchangeintheagriculturalsectorareclimatechange,populationgrowth,techno-logicalinnovation,publicpolicies,economicgrowthandthecost/pricesqueeze(IPCC,2007).Popula-tiongrowthandglobalisationhavesignificantlyaffectedagriculturalproductionandconsumptionpat-terns,whiletechnologicalprogresshasboostedagriculturalproductivity(Steduto,Faurès,Hoogeveen,Winpenny,&Burke,2012).Thisgrowth,however,hasbeenattheexpenseofincreasedpressureontheenvironment,anddepletionofnaturalresources(IPCC,2007).Duetoclimatechangeandanin-creasingworldpopulation,droughthasbeenthemostimportantenvironmentalstressaffectingagri-cultureworldwide,particularlyintermsoftheproductivityoffieldcrops(Hu&Xiong,2014).Agricul-tureaccounts for70percentofglobal freshwaterandmore than90percentof consumptiveuse(Stedutoetal.,2012).Breedershavemadegreatprogressinimprovinganddevelopingdrought-toler-antcrops,butthesestillcannotmeetthedemandsoffoodsecurityinthefaceofanincreasingworldpopulation,globalwarming,andwatershortage.Otherexogenouspressuresontheagriculturesectorarethecompetitionbetweenurbanandagriculturallands(Seto,Lin,&Deng,2014)andtheinefficientuseoflandtogenerateenergyviabioenergy(Searchinger&Heimlich2015;ontheroleofbioenergyinpowerandtransport,seesections4.5and4.8).


Variousoptionsforreducingemissionfromthemainsubsectors(entericfermentation,fertilisation,riceproduction)alreadyexist.Forexample,addingaCH4inhibitortothedrymatterfeedcaninprin-ciplesafelyreduceCH4emissionsfromhigh-producingdairycowsby30percent(Hristovetal.,2015).Recentadvancesinfertilisertechnologycouldhelptoreducebetween30percentand60percentofN2Oemissionsdependingontheirrigationofthecrops.Recentresultsalsosuggestthatcombiningno-tillageagriculture (inwhich soilsarenot turnedoverwith farm implements)with theuseof slow-releasefertilisercanresultinareductionof75percentormoreinsoilN2Oemissionsfromirrigatedsystems(Parton,DelGrosso,Marx,&Swan,2011).Also,capturingandburningtheCH4fromlivestockmanure(forenergy)cangreatlyreducerelatedGHGemissionsandevencontributetoelectricitypro-duction.AccordingtotheWorldResourcesInstitute(WRI),perfectwatermanagementcantheoreti-callyreduceemissionsofricepaddiesupto90percentcomparedtofullflooding(Adhya,Linquist,Searchinger,Wassmann,& Yan, 2014). In reality, farmers in the Philippines andmanyotherAsiancountrieshavelimitedtechnicalabilitytodraintheirfieldsduringtherainyseasonsotechnicaloppor-tunitiesremaingenerallyunexplored.

Broaderincentiveswillbenecessarytoenableandencouragefarmerstoimplementavailabletechnol-ogiesandbestpracticesatthenecessaryscale.Atthesametime,technologiesdevelopedsofararenotcapableofcompletelyphasingoutGHGemissions;hence,moreresearchwillbeneededtodevelopnewoptions.

Enhancingthesinkcapacityofsoilwillalsobeimportantassoilscurrentlyoffsetabout15percentofagriculturalGHGemissions(Partonetal.,2011).However,soils,likeotherbiologicalsinks(e.g.vege-tation),arebelievedtohaveaninherentupperlimitforstorage.Thetotalamountthatcanbestorediscropandlocation-specificandtherateofsequestrationdeclinesoverseveralyearsbeforeeventuallyreachingthislimit(FAO,2002).Infuture,itmaybepossibletotoincreasethestabilityofsoilorganicmatterandtherebyretaincarboninthesoilforalongerperiodoftime(Wollenbergetal.,2016).

Also,ashiftofdietarypatternsholdssignificantpotentialforreducingagriculturalGHGemissions.Inparticular, reduceddemandformeatanddairyproductscouldsignificantlyreduceagriculture’scli-matefootprint.Widespreadadoptionofvegetariandietcouldcutfood-relatedemissionsbymorethan50percent(Milmann&Leavenworth,2016;Springmann,Godfray,Rayner,&Scarborough,2016).AshifttothedietrecommendedbytheWorldHealthOrganizationcouldhelpprevent0.31–1.37Giga-tonnesofCO2equivalent(GtCO2eq)or6.2-23.6percentoftheglobalagriculturalGHGemissionsperyearin2030(Wollenbergetal.2016;Smithetal.2014).

Decreasingfoodlossandwasteconstitutesanotheroptionwithsignificantpotential.Currentlossandwasteis30-50percentofglobalfoodproduction.Reducingthislossandwasteby15percentcouldreduceemissionsby0.79-2.00GtCO2eqperyear(Wollenbergetal.,2016).

Wideregionalandcountrydifferencesareevident.Agriculturecontributesasmallerportionoftotalemissionsindevelopedcountries(12percent)thanindevelopingcountries(35percent)(Richardsetal.,2015).In2011,44percentofagriculture-relatedGHGemissionsoccurredinAsia,followedbytheAmericas(25percent),Africa(15percent),Europe(12percent),andOceania(fourpercent)–withanincreasedshareinAsiaandandecreasedsharefromEurope(FAO,2014).Asregardslivestock,beefandchickenplaythemainroleinLatinandNorthAmerica,whereasthedairycattlesectordominatesinWesternEurope(FAO,2017).Theworld’slivestocksectorisgrowingatanunprecedentedratewithastrongpositiverelationshipbetweenthe levelof incomeandtheconsumptionofanimalprotein,withtheconsumptionofmeat,milkandeggsincreasingattheexpenseofstaplefoods(WHO,2008).TheOrganisationforEconomicCooperationandDevelopment(OECD)predictsafurtherincreaseintheproductionofmeatof15.5percentby2025(OECD/FAO,2016).


4.1.2 Mainchallengesandbarrierstowarddecarbonisation

Agriculture is heavily dependent onphysical andhuman factors. The approaches that best reduceemissionsdependonlocalconditionsandthereforevaryfromregiontoregion.Bestpracticesforin-tensivecommercialfarmingsuchaspigfarminginWesternEuropeisnotofinterestforintensivesub-sistencefarmingsuchasricecultivationinSouth-EastAsia.

Theadoptionofavailabletechnologiesandbestmanagementpracticesbyagriculturalproducersis,despitetheirpotentialbenefits, laggingforseveralreasons.Oneofthereasonsishighcosts:Inthelongrun,reducedtillagecanbeexpectedtoreducefuelexpensesandpersonneltimewhilemaintain-ingorincreasingcropyields,buttheupfrontcostofconvertingtillageequipmentmayprohibitfarmersfromadoptingthepractice.Anotherexamplearestabilisedfertiliserswhichcostapproximately30percentmorethanconventionalfertilisers(Partonetal.,2011).Disseminationofnewtechnologiesandbestpracticestolocalfarmersalsoconstitutesaformidablechallenge.Incentivestoadaptpracticesmayespeciallybelaggingwherechangingpracticesdoesnotpromiseimmediatebenefitstofarmers(whilecarryingconsiderabletransactionandopportunitycosts).Adequateincentiveswouldthusneedtobecreatedbyappropriatepolicies.

Tomaximisethecontributionofagriculturetoclimatemitigation,furthertechnologicaladvanceswillalsoberequired.Thepotentialofcurrentlyavailabletechnologiestoreduceemissionsislimited.Wol-lenbergetal. (2016) suggestapreliminaryglobal target for reducingemissions fromagricultureofabout1GtCO2eqperyearby2030tolimitwarmingin2100to2°Cabovepre-industrial levels.Thisglobaltargetisbasedonacomparisonofseveralmodelsformeetingthe2°Ctargetinacoherentleast-costapproachacrosssectors.Yetplausibleagriculturaldevelopmentpathwayswithmitigationco-ben-efits deliver only 21–40 per cent of this target (Havlik et al., 2014; Pete Smith et al., 2008, 2013;Wollenbergetal.,2016).Thereisparticulardemandforhigh-impact,quicklyimplementabletechnicaloptions,especiallyfornewbreedsandvarietiesthatcanbeeasilyaccessedanddonotrequirecom-pletelynewmanagementpracticesorinputs(Wollenbergetal.,2016).

Achievingawide-spreadadoptionofclimate-friendlydietsfacesanuphillbattleundercurrentmarketconditions,asdemandformeatisgrowingratherthandeclining.Alackofawarenessbyconsumersandculturalpredispositionsconstitutebarriersasdothelackingreflectionoftheexternaleffectsinthepricesofintensiveagriculturalproducts.Incentivesarealsolackingforreducingfoodwaste.Con-sumerswhoarewillingtooptforclimate-friendlyproductsmayfaceinformationalhurdlesasitisnoteasytoidentifytheclimateimpactsofdifferentlike-products.

4.1.3 Thepromiseandpotentialofinternationalcooperation

GuidanceandSignalFunction

Asectoraltargetandgoalsrelatedtocoreemission-causingactivitiesinthesectorcouldprovideim-portantguidancetosectoralactors,includingnationalgovernmentsresponsiblefordesigningvariousrelatedpolicies.Theimpactandfeasibilityofcleartargetsandgoalsislimitedbecause(1)thesectorcannotreduceitsemissionstozeroanytimesoonand(2)whattheowncontributiontoachievingthe2/1.5°Ctargetshouldbeishencenotimmediatelyclear.Apreliminarycontributionofthesectorcouldbetoreduceemissionsfromagricultureby1GtCO2eqperyearby2030(Wollenbergetal.,2016).Amorecomprehensivetargetforthe2°Climitcouldincludesoilcarbonandagriculture-relatedmitiga-tionoptions (Wollenbergetal.,2016).Furtherobjectives for sectoralactivities suchas fertilisation(reducing theuseof traditionalnitrogen fertiliser), emissions from ricepaddiesand from livestockcouldfurtherconcretisetheguidance,ascouldderivingnationaltargetstherefrom.


Settingrules

Rule-makingattheinternationallevelcouldalsosignificantlycontributetofacilitatingemissionreduc-tions.Forexample,labellingschemescouldhelpcreatemarketsforlow-emissionproducts(givenin-ternationaltradeinagriculturalproducts).Internationalagreementcouldalsohelpestablishingacar-bonpriceinagricultureandaligningcountriestowardareductionoftheuseoftraditionalnitrogenfertiliser(includingsupportfortheintroductionofalternativesincountriesofneed),whichotherwisefacescosthurdles.

CapacityBuilding,TechnologyandFinance(meansofimplementation)

Internationalcooperationcanhelpdisseminatenewtechnologiesandbestpractisestolocalfarmers,including through the provision of financial assistance.More ambitious policymechanismswill beneededtocreateincentivesforimprovedinformationsystemsandforfarmerstousenewpracticesatlargescales.Policiessupportingmoreproductiveagriculturalpractices,financeoflow-emissionagri-culturaldevelopment,innovativemeansforvaluingcarbonreductions,anduseofgovernmentorsup-plychain incentivestomeetsustainabilitystandardsforreducedemissionswillall likelybeneeded(Wollenbergetal.,2016).Whilemanyofthesolutionsneedtobeadaptedtonationalandlocalcir-cumstances,internationalcooperationcanplayanimportantroleindevelopinganddiffusingavailabletechnologiesandprovidingtargetedfinanceandinvestment.

TransparencyandAccountability(includingcompliance)

Totheextentthatrulesaresetinternationally(seeabove),therewouldalsobeaneedtocreatetrans-parencyandaccountabilityforimplementationofanylabellingschemes,acarbonpriceorrestrictionsontheuse/productionoffertilizer.


Coordinatedinternationalresearchandinvestmenttowardhigh-impact,quicklyimplementabletech-nicallow-emissionoptionsareneeded,especiallyfornewbreedsandvarietiesthatcanbeeasilyac-cessedanddonotrequirecompletelynewmanagementpracticesorinputs(Wollenbergetal.,2016).Astherearealotofdifferentfarmingstyles,thereisaneedofdifferentiatedandadaptedtechnologiestoaddressGHGemissions.Moreresearchcouldhelpincreasetheaffordabilityandadoptionofmiti-gationpracticesandidentifyhowtobestexploitthepotentialforreducingtheconsumptionoflive-stockproducts(Herreroetal.,2016).Internationalstimulicanespeciallyprovideincentivesforlow-emissioninnovationforawide-rangeoffarmingcontexts.

Internationalinstitutionscanalsocontributetoawarenessraisingregardingmoreclimate-friendlydi-etsandreducingfoodwaste.

Linkages

Transport:GHGemissionsassociatedwithfoodaredominatedbytheproductionphase.Transporta-tionasawholerepresents11percentoflife-cycleGHGemissions,andfinaldeliveryfromproducertoretailcontributesfourpercent(Weber&Matthews,2008).Theagriculturesectorislinkedtotransportthroughtheproductionofbiofuelsfromcertaincrops,whichinturnenhancespressureforland-usechange.

Waste:Reducingfoodwastehasaconsiderablepotentialforreducingemissions.Furthermore,whileplasticpackaginghelpspreventfoodlosses,theproductionofsuchplasticpackagingconsumesitselfconsiderableamountsofenergyandfossilfuels(Pilz,Brandt,Fehringer,&Fehringer,2010).

Landusechange,whichcontributesabout11percenttotheglobalGHGemissions(Searchinger,2013)isprimarilydrivenbyagriculture.


Thechemical industry is linked through ‘agrichemicals’which includesabroad rangeofpesticides,herbicides,insecticidesandfungicides,aswellassyntheticfertilisers,hormonesandotherchemicalgrowthagents.

4.2 LULUCF


Landuse, land-use change and forestry(LULUCF) coversemissionsand removals ofGHGs resultingfromdirecthuman-inducedLULUCFactivities.Therateofbuild-upofCO2intheatmospherecanbereducedbytakingadvantageofthefactthatatmosphericCO2canaccumulateascarboninvegetationandsoilsinterrestrialecosystems.Anyprocess,activityormechanismwhichremovesaGHGsfromtheatmosphereisreferredtoasa"sink"(UNFCCC,2017).Landusereferstothesumtotalofactivitiesundertaken on a certain land area, including grazing and timber extraction, which release carbontrappedinterrestrialsinks,andconservationefforts,whichleadtoincreasedCO2sequestration.Clear-ingforestsforagriculturaluse,conversionofgrasslandtocroplandandabandoningcroplandorpas-turelandqualifyaslandusechangeactivities.Forestryincludesawiderangeofactivitieslikeplanting,andtendingofgrowingtrees,pestcontrol,firemanagementandwildlifeprotection(Gaan,2008).LandconvertedtocroplandisthedominantsourceofCO2,andlandconvertedtoforestlandisthedominantsink(UKDepartmentofEnergyandClimateChange,2012).

Landusechangecontributedabout11percentofglobalGHGemissionsin2010(Searchinger,2013).Forestryandlandusecontributed12percentofGHGemissionsbetween2000-2009(PSmithetal.,2014).GHGemissionsduetolandusechangeanddeforestationregisteredanearlytenpercentde-creaseoverthe2001-2010period,averagingsome3billiontonnesCO2eqperyearoverthedecade.Thiswas the resultof reduced levelsofdeforestationand increases in theamountofatmosphericcarbonbeingsequesteredinmanycountries(FAO,2014).In2014,landuseaccountedfor2.74GtCO2and3.15GtCO2eq(FAOSTAT,2014).

Figure4.1:AnnualForestAreaNetChangebyClimaticDomain,1990-2015

Source:(FAO2015).


Figure4.2:GlobalForestCover

Source:(FAO,2010).

Landusechangeisstronglydrivenbyagriculture.Subsistencefarming,commercialagriculture,loggingandfuelwoodremovalsareresponsiblefor48percent,32percent,14percent,andfivepercentofdeforestation,respectively(UNFCCC,2007).Thereareseveralcausesofcontemporarydeforestation,includingpopulationgrowth,globalization,increasedlevelsofurbanization,areadevelopment,forestburningandclimatechange(Kummer1992;Mather&Needle2000;Butler2012a;Butler2012b).

Deforestationisanimportantfactor.Thenetlossof129millionhectaressince1990–anareathesizeofSouthAfrica–hasbeenamajorsourceofCO2emissions(FAO,2016).Whileglobalforestcoverhasdecreasedfrom31.6percentin1990to30.6percentin2015,thenetannualrateofdeforestationhasdeclinedfrom0.18percentintheearly1990sto0.08percentbetween2010-2015.Asaresult,totalcarbonemissionsfromforestsdecreasedby25percentbetween2001and2015(FAO,2015).Ratesofdeforestationvaryfromregiontoregionaroundtheworld(Figures1and2).Todayabout30percentofEarth'slandsurfaceiscoveredbyforests(WWF,2017)andin2015twothirdsoftheworldforestswereinthefollowingtencountries:Russia(20percent),Brazil(12percent),Canada(ninepercent),UnitedStatesofAmerica(US)(eightpercent),China(fivepercent),Congo(fourpercent),Aus-tralia(threepercent),Indonesia(twopercent),Peru(twopercent)andIndia(twopercent)(FAO,2015).Deforestationoccursaroundtheworld,thoughtropicalrainforestsareparticularlytargeted.TheUSNationalAeronauticsandSpaceAdministration(NASA)predictsthatifcurrentdeforestationlevelsproceed,theworld'srainforestsmaybecompletelygoneinaslittleas100years.Countrieswithsignificantdeforestation includeBrazil, Indonesia, Thailand, theDemocraticRepublicofCongoandotherpartsofAfrica(Bradford,2015).AlthoughBrazilhasreduceditsdeforestationratebymorethan60percentsince1970,inabsolutenumbersitstaysnumberoneindeforestationwith8000sqkmin2016(Butler,2017).Nonetheless,theworld’splantedforestcover(whichaccountsforsevenpercentoftheworld’soverallforestarea),hasincreasedby110millionhectaressince1990(FAO,2015).


Thedegradationofforestecosystemshasbeentracedtoeconomicincentivesthatmakeforestcon-versionappearmoreprofitablethanforestconservation(Pearce,2001).Manyimportantforestfunc-tionshavenomarkets,andhence,noeconomicvaluethatisreadilyapparenttotheforests'ownersorthecommunitiesthatrelyonforestsfortheirwell-being(Pearce,2001).Fromtheperspectiveofthedevelopingworld,thebenefitsofforestsascarbonsinksorbiodiversityreservesgoprimarilytoricher


developednationsandthereis insufficientcompensationfortheseservices.Moreover,therighttodevelopment/growthparadigmisoftenputforth,i.e.thatthepoorshouldn'thavetobearthecostofpreservationwhentherichcreatedtheproblem(Bulte,Joenie,&Jansen,2000).Anotheranalysissug-gests thatdemographic shifts,economicdevelopment,and technological change in lessdevelopedcountrieswillresultincontinuedgrowthintherateofdeforestationinthemedium-term(Ehrhardt-Martinez,2003).

Thereisnoagreementonthedefinitionofaforest.Differentorganisationsusedifferentdefinitions.Definingaforestsimplyintermsoftreecover–ratherthancomplexecosystemsandthelivelihoodsofpeoplesinteractingwiththem–suchastheUNFCCCallowsto,hasbeenusedasacoverfortheexpansionofindustrial-scaleplantations.WhilethereisasafeguardagainsttheconversionofnaturalforestbytheUNFCCC,partiesarefreetoincludeplantationsofcommercialtreespecies,agriculturaltreecrops,orevennon-treespeciessuchaspalmsandbamboo(Cardona&Avendano,2010).Inordertohaveatransparentmonitoringofthesector,asingledefinitionisneeded.

SomeregionalpoliciesinplacearesimplyshiftingtheGHGemissionsacrosstheglobe.UndertheCom-monAgriculturalPolicy(CAP)oftheEU,theagriculturalproduction isdistorted infavouroftheEUeconomywhichhashadadirectimpactonabroaderscaleonLULUCFoutsideoftheEU.Intheabsenceoftariffsforanimalfeed,theEUcheaplyimportsanimalfeedfromLatinAmerica,includingsoybeansthatareamongthemaincausesofdeforestationintheAmazonandtheCerradoregion(Khatun,2012).

AnothermajorconcernisthepotentialforleakageofLULUCFprojects.LeakagereferstotheindirectimpactthataLULUCFprojectoractivityhasonthecarbonstorageorGHGemissionsinanotherareaoutside theproject. For instance, efforts to reducedeforestation inoneareamaybeoffsetby in-creaseddeforestationelsewhere.Toolstoaddressleakageincludediscounting,project-eligibilitycri-teria,andtheuseof“aggregatebaselines”.Baselines,thedevelopmentofnational,regionalorsector‘standards’havebeenoneproposedwaytoaddress leakage.Butthistool is likewisehamperedbypoorbackgroundinformationformanydevelopingcountriesaswellaspoliticalopposition(Schwarze,Niles,&Olander,2002).

OverallLULUCFgeneratesalotofuncertaintieswhicharisebothfromnaturalvariabilityinvegetationandsoilsandincompleteknowledgeabouttheextentofactivitiesandtheunderlyingprocessesaffect-ingsinksandsources.Typically,uncertaintiesintheestimatesassociatedwiththesoilcarbonpoolaremuchgreaterthanthoserelatedtoabovethegroundstandingbiomassintrees(UKDepartmentofEnergyandClimateChange,2012).Environmental riskanduncertaintyanalysismustbe integratedintothemanagementplanofeachLULUCFproject(Madlener,Robledo,Muys,&Freja,2006).

Inmanycountries,implementingpolicyinvolveshightransactioncosts,mostlybecauseofpoorcoor-dination and overlapping functions amongministries, and lack of transparent financialmonitoring(Murdivarso,Brockhaus,Sunderlin,&Verchot,2012).Thereisalsoaneedtohaveclearlandtenureandland-userightsregulationsandacertainlevelofenforcement,aswellasclarityaboutcarbonown-ershiptopreventcorruption. Implementationchallenges, including institutionalbarriersandinertiarelatedtogovernanceissues,makethecostsandnetemissionreductionpotentialofnear-termmiti-gationuncertain(IPCC,2014c).



AglobalobjectivefortheLULUCFsectorcouldprovideimportantguidancetocountriesandrelevantsectoralactors.Suchatargetcouldbetohaltandreversedeforestationand,moregenerally,toturn


theLULUCFsectorfromanetsourcetoanetsinkofGHGs,e.g.by2030.Animportantchallengecon-sistsinmakingsuchaglobalobjectiveconcreteforspecificcontextstakingintoaccountbiophysical,geographical,andsocio-economicvariabilityanddifferences.

SettingRulestoFacilitateCollectiveAction

TheprimaryneedforinternationalactionintheLULUCFsectorisaboutprovidingeconomicincentivestopreserveforests,re-andafforestation.Thiscanespeciallybeachievedbyschemesof“results-basedpayments” (paymentsper tonneofmitigationachieved),whichcanbearrangedfor internationallythroughconcreteagreementsbetweenforestcountriesasrecipientsanddonorcountriesorinterna-tionalorganisationsprovidingthenecessaryresources.Theinclusionofsocialandenvironmentalsafe-guardsisimportanttopreventandcontainsocialandenvironmentalexternalities.Thevalueofforestsgoesmuchbeyondtheirroleintheglobalcarboncycleandprioritisingclimatechangemitigationrunstheriskoflimitingthelivelihoodsespeciallyofpoorerandweakersegmentsofthepopulationrelyingonforestsandofsacrificingotherimportantenvironmentalandsustainabilityobjectives(suchasbio-logicaldiversity).Lackofaninternationalagreementthatsupportsawideimplementationofmitiga-tionmeasurescanbecomeamajorbarrierforrealisingthemitigationpotentialfromthesectorglob-ally(IPCC,2014c).

TransparencyandAccountability(includingcompliance)

Theeffectivenessoftheaforementionedresults-basedpaymentsentailsimportantrequirementsre-garding transparency and accountability. Reference levels need to be defined as baselines againstwhichthesuccessofeffortstopreserveandenhanceforestscovercanbemeasured.Also,monitoringof actual results is required in order to verify achievements, includingmonitoring beyond projectboundariestocontrolforpossibleleakage.Providersofresults-basedpaymentstypicallyseekreliableverification(UNFCCC,2007).Remotelysenseddatasupportedbygroundobservationsarekeytoef-fectivemonitoring(DeFriesetal.,2007).

Meansofimplementation

Asmentioned,financialincentivesadaptedtoregional/nationalandlocalcircumstanceswillbeneededtoachievesignificantreductionsinemissionsthroughreduceddeforestationandforestmanagement.

Giventhelackofinstitutionalcapacityamongstanumberofdevelopingcountriestoensurethesus-tainabilityofLULUCFactivities,capacitybuildingmechanismsareneeded.Theseneedtoaddressinparticularthe legal frameworksthatregulate landtenureandownershipofenvironmentalservicesthatareessentialfordesigningandimplementingLULUCFprojects,aswellastherequiredcoordina-tionbetweentheresponsibleinstitutionsatthenationalandsub-nationallevel.


ImportantknowledgegapswithrespecttotheLULUCFsectorcanbeaddressedbyinternationallyco-ordinatedefforts,includingregardingtheaccountingmethodologiesforforestsandsoils(seealsoonTransparencyandAccountabilityabove),appropriateregulatoryframeworksatnationalandsubna-tionallevels,howtoaddressandcontrolcarbonleakage,socialandenvironmentalexternalities,etc.Ageographicalinformationsystemintegratinginventory,monitoring,mapping,etc.ofallenvironmen-taldataconcerningaprojectareawouldalsobeuseful(Madleneretal.,2006).

Linkages

Agriculture,andmorespecificallythefoodindustry,causesindirectGHGemissionsbybeingthepri-marycauseofglobaldeforestation(FriendsoftheEarth,2007).


Thereisalsoalinkwiththetransportsectorthroughbioenergywhichisenergyderivedfrombiofuels.Biofuelsare fuelsproduceddirectlyor indirectly fromorganicmaterial–biomass– includingplantmaterialsandanimalwaste.Risingdemandforbiofuelsproducedfrompalmoil,soyandotherplayamajorpartinthelossofforests(TheWorldCounts,2014).

Thepowersectorisimplicatedsinceforestsareone(potentiallygrowing)sourceofbiomassforelec-tricityproduction. In the future,burningbiomass inpower stations couldbeonewayofachievingnegativeemissioniftheresultingCarboniscapturedastoredunderground(bio-energycarboncaptureandstorage–BECCS).

Boththeindustryandbuildingssectorarebigconsumersofwood.Loggingisresponsiblefor14percentoftheemissionsintheLULUCFsector(UNFCCC,2007).

4.3 Waste


Theglobalwastesector(wasteandwastewater)contributedthreepercentofglobalGHGemissionsorabout1.5GtCO2eqin2010/12(IPCC,2014d;WRI,2012).MajorGHGemissionsfromthewastesec-torareCH4fromlandfills,CH4andN2Ofromwastewater,andsmallamountsofCO2(fromtheincin-erationoffossilcarbon)(IPCC,2014d).Minorlevelsofemissionsarereleasedthroughwastetreatmentanddisposal(UNEP2010).CH4isthesecondmostabundantGHGafterCO2,accountingfor14percentofglobalemissionswithan impact25 timesgreater thanCO2whena timehorizonof100years isconsidered.GlobalanthropogenicCH4emissionsfor2010stoodat6,875millionmetrictonnesofCO2equivalentofwhichCH4emissionsfromlandfillswas11percentwhilethatfromwastewaterwasninepercent(GlobalMethaneInitiative,n.d.).

ThewastesectorisaUSD1.5trillionperannummarketandisexpectedtogrowtoUSD2trillionby2020(Stiehler,2017).AccordingtoHoornwegandBhada-Tata(2012),1.3billiontonnesofsolidwastearegeneratedeachyearbycitiesaroundtheworld,afigureexpectedtogrowto2.2billiontonnesby2025.Globally,wastevolumeshaverisenfrom0.68billiontonnesin2002(Hoornweg&Bhada-Tata,2012).Keydriversincludepopulationgrowth,industrializationandurbanizationparticularlyinemerg-ingmarkets,GrossDomesticProduct(GDP)growth,andshorterproductshelflifeofelectronicdevices.

Therearefourkeycategoriesofwaste:municipalsolidwaste(MSW)(whichincludesresidentialwaste,industrialwaste,commercialandinstitutionalwaste,constructionanddemolitionwaste,andmunici-palserviceswaste),processwaste,medicalwaste,andagriculturalwaste(WorldEnergyCouncil,2016).MSWrepresentsthelargesttypeofwasteandispredominantlyanurbanphenomenonwithwastepercapitarisingaseconomiesdevelop.Industrial,commercial,andinstitutional(ICI)wastesusuallyrep-resentmorethanhalfofMSW(Hoornweg&Bhada-Tata,2012).

Thetypeandquantityofwastediffersamongstcountries(andwithincountries)accordingtolevelsofeconomicdevelopment,degreeofindustrialization,publichabits,andlocalclimate.In2010,highin-comecountriesgeneratedhalfofglobalMSW(IPCC,2014d).However,wastegenerationratesaresettomorethandoubleoverthenexttwentyyearsinlowerincomecountries.In2004,ChinaovertooktheUSastheworld’slargestwastegenerator.Organicwastetendstobehigherinlow-incomecoun-tries’MSW,whilepaper,glass,andmetalsarehigherinhigh-incomecountries’MSW(Hoornweg&Bhada-Tata,2012).

Solidwastemanagement(SWM)isanessentialutilityservice.Thewastemanagementsectorhasfol-lowedahierarchyof“reduce,reuse,recycle,andrecovery”whichcanbeadaptedtofinancial,envi-


ronmental,socialandmanagementconsiderationswhilealsoencouragingminimizationofGHGemis-sions(Hoornweg&Bhada-Tata,2012).However,muchofglobalefforthasfocusedonrecoveryinsteadofthefirstthree.

TheIPCC(IPCC,2007)advisesthatGHGemissionsfromwastecanbemitigatedbyeffectivelyaddress-ingintegratedwastemanagementgiventhatmosttechnologiesforwastemanagementarematureandhavebeensuccessfullyimplementedfordecadesinmanycountries.Thereareeightmainkindsofwastedisposalmethods/technologicaloptions:landfills,incineration/combustion,recoveryandrecy-cling,plasmagasification4,composting,WastetoEnergy(WtE)5,andwasteminimisation6(ConserveEnergyFuture,n.d.).Othermethodsincludeanaerobicdigestion7andpyrolysis8.Onthehighendofthespectrumaretechnologieslikepyrolysisandgasification,whicharealreadyappliedinanumberofOECDcountries,especiallyintheEU(IPCC,2007).

Smallwastewatertreatmentsystemsincludepitlatrines,compostingtoiletsandseptictanks(inexpen-siveandmostwidelyusedaroundtheworld).Activatedsludgetreatment isthemostconventionalmethodforlarge-scaletreatmentofsewage.(IPCC,2007).

However,wastetolandfillscontinuestobethemostcommonmethodofMSWmanagementindevel-opedcountrieswhileindevelopingcountriesMSWisgenerallydisposedoffinopendumps.IntheUS,52.9percentofMSWgeneratedisdisposedoffin1,908landfills(EPA2015)whichannuallyemitover426millionmetrictonnesofCO2equivalenttotheGHGemissionsfrom124coal-firedpowerplantsovera20-yearimpact(Bailey,2017).Nonethelesstherehasalsobeenprogress.IntheEU,thelandfilldirective(CouncilDirective1999/31/EC),strictlyenforcedbymemberstateshashelpedreducewastetolandfillsfrom220kg/capitain2006to122kg/capitain2015(Eurostat,2016).Landfillsarealsoprev-alentincertaindevelopingcountries.In2013,almost70percentofChina’shouseholdMSWwasstillendingupinlandfills(Zhang,Huang,Xu,&Gong,2015).Intheruralareasoflow-incomecountries,itis commontohavenocontrolleddisposal.However,wastecollection isachallengeand fluctuatesfrom98percentinOECDcountries,toaslowas20percentinlowincomecountries(Hoornweg&Bhada-Tata,2012).Itiscloselylinkedtoincomelevels.Inlowincomecountries,wastecollectionser-vicescantakeupalmost80-90percentofamunicipality’sSWMbudgetwhilethesamecouldrepre-sentaroundtenpercentofamunicipality’sbudgetinahigh-incomecountrywherecollectionismoremechanized,efficient,andfrequent(Hoornweg&Bhada-Tata,2012).

OnepartofthesolutioncanbeWtE(Florin&Madden,2017).WtEtechnologiesareaviableoptionfordisposalofMSWandenergygenerationwiththepossibilityforeveryregiontoadequatelyassessitsspecificcontexttoimplementthemostreasonablesolution(IPCC,2007).TheglobalWtEmarketisfastgrowing.EuropeisthelargestandmostsophisticatedWtEtechnologiesmarket(47.6percentoftotalmarketrevenuein2013)butChinaisfastcatchingup(WorldEnergyCouncil,2016).ItisestimatedthatforeverytonofwastethatgoesthroughaWtEfacility,atonofGHGemissionsisavoided.PaulHawken

4 Useofplasmatorchesoperatingat+10,000°Ftocreateagasificationzoneof3,000°Ftoconvertsolid

orliquidwastesintoasyngas,typicallyusedforhazardousmaterialsandgeneratesrenewableenergy.5 Conversionofnon-recyclablewaste items intouseableheat,electricity,or fuel throughvariouspro-

cesses,whichcanhelpcarbonoffsettingbyreducingtheneedforfossilfuels.6 Reducingthecreationofwastematerials7 Usedformainlyorganicmaterial likeindustrialeffluent,wastewaterandsewagesludgetreatmentto

reduceorganicmatterintheabsenceofoxygen8 Thermochemicaldecompositionoforganicmaterialathightemperaturesintheabsenceofoxygenor

anyhalogen,usedmainlybythechemical industrytofor instanceturnplasticwastetoliquidfuelorrecoverfuelfromtires


(2017) estimates that if 62.6 gigawatts of WtE plants are installed globally between 2020-2050,avoidedemissionswouldequal1.1GtCO2e.


Wastemanagement systems in lowandmiddle-incomecountrieswhere themajorityof thewastegrowthisexpectedtocomefromby2030,continuetobeunder-developedandlargelyinefficient.

• Wasteiseithertransferredtolandfillsor,asmentionedabove,disposedoffinopendumps.Chinaisfacinga“wastesiege”withtwo-thirdsofChina’s668citiessurroundedbygarbage(Zhangetal.,2015).

• SWMcostsremainhigh,especiallyinmostlow-incomecountries(Hoornweg&Bhada-Tata,2012)whileSWMservicesservelessthanhalfofthepopulationandcoveronlybetween40–70percentofallurbansolidwastes(Scarlat,Motola,Dallemand,Monforti-Ferrario,&Mofor,2015).Problemsalsotypicallystartatthegrassrootslevelwithastartabsenceofdustbinsandcommunitygarbagecanseveninmajorcitiesinthedevelopingworld.

• Costsarelikelytoincrease.Globally,SWMcostswillrisetoaboutUSD375.5billionin2025fromannualUSD205.4billioncurrentlyandwillbe5timesmoresevereinlowincomecoun-triesand4timesmoresevere in lower-middle incomecountries (Hoornweg&Bhada-Tata,2012).

• Wastecollectionandrecyclingindevelopingcountriesremainslargelyunorganisedandofteninvolvesalargenumberofinformalsectorwastepickers–uptoonepercentofurbanpopu-lationor at least 15millionpeople (WIEGO, 2013). Inmany cities in developing countries,wastepickersattimesperformbetween20-100percentofallwastecollection(UNEP,2010).

Inmostdevelopingcountries,regulationsmaynotbestringentandinthecasetheyare,implementa-tionmayremainpoor.ThelackofeffectivelegislationforSWMpartiallyresultsinunclearroles/func-tionsofrelevantnationalagenciesandlackofcoordinationamongthem(Ogawa,2010).Moreover,SWM legislation in developing countries is usually fragmented, and is spread across clauses onrules/regulationsinseverallaws(e.g.,PublicHealthAct,LocalGovernmentAct,EnvironmentalProtec-tionAct,etc.).Enforcementalsoensuesviadifferentagencieswhichoftenresults induplicationofresponsibilitiesandgaps/missingelementsineffectiveSWMsystems(Ogawa,2010).

Thereisalsoacriticallackofexpertiseamongstthehumanresourcesdealingwithwastemanagementplanningandoperationindevelopingcountries.ManySWMpersonnel,particularlyatthelocallevel,havelittletechnicalbackgroundortraininginengineeringormanagement(Ogawa,2010).

Awarenessremainslowindevelopingcountries(Ferronatoetal.,2017).Behaviouralchangethroughawarenesscampaignsisoneofthreemeasuresthatcanencouragecommunityinvolvementinclean-linessandwastemanagementalongwithinformationdiffusionandtaxincentives.Incivicspacesinsomecountries, touchingwastemayproduceasocial stigmaor reflectuponone’ssocialnormsoridentities(Najib,2007).Anumberofdevelopingcountrygovernmentshaveindeedinitiatedcleanli-nessandawarenesscampaigns.Indiaforinstancehasinitiatedoneoftheworld’sbiggestcleanlinessawarenesscampaigncalledSwachhBharat(CleanIndia).

Oneofthebiggestbarrierstoeffectivewastemanagementisthecostofhightechnologyincompari-sonwithlandfilling(WorldEnergyCouncil,2016)(whichremainsthemostfinancially-effectivewayofwastedisposal).WhileWtEmaybeaneffectivesolutiontobothreducingGHGemissionsfromlandfillsand in carbonoffsetting,qualityhigh-performanceWtE remains costly formuchof thedevelopingworld.IncinerationisthemostprominentWtEtechnologyinpractisegloballyandislikelytocontinue(WorldEnergyCouncil,2016).SophisticatedWtEcaninvolvealargecapitalinvestmentandincurshigh


operatingcosts(Zhengetal.,2014).Importedincinerationequipmentisveryexpensive.Forinstance,thetotalcostoftheShanghaiPudongWasteIncinerationPowerPlantbasedonAlstomequipmentandtechnologycostnearlyUSD110million,andtheShanghaiJiangqiaoWasteIncinerationPowerPlantbasedonSeegerequipmentcostUSD144million.Moreover,WtEcanalsounderminerecyclingandcanresultinGHGemissionsandthereleaseoftoxicgases(Florin&Madden,2017).

Quantifyingmitigationcostsandpotentialsforthewastesectorremainsachallengeduetonationalandregionaldatauncertaintiesaswellasthevarietyofmaturetechnologieswhosediffusionislimitedbylocalcosts,policies,regulations,availablelandarea,publicperceptionsandothersocialdevelop-mentfactors(IPCC,2007).



Avisionforfulldecarbonisationofthewastesectorandgoalstoendkeyemission-causingactivitiesinthesector(uncontrolleddumpingandburning,andlandfills)(e.g.bythesecondhalfofthecentury)couldprovideimportantoverallguidancetonationalgovernmentsresponsiblefordesigningrelevantpoliciesandotheractors(UNEP,2015).Thiscouldbeaccompaniedbytargetsdifferentiatedbyregion.Aglobalpledgetophaseoutwaste-to-landfillswouldmakethemostdramaticimpactgiventhatCH4fromlandfillsisthemainsourceofemissionsinthesector.


Internationalrulesholdaratherlimitedpotential.Whileimplementingappropriatewastepolicieshassignificantcosts,thelocalbenefitsthataccruearealsosignificant.Properwastemanagementsystemshencecreateratherlimitedcompetitivenessconcerns.Havingsaidthat,internationalregulationcould–incombinationwithprovidingappropriatemeansofimplementation–inprinciplehelpaligngov-ernmentstowardthedevelopmentofefficientnationallevelframeworksforSWM,especiallyinlessdevelopedregions.


Appropriateprovisionswouldberequiredtomonitorandverifytheimplementationofanyinterna-tionalregulation.Inaddition,regularmonitoringofpoliciesandemissionswouldallowtotakestockofprogress.


Theprovisionofmeansofimplementation(incombinationwithorindependentlyofinternationalreg-ulation)couldhelpaddresssomeofthekeybarrierstodecarbonisationofthewastesector.Capacitybuildingprogrammescouldprovidetechnicalexpertise, skillsbuilding,bettermanagementabilitiesthatremainpooracrossanumberofcountries/regions,inparticularmid-to-lowincomecountries,andraiseawareness.Oneparticularaspectconcernstheintegrationoftheinformalsectorwastepickers–approximately15millionpeople–intowastecollectionandrecyclingservices.Mobilisinginternationalfinanceandinvestmenttowardseffectivewastemanagementandrecyclingacrosstheentirelifecycleofwastewillalsobenecessarytomitigatecoststhatlow-midincomecountriesface.Accordingly,theUnitedNationsEnvironmentProgramme(UNEP)andtheInternationalSolidWasteAssociation(ISWA)advocateincreasing“theleveloffundingonwastemanagementbyafactorof10,fromthe0.3percentachievedsince2000toanaverageofthreepercentoftotalinternationalaidfundingintheperiodfrom2015to2030”(UNEP,2015).Internationalcooperationcanalsoplayanimportantroleindevel-opinganddiffusingavailablewastemanagementtechnologies,includingaffordableWtEtechnologies.



Policy and technical knowledge platforms can also help promote awareness, education, andknowledgeofavailablemeansandpromisingpoliciesforbetterwastemanagement.Aninternationaldatabaseofnationalandregionaldata,aprogressmeasurementsystem,existingfinancialopportuni-ties,relevanttechnologiesandinnovations,efficienttreatmentmethodscanalsobeusefulinparticu-larforlow-midincomecountries.InternationalResearchandDevelopment(R&D)fundingmayhelpfurtherdevelopadaptedWtEtechnologies.

Linkages

Power:Greater,morewidespreaduseofWtEwouldhelpfurtherdecarbonisethepowersectorgiventheconversionofnon-recyclablewasteitemsintouseableheat,electricity,orfuel,whichhelpcarbonoffsettingbyreducingtheneedforfossilfuels.ConcertedeffortsataglobalscaletoencouragebetterSWMcoupledwithWtEcouldbecomeadriverforrenewableenergyinthepowersector.

IndustryandAppliances:More“reduce,reuse,recycle,andrecovery”ofwasteataglobalscalewouldalsopositivelyimpactdecarbonisationinthe(energyintensiveandmanufacturing)industryandappli-ancessectors.Greateruseoforganicwasteintheagriculturesectorwouldalsoreducethedemandforchemicals-basedfertilisers.

Agriculture:Lessfoodwastethroughbettermanagementandawarenesswouldhelpreducethepro-ductionpressureintheagriculturesector(alsoasregardsfirstgenerationbiofuels),therebyreducingemissions.

CircularEconomy:Ashifttoacirculareconomywhichunderscoresrecycling,reuse,lessdemandforandefficientuseofprimaryresources,includingthroughtheuseofhigherqualitymaterials,products,systems,wouldreduceemissionsinthewastesector.

4.4 CircularEconomy


Theconceptofacircularorclosedloopseconomyadvocatesatransitionfromthecurrent“take,make,dispose linear economic model” to one which is restorative and regenerative in design (EllenMacArthurFoundation,2015).It“preservesandenhancesnaturalcapital,optimisesresourceyields,andminimisessystemrisksbymanagingfinitestocksandrenewableflows,workingeffectivelyateveryscale”(EllenMacArthurFoundation,2015).Theeconomicbenefitsoftransitiontothecircularecon-omycouldamounttoUSDonetrillioninmaterialsavings(EllenMacArthurFoundation,2014).EcofysandCircleEconomyestimatethatcirculareconomystrategiescanhelpmitigatearound11-13billiontonnes of CO2e by 2030, given that production of basicmaterials generatemore than half of theworld’sGHGemissionsandonlysevenpercentofthematerialsusedbytheglobaleconomyarecur-rentlyreused(Ecofys&CircleEconomy,2016).

Whiletheconceptisthusbroad,weherefocusonrecycling,reuse,lessdemandforandefficientuseofprimary resources, including through theuseofhigherqualitymaterials, products, systemsandbusinessmodelsascoreelementsofthecirculareconomy(EllenMacArthurFoundation,2013).

Thecirculareconomymodelunderpinstheshifttobusinessmodelsthatcombinecompetitiveness,environmentalbenefitsandproduct-servicesystems;andseekstorebuildcapitaltherebyenhancingtheflowofgoodsandservices.Itmakesanexcellentbusinesscasebyfosteringinnovation,competi-tiveness,economicgains,energysavings,environmentalbenefits,enhancedsecurityofrawmaterials


supply,socialintegration,jobs,investment,andmore.Italsostrengthenseffortstowardsreduceden-ergyconsumptionanddecarbonisationbyadvocatingrecycle,reuse,sharingandeliminationofwaste(EuropeanCommission,2017b).

Keydriversoftheshifttowardscircularitywillbeurbanisationandpopulationgrowth,thefinitenatureofresources,risingproductioncosts,climatechangeandfavourablealignmentofenablers(likecon-sumerpreferenceshifttosharingandtechnologicaladvances)(EllenMacArthurFoundation,2014).

Circulareconomystrategies (recycle, reuse, lessdemand forprimary resources,efficientuseof re-sources,eliminationofwaste,newbusinessmodels)canhelpmitigateemissions.Eachyear,60billiontonnesofrawmaterialsareextracted(W.Haas,Krausmann,Wiedenhofer,&Heinz,2015).About30billion tonnes represent fossil fuels or food.Constructionmaterials account for the second largestshareoftheextractedrawmaterialswherein ‘virgin’materialsareexclusivelyprioritisedandreuseoptionsarelimited(Ecofys&CircleEconomy,2016).Thelastgrouprepresentsmostoftheotheritemsofdailyuse(automobiles,appliances,chemicals,andsoon).Alargeproportionoftheseproductshaveahighpotentialforrecovery,reuseandrecycle,lifetimeextensionandsharing.Thebiggestimpactofcircular economy thus can be felt in the energy intensive industrial sector, agriculture, buildings,transport,powerandwaste.

Intheenergyintensiveindustrialsector,recyclingcanbeaparticularlypotentstrategy.Bothsteelandaluminiumare100percentrecyclablewithoutlossofqualityandwithapotentiallyendlesslifecycle.RecyclingaluminiumandsteelrequiresaroundfivepercentandathirdoftheenergyusedandemitfivepercentandaquarteroftheGHGemissionswhencomparedtoprimaryproduction(Cullen,2010;Kechichian,Pantelias,Reeves,Henley,& Liu, 2016). Similarly, currently, only14per centofplasticpackaging is recycledgloballyalthough it ispossible to recycleup to70per cent (EllenMacArthurFoundation,2016).

Inthewastesector,e-waste isoneof thefastest-growingtypegloballyat41.8milliontonnes (Mt)worldwidein2014,a25percentjumpfrom2010figures.Movingfromalineartoacirculareconomyhelpsmanagee-wastewhich in2014representedaroundUSD52billionofpotentiallyreusablere-sourcesofwhichlittlewascollectedforrecovery,ordisposedofinaneco-friendlymanner(seealsosection4.3).

Intheagriculturesector,circularstrategieslikemoreefficientuseofresourcesandrecyclingcanhelpreduceemissions,decreasethepressureonproduction,freeupland,waterandresources,andfosterbiodiversity(Ecofys2016;seealsosection4.1).Inthetransportsector,enhanceduseofelectricvehi-clesandsharingservicescandramatically loweremissionsandhelpgreenthesystem.Automobileswhichdominatethetransportationandmobilityindustry(thereare1.2billionmotorvehiclesontheroad)normallyremainidlefornearly95percentoftheirlifetime(Ecofys2016;seealsosection4.8).Circularstrategiescandrasticallyhelpreduceemissionsinthebuildings,wasteandpowersectortoo(seerespectivesections).


Someofthekeycriticismsofthecirculareconomicmodelrelatetothefactthattheconceptistoobroad, it isdifficult toassess impact, the shift tonewbusinessmodels isa largelyunderestimatedchallenge,theemphasislaidonsocialaspectsisinadequate,andthattheenvironmentalimpactmaybeoverestimated(inparticularlongershelflifeofproductsmayrequirelongerenergytocreate,solarpanelsandwindfarmsaredifficulttorecycle,andthatrecyclingalsohasanend)(Behrens,Rizos,&Tuokko,2017).

Thetimeframetoshifttoacirculareconomyataglobalscaleremainsunquantifiedandassumedlylarge.Mainstreamingtheconceptof"circulareconomy"alsopresentsnumerouschallengesincluding


financing,keyeconomicenablers(likepricingsystemsthatsupportefficientresourcereuse,incentivesforproducersandrecyclerstocooperateacrossspecificvaluechains;andmarketsforsecondaryrawmaterials) (Bourguignon, 2016), skills, remoulding consumer behaviour and business models, andmulti-levelgovernance.Transformingthelineareconomy,intoacircularonewillentailaradicaltrans-formationofentireexistingproductionandconsumptionpatterns(Behrensetal.,2017).

Politicalbarriersexist. Intoday’sglobalisedworld, it isquitecommontohavepartsofoneproductmadeindiversegeographiclocationsincludingdifferentcountries.Closingthelooponproductsandvaluechainscharacterisedbygeographicdispersion is challenging.Moreover,moving tocircularitywouldimpactexportingcountriesthatengageinprimarymanufacturing,likeChina,whichmayturnintoapoliticalandcompetitivenessbarrier(EllenMacArthurFoundation,2014).

Technicalbarriersincludematerialcomplexity(transformationofmaterialsalongthevaluechainren-deringitmoredifficult“toidentifyandseparatematerials,maintainqualityandensurepurity”),mis-alignedincentives,sub-scalemarkets,limitedreversecapabilitiesandinfrastructureandlackofena-blers(EllenMacArthurFoundation,2014).Customersdonotalwayshavetherightincentivestoadoptalternativesmodelswhichmaybelonger-lastingatlowerusagecoststherebymoreeconomical.

Economicbarriersareequallychallenging.Establishingmorecircularbusinessmodelsareinhibitedbyfactorssuchascompetitiveness,higherinvestmentsrequiredtochangeaproductdesignandmovefromasales-basedtoausage-basedmodelwithouttransferofownership,theneedtocreateaninte-gratedreversesupplychain,andachievingscale(EllenMacArthurFoundation,2014).Reversecyclesorsupplychainsarethelinkbetweenpointsofrecycle,(re-manufacturing)andusageandaredifficulttoconquer.Theabsenceofmarketsofscaleinreversecycles,makesitchallengingorevenimpossibleforcompaniestosecurequality-controlledandreliablesecondarymaterialsandcomponentstocom-plementor replaceprimarystock (EllenMacArthurFoundation,2014).Reversecycle infrastructureandlogisticscapabilitiesremainpoor.Moreoverwastemanagementmechanisms(landfillsandincin-erators)remainlocalised,sortingandefficientlyhandlingdifferenttypesofmaterialsremainspoor,limitingopportunitiesfurther(EllenMacArthurFoundation,2014).RegulatorymeasureslikeExtendedProducerResponsibility(wheretheproducershavetheresponsibilityofmanagingequipmentafteritsendof life),certificationprogrammes, labelsandproductpassportscanbeausefultoolbutdonotexistacrosstheboard.Moreover,transitionwillbeacostlyaffairespeciallyforpooranddevelopingcountries.MoreR&Dwillalsobenecessarytoinformthetransitionanditsrequisites.



Foraglobalcirculareconomy,goalsrelatedtorecycling,reuse,lessdemandforandefficientuseofprimaryresourcesincoreemission-causingsectorscanhelpachieveprogresstowardsthecirculareco-nomicmodelandharnesspotentialbenefitsgivendeepinterdependencegeneratedbyglobalisationandthegeographicandsectoraldispersionofvaluechains.Aroadmapunderscoringdifferentcirculareconomystrategies (acrossvaluechains)ataglobal levelwillberequiredtosupport theshift toacirculareconomy(Bourguignon,2016)andcanclearsomeofthevaguenessoftheconceptandthetimeframerequiredtoshifttoacirculareconomy.Inessence,hence,circulareconomythinkingshouldbeintegratedinsectoralstrategiesandvisions(ratherthanaseparatecirculareconomyobjective).


RegulatorymeasureslikeEPR,passports(withinformationregardingthecomponentsandmaterialsaproductincludingdisassemblyorrecyclingattheendoftheproduct’slife),labellingandclearmaterialspricing(todisplaytherealcostsofmaterialsincludingexternalitiesinordertodriveefficientuseof


resources)(WEF,2016)canbedevelopedattheinternational levelgiventheglobalisednatureofanumberofvaluechainswhichcanhelpinformconsumersaboutthesustainabilityofproductswhilehelpingencourageinnovativeformsofconsumption(e.g.sharingorconsumingservices)andpromot-ing'green'publicprocurement(Bourguignon,2016).Certificationprogrammescanhelpconfirmthe“viabilityorsafetyofcircularproducts;optimizeandcontroltheuseofincineratorstoavoidnegativeeffectonmaterialsrecycling;andrevisitcurrenttradebarriersandregulatorygreyzonestofacilitatetransboundarymaterialsflows”(WEF,2016).Initiativeswouldmostlikelyhavetoproceedsectorbysectorand/orvaluechainbyvaluechain.


Relatedtransparencyandaccountabilitymeasureswouldbeneededforimplementationofanyregu-latorymechanismsagreedat the international level,andcould includereporting toolswhichallowstocktaking,confidencebuildingandmutualencouragement.


Giventhescaleofchangeinvolvedinthetransitiontoaglobalcirculareconomy,significantinterna-tionalcooperationwillberequiredtodeveloptechnicalskillswhichremaincurrentlyabsentamongtheworkforceat large (Bergema,de Jong,Kraak,Usanov,&vanderGaast,2016).Quantifying theeconomicimpactandbenefitswillalsobeessential.

Theshiftwillrequiresignificantinternationalfinancingoptionsforconcreteprojects,R&D,assetin-vestments,subsidypaymentstopromotenewbusinessmodels,andpublicinvestmentininfrastruc-ture,inparticularindevelopingcountries(Bourguignon,2016)whichcanalsoalleviatecompetitive-nessconcerns.Bergemaetal.(Bergemaetal.,2016)estimatethatcountrieswiththehighestresourcerentsandfewothersectorstofallbackon(likemanyoftheAfricanrawmaterialexporters)willbemostexposedtoashifttothecirculareconomyindevelopedregions.Theywillrequireassistance.


Given that the transition to a circular economy involves tremendous transformation across valuechainsandindustriesinascoreofareas, itwillbeessentialtoinitiatepolicyandtechnicaldialogueplatforms bringing together various stakeholders, in particular government and business leaders,acrosstheglobe.Involvementofbusinessleaderswillbeessentialinordertospecifyprecisecriteriaforconnectingdifferentsectors.Supportingcross-industrycollaborationwillbecritical(WEF,2016).Sharingofknowledge,bestpractises,knowhowandexpertisewith lessdevelopedcountries isalsoessentialinparticularwithmostoftherawmaterialexportingdevelopingcountriesgiventhatcircu-larityinoneregion,sayEurope,willhaveasignificantimpactondevelopingcountries(Bergemaetal.,2016).

4.5 Power


TheCO2emissionsfromtheenergysectorcontributesome61percentofglobalGHGemissions.Withinthatsector,electricitygenerationisthesinglelargestsubsectoraccountingforsome38.2percentofCO2emissionsfromfuelcombustion(IEA,2016a).9Withrespecttotheglobaltransformationchallenge,

9 DifferentiatingCO2emissionsfromheatandelectricitygenerationischallenging,sincedataisnotre-

portedseparatelyintheIEA’sCO2emissionsfromfuelcombustiondataset.WehavecalculatedCO2


globalpowersupplyisakeysectorfortworeasons:(1)withmaturingrenewableenergytechnologies,solutionsforzero-carbonelectricityarealreadytechnicallyavailableand(2)formanyothersectorselectrification of processes is the most promising mitigation strategy. This holds for example fortransportandemissionintensivebasicmaterialssuchassteelandcement(Ahman,Lechtenbohmer,Nilsson,&Schneider,2016).

Despite theavailabilityof low-carbonalternatives,globalCO2emissions fromelectricitygenerationhavebeenrisingatanaveragerateofaroundthreepercentannuallybetween2000and2014.Onlyafter2011hasthistrendstartedtoleveloffsomewhat.Whilegrowthinelectricitydemand(andhenceelectric output) remained largely stable, the emission intensity of global electricity has started toslightlydecreaseafter2011(IEA,2016a).Sincethelatestdataisavailableonlyfor2014,itisatthispointdifficulttoassesswhetherthistrendisrobust,althoughrecentdevelopmentswithrespecttocoalconsumptioninChinaandIndia(seemorebelow)indicatethatinfactitmayberobust.

Historically,electricityhasbeensuppliedbyfiveenergysources:coal(hardcoalandlignite),naturalgas,oil,(large)hydropower,andnuclearpower.Onlyrecentlyhaveotherrenewableenergysources(wind,solar,geothermal,tidal,andbioenergy)startedtoassumeamoresignificantshareoftheglobalpowermix.Whilethestockglobalpowergenerationcapacityisstillheavilydominatedbyfossilfuel,nuclearandlargehydropowerplants,thelion’sshareofinvestmentshasshiftedtowardsrenewableenergies in recent years, both in terms of dollars spent as well as in terms of capacities added(Frankfurt School/UNEP/Bloomberg, 2016). The followingparagraphs synthesise keydevelopmentswithrespecttoalloftheabove-mentionedtechnologies.

Coalusedtobethebackboneofthemajorityoftheworld’spowersystems.Andcoalstillisbothabun-dantaswellasrelativelycheap.Formanydevelopingcountriestherefore,investingincoalcapacitieswasconsideredaviablewayof fuellingtheirrapideconomicgrowth.Consequently,coalcapacitieswereexpandeddramatically.Ifexistingcapacitiesandonlyafractionofgenerationcapacitiescurrentlyin theplanningareutilizedto their full technical life-time, theremainingglobalcarbonbudgetwillalreadybeconsumedentirely(OttmarEdenhofer,2015).However,therearesomesignsthatthecoalboommaycometoanend. In theUS,coalconsumptionandproductionhasplummeted in recentyears,partlyduetoregulationundertheObamaadministrationandpartlybystiffcompetitionfromshalegasand renewableenergies (seebelow). In thewakeof thisdownturn,PeabodyEnergy, thelargestprivatecoalminingenterprisehadtofilebankruptcyinitsdomesticUSmarket(Reuters,2016).ThemostdramaticturnawayfromcoalwaswitnessedintheUnitedKingdom(UK).On21April2017theUKsawthefirstworkingdaywithoutcoalpowersincetheonsetoftheindustrialrevolution(Brown,2017).AlsoChinaandIndiadrasticallycuttheirrespectivecoalprojectpipelinesandChinaevenhaltedongoingconstructionsonnewcoalpowerplants(Shearer,Ghio,Myllyvirta,Yu,&Nace,2017).

EversincetheIPCC’sSpecialReportonCCSin2005,therehasbeenprofoundhopethatCCSwouldmakeasubstantialcontributiontoreducingCO2emissionsfromthepowersector(IPCC,2005).TherewasparticularhopethatCCSwouldhelptobringabout“cleancoal”.10CCSisacombinationofmostly

emissionsofelectricitygenerationbymultiplyingthereportedCO2emissionfactorsperelectricityout-put[tonnesCO2/kWhelectricitygenerated]withreportedglobalelectricityoutput[TWh].For2014thiscalculationyieldsatotalof12360MtCO2,i.e.some9.3percentlessthanthe13,625Mtreportedjointlyforelectricityandheat.

10 TheissueofCCSisnotrestrictedtoemissionsfromfuelcombustionbutmayalsocoverindustrialemis-sions(seesection4.6).Furthermore,manyscenariomodellingexercisescometotheconclusionthatnegativeemissionswillbenecessarytoattainthewellbelow2/1.5°Ctarget.Thesenegativeemissionscouldbeachievedbycombiningthecombustionofbio-energywithCCS(BECCS).However,wedonotconsiderBECCSasanintegralpartofthepowersector’stransformationchallengeandthereforedonotcoverthisimportantissuehere.


proventechnologies.However, todatetherearenocommercialscaleprojects inthepowersectorthatproofthattheconceptisworkingnotonlytechnicaltheorybutalsoinsocio-economicreality.Tochangethis, the IEAhassetagoaltoestablish100CCSdemonstrationprojectsacrosstheglobe in2009.However, in2013the IEAhadtochangethisgoaltoonly30projects in2020.AndgiventhecurrentpipelineofCCSprojects itmaybeevendifficulttomeetthismuchhumblertarget.Overall,thereareonlythreedemonstrationprojectsoperationalinthepowersectorandonlyoneofthemhascomeonlineafter2010(Gaede&Meadowcroft,2016).

Amongfossilfuels,naturalgashasthelowestspecificemissionfactoratcombustion.However,gasextractionandinparticularhydraulicfracturing(fracking)canleadtoinadvertentdiffuseCH4emissionsthatnecessitateasignificantincreaseoftheemissionfactor.Therecentboominnaturalgasproduc-tionwasdrivenprimarilybythistechnology.Annualproductionrosefrom21.23millionterajoules(TJ)in2010to29.43millionTJin2015intheUSalone(IEA,2016d).CheapnaturalgaswasoneofthemainreasonsforthedeclineofcoalconsumptioninsomeregionssuchastheUS.Withrespecttoglobaltradeofnaturalgas,anothertrendwasobservedintherecentdecade:increasinginvestmentsinliq-uefiednaturalgas(LNG)technologyandinfrastructure.LNGterminalsandsupertankersunshacklednaturalgasfrompipelineinfrastructureandmadenaturalgasaglobalizedcommodity(IEA,2016e).

Theglobalshareofnuclearpowerhasbeenindeclineoverthelastdecade(EIA,2017).While60reac-torsarecurrentlybeingbuilt,mostlyindevelopingcountriesandemergingeconomies,numerousre-actorsarerapidlyapproachingtheendoftheirtechnological lifetime(IAEA,2017).Whatismore,anumberofcountrieshavereversedtheirnuclearenergypolicyaftertheFukushimacatastropheandcommittedtophaseout(e.g.Germany)orreducetherelianceon(e.g.France)nuclearenergy.Acom-monthreadamongallnuclearreactorscurrentlyunderconstruction,atleastinindustrializedcountries,isheavycostoverruns.ThisholdsforexampleforconstructionsinFinland,theUS,andFrance(Gilbert,Sovacool,Johnstone,&Stirling,2017).IntheUK,theplannednuclearstationinBritain,HinckleyPointC,couldonlyattractinvestorsafterthegovernmenthadguaranteedaheftyfeed-intariff.Therateisalreadynowmuchhigherthanwhatisusuallypaidforwindpowerandwillnotdecreaseovertimebutautomaticallyincreasewithinflation(UKDepartmentofEnergyandClimateChange,2013).Allthingsconsidered,the“nuclearrenaissance”thatwasproclaimedrepeatedlyinthepastisfarfrommaterial-izing.

Renewableenergyrepresentsthemostdynamicpartoftheglobalpowersector.Technologycostsforsolarandwindpowerhavebeenfallingsharply.Forexample,globalaverageutility-scalelevelisedcostofelectricityofsolarphotovoltaics(PV)fellbyaround58percentbetween2010and2015andthecostareprojectedtocontinuetofall(IRENA,2016).Whenlevelisedcostsofelectricityareconsidered,renewableenergiesarealreadycompetitiveinmanymarkets.Inparticularlywell-suitedlocations,re-newableenergiesareprovidingsomeofthecheapestelectricityeverproduced.ExamplesincludesolarPVinUnitedArabEmiratesthatwasrecentlycontractedat2.4ct/kWh(USD)andwindpowerinMo-roccoat~3ct/kWh(USD)(Dipaola,2016;Parkinson,2016).Inthewakeofthisdevelopment,therehasbeenastronguptakeininvestmentsinrenewableenergy,particularlyinemergingeconomies.IndiaandChinaarenotonlyamongtheleadingmarkets,buthaveconsideredtherenewableenergyindustryapriorityforindustrialpolicyandhencehavebecomeleadingsuppliersforrenewableenergytechnol-ogies(REN21,2016).

Cleaninguppowersupplyis,however,onlyonestrategy.Cleanrenewableenergysupplysimplycannotoratleastnoteconomicallyrampedupfastenoughtomaintaincurrentconsumptionlevels.Thisisparticularlytrueifitisassumedthatdevelopingcountrieswillcatchuptolevelscomparabletocurrentconsumption in industrialized countries. 2°C-compatible IPCC scenario therefore generally projectsteepincreasesinenergyefficiencyontheconsumptionside(IPCC,2014a).Whileenergyefficiencyimprovementsareanessentialelementofthetransformationoftheglobalpowersector,theyhave


toberealizedintheconsumingsectors.Forthesakeofclarity,energyefficiencymeasuresarethere-forediscussedinvariousothersectors.

Beyondthesetechnicalchallenges,thereareanumberofotherdevelopmentswithrelevancetothepowersectorthatareworthmentioninghere.Oneissueisthecentralrolethatelectricpowerplaysinhumandevelopment.Basicaccesstoelectricitycanbeconsideredanecessaryconditionfortheerad-icationofpoverty(IPCC,2012).Stillmorethan1.2billionpeople,predominantlyinruralareasinAfricaandAsiastilldonothaveaccesstoelectricalenergy(IEA,2015b).ProvidingelectricitytothesepeopleisthereforeconsideredapriorityandwasthereforeincludedasaseparateSustainableDevelopmentGoalandisreflectedinthemajorityofNDCssubmittedundertheParisAgreement.

Anotherissueofimportancetothepowersectoristheglobalfossilfueldivestmentcampaignthathasbeenrelativelysuccessful inconvincing(institutional) investorstoremovesharesincompaniesthatgeneratealargepartoftheirrevenueinthefossilenergyindustryfromtheir investmentportfolios(seesection4.13foramoredetailedtreatmentofthedivestmentcampaign)Additionaltothesegen-eraltrends,thesectoraltransformationchallengesareverydiverseindifferentcountries.Keycharac-teristicsthatdeterminethesedifferencesarethefollowing:

• renewableenergypotentials;

• existenceofdomesticfossilfuelreserves;

• structureandownershipofthepowermarket;

• stateofthepowersystem(gridinfrastructure,currentpowermix).


Thephysicalpre-conditionsforrenewableenergydeploymentdiffergreatlyacrosscountries.Corre-spondingly,differ the transformationchallengesandbarriers.Countrieswithahighshareofhydropowerforexamplehavetheadvantageinthathydropowercantypicallydispatchedflexiblytoaccom-modatevariablepowersupplyfromintermittentrenewableenergysourceslikewindandsolarpower.Forcountrieswithoutsuchendowmentsothertechnicalsolutionswillneedtobedeveloped.

Withrespecttotechnologicalaspectstheneedforstoragecapacities isoneofkeychallenges.TwodifferenttypesofstoragewillbenecessarytoensurethestabilityofpowersystemswithhighsharesofintermittentRE,particularlywindandsolarpower:(1)short-termstoragethatcansubstitutelargerotatingmassesinthermalplantswhousedtohelpbufferingvariabilityinfrequencyandvoltageinamatterofsplitsecondsuptoacoupleofminutes(ancillaryservices).Intheshorterterm,theneedforstoragecanbereducedbymakingelectricitydemandmoreresponsive(Palensky&Dietrich,2011).Currently,powerdemandislargelyinelasticanddoeshardlyrespondtoshort-termpricehikes.Ena-bledbysmartgrids(andsmartappliances)demandcouldbemanagedinordertoshiftsomeofitfrompeak loadhours tohourswith lowerdemandand/ormoreabundantrenewableenergysupply. (2)long-termstoragewillberequiredtobalanceoutseasonalvariabilityintheavailabilityofRE.Energystorage is stilldominatedgloballybypumpedhydropower. Still,both research spendingaswell asinvestmentsinbatterystoragehavebeenskyrocketinginrecentyears.Asamatterofconsequence,batterycostshaveplummetedatratessimilartothoseseeninthecostreductionsofSolarPV(IEA,2016c).

Anotherkeytechnicalchallengetobeaddressedistheupdateandre-buildofexistinggridinfrastruc-tures. Incountries thathistorically reliedon fossil fuelledpowergeneration,powerplants typicallywherebuiltatlocationsthatareclosetothecentresofelectricitydemand(i.e.majorindustrialcen-tres).Contrastingly, renewableenergygenerationunitswillbe locatedwhereverthepotentialsarehighest.This isoften in rather ruralareaswithout largeamountsofdemand.While inprototypical


fossilfuelledpowersystemstheroleofdistributionnetworkswasmainlyoneofinterconnectingin-dustrialhubsandthushedgingagainsttheriskofblackouts,thetaskinaprototypicalRE-basedpowersystemisoneofconnectingcentresofsupplytothecentresofdemand.Thismayrequirefundamen-tallydifferentgridlayoutsandenormousinvestmentsoverthecomingdecades(IEA,2016c).

Thisleadsustoeconomicbarriers.Intheeconomicrealm,twobroadchallengesarestandinginthewayofaglobaltransformationofthepowersector:aninvestmentchallengeaswellasamarket-designanddispatchchallenge.TheinvestmentchallengedirectlyrelatestoArt.2.1coftheParisAgreement,“[m]akingfinanceflowsconsistentwithapathwaytowardslowGHGemissionsandclimate-resilientdevelopment.”Currentinvestmentsinrenewableenergyin2015amountedtonearlyUSD286billion(REN21,2016).Yet,inordertohaveachanceoflimitingglobalwarmingwellbelow2°Cannualinvest-mentsintheballparkofonetrillionwillberequired(Ceres,2014).Atthesametime,investmentsinfossilfuelinfrastructureneedtobephaseddownandout.

Theissueofhighcostsforrenewableenergytechnologieshasbecomemuchlessimportantrecently.TechnologycostshaveplummetedinparticularforsolarPVandwindandthislikelytocontinue(IRENA,2016).Thisisnottosay,thatcostshavebecomeanon-issue.Despitelowcostforthehardware,re-newableenergycanbecomeexcessivelyexpensiveifanunfavourablegeneralinvestmentclimate(highprimelendingrates)drivesupcapitalcostsandifalackoflocalexpertiseandskilledworkersdrivesupthesoftcostsofinstallingandmaintainingrenewableenergysystems.Also,costdistributionmaybeanissue,includingregardingequityandfairness.

Thesecondchallengeisoneofmarketdesign.Sincetheearly1980snumerouscountrieshavestartedtoliberalize(andprivatize)theirrespectivepowermarkets.Typically,thesemarketsareorganizedwithpowerspotmarketsattheircore.Pricesatthespotmarketarebasedprimarilyonmarginalgenerationcosts.MostformsofRE,however,donotfeaturemarginalgenerationcosts.Windandsolarenergyisgeneratedwhenthewindblowsorthesunshines,irrespectiveofthewholesalepriceforelectricity.Inmarketswithparticularlyhighsharesofelectricitywithzeromarginalcosts,themarketdesignap-proachesitslimits.Pricesaregenerallylowandcanevenbecomenegative.Inconsequence,thespotmarketlosestoessentialfunctions.Firstly,thespotmarketcannotensurethatinvestments–irrespec-tiveofwhetherinrenewableenergyorfossilfuelcapacities–cannotberecoupedovertheprojectlifetimewithoutotherrevenuesstreams.Secondly,thespotmarket loses itsabilitytoorganizethedispatchofpowerplants,i.e.signallingwhichplantshouldbegeneratingpowertosatisfytheexactcurrentlevelofdemandandwhichplantshouldnotberunning.Creatingacompetitivemarketsystemthatensuresthatlong-terminvestmentscanberecoupedandthatefficientlyorganizesdispatchforsystemswithveryhighsharesofintermittentrenewableenergyisstillnotonthehorizon.

Thechallengesandbarriersdifferamongcountriesalso in theway thepowersector is structured.Whileinsomecountries,thesectorisdominatedbyprivatelyownedutilities,inmanycountriesutili-tiesarestate-owned.Insomecountries,institutionallinkagesbetweengovernmentandutilitiesispar-ticularlycloseandamounttowhatUnruhhascalleda“techno-industrialcomplex”fromwhichstrongsystemicchangeresistancemustbeexpected(Unruh,2000).Increasingdeploymentofrenewableen-ergycancontributetoadiversificationoftheownershipstructureinthepowersector.Forexample,inGermanyinvestmentsinrenewableenergywerelargelydrivenbymunicipalutilities,smallenergycooperativesandevenindividuals(Schmid,Knopf,&Pechan,2016).

Lastbutnotleast,humancapitalandsocialbarriersneedtobehighlighted.Implementingglobalen-ergytransformationtowardsrenewableenergyrequiresaskilledworkforce.Inmanydevelopingcoun-triestechnicalcapabilitiesandskilledworkersarestillabottleneckforthescaled-uprenewableenergydeployment(Hirsch,2015).Socialbarriersincludeissuessuchasenergypoverty.Changesinthepro-visionofelectricitymayresultinshiftingcostsandpayments.Inthecourseofthetransformationofglobalpowersectors,particularattentionneedstobepaidtoavoidingpotentialeffectsthatpolicies


mayhaveonmarginalizedcommunitiessoastoavoidincreasedincidenceofenergypoverty(Cherian,2015).



Thesignallingfunctionofinternationalgovernanceisofparticularrelevanceforthepowersector.In-vestments inthesectorareextremely long-lived.Ontheonehand,thismeansthat investments infossilfuelinfrastructuretodaymayliterallycementacarbon-intensivepathwayforthenextdecades.Ontheotherhand,thislong-termperspectiverequiresinvestorstomakeinvestmentdecisionstoalargeextentonthebasisoflong-termexpectationsofthesectorandtheeconomyingeneralasop-posedtothemarketconditionsoftheday.Whencountriescrediblyagreeonlong-termvisionsandgoalsforthesector,thismayaltertheinvestors’expectationsabouttheviabilityoftheirprojectedinvestmentsandhencetheirinvestmentdecisionsoftoday.Themorespecificthevisionis,themoreimpactitislikelytohaveontheinvestmentdecisions.

OneparticularexamplerelatestoinvestmentsinCCS.Oneofthekeybarriersisthatpotentialinvestorsfacesplitincentives.InvestinginCCSmayhelpto“future-proof”thesector,yetthismaycomeatsig-nificant short-term financial risks (Gaede&Meadowcroft, 2016).Also, the countries thathave thestrongestinterestindevelopingCCSarethosethathavevestedinterestsand/orlargefossilfuelre-serves.Yet,thisinterestiscontingentonambitiousclimatepolicy.Inthepast,manyofthosecountrieshaveratherfocusedondelayingaggressiveclimateaction(deConinck&Bäckstrand,2011).Astronginternationalsignalcouldhelpshiftthepoliticaleconomysothat interestandconsequently invest-mentindevelopingCCSincreases.


Therearevariouswaysinwhichthepowersectortransformationinonecountryinterrelateswiththesectortransformationinothercountries.Themostdirectinterdependencerelatestoglobaltradeandcompetition.Powersystemsareconnectedthroughmarketsforfossilfuels,aswellasglobalizedtech-nologymarketsforalltypesofenergytechnologies,includingrenewableenergytechnologiesandbat-terystorage.Sinceelectricityisanessentialinputtoalmostallindustries,theremaybeindirectcom-petitionamongcountries:ifinthecourseofasectortransformationacountryexperiences(temporary)electricitypriceincreases,energyintensiveindustriesmaymigratetoanothercountrywithlowerelec-tricityprices.Apowersectortransformationcanthusbecomeanissueofindustrialcompetitivenessforthecountry.Moreover,internationaldirectinterdependenciesmayexistintheformofmultina-tionalcorporations.However,inthepowersectorthismaybelessofanissuethanforexampleintheextractiveindustriessector.Whilesomemultinationalutilitiesexist,themajorityofthepowersectorsaredominatedbynationally operatingutilities. Last but not least, regional spill-overs exist,wherepowersystemsarephysicallyinterconnected.

Rule-settingtofacilitatecollectiveactionisasecondkeyfunctionforinternationalgovernance,partic-ularlytoaddressconcernsofindustrialcompetitiveness.Coordinatedtargetsettingcouldaddresssuchconcernsatleastpartially.Moreover,possibleapproachesforinternationalcooperationincludejointresearchprogrammes,patentpoolingandremovingtradebarriers.

Wherepowergridsareregionallyinterconnected,regionalgovernanceapproachesmaybeconducive.Interalia,coordinatedinvestmentsinthegridinfrastructurecouldminimizetheneedforstorageca-pacitiesasvariabilityinrenewableenergysupplytosomeextentbalancesitselfoutoverlargegeo-graphicdistances.



Transparentreportingandmonitoringcansupportandhelpreinforcerules,targetsand/orstandardscollectivelyagreedasoutlinedabove.


Anotherleveragepointforinternationalgovernanceismobilizingthemeansofimplementationofthesectortransformation.Inparticular,internationalcooperationcouldhelpaddresstheinvestmentchal-lengesdescribedabove.Typically,renewableenergyinvestmentsincurthelion’sshareoftheirlifetimecostintheformofupfrontinvestmentcostswhilefeaturingloworevenclosetozerooperatingcostslateron.Forcountriesinwhichdifficultinvestmentconditionsprevail,thisbecomesacriticalbarrierforrenewableenergyinvestment.Duetohighprimelendingratesandcurrencyrelatedrisks,capitalcostcanrenderrenewableenergytechnologies,whichwouldotherwiseoutcompetethealternatives,uneconomical.Thisargumentalsoholdsforanyhighlycapitalintensivecomponentoftheenergysys-temincludingstorageandgridinfrastructure.Atthesametime,thereisnolackofinvestorslookingforopportunitiestoinvest.Ifwayswerefoundtoenhancetheattractivenessofinvestmentsinsus-tainablepowersystems,thiscouldstronglyexpeditethetransformationofpowersectorsacrosstheglobe.Internationalgovernancemayespeciallycontributethrougharrangementsforsharingthein-creasedfinancialrisksforinvestmentsindevelopingcountries.

Meansofimplementationintermsofinternationaltransferofrenewableenergyandenergystoragetechnologiesaswell as capacitybuildingboth (administrativeand technological) aswell arehighlyconduciveforasuccessfultransformationofpowersystems.


Learningandknowledgediffusioncanalsomakeasignificantpositivecontributiontoexpeditingglobalpowersectortransformations.Forexample,asuccessfulsectortransformation inonecountrymaydemonstratethefeasibilityoftransformation.Ideally,moresuccesswoulddemonstratethattherearenumerousconfigurationsthatwork,encouragingothercountriestopursuethetransformationoftheirsectorsandatthesametimeprovidingorientation.This includesforexamplegovernancelearning:whichpoliciesworkandwhichpoliticalprocessesarepromisinginordertoforgealliancesandaligninterests.Italsopertainstolearningofmanagementandorganizationalpracticesincludingforexam-ple effectivemarketdesigns forhighRE-sharepowermarkets. Furthermore, if successful transfor-mationstakeplaceinlargeenoughmarkets,thiscanleadtode-factostandardsettingoftechnologicalparameters.

Thesekindsofspill-overscouldbesupportedinteraliabycreating(international)forainwhichexper-imentationandgoodpracticesharingwithrespecttopoliciesandpoliticalprocessescanbefacilitated,e.g.withrespecttomarketdesignsandlong-termplanningprocedures.

4.6 Energy-intensiveindustries


Theglobalenergy-intensiveindustrysectorcontributes21percentoftotalglobalGHGemissions(IPCC,2014a).Globalindustrialemissionshavegrownfrom5.4GtCO2eqin1970to8.8GtCO2eqin2010oraround63percent(Kechichianetal.,2016).Emissionsfromtheenergy-intensiveindustrysectorcom-prisemainlyofdirectenergy-relatedemissions,indirectemissionsfromelectricityandheatproduction,processemissionsandatinypercentagefromwaste/wastewater(IPCC,2014a).OtherGHGemissionsfromindustryaremainlyN2Oemittedduringtheproductionofammoniumandadipicacidandsulphur


hexafluoride(SF6) fromaluminiumproduction.Thesectoraccountedforaround29percentofthefinalglobalenergyconsumption in2012(IEA,2014b),morethan70percentofwhichcomesfromfossilfuels(Kechichianetal.,2016).Fossilfuelsaccountfor74percent,85percentand85percentoftheironandsteel,cementandchemicalindustries’energyconsumptionrespectively(Kechichianetal.,2016).Aluminiumistheonlyenergy-intensiveindustrialsubsectorthatreliesmostlyonelectricityasitsenergysupply(Kechichianetal.,2016).

Table4.1: GHGEmissionsOverviewofEnergy-IntensiveIndustriesin2010

Sub-Sector TotalEmissions(inMtCO2) %ofIndustryEmissions

IronandSteel 2410 24.05percent

Cement

(aspartofnon-metallicminerals)

1910 19.06percent

Chemicals 1880 18.76percent

Aluminium

(aspartofnon-ferrousmetals)

690 6.89percent

Source:Kechichianetal.2016(totalemissions)andEcofys2013(shareofindustryemissions)

Thissectionfocusesonfourkeyenergy-intensiveindustrysubsectors:ironandsteel,cement,chemi-calsandaluminiumwhichconstitute68.76percentofindustrialemissions(Kechichianetal.,2016);Table4.1).Thesefoursubsectorshavegrownsharplyinthepastdecadesdrivenprimarilybyglobali-sationanddramaticgrowthindevelopingcountriesandcountrieswitheconomiesintransition.Oneofthemostimportantrawmaterialsusedtoday,globalcrudesteelproductionstandsat1,628.5mil-lionmetrictonnes(Mt)(2015)(WorldSteelAssociation,2017),upfromjust200mtin1950.Cement,thesecondmostconsumedmaterialontheplanet,hasseenadramaticgrowth–from133mtin1950(U.S.GeologicalSurvey,2015)tonearly4.1billionmetrictonnesin2015(Olivier,Janssens-Maenhout,Muntean,&Peters,2016).Thechemicals industry, the largestamongstthe industrialsubsectors inmonetaryvalue,hasalsoexpandedsignificantly,fromUSD171billionsin1970(Perlitz,2008)toUSD4.1trillionin2013(Consultancy.uk,2015).Aluminiumisakeyenablingmetalandistheworld’sthirdlargestconsumedmetalaftersteelandcopperandproductionofnewaluminiumresultsinonepercentoftotalglobalannualGHGemissions(Tyabji&Nelson,2012).

Overthepasthalfcentury, industryemissionshaverisensharplyamongstthe lowtouppermiddleincomecountriesascomparedtoagradualdeclineamongsthighincomecountries.Someofthekeyexogenoustrendsdrivingdevelopmentsinthesesubsectorshavebeenthepursuitofgrowthinthedevelopingworldstronglysupportedbypublicpolicyincentivesandglobalisation,lowerproductioncosts,population risealongsidegrowingper capita income.Productiongrowthofenergy intensivematerials(inparticularsteelandcement)inemergingeconomies,closelylinkedtolargeinfrastructureconstructionandurbanisation.

Fewcountriesdominatetheseindustrialsubsectors–China,theEU,theUS,JapanandIndia.Chinaiscurrentlyoverwhelminglythelargestproducerandconsumerinallthefoursubsectorsandoneofthetopfiveimportersandexporters.Asiaisthemostimportantregionaccountingfornearly65percentofsteeluse(WorldSteelAssociation,2016),morethan75percentofglobalcementconsumption,and61percentoftotalglobalchemicalsales.ProductionanddemandishighlyconcentratedinAsia,alt-hough it isgrowing inotherdeveloping regions like theMiddleEast, LatinAmericaandAfrica.For


instance,themostrapidgrowthinthecementsectorisseeninSudan,Peru,Nigeria,Turkey,Colombia,andBrazil(Kechichianetal.,2016).These“fastestrisers”between2003and2013havecompensatedrecentcontractioninmaturemarkets,suchastheEUandtheUSIndustrialisednationsalthoughinno-vative,faceacomparativedisadvantageinthesesubsectorsgivenlowerinput(e.g.energycosts,la-bourorrawmaterial)andlargerdomesticdemandintheglobalsouth.

NexttoageographicconcentrationinAsia,theseindustriesarealsodominatedbyafewprivatesectorcompanies.TheWorldSteelAssociationlists94globalsteelcompanieswhoproducedalmost60percentofthetotalglobalcrudesteelproductionof1,628.5mtin2015(WorldSteelAssociation,2017).FiftyofthesecompaniesarebasedinChinawhilefourteenothersarebasedin India(5),Japan(4),SouthKorea(3),Taiwan(1)andAustralia(1)(WorldSteelAssociation,2016).Similarly,just10compa-niesproducealmosthalftheworld’saluminium.Morethanhalfofthetop50chemicalscompaniesareheadquarteredinjusteighteencountries.TwelveareintheUS,eightinJapanandsixinGermany.BASF,headquarteredinGermanyistheworld’slargestchemicalcompanysinceadecade,withUSD63.7billionsalesin2015,downfromUSD78.7billionin2014(Tullo,2016).Thecementsubsectorismorespeckledincomparison.AccordingtotheGlobalCementDirectory2016,therewere2273activeintegratedcementplantsaroundtheworldin2015(Saunders,2015).

Trade in the ironandsteelandchemicals subsectors ishighlyglobalised:nearlya thirdofall steelproducedistraded(USDepartmentofCommerce,2016).Inthealuminiumsector,mostaluminiumproductsaretradedwithregionsorcountries.Forinstances,Chinawhichproducesnearlyhalfofglobalaluminiumisself-sufficientwhilenosinglecountryaccountsformorethan13percentoftheimportorexportmarket(Ludwig&VanHouwelingen,n.d.).However,thetradeintensityofproductsusingaluminium(e.g.cars,laptops,…)isofamuchhighertradeintensity.Finally,thecementsubsectorispredominantlyregional.Cementproductionissignificantlylocal:virtuallyeverycountryproducesce-mentandonlythreepercentofglobalproductionistradedinternationally(TheEconomist,2013).

Deepdecarbonisationpotentialanddrivers

Themodelusedby the IEA’s (2017)EnergyTechnologyPerspectives (IEA,2017a)shows thata2°CscenariorequiresglobaldirectCO2emissionsfromindustrytobereducedby44percentby2050andhalvedby2060comparedwithitsbaselinescenario.However,toreachnet-zeroCO2emissionsatthesystemlevel,by2060,whichisrequiredforabeyond+2°Cscenario,industrywouldneedtofurtherreduceitscarbonemissionsby69percentby2050and80percentby2060comparedwiththebase-linescenario(IEA,2017a).

Technologysolutionsfordecarbonisationandmodernisationacrossindustrialsectorscanbecatego-risedbroadlyinthreeareas(Kechichianetal.,2016);energyefficiencyimprovements(inprocesses),low-carbonsubstitutes(formaterialsandfuels)andinnovativeandalternativeprocesses.

Formostexistingindustrialprocessestherestillisanoverallpotentialtoimproveenergyandprocessefficiency(e.g.byclosingoldinefficientplantsandinvestinginbestavailabletechnologiesandbestpracticesolutionsalreadyexistthatfocuslargelyonrelativelyeasyretrofitswhichhavequickpaybacks(Kechichianetal.,2016).However,energyandprocessefficiencywillmeetthelawofdiminishingre-turns(i.e.moreeffortrequiredtoachievelowergains),theclosertheseprocessesgettothermody-namicorchemicaloptimisation.

Low-carbonsubstitutesformaterialsandfuelinputsarebeingexploredonaglobalscale(e.g.useofmunicipalwasteandbiomassincementproduction).Thefuturepotentialofthisoptioncanbesignif-icant insomesectors (e.g.biomassbasedfeedstockoruseofwastegases fromother industries inchemicalsproduction),butwilldependonthe(limited)availabilityofthesesubstitutes.(CEFIC,2013,p.112).


Table4.2:DeepDecarbonisationOptions

Sector Deepdecarbonisationoptions

Steel

• Improvingenergyefficiencybeyondbestavailabletechnologies• NewSmeltingReductionTechnologies• DirectReductionofironoreusingnaturalgasorhydrogen• Usingelectricityforironorereduction• Useofbiomassinsteelproduction• Higherlevelsofsteelrecycling(whilemaintainingquality)• Useofwastegasesfromcokes/iron/steelproductionasfeedstockforchemicalspro-

duction• Carboncaptureandstorage

Cement

• Higherenergyefficiencyofprocessesandfuelswitching(tolowcarbonfuels)• Reducingclinkercontentinconcrete• Innovativechangestothecompositionofconcrete• Enhancedconcreteandcementrecycling• Extendlifetimeofconcrete(e.g.throughself-healingconcrete)• Carboncaptureatprocesslevelorduringconcreteformation• CO2utilisation

Chemicals

• Majorimprovementsinresource/energyefficiencyofprocesses• Higheruseof(renewable)electricitye.g.forproductionofH2• Higheruseofbiomass(waste),wasteandrecycledmaterialsincludingutilisationof

wastegasesfrome.g.steelindustryandindustrialsymbiosis• Developmentofadvanced(plastics)recyclingprocesses

Aluminium

• Useofnon-oxidisinganodes inprimaryaluminiumproduction incombinationwithhighlyefficientprocesses.

• Improvementofrecyclingtechnologiestomaintaindifferentaluminiumtypequalities• Establishmentofcircularvaluechainsandleasingofmetals.

Source:BasedonEuropeanCommission2017a.

Theuseofinnovativeandalternativeprocesseswillbeessentialfordeepdecarbonisationofindustrialsectors.This includeshigher levelsofelectrificationofenergyintensiveprocesses(usingrenewableenergysources)andtheuseofcarboncapture,utilisationand/orstorage.Table4.2belowgivesabriefoverviewofsomemajornew(orimproved)processesthatwouldenabledeeperemissionreductionsinindustrialsectors.

Nexttothe(process)technologysolutions,deepemissionreductionsinindustrialsectorswillalsore-quireavaluechainapproachthatcoversthesupplyandvaluechainsacrossdifferentsectors.Steel,cement,chemicalsandaluminiumproducersmostlymakeintermediateproductsandhencehavelim-itedimpactontheuseofintermediategoodsinthefinalconsumerorotherproducts(e.g.cars,air-planes,buildings,…).Therefore,reducingthebasicmaterials’intensityintheseendproductsthroughsmarterdesign,efficientconsumptionandenablingacircularresourcemodelwillneedtobepartoftheover-allmitigationeffortsrelatedtotheemissionsofthebasicmaterialssectors.Abehaviouralswitchtoacirculareconomycanmakeitsmarkonthewidermarketandthecarbonfootprintoftheindustrialsectorbyreducingdemand,recyclingandunderscoringgreaterefficiency.Theconceptofacirculareconomywhichis“acontinuouspositivedevelopmentcyclethatpreservesandenhancesnat-uralcapital,optimisesresourceyields,andminimisessystemrisksbymanagingfinitestocksandre-newableflows”(EllenMacArthurFoundation,2015)canpotentiallyhaveadirectimpactonemissions


reduction11.Whiletheconceptofacirculareconomyispervadingtheregionallevelandatbestthenationalechelon (mostly limited tocertain sectors), it remains largelyabsentat theglobal level.Atransitiontowardsmorecircularity(recycling,wastetoenergy,andsoon)wouldcertainlyaiddecar-bonisationefforts.However,circularityremainspoorerinthedevelopingcountriesthaninthedevel-opedones(seealsoSection4.4onthecirculareconomy).

4.6.2 ChallengesandBarrierstowardsdeepDecarbonisation

Activatinglow-carboninterventionsinindustrialsectorsdependsonthepresenceofacombinationofvariables(Kechichianetal.,2016).Theseincludetheabilitytoprovidequickpaybacksfromlow-carboninvestmentsandaminimaloperationaldisruption;thecapitalexpenditure(CAPEX)oftheinterventiontogetherwithaccesstofinance(andthecostofcapital);thecostofcurrentinputsinprocessescom-paredtothelow-carbonsubstitutes;astrongandgloballyimplementedcarbonpolicyandtheextenttowhichcompetitorsaroundtheworldareimplementingGHGmitigationmeasures.

Themainbarriersorchallengesfordeepdecarbonisationareacombinationoftechnologicalinertia,thehighcapitalexpenditureandriskassociatedwithnew(process)technologies,thereluctancetoimposeambitiousGHGregulationsorCO2costsduetofearoflossofinternationalcompetitivenessorimpedingdevelopmentandthecomplexityofglobalvalueandsupplychains(Bennett&Heidug,2014).

TechnologicalinertiaandR&Dmismatch

Thebasicmaterialsindustriessuchastheonescoveredinthissectionalmostallsawtheirmajordis-ruptiveprocessinnovationshappenby1970-1980(Freeman&Soete,1997).Largeproductioninstal-lationsmostlysee incremental,butstill important, improvements inenergyandmitigationofGHGemissions.Sincethesesectorsuse large(andcostly)process installationsthe investmentcyclesarelong.Thispreventsanacceleratedtake-upofnewbreakthroughtechnologies,especiallyifthesere-place incumbent installations. Furthermore, the basic materials industries (with the exception ofchemicals)haveanover-all lowR&Dintensity (expressedasR&Dexpenditureoverrevenues)com-paredtootherindustrialsectors12.OnecanevenseeanR&DmismatchwithsmallernewentrantsinthesesectorsshowingmoreinterestinR&Dbuthavinglowermeanstodosocomparedtolargerin-cumbentcompanies.Thesesmallercompaniesalsolacksufficientmarketaccess(intoe.g.consolidatedcement,steelandchemicalsmarkets)tofurthertheirinnovativeproductsandprocesses.

HighCapexandtechnologyriskofnewbreakthroughprocesstechnologies

BeyondtherelativelowR&DspendingandthepossibleR&Dmismatchthereexistsalsoanimportantbarrieratthelatter,demonstrationtocommercialisation,stageofR&Dintolowcarbontechnologies(e.g.technologyreadinesslevel6-9).Theselargescalepilotanddemonstrationplants,thefinalstepstowardscommercialisation,requireahighlevelofcapitalexpenditure.Atthesametime,thestillex-perimentalnatureoftheseinstallationscomeswithanimportanttechnologyrisk.

11 Both steelandaluminiumare100per cent recyclablewithout lossofqualityandwithapotentially

endlesslifecycle.Recyclingaluminiumrequiresaroundfivepercentoftheenergyusedtoproducepri-maryaluminiumandemitsaslittleasfivepercentoftheGHGemissionswhencomparedtoprimaryaluminiumproduction(Kechichianetal.,2016).Steelmakingfromscrapusesone-thirdoftheprimaryenergyandemitsaquarteroftheemissionsascomparedtosteelmakingfromironore(Cullen,2010).However only a third of all aluminium produced today comes from old, traded and new scrap(InternationalAluminium Institute,2009). Similarly,650million tonnesof steelare recycledgloballyeveryyearoronlylessthanone-thirdofglobalproduction.

12 SeetheJRC’sEUandglobalR&Dscorecards2016http://iri.jrc.ec.europa.eu/scoreboard16.html


Theinnovativetechnologies,whilepromising,arethereforegenerallynotyetdeployable,financiallylessattractive,requirelongerpaybacksandmaynecessitatelongeroperationalshutdownperiodstointegrate changes in production process/existing assets. Some promising technology options maythereforeneverbecomemainstreamsolutions.

Competitivenessanddevelopmentconcerns

Acrossmostcountriesintheworldthereisresistancebytheseindustrialsectorstoexternalitiesbeingpriced(fully)inorbeingfacedwithastringentregulatoryenvironmentrelatedtoGHGmitigation.Inindustrialisednations,incumbentproducersfearthatahigh(er)priceonCO2emissionsand/orafullexposuretoaCO2pricewould,intheabsenceofsimilarmeasuresinmostothercountriesaroundtheworld,deterfurtherinvestments,leadingtosocalledinvestmentleakage.Commonlyacceptedregu-lationsandstandardscouldcreateagloballevelplayingfieldwhichcouldfostercompetitivenessintherightdirection(Kechichianetal.,2016).

Indevelopingcountries (thatseehigh levelsofgrowth inbasicmaterialsproduction),ontheotherhand,introducingpriceonCO2emissionsisoftenseenasstuntingdevelopmentandtheconstructionof necessary infrastructure for an increasing andmore affluent population.Notwithstanding theseconcerns,agrowingnumberofindustrialisedanddevelopingcountriesareadoptingaformofcarbonpricing.Whileitishardtoquantifyorevenprovetheabove-mentionedconcerns,theyareclearlypartofthepoliticaldiscourseandhenceshapebothdomesticandinternationalpositioningandpolicies.

GlobalcomplexvaluechainsvisàvisthenationalbottomupapproachoftheParisAgreement

Finally,asstatedbefore,deepdecarbonisationinindustrialsectorswillrequireaddressingthewholevalueandsupplychainsrelatedtothese industries.Overthepastdecadesthesevaluechainshavegrowntobecomemorecomplexbutalsomoreglobalinscale.Thisissueisconnectedtotheproblemofaccountingforembeddedemissions(i.e.theGHGemissionsembeddedinimportedgoods).Inprac-tice,thismeansthatabasicmaterialscompanyisnot(always)abletotrackandcontroltheenduseofitsproducts.Thismakesclosingvaluechains(circularity)difficultand/orexpensive.Itthereforepre-ventsthewide-scaleintroductionofnewbusinessmodelssuchasthetransitionfromasales-basedmodeltooneinwhichbasismaterialsareleasedandreturnedtotheoriginalproducerforre-orup-cycling.FuturegovernanceforthesehighlyglobalisedsectorsoperatingacrossbordersdoesnotfullymatchtheapproachundertheParisagreementwhichaskseachcountrytodevelopnationallydeter-minedcommitmentsandlong-termdecarbonisationplans.

Someoftheabove-mentionedbarrierscanbenegativelyreinforcing.Forinstance,thelowR&Dinten-sityof(many)energyintensiveindustriesincombinationwiththelargeCAPEXneedforbreakthroughtechnologies.Thehightechnologyandfinancialrisksrelatedtothesetechnologiescan,incaseoffail-ure,hamperthecompetitivenessoncompaniesandhencemakethemmoreriskaverse.

4.6.3 ThePromiseandPotentialofInternationalCooperation


Aclearinternational‘decarbonisation’objectivewithfirmtimelinesanddifferentiated(national,re-gionalandglobal)mitigationpathwayscouldprovideimportantguidancetodecision-makersinindus-trialsectors.Thiscouldbeachievedthroughtheconstructionofglobalroadmap(s)fordecarbonisationofenergy intensive industries,e.g.builtup fromnational, regionalandexistingsectoral roadmaps.Theseroadmapsshouldpresentanintegratedviewofhowtheindustriescantransformtheirsupply,productionandvaluechainswhilemaintainingcompetitiveness(Ahmanetal.,2016)andnotinfringingeconomicdevelopment.


Given the disparities highlighted between regions, each economic regionmay need a low carbonroadmapincludingtrajectoriesfortheindustrialsectorswhichneedtobeembeddedwithintheotherpartsof theeconomythat formthedownstreamdemand fortheproductsof theenergy intensivesectors.Resourceefficiencylinkedtoa(global)circulareconomywillneedtobeapartofthedevelop-mentofsuchroadmaps.Coordinatingthese(sectoral)globalandregionalroadmapswithnationalde-carbonisationplans(developedundertheParisAgreement)willbearequirement.


Giventheglobalisednatureofenergy-intensiveindustries,thereisaclearrationaleforinternationalregulation(toaddresscompetitivenessandcarbonleakageconcerns).Collectiveactiontoenablethedecarbonisationofindustrialsectorscanberealisedthrough(acombinationof)different(regulatory)instruments.Regulationcouldtaketheformofcarbonpricing(beita(coordinated)CO2taxoraglobalemissionstradingsystem,e.g.throughlinkingregionaltradingsystems)or(coordinated)internationalregulationsand/orstandards.Thesecanbetargetingtheproductionprocesses(e.g.CO2emissionlim-itsper tonneofproductproduced)or theconsumptionside (limitonembeddedemissions in finalproduct;seeNeuhoffetal.2014).Shortofinternationalagreement,nationalandregionalfrontrunnerscanpavethewaytobroaderapproaches.Regulatingembeddedemissionsinfinalproductscouldhelpcreatealevelplayingfieldbetweenglobalindustrialproducersbecause‘endofthevaluechain’pricingwouldnotdiscriminatebetweenlocalandforeignproduction.


Foranyinternationalregulatoryapproach,itisimportanttohavecommonMRVstandardsforindus-trialemissions,preferablyevenincludingthewholesupplyandvaluechain,asabasisforcomparingandverifyingefforts.TransparencyofGHGimpactinsemi-andfinishedproductsacrosscomplexandglobalvaluechainswouldrequirecommon/globalGHGaccountingstandards.


Globalcooperationoninnovativetechnologydeployment(includingthefinancingthereof)isurgent.AccordingtotheIEA,goingbeyond2°CwillrequireOECDcountriestotransferinnovativetechnologiesforindustrytonon-OECDcountrieswherenewcapacityinstallationsincreasethepotentialtowidelydeployinnovativeindustrialprocesstechnologies.Thishastohappenverysoontoavoidcarbonlock-in/strandedassets(IEA,2017a).Processesandplatformsenhancingbilateralandmultilateraldiffusionof technologyandresearchcooperation–suchas theMission Innovation13initiative–could fostersuchcooperation.

Suchinternationalcooperationwouldalsoneedtoaddressthehighcapitalcostandriskassociatedwithlargeindustrialbreakthroughtechnologies.OneoptionwouldbeR&Dcooperationthatcombinestheknowhowandfinancepresentindifferentcountriesandatdifferentstagesinthetechnologyread-inesslevel.Suchanapproachcouldmakeuseofthedifferentstagesofindustrialisationaroundtheworldtomakeuseofavailableresourcesefficiently.Whilepotentialforbuildingnewlargelow-carbondemonstrationplantsparticularlyexistsinemergingeconomies,moreadvancedeconomiescouldpi-oneercirculareconomyrelatedtechnologies.Suchinternationalinnovationprogramcouldbeimple-mented through a global industrial innovation fund in combinationwith coordinated internationaltechnologyprojects(alongthelinesoftheITERnuclearfusionproject).Leveragingprivatecapitaltoenabletheseinvestmentswillrequiretheactiveparticipationoflargenationalorregionalinvestmentbanks.

13 http://mission-innovation.net



To theextent theaforementioned technologycooperation involves thedevelopmentof innovativetechnology,itwillalsosupportthecreationoftechnicalknowledge.Beyondthat,decarbonisingindus-trialsectors(atagloballevel)willalsorequireasignificantinvestmentincirculareconomypoliciesandtherealisationofdomesticenablingconditionsforindustrialinnovation(e.g.innovationandindustrialpolicies).Globalcoordinationanddisseminationofknowledgeand learning in relationto industrialdecarbonisationisthereforerelevant,inparticulargiventhecomplexityofsupplyandvaluechainsofindustrialsectors.Forinstance,sharingbestpracticesoncirculareconomy,industrialandinnovationpoliciesthroughaglobalknowledge&learningdepository/platformcanacceleratetheimplementa-tionofenablingconditionsinawidergroupofcountries.

Linkages

Power:Substitutingfossilfuelsintheproductionprocesswithelectricitywouldincreasethedemandforelectricity,whichifnotdecarbonizedwouldresultinhigheremissionsinthissector.

AgricultureandLULUCF:Someofthepossiblesubstitution/innovationoptionsinvolvehigherdemandforbiomass.

4.7 Extractiveindustries(‘losers’)


Remainingwithina2°Ccarbonbudgetrequiresmostglobalfossilfuelreservestoremainunexploited.McGladeandEtkins(McGlade&Etkins,2015)findthatathirdofoil,halfofgasandover80percentofcoalreservesshouldremainuntouchedfrom2010to2050(seefig.1).Achievingthis,however,isadauntingchallenge.In2012,theIEAwarnedthatoncurrenttrends,enoughnewfossilfuel-basedin-frastructure–mines,powerplants,pipelines,refineriesetc.–wouldcomeonlineby2017tolock-intheremainderofemissionsallowable(IEA,2012).Fossilfuelextractionandtradearewidelyperceivedascentraltoenergysecurityandeconomicdevelopment,especiallyindevelopingcountrieswithlargeunmetenergyneeds(Manley,Cust,&Cecchinato,2017;Whitley&vanderBurg,2015).Bothproduc-tionandconsumptionoffossilfuelscontinuetobewidelysubsidised.Multinationalcompaniesinthesector(s)aresignificantwealthgeneratorsandunderpinthereturnstomanypensionfundsindevel-opedcounties.Giventhiscontext,climatepolicy,atdomesticand international levels,has focusedalmostexclusivelyoncurtailingdemandforfossilfuelenergy,neglectingsupply-atleastuntilrecently.Butitisincreasinglyrecognisedthateffectiveclimatepolicyrequiresactiononboth(SEI,2015).

Governmentsownover50percentofglobalproductionoffossilfuelsthroughfullormajority-stakeownershipofproducingcompanies(Whitley&vanderBurg,2015).Nationaloilcompaniescontrol80-90per centofprovenglobaloil reserves (up from less than tenper cent in the1970s),withmostengaginginternationaloilcompaniesinavarietyofcontractualarrangements.Becauseofthisshiftingownership,internationaloilcompanieshavefocusedonhard-to-access(e.g.deepwater)andhard-to-recover (e.g. oil sands, shale oil) reserves that costmore than the current price of oil to develop(Holmes,2017).

Coalproductionhasgrownsince2000,particularlyinChina(seefigure2).However,China’sNationalBureauofStatisticssuggeststheworld’sbiggestproduceranduserreduceditsconsumptionin2016


(forthethirdyearrunning)by4.7percent(ref).Chinaisalsoreducinghugesubsidiestocoalpower,althoughthefigureisstilldoublewhatisreceivedbyrenewables.14

Figure4.3:‘Unburnable’FossilFuelstoRemainwithin2°CCarbonBudget

Figure4.4:Top5CoalProducers(billionshorttonnes)

Source:USEnergyInformationAdministration.https://www.eia.gov/todayinenergy/de-tail.php?id=3350

14 ThevalueofChinesegovernmentsubsidiestocoal-firedgenerationwasestimatedasatleastCNY252

billion(USD37.7billion)in2014andCNY120billion(USD18billion)in2015(Denjeanetal.,2016).


Consumptionofcoal,however,lookssettolevelout(figure4.5).

Figure4.5:WorldEnergyConsumptionbySource,1990–2040.

Source:USEnergyInformationAdministrationhttps://www.eia.gov/todayinenergy/de-tail.php?id=26212

Aparticularfocus inthissection istheroleofsubsidiestofossil-fuelextractive industries,andpro-spects fortheirreduction.This isbecauseextraction(andcurrentconsumption levels)dependtoasignificantextentonsubsidy.Continuingcurrentlevelsofsubsidytoproductiongloballyhasbeenes-timatedtoleadtotheemissionofover37GtCO2from2017to2050thatwouldotherwisenotoccur-roughlyequivalenttoburningallprovenUSandNorwegianoilreserves(Gerasimchuketal.2017).G20publicfinanceforexplorationofnewreservesaveragesUSD13.5billionannually(Doukas,DeAngelis,&Ghio,2017).Consumptionsubsidiesalsounderminemitigationefforts,potentiallymakingothersec-torsoftheeconomy(e.g.transport)moredependentonfossilfuels(Manleyetal.,2017).Otherdam-agingeffectsofproductionandconsumptionsubsidiesincludeunderminingtheattractivenessoflow-carboninvestments,discouragingprivateresearchanddevelopment(R&D)onnewlow-carbonenergytechnologies,andobstructingtechnologytransfer(Whitley&vanderBurg,2015).Subsidiestendtolock-inpatternsofactivity,preventingdynamicresponsestochangingcircumstances(Whitley&vanderBurg,2015).Althoughoriginallyintendedtobeshort-term,theyoftenbecomeembeddedinplan-ningandexpectations,prices(includingofcapital),resourceallocationetc.,creatingnewvestedinter-ests.

Thoughestimatesvary-becauseprecisedefinitionsarenotagreed-theIEAestimatesthatfossilfuelsubsidies (FFS)amountedtoUSD493billion in2014(upfromUSD300billion in2009)andexceedrenewableenergysubsidiesbymorethanfourtoone(IEA,2015c).Estimatingtheirextentiscompli-catedbysubstantialdatagapsbecauseoflimitedtransparencyatthenationallevel,andafullaccount-ingofglobalenergysubsidies (forall types)hasneverbeencompleted.Asa result, it is likely thatexistingfiguresareunder-estimates(Whitley&vanderBurg,2015).Productionissupportedbyawiderangeofsubsidiesthatinclude,interalia:directpayments;preferentialaccessrightstoenergydepos-its;creditandinsurancesupport;capsonliabilities;tariffsorexportrestrictions;governmentowner-shipofpowergeneration(Koplow&Charles,2010).Consumptionsubsidiesmay improveaccessto


affordableenergy,buttendtobenefithigherincomegroupsmore(Asmelash,2017;Whitley&vanderBurg,2015).

Signsofdestabilisation

Intheoilandgassector,demandisfallinginmanyregionsasenergyefficiencymeasurestakeeffect.Infuture,substitutionwithotherfuels,thedevelopmentoflowercostlow-carbontechnologiesaswellasincreasedefficiencywillfurtherreducedemand,andalsolimitpricerisesinthelongerterm(Holmes,2017).Decliningoilpricesfrom2014haveencouragedMiddleEastandNorthAfrican(MENA)coun-triestoundertakeeconomicdiversificationefforts;all regionaloilexportersnowhavestrategies inplace(Tagliapietra,2017).Reformshavebeenundertakeninalmost30countriesin2013and2014,inseveralcasesspurredbyfallingoilprices.Manyhaveseentherecentdropinoilpricesasa‘once-in-a-generationopportunity’toslashsubsidiesandintroduceacarbonprice.However,otherswarnthatfallingcommoditypricesleadtoaparallelriseindemandsforproductionsubsidies,asdemonstratedbycallsfromUKNorthSeaoilproducersfortaxbreaks(Whitley&vanderBurg,2015).

TheG7/G20andAPEC,amongothermulti-lateral institutions,havestronglyurgeddecarbonisation.TheG20(G20,2009)committedtophasingout‘inefficientFFS,’andencouragednationalstrategiestodosowhileprotectingthemostvulnerable.TheG7subsequentlypledgedtoendallfossilfuelusebytheendofthecentury(G7,2015).

Shareholderactivismandlegalchallengesrepresentafurther,increasingthreatto‘businessasusual’.A2017shareholderresolutionrequiresannualassessmentsoftheimpactthatthe2°Cgoalwillhave(byreducingfutureoilandgasdemand)onExxon’sbusiness(Darby,2016).Twooftheworld’slargestassetmanagers,BlackRockandVanguard,votedinfavour.However,institutionalinvestorsareunlikelytodivestenmasse.Instead,annualassessmentsaremorelikelyafirststeptowardsenergycompaniesdiversifyingintocleantechnologyorreturningmoneytoshareholders(Darby,2016).

Whatneedstochange?

Preciserecommendationsfor‘roadmaps’towardsdecarbonisationofextractiveindustriesdependonthescenarioenvisagedforwidermitigationefforts(forexample,howwidespreadwillCCStechnologybecome,howwillgrowthine-mobilitydisrupttheoilmarket)andeconomic/societalpathways.15Asnotedintheintroduction,McGlade&Etkins(McGlade&Etkins,2015)offeronepossiblebreakdown,sectorallyandbyregion,ofwhatneedstobeleft‘intheground’.Thismakesclearthatthebiggest‘contribution’,intermsofassetsleftunrecovered,willneedtobefromcoal,givenitshighercarboncontent.

Foroil,thereisadegreeofconsensusthatexplorationdoesnotneedtostopentirelyinthelowest-incomecountries(Manleyetal.,2017;Tagliapietra,2017).Costsofdevelopmentandextractionvarysignificantlyacrossdifferentgeology,soitmaybeworthwhileforcertaincountriestoallowexplorationforreservesthatmaybelessexpensivetoextract-evenafteracarbontaxisfactoredin(Manleyetal.,2017;Tagliapietra,2017).IntheIEA’s‘450scenario’(consistentwitha50percentchanceof2°C),demandfallssharplyafter2020.Lowerproductioncoststhatallowexportcompetitivenesstobemain-tainedmeanthatMiddleEasternexports,however,areassumedtocontinueat2020levelsuntil2040(IEA,2016e).Butlowerpricesoverthistimescalewillseeoilrentsdeclinesignificantly.Thus,oilex-portingMENAcountries’entireeconomic,socialandpoliticalmodelsmustchange(atatimeofsignif-icantdemographicchange),totransformthemfrom‘rentierstates’intomoreeconomicallydiverse‘productionstates’(Tagliapietra,2017).

15 Ondisruptiontooilmarketscausedbychangesinthetransportsector,seeArbib&Seba2017.


4.7.2 Challengesandbarrierstowarddecarbonisation

Decisionsaboutfossilfuelproductionandconsumptionarecloselylinkedtonationalsovereigntyandperceivedinterests,andenergypolicyquestionsmorebroadlyremainlargelytheprerogativeofna-tionaldecision-makers (VanAsselt&Kulovesi,2017).Thisapplieseventorelativelywell-integratedregions,suchastheEU.

Thelikelihoodofstrandedassetsraisespublicpolicyconcernsaboutfinancialinstabilityandagrowingpensiondeficit,particularlyindevelopedcountriessuchastheUK(Holmes&Orozco,2017).Unlikethelargecoal-basedenergycompanies,theiroilandgascounterparts–bothinternationalandnational–canberegardedastoobigtobeallowedtofail.16Countriesaremorevulnerablethanprivatecom-panies.Diversificationbyinternationaloilcompaniescouldpotentiallyaddressdevelopedcountrygov-ernments’concernsaroundlossofoilrevenueandtheneedtoshoreupofcompaniesintheshorttermthroughtaxcredits.Ontheotherhand,pensionfundsandinsurerswouldneedtodevelopothersourcesofreliablereturnsasdividendspaidbytheoilcompaniesdwindle(Holmes&Orozco2017.Thesituationforcountriesismorechallenging:notonlyisitmoredifficulttoshiftcapitalandcapabilities,theyarealsotied,geographicallyandconstitutionally,toownershipofreserveswhichcannotbesoldoutrightbutonlylicensedtocompaniesfordevelopment.Bycontrast,companiescould,iftheywanted,rundowntheirexistingreservesinlessthan15years(Manleyetal.,2017).

A furtherobviouschallengerelates toequityconsiderationsandthe importanceofsecuringa ‘justtransition’ (L.Hermwille,2017).But ‘while there isgrowing interest… insupply-sideclimatepolicyoptions,theattendantequityquestionshavereceivedrelativelylittleattention’(Kartha,2016,p.1).Trillionsofdollarsin‘foregonerents’maybeatstake,constitutingasubstantialshareofGDPinmanycases(Kartha,2016).Controloverfossilresourcesisunevenlydistributedamongcountries,andoftenalsoamongregionsandindividualeconomicentitieswithinthem.Sotooarethebenefitsofexploitingthem. That some stand to losemuchmore than others from any future constraints on extraction(McGlade&Etkins,2015)constitutesahugechallengetomulti-lateralefforts.17

AsHermwille(L.Hermwille,2017)notes,phasingoutofcoal,oil,andgas‘wouldhavetobeplannedandexecutedinaproactive,long-termwayandsystematicneweconomicperspectiveswouldhavetobedevelopedfortheaffectedregions’.Buttodate,alackofincentivesencouragingeconomicdiversi-ficationisevident(Tagliapietra,2017).ForMENAoilexporters,thisproblemisexacerbatedbyprivateinvestors’unwillingnesstoinvestinnon-oil,potentiallyimport-substitutingsectors,forfearthatwhenoilpricesrise,sowillvalueofthecurrencyofforeignexchanges,makingexportslesscompetitive.

OnthespecificissueofFFS,thoughwidelyrecognisedasdesirablefromefficiencyandclimateprotec-tionperspectives,theirremovalalsoraisesseriousequityissues.Benefitsofsubsidyreform–particu-larly in theshort term–willbeunevenlydistributedandstronglydependentontheapproachandcomplementary(compensatory)measuresadopted(Whitley&vanderBurg,2015).Complementarymeasuresshouldaimtoimprovethecompetitivenessorviabilityofthosewhostayinthesector(s),supportthosewhowanttoleavetheindustryortodiversifyintootheractivities,andtakeintoconsid-erationthepotentialoftheprivatesectortocreatenewopportunities(Caldecott,Sartor,&Spencer,

16 ForexampleRWE’smarketcapisaroundUSD8.4billionscomparedtoExxonMobil’sUSD314.5billions

(Holmes,2017).17 Edenhoferetal.(O.Edenhofer,Flachsland,Jakob,&Lessmann,2013)estimatethevalueoftheGHG

emission endowments that are created by establishing a cap-and-trade system (‘climate rents’) ataroundUSUSD1trillionperyear.Theyarguethat‘amajorandsofarperhapsunderappreciatedchal-lengeofclimatepolicynegotiationsistodealwithwhatmaybelargestdistributionalnegotiationstheglobalcommunityhaseverengagedin’.AsKartha(Kartha,2016)notes,thisappliesevenmoretofossilfuelextractionrents.


2017;Whitley&vanderBurg,2015).FFSareparticularlyhigh intheMENAregion,wheretheyareestimatedat13per centofGDPand35per centof government revenues (Caldecott et al., 2017;Whitley&vanderBurg,2015).

ThemainchallengestomultilateralactionwillbetodefinewhatconstitutesFFSs,achievetransparencyabouttheirapplication,bridgethedeveloped-developingcountrygap,andtosetoutenforceableob-ligationswithimplementationtimelines(Asmelash,2017).Thecross-cuttingnatureoftheissuemeansthattheglobalefforttophaseoutFFSslacksanobvious,singleinstitutionalhomeattheinternationallevel(Asmelash,2017).Arguably,asingleinternationalorganizationisneededtocoordinateotherwisefragmentedefforts,provideaforumfornegotiationstowardsaninternationalagreement,andoverseeitsimplementation.

Researchershaveidentifiedseveralreasonsforthepersistenceofsubsidies(Whitley&vanderBurg,2015),togethercreatingadangerous inertia.Aprincipalreasonfor lackofprogressregardingbothproducerandconsumersubsidiesislackofinformation.A2015inventoryofFFSuncoveredabout800typesofsubsidy,mainlyinnationalbudgets,buteventhatdidnotcoverallfactorscausingartificiallylowerprices(OECD,2015b).Mostarenotclearlyidentifiedinstandardgovernmentbudgetdocuments(Whitley&vanderBurg,2015). Inorderforgovernmentstobefullyaccountablefortheircommit-ments,thereisanurgentneedformoretransparentandcomparableinformation.Theimportantroleof special interestsalsoneedsmention.Because thebenefits of subsidies areoften concentrated,whilethecostsarespreadacrossthegeneralpopulation(i.e.consumersandtaxpayers),politicallead-ersfaceasymmetricincentives.Thelackofcountervailingalobbystrengthensvestedinterests’chanceofblockingsubsidyreforms(Asmelash,2017).Theeconomicandpoliticalpowerofthefossilfuelsec-torhasenabledthemtostrongly influencedomestic(and indeedinternational)climateandenergypolicies,andtobesuccessfulshapersofpublicopinion(Kartha,2016).Afurtherimplicitreasonliesintheweaknessof institutions:governmentssometimessubsidisefossil fuelsbecausethey lackothereffectivemeansand institutionalcapacity to implementmore targetedpolicies (Whitley&vanderBurg,2015).

4.7.3 Promiseandpotentialofinternationalcooperation

Herewetrytodescribetheroleandimportanceofeachinternationalgovernancefunction,firstforextractiveindustriesingeneral,thenspecificallyconcerningFFSreform.


Inprinciple,there isaclearneedtosignaltheresolveofgovernmentsandothers, indicating‘likelypolicytrajectoriestobusiness,investorsandotheractorsoperatingatalllevels’(seesection3above).Consensualanddeliberatetransitionawayfromextractionoffossilfuelsrequiresacommonunder-standingof itsnecessityandurgency.Stronginternationalsignalscanhelptoachievethiscommonunderstanding,basedonthelearningandknowledgedescribedunderthepreviousheading.Thesec-tionaboveonbarriersnoteshowpensionfundsandinsurerswouldneedtodevelopothersourcesofreliablereturnsasdividendspaidbytheoilcompaniesdwindle.Strongsignalsfromglobalinstitutionswouldfacilitatethis.

Settingrulestofacilitatecollectiveaction

Ideallytargetswouldbesetandimplementedthroughaglobalinstrument,recognisedasequitable.AsstatedinSection3,‘agreementoncollectiveactionrequiresagreementonthecontributionofeachindividualpartyandhenceonaburden-sharing’.Todate,internationalclimatenegotiationshavefo-cussedondeterminingwhocanemithowmuchfromfossilfuels.Theoretically,theycouldgoontoaskwhocanextracthowmuchintermsoffossilfuels,establishingaformof‘burdensharingagreement’.


The Kyoto 2 concept (Tickell, 2008) suggests a global system, implemented through the UNFCCC,wherebythebulkofGHGproductionrightsareallocatedbyregularglobalauctionopentoallbidders.ProducersoffossilfuelsandindustrialGHGswouldneedtoholdsufficientrightstomatchtheirpro-duction.AuctioningofpermitscouldcrediblyraiseasumofaboutEUR1trillionperyearforamulti-purposeClimateChangeFund,withanemphasisonaddressingtheneedsofthepoorandmostad-verselyimpacted.Theconceptwouldbeaboldre-orientationofcurrentinternationalefforts,andthusagreatchallengetonegotiate.


Globalregulationwouldrequiremonitoringandverificationofimplementation.ItmakesmostsensetodiscussthispredominantlyintermsofFFS(seededicateddiscussionbelow).


IthasbeensuggestedthattheproblemoflackofinvestmentinboostingtheprivatesectorsofMENAcountries,whichperpetuatestheirstatusas‘rentier’ratherthan‘production’statescouldberemediedbystrategicinvestmentbysovereignwealthfunds(Tagliapietra,2017).Thiswouldrequire‘stronggov-ernanceandforward-lookingvisionsonthepartofgovernments’(Tagliapietra,2017),andwouldben-efitfrominternational-levelcoordination.

Seealsospecificdiscussionofsubsidyreform,below.


Tohelpovercomethecurrentstalemateoverthesupply-sideofclimatepolicy,Kartha(2016)suggestsimprovingknowledgeandunderstandingaroundparticularquestions(thecurrentabsenceofwhichpreventsstrongrecommendationsonimprovedinternationalcooperationinthissectionasawhole).Suchimprovedknowledgecouldbegintoshiftengrainedperceptionsofthe‘nationalinterest’infossil-fuelproduction-reliantcountries.Relevantquestionsinclude,interalia:

• Howfardoesfossilfuelextractionreallycontributetodevelopment,givendocumented‘neg-atives’ including environmental and human rights impacts, concentration of wealth andpower,Dutchdisease18andgeopoliticalinstability? Suchanassessmentcouldinformeffortstodecidehowextractioncouldbedistributedsoastomaximizedevelopmentbenefits.

• Whatarethedistributional impactsofpoliciesconstrainingextraction?Whenaredomesticstepssufficient,andwhenmightinternationalsupportbeappropriatetohelpalleviateregres-siveimpacts?

• What‘justtransition’lessonscanbelearnedfromothersectors?Whatobligationsmaysomenationsbeartosupportjusttransitionsinothernations,analogoustosupportformitigationandadaptation?

• Whichcountries’resourcesshouldstayintheground,andwhichshouldbeexploited?

• Howtodecideontheabove:basedoneconomicefficiency,ethicalprinciples,acombination,mediated by tradeable “extraction rights”? Is there a role for command-and-control ap-proaches,e.g.a‘coalnon-proliferationtreaty’?19

18 Asituationwheregrowthinnationalincomefromnaturalresourceextractiondamagesothersectors

ofacountry'seconomy,byraisingthevalueofthecurrency.19 See e.g. https://thinkprogress.org/a-simple-proposal-a-coal-power-non-proliferation-treaty-

a7132622a7dd


Internationalcooperationonfossilfuelsubsidy(FFS)reform

InthemorespecificfieldofFFSreform,thefollowinggovernancefunctionscanbehighlightedasre-quiringattentionifthekindofbarrierswehaveidentifiedaretobeaddressedseriously,andasareaswherefeasiblepolicyactionsexist.

KnowledgeandLearning,andTransparencyandAccountability

Asnotedabove,oneofthemainchallengesistodefinewhatactuallyconstitutesFFSs,topre-emptdenialsthattheyexist.20Then,internationalinstitutionswillbeinapositiontohelpaddressthem.AsWhitleyandvanderBurg(Whitley&vanderBurg,2015)observe,whiledomesticreformscanproceedwithoutinternationallycomparabledata,thisinformationcanfacilitatevaluablelessonlearningandevaluationofprogress,creatingpeerpressureandenablingcross-countrycomparisonsoftheeffec-tivenessofdifferentinterventionsonFFS.Theysetoutarangeofpossibleinitiatives,frommandatorytovoluntary.MandatoryreportingonFFS(followingthemodelforagriculture)isconceivable.Amongthemore voluntary proposals is to include reportingon FFS inUNFCCCNational Communications.Countrycommitments to transparencycanalsobewidenedandstrengthenedwhengovernment’salreadycommitted to reform insistonsubsidy reform inbilateralormultilateral tradeagreements(Whitley&vanderBurg,2015).


Languageonlanguageonphasingdown“high-carboninvestmentsandFFS”couldbeincludedinthenegotiatedoutputsoftheUNFCCCinordertowidenandstrengthencountrycommitments(Whitley&vanderBurg,2015).

Settingrulestofacilitatecollectiveaction

Somesuggestthatstrongerregulatorystepsbeyondthevoluntarismreflectedinrecentinter-govern-mentalinitiativeswillbenecessary:

‘Pastprecedentsuggeststhatsuchcommitmentsmaynottranslateintoactualsubsidyreforms,and,evenwhentheydo,thereformstendtobevulnerabletooilpriceshocks,publicprotest,andchangesofpoliticalregime.Withoutanymechanismthattiestheirhands,reluctantgovern-ments often find it easier to renege on their voluntary commitments …’ (Asmelash, 2017;Tagliapietra,2017).

AsmelashandBirhanusuggest that itmaytakeacoregroupof ‘like-minded’countries topush formultilateral,bindingaction.Others(J.Smith&Urpaleinen,2017)seethefeasibilityofcoercionaslim-ited,andpreferpeerpressurethroughinternationalorganisationssuchasG20andAsiaPacificEco-nomicCooperation(APEC).


ThereisastrongneedforthisfunctiontobefulfilledintermsofFFSreform.WhitleyandvanderBurg(Whitley&vanderBurg,2015)suggesttheneedtoincreasetechnicalandfinancialsupportforna-tionalefforts,andtoensureclimatefinanceisnotusedtosupportfossilfuels.Resourcesandfinancefor‘complementarymeasures’indevelopingcountries,suchassupportforhealthservices,education,socialprotection,energy-sectordevelopmentandeconomicdiversification,needtobelinkedtosub-

20 SaudiArabia,forexample,hasreportedthatithadnoinefficientFFSandtherefore‘phasingoutineffi-

cientFFSdoesnotapplytoSaudiArabia’(J.Smith&Urpaleinen,2017).


sidyreformprocesses,either intermsof institutionalarrangementsorcarefultiming. Itwillbe im-portant to not only increase these resources, but to also foster linkagesbetweenexisting supportmechanismsandtheprocessesofreformingFFS.

Internationalinstitutionscanputinplacefinancialandothereconomicincentives,particularlyforde-velopingcountries:byindicatingclearlythatfossilfuelsubsidyreformispartofacountry’smitigationportfolio,thelikelihoodincreasesthatsuchactionscanbeeligibleforsupport.Eventhoughnational–level subsidy reform ismore likely tobe triggeredbyeconomicand fiscalmotivations, theclimateregimecouldstrengthenthecaseforreformbyofferingtheseincentives(VanAsselt&Kulovesi,2017).

Overall,theprimarychannelsforgreaterinternationalambitionandactiononFFSreformmaybesum-marisedas:‘bodiesforreporting,trackingandaccountability;financialandtechnicalsupport,whichmustbedivertedfromprovidingsubsidiesandtowardsreform;multilateralandbilateralagreements(includingontrade);andagreaterunderstandingoftheprocessesbeingundertakenbyregionsandcountriesthatarealreadyleadingbyexampleinreformingsubsidiestofossilfuels’(Whitley&vanderBurg,2015).

4.8 Transport


Thetransportsector isoneofthefastest-growingemissionsourcesworldwide. Intheperiod1990-2014,totalsectoralemissionsfromfuelcombustiongrewby71percentandreached23percentofglobalCO2emissions(7.5GtCO2)in2014(IEAfigures,includingemissionsfromroad,domesticnaviga-tion,domesticaviation,andotherdomestictransport,butalsomarinebunkersandaviationbunkers,seesection4.9)(IEA,2016a).

5.7GtCO2ofthesewereemittedbyroadtransportalone(IEA,2016a).Andtheroleofthetransportsectorissettobecomemoreprominenteveniftheworldmanagestoembarkona2°Ccompatiblepathway. Themajorityof 2°C-compatible scenarios analysed for the fifth IPCC report indicate thattransportwillcontributethesinglelargestshareofemissionsin2050asemissionsfromindustry,build-ingsandelectricitygenerationdecrease(IPCC,2014c).

Passengertransportaccountedfor60percent,freighttransportfor40percentofglobaltransportenergydemand.Urbantransportemissions(currently40percentemissionsshare)areprojectedtodoubleby2050despitetechnologicalimprovementsintheabsenceofaggressivemitigationpolicies(Gota,Huizenga,Peet,&Kaar,2015).

Privateroadtransportisdominatedbyprivately-ownedindividualvehicleswithlowuseeffectivenessandhighemissionsperpersonkilometre.Especiallyincities,traveldistancesarecomparablylow(cf.(Chapman,2007),andsection4.10).

Nearlyallgrowthinthetransportsector,bothpassengerandfreight,isexpectedtooccurindevelopingcountriesandemergingeconomies(SLoCaT,2015).Oneofthemainchallengesofthenearfuturewillthereforebetodecoupleexpectedgrowthintransportfiguresfromemissionsinthesecountries.Thiswillnotbeaneasytask,astransportinitscurrentformishighlydependentoncombustionofoilprod-ucts.


• Roadtransportisalmostcompletelydependentoninternalcombustionenginesrunningongasolineordiesel.Electricalpowerandhydrogenfuelcellsarealternativepropulsionoptions,butarenotinveryhighuseasofyet.21

• Navigationalmostexclusivelyreliesonheavyoil.

• Aviationiscompletelydependentonkerosene,anotheroilderivative.

• Railtransporttoalargeextentalsoreliesondieselfuel,butelectricityasanenergysourceiswidelyusedaswell.

Decarbonisingtransportinindustrialisedcountrieswillnotbeanylessdifficult,buttheproblemstruc-tureissomewhatdifferent.Whileindevelopingandemergingcountriesthemaintaskistomakenewtransportcapacitiesindependentofoilproducts,transportinindustrialisedcountriesalreadyhasboththevehiclesandtheinfrastructurethatlocksinhighcarbonpractices.Thetaskinindustrialisedcoun-tries thereforewillbe toswitchexisting transportmodes.Thismeans largescale replacementofasystemthat is largelygeared towards servicingcombustion-basedvehicleswithanewsystemthatminimisestransportemissions.

CurrentstrategiesinthesectortofostermoresustainableformsoftransportveryoftenrelyontheAvoid-Shift-Improveframeworktowardsinfrastructureandservices(Bakker,vanAsselt,Gupta,Haug,&Saidi,2009;SRU,2005):

• Avoidtravelorreducetravel-length:Ideally,transportinfrastructureshouldbedesignedinawaythatminimisestheneedtotravel,andminimisesthelengthoftravelincaseofunavoid-abletravels.Thiscanbestbeachievedbyoptimisedinfrastructures,especiallyinurbanenvi-ronments(seesection4.10).Forfreight,thisalsomeansinfrastructuralplanninganddecisionsif(partsof)rawmaterialsorpre-productscanbesourcednearertotheareasofproductionorrefinement.

• Shifttraveltomoreclimate-friendlymodes:Iftravelcannotbeavoided,policiesshoulden-courageorregulatethatlow-emissiontransportoptionsarefavouredoverhighemissionones.Forpersonaltransport,thismeanstoencouragewalkingandbicyclingforshortertravels,andpublictransportsystemsforlongerdistanceones.Policieshereoftenincludeeconomicincen-tivesanddisincentives(Roadpricing,publictransportsubsidies),andregulations(e.g.car-freezones). For freight, this canmean incentivising theuseof rail or boat transport over roadfreight,whichagainmaytaketheformofeconomic(dis-)incentiveschemes(e.g.tollsystems),butalsomakingsurethatneededinfrastructures(e.g.rail lines)areinplace.Formotorisedtransportingeneral,electricvehicleshavetobemadethepreferred,andinthemediumtermonly,option.However,torenderelectricvehiclestrulyemissions-freewilldependonthede-carbonisationofthepowersector(seesection4.5).

• Improvetheenergyefficiencyofvehiclesandfuels:Technologically,bothfuelsandvehicles,butalsotransportinfrastructuressuchasroadsurfaceshavenotyetreachedtheirlimitsofenergyefficiency.Consequentially,policiesthatfosterenergyefficiencyshouldbeputinplacetoreapthehighest-possibleefficiency.Mostefficiencyimprovementsareeconomicallyposi-tive–policymakersshouldthereforecloselyscrutinisebarrierstoefficiencyimprovements.Itshouldbeclear,however,thatenergyefficiencyimprovementstendtolockincertaintechno-logicalpathways.Therefore,ifgovernanceframeworksaretostronglypushelectro-mobility,

21 Personalscootersareabitofanexception,asthereisastrongpush,especiallyinChina,forelectrified

scooters.Also,electricallyassistedbicyclesareincreasinglypopularandhavegainedasignificantshareoftheglobalbicyclemarket.


itmaybecounterproductivetospendlargeresourcesonefficiencyimprovementsofcombus-tiblefuelsandenginetechnologies.

Barringdisruptiveinnovationsinthesectorthatcombinetechnologicalbreakthroughswithsocietalreconfigurations, theseapproachescontinue tobeapromisingavenue to"greening" the transportsector.However,itispossiblethatsuchaninnovationisimminent.Arecentprognosis(Arbib&Seba,2017)comestotheconclusionthattheemergenceofautonomousroadvehiclesinconjunctionwithdistributedpassengerservices(Lyft,Uber)andagrowingrateofelectricvehicleswill leadtoarun-awaytransportrevolutiontowardsautonomoustransportservicesthatarenolongerreliantonper-sonally-ownedvehicles,butratherfleetsofrobotictaxis(Transport-as-a-Service)thatarevastlymoreefficientbothintermsofenergyuseandutilisation.Theauthorsholdthatsuchserviceswouldallowvastlycheapercostspertravelledkilometrethancurrentformsofpersonalandfreighttransport,andwouldleadtoasignificantdecreaseinvehiclenumbers,effectivelyeliminatingcongestionandmakingpersonally-ownedinternalcombustionvehiclesmoreorlessobsoleteby2025,atleastinindustrialisedcountries.Atthesametime,batteriesinthoseautonomouscarswouldbeutilisedasstoragefortheelectricitygrid,furtherstrengtheningoptiontocompletelydecarbonisepowerproductionbyalleviat-ingcurrentconstraintsofpowerstorage.Theauthorsforeseearesultingdropinoildemandby30percentin2023,leadingtoaglobaloilpricecollapsetoaboutUSD25perbarrel.

Theanalysiscurrentlyisanoutlier,though.Mostotherstudiesforeseeamuchslowerchangetowardsformsofsustainabletransport,thoughtheauthorsclaimthatbyusingsystemsanalysistools,theyaremuchbetterabletopredicttrendsinthetransportsector.AresearchnotebyBloombergNewEnergyFinancefromearly2016predictsasalesofelectricvehiclestoreachatmost50percentofthemarketin2040inthemostoptimisticscenario(Morsy,2016).

Whatiscertainisthatthecombustionengineisunderpressure.Transportcontributesstronglytolocalairpollutionenhancingpressureonthesectortocleanup.Atthesametime,batterytechnologyisadvancingrapidlybothintermsofcostsandintermsofdrivingrange.Increasingnumbersofcountries(China,France,India,theNetherlands,Norway,theUK)aremullingplanstophaseoutorevenoutrightban salesofnewdiesel or gasoline vehicles in timeframes ranging from2025 to2040 (Chrisafis&Vaughan,2017;Stumpf,2017).Someincumbentmanufacturersarestartingtomovemorestronglytowardselectrification.Volvohasannouncedthatallnewmodelswillbeelectricorhybridvehiclesstartingin2019(Ewing,2017).VWrecentlyannouncedplanstoinvest€50billiontodevelop80newelectrifiedmodelsby2025(vonGermis,2017).


Thetransportsectordoes,however,faceseriouschallengesthatbarthewaytochange.Powerfulin-cumbentactorsprofitimmenselyfromthestatusquo,andwilllikelyputupstrongresistanceagainsttheemergenceofaradicallychangedtransportconcept.Amongthemare:

• Thecar-manufacturingindustry.Thisindustryisamajoreconomicpowerinvehicle-producingcountries,oftenwithstronghistoricalandpersonaltiestopoliticians,butalsotoworkers,andsometimesthemilitaryaswell.Thecarindustryalsoissurroundedbyalongproductionchainthatwouldstandtoloseitscorebusiness.

• Theoilindustry.Asmosttransportvehicles,beitcars,planes,ships,ortrains,historicallyandcurrentlyrelyonoilproductstorun,theoilindustrystandstolosemassivelyiftheinternalcombustionengineweretobereplacedbyelectricalorhydrogenpropulsion.

• Themotoristlobby.Especiallyinindustrialisedcountries,thereareoftenhighlytraditionalcarclubsandassociationsthatarestronglyconservativeandhighlyscepticconcerningchangesof


transportationsystems,especiallyforpersonalvehicles.Completelydepersonalisedcar-shar-ingwouldthreatentheirpowerbase.

• Thefreightbusiness.Companiesinthefreightbusinessdonothaveaninterestinaradicallychangingtransportsector,asthiswouldpotentiallythreatentheirbaseofbusiness,andinanycase,wouldmeanalargesetoflostinvestments,e.g.intrucks.

Apartfromtheseactorsthereareanumberofbarriersthatstandagainstchange.

Technological:Technologiesassucharemostlynotaproblem,asmostinnovationsneededtofostermore sustainable transport systemsare inplace.The largestbarrierona technological level is thedevelopmentofhigh-yieldbatterysystems.However,a"techno-cultural"barriercanpotentiallybethatmanyengineersanddesignersimplicitlyfavoursystemicimprovementstoexisting,combustion-based technologiesover themore radical changesneeded for a large-scaledecarbonisationof thetransportsector.

Twootherbarriersare"techno-political"innature:Customersarecurrentlyfacedwithstandardisationproblemsinelectricalpropulsionsystems,astherearecurrentlynorealstandardssetforcharging,e.g.currents, connectors etc., which vary widely across manufacturers, countries, and even models(Pereirinha&Trovão,2016).Thislackofstandardisationmaydetercostumersfromadoptinginnova-tivetechnologiesearlyon.Theotheroneconcernsthechangeininfrastructurethatisneeded-currentinfrastructuresarestronglygearedtowardsservicingcombustionengines(fuelstationsetc.).Inordertofosterachangee.g.towardselectricalpropulsion,theinfrastructureneedstobechangedalmostcompletely.Another"socio-technical"barriertochangecanbetheabsenceofviablealternatives-asmuchdependsoninfrastructures,especiallyruralorremoteareasmayfacedifficultiesofaccess(nopublictransport,norailwaylinesforfreighttransportetc.).

Economic:Ascurrentmobilitypatternsrelyheavilyonindividualownershipofunits,replacementcostsfall towards individual users. This does impose a high economic burden to owners that especiallypoorerpeoplewillnotbeabletoafford.Anothereconomicbarrierconcernsthestate-fueltaxescanbealargesourceofincometostates,makingthemhesitanttopushtoostronglyforsun-settingfossil-basedtransportmodes.(Ontheotherhand,FFSconstitutealargeportionofmanystates'expendi-tures,sotheremaybeanetpositiveatleastinsomecases).

Institutional:Asallformsof(motorised)transportdependtolargeextentsoninfrastructures,andin-frastructuresconstitute large, long-terminvestments,any infrastructuredevelopmentconstitutesapotentialinstitutionallock-in.Aradicalchangeintransportinfrastructureasnecessitatedbyalow-orzero-carbonparadigmtriggers investmentneeds thatare toohigh toshoulder formanycountries,especiallyinthedevelopingworld,ontheirown.

Linkages:Aspointedoutabove,transportandoilindustriesstronglydependononeanother.Changesinonewillverylikelyleadtochangeintheother.Thisconstitutespotentialtoswattwofliesatonce,but also double opposition by two strong incumbents. Sector-wise, the transport sector is closelylinkedtonationalpowersectors,especiallyifafuturestrengtheningoftransportelectrificationistakenintoaccount.Also,due to infrastructureneeds,anychange in the transport sectorwillhave tobeaccompaniedbyadaptingurbansettlementsandinextensionnationalinfrastructurestoaccommo-dateshiftingparadigmsintransportsystems.Therefore,commontargetsandsolutionswillverylikelybemoreeffectiveandhavehigherprobabilitiestolimitcarbonemissionsthanisolatedsectoralinsti-tutions.

Culturalbarriers:Vehicleownershipisoftenconnectedwithasenseofpersonalfreedom,andanat-tachmenttothevehicle.Moreover,inmanycountriescarsareseenasastatussymbol.Somecountries(US,Germany)haveastronghistoricalandculturalbackgroundascarproducersinsomuchthatitisoftenperceivedasunthinkabletosunsetindividualcarownership.



GuidanceandSignal

Asevidentfromnationaldiscussionsaboutendingtheuseofcombustionenginevehicles,targetsandtimetablescanbeastronglevertoredirectsectoraldevelopments.Internationalagreementonatar-gettocompletelyendtheuseoffossilfuelsinthetransportsectorwouldsendastrongsignaltoallcarmanufacturerstoeitherchangedirectionorbeputoutofbusiness.TheongoingscandalrelatedtoDiesel technologymayprovideawindowofopportunity inthisrespect.Asectoraldecarbonisationtargetwouldalsosupportavoidandshiftstrategiesastheseminimisetheneedforenergyinputsinthefirstplace.Agreementonanewparadigmcentredontransit-orienteddevelopmentandprioritis-ingpublicandnon-motorisedtransportoverindividualmotorisedtransportcouldbeevenmoreeffec-tivebutisprobablylessrealisticpolitically(seealsosection4.10).

Internationalcooperationcouldsetacommonroadmapforthesector,withdifferentiateddecarbon-isationtargetyearsfordifferentcountrieswithdifferentlevelsofdevelopment.Targetsandroadmapstoreachthemwouldhavetodistinguishbetweendifferentcapacitiesofcountries,andensuretech-nicalandfinancialaidandcooperationtoachievethegoals.Milestonesforachievingeverhigherlevelsofcarbonneutralitycouldbesetfordifferentcountrygroups,withaquickerpacefordevelopedcoun-tries,andsomemoreslackforlessdeveloped.


Definingcommonstandardsisaclassiccollectiveactionproblemthatprofitsfromcoordination.Inter-nationalgovernancecanplayalargeroleinremovingbarriersthatarisefromalackofstandardisation.Onceastandardisset, it is likelythat itwillbeadheredtoprovidedthereissomeenforcementbynationalentities in thebeginning.On theotherhand, leavingstandardisation to theprivatesectorregimesoftenleadstodivergentstrategiesandcomplicationsinfindingacommonground(seee.g.phonecharging),butmayalsoensuecompetitionthat,inturn,furtherdrivesinnovation.

Acommonregulatoryapproachofasmanycountriesaspossiblestrengthensthechancetopavethewaytowardsaglobalshifttowardssustainabletransportsystemsonceacriticaljunctureisreached.Harmonisationofrulesandregulations,suchascommonfleetemissionlimits,ortheformulationofcommonemissiontradingsystemsorotherformsofcarbonpricingcansignificantlyimprovethevia-bilityofsuchachange,asitaddressesconcernsofeconomiccompetitivenessandfree-ridingforindi-vidualcountries.


Transparencyrequirementsinthetransportsectorwouldlikelyvarywiththescopeofinternationalcooperation,andconsequentlytherulesset.Commonstandardswillnotrequirestrongaccountability,asstandardsaremostlyself-enforcingoncetheyhavereachedacertainpointofpenetration.

Emissionlimitsshouldbemonitoredbyglobalinstitutions,creatingacommonknowledgebase.How-ever,suchatransparencyframeworkwouldneedtostayonaratherhighandabstractlevel,asnationaltransportsystemswillmostprobablynoteasilybeharmonised.Thedesignofatransparencyframe-workwouldneedtogetmoredetailifacommondecarbonisationroadmapisagreedinternationally.Inthatcase,atransparencyframeworkmonitoringthecompliancee.g.withagreedmilestoneswouldneedtobeputinplace.

Finally, if a harmonised system for carbon pricing and a trading system is extended to nationaltransport sectors,an international registrywillneed tobe installed inorder toensure thatagreedemission limitsandthresholdsarerespected inordertoensurethe integrityof thesystem.Sucha


registrywouldmostprobablynotonlycoverthetransportsector,butallregulatedsectorsunderacommonemissionlimit.


Asregardsthebuild-upoflarge-scaleinfrastructures,internationalcooperationcouldtaketheformofrisksharingarrangementsthathelptobringdowncapitalcostsindevelopingcountrieswithgenerallydifficultinvestmentclimates.Thismayenabledevelopingcountriestoshouldertheincrementalcostsofmakingtherequiredinvestmentsclimatechangeresilientandwithafocusonlow-carbonsolutions.Technologycooperationcouldalsobeusefulinordertoimplementbestpracticesjointly.

Likely,risk-sharingwillnotsufficetoenableallcountriestocompletelyoverhaultheirtransportinfra-structure.Therefore,internationalcooperationwillmostlikelyalsohavetoincludearrangementsfortargetedfinancial,technicalandcapacityassistancewhereitismostneeded.


Currentstudiesindicatethatmanydeveloping/emergingcountriesmimicinfrastructuredevelopmentsofindustrialisedcountries,albeitatoftenamuchgranderscale(Arndtetal.,2014).Internationalco-operation,mainlybutnotlimitedtoNorth-Southcooperation,onbestpracticesthroughpartnershipssuchasLocalGovernmentsforSustainability(ICLEI)orthroughtheNon-StateActorZoneforClimateAction, would help leapfrogging such suboptimal solutions. This would include common technicalknowledge,butwouldalsoextendtoexchangesonpoliciesthathaveshownhigheffectiveness.Whilepolicieswillalwaysneedtobeshapedaccordingtonationalcircumstance,policydialogueswillprovideusefulstartingpointsfortransportdecarbonisation.

4.9 Internationaltransport(aviationandmaritime)


Global aviation (domestic and international combined) currently produces around twoper cent ofglobalCO2emissions;globalshippingaboutthreepercent(Gencsu&Hino,2015).22Incombination,however, the internationalshippingandaviationsectorsconstituteasignificantlygrowingshareofglobalemissions;growingbyaround80percentintermsofcarbonemittedbetween1990and2010,whilegrowthofothersectors intheworldeconomywasapproximately40percent(CDIAC2013a;CDIAC2013b;UNFCCC2013cited inBows-Larkin2015). Inpart thiswasdrivenby rapidgrowth inemergingeconomies,butalsoaroseasaconsequenceofthelackofcoverageofthesesectorsinthenationalmitigationpoliciesofUNFCCCAnnexInations(Bows-Larkin,2015).Thishighgrowthislikelytocontinue.Forshipping,CO2emissionsareexpectedtoriseby50-250percentby2050undercurrentpolicies(IMO,2014).Foraviation,arangeofscenariosispossibleinwhichCO2emissionsrisebyupto515percentbetween2000and2050(Gudmundsson&Anger,2012),althoughmoretypicalfiguresarearound220percent(Bows-Larkin,2015).

Theimplicationsfortheglobaltemperaturetargetsareserious:a50percentchanceofavoiding2�entailsareductionof71–76percentby2050foraviation,calculatesBows-Larkin(Bows-Larkin,2015).Bringingshippingintolinewouldrequirea50percentreductionfrom2012levels(T.W.P.Smithetal.,2015).Undercurrentpolicyandprojections,assumingthattotalemissionsfallsufficientlytohold

22 However,aviation’snon-CO2emissionsathighaltitudesintensifytheimpactofaviationemissionson

globalwarming,makingthemmuchgreaterthanthatofCO2alone.Blackcarbonemissions,interalia,fromshipsarealsorising(Azzara,Minjares,&Rutherford,2015).


warmingat2�,the(international)aviationandshippingsectorscombinedcouldcontributenearly40percentoftotalCO2outputby2050(Cames,Graichen,Siemons,&Cook,2015).Governanceeffortstocontainorreversethesetrendsfacethedifficultyofallocatingresponsibilityforinternationalemis-sions,whichmakeupthemajorityofemissions,butwhicharenotcoveredunderdomestic-levelpolicyarrangements(Bows-Larkin,2015).

Tradeflowsandglobalisationrepresentimportantexogenoustrendsdrivingsectoraldevelopments.Totalinternationalseabornecargo,forexample,hasrisenfrom2.6billiontonnesin1970to9.5billiontonnesin2013(Gencsu&Hino,2015).Manystakeholderssuggestthatbecausethemaritimeindustryservesdemandsoriginatinginothersectors,managementofthedemandforshippingshouldnotbeattempteddirectly.

Thestructureoftheaviationindustry–featuringtwodominantmanufacturersandafewkeyairlines–issomewhatconducivetodecarbonisationefforts(Bows-Larkin,2015).Majorregionalshiftsarealsonotable,withgrowthofairtravelindevelopingmarkets,notablyinLatinAmericaandAsia.Inthecaseofshipping,acomplicatedindustrystructure-manyshipbuilders,owners,operators,shippers,char-terers and end-users –makes steps to encourage decarbonisationmore problematic (Bows-Larkin2015).FollowingBows-Larkin(Bows-Larkin,2015),inthediscussionbelowwedistinguishtechnologicalaspectsfrompractice/operationalanddemand-sideaspects.

Aviation

Concernoverenergycostshasdrivendevelopmentandrelativelywidespreaddeploymentofbettertechnologyintheformofextremelyefficientgasturbineengines.Opportunitiesforongoingimprove-mentsare,however,indecline(Bows-Larkin,2015).Furthergainswouldrequireafundamentalshiftindesign,e.g.open-rotorenginesorpropfans,whichcouldcutfuelintensityperaircraftbyuptoa50percent(Akerman,2005),butwhicharecurrentlyheldbackbyhighnoiseandvibrationlevels.Newconstructionmaterialscanalsodeliverbetterfuelefficiency,butrealbenefitsonlymaterializeasthefleetrenews.Biofuelsarebeingdevelopedandmayalsooffersomebenefits.Theindustry’sowntar-gets (seebelow) suggest that combined technologicaldevelopmentsoffer aone–twoper cent im-provementinfuelefficiencyperyear(Bows-Larkin,2015)(insufficientofitselftobecompatiblewiththe2℃target,althoughrecentlyfiguresof3.7percenthavebeenrecorded(IEA,2017b).

Intermsofpractices/operations’,unlikeshippingaviationcontinuestobelargelyorientedtowardsleisurepassengers-althoughaccordingtosomeestimatesonlyfivepercentoftheworldpopulationhaseverflown(PeakOil.com,2014).Industrypressuretoexpandairportcapacityhasmetwithsuccess.While increases inairportcapacity(and improvedairtrafficcontrol)canreducefuelconsumedperpassenger-km,theycarrytheriskofreboundeffects,maintainingorraisinggrowthrates,increasingabsoluteenergyconsumption(Bows-Larkin,2015).

Shipping

Relativelyhighengineefficiencymakesshippingarelativelylow-carbonfreightmover.Nevertheless,awiderangeof incrementaltechnologies,manyofwhichcouldberetrofitted,areyettobewidelyexploited(Mofor,Nuttall,&Newell,2015).Efficiencycanbedisaggregatedintotechnicaldesignandoperationalaspects;evenshipswithsimilardesignefficienciescanhavevastlydifferentoperationalefficiencies(Gencsu&Hino,2015).Speedisacriticalfactor:atenpercentreductioncorrespondstoa27percentdropinfueluseperunitoftime(Gencsu&Hino,2015).‘Slowsteaming’practices,widelyadoptedfrom2007–2012inresponsetotheglobaleconomicdownturn,reduceddailyfuelusebyanaverageof27percent,butbyover70percentinsomeshipsizecategories(IMO,2014).

Biofuelsarecurrentlythemostrelevantalternativeforreplacementorblendingwithfossilfuelsinthesector.Althoughexperiencewiththeiruseandthescaleoftheirapplicationintheshippingsectoris


stillminimal,recenttechnologylearningregardingsecondandthirdgenerationbiofuelsmakesthesethemostviablerenewableoptionwiththehighestlong-termpenetrationpotential(Moforetal.,2015).

WhatneedstochangetophaseoutGHGemissions?

Despitesomeencouragingrecentdevelopments,includingcommitmentsbytheaviationsectortocapnetemissionsat2020levels(principallybyoffsetting)(Gencsu&Hino,2015),progressinbothsectorshasbeenslow.ThelatestassessmentbytheIEAofprogresstowardsinterim2°Cscenariotargetsin2025warnsthatinternationalshippingis‘off-track’whileaviationshowssomeimprovementbutmoreeffort is needed (IEA, 2017b).Although lower carbonalternatives certainlyexist, phasingoutGHGemissionsentirelyinthesesectorsisadistantprospect.Mitigationpotentialsvarysignificantly:whileshippinghasmanytechnologicalandoperationaloptionsthatcouldbeeffectiveintheshorttome-diumterm,aviationdoesnot.Inthissection,weagaindistinguishtechnologicalmeasuresfrominter-ventionsbasedonchangingoperationsanddemand-sidemeasures.Webeginwithshipping.

MeetingtheIEA’s2�scenariorequirestheglobalshippingfleettoimprovefuelefficiencypervehicle-kmatanannualrateof2.3percentbetween2015and2025.Initscurrentform,theIMO’sEnergyEfficiencyDesignIndexmandatesaonepercentannualimprovementintheefficiencyoftheglobalfleetfrom2015to2025(IEA,2017b).Further improvementstoefficiency,throughawiderangeofincrementaltechnologies,manyofwhichcouldberetrofittedtoexistingships,arepossible(Moforetal.,2015).Inaddition,pioneeringwindpowertechnologies–includeFlettnerrotors,kites,andfixedorrigidsails-couldofferfuelsavingsofupto50percent(Moforetal.,2015).Regardingtherangeofalternativefuels,LNGcutstheemissionsintensityofoperationsintheshortterm,andisfavouredbythe sector as a transitional fuel; a suitable bunkering network is rapidly evolving on establishedtransportroutes(Moforetal.,2015).However,afleet-wideswitchtoLNGwouldbe insufficienttodeliver2�-typedecarbonisation,andwouldriskfurthercarbonlock-in.Biogas,biofuels,andmicro-algae are subject to the same sustainability concerns expressed about them in other sectors(Bengtsson,Fridell,&Andersson,2012).

Variousconceptsandprototypesexistforelectricandhydrogenfuelcell-poweredvessels.However,emissionsavingsdependontheprimarysourceofenergybeingused(Moforetal.,2015).Potentialforsolar-powerhasalsobeennoted(Moforetal.,2015),aswellasforalternativefuelssuchashydro-genandammonia.Developmentofhydrogenfuelcelltechnologyhasmadesignificantadvances,alt-houghsustainabilityofhydrogenproductionisacriticalissue,withalmostallcurrentcommercialpro-ductioncomingfromfossilfuels(Moforetal.,2015).Atleastinprinciple,nuclearpowercouldhaveasignificant decarbonising effect (Walsh,Mander, & Larkin, 2017), benefiting from development ofmodularnuclearreactorsinthepowersector.Todevelopsuccessfulmarinemitigation,‘itisessentialtoconsidertheinterdependenciesbetweenshipspeed,levelandpatternofdemandforservices,andtheextentandrateofinnovationinpropulsiontechnology’(Walshetal.,2017).Therateoftechno-logicalinnovationistooslow,meaningthat‘itisdifficulttoforeseehowdeepdecarbonisationcanbeachievedwithoutanimmediate,fleet-widespeedreduction;andaland-basedenergy-systemtransi-tionstronglyinfluencesshippingdemand,whichinturn,influencestheextentofrequiredlow-carbonpropulsiontechnologychange’(Walshetal.,2017).Reducingpowerrequirementsimprovesthepro-portionthatcouldbeprovidedbyrenewabletechnologies,andalsoallowsimmediatecutsinCO2tobedelivered(IMO,2014;Psaraftis&Kontovas,2013).

Thescaleofthetechnologicalchallengeforaviationismuchgreater.Here,emissioncutscannotbemadeby reducingspeedor introducingon-board renewableenergysources.Althoughbiofuelsareregularlytouted,andinitiativesandresearchpartnershipsareunderwaytoscaleuprenewable jetfuelandreducecosts(Gencsu&Hino,2015)theyfailtoaddresstheimpactofcontrailsoncloudfor-mationandaerosoldeposition(T.Smith,2015),andprovoketheaforementionedsustainabilitycon-


cerns.Arguably,theaviationsectorrepeatedlysuccumbstotechnology‘myths’,which‘mustberec-ognised,confrontedandovercomeasacriticalstep…tosustainableaviationclimatepolicy’(Peeters,2016).

Lesscontroversially,widerefficiencyimprovementsinaviationarepossibleandcost-effective:thedif-ferencebetweenthefuelefficiencyoftheleastandmostefficientUSairlineswas27percentin2013,andtherewasnoimprovementinfuelefficiencyinUSpassengerairlinesondomesticflightsin2012–2013(Gencsu&Hino,2015).In2017,theInternationalCivilAviationOrganisation(ICAO)adoptedaninternationalCO2standard,applicabletonewaircrafttypedesignsfrom2020,andtodesignsalreadyin-productionasof2023(ICAO,2017).

On thedemand-side, although investments inhigh-speed railmay serve to reducedemand for airtravel,itsroleislimitedinthataround80percentofallaviationemissionsarefromflightsover1,500km(ATAG,2014).Technological innovations,suchasvideo-conferencing,canalsoservetomanagedemandinsomecircumstances,savingtimeandmoneyforbusinessesandindividuals.

Tosummarise,‘[o]nlyelectricalpropulsion,demandreduction…oroffsettingremainingemissionswillenablefulldecarbonisationoftheaviationsector’(Camesetal.,2015).Biofuelscouldalsocontributeifsensitivelyhandled.


Withshipping,acomplexsetofbarrierstotheadoptionoflowercarbonenergy(includingimprovedefficiencymeasures)canbecategorisedintermsoforganisational/structural,behavioural,marketandnon-marketfactors(Moforetal.,2015).Thiscomplexity,inpart,reflectstheuniqueandinternationalnatureoftheshippingindustry,withunderlyingconstraintsandfactorsbeyondtheabilityofindividualstatestomodify(Moforetal.,2015).Mostshipbuildinghasoccurredinjurisdictionswithoutclimatetargets,withmanydiversemanufacturers,aswellascharterers,owners,operators,andotherglobalstakeholders(Bows-Larkin,2015).

Withregardtoorganisational,structuralandbehaviouralbarriers,limitedR&Dfinancing,particularlyforinitialproof-of-concepttechnologies,isamajorfactor,togetherwithshipowners’concernsovertheriskofhiddenandadditionalcosts,aswellasopportunitycostsofrenewableenergysolutions.Historically, a lack of reliable information on costs and potential savings of specific operationalmeasuresorrenewableenergysolutionshasbeennoted(Gencsu&Hino,2015;Moforetal.,2015).Thefundamentalmarketfailureisoneofsplitincentivesbetweenshipownersandhirers,limitingthemotivationofownerstoinvestinsolutionssincebenefitsmaynotaccruetotheinvestingparty.Inves-torstendtoberiskaverse,especiallyaftertheshippingboomcollapsedin2006.Significantlevelsoffleetturnover/retrofittingmustbeachieved,themaintenanceofwhichacrossextendedperiodshashistoricallyproveddifficult(Walshetal.,2017).Sufficientlyrapidfleet-wideretrofitarguablyrequiresadequatedry-dockingservicesaroundtheworldandopportunitiesfordemonstratingnewtechnolo-gies (Walsh et al., 2017). Moreover, widespread technological uptake necessitates extensiveknowledgeexchangetoensurenewlyfittedtechnologiesareoperatedcorrectly.North-Southtech-nical co-operation and transfer of technologymaybe necessary. Early-adopterswould need to bestronglyincentivised(Walshetal.,2017).Furthermore,theshippingsector’slowpublicprofileresultsinlesssocietalpressuretochange.Ofthenon-marketbarriers,thedifferentclassesandscalesofships,themarketsandtraderoutesservedandthe lackofaccesstocapitalaresomeof thekeybarriers(Moforetal.,2015).

Intermsofspecifictechnologies,thehighpotentialofadvancedbiofuelstotransformtheshippingsectorultimatelydependsonanumberoffactors,includingtheglobalavailabilityofsustainablefeed-stock.Hydrogenfuelcellsalsoholdgreatpotentialbutthesustainabilityoftheenergysourceusedtoproducethehydrogen,aswellaslackofcost-effectiveandreliablelow-pressurestorageoptionsfor


thefuel,remaincriticalissues(Moforetal.,2015).Aradicaltechnologicalchangesuchasnuclearpro-pulsionwouldbecontingentonboththedevelopmentofappropriatemodularreactors,andaddress-ingwiderregulatoryandacceptabilitychallengesataglobalscale.

Intermsofslowsteaming,compensationintheformofincreasedshipsizeornumberstomaintainfreightflowsmightberequiredtoensureacceptabilitytotheindustry.Globalsupplychainsmustbecapableofaccommodatingspeedreductionsoverall journeylegs(Walshetal.,2017),whichmightrequirerestructuringofsomeindustries.

Thesimplerindustrystructureofaviation,comparedtoshipping,meansthatotherthingsbeingequal,incentivizingchangeshouldberelativelypractical(Bows-Larkin,2015).However,significantcommer-cial,technologicalandculturalbarriersexist.Forexample,currentpricesofbiofuelsarearoundthreetimeshigher thanconventional jet fuel.Althoughthe industry favoursoff-settingmeasures,uncer-taintyexistsoverlong-termavailabilityandcostofcredits(Gencsu&Hino,2015).Flyingishigherinpublicconsciousnessthantheshippingofgoods-makingdemandmanagementasensitiveissue.Theperceived‘righttofly’isbecomingmorewidelyengrainedaroundtheworld,evenamongthoseoth-erwiseengagedinmorepro-environmentalbehaviour(Alcock,2017).

Forbothinternationalshippingandaviation,thepowerofincumbentactorsinthepoliticalinstitutionsinvolvedinsectoralgovernance(tobeexploredfurtherinTask4.2)isafurtherimportantchallengetodecarbonisation.Nationaldelegationsto,andtechnicalworkinggroupsoftheInternationalMaritimeOrganisation(IMO)oftenincludeindustryrepresentatives.Industryvoicesexertinfluencethroughpar-ticularMemberStates(Darby,2016).Industrygroupshaveembracedthe‘fairshare’conceptforemis-sionsreduction(Vidal,2016),but insistthatanyoutcomemustnot inhibitdevelopment.Refusaloflargedevelopingcountriestoacceptreductiontargets(atleastuntil2014),inparticularChina,BrazilandIndia,hasalsoimpededprogress.Theimportantlobbyingroleofcommercialairlines,representedbytheAirTransportActionGroup(ATAG)andtheInternationalAirTransportAssociation(IATA),anassociationencompassingmorethan80percentofthesector,maybehighlighted.Overall,theavia-tionindustrymayberegardedastryingtodrivesomerelativelylimitedkindsofchange–suchasoff-setting-inordertohead-offmorefundamentalchangethatwouldbemoredetrimentaltoitsinterests(Goncalves,2017).

Anotherbarrieraffectingdecarbonisationeffortsinbothsectorsisthemajorperversesubsidyattheinternationallevelconstitutedbytheabsenceoftaxationofaviationandshippingfuels.Inthecaseofaviationfuel,thisisduetolong-standinglegalbilateralairserviceagreementswhicheffectivelypro-hibitsuchtaxationandwouldrequirerenegotiationstoalter.The incentiveforreducingfueluse isthusconsiderablylowerthanitcouldbe.Intheshippingsector,althoughmarinefuelrepresents50percentormoreofaship’soperatingcost,thefactthatitisuntaxedisonefactorbehindthelackofprogressinshippingefficiency,particularlydesignefficiency(Gencsu&Hino,2015).Indiscussionsofmeasurestointernalisecarbonexternalitiesforbothaviationandshipping,suchascarbontaxation,compensatingdevelopingcountriesfortheeconomicharmtheymightsuffer-ensuringthattheybear‘nonetincidence‘-iswidelyrecognizedascriticaltotheiracceptability(IMF,2011).


Sincethevastmajorityofaviationandshippingactivitytakesplaceacrossnationalborders,interna-tionalharmonisationofpolicy responses isessential toeffectivegovernance. Impositionof stricterrequirementsonshipsregistered inone jurisdictionmaysimplypromptownerstore-registerelse-where,harmingonestate’scompetitivepositiontolittleenvironmentalbenefit.Meanwhile,thetrans-actioncostsofnationalregulatoryvariationcanbehighforshippingcompanies.Theliteraturenoteshowfierceglobalcompetition,particularlyinshippingbutalsoinaviation,makesinternationalcoop-erationessentialforraisingmitigationambition(Gencsu&Hino,2015).Givenitscomplexity,directly


influencingchangeintheinternationalshippingsectorisarguablymosteffectivelyencouragedbycom-biningglobal-ledpolicieswithmeasuresimplementedattheport-statelevel(Bows-Larkin,2015;IEA,2017b)

GuidanceandSignal

Giventheprojectionsforemissionsgrowth,andthetrendstowardsinternationalaviationandshippingtakingupmoreandmoreoftheavailable2/1.5°Ccarbonbudget,thereisasignificantneedtosignalmorestronglywhatlevelofemissionsconstitutesthesectoral‘fairshare’.Inthecaseofshipping,partsoftheindustryhavethemselvesexpressedinterestinsettingsuchatarget(Vidal,2016).


Thereissignificantneedforregulation(standards,rules)at international leveltoincentiviseglobal-scaleaction.Inbothsectors,globalemissionlimitscouldbeimplementedgloballybymarket-basedinstrumentssuchastaxationandemissionstrading,ormoredirecttechnologicalregulationthroughstandardsetting–oracombination.Internationalagreementtotaxaviationandshippingfuel(withrevenuespotentiallyrecycledintoresearchanddevelopmentfordecarbonisation)couldfacilitatecol-lectiveaction.Inprinciple,itisalsopossibleforstatestoremovetaxexemptionfromairserviceagree-mentsonabilateralbasis.Theemergenceofnewtechnologieswilllikelyrequireadequatestandards(agreeduponbyglobalinstitutionsandshipclassificationcompanies).Inshipping,requiringverifiedvesselefficiencyratings,takingintoaccounttheeffectofnewtechnologies,mayincentivisetheinstal-lationofsuchtechnologiesthroughenhancingthecompetitiveresalevalueofavessel.Inbothsectors,ensuringthatoffsetschemesandtheproductionofalternativefuelsadheretohighqualitystandardsiscritical,asside-effectscouldunderminetheeffectivenessofsuchmeasures.

Addressingdistributionalequity issues (esp. inNorth-Southcontext) is alsonecessary, andmaybepromotedbyinternationalagreementsthatarephasedinovertimeforcertainactors,orbyexplicitfinanceandtechnologytransfermeasures(seealsodiscussionbelow).


Totheextentthatinternationalregulationisintroduced,implementationwouldrequireappropriatetransparency(monitoringandverification)andaccountability(enforcement).International,industry-wideeffortsareneededtoimprovetransparencyandstrengthenincentives,includingonuseofalter-nativejetfuelsandtoaccountforchangesinlifecycleGHGemissionsinordertoassessprogressto-wardachievingglobalgoals.


Policiesthatprovidefinancefornewtechnologiescanincentiviseinnovativesolutions.Thismayassistincombatingthe‘landlordtenantproblem’inshipping(Walshetal.,2017).

GençsüandHino(Gencsu&Hino,2015),whileechoingtheadvocacyofport-levelmeasures,alsohigh-lighttheimportanceofthebankingsectorinincentivisingefficiency.Twoleadingshippingbanks,HSHNordbankandKfW-IPEXBank,useRightShip/CarbonWarRoom’sratingschemewhenevaluatingtheriskandreturnofaloan,favouringefficientships.


Giventheevidentmarketfailures,particularlyinshipping,significantinternationallevelmeasuresareneededtoovercomelackofreliableinformationoncostsandpotentialsavingsofspecificoperationalmeasuresorrenewableenergysolutions.


(Joint)R&Dforlow-carbontechnologies,involvingairlines,governmentsandotherstakeholdershasbeen recommended, particularly for new aircraft design and sustainable biofuels (Gencsu&Hino,2015).

Inshipping,theneedforimprovedinformationoncosts/savings/correctoperationofnewtechnolo-giesandoperationalmeasuresmaybehighlighted.

Linkages

Theliteraturenoteshowdecarbonisationofinternationalshippingcanbegreatlyfacilitatedbywiderdecarbonisationoftheeconomy.ForacountrysuchastheUK,asmuchas50percentofthetonnageimportedmaybefossilfuels(thefigurefrom2010).Changestothelevelsoffossilfuelconsumptionand thegrowth inbiomass/biofuels could thereforehavea significant impacton shippingdemand(Bows-Larkin,2015;Mander,Walsh,Gilbert,Traut,&Bows,2012).

Inter-linkagesarealsoevidentintermsofthepotentialeffectsofslowsteaming.Whilecompensationintheformofincreasedshipsizeornumberstomaintainfreightflowsmighthelpensureacceptabilityto the industry, the effects on global supply chainsmight require restructuringof some industries(Walshetal.,2017).

Regardingaviation,althoughtheindustryfavoursoff-settingmeasures,uncertaintyexistsoverlong-termavailabilityandcostofcredits(Gencsu&Hino,2015).Theavailabilitydependsonlinkageswiththecarbonmarketsassociatedwithothereconomicsectors.Scarcityissuesalsoariseforbothaviationandshippingintermsoftheneedtocompeteforsuppliesofbiofuelwithalternativeuses.

4.10 UrbanSystems/Settlements


UrbanareasarethelocusofthemajorityofGHG-emittingactivities.Theyaresitesofhabitation,com-merce,energysupplyanduse,transport,wastemanagementandenergy-intensiveindustries.Takingintoaccountdirectandindirectemissions,urbanareascurrentlyaccountforaboutthree-fourthsofglobalenergyuseandenergy-relatedCO2emissions.Accountingonlyfordirectemissions,theshareis44percent.TherehavesofarbeenonlyfewattemptstoquantifytheurbancontributiontoallGHGs,arrivingatanestimateof37-49percentfortheyear2000(Seto,Dhakal,etal.,2014).

Percapitalevelsofenergyuseandemissionstendtobehigherthannationalaveragesindevelopingcountriesandlowerindevelopedcountries.Percapitaemissionlevelsvarystronglyamongcities,evenwithinthesamecountry.Thereisnotonesinglefactorresponsible,relevantfactorsincludeincome,populationdynamics,urbanform,locationalfactors,economicstructure,andmarketfailures(Seto,Dhakal,etal.,2014).Withintheseframeworkconditions,eachurbanareapursuesitsowntechnolog-ical,political,socialandculturalinnovationlogicandtransitionpathway(Schneidewindetal.,2015).

Toachievetheinternationalclimateobjectives,urbanenergyandmobilitysystemsaswellassystemsforheatingandcoolingbuildingsandwastemanagementwillneed tobedecarbonisedas soonaspossible.Aselectricity,transport,buildingsandwastearediscussedinotherchaptersofthisreport,thefollowingwill focusonurbanformand infrastructure.Theseareespeciallyrelevant for limitingtransportvolumes,the‘avoid’partoftheavoid-shift-improvestrategydiscussedinthetransportchap-ter.

Urbanformandinfrastructurearestronglyinterlinkedand,giventheirlonglifetimes,lock-inpatternsoflanduse,transportchoice,housing,andbehaviour.Onceinplace,theyaredifficulttochange.KeyaspectsofurbanformandinfrastructurethatimpactGHGemissionsaresettlementdensity,land-use


mix,connectivityofurbandesign,andaccessibility(foremployment,shoppingetc.).Thesefactorsareinterrelatedandinterdependent,e.g.highlyconnectedplacesarehighlyaccessible(Seto,Dhakal,etal.,2014).

UrbanmitigationneedstobesquaredwiththebreakneckurbanisationdynamicsintheglobalSouth,particularlyinAfricaandAsia.Whilecurrentlyroughlyhalfoftheglobalpopulation,about3.6billionpeople,livesinurbanareas,thisisexpectedtoincreaseto5.6-7.1billion,abouttwo-thirdsoftheglobalpopulation,by2050(UnitedNations,2014).Asresult,theincreaseinurbanlandcoverduringthefirstthreedecadesofthiscenturyisexpectedtobegreaterthanthecumulativeurbanexpansioninallofhumanhistory.InChinaalone,morecementwasusedinthethreeyearsfrom2008to2010thanintheentire20thcenturyintheUS(Smil,2013).Basedonprojectionsforpopulationdensitiesandeco-nomicandpopulationgrowth,world-wideurbanlandcoverisexpectedtoexpandby56–310percentbetween2000and2030.Mostofthisgrowthisexpectedtotakeplaceinsmall-tomedium-sizecitiesindevelopingcountries. Inascenariowhereglobalpopulation increases to9.3billionby2050anddevelopingcountriesexpandtheirbuiltenvironmentandinfrastructuretocurrentglobalaveragelev-elsusingcurrentlyavailabletechnology,theproductionofinfrastructurematerialsalonewouldgen-erateabout470GigatonnesofCO2emissions(Seto,Dhakal,etal.,2014).Thiscorrespondstoabouthalfthecumulative‘budget’ofCO2thatmaystillbeemittedifaverageglobaltemperatureincreaseistobelimitedtobelow2°Cwithalikelihoodofmorethan66percent(IPCC,2013).

Thekeychallengethereforeistoguidethisbreakneckurbanisationontosustainablepathways.Busi-nessasusual–incrementalapproachesandlessstructured,quasi-automaticurbanization–wouldleadtogrowthofhighlyunsustainablecities.Whatisrequiredistransformativestrategiesdepartingfromconventionalinfrastructurepatterns(WBGU,2016).

Atnationalandregional level,apolycentricapproachtourbandevelopmentcanhaveconsiderableadvantages. The emergingmega-cities frequently feature overtaxed infrastructures, overburdenedmunicipaladministrations,hostile-to-lifesettlementstructuresandsocio-economicallypolarizedur-bansocieties.Strengtheningsmallandmedium-sizedtownsandnetworkingthemwith largercitiescan combine the advantages of agglomeration and decentralization, allowing for better use of re-sourcesaswater, foodandenergydonothavetobetransportedover longdistances intothe fewcentres(WBGU,2016).

Atthelevelofindividualurbanareas,giventhewidevarietyoflocalsituations,therecanbenosche-maticmasterplanforurbanchange.Thetaskoflow-emissiondevelopmentvariesfundamentallyde-pendingonthecurrentlevelofurbanisation:

• Inestablishedurbanareas,thetaskistore-developurbanformandinfrastructure.Thekeystrategyistransit-oriented(re-)development,thatis,thecreationofcompact,pedestrian-ori-entedmixed-useresidential,businessandleisureareascenteredaroundhighqualitypublictransportsystems

• Inareasthatareurbanising,thetaskistoshapeurbanformandinfrastructuredevelopmenttowardssustainablepathways,establishingtransit-orienteddevelopmentasthebaseline,lim-itingurbansprawl,andprovidingaffordable,dignified,safeandloweco-impacthousing.

• Establishedurbanareasthatarestillgrowingdynamicallyfacebothchallengesatthesametime.

• Finally,low-lyingcitiesthatarefrequentlyhitbystrongstormsystemsfacethedoublechal-lenge of achieving low-emission and climate-resilient development (Huang, Busch, He, &Harvey,2015;Seto,Dhakal,etal.,2014;WBCSD,2010).

Given the central role of localisedurban strategies, a core elementof sustainability governance isgrantingcitiestherighttoself-governmentandprovidingthemwiththemeanstocharttheirownlocal


transformationpathways.Moreover,citiesshouldbeinvolvedinnationaldecision-makingprocesseswherevernationaldecisionsarerelevantforthem.(WBGU,2016).

Giventhehugevolumesofemissionsassociatedwiththeproductionofcurrentlyusedinfrastructurematerial,onekeyfactorofrelevanceforallurbanareasisthedevelopmentofmaterialsanddesignsthatfeaturerenewableresources,recycledmaterialsand/orlow-impactprocesses(WBCSD,2010).


Themainchallengeofachievingurbanlow-emissiontransformationsistogetaheadoftherapidtrans-formationthatisalreadytakingplaceintheglobalSouth,breakneckurbanisation.Infrastructuredeci-sionsthataretakenoverthenext10-20yearswilldeterminetheurbanemissionprofilesofthefuture.

Indoingso,urbandevelopmentwillhavetoovercomeenshrinedparadigms.Mostcitiesintheworldtodayhavebeenbuiltas ‘zoned’ cities,wheredifferent typesof landuse (residential, commercial,manufacturing,service, recreational)havebeen largelykeptseparate.Anotherdominantparadigmhasbeentheequationofmobilitywith(individual)transport,withbuildingofevermoreinfrastructurefor cars at the heart of transportation strategies and policies (UnitedNationsHuman SettlementsProgramme,2013).

Theabilityofurbanareastosteertheirdevelopmentontoa low-emissioncoursedependsontheirgovernance,technical,financial,andinstitutionalcapacities.Whilethemostaccessiblemitigationop-portunitiesareinrapidlyurbanizingareaswhereurbanformandinfrastructurearenotyetlockedin,theseoftendisposeofthemostlimitedcapacities(Seto,Dhakal,etal.,2014;WBCSD,2010).

Manycitiesare implementingclimateactionplans,buttheir impactonurbanemissions isunclear.Therehassofarbeenlittlesystematicmonitoringandevaluation.Morefundamentally,consistentandcomparableemissionsdataatlocalscalesislacking,andthereislittleconsistencyandcomparabilityonlocalemissionsaccountingmethods.Moreover,currentinitiativesfocuslargelyonenergyefficiency.Relatively fewactionplansaddress land-useplanningandcross-sectoralmeasurestoreduceurbansprawlandpromote transit-orienteddevelopment.This reflects traditionalurbanisation ingeneral,wheredevelopmentusuallyoccurspiecebypieceinsteadofintegratedland-useandtransportationplanning(Seto,Dhakal,etal.,2014).

Inaddition,allurbanareasandespeciallyfastgrowingonesstrugglewithmoreimmediatechallenges,suchasprovidingadequatehousingandemploymentopportunities,ensuringaccesstoenergy,waterandsanitation,limitingairandwaterpollution.Indevelopingcountriesandemergingeconomies,one-thirdoftheurbanpopulationdoesnothaveadequatehousing,inSub-SaharanAfricaitistwo-thirds.Theabilitytomobiliseurbanmitigationactionsthereforeoftendependsontheabilitytorelatemiti-gationeffortsto localdevelopmentbenefits.Stand-alonemitigationapproacheswill fail;mitigationneedstobeembeddedinoverallconceptsofsustainableurbandevelopmentandqualityoflife(Seto,Dhakal,etal.,2014;WBGU,2016).

Asresult,crucialfactorsforsuccessfulmitigationare:

• institutionalarrangementsthatenabletheintegrationofmitigationwithotherhigh-priorityurbandevelopmentobjectives;

• amultilevelgovernancesystemthatempowerscitiestosteertheirtransformationsbythem-selves;

• spatialplanningcompetenciesandpoliticalwilltosupportintegratedland-useandtranspor-tationplanning;and

• sufficientfinancialandinstitutionalcapacities(Seto,Dhakal,etal.,2014).



Internationalinterdependenceofmitigationinurbanareasislow,therearenocompetitivenesscon-cernsortechnologyspill-overs.Nonetheless,thereissubstantialscopeforinternationalgovernancetoprovideguidanceandmeansofimplementationandtopromotetransparencyandmutuallearningamongcities.

GuidanceandSignal

Whereurbandevelopmentdoesnotsufferfromalackofplanning,itoftensuffersfromplanningdoneonthebasisofhigh-emissionparadigms,suchaszoningandorientationoftransport infrastructuretowardscars.Climate-friendlyurbandevelopmentcouldprofit strongly if internationalgovernancedevelopedanewparadigmofsustainableurbandevelopment.Thisparadigmwillhavetointegratemitigationwithotherhigh-priorityurbandevelopmentobjectives.Keyelementsofsuchaparadigmshouldincludeanobjectiveofnetzeroemissionsby2050,tobeachievedthroughmeanssuchaslim-itingurbansprawl,transit-orienteddevelopment,developmentofmixed-useareas,useofrenewableenergyresourcesandothers.

Rule-SettingtoFacilitateCollectiveAction

Giventhehugevarietyof localsituationthereseemslittlescopeforuniformrulesorstandardsforhowurbansystemsshouldbedesigned.

Nonetheless,internationalgovernancemightrecommendgrantingcitiestherighttoself-governmenttoenablethemtocharttheirownlocaltransformationpathwaysinlinewiththeirlocalcircumstances.


Asnotedabove,whiletherearemanyurbanclimateinitiatives,theresofarislittlesystematicmoni-toringandassessmentoftheirimpacts.Internationalcooperationcouldworktoenhancemonitoringmethodologiesandcontributetobuildingcapacitiesfortheirimplementation.

Inaddition,aninternationalprocessofreviewandconsultationcouldhelptopromoteimplementation.Citiesornationalgovernmentscouldbeaskedormadetoreportontheirprogressinsustainableurbandevelopmentandthesereportscouldbemadesubjectofexpertorpeerreviews.


Manyurbanareasintheworldarecommittedtodomoreonclimatechangebutareshortofcashandinstitutionalcapacities.Increasedprovisionofmeansofimplementationcouldthereforeunlocksub-stantialpotentialformoreaction.Resourcesshouldinparticularbeusedforstrengtheningadminis-trativecapacity.


Keyelementsofthetransitiontosustainability,suchasdevelopmentofenergy,mobility,wasteandsanitationinfrastructure,willbedecidedincities.Itwouldthereforebehelpfulifcitieswereenabledtoplayaroleininternationalcooperation.Theyshouldbeallowedtoparticipateandspeakatrelevantinternationalforumsinordertoimproveexchangesbetweenthedifferentgovernancelevelsandtodeveloptransnationalcitynetworks(WBGU,2016).Thiswouldfacilitatemutuallearningamongcitiesaswellashelpnationaldelegationstobettertailorinstrumentsoftheinternationalregime,suchasmeansofimplementation,totheneedsofcities


Despitethehugevariationofurbanconditions,thereissubstantialpotentialforpolicylearningacrosscitieswhichhassofarnotbeenmobilised.Anespeciallypromisingapproachliesincomparativelearn-ingatthelevelofurbanquarters.Atthislevel,therearecomparablestructuresthatarelargelyinde-pendentofurbansizeandthusallowforinternationallearningprocesses.Aspecificapproachisor-ganisinglearningpartnershipsamongcities(Schneidewindetal.,2015).

4.11 Buildings


The global buildings and construction sector accounts formore than half of globalwealth (GlobalAllianceforBuildingsandConstruction,2016).In2010,thebuildingssectorconsumed32percentoftotalglobalfinalenergyuse(51percentofglobalelectricityconsumption)andproduced19percentofGHGemissionsor9.18GtCO2eq(includingelectricity-related,whiledirectemissionsstoodat6.4percentoftheglobaltotal)(Luconetal.2014,p.687).GHGemissionsfromthebuildingsectorhavemorethandoubledsince1970(Luconetal.2014,p.678).MostoftheGHGemissionsinthebuildingssectorareindirectCO2emissionsthatemanatefromelectricityuseinbuildingsandareprojectedtogrowfasterthananyothersector,inparticularemissionsfromcommercialbuildings—1.8percentayearthrough2030(Knox,2015).

Populationgrowth,urbanisation,risingpercapitaincomes,andclimatechangearekeyfactorsthatwilldramaticallyimpactthissectoranddriveanincreaseofenergyuse.TheUnitedNationsDepart-mentofEconomicandSocialAffairs(UNDESA)estimatesglobalpopulationtogrowto9.7billionby2050 of which approximately 2.5 billion will be new urban inhabitants, mainly in Africa and Asia(UNDESA,2015).Urbanareaswillcomprise85percentofgrowthinbuildingenergyuseuntil2050,70per cent of them in developing countries (Diana Urge-Vorsatz, Cabeza, Serrano, Barreneche, &Petrichenko,2015).Asglobaltemperaturerises,thedemandforspacecoolingamongstwarmercoun-triesisexpectedtotriplebetween2010and2050(IEA,2013).Moreover,urbanisationistypicallyas-sociatedwithashiftfromtraditionalbiomassfuels(suchaswoodandwaste)tomoremodernfuels(suchasnaturalgasorelectricity),butalsowithgreaterpotentialforenergyefficiencymeasures.Over-all,theIPCChaswarnedthat,intheabsenceofaction,theuseofenergyinbuildingscoulddoubleorinworsecase,tripleby2050(Luconetal.,2014).Inordertomeetthe2°CobjectivesetoutbytheParisAgreement,thebuildingssectorwouldhavetoreduceenergyandprocess-basedCO2emissionsby60percentin2050comparedto2012(Dean,Dulac,Petrichenko,&Graham,2016).

Spatialheatingandcooling,cookingandwaterheatinginthebuildingssectoraccountforthelion’sshareofthebuildingssector’sfinalenergyconsumption.In2012,therespectivesharesinresidentialandcommercialbuildingswere:32and33percentforspaceheating,24and12percentforwaterheating,twoand32percentforcoolingand29percentforcooking(residentialbuildingsonly)(IEA2013inLuconetal.2014,p.681).Therelativelylargeshareofcookingensuesasaresultoftheuseoftraditionalbiomass(incombinationforwaterheating)byapproximately3billionpeoplewithlowcon-versionefficienciesindevelopingcountries(IEA,2013).

Thebuildingssectorvariesbothregionallyandwithinregions,dependingonclimate,economy,energyaccess,availabilityofenergysources,andenergy-relatedpolicies(Knox,2015).PercapitafinalenergyuseinbuildingsincountriesliketheUSandCanadacanbeasmuchasfivetotenfoldhigherthaninAfricaor LatinAmericaper se (D.Urge-Vorsatzet al., 2012). Spaceheating continues todominatebuildingenergyuseinOECDcountries,whilecookingandwaterheatingaccountfornearly60percentofbuildingenergydemandinnon-OECDcountries.Inthenon-OECDnations,consumptionofdeliveredenergyinbuildingsisestimatedtogrowby2.1percentperyearfrom2012to2040,nearlythreetimesthegrowthratefortheOECDnations(Knox,2015).Threequartersofthefinalenergyconsumptionfor


heatingandcoolingisfossilfuelbasedincludingthegenerationmixesforelectricityusedforheatingandcooling,andforcommercialheat.Renewablesconstitutetheremainingofwhichalmost90percentistraditionalbiomass(IEA,2015a).

AchievingthegoalsoftheParisAgreementwillrequireanambitiousmixofmainstreaminghighlyen-ergy-efficientnear-zeroornet-zeroenergyandenergy-plusbuildingsinnewconstruction,amassiveretrofitoftheexistingbuildingstockandaswitchtogreenersourcesofenergyinparticularelectricityfromrenewables(Deanetal.,2016).AlthoughthebuildingssectoriscurrentlyoneofthelargestGHGemittingsectors,itofferslargelow-costpotentialforreducingenergydemandandassociatedemis-sionsinallworldregionsby2030(Luconetal.,2014).Althoughdefinitionsvary,net-zeroenergybuild-ings(NZEBs)arebuildingswithon-siterenewableenergysystems(suchasPV,windturbines,orsolarthermal)thatgenerateanequivalentamountofenergyasisconsumedbythebuilding(Luconetal.,2014).Inthecaseofenergy-plusbuildings,suchrenewableenergygenerationexceedsconsumption.

EnormouspotentialforreducingenergyconsumptionandGHGemissionscanberealisedthroughret-rofittingexistingbuildingsaswellas,evenmoreso,inconstructingnewbuildings.Buildingsenvelopesarekey.AccordingtotheIEA,ahigh-performancebuildingenvelopeforexistingandnewbuildingsinOECDcountriescanreduceenergyrequiredforheatingto20-30percentofcurrentconsumptionwhileitcanboostenergysavingspotentialforcoolingbetween10-40percentinhotcountries(IEA,2013).Holistic retrofitscanresult in50–90percent finalenergysavings in thermalenergyuse inexistingbuildings,withthecostsavingsusuallysurpassinginvestments(D.Urge-Vorsatzetal.,2012).Asre-gardsnewbuildings,cost-effectivetechnologyandmaterialsnowmakeitpossibletoconstructbuild-ingsthatuse10–40percentofthefinalheatingandcoolingenergyofconventionalnewbuildingsinallworldregionsandclimatezones(D.Urge-Vorsatzetal.,2012).

LeadershipinEnergyandEnvironmentalDesigncertificationisthemostwidelyusedthird-partyveri-ficationforgreenbuildingsandensuresthatbuildingsuseonethirdlesselectricity(Knox,2015).TheWorldGreenBuildingTrends2016 study finds thatglobally, greenbuilding construction is steadilyrising,mostofthegrowthcomingfromemergingeconomiesinAsia.Smartbuildingtechnologyspend-ingisalsoexpectedtorisefromUSD6.3billionin2014toUSD17.4billionin2019(Feblowitz&Levine,2015).

Asregardscookstoves,biomassusedinopenfireorbasiccookstoves,stillrepresentstwo-thirdsofenergyconsumptionforcookingglobally.Moreefficientbiomassstovescandeliverfuelsavingsof30–60percentandchimney-includedmodelscanreduceindoorairpollutionlevelsby80–90percent(D.Urge-Vorsatzetal.,2012).andtransitionfromtraditionalbiomasstomodernfuelscouldsave3.5EJofenergy,(oraroundor34percentoftotalbuildingsenergyconsumptionin2010(IEA,2013).


Thereisapalpablepaucityofstrongregulatorymeasuresorincentivesacrossallregionsandcountries,eventhoughanumberofaffordabletechnologiesandefficiencyimprovementsthatcanhelpdecar-bonisethesectorexist.Eveninmostdevelopedcountries,policiesthatmandateenergy-efficientret-rofitstypicallyresultinsavingsofonly20–40percentofthebuildingenergyuse(Guneralpetal.,2017).LowefficiencytargetsriskresultinginadecadeslonglockinforenergyuseandcorrespondingGHGemissions(D.Urge-Vorsatzetal.,2012).Moreover,eveninmostdevelopedregionsliketheEUevenwherepoliciesexist,implementationispoor(Boasson&Dupont,2015).TherateofretrofittingintheEUiscurrentlyamereonepercentannually,whichwouldrequireacenturytodecarbonisethesector.ManyOECDmembershaveindeedpursuedNZEBsforthepast10-12years,butprogressremainslowincludinginsidetheEU(Boasson&Dupont,2015;IEA,2015a).Introducingpoliciesthatmandatestate-of-the-artdeepretrofitscouldsave70-90percentofbuildingenergyuse(Guneralpetal.,2017).At


thepolicylevel,ambitionislowinnon-OECDnationstoo,wheretheemphasiswillbeonnewconstruc-tionsratherthanonretrofits.

Thelackoftraining,awarenessofexistingtechnologycostsandcapacitybuildingmeasuresconstitutean importantnon-financial barrier (IEA, 2013). The sector involves a largenumberof stakeholders(constructors, building product producers, buildingmanagers, architects, engineers, owners, occu-pants, investors, trades people, equipment manufacturers, suppliers, architects, lenders, insurers,codesandstandardssetters,zoningofficials,realtorsandothers)(Boasson&Dupont,2015;IEA,2013)and isdeeply fragmented (betweenthenationalor local level).Consumer-awarenessprogrammes,standards and labellingwhile effective tools toencouragepurchaseof themost efficient availabletechnologies,arenotprevalentacrosstheglobe,inparticularindevelopingcountries.Intheabsenceofawareness,easyaccesstoknowledgeandtechnology,andorganizedtraining,thelargenumberofprivate construction companiesmay either entirely perceive otherwise affordable decarbonisationmeasurestoharmtheircompetitivenessinahighlycompetitiverealestatemarketoroverlookthementirely.

TransitioningtoNZEBswouldbedifficulteventhough itmaybethemostefficientsolution.NZEBsremainlargelyunaffordable,especiallyinthedevelopingworld.Moreover,thereisadistinctlackofdesignersorbuilderswiththenecessaryskillsorexperiencetoconstructNZEBs.TechnicalchallengesalsoinhibitthewidespreadconstructionoftrueNZEBsandNZEBcommunitiesgiventheirsuitabilityforonlycertainbuildingtypesandsettlementpatterns,primarilylow-risebuildingsandlessdenselypopulatedresidentialareas.Moreover,theireconomicsarepresentlytypicallyunfavourable,asop-posedtohigh-efficiencybuildings(D.Urge-Vorsatzetal.,2012).Ina2010studycitedbytheIPCConlyabout300bothcommercialandresidentialnetzerooralmostNZEBsexistedworldwideatthetime(Luconetal.,2014).

Thecontinuedwidespreaduseofsolidfuels—includingwood,charcoal,coal,animaldung,andcropwaste—forcookingandheatingenergysupplyremainsanimportantsourceofbuildingssectorGHGemissions.Globally,thereremainsalackofadequatesupportforthesustainableproductionofcleanbiomassfuelsandrenewablefuelalternativesalongsidethecurrentfocusonstoveefficiencyandemis-sionsgiventhatdemand-sidesolutionsalonearenotenough(Putti,Venkata,Tsan,Mehta,&Kammila,2015).Thedrivetoincreasethefocusoncleancookingsolutionsremainsarbitraryacrosstheworld.Globally,morethan3billionpeople,particularlyinruralareasinthedevelopingworld,stillusesolidfuelsastheirprimarycookingandheatingenergysupply.

Andonlyabout200millionhaveaccesstoimprovedorcleancookstoves(Puttietal.,2015).Accesstofinance,consumereducation,qualitystand-ards,policyreform,andmarketintelligencewillbeneededforatransitiontomoreefficientcookingandheatingenergysupply(Puttietal.,2015).

Althoughimprovingbuildingefficiencyisoftenprofitable,investmentsarehinderedbyvariousbarriers:“marketbarriers(likehighinitialcostsandlowpriorityofenergyefficiencyindecision-making–andmarketfailurese.g.principal-agentproblems,transactioncosts,searchcosts,regulatorycomplianceissues)(IEA,2013),misplacedincentives,distortedenergyprice/taxregimes,limitedaccesstofinanc-ing,lackofinformationandawarenessofbenefits,regulatoryfailures,andsoon(Luconetal.,2014).Regulatory failurescan includepolicies thathave inhibitedthedeploymentof technologies.For in-stance,insomecountries,buildingcodesprohibittheinstallationofsolarthermalcollectorsonroofsorlocalregulationsexistthatmaynotfosterinnovativebuildingsolutions(IEA,2013).Decisionmakersthemselvesattimesdonothaveaccurateoradequateinformationonvariedaspects.

Theprincipal-agentproblemisalsoimportantespeciallyinOECDcountrieswhereeitherbuildingde-velopersseektominimisecostswithout the long-term interestsofownersoroccupiers inmindorwherelandlordsmakepurchaseheatingandcoolingequipmentfortenantswithoutregardtolife-cyclecosts(Murtishaw&Sathaye,2006).Stronganddiversemarketorientedpoliciesthatcanovercomethesehurdleswillhelpincatalysingpotentiallycost-effectiveinvestments(Luconetal.,2014).Thelack


ofrobustdataandlarge-scaledemonstrationprojectsthatevaluatestheperformanceofenergy-effi-cientandlow/zero-carbontechnologiesineachmarketsegmentalsocomposeabarrier(IEA,2011).

Financialchallengesalsoremain.AccordingtotheIEA(IEA,2013),decarbonisationinthesectorwouldrequireanestimatedUSD31trillionby2050.



Acommoninternationalgoaloffulldecarbonisationofthesector(e.g.bythesecondhalfofthecen-tury)withtargetsdifferentiatedbyregioncouldhelptoalignthediversityofactorsinthesector.Thiscouldbeanimportantsignal“toconsumersandmanufacturers,bothtomaximiseefficiencyandtolimit the costof future changes” (IEA,2011).Awell-definedglobal carbonneutral strategy for thebuildingssectorwithdifferentiatedtargetscanprovidearoadmapforsustainablebuildingssubsectors(likeheatingandcooling,cooking,heatingwater,wherechallengesareindeedsharedacrossanumberofcountriesand/orregions)(GlobalAllianceforBuildingsandConstruction,2016).


Internationalregulationcanplayacomplementaryrolebyaddressingcompetitivenessconcerns.Suchconcernsexisttotheextentthatdecarbonisingbuildingscausesignificantnetcosts.ThisisespeciallythecaseforthemoreadvancedtransitiontoNZEBs.Havingsaidthat,manyoftheoptionsforsignifi-cantlyreducingemissionsinthesectordonotinvolvesignificantnetcosts,butevengeneratenetben-efits.Onechallengeindevelopinganyinternationalruleswillbetotakeintoaccountthewidelyvaryingconditions indifferentcountriesandregions.Anadditionalpotentialmayexistwith respect to theinternationalharmonisationofcertainbuildingmaterials.


Internationalagreementondifferentiatedtargets/ruleswouldrequireatransparencyframeworkforperformanceassessment.Collectionofdatawillbeessentialforregulartrackingofprogress.


Theprovisionofadequatemeansofimplementationcanhelpaddresssomeofthekeybarrierstothedecarbonisationofthebuildingssectoratthegloballevel.Internationaltraining,capacitybuildingandawarenessprogrammesforthelargenumberofstakeholdersinvolvedinthebuildingssectorcanhelpraiseawarenessandenhanceskillsandexpertise.Suchcapacitybuildingcanhelpinformstakeholdersin particular in low-mid income countries about otherwise overlooked affordable decarbonisationmeasures.Internationalfinancehasakeyroletoplayindeliveringtheenormousfinanceandinvest-mentrequiredtobringaboutthetransitioninthebuildingssector,inparticularamongstlow-midin-comecountries.Internationalbankscanhelppromotedecarbonisationbyprioritizinggreenbuildingsthroughsoftloans,betterinterestratesorgreenbonds(WEF2011).Multilateraldevelopmentbankscanhelpensurethat investmentsareavailable inallcountries/regions.Aparticularpotentialexistsregardingthedistributionofcleancookstovesthatcanhelpreduceemissionsinthesectoratalargescaleinmanydevelopingcountries.


Policy and technical knowledgeplatforms canhelp increase information and awareness, allow thesharingofbestpractices,enablediffusionoftechnicalknow-how,developsolutionstocommoncon-cernsliketheprincipal-agentproblemandempowerpolicymakerstodevelopeffectivepoliciesand


low-carbontechnologypriorities(IEA,2013).Theseplatformscanalsohelppromoteawarenessandknowledgeofavailablefinancialincentivesforhigh-performingproductsandsystems(IEA,2015a).Aglobaldatabasecanhelpbuildandmaintainreliableinformation,sectoralmapping,existingfinancialopportunities,climatecompatibleinnovations,andaprogressmeasurementsystem(GlobalAllianceforBuildingsandConstruction,2016).TheIEAalsorecommendsanarrayofstandardisedinformationpackagesthatcanallowdecisionmakerstocomparethepotentialoftechnologyalternatives,identifyperformancetargetsandenergyandCO2

savingsatthetimeofdesignorpurchase(IEA,2013).

Interlinkagestoothersectors

PowerSector:Afuelswitchtoelectricityforheatingwouldincreasetheconsumptionofelectricityinbuildings(beyondanincreasealreadyprojectedonthebasisofcurrenttrends).Thegrowthofenergyefficientorgreenbuildings,includinggenerationanduseofrenewableenergy,willconverselyreducethedemandinthepowersector.

Construction:Greaterefficiency inbuildingsmay increase theneed formoreefficientconstructionmaterialandperhapslesswaste.

4.12 Appliances


Appliancesmakeupamajorshareofresidentialelectricitydemand:refrigerators(14percent),televi-sions(TVs)(sevenpercent),andwashingmachines(twopercent).Collectively,thesethreetypesofappliancesaccountedfor~761MtCO2ein2010(bigEE,2013a)equivalenttoabout2.5percentoftotalCO2 emissions from fuel combustion. Substantial emission reduction potential exists, if consumersopted for themostefficientmodelevery timeoneof theseappliances ispurchased.Thepotentialamountstoalmost0.5GtCO2perannumby2020(bigEE,2013a;IPCC,2014b).Thisdoesnotevencoverembodiedemissionsthatoccurintheprocessproducingandrecyclingofappliances.Forbigappliances,dependingontheemissionintensityoftheelectricityusedduringtheusephaseassociatedemissionsofproductionandrecyclingareestimatedtoamountto~20percentoftheemissionsthatoccurovertheproduct’slifecycle.ForTVsandInformationandCommunicationTechnology(ICT)equipmentthesharemaybeevengreater(GEA&IIASA,2012).Forrefrigerators,thereisanotherchallengeasmostrefrigerantsentailhighlypotentGHGsthatmayentertheatmosphereifnotrecycledproperly.23

AccordingtoUNEP’s“en.lighten”initiativelightingaccountsfor15percentofglobalelectricitycon-sumptiontranslatingintoroughlyfivepercentofglobalGHGemissions(UNEP,2016).Efficiencyim-provementsinlightinghavemadeparticularadvanceswithcostsofLightEmittingDiode(LED)lightingplungingand investmentssoaring (seebelow).Consequently,substantialenergysavingshavebeenrealizedover conventional lighting setups (145 terawatthoursorTWh in2016). Yet, these savingsrepresent only a fraction of the total remaining savings potential of an estimated 1600 TWh (IEA,2016b).

Cookingisthemostuniversalresidentialenergyservice.ItisresponsibleforaroundfivepercentofallGHGemissionsworldwide,whichisabout2GtCO2eqannually.Thelion’sshareofthisisduetoineffi-cientbiomass-orcoal-basedcookingpredominantlyindevelopingcountries.Energyconsumptionforthistypeofsolid-fuelcookingcanbecutinhalfatrelativelylowcostandsimultaneouslyrealizesub-stantialco-benefits(bigEE,2013a).

23 The issueof fluorinatedhydrocarbons(HFC)thatarecommon inrefrigerants is furtheraddressed in

section4.14.


Annualemissionsarelikelytogrowfurtherinthecomingdecadesastheproliferationofappliancesincreasesindevelopingcountries.Typically,theappliancepenetrationincreaseswithlevelsofincome,butotherfactorssuchaswealth,affordabilitybutalsoculturalfactorsmayplayarole.Indevelopedcountries,thereisalmostubiquitouspenetrationofTVsandrefrigerators,butgreatervariabilityfordomesticwashingmachines.While95percentofEuropeanandJapanesehouseholdsownwashingmachine,thepenetrationrateseemstohavelevelledoffintheUSat~80percentandthereissomeindication that thismay also occur in emerging economies such as SouthAfrica andBrazil (Rao&Ummel,2017).

Themarketforenergyefficientappliancesalreadyisamassiveone,butisdrivenprimarilybypublicpolicies.In2015justoverUSD90billionwasspentonenergyefficientappliancesandlighting,anin-cremental investmentofUSD44billionoveraverageefficiencyproducts (IEA,2016b).Despite thisdevelopment,stillthishasnotledtoadecreaseinelectricityconsumption,becausetheincreaseinuptakeanduseofappliancesoutpacesefficiencygains.Forexample,inTVs,increasingownershipandinparticulareverlargerscreenshaveworkedagainstefficiencyimprovements(IEA,2016c).

TwoglobaltrendsareapproachingthatmayhavesignificantimpactontheenergyconsumptionandhenceassociatedGHGemissionswithrespecttoappliancesandelectronicconsumergoods.Onetrendisdigitalisation:increasinglysmartappliancesareintroducedintothemarket.Whilethismaycausehigherenergydemandbothasthesmartcomponentsintheappliancesrequireadditionalelectricityascomparedtonon-smartappliancesofthesamelevelofefficiencyregardingtheoriginalserviceaswellasfortheICTinfrastructurenecessarytoconnectthesmartappliances.Ontheotherhandasmart“internetofthings”mayleveragesystemicmitigationpotentialse.g.becausetheymakeappliancesresponsivepartsoftheenergysystemthatcanhelpreducepeakdemandandthuslimitdemandforenergystorage(Palensky&Dietrich,2011).Whichofthetwoeffectswillprevailovertheotherisatthisstageimpossibletoproject.

Thesecondgeneraltrendisstillfaronthehorizon,butmayneverthelesshaveastrongimpact.Cur-rently,mostelectricityinfrastructureisbasedonalternatingcurrent(AC).Theincreasinglyfragmentedgenerationofelectricitybasedondecentralizedrenewableenergysystemsmaychallengethis.SolarPVproducesdirectcurrent(DC)thatcurrentlyhastobetransformedinACtobefedintothegrid.Atthesametime,manyappliances(e.g.LEDlightingandICTequipment)alsorequireDCthatneedstobeconvertedbyexternalpowersupplies.EachAC/DCconversionreducesefficiency.Toavoidconver-sionlosses,ithasthereforebeenproposedtointroduceDC-baseddomesticpowersystemsalongsidetheexistingACinfrastructure(Pantano,May-Ostendorp,&Dayem,2016).


Thechallengesfor increasingenergyefficiencyaresimilaracrossvarioussectors.Fortheuptakeofenergyefficientappliancesishinderedinteraliabythefollowingkeybarriers(bigEE,2013b):

• Economicandfinancialbarriers:efficiencymeasurestypicallyrequiresubstantialupfrontin-vestmentswhilethepayoffsmaterializeonlyovertime.Alsoformanufacturersthereisariskthatnewhighlyefficientproductsdonotmeetsufficientdemandandhenceinvestmentscan-notberecouped.

• Lackofknowledge:inmanycases,thereissimplynoinformationavailableoreasilyaccessibleatthepointatwhichinvestment/purchasedecisionsarebeingtaken.

• Lackofinterest:typically,operatingcostsforappliancesmakeuponlyasmallshareinhouse-holdbudgets.Atthesametime,searchingforefficientalternativesmayproducesignificanttransactioncosts.Also,thepriorityofthosemakingconsumptiondecisionsisonprovidinga


specificenergyservicetotheirhouseholdandnottominimizecostand/orenergyconsump-tion.

Even if energy efficiency improvements are realized, there further challenges that need to be ad-dressed tocurbabsoluteemissions in the sector.Amajorone is the reboundeffect:whenenergyservicesbecomemoreaffordablebecauseofefficiencyimprovements,thismayleadtoanincreaseofdemandinthesameservices.Theremayalsobeanindirectreboundeffectinthathouseholdsmayspend financial savings realized throughmoreefficientenergy servicesonother formsofemissionintensiveconsumption(Gillingham,Rapson,&Wagner,2016).

Anotherissueregardssufficiency.Sachsdefinessufficiencyinrelationtoefficiency:“Whileefficiencyisaboutdoingthingsright,sufficiencyisaboutdoingtherightthings”(Sachs,2015).Theconceptofsufficiencythusentailsrestrictionsonabsolutedemandforgoodsandservices(Samadietal.,2016).Inotherwords,theremaybeunsustainablelevelsofdemandforenergyservicesandhenceaneedtoreduceabsoluteconsumption levels. Inpractice, thiswouldmeanthat the trend toeverbiggerTVscreensormorevoluminous refrigerators is reducedandeventually reversed.While firstadvanceswith respect to sufficiencyenablingpolicieshavebeenmade (Thema,Thomas,Kopatz, Spitzner,&Ekardt,2017),theissueremainsstillamarginalone.

Marketsforefficientappliancesandconsumerelectronicsishighlydependentonpolicyinterventions.Demandisdriventoagreatextentbypolicies(IEA,2016c).Thepoliciescantargetatvariousstagesofthevaluechainofappliances.Themostcommonapproachesare(4E,2016;bigEE,2013b):

• Policiesthatreduceuncertainty formanufacturesbysignallingcredible long-termdemand.Thiscanbeachievedthroughpoliticalcommitmentsandlong-termgoals.

• Regulationofmanufacturessoastoprohibittheproductionoftheleastefficientappliances(MinimumEnergyPerformanceStandards–MEPS).Thisalsoreducescomplexityforconsum-ers.

• Enablingconsumerstocompareefficiencyofdifferentmodelsbysettinginformationrequire-mentsforretailersand/orefficiencylabelling.

• Monetaryincentivestoreplaceoldinefficientapplianceswithnewefficientones.

ProminentexamplesforpoliciesthataddressenergyefficiencyofappliancesaretheEU’sEcodesignDirective,theUSenergystar labelandtheJapanesetop-runner initiative.Thenumberofcountriesthathaveintroducedsimilarregulationsonthevarioustypesofapplianceshasincreasedsubstantiallyoverrecentyears,stillalargenumberofcountrieslacksuchregulationsandorlackthecapacitiestoadequatelyimplementandenforceregulations(IEA,2016b).

Asregardstheinterdependencieswithothersectoralsystems,theapplianceandconsumergoodssec-torhasanobviousrelationtothepowersector.Reducingelectricitydemandthroughenergyefficiencyinappliancesandconsumergoods isacriticalcomponent forasuccessful transformationofglobalpowersystems.


Thepotentialleverageforinternationalcooperationislargelylimitedtothoseinstrumentsthattargetthemanufacturingindustryforappliancesandconsumergoods.Thereisverylimitedscopetoaddressconsumerdecisionmakingfromtheinternationallevel.Also,notallappliancesandconsumergoodsarecreatedequal:thedegreetowhichmarketsareglobalizedvaryforthedifferenttypesofappliances.Whileformostconsumerelectronics,includingTVs,themarketislargelyahomogenousglobalmarket,thisisnottrueforwhitegoodswheretraditionallyatleastthreelargelyseparatedmarketsexistedintermsofproductssoldandconsumerpreferencesalike:aEuropean,aNorthAmerican,andanAsian


market.However,inrecentyearsthishasstartedtochangeasespeciallyChineseandKoreanbrandshavestartedtotakeholdalsoinEuropeandNorthAmerica.


Thefirstwayinwhichinternationalgovernancecouldadvancethetransformationofappliancesandconsumergoodmarketswouldbe throughsignallingclearandcrediblecommitment for long-termefficiencyimprovements(guidanceandsignalfunction).Asdiscussedabove,onekeybarrieristhehighdegreeofuncertaintyfacedbymanufacturerswithrespecttodemandforenergyefficientproducts.Politicalstatementsandlong-termgoalsforenergyefficiencyimprovementsincombinationwithcred-ibleshort-termpoliciestoachievethesetgoalscanhelpreducerisksandincentivizemanufacturerstoinvest in innovatinganddiffusinghighefficiencymodels. Forexample, theEU included theoveralltargettoimproveenergyefficiencyby20percentoverbusiness-as-usualprojectionsby2020inits2020climateandenergypackage,alongsidegoalstoreduceGHGemissionsandtoincreaserenewableenergydeployment.Includinganexplicittargetforenergyefficiencyalongsideothertargetscouldpro-videtherequiredsignalforthesector(Sterk&Hermwille,2013).Analternativetosuchaninterna-tionalgoalmightbearequirementtoestablishsuchtargetsatlowergovernancelevels.

Apartfromabstractpolicygoalsandpoliticalcommitments,anotherwaytoconveythe(investment)signaltothemanufacturersistosetupstrongMEPSandsetupclearandambitiousenergylabellingschemes.Theimportanceoftheguidanceandsignalfunctionofinternationalclimategovernanceishenceregardedhighlyimportant.


InternationallyharmonizedMEPS,efficiencylabels,informationrequirementsandmeasuringstand-ardscouldnotonlyhelptoconveyinvestmentsignalsbutwouldalsoservetofulfilthegovernancefunctionofenablingcollectiveactionandwouldhelptoaddresstheothertworemainingkeybarriersforincreaseduptakeofefficientappliances,namelylackofknowledgeandtosomeextentlackofin-terest on thepart of consumers. Efficiency labelling addresses the former.Minimumperformancestandardscanbeseenasawaytoovercomethelatterasitwouldincreasetheenergyperformanceofdefaultchoicesforthosewhohavenostronginterestinsearchingforthemostefficientalternativetoprocuringenergyservices.

What ismore, theharmonizationof labelsandstandardsmayhelp reducecoston thepartof theindustry.Ontheotherhand,acommonstandardforefficiencyassessmentsmaycreatethefoundationalsoforcommonminimumenergyperformancestandards.Butthereisalsoapotentialdownsidetoaglobalharmonizationofefficiencystandards. In thepast, thevariousefficiencystandardshaveen-gaged in competition on themost stringent efficiency labels. A harmonization of global efficiencystandardscutcurtailthiskindofcompetitionandhencecurtailanimportantdriveroftheevolutionofefficiencystandards.Giventheambivalenceofthepotentialeffectofinternationalharmonizationofefficiencylabellingandstandards,thecollectiveactionfunctionfortheappliancessectorisconsideredtobeofmediumimportance.


Whilethenumberofcountriesthathaveintroducedsomeformofefficiencyregulationonthevarioustypesofapplianceshasincreasedsignificantly,thereisstillalargenumberofparticularlydevelopingcountriesthatlacksuchpoliciesand/orlackcapacitiestoimplementandenforcethem.Internationalcooperationcancontributetoredeemthisbyfacilitatingknowledgeproductionandlearningbothintermsoftechnologiesandpoliciesandmeasuresfordrivingenergyefficiencyimprovements.Thecon-tributionthatinternationalinstitutionscouldmaketoknowledgeandlearningisconsideredtobeofmediumimportance



Giventhenatureofthesectorchallengeandsinceefficientappliancescanoftenpayforthemselvesinmanycasesduetoenergysavings,supplyingfinancialmeansofimplementationarenotconsideredacentralgovernancechallenge.Thesameholdsfortechnologytransfers.However,capacitybuildingonhowtoestablishMEPSandothertypesofefficiencypoliciesatthenationallevelshouldbeconsidered.Hence,themeansofimplementationfunctionisconsideredofmediumimportance.


Thetransparencyandaccountabilityfunctionofinternationalgovernanceisonlyrelevanttotheextentthatcommonstandards (MEPS)areadopted internationally. In this case, it canhelpenforce thosestandards.

4.13 Financialsector


Iftheworldistoholdglobaltemperatureincreasetowellbelow2°Candlimitthisto1.5°C,asagreedtoinParis,investmentpatternshavetochangedrastically.Significantadditionalinvestmentinlow-emissioninfrastructureandtechnologiesneedstobemobilised.Atthesametime,broaderfinancialflowshavetobealignedwithclimateobjectivesbyphasingouthigh-carboninfrastructureinvestments.Estimatesoftheinvestmentsneededtodecarbonizetheenergysectorarebasedondifferentmeth-odologiesandarerelativetodifferenttimeframesandsectors,andarethusnotdirectlycomparable.Nevertheless,asacommontrend,theseestimatesidentifytheorderofmagnitudeforannualinvest-mentsneedsinclimateactionby2020tobewellbeyondUSD1trillion(Mission2020,2017).Giventhelonglifespanofenergyandtransportinfrastructure,investmentchoicesto2030thatareincon-sistentwiththegoalsoftheParisAgreementriskbothalockinoffutureGHGemissionsaswellasfinancialinstabilityandlarge-scalestrandingofassets(OECD,2017).

Global financial flowsgoingto low-carbonandclimate-resilientdevelopmenthavebeengrowing inrecentyearsfromUSD97billionin2009/10(Buchner,Falconer,Hervé-Mignucci,&Trabacchi,2011),toanannualaverageofUSD367billionin2013/2014,withthemajority(93percent)ofthesefundsgoingtoeffortstoreduceGHGemissionsinthreemainareas:renewableenergygeneration,energyefficiency,andsustainabletransport(Buchneretal.,2016).Althoughthetrackingoffinancialflowstolow-carbondevelopmenthasbeenimproving,awiderangeofdefinitionsandmethodologiesarestillused.However,mostdataaggregatorsreportsimilarlevelsofannualrenewableenergyinvestmentinarangeofUSD250to265billionfortheperiod2013/14.(Buchneretal.,2016;IEA,2014a;UNFCCC,2016).

Nevertheless, investmentsstill fall significantlyshortofwhat isneededtoachievenationalclimatetargetsandglobalgoals.Therearedifferentestimatesforhowmuchinvestmentisneededtoshifttheworldontoawellbelow2°Cpathway,andverylittleliteratureisavailableoninvestmentneededtoshifttoapathwayconsistentwiththegoaltolimitglobaltemperatureincreaseto1.5°C.Reportsthatusescenariosthatarenotcompatiblewiththe1.5°Climitwillthereforeunderestimatetheactualscaleofinvestmentsneeded.

TherearevaryingestimatesofinvestmentsrequiredrangingfromUSD2.5-6.9trillionperyear,withdifferentestimatesreacheddependingonvariablesconsideredsuchasatmosphericGHGconcentra-tion,total investment,additional investment,andcoverageofcountriesand/orsectors.TheGlobalGreenGrowthInstitutehasestimatedthattheclimatefinancegapbetweencurrentinvestmentand


theinvestmentrequiredoverthenextfifteenyearsinnon-OECDcountriestostaybelowanatmos-phericGHGconcentrationof450partspermillion isUSD2.5–4.8trillion.BridgingthisgapwouldrequireanadditionalUSD166–322billionperyear(GlobalGreenGrowthInstitute,2016).

TheOECD,buildingonIEAandtheInternationalRenewableEnergyAgency’s(IRENA)jointanalysisofadditionalinvestmentrequiredinlow-carbontechnologiestoachievethe66percentprobabilityof2°Cscenario,estimatedthattheinvestmentrequiredtoremainbelow2°CwillbeUSD6.9trillionperyearoverthenext15yearsfornewinfrastructure,whichrepresentsmerelyatenpercentincreaserelativetotheUSD6.3trillionofannualinfrastructureinvestmentneedsbeforetakingintoaccountclimateissues(OECD,2017).ThisnumberistobecomparedwithcurrentinfrastructurespendingofaroundUSD3.4toUSD4.4trillion.Themajorityofinfrastructureinvestmentsarerequiredintransportandpower,twocriticalsectorsthatarealsoattheheartofdecarbonisationstrategies.

Inthiscontext,anewparadigmof“shiftingthetrillions”hasemerged,inwhichthenecessaryinvest-mentshiftfordecarbonisationrequirestrillionsofprivatefinancedollarstoberedirectedinsteadofonlybillionsbeingmobilisedbymainlypublicresourcesforclimate-specificinvestments.Thispointstotheindispensabilityofthenexusbetweentargetedclimateactionandthe“greening”ofbroadereconomicandfinancialpoliciesforfinancialstabilityandeconomicgrowth,requiringbothlong-termclimatestrategiesandclimate-alignedinvestmentenvironments.ThishasbeenacknowledgedintheParisAgreement’sgoalofmakingfinanceflowsconsistentwithapathwaytowardslowGHGemissionsandclimate-resilientdevelopment (Article2.1(c)),whichwill requirebothscalingdownfunding forhigh-emissionactivitiesandscalinguptheflowofclimatefinance.

Globally,energyinvestmentisnotyetconsistentwiththenecessarytransitionawayfromfossilfuelfinancing.Between2000and2014,capitalexpenditureonfossilfuelsupplyhasbeenincreasingstead-ily,triplinginrealtermsandinterruptedonlyin2009bythefinancialcrisisandmorerecentlybythesteepdropinglobalenergyprices.Morerecentestimatesof“brown”finance(i.e.high-carbonfinanc-ingand investments)putglobal investments inoil, gasandcoal supply in2015atUSD900billion,representingadeclineof18percentfromtheUSD1.1trillioninthepeakyear2014(OECD/IEA,2016).Itremainstobeseenwhetherthisisalastingchangeintheinvestmentflows.

Onthe“green”financeside,renewableenergyinvestmentsreachedarecordofUSD312.2billionin2015andaccountedfornearlyafifthoftotalenergyspendinginthatyear,establishingrenewablesasthelargestsourceofpowerinvestment.WhilespendingonrenewablepowercapacityhasdecreasedtoUSD241.6billioninthesubsequentyear,theinstalledcapacityin2016increasedtoreach161gi-gawatts,including136gigawattsfromnon-hydro,mainlywindandPVs(REN21,2017).Thisdiscrep-ancybetweendecreasinginvestmentsandincreasingcapacityreflectsthesteepcostdeclinesinwindturbinesandsolarPV(Lazard,2016).

Despitethepositivetrendstowardsagrowingmobilisationofclimatefinancing,onaglobalnetlevelbothpublicandprivatefinancearecurrentlystilldominatedbyhigh-carboninvestments.Forexample,whilethepublicandprivatemobilizedclimatefinancefordevelopingcountrieshasbeengrowingoverthepastdecadereachinganaverageforthetwoyearsofUSD57billionperyearfor2013/2014(OECD,2015a),itremainsasmallportionofgovernmentsubsidiesforfossilfuelconsumptionwhichreachedaroundUSD513billionayeargloballyinthesameperiod(IEA,2014a).PublicsupportbyG20govern-mentsinsubsidiestofossilfuelproductionhasbeenestimatedatUSD444billionayear(Bast,Doukas,Pickard,vandeBurg,&Whitley,2015).AglobalremovaloffossilfuelproductionsubsidieswouldresultinestimatedGHGemissionsreductionsofupto37GtCO2eqovertheperiod2017–2050(Gerasimchuketal.,2017).Toputthisincontext,totalglobalGHGemissionsin2014were51GtCO2eq(Gütschow,Jeffery,Gieseke,&Gebel,2017).

Public financingtomitigateclimatechangeremainskeybecause itdirectlymobilisesand leveragesprivatesectorinvestmentandindirectlycreatesscaledupandcommerciallysustainablemarketsfor


low-carbontechnologies(Maclean,Tan,Tirpak,Sonntag-O’Brien,&Usher,2008).Shiftingthetrillionsofglobalassetscontrolledbyprivateentities,includingtheglobalbankingsectorworthUSD140tril-lion;institutionalinvestors,suchaspensionsfundsandinsurancecompanies,managingoverUSD100trillion;andcapitalmarketsincludingbondsandequitiesofoverUSD100trillionandUSD73trillionrespectively(Buchneretal.,2016)fromhightolow-carbonalternativesremainsthekeychallengeforgreeningthefinancialsector.

Thefinancialsectorhasseenanumberofdevelopmentsinrecentyearswithrelevancetothe“shiftingthetrillions”challenge.MajorcreditratingagenciessuchasMoody’sandStandards&Poorarebegin-ningtoincorporateclimaterisksintheirratingcriteria.Stilltheseriskshavenotyetbeenfullyincludedincreditratings,whichsignalinvestorstherelativecreditrisksoffinancialobligationsissuedbycorpo-rationsinacomprehensivemanner.Carbonthusremainsahiddenrisktotheseinvestorsandhasoftenbeenreferredtoasthe“carbonassetbubble”,whichsomeanalystshaveconcludedposessimilarsys-temicriskstothefinancialmarketasthehousingcrisisthatledtotheglobalfinancialcrisisin2008(CarbonTracker,2011).Risksthatarecausedby“strandedassets”(i.e.assetsthathaveexperiencedunanticipatedwrite-downsordevaluation)arerecentlyreceivingmoreattentionbytheinvestmentindustry.ThevalueofglobalfinancialassetsatphysicalriskfromimpactsofclimatechangehasbeenestimatedatUSD2.5trillionbytheLondonSchoolofEconomics,andUSD4.2trillionbytheEconomist(EY,2016).

Theneedforbettertransparencyhasalsobeenrecognizedby,forexample,regulatorybodiessuchastheBankofEngland,andtheestablishmentoftheFinancialStabilityBoard(FSB)TaskForceonClimate-relatedFinancialDisclosuresthatisdevelopingvoluntaryclimate-relatedfinancialriskdisclosuresforusebycompaniesinprovidinginformationtoinvestors,lenders,insurersandotherstakeholders(TCFD,2016).Inonehigh-profilerecentexample,over63percentofExxonshareholdersvotedinfavourofaproposalcallingontheworld’sbiggestoilcompanytodisclosetheriskitfacesfromclimatechangeandstress-testitsassetsforclimateriskeachyear(Rushe,2017).

Further,climatespecificfinancialinstrumentssuchasgreenorclimatebonds,includingtheintroduc-tionofstandardsandcertification,havesuccessfullybeenaddedasfinancialproductswithinthefi-nancialsectorinrecentyears.AnnualissuanceofGreenBondsreachedUSD81billionin2016,whichrepresentsa92percentgrowthon2015figures(ClimateBondsInitiativeMarketsTeam,2016)andoverallthemarketstillremainsinitsinitialphaseofdevelopment.

Beyondthesedevelopments,severalmajorfinancialinstitutionshaverepeatedlyexpressedtheirneedforclear,stableandlong-termpolicyframeworkstoaccelerateandfurtherscale-upinvestmentsinclimatesolutions,showingtheirwillingnesstodriveaninvestmentshift.Inaddition,acoalitionofin-stitutionalinvestors(CDP,2017;UNClimateSummit2014,2014)committedaheadoftheParisAgree-ment todecarbonizingUSD100billion in institutionalequity investments. Several individualbankshavealsopledgeddecarbonisationmeasures.Forexample,DeutscheBankhascommittedtoendnewcoal investmentsandtogradually reducetheexposureof itscurrentportfolio tosuch investments(TheGuardian,2017).Fundingfor‘extremefossilfuels’droppedby22percentfromthepreviousyearin2016from37ofthelargestprivatebanksinNorthAmerica,Europe,Japan,China,andAustralia.Whilethissteepdropinfundingisapositivedevelopment,ithastobethestartofasustainedandrapidphase-outratherthanatemporarydecline(RAN,Banktrack,SierraClub&OCI2017).

Amonggrass-rootinitiativestargetingthefinancialsector,theglobalfossilfueldivestmentmovementhasgainedmomentumthroughdecisionsof somemajor insurancecompanies,pension funds,andfoundations inseveralcountriestodivest fromfossil fuelassets, includingtheRockefellerBrothersFund(RockefellerBrothersFund,2017),France’slargestinsurancecompanyAXA(AXA,n.d.),andtheNorwegian Government Pension Fund (The Storting, 2015) (Stadelmann, Roberts, & Michaelowa,2011).Attheendof2016,andoneyearaftertheadoptionoftheParisAgreement,institutionswithatotalvalueofUSD5.45trillionhavejoinedthedivestmentmovement(ArabellaAdvisors,2016).


Inthearenaofmultilateraldevelopmentassistanceandinternationalcooperationforsupportingcli-matechangeactionsindevelopingcountries,multilateraldevelopmentbanks(MDBs)continuetoplayacriticalroleinbridgingtheflowoffundsbetweenpublicandprivateactors.In2015,thesixlargestMDBsmobilizedatotalofUSD81billion,includingUSD56billionleveragedfromotherinvestors(TheWorldBank,2016).Despitethis,MDBscouldbetteraligntheirfinancingforinfrastructurewithlow-emissionpathways,particularlyinthetransportandwatersectors(OECD,2017).


Despite the above developments and emerging shifts that demonstrate the potential for climate-alignedinvestments,asignificantaccelerationin“shiftingthetrillions”towardsgreensourcesofen-ergy isneededtoavoidexceeding theParisAgreement’s temperature limit.Sucha transformationrequiresreformsinanumberofareas,includingforexample,disclosureofinformationaboutclimateriskstofinancialmarkets,mainstreamingrisksandimpactsassociatedwithclimatechangeintoinvest-mentdecisions,andmovingfromshort-termtowardslong-terminvestmenthorizons.Further,policyframeworksinfluencinginvestmentsintheenergysectormayneedtobereformedsothatfossilfuelexternalitiesareinternalisedintoproductionandconsumptionpractices.ThisshouldincludesettingstrongcarbonpricesandeliminatingdistortingFFSandothersupporttofossilfuels.Developingcli-mate-compatiblefinancialinstrumentsandinvestmentcriteriawillalsohelptoinforminvestmentde-cisionsthatwillcontributetowarddecarbonisationandimprovetransparencyofthosedecisions.

However,therearechallengesandbarrierstoachievingtheseoutcomes,includingeconomic,political,institutionalandknowledgebarriers.

Inconsistentpolicysignalsbygovernmentsaresignificantbarriersforadecisiveandorderlylow-car-bontransition.TheParisAgreementhasgivenaclearsignalthatstrengtheningtheglobalresponsetothethreatofclimatechangeneedstomakefinancial flowsconsistentwithapathwaytowards lowGHGemissionsandclimate-resilientdevelopment.However,anumberofstudieshaveconcludedthatgovernments’backingandsupporttofossilfuelproductioncreateenergymarketdistortionsbysend-ingcontrarysignals to investorsthatcontinuetodependonfossil fuels (Gerasimchuketal.,2017).Clearlong-termpoliciesandsufficientregulatoryframeworksareneededtosendappropriatesignalstomarkets and investors, and to incentivize the engagement of the private sector (OECD/IEA andIRENA,2017).

WhilevariouseffortsandinitiativessuchascarbontradingandreformingandshiftingFFShavestartedtheshifttolow-carbondevelopment,thesearegenerallyatinsufficientscaleandstillinearlyphases.Forinstance,G20countries,whichaccountfor75percentofglobalGHGemissionsandabout82percentofglobalenergy-relatedCO2emissions,havenot liveduptotheircommitmenttophasingoutinefficientFFS.Whilethesecountrieshavedecreasedtheenergyandcarbonintensityoftheirecono-mies,theyarestillattheearlystagesofdecarbonisationandtheircollectiveeffortsarenotyetsuffi-cienttoleadtoanoverallreductioninGHGemissions.Whilerenewableenergyinthesecountriesisontherise,fossilfuelsstilldominatetheenergymarketwithcoalbeingtheprimaryenergysupplyformostG20countries(Burcketal.,2017).

Subsidiestofossilfuelproductionfurtherdistortenergymarketsbyloweringcostsofoil,coalandgasproduction,therebyencouragingfossilfuelconsumption.Thisisoneofthemainreasonswhyenergyefficiencyandcleanenergyinvestmentsstillremainlesscompetitiveinsomemarkets(Gerasimchuketal.,2017).SomestudieshavefoundthatabarrierforremovingFFS,particularlyindevelopingcoun-tries,istherisingcostofenergywhichisusuallytransferredtohouseholdconsumers,whicharemostsensitivetopricerises(Roberts,2016).However,thereareotherstudiesthatindicateeliminatingFFSdoesnotaffectallhouseholdsequallyandusually it is thehigher incomegroupsthatbenefitmostfromFFS(Coady,Parry,Sears,&Shang,2015).


Subsidiesforfossilfuelsandothermarketdistortionsthatdonotreflecttheexternalitiesofthefulleconomic,socialandenvironmentalcostoffossilfuelscaninpartbeaddressedwithmarket-basedmechanismsintendedtopricecarbonthrough,forexample,emissiontradingschemesorcarbontaxes.However,remainingbarrierstothemarketpenetrationofsuchmechanismsincludelowpricesofcar-bon and their insufficient coverage relative to global GHG emissions. Prices under carbon-pricingschemesremaintoolowinG20countriestoencourageasubstantialshifttolowcarboneconomies(Burcketal.,2017).

Carbonpricing,ifwelldesigned,couldbeatoolthathelpstolowerGHGemissionsandshiftinvest-mentstolow-carbonsourcesofenergy.Variousstudiesindicatethatcarbonisgenerallystillpricedverylowwherecarbon-pricingschemesareinplace.Currently60percentofCO2emissionsarepricedatzeroandlessthantenpercentoftheemissionsarepricedatEUR30ormore(OECD,2017).TheHigh-LevelCommissiononCarbonPriceshasstatedthat.acarbonpricelevelthatisconsistentwithholdingglobaltemperatureincreasebelow2°CisatleastUSD40-80pertonneofCO2by2020andUSD50–100pertonneofCO2by2030,withasupportivepolicyenvironmentinplace(CarbonPricingLeadershipCoalition,2017).Sincethestudyusedscenariostolimitwarmingbelow2°Cwithagreaterthan66percentprobability,holdingglobaltemperatureincreasetowellbelow2°Candlimitthisto1.5°Cwouldimplycarbonpricesatthehighrangeorabovetheseestimates.

AccordingtoCarbonPricingWatch(2017),thenumberofcarbonpricinginitiativesimplementedorscheduledhasalmostdoubledoverthepastfiveyears,including40nationaland25subnationaljuris-dictions,responsibleforaboutaquarterofglobalGHGemissions.However,onlyabouthalfofthetotalemissionsfromthesejurisdictionsarecoveredbythecarbon-pricinginitiatives,leadingtoatotalcov-erageofonlyabout15percentofglobalGHGemissionsorabout8GtCO2eq(WorldBank&Ecofys,2017).

Lackof informationandknowledge isanotherbarrier that institutional investorsandcentralbanksface.Thoughtheawarenessandresponsivenesstoclimaterelatedrisksofassetownersandinvestorshasincreased,mostofthemstilllackin-housecapacityandexperiencetodevelopaninformedviewaboutclimatechangescenariosandstrategizeaccordingly.Moreover,manyoftheseinvestorsfinditdifficulttoincorporateclimaterisksintotheirinvestmentstrategies(EY,2016).Onestudyevenfoundthatcentralbanksdonotconsidermainstreamingclimatechangeintotheiroperationaldecisionsistheirresponsibility,withonestatedreasonbeingtheneedtoavoiddistortingthemarket(Matikainenetal.2017).

Anothermajorbarrieristhefactthatfinancialinvestorsareprioritizingfinancingshort-termliabilitieswhichhasnegativeimpactongreeninvestments,whichoftenrequirehighupfrontinvestmentcosts(MatthewScott,vanHuizen,&Jung,2017).Highperceivedrisks,limitedfinancialviabilityandlimitedlong-termcapital formbarriers for theprivatesector to invest incapital intenserenewableenergyprojects.Green investments typicallysufferhigher riskperceptionsduetoadependenceonpublicpolicyand,often,therelativeimmaturityoftechnologies,markets,andindustries,especiallyindevel-opingcountries(Frisari,Hervé-Mignucci,Micale,&Mazza,2013).However,investorsoftendonottakeintoaccountthatdelayedactionwouldhaveasignificantimpactonstrandedassets,createdbyphys-icalclimatechangeimpactsandthetransitiontoalow-carboneconomy(IRENA2017b).Anoverarch-ingchallengeisthereforehowtoleveragethefinancialsystemtosupportthelow-carbontransitionintherealeconomy.Thepublicsectorcanhelptoovercomethesebarriersthroughtheuseofpublicfinancingmechanismssuchasriskmitigationinstrumentsincludingriskpoolingandtransfer,publicconcessionalfinancingandguarantees.

Whilethereisgrowingmomentumforfinancialinstitutionstodiscloseclimaterisksintheirinvestmentportfolios to investors, the lackof coherent, comparableand standardizedapproach toassessanddiscloserisksremainsthebiggestbarrier.Inordertoaddressthisconcern,theG20in2015requestedtheFSBtoreviewhowthefinancialsectorcantakeaccountofclimaterelatedissues(TCFD,2016).The


TaskForceonClimate-relatedFinancialDisclosures,establishedbytheFSB,designedacoherentbutvoluntaryframeworkfordisclosingclear,comparableandconsistentinformationabouttherisksandopportunitiesofclimatechange.TheTaskForcerecommendedthatclimate-relatedfinancialdisclo-suresshouldbemainstreamedintofinancialinstitutions’publicannualfinancialfilingstoinforminves-torsandothersonclimate-relatedrisksandopportunities(TCFD,2017).Thefactthatitisvoluntarycontinuestocreatechallenges-withtheexceptionofFrance,thatbecamethefirstcountrytointro-ducemandatoryclimatechangerelatedreportingforinstitutionalinvestorsin2016(Rust,2016).


GuidanceandSignal

Anoverallinternationallyagreedobjectivetobringinternationalfinanceandinvestmentfullyinlinewithclimateobjectives(“greening”ofinternationalfinanceandinvestment)couldsendastrongsignaltoinvestors.

Apart fromthat, thesignalcouldalsoemanate fromandbereinforcedbyconsistentandcoherentclimatepolicyactionsbygovernments(OECD/IEAandIRENA,2017).Providingstrategicenvironmentalandeconomicpolicy signalsand frameworks for investorswas identifiedby theG20asoneof theoptionstoscale-upgreenfinancing(MatthewScottetal.,2017).Suchclimatepolicysignalsandguid-ancecaninfluencefinanceflowsanddriveinvestmentstowardsalow-emissionandclimateresilientpathway,whichinturnwillcontributetothedegreeofdecarbonisationglobally(Burcketal.,2017).

TheremovalofFFSandpricingofcarboninparticularcansendsignalstomarketsandinvestorsthatgovernmentsarecreating long-termregulatoryframeworksandenablingenvironmentsforaligninginvestmentswiththegoalssetoutintheParisAgreement.

Moregenerally,targetedinternationalinitiativesandcooperationaimedatdecarbonisationofecon-omiesorspecificsectorscanhelpsendsignalstoinvestorsregardinginvestmentandportfoliodeci-sions(e.g.phasingoutcoalplantsintheelectricitymix,renewableenergytargets,electricvehicletar-getsandphaseoutofcombustionengines,greenbuildingstandards).


Theabsenceofanyinternationalburdensharingmechanismorrulesregardingtheprovisionandmo-bilization of financial resources to developing countries raises the question ofwhether developedcountryPartieswithobligationstoprovidefinancialsupportfollowthroughwithdeliveryofsuchsup-port.Inordertoensurethatallindustrialisednationsprovidetheirfairshareofsupporttodevelopingcountriesinlinewiththeirhistoricalresponsibilityandcapacitytopay,thefeasibilityofdevelopingfairburdensharingapproachescouldbeconsidered.However,inpreviousinternationalnegotiations,con-tributorscouldneitheragreeontheconceptnorformulasforburdensharing.

Reachinginternationalconsensusonconcepts,definitionsandmethodologiesrelatedtowhatcountsasclimatefinanceandsettingcommonrulesforreportingonclimatefinanceprovided,neededandreceivedisaprerequisiteforimprovedtransparencyofclimatefinanceflowsforenhancingtrustandmobilizingcooperationamongcountries.

SharedcommitmentsandtargetsforreformingandeliminatingFFSandpricingcarboninlinewithadistributedglobalcarbonbudgetofferprotectionagainstexploitationbyfree-riders.Alackofinterna-tionalcooperationmaydecreasethecompetitivenessofcountriestakingclimateactionanddiscour-agegovernmentsrelyingonfossilfuelstointernalizethefullcostsofcarbon.Aglobalpricetargetsuchasaninternationallyagreedminimumcarbonpricewouldcreateastrongmarketsignalandincentivestoincreaseaction“toshiftthetrillions”(Cramton,MacKay,Ockenfels,&Stoft,2017).Forpurposesof


accountability and trackingprogressof fossil fuel subsidy reformsand carbonpricingmechanisms,commonreportingsystemsshouldbeestablished.

Internationalcooperationinmultilateralorganisations,institutionsandforasuchasOECD,G20,UN-FCCC,andmultilateralclimatefundscanshapeinternationalnormsbysettingrulesonwhichtypeoffinancialinvestmentsaresocially,economicallyandenvironmentallybeneficialandacceptable.Inad-ditiontosharedtargetsbetweencountries,MDBsandInternationalFinancialInstitutionshaveakeyroletoplaybysettingtargetsforphasingoutfossilfuelinvestmentsandmainstreamingclimatecon-siderationintotheirentireportfolios.Similarly,commonrulessuchasexcludingcoalandotherfossilfuelactivitiesarenecessaryforexportcreditagencieswhocurrentlystillprovideguaranteesforcoalinvestmentsindevelopingcountries.


Internationaltransparencyandaccountabilityarekeyelementsfortrackingprogressonthefulfilmentofdevelopedcountries’obligationstomobilizeandprovideclimatefinancetodevelopingcountries,aswellasfortrackingprogressonglobaleffortsofshiftingallfinancialflowsfrombrowntowardsgreeninvestments.Existingtransparencyeffortslacktwomainelementsthatcouldbenefitfromincreasedinternationalcooperation:firstly,accountingforbothsidesoftheclimatefinanceledger,includingnotonly the climate-compatible investmentsbutalso thehigh-carbon investmentsor “brown finance”going to fossil fuel extraction andproduction, formeasuring the net climate benefit (Bodnar,Ott,Thwaites,DeMarez,&Kretschmer,2017);andsecondlycoherentandstandardizedapproachesforfinancial institutionstoassessandreportclimate-relatedfinancialriskandtoprovidedisclosurere-porting.


Publicfinanceisneededtoleverageandmobilizeadditionalclimatefinance,particularlyfromthepri-vatesector.Coordinationandcooperationamongdonorcountriesandbilateral/multilateralfundsandinstitutions(e.g.GreenClimateFund,GlobalEnvironmentFacility,MDBsincludingtheWorldBank)isrequiredtoensurecoherenceandminimizeduplicationofeffortsintheprovisionofclimatefinance,capacity-buildingandtechnologytransfer.Thebuildingofinstitutionalcapacityingovernmentsandfinancialinstitutionsiscriticalforputtinginplaceregulatoryframeworksandpolicyreformstoalignpublicandprivatefinancingwithglobalclimatetargets.Especiallythefinancialsectorcurrentlylackscapacityfordevelopingappropriatemethodologiesforassessingclimate-relatedrisksinallinvestmentdecisions.


Decouplingemissionsfromeconomicgrowthisanewpathofdevelopmentthatrequiresmoregener-ationanddisseminationofrelevantdata,knowledgeandadaptivelearning(Burcketal.,2017).Inthisregard,internationalcooperationtofacilitateplatformsforexchangeofknowledgeandlearningaboutwhichpoliciesworkbesttomobilizeclimatefinanceanddivestassetsfromfossilfuelswillbecritical.Internationalcooperationamongfinancialinstitutionsandinvestorsisneededtofacilitatesharingofknowledgeandexamplesofbestpractice,includingindevelopingscenariosandnewmethodologiesrelatedtoclimate-relatedriskanalysisandmanagementinthefinancialsector.


4.14 FluorinatedGHGs


FluorinatedGHGsorF-gasesarea familyofmanmadegasesused inmainly industrialapplications.TherearefourtypesofF-gases:hydrofluorocarbons(HFCs),perfluorocarbons(PFCs),sulphurhexaflu-oride(SF6)andnitrogentrifluoride(NF3).WhileF-gasesareenergyefficientandsafeforusersgiventheirlowlevelsoftoxicityandflammability,theyhave(duetotheirverylongatmosphericlifetimes)veryhighglobalwarmingpotentials–thousandsoftimesgreaterthanCO2.HFCsweredevelopedinthe1990sassubstitutestoozone-erodingchlorofluorocarbons(CFCs)andhydrochlorofluorocarbons(HCFCs)whicharetobephasedoutundertheMontrealProtocolfortheprotectionoftheozonelayer.PFCsandSF6werealreadyinusepriortotheMontrealProtocol.

F-gasesrepresentedlessthantwopercentofanthropogenicGHGemissionsin2010(BlancoG.etal.,2014),buthavealmostdoubledfromanestimated1.1percent(or0.5GtCO2eq)ofanthropogenicGHGemissionsin2004(IPCC,2007).Intheabsenceofmitigationmeasures,thetotalglobalemissionsofF-gaseshavebeenestimatedtoamounttoabout4GtCO2eqby2050(Gschrey,Schwarz,Elsner,&Engelhardt,2011;IPCC/TEAP,2005;Purohit&Höglund-Isaksson,2017;TEAP,2016).HFCsarethefast-est-growingGHGswithanannualestimatedglobalgrowthrateoftento15percent(Andersen,2015).Whileby200280percentofHFCemissionshadoriginatedfromindustrializedcountries(UNEP,2002),theshareofdevelopingcountriesby2012hadincreasedtomorethan50percent(Rigby,2014).De-velopingcountriesarealsoexpectedtoleadfuturegrowthinHFCemissions(DuncanBrack,Andersen,& Sun, 2016; Purohit & Höglund-Isaksson, 2017; TEAP, 2016; Velders, Fahey, Daniel, Andersen, &McFarland,2015).

F-gasesareusedinalimitednumberofapplications.HFCsareprimarilyusedasrefrigerants(includinginairconditioningsystemsinvehiclesandbuildings),aerosolpropellants,foamblowingagents,sol-vents,andfireretardants(TEAP,2016).Theyarereleasedintotheatmosphereduringmanufacturingprocessesandthroughleaks,servicing,anddisposalofequipmentinwhichtheyareused.PFCsareemittedasaby-productofvariousindustrialprocessesassociatedwithaluminiumproductionandthemanufacturingofsemiconductors.SF6isusedinelectricaltransmissionanddistributionequipment,includingcircuitbreakers,magnesiumprocessing,semiconductorandflatpaneldisplaysmanufactur-ing, as a tracer gas for leak detection and filler for sound-insulatedwindows (Purohit&Höglund-Isaksson,2017;TEAP,2016).

DriversforgrowthinuseofF-gasesincludeclimatechange,growthinpopulationandGDP,growthincommercialandindustrialvalue,andgrowthinnumberofvehicles(BlancoG.etal.,2014;Purohit&Höglund-Isaksson,2017).Climatechangeinparticular,witheverincreasingglobaltemperatures,willboosttheneedformorerefrigerationandairconditioning.

AlternativesfortheuseofF-gasesarealreadywidelycommerciallyavailableandtestedandarebeingfurtherdeveloped.TheyalreadyenablesignificantemissionreductionsatlowcostandshouldevenmakeaphaseoutofF-gasespossible.Newlydevelopedhydrofluoroolefins(HFOs)arecurrentlybeingintroducedasnewrefrigerants,aerosolpropellantsandfoamblowingagentsthatcouldreplacetradi-tionalHFCs(Greenpeace,2016;TEAP,2016).TheyareasubsetofHFCsbutwithshortatmosphericlifetimesandlowglobalwarmingpotentials,althoughtheymaystillposethreatstotheenvironment(Greenpeace,2016). Iso-butane,n-propane,propene,ammonia,Fluoro-ketone,andotherscanalsoreplaceHFCsinahostofapplicationslikeaerosols,air-conditioning,heatpumpsorfoams.TheyhavelongbeenprovenasalternativestoCFCsandHCFCsandcouldthusalsoreplaceHFCs.RetrofittingandswitchingtonewconversionmodelscanhelpmitigatePFCemissionsfromaluminiumproductionwhileNF3canreplacePFCsinsemi-conductors.SulphurdioxidecanreplaceSF6inmagnesiumproductionandcasting.Goodpracticemeasureslikeleakagecontrolandend-of-liferecollectionandrecyclingcan


alsocontributetoreducingF-gasemissions(Purohit&Höglund-Isaksson,2017;Seidel,Ye,AndersenStephen,&Hillbrand,2016;TEAP,2016).

Costsdifferacrossdifferentapplicationsandalternatives(attimesevenbeingnegative),butoverallphasingdown/outF-gaseswillrequireadditionalinvestmentsandcomeata(low)netcost(nottakingintoaccounttheavoidedenvironmentaldamage).By2050,mostF-gasusescouldthusbephasedouttechnicallyandcumulativeemissionsbereducedbymorethan70percentatamarginalabatementcostoflessthan10EuropertonneofCO2eq(leadingtoareductionofmorethan50percentfromcurrentlevels)(Purohit&Höglund-Isaksson,2017;TEAP,2016).


AfirstmajoreconomicbarrierconcernsthecostsandinvestmentsincurredbyswitchingfromF-gases.Asmentionedabove,whilesomealternativespromisenetsavings,overallcostswillneedtobebornandinvestmentswillberequired.Whilesmalleremissionreductionsmaybeachievedfairlyeasilybyeither substitutinggasesor implementingmarginalefficiency improvements,deeper reductions in-volveincreasingmarginalcostsandrequirenewcapitaloralternativeprocessescominginathighercosts.Sometechnologiesremainprohibitivelyexpensive.Thereislimitedincentiveforindividualac-torstocoversuchcostsandinvestments.Inaddition,userindustrieswillpartiallyhavetoadapttech-nicalroutinesandpracticesandinstallnewequipment(totheextentdrop-inalternativesarenotavail-able), contributing toan inertia in thedeploymentofavailablealternative technologies (Purohit&Höglund-Isaksson,2017).

PoliticaloppositionbypartsoftheF-gasindustryhasalsobeenanimportantobstacle.Thechemicalindustry,animportantinfluenceinmanycountries,hasarguedagainstF-gascontrolsaslongasthisseemedtoleadtoalossofbusinesstothem.ThisoppositionhassoftenedandevendisappearedwiththeinvestmentcycleforF-gasescomingtoanend(andrelatedintellectualpropertyrightsexpiring)andwith the industrymakingprogresson thedevelopmentof substitutes suchasHFOspromisingfuturebusiness(andnewintellectualpropertyrights).Thisfollowsapatternalsoobservedwithre-specttotheregulationandphase-outofCFCsandotherozone-depletingsubstances.

Regulatoryhurdlesarerelativelylimited.Regulatoryframeworksexistworldwideasaresultofthreedecadesofeffortstophaseoutozone-depletingsubstances,whichespeciallyHFCspartiallyreplaced.SubstitutingF-gasesinlargepartsconstitutesasimilarchallengethatcanbuildontheexistingframe-works forCFCs andotherozone-depleting substances.Accordingly, regulations to tackle certain F-gasesexistincertaincountriesandregions,includingtheEU,Japan,theUS,Australia,Norway,Swit-zerlandandChina(Purohit&Höglund-Isaksson,2017).

Finally,differencesincapacitybetweendevelopedanddevelopingcountriesneedtobeacknowledged.PatentsonHFOprocessesandapplicationsheldbyindustryindevelopedcountrieslimitopportunitiesforawiderangeof industry indevelopingcountries(inbothproductionandconsumptionsectors).Patentchallengescreatetechnologyandlegaluncertainties(WorldBank,2015).Moreover,technolo-giespertainingtonaturalsubstances,whichareatechnicallyfeasiblealternativeandwouldhelpde-velopingcountriesleapfrogHFCsaltogether,arecostlyandprimarilyavailableinindustrializedcoun-tries(Greenpeace,2016).Overall,especiallythelimitedavailabilityoftechnologyandfinanceaswellastheoverallcostsputconstraintsoneffortstoreduceandphaseoutF-gasesindevelopingcountries.




Aglobalphase-outgoalfortheproductionandconsumptionofF-gasesandarelatedroadmapwithinterimstepsmayprovideguidancetotheactorsproducingandconsumingF-gases.AspecificgoalforF-gaseswouldbemoretangibleforrelevantactorsthanageneralglobalGHGemissiontarget,asitmightnotbeclearfromsuchaglobaltargetwhatthemorespecificaimforF-gasesshouldbe.Adif-ferentiationoftheglobalgoalbyregionsandcountrieswouldaddvalueinviewofvaryingcapacitiesandnationalcircumstances(e.g.varyingroleofrefrigerationandairconditioningindifferentregions).


GiventhecostimplicationsofphasingdownF-gasesandlackingincentivesforcounteringtheinertiainvolvedinthedeploymentofcommerciallyavailable,affordabletechnologies,thereisahighdemandforinternationalregulationtoaligncountriesandotheractorstowardaphase-don/outroadmap.


Global rules for phasing out F-gaseswill consequently require appropriate provisions for ensuringtransparencyandaccountabilitysothatanyfreeridingcanbediscoveredandaddressed.Inthisregard,itmaybenotedthat,adangerofillicittradeinrelevantsubstancesnotwithstanding,therelevantreg-ulatedactivities(productionanduseofthesechemicals)isintrinsicallyrelativetransparent(produc-tionisconcentratedinfewlargefacilitiesanduseinlargepartoccursinproductsthatarewidelyavail-able).


ThereisahighdemandformultilateralfundingandtechnologytransferinordertoenableandensurethatdevelopingcountriescanphaseoutF-gases.AsuccessfulblueprintexistsintheformoftheMul-tilateralFundfortheImplementationoftheMontrealProtocol.Financialsupportwouldallowdevel-opingcountriestoadopttechnologicalalternativesmoreeasily.

Capacitybuildingcouldperformcomplementaryfunctions.Trainingandskillsdevelopmentinparticu-larfordevelopingcountrieswillbebeneficialinordertoenhancetheuptakeofnewtechnologiesandpracticesandincreasethemitigationpotentialofgoodpracticemeasureslikeleakagecontrolandend-of-liferecollectionandrecycling.


Whilemanyofthetechnologiesrequiredalreadyexistandrelevantsolutionsareinlargepartknown,internationalcooperationmayhelptransferrelevantknowledge(e.g.byestablishingaglobaldatabaseandclearinghousethatcanhelpbuildandmaintainreliableinformation,regionalmapping,existingtechnologiesandfinancialopportunities).

Linkages

Power:Someofthealternativesubstances/technologiesmayleadtoahigherconsumptionofelectric-ity.However,technologicaladvancesarelikelytomakeupforsuchincreasedpowerdemandtoalargeextent.


5. ConclusionsThisreporthasundertakentoshedfurtherlightonthespecificfunctionsthatcooperationininterna-tionalgovernance institutionscanperformsoas tocontribute tomitigatingglobal climatechange.Fromtherelevantliterature,wehavetothisendderivedfivegeneralgovernancefunctionsofinter-nationalinstitutions:guidanceandsignal,settingrules,transparencyandaccountability,meansofim-plementation,andknowledgeandlearning.Thishasprovidedasolidbasisforseparatelyanalysing14keysectoralsystemsastotheneedanddemandforinternationalgovernanceinstitutionstoperformthesefivegovernancefunctions.Thissectorallydifferentiatedapproachfollowsfromtheincreasinglysharedinsightthatmitigatingclimatechangefacesveryvariedchallengesandopportunitiesindiffer-entsectorsandfieldsofaction.Itshouldanddidallowustoidentifyandspecifyingreaterdetailthepotentialofinternationalgovernanceinstitutionstocontributetomitigatingclimatechange.

It shouldbeworthpointingout thatouranalysisat this stageabstracts fromtheworldofexistinginternationalinstitutions(bothintergovernmentalandtransnational).Itdoesnotincludeorimplyanassessmentoftheperformanceofthevariousexistinginternationalinstitutionsinaddressingclimatechangeandcontributing to thegovernance functionsdistinguished.Wehavehencehereaimed toidentifyandspecify thepotentialof international institutions ingeneral tocontributetomitigatingclimatechangeinlightofthespecificchallengesandcircumstancescharacterisingthesectoralsystemsinfocus.Thisismeanttoenableustocontrastthispotentialwiththeactualcontributioninternationalinstitutionsmake,inordertoidentifythescopeforenhancingthiscontributionandtoidentifyrelatedgaps–ananalysisthatistobeconductedaspartoftask4.2oftheproject.Wehaveherenotevaluatedexistinginternationalgovernanceefforts.

Weprovideasnapshotsummaryofourresults inMatrices5.1,5.2and5.3.Matrix5.1providesanoverviewofmainchallengesandbarrierstodecarbonisationbysectoralsystem.Theoverviewbacksupourhypothesisthatchallengesdifferconsiderablyamongthem.Allsuchsystemsfeatureanumberofspecificbarriersrelatingtothesector-specificactorsandoptions.Nonetheless,somecommonpat-ternscanbeidentified.

Inmanysectoralsystems,economicbarrierssuchashighermarginalcostsofclimate-friendlytechnol-ogiesandpracticesarekey,includinginagriculture,LULUCF,waste,energy-intensiveindustries,andF-gases.Insomeofthesesectors,ahightradeintensityfuelsconcerns(agriculture,energy-intensiveindustries,F-gases)thatthecostofclimateactionwouldendangerinternationalcompetitiveness.Inothersectors,mitigationoptionssuchasrenewableelectricity,efficientbuildingsandappliancesin-creasinglyhave loworevennegativemarginalcostsovertheir lifetime,butupfront investmentre-quirementsarehigher,whichcreatesabiastowardslessefficientoptionsandposesproblemsforac-torsandcountrieswithlimitedaccesstocapital.

Politicalandinstitutionalbarriersareparticularlypronouncedinsectoralsystemsthataredominatedby large incumbentcorporations, suchaspower,energy-intensive industries,nationaland interna-tionaltransportandF-gases.Theseincumbentsoftenfiercelytrytoprotecttheirestablishedbusinessmodels.Uncleardivisionof labouramongrelevantnationalagenciesand/orlackofenforcementofregulationshavebeenidentifiedasbarrierinanumberofsectorsincludingLULUCF,waste,urbansys-temsandbuildings(especiallyinlesscapacitatedcountries).

Technologicalbarriersarenotakeyconcerninmanysectoralsystems,butinsomefulldecarbonisa-tionwill requiresubstantial furthertechnological researchanddevelopment.Thesesectors includeagriculture,power,energy-intensiveindustries,internationalandnationaltransportandbuildings(re-gardingnetzero-emissionbuildings).

Awareness,informationandcapacityarekeybarriersinmostsectors.Awarenessofproblems,infor-mationaboutmitigationoptionsandeffectivepolicies,andthetechnicalskillsoftheworkforceneed


tobeimprovedacrosstheboard(withsomewhatvaryingprominenceoftheseelementsacrosssec-toralsystems).

Basedontheanalysisofsectoralbarriers,Matrix5.2providesaveryroughgradingofthesignificanceofthefivedifferentgovernancefunctionsineachofthe14sectoralsystemsinto“high”,“medium”and“low”.Thisgradingisbasedonaqualitativeexpertassessment(ratherthananyquantifiedcriteria).Gradingashighindicatesthatthegovernancefunctioninquestionisconsideredasacrucialprioritytobeaddressedby internationalcooperation(climatemitigationmaynotbeabletoadvancewithoutsuchcooperation).Mediumsignificanceimpliesthatprovidingthisfunctionisalsoimportantsothatcooperationinthisrespecthasconsiderablepotential(withoutnecessarilybeingcrucialforprogress).Gradingaslowimpliesthatthegovernancefunctionhaslittlepotentialandmayatbestmakeacom-plementarycontribution.Wereadilyadmitthatsuchagradingonlydeliversacrudepicture,whichfurthermoreissubjecttochallengebyotherexperts.

ThetextualentriesinMatrix5.3providesomefurtherdetailonthespecificsregardingthepotentialcontributionofinternationalinstitutionstothegovernancefunctionspersectoralsystem.Inescapably,thismatrix/tablecannotreflectthenuancesascontainedintheprecedingsectoralanalysis,buthastofocusonprovidingbriefsummariesofthemainpoints.Theinterestedreaderisreferredtothesectoralanalysesinsection4forfurtherdetails.

Withrespecttotheguidanceandsignalfunction,thesynopsisshowsthatthereisageneraldemandforsuchguidanceandsignalinthedifferentsectoralsystems.Thecirculareconomythatisitselfnotcontributingtoclimatechangeconstitutesthesoleexception,as itwouldbestbedrivenbytargetsandvisionsforthesectoralsystemsthatarekeyforasectoraleconomy(includingwaste,energyin-tensiveindustries,etc.).Agriculturescoressomewhatlowerbecauseofthespecificcharacteristicsofthissectoralsystemandinparticularsinceafullphase-outofemissionsinthissectorseemstechno-logicallyandsocio-economicallyunfeasible(whichhindersthedeterminationofclear-cutoverarchingguidingtargets). Inthe largemajorityofsectoralsystems,there isaclearaddedvalueofestablish-ing/havinginternationallyagreedtargetsandvisions.Suchtargetsandvisionshavethepotentialtoalignactorsgloballytowardsdecarbonisation.

ThispotentialisnotleastrootedintheneedtocompletelyphaseoutnetGHGemissionsasearlyaspossibleinthesecondhalfofthiscenturyinordertoenableholdingtheincreaseofglobalaveragetemperature towellbelow2/1.5°C,as recognised inArticles2and4of theParisAgreement.Thisopensuptheopportunityofestablishinggeneraltargetsthatcanprovidedirectguidancetoindividualactorswithinsectoralsystems.Forexample,theneedtoachievenet-zeroemissionswithinthenextfewdecadestranslatesintotheneedtoimmediatelyhaltinvestmentintofossilfuelpowerstations,aclear target providingdirect guidance to any investor. In contrast, a hypothetical target of halvingemissionswouldnotnecessarilyprovidesuchclearguidance to individual investorsaseachoneofthemmayassumethe50%reductionwouldberealisedbyothers.

TheentriesinMatrix5.3illustratethattheaddedvalueliesinparticularwithtargetsandvisionsthatareconcreteenoughfortherelevantsectoralactors.Hence,theLULUCFsectorcouldbenefitfromanagreedtargettohaltdeforestationandtoturnthesectorfromanetsourcetoanetsinkofGHGs.Similarly,thebuildingssectorcouldbeguidedbyaclearvisionofafulldecarbonisationofthissectoranditscomponents(heating,cooling,cooking,heatingwater).Asthisexampleindicates,guidanceandsignaltosectoralactorsmightevenbestinvolveafurtherdifferentiationoftargetsandvisionsbeyondthesectoringeneraltowardssub-sectorsandkeyactivitiesinthesectoralsystem.Asafurtherexample,greeningfinanceandinvestmentmightbenefitfromarelatedoverallobjective,butthesignalarguablyalsoresultsfromspecific,concreteobjectivestofullyremoveFFSbyaspecificdateandtointroducecarbonpricing.Giventhecrosscuttingnatureoffinancing,thesignalarguablyemanatesfromthemixofspecificfinanceobjectivesandcross-sectoralandsectoralclimateobjectivesandpolicyframeworks


atbothnationalandinternationallevels.Overall,thesectoraltargetsunderconsiderationintheanal-ysishencegomuchbeyondthegeneralobjectivesenshrinedintheParisAgreementthatremainataratherabstractlevelwhenitcomestosectoralaction.

Asconcernssettingrules,wefindamorevariedpicture,withthegradesinMatrix5.2spanningthefullspectrum.Inunderstandingthisgradingandtheoverallpicture,itmaybeusefultoappreciatethattheneedanddemandforinternationalregulationcanbetracedbacktoatleastthreeverydifferentsourcesthatarenotmutuallyexclusive:First,inafewsectorsinternationalcompetitionandinterde-pendenceprovideastrongandevencompellingrationaleforaninternationalburdensharingandre-assuranceof implementation (energy-intensive industries,F-gases,…)aswellas foracommonap-proach(internationaltransport).Second,insomecasestheestablishmentofinternationalrules/stand-ardsseemstoenablecooperativeactionandprogressbyactors.Forexample,internationalstandardsseemtoberequiredtoenabletheestablishmentofrelatedexchangerelationships(results-basedpay-ments)intheLULUCFsector.Similarly,labellingandcertificationmayberequiredinordertoenablethecirculareconomygivenglobalvaluechains.Third, international regulationcouldservetomakeevengovernmentsactwhomaynototherwiseseethisasapriority.Thismay,forexample,bethecaseespeciallyasregardswasteandbuildingsandwouldneedtogohandinhandwiththeprovisionofsufficientmeansofimplementation(thisthirdcasewouldinitselfleadatbesttoagradingas“medium”sinceinternationalregulationcouldhardlybeseenascrucial).Overall,thereisclearlyalowerneedanddemandfor internationalregulation insomesectoralsystems(includingwaste,urbansystems,transport,andappliances)becauseactionintheseisdrivenbyotherfactors.

Asinthecaseoftheguidanceandsignalfunction,acloserlookatthespecificneedspersectoralsys-temisrequired,takingintoaccountpotentiallydifferentsituationsasregardsdifferentcomponentsofthissystem.Anoverarching,aggregateassessment(asreflectedinMatrix5.2)cannotdojusticetothefrequentlyvaryingcharacteristicsofdifferentcomponentsof thesectoralsystems in focus.Forexample,whilemanycausesofagriculturalGHGemissionsmaynotcruciallyneedtobeaddressedbymeansofinternationalregulation(e.g.CH4emissionsfromricepaddies),reducingandmodifyinguseoffertilisermaybenefitfrominternationalrulessinceitisacomponentaffectingthecompetitivenessoninternationalmarkets.Similarly,removingFFSmaybeoneparticulararearegardingextractivein-dustriesandfinanceandinvestmentforwhichinternationalagreement/regulationmayberequired.Ingeneral,anyaddedvalueofinternationalregulationinmostcasesrelatestoparticularcomponentsandspecificelementsofasectoralsystemanditsgovernance(ratherthanthesectorasawhole;fordetails,seeMatrix5.3andtheanalysesinsection4).Ameaningfulanalysisthusneedstofurtherdis-aggregatebeyondthelevelofsectoralsystems,forwhichthedistinctionbetweendifferentsectoralsystemswouldappeartoprovideausefulentrypoint.

Transparencyandaccountabilityaregenerallycloselylinkedtotheneedforinternationalregulationand itsunderlyingrationale.This linkshouldnotcomeasasurprisesincethetransparencyandac-countabilityatstakespecificallyrelatetotheimplementationofagreedrules(ratherthantotranspar-encyingeneral;seesection3.4above).Thedemandforsuchtransparencyandaccountabilityispar-ticularlypronouncedwhereinternationalcompetitionandinterdependenceprovideastrongmotiva-tionforfree-ridingand,consequently,thesettingofrulesandchecksontheirimplementation.Itmaybeforthisreasonthatinternationaltransportandenergyintensiveindustrieshighonthisfunction.Also,addressingLULUCFseemstorequirehighlevelsoftransparencytoensuretrustintheexchangerelationshipimpliedinresults-basedpaymentsonthebasisofinternationalrules.

Therewouldappeartobethreeconditionsunderwhichasectoralsystemscoreslowerontranspar-encyandaccountability.First,thedemandforaninstitutiontoperformthisfunctionmaybedamp-enedevenincaseofhighdemandforinternationalregulationandhighcompetition,iftheregulatedactivities are intrinsically relatively transparent themselves (extractive industries, F-gases, alsotransport).Second,demandforinternationalgovernanceoftransparencyandaccountabilitymaybe


ratherlowbecauseofalowdemandforinternationalregulationthatwouldrequireimplementationinthefirstplace(e.g.waste,urbansystems,appliances).Third,theinternationalregulationrequiredmayitselfnotprimarilyaddresscompetitivenessissuesbutenableandfacilitateactiontoreduceemis-sions(e.g.circulareconomy).

Insomesectoralsystems,theserationalesmix(power,buildings,agriculture).Thisisalsoagainacon-sequenceofthedifferentneedsandconditionsofdifferentsegmentsandcomponentsofthesectoralsystemsinvestigatedthataremoreobviousinsomeareasthaninothers,eventhoughtheymaybeacommonfeatureoverall.Apossibleinternationalagreementonlimitingtheuseoffertilisermay,duetoitsimplicationsforinternationalcompetition,requireinternationaltransparencyandaccountabilityprovisions.Incontrast,internationalfoodlabellingregulationmay(dependingonitsdesign)beself-enforcing.Similarly,internationaltechnicalstandardsforelectricvehiclesmaybequasiself-enforcing,whereascompliancewithinternationalemissionstandardmayrequireclosescrutinyandfollow-up.

Thedemandfortheprovisionofadequatemeansofimplementationisoverallrelativelyhighacrossthesectoralsystems,especiallysincemanydevelopingcountriesrequiresomeformofassistanceinordertoadvancesufficientlyfast.Mostsectoralsystemshencescore“high”onthisfunction.Somearerated“medium”or“medium-high”,mainlybecausetheintrinsicincentivesandtheeconomicrationaleforactionaresostrongthatadditionalmeansofimplementationareconsideredlesscrucial(buildings,appliances,financialsector).Inthecaseofinternationaltransportandextractiveindustries,therele-vantsectoralactorseven indevelopingcountriesarearguably relativelywell-resourced inorder totakeactionevenwithoutfullprovisionofmeansofimplementation.Forexample,manydevelopingcountryairlinessuccessfullycompetewiththeirdevelopedcountrycompetitorsandmanyfossilfuelexportingcountries(includingmanymembersoftheOrganisationofPetroleumExportingCountries–OPEC)havesignificantcapitalreserves.Eveninthesecases,somemeasureofsupportforadvancingthetransition,includingaccesstocapital,mayberequired.

Again,therearesignificantdifferencesbetweenthevarioussectoralsystemssothatacloser,differ-entiatedlookisrequiredforidentifyingthespecificneeds.Insomesectors,technologydiffusionmaybeaprominentchallenge(e.g.agriculture,waste),inotherstechnologydevelopmentortransfer(e.g.shipping,power,energy-intensiveindustries,transport,F-gases).Inseveralsectors,capacitybuilding(ofvariouskinds)ismuchneeded(LULUCF,waste,power,transport,urbansystems,buildings,appli-ances,financialsector).Inmostsectoralsystems,theneedforeitherdirectfinancingoptionsoraccesstofinanceandinvestmentloomslarge(exception:appliances),andthereisageneralcross—sectoralneedformore long-termfinancingoptions(tobeadvancedby internationalcooperation). Inafewcases,therelatedneedspecificallyconcernsrisk-sharing(powerandtransport).Overall,thevariationintheneedprofilesofvarioussectoralsystemshencederivesfromthedifferentneedsforthethreemeansofimplementationdistinguished(technology,finance,capacitybuilding–alloftheseoronlysomepart/mixture)aswellasvaryingneedsforthespecificformofeachofthesemeansofimplemen-tation.

Thereisalsosomelevelofdemandforinternationallycoordinatedknowledgeandlearningacrossthesectoralsystems.Inmostsectoralsystem,thisdemandis“high”or“medium”.Lesserscoresexistonlywithrespectto:(1)F-gaseswhereknowledgeaboutalternativesandeffectivepoliciesiswidelyavail-able,alsoasaresultofthelong-lastingeffortstophaseoutozone-depletingCFCs;and(2)thepowersectorwhererenewableenergytechnologieshavespreadandmaturedashasknowledgeaboutre-latedpolicyframeworks.Intheothersectoralsystems,internationalcooperationcansignificantlyad-vancetechnologydevelopment,thedesignofeffectivepoliciesandawarenessraising.Foragriculture,thecirculareconomy,energy-intensiveindustries,urbansystems,andthefinancialsector,knowledgeandlearningseemacentralchallengewithrespecttodecarbonisation(inthecaseofthecircularecon-omyandurbansystemsalsoduetotherelativelyrecentnatureoftheirframing).


Asthisoverviewalreadyindicates,alsoinregardtothisfunction,theaggregationas“knowledgeandlearning”masksasignificantvarianceastowhatthespecificdemandforthisfunctionentailsfordif-ferentsectoralsystems.Insomesuchsystems,thereisaparticularneedforawarenessraisingsup-portedbyinternationalinstitutions(agriculture,buildings,waste,financialsector).Forsome,technol-ogydevelopmentandresearchcoordinationseemcrucial(agriculture,internationaltransport,energy-intensiveindustries).Inseveralareas,thereisamoreorlessspecificpotentialforpromotingtechnicaland/orpolicy learningacross countriesand jurisdictions (LULUCF,waste, circulareconomy,power,buildings,extractiveindustries,transport,urbansystems,appliances,financialsector).Insomecases,specificdemandforthecreationofparticular informationordataexists(LULUCF,waste,extractiveindustries, internationaltransport,financialsector).Overall,thereappearstobe,nexttothediffer-encesofthegeneralimportanceofknowledgeandlearning,aspecificfocusandmixofmorespecificneedsidentifiableforeachsectoralsystem.

Whilewemaygroupsectoralsystemsalongkeydemandsforinternationalgovernanceperfunctions(asperabove),therearefewclearpatternsemerging.Ahighdemandforinternationalregulationdoesnotcorrelatewithaloworhighdemandforknowledgeandlearningormeansofimplementation.Nordoesahighor lowdemand formeansof implementationcorrelatewithahighor lowdemand forpromotingknowledgeandlearning.Afewcorrelationsgetvisibleifwesub-divideanddisentanglethegovernancefunctionsasdoneabove.Hence,ademandforpromotingpolicyandtechnicallearningaswellasforcapacitybuildingseemstocorrelatetosomeextentwithalowerdegreeofinternationalcompetitionandinterdependence.Asalreadymentioned,ahighdemandforinternationalregulationrootedinhighinterdependenceandcompetitionusuallyleadstoarelativelyhighdemandfortrans-parencyandaccountability.Apartfromtheserelativelyfewcorrelationsandlinks,thespecificneedanddemandforthefulfilmentofthegovernancefunctionswouldappeartoberatherrootedinthespecificcharacteristicsandconditionsoftherespectivesectoralsystemsthatarelargelyindependentoftheofthevariousgovernancefunctionsandtheircomponents.

Overall,theapplicationofourframingofthegovernancefunctionsofinternationalinstitutionsinthesectoralanalysisrevealsitspotential,butalsosomelimitations.Itenablesamoretargeted,differenti-atedanddetailedanalysisofthevaryingdemandfortheperformanceofcertaingovernancefunctionsbyinternationalinstitutionsinspecificsectoralsystems.Itthereforeadvancesfromanoverallaggre-gateperspectiveoninternationalclimategovernancethattreatsitasoneintegratedproblemtowardsamoreappropriateoutlookthattakesintoaccountthemultifacetednatureofthischallengeinvariousrelevantsectorsandcontexts.Suchamoredetaileddiagnosisenablesustoidentifymoreappropriateandmoretargetedcuresforthedifferentaspectsofthechallenge.Italsoprovidesanopportunitytoinvestigateand take intoaccount the furtherdifferentiation thatexistswithinsectoral systems.Asdemonstratedinouranalysis,settingrules,meansofimplementationandknowledgeandlearningcaneachmeanvariousthings.Thisdifferentiationshouldbeinvestigatedsinceitrequiresappropriatelyadaptedresponsesandcreatesvaryingdemandsforinternationalgovernance.

Thisneedforfurtherdisaggregationanddifferentiationcanalsobeconsideredoneofthelimitationsoftheapproachchosen.Itdemonstratesthatthedistinctionofvarioussectoralsystemsisnotneces-sarilyenoughtogetagriponanalysingtheunderlyingproblemstructuresandrelateddemandsforinternationalgovernance.Asmentioned,however, itmaybeconsideredto facilitategettingtothebottomoftheproblemstructuresandrelatedneedsandpotentials.Afurtherlimitationconcernsthetransparencyandaccountabilityfunctionthatappearstobecloselylinkedtothedemandforsettinginternationalrulesanditsunderlyingrationales.Forexample,thedemandforthisfunctionisparticu-larlypronouncedwhereinternationalregulationistoaddress issues involvingcompetitivenesscon-cernsandinternational interdependence.Thisraisesthequestiontowhatextentthisfunctionmayformpartoftheanalysisofthefunctionofsettinginternationalrulesinthefirstplace.


Allinall,thesectorallydifferentiatedapproachdevelopedinthisreportpromisestoconstituteainno-vativeandsoundbasisforanalysingtheeffectivenessandadequacyofinternationalclimategovern-ance.Theobjectiveoftheoverallworkpackageandprojectistohelpidentifyoptionsforenhancingtheeffectivenessandadequacyofinternationalclimateprotection.Ourapproachadvancesthestateoftheartbysystematicallydisaggregatingtheoverallgovernancechallengeintothespecificsectoralandsub-sectoralelementsofthischallenge.Ittherebyenablesustodeliveramoredifferentiatedpic-tureof thebarriersandopportunities thatexist indifferent fieldsofactionandcanorneed tobeaddressedbyinternationalinstitutionsandcooperation.Thisshouldenableustoclearlyidentifyexist-inggapsandpotentialstobeaddressed invarying internationalgovernance institutions,whichwillneedtobefurthersubstantiatedinTask4.2oftheproject.

Hence, our analysis of the demand for international governance across different sectoral systemsshouldconstituteasoundbasisforthenextstepsandtasksinWorkPackage4oftheCOP21RIPPLESproject. Itprovidessuitablebenchmarks for investigatingexisting international institutionsand thecontributiontheymaketomeetingthedemandforinternationalgovernanceidentified.Thisinvesti-gationistoenableustoidentifyremaininggapsandunderdevelopedpotentialsandtosuggestprior-itiesinthisrespect.SuchananalysisshouldprovideusefulinputandguidancetopolicymakersintheEUandbeyondforidentifyingscopeandprioritiesforactiontoimproveinternationalclimategovern-ancetoacceleratethedecarbonisationofoursocietiessoastoenhancethechancestoholdglobaltemperatureincreasewellbelow2/1.5°C,inlinewiththeParisAgreement.


SectoralGovernanceMatrix5.1:BarriersandChallengestoDecarbonisation

Sectors FinancialandEconomic InstitutionalandPolitical Technological Awareness/Inform./Capacity

Agriculture • Lowerproductivityofsomealternativepractices

• Highupfrontcostsofconvertingpractices

• Limitedpotentialofcurrenttechnologies,needfornewbreedsandvarieties

• Slowdisseminationofbestfarmingpractice

• Socialpreferenceformeat

• Lackofinformationaboutclimateimpacts

LULUCF • Lackofinternalisationofforestbenefits

• Demandpullespeciallyfromwealthycountries

• Pressurefromoveralleconomicanddemographicdevelopment

• Insistenceonrighttoexploitnationalnaturalresources

• Overlappingresponsibilitiesofnationalministries

• Lackofclearlandtenureandland-userightsandenforcement

• Noagreeddefinitionofforests• Uncertaintiesaboutcarbon

contentofforests,particularlysoils

Waste • Costofsustainablewastemanagement

• Lackofstringentwasteregulationandenforcement

• Uncleardivisionoflabouramongnationalagencies

• Lackoforganisationofwastecollection

• Lackoftechnicaltraining• Lackofawareness

Circulareconomy

• Highupfrontinvestmentsforchangingbusinessmodels,designs,supplychains

• Underdevelopedmarkets

• Highupfrontcostsofdurableproducts

• Regulationofinternationalvaluechainsdifficult

• Impactonexportersofmanufacturing

• Complexityofmaterials • Poorreversecyclelogistics• Lackofinformationonflowsof

materials/productcomposition

• Poorsortingandhandlingofwaste

• Consumerpreferences



Power • HighupfrontinvestmentforRE

• HighoverallcostforCCS• Costofre-buildinggrid

infrastructure

• Blockingpowerofincumbents,“techno-industrialcomplex”

• Appropriatemarketregulation/design

• DeployabilityofCCS• Intermittencyofwindand

solar

• Storagesolutions• Newgridinfrastructure

• Lackofskilledworkers

Energy-i.industry

• Longinvestmentcycles,highinvestmentrequirementsandrisksandlongpaybacksofnewtechnologies

• Fearoflosingcompetitiveness/stuntingdevelopment

• Complexityofglobalvaluechains

• Technologicalinertia,insufficientR&Dspending

• Innovativetechnologiesstillatexperimentalstage

ExtractiveIndustries

• Resourcecurse:unwillingnessbyinvestorstoinvestinothersectors

• “Justtransition”ofregionsrelyingonfossilfuelextraction

• Poweroffossilfuelcompanies

• Distributionalconflictsaroundforegoingresourcerentsandsubsidyreform

• Riskofstrandedassets–oilandgascompanies“toobigtofail”

• LackoftransparencyonFFS• Lackofgovernmentcapacityto

substituteFFSbymoretargetedpolicies

Transport • Veryhighinfrastructureexpenditurerequired(change)

• Higherupfrontcostsofnewvehicletechnologies

• Powerofcarandoilcompanies,motoristlobbies,freightbusiness

• Lackofstandardsforelectricvehicles

• Fueltaxesamajorsourceofpublicincome

• Developmentofhigh-yieldbatteries

• Carculture• Engineerbiastowards

incrementalimprovementofexistingtechnologies

Internationaltransport

• Notaxationofaviationandshippingfuels

• Splitincentivesbetweenshipownersandhirers

• Highpriceofbiofuels

• Effortsharingcontroversy• Powerofincumbents

• Lowpublicprofileofshippingsector(lackofpressure)

• Technicalproblemsregardinguseofbiofuels,hydrogen,electricity

• InsufficientR&Dspending

• Lackofinformationonreductionpotential

• Perceived‘righttofly’



• Restructuringofsupplychainsneededforslowsteaming

UrbanSystems • Veryhighinfrastructureexpenditurerequired

• Lock in of high-emissioninfrastructure throughongoingurbanisation

• Lack of integrated land-use andtransportationplanning

• Enshrined paradigms such aszoningandequatingmobilitywith(car)transport

• Limitedcapacitiesandcompetingprioritiesofcities

• Lackoflocalemissionsdataandmonitoring/evaluationoflocalclimateactions

Buildings • Highupfrontinvestment

• Lackingaccesstofinance,particularlyindevelopingcountries

• Lackofregulations/incentivesandenforcement

• Largenumberofstakeholders,strongfragmentationofsector

• Splitincentivesbetweenbuilders,landlordsandtenants

• TechnicalchallengesofNZEBs

• Lackoftechnicalskillsamongdesignersandbuilders

• Lackofawarenessofoptions• Lowpriorityofefficiency

Appliances • Highupfrontcosts • Lackofinformationforbuyers

• Lowpriorityofefficiencyinpurchasedecisions

• Preferenceforeverlargerappl.

Financialsector • Highriskperceptionofgreeninvestment

• Lackoflong-termcapital

• Short-terminvestmenthorizons

• Lackofadequateregulatoryframeworks

• FFS

• Lackofinformationabout/standardstoassessclimaterisks

• Lackofcapacitytoassessclimaterisks

FluorinatedGHGs

• Deepreductionsrequirenewtechnologieswithhighcosts

• Resistanceby(chemical)industry • Accesstonewtechnologies(patents)


SectoralGovernanceMatrix5.2:SignificanceofGovernanceFunctions

Sectors GuidanceandSignal SettingRules TransparencyandAccountability



Agriculture Medium Medium Low High High

LULUCF High High High High Medium

Waste High Low-Medium Low High Medium

Circulareconomy (-) High Low High High

Power High Medium-High Medium High Low-Medium

Energy-i.industry High High Medium-high High High

ExtractiveIndustries High High Medium(FFS:High)24 Medium-High Medium

Transport High Medium-High Low High Medium

Internationaltransport High High High Medium Medium

UrbanSystems High Low Medium High High

Buildings High Medium-High Medium Medium-High Medium

Appliances High Medium Low Medium Medium

Financialsector High High Medium(FFS:High)24 Medium High

FluorinatedGHGs High High Medium High Low

24 Separateentryforfossil-fuelsubsidyreformwhichhasahighneedfortransparencyandaccountabilitytounderpininternationalagreement.


SectoralGovernanceMatrix5.3:MainPotentialContributionsofInternationalInstitutions

SectorsGuidanceandSignal SettingRules Transparencyand

AccountabilityMeansof

implementationKnowledgeand

Learning

Agriculture • Sector-specificreductiontargetandsubtargetsforfertiliseruse,emissionreductionfromentericfermentation–nationaltargets

• Labelling• Reductionoffertiliser

use(includingassistance)

• Carbonprice

• Implementationofanyrules(seerules)

• Technologydiffusionandadaptation

• Financeandinvestment

• Internationalresearchefforts

• Awarenessraising(waste,diets)

LULUCF • Targettohaltandrevertdeforestationandtoturnsectorfromanetsourcetoanetsink

• Economicincentivestopreserveandregrowforests(results-basedpayments)

• Referencelevelsandmonitoringofresults

• Finance• Capacitybuildingfor

legalandinstitutionalframeworks

• Jointaccountingmethodologies

• Policylearning(legalandinstitutionalframeworks)

• Geographicalinformationsystem

Waste • Sector-specificdecarbonisationtargetandsubtargetssuchasendinguncontrolleddumping,burning,andlandfilling

• Commonglobalregulationsandstandards(e.g.prohibitionoflandfilling)

• Wouldberequiredformonitoringofinternationalregulation

• Transparencyofsectordevelopments

• Internationalcapacitybuilding

• Internationalfinance• Technologydiffusion

• Policyandtechnicalknowledgeexchange

• Internationaldatabase

Circulareconomy • Bestintegratedintovisionforcoreemission-causingsectors

• EPR,passports,labellingandclearmaterialspricing(byvaluechain)

• Implementationofanyregulatorymechanisms

• Technicalskillsdevelopment

• Internationalfinancingoptions

• Policyandtechnicaldialogueplatforms





Learning• Certification

programmes• Supportforcross-

industrycollaboration

Power • Signalforlow-carboninvestmentsinenergyinfrastructure.

• coordinatedtargetsetting(decreasingimportanceduetoincreasinglycompetitiverenewableenergytechnologies)

• coordinationattheregionallevel(especiallygriddevelopment)

• requiredtosupportcollectiveactionfunction

• risksharingforcapitalintensiveinvestmentsinsustainablepowersystems,especiallyindevelopingcountries

• internationaltransferofrenewableenergyandenergystoragetechnologies

• administrativeandtechnologicalcapacitybuilding

• sharingofgoodpracticepoliciese.g.onmarketdesignsandlong-termplanning

Energy-intensiveindustry

• Sectoraldecarbonisationobjectivesandrelatednational,regional,globalroadmaps

• Internationalemissionlimitsand/orcarbonpricing(productionorconsumption)

• Requiredtomonitorandverifyimplementationofrules

• Financialsupport/incentivesandtechnologytransfer

• Globalknowledgeandlearningplatform(s)(policylearning)

• InternationalR&D





Learning

ExtractiveIndustries • Phaseoutoffossilfuelextractionasapafter2050

• PhaseoutofFFSbyfirmdeadline

• GlobalregulationofFFextraction(rights)

• AgreementonFFSphasedown/out

• GlobalregulationwouldrequireT&A(butrelativelyhighintrinsictransparencyofregulatedactivities)

• RequiredformonitoringofFFSreform

• Totrackprogress,createpeerpressure

• Technicalandfinancialsupportfornationalreformefforts(transitionawayfromFFextraction)

• DefinitionofFFS• International

comparabledata(especiallyonFFS)

• Enhancepolicylearningre.‘nationalinterests’

Transport • Internationaltransportdecarbonisationtargetandroadmap(differentiated)

• Newmobilityparadigm(transit-orienteddevelopment&prioritisingpublicandnon-motorisedtransport)

• Commontechnicalstandards(e.g.forelectricvehicles)

• Commonregulation,e.g.emissionscontrol,carbonpricing

• Noneedformonitoringofcommonstandards

• Neededforemissionlimitsandcarbonpricing

• Financialrisk-sharingforlargeinfrastructureprojects

• Finance,technologyandcapacitybuilding

• Learningpartnerships(especiallyNorth-Southcooperation)ontechnologiesandpolicydesign(includingpolicyintegrationwithothersectorssuchaspowerandurbansettlements)

Internationaltransport

• Globallimitsandphase-outof(net)emissions(withdifferentiation)

• Globallimitsonemissions

• Internalisationofexternalitiesinfuelprices/carbon

• Toensureeffectiveimplementationofinternationalrules

• Accesstocapital/fi-nance,e.g.toimple-mentretrofits(ship-ping)

• Incentivisingofearlytechnologyadoption

• (Joint)R&Dforlow-carbontechnologies

• Informationoncosts/savings/newtechnologiesand





Learningpricing/emissionstrading

• Operationalandtechnologicalprescriptions(e.g.speedlimits)

• Technicalcooperation/transfer(shipping)

operationalmeasures(shipping).

UrbanSystems • Newparadigmofsustainableurbandevelopmentintegratingmitigationandotherdevelopmentobjectives(includingzeroemissionsgoal)

• Littlescopeforuniformrulesorstandards

• Needforsystematicmonitoringandassessmentofandinternationalconsultationonurbanclimateactions

• Strongneedforbuildingurbanplanningcapacityandfinancialsupportformitigationmeasures

• Participationofcitiesininternationalforumstopromotemutuallearning

• Establishmentoflearningpartnershipsbetweencities

Buildings • Sector-specificdecarbonisationtargetandsub-targetsforsubsectors(likeheating,cooling,cookingandheatingwater)

• Internationaltechnicalstandardsandagreementonfar-reachingdecarbonisationobjectives

• Monitoringofimplementationofrules

• Training,capacitybuildingandawarenessraising

• Financeandinvestment

• Policyandtechnicalknowledgeplatforms

• Globaldatabase

Appliances • Internationalenergyefficiencytargetand/orrequirementtoestablishsuchtarget

• harmonizationofstandardsandlabel-ling(butcouldalsolimitupwardcompeti-tionamongdifferentlabels/schemes)

• MayhelptoenforcecommonlyagreedMEPS

• CapacitybuildingforpolicymakersfortheintroductionofMEPSregulation/efficiencylabelling

• knowledgediffusionontechnologyandeffectiveefficiencylabelling





Learning

Financialsector • Overallobjectiveto“green”financialflows

• PricingofcarbonandremovalofFFS

• Sectoraldecarbonisationtargets

• Fairburdensharingapproaches

• Minimumcarbonpriceandfossilfuelsubsidyremoval

• Agreementonacceptabletypesoffinancialinvestments

• Coherentandstandardizedapproachesforfinancialinstitutionstoassessandreportclimate-relatedfinancialrisk

• Monitoringofimplementationofrules

• Commonrulesforaccountingforandreportingonclimatefinanceprovided,neededandreceived

• Accountingofbothclimatecompatibleandhighcarboninvestmentstotrackprogress

• Publicfinancetoleverageandmobilizeprivatefinance

• Coordinationandcooperationamongdonorcountriesandclimatefinancedeliveryinstitutions

• Buildinginstitutionalcapacityingovernmentsandfinancialinstitutions

• Exchangeofknowledgeonpolicies

• Exchangeknowledgeamongfinancialinstitutionsforclimaterisksanalysisandmanagement

• Systematicdatacollectiononcostsofclimaterisks

FluorinatedGHGs • PhaseouttargetforF-gases(productionandconsumption)

• Regulatorymechanisms/phase-outobligations

• Implementationofanyrules(seerules)

• Financialincentives• Technologytransfer

• Globalinformationsharing

107

COP21RIPPLES–DX.X–Title-VX.X-[DraftorFinal]-Date

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