Methodology for Setting a Low Carbon Green Growth Path:World Bank Efforts for Romania

Towards a Green Economy with Low CO2 Emissions SEVER CO2 Methodology for Setting a Low Carbon Green Growth Path: World Bank Efforts for Romania

By Jian Xie, Ph.D., The World Bank

Bucharest, 18 September 2014

PROJECT CO-FINANCED BY A GRANT FROM SWITZERLAND THROUGH THE SWISS CONTRIBUTION TO THE ENLARGED EUROPEAN UNION

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A Stepwise Approach • • • • • • •

Understanding of current situation and trend Identification of key sectors as the focus areas of GHG emission reductions Brainstorming of sectoral issues and possible interventions Screening and shortlisting of priority issues for further analysis Sectoral and macro-economic modeling for impact assessment Evaluation and consultation of key policy issues and interventions Development of a low carbon development strategy and action plan

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Our Efforts for Romania: Introduction to World Bank CC Program

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Climate Risks in Romania Like all countries, Romania is not immune to climate change. 2007 was Romania’s warmest year in two decades (average temperature 11.5° C), while the coldest average temperature (8.4°C) happened in 1985. In 2005, Romania suffered historic floods which caused 76 deaths and significant property damage, and 2007 brought the country’s most severe drought in the last 60 years. The effects of these extreme weather events adversely affected the country through significant economic loss in agriculture transport, energy supply, and water management. In a scenario of increased global warming by 4°C, the situation and impacts of climate change would certainly deteriorate in Romania.

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Sectoral Contributions to GHG emissions (2011) The total emissions of CO2 equivalent without LULUCF for Romania were 123 million tons in 2011, accounting for 2.7 percent of the total EU emissions.

GHG Source and Sink Categories Energy (including Transport) where Transport Industrial Processes

Total GHG Emissions in 2011 (CO2 equiv.)

86,320.46 14,577.72

% in Total GHG emissions (without LULUCF)

% Changes since 1989 (reference year)

69.98%

-54.99%

11.82% 10.21%

-59.67%

15.36% -

-53.50% +14.91% -54.86%

12,591.53

(including Solvent use) Agriculture Forestry

18,941.46 -23,353.01

Other Land Use (without Forest)

-1,951.93

Waste

5,366.48

Total CO2 equivalent with LULUCF

98,040.60

4.35% -

Total CO2 equivalent without LULUCF

123,345.54

100%

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Identification of Key Sectors Energy sector contributes to about 70% of GHG emissions and is doubtlessly the priority sector for mitigation.

Transport sector, although attributing only 12% in total GHG emissions so far, has been increasing rapidly—up 36% since 1990. This upswing trend remains likely in the future, and the sector, especially road transport, deserves full attention in terms of containing GHG emission growth.

Urban space is where 56% of the population and the majority of economic activities are located. It is a diverse and complex area for a wide range of both mitigation and adaptation opportunities, from building energy efficiency and urban transport, to solid waste management, water, and sanitation.

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Identification of Key Sectors (cont.)

Agricultural sector remains traditional and dominant in the Romanian economy in terms of land occupation and population (about 45% living in rural areas). Over 15% of total GHG emission is attributable to agriculture, and the sector is also very vulnerable to CC. It is an important sector to factor into the potential for adaptation actions.

Water sector is essential to stability and growth and vulnerable to global warming which is likely to result in changes in precipitation, river flows, water supply, and patterns of floods and droughts. Thus water is another key sector for introducing adaptation measures to climate change.

Forest sector, as a major sink of GHGs, offers a range of forest-based mitigation measures such as conserving existing CO2 sinks, enhancing carbon sinks, and reducing the trade-off between the sinks and the tangible and intangible benefits from other land uses. Romania’s rich forest sector represents major carbon sink with an increasing role to play in CC. . www.worldbank.org

Sector rapid assessments were conducted in the six sectors, primarily for the purpose of identification of climate actions for EU Operational Programs. The next few slides use the energy sector as an example to show the results.

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Energy Sector Continued de-carbonization of the energy sector, through low-carbon power and heat supply options and improved efficiency in energy conversion, transmission, distribution and consumption, is essential to Romania’s climate change mitigation agenda.

This will require a substantial increase of energy efficiency investments and clean energy solutions, implementation of energy sector reforms which enable financing and sustainability, and putting an institutional framework in place for delivering sustained energy efficiency improvements. For the 2014-2020 period, the following priorities have been identified:

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Energy Sector Investing in energy efficiency and clean energy solutions by both public and private sectors: (1) scale up thermal retrofit of “blocks of flats,� in particular apartment buildings constructed during the 1950s and 1990s; (2) modernize and commercialize economically viable district heating systems; (3) reduce energy intensities in chemical and steel manufacturing; (4) address highly disaggregate energy efficiency investments, such as high-efficiency appliances, through energy efficiency obligations; (5) expand the balancing infrastructure for integrating increased wind and solar generation capacity; (6) increase high-efficiency gas-fired generation capacity; and (7) modernize the electricity distribution network.

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Energy Sector Implementing energy sector reforms and improving sector governance: (1) Resume the implementation of the 2003 Road Map for the Energy Field: a balanced strategy of attracting private sector investment and developing viable public sector energy companies; (2) Improve governance of energy SOEs in accordance with OECD best practice for transparency and accountability; (3) Rebuild the energy regulator ‘s capacity, autonomy and accountability; (4) Improve inter-ministerial coordination of energy functions across the Government; and (5) Improve institutional set-up and governance arrangements for business environment functions in accordance with good international practices for regulatory management systems.

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Energy Sector Creating an institutional framework for delivering sustained energy efficiency improvements: (1) plug gaps in policies and regulations, in particular, addressing price subsidies and the enforcement of codes and standards; (2) strengthen institutions, especially the authority and accountability of the national entity with an energy efficiency mandate; (3) establish long-term financing and delivery platforms for thermal retrofit of residential buildings; (4) improve access to finance, especially mechanisms which support access to EU cofinancing; (5) develop technical the capacity of key energy efficiency market participants, such as end users, energy managers/auditors, banks, and energy service providers; and (6) increase information, data gathering and outreach to all stakeholders.

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Compiling a full list of sectoral and macro-level issues and interventions for mitigation

The results of rapid assessments is for EU OPs. But they provides a starting point for further setting a path for LCD. Brainstorming and consultation were conducted to generate a comprehensive list.

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Screening and shortlisting of sectoral and macro-level issues for further analysis Proposed Adaptation / Mitigation Measures

Screening approach based on expert judgment Do the benefits clearly outweigh costs?

YES

For no-regret measures, or when benefits largely outweigh costs, the CC decision-makers could include the measure in the CC Action Plan

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NOT CLEAR

When benefits do not clearly outweigh costs or / and when risks are irreversible, CC decisionmakers cannot conclude on the basis of the screening and therefore further evaluation is needed.

NO

When the costs incurred are significantly higher than the benefits, the measure is labeled as High Risk, and should be excluded from further analysis and from the Action Plan

Methods for Evaluating Mitigation Measures:

Multi-criteria Analysis (MCA) Cost-Effectiveness Analysis (CEA) Cost-Benefit Analysis (CBA) Sectoral and Economy-wide Modeling

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A Sample Macroeconomic Marginal Abatement Cost (MacroMAC) Curve, 2030 (Poland)

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Sectoral and Economy-wide Modeling for Impact Assessment

Note: The following slides were taken from a presentation made by Erika Jorgensen and Leszek Kasek of the World bank on the methodology of the Romania CC Program

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Energy modeling

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Transport modeling

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Urban modeling

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Water modeling

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Next Steps: Updating and Operationalizing National CC Strategy and Developing Action Plan

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For information on Romania Climate Change and Low Carbon Green Growth Program and on how to join on-line discussion group, please visit: http://www.worldbank.org/en/country/romania/brief/romania-climate-change-and-low-carbon-greengrowth-program

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Thank you!

PROJECT CO-FINANCED BY A GRANT FROM SWITZERLAND THROUGH THE SWISS CONTRIBUTION TO THE ENLARGED EUROPEAN UNION

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