Transport efficiency in China
China’s growing transport sector, which is the subject of Chapter 4, presents a more complex case. In urban areas in particular, the growth in car ownership and use is spectacular, and the gap between China and developed economies suggests that this growth will continue for some time. The welfare benefits of the increased mobility that this implies are very large, but they also give rise to rapidly increasing GHG emissions.

The authors see potential constraints on these mobility gains emerging from two factors:

• China’s rapidly-growing oil demand, which is making the price and provenance of its imported oil an increasing concern, and
  
• The rapid growth in car use, which is leading to gridlock in cities that were not designed, and cannot be easily adapted, for such traffic.

They present three scenarios for China’s urban transport through 2020. “The Road Ahead” describes a business-as-usual scenario; “Oil Saved” applies measures taken expressly to curtail oil demand growth; and “Integrated Transport” includes measures to reduce the burden on China’s urban infrastructure.

These scenarios give an indication of the scope for policy to work. Oil Saved results in a 55 percent reduction in transport energy use by 2020 relative to The Road Ahead, while Integrated Transport leads to a 78 percent reduction. These reductions come through three improvements: more efficient engine types (hybrids, compressed natural gas); smaller vehicles to adapt to constrained road and parking space; and lower vehicle-miles-traveled as people use public transportation alternatives. The authors are at pains to point out that these measures are likely to improve, rather than constrain, mobility for urban Chinese.

The challenges described in this chapter lend themselves to an SD-PAMs approach in several ways:

• China has already recognized these problems and is starting to implement policies to address them, such as improved vehicle efficiency standards.
  
• The scope for extending and accelerating such policies and measures appears to be significant, and the benefits are major both for Chinese policy interests and for reduced CO2 emissions.
  
• The sectors involved, especially the automobile sector, are global in scope and work in global markets. Concerted international action may prove more effective than countries acting individually.

Rural electrification in India
Rural electrification is a pivotal development issue in many parts of the world. Electricity provides a wide range of development advantages, promoting better education, better health, and more economic activity. The Indian government has set ambitious targets for providing ull electrification, but it is far from clear that these goals can be met. Experience in India to date suggests that electrification goals will prove extremely challenging. Despite repeated efforts, 56 percent of Indian households have no electricity supply, and the problem is growing worse as new connections fail to keep pace with population growth.

For the purposes of this study, the authors start from the premise that these goals will need to be met somehow, and consider three scenarios under which this is done: an extension of the grid using India’s existing generation mix; a scenario dominated by off-grid diesel generators; and one dominated by off-grid renewable energy generation. They also consider three levels of demand in rural communities, including households, communal services, and (for the high level scenario) productive uses of power. They evaluate these approaches according to a set of nonclimate criteria:

• speed in meeting the electrification targets
• quality and reliability of the power
• cost
• security of fuel supply

They find reason to doubt whether grid-based electrification can meet the ambitious timetable of the government’s argets, given fundamental structural problems with India’s electricity market. Diesel generation is perhaps more promising, with perhaps the best potential for quickly delivering electrification off-grid, and in many ways it can be expected to play an important role. However, the authors point out that high levels of diesel use do present a significant import dependence and fuel security problem for India. Depending on the demand scenario used, the increase in oil imports is between 6 percent and 41 percent of today’s levels. The authors argue that this economic impact, together with the strategic issues associated with growing oil imports, raise doubts as to the desirability of seeing a large use of diesel in electrification.

Favoring renewable energy sources brings significant CO2 emission savings: 14 to 102 million tons of CO2 per year compared to using the grid. The authors argue that this in itself should not decisively influence Idia’s choice of technology; they conclude however that based on the concerns raised about the grid and diesel technologies, there are significant reasons for India to prefer renewable energy on domestic policy grounds, provided that the institutional delivery mechanisms can be put in place. They acknowledge that the cost of renewable energy technologies tends to be high in India due to the high cost of capital, but suggest that making India’s electrification goals part of an international climate effort might offer scope for addressing this obstacle.

India’s rural electrification therefore seems to offer an opportunity for an SD-PAMs approach that is challenging in its scope but equally large in its potential development and climate benefits.

Carbon capture and storage in South Africa
South Africa typifies an important challenge for several major developing countries. A significant part of its population lacks access to electricity, and providing that access is an urgent political priority. However, the country’s fuel mix is dominated by coal, and the large domestic coal resource suggests that expanding generation means a major increase in CO2 emissions. Carbon capture and storage (CCS) technology, which involves the capture of CO2 emissions from power plants or industrial processes and its permanent disposal in geological formations, offers the technical potential to address this problem. Can the implementation of this technology work as an SD-PAM? The authors examine the technical potential in South Africa for both the capture from particular facilities and the availability of disposal sites. They also address issues such as the technical and institutional capacity in South Africa to makes CCS work.

They conclude that CCS has significant potential for cutting emissions in South Africa. Some of this is at relatively low cost—some 30 million tons CO2 per year may be available for capture and storage at an estimated $20 per ton—but most will be much more expensive than this. More importantly, they find few sustainable development benefits for South Africa beyond the mitigation of GHGs. One possible exception is in the potential for transfer of technologies that are more generally useful in South Africa, such as CO2 gas transmission which may also be useful for piping natural gas. But this alone is far from making the case for South Africa to implement CCS in the absence of a formal emission constraint, which is unlikely in the foreseeable future.

This case illustrates one of the limitations of the SDPAMs approach. CCS brings few sustainable development benefits, and none that come close to making it viable in the absence of explicit mitigation commitments. These mitigation commitments would not need to be on the part of South Africa: it would be possible for donor countries to finance the future capture and storage of South African emissions. But the amounts of money involved would be a step-change in the willingness of the international community to pay for GHG mitigation, which thus far has been low. The authors make a valuable contribution to the study of CCS in South Africa, but it does not seem that the SD-PAMs model will serve well, absent significant international support.

Conclusions
The use of SD-PAMs opens up a way of putting into more formal effect the provisions of the UNFCCC and offers hope of a more constructive dialogue around developing country emissions and the importance of development. While the concept is not new, this report aims to lay the idea out systematically and to explore some of its implications and potential applications.

The country studies presented in this report show a range of opportunities for SD-PAMs. In the case of Brazil’s biofuels program, the potential is not so much to expand ethanol use in Brazil itself as to find ways to expand the approach to other countries. In China, more efficient vehicles and integrated transport solutions are already a target of government policy, but an SD-PAMs approach has potential to help the uptake of these be faster and deeper. India has already made rural electrification a policy priority, but has seen renewable energy as a relatively minor component within that policy; SD-PAMs can be used to set the conditions for a shift towards making renewables the core of a rural electrification strategy.

The chief advantage of SD-PAMs is that they align the interests of climate protection with those of policy goals that have a higher priority for developing country policy makers. The emphasis must be on how to improve the delivery of development goals at the same time as reducing emissions. This leveraging of existing policy priorities means both that the appropriate level of domestic incentive will exist to implement the necessary laws and policies, and that larger financial flows can be influenced, rather than depending on more limited funds dedicated to climate policy. The overwhelming importance of domestic and private capital in energy investment in major developing countries means that leveraging existing financial flows is far more significant than creating new funds specifically aimed at climate protection.

The process of establishing SD-PAMs promises to be more varied than many existing proposals for future climate policy. In some cases the approach may be a simple pledge and review; in others an agreement of comparable commitments in specific sectors; in yet others negotiation of mutual commitments between countries. This may seem messy, but in fact most international agreements with aims of a similar level of ambition to those of climate policy have proceeded a similar fashion.

More work needs to be done. Analysis is needed of sectors such as water, agriculture, forestry and non-electricity energy efficiency. The interaction between SD-PAMs and market mechanisms such as the CDM, how SD-PAMs might be financed, and how mutual commitments could work, are all important areas of further enquiry.

The world needs a climate agreement beyond 2012 that will meet the needs of all the world’s countries, rich and poor; it also needs to accelerate the rise of its poorest inhabitants out of poverty. SD-PAMs offers some hope that these two crucial aims can be met.