5.3 The degree to which technical potential and cost-effectiveness are realized is dependent on initiatives to counter lack of information and overcome cultural, institutional, legal, financial and economic barriers which can hinder diffusion of technology or behavioural changes.

5.4 By the year 2100, the world's commercial energy system in effect will be replaced at least twice, offering opportunities to change the energy system without premature retirement of capital stock; significant amounts of capital stock in the industrial, commercial, residential, and agricultural/forestry sectors will also be replaced. These cycles of capital replacement provide opportunities to utilize new, better performing technologies.

Energy Demand

5.5 The IPCC projects (IPCC 1992; IPCC 1994) that without policy intervention, there could be significant growth in emissions from the industrial, transportation, and commercial/residential buildings sectors. Numerous studies have indicated that 10-30% energy efficiency gains above present levels are feasible at negative to zero cost in each of the sectors in many parts of the world through technical conservation measures and improved management practices over the next 2 to 3 decades. Using technologies that presently yield the highest output of energy services for a given input of energy, efficiency gains of 50-60% would be technically feasible in many countries over the same time period. Achieving these potentials will depend on future cost reductions, the rate of development and implementation of new technologies, financing and technology transfer, as well as measures to overcome a variety of non-technical barriers. Because energy use is growing worldwide, even replacing current technology with more-efficient technology could still lead to an absolute increase in greenhouse gas emissions in the future. Technologies and measures to reduce greenhouse gas emissions in energy end-use sectors include:

Industry: improving efficiency; recycling materials and switching to those with lower greenhouse gas emissions; and developing processes that use less energy and materials. Transportation: the use of very efficient vehicle drive-trains, light-weight construction and low-air-resistance design; the use of smaller vehicles; altered land-use patterns, transport systems, mobility patterns and lifestyles; and shifting to less energy-intensive transport modes; and the use of alternative fuels and electricity from renewable and other fuel sources which do not enhance atmospheric greenhouse gas concentrations.

Commercial/residential: reduced heat transfers through building structures and moreefficient space-conditioning and water supply systems, lighting, and appliances.

Energy Supply

5.6 It is technically possible to realize deep emissions reductions in the energy supply sector within 50 to 100 years using alternative strategies, in step with the normal timing of investments to replace infrastructure and equipment as it wears out or becomes obsolete. Promising approaches, not ordered according to priority, include:

a.

b.

Greenhouse gas reductions in the use of fossil fuels

More-efficient conversion of fossil fuels (e.g., combined heat and power production and more efficient generation of electricity);

Switching to low-carbon fossil fuels and suppressing emissions (switching from coal to oil or natural gas, and from oil to natural gas);

Decarbonization of flue gases and fuels and carbon dioxide storage (e.g., removal and storage of CO2 from the use of fossil fuel feedstocks to make hydrogen-rich fuels); Reducing fugitive emissions, especially of methane, in fuel extraction and distribution.

Switching to non-fossil fuel sources of energy

Switching to nuclear energy (if generally acceptable responses can be found to concerns such as about reactor safety, radioactive-waste transport and disposal, and nuclear proliferation);

Switching to renewable sources of energy (e.g., solar, biomass, wind, hydro, and geothermal).

Integration of Energy System Mitigation Options

5.7 The potential for greenhouse gas emission reductions exceeds the potential for energy use efficiency because of the possibility of switching fuels and energy sources, and reducing the demand for energy services. Even greater energy efficiency, and hence reduced greenhouse gas emissions, could be attained with comprehensive energy source-to-service chains.

5.8 To assess the potential impact of combinations of individual measures at the energy systems level, "thought experiments" exploring variants of a low-CO, emitting energy supply system were described. These variants illustrate the technical possibility of deep reductions in CO2 emissions from the energy supply system within 50 to 100 years using alternative strategies. These exercises indicate the technical possibility of reducing annual global emissions from 6 GtC in 1990 to about 4 GtC in 2050 and to about 2 GtC by 2100. Cumulative CO2 emissions from 1990 to 2100 would range from about 450 GtC to about 470 GtC in these constructions, thus keeping atmospheric concentrations below 500 ppmv.

5.9 Costs for integrated energy services relative to costs for conventional energy depend on relative future energy prices, which are uncertain within a wide range, and on the performance and cost characteristics assumed for alternative technologies. However, within the wide range of future energy prices, one or more of the variants would plausibly be capable of providing the demanded energy services at estimated costs that are approximately the same as estimated future costs for current conventional energy. It is not possible to identify a least-cost future energy system for the longer term, as the relative costs of options depend on resource constraints and technological opportunities that are imperfectly known, and on actions by governments and the private sector. Improving energy efficiency, and a strong and sustained investment in research, development, and demonstration to encourage transfer and diffusion of alternative energy supply technologies and improvements in energy efficiency is critical to deep reductions in greenhouse

gas emissions. Many of the technologies being developed would need initial support to enter the market, and to reach sufficient volume to lower costs to become competitive.

5.10 Market penetration and continued acceptability of different energy technologies ultimately depends on their relative cost, performance (including environmental performance), institutional arrangements, and regulations and policies. Because costs vary by location and application, the wide variety of circumstances creates initial opportunities for new technologies to enter the market. Deeper understanding of the opportunities for emissions reductions would require more detailed analysis of options, taking into account local conditions.

Industrial Process and Human Settlement Emissions

5.11 Large reductions are possible in some cases in process-related greenhouse gases including CO2, CH, N2O, halocarbons and SF, released during manufacturing and industrial processes, such as production of iron, steel, aluminum, ammonia, cement and other materials. Measures include modifying production processes, eliminating solvents, replacing feedstocks, materials substitution, increased recycling, and reduced consumption of greenhouse gas-intensive materials. Capturing and utilizing methane from landfills and sewage treatment facilities, and lowering the leakage rate of halocarbon refrigerants from mobile and stationary sources also can lead to significant greenhouse gas emission reductions.

Agriculture, Rangelands, and Forestry

5.12 Beyond the use of biomass fuels to displace fossil fuels, the management of forests, agricultural lands, and rangelands can play an important role in reducing current emissions of carbon dioxide, methane, and nitrous oxide and enhancing carbon sinks. A number of measures could conserve and sequester substantial amounts of carbon (approximately 60-90 GtC in the forestry sector alone) over the next 50 years. In the forestry sector, measures include sustaining existing forest cover; slowing deforestation; natural forest regeneration; establishment of tree plantations; promoting agroforestry. Other practices in the agriculture sector could reduce emissions of other greenhouse gases such as methane and nitrous oxide. In the forestry sector, costs for conserving and sequestering carbon in biomass and soil are estimated to range widely but can be competitive with other mitigation options.

Policy Instruments

5.13 The availability of low carbon technologies is a prerequisite for, but not a guarantee of, the ability to reduce greenhouse gas emissions at reasonable cost. Mitigation of emissions depends on reducing barriers to the diffusion and transfer of technology, mobilizing financial resources, supporting capacity building in developing countries and countries with economies in transition, and other approaches to assist in the implementation of behavioural changes and technological opportunities in all regions of the globe. The optimum mix of policies will vary from country to country, depending upon their energy markets, economic considerations, political structure and societal receptiveness. The leadership of national governments in applying these policies will contribute to responding to the adverse consequences of climate change. Policies to reduce net greenhouse gas emissions appear more easily implemented when they are

designed to also address other concerns that impede sustainable development (e.g., air pollution, soil erosion). A number of policies, many of which might be used by individual nations unilaterally, and some of which may be used by groups of countries and would require regional or international agreement, can facilitate the penetration of less greenhouse gas-intensive technologies and modified consumption patterns. These include, inter alia (not ordered according to priority):

:

Putting in place appropriate institutional and structural frameworks;

Energy pricing strategies - for example, carbon or energy taxes, and reduced energy subsidies;

Phasing out those existing distortionary policies which increase greenhouse gas emissions, such as some subsidies and regulations, non-internalization of environmental costs, and distortions in agriculture and transport pricing;

Tradable emissions permits;

Voluntary programs and negotiated agreements with industry;

Utility demand-side management programs;

Regulatory programs including minimum energy-efficiency standards, such as for appliances and fuel economy;

Stimulating research, development and demonstration to make new technologies available;

Market pull and demonstration programs that stimulate the development and application of advanced technologies;

Renewable energy incentives during market build-up;

*Incentives such as provisions for accelerated depreciation and reduced costs for consumers;

Education and training; information and advisory measures;

Options that also support other economic and environmental goals.

5.14 The choice of measures at the domestic level may reflect objectives other than costeffectiveness such as meeting fiscal targets. If a carbon or carbon-energy tax is used as a policy instrument for reducing emissions, the taxes could raise substantial revenues and how the revenues are distributed could dramatically affect the cost of mitigation. If the revenues are distributed by reducing distortionary taxes in the existing system, they will help reduce the excess burden of the existing tax system, potentially yielding an additional economic benefit (double dividend). For example, those of the European studies which are more optimistic regarding the potential for tax recycling, show lower and, in some instances, slightly negative costs. Conversely, inefficient recycling of the tax revenues could increase costs. For example, if the tax revenues are used to finance government programs that yield a lower return than the private sector investments foregone because of the tax, then overall costs will increase. The choice of instruments may also reflect other environmental objectives such as reducing nongreenhouse pollution emissions or increasing forest cover or other concerns such as specific impacts on particular regions or communities.

6.1 Equity considerations are an important aspect of climate change policy and of the Convention and in achieving sustainable development". Equity involves procedural as well as consequential issues. Procedural issues relate to how decisions are made while consequential issues relate to outcomes. To be effective and to promote cooperation, agreements must be regarded as legitimate, and equity is an important element in gaining legitimacy.

6.2 Procedural equity encompasses process and participation issues. It requires that all Parties be able to participate effectively in international negotiations related to climate change. Appropriate measures to enable developing country Parties to participate effectively in negotiations increase the prospects for achieving effective, lasting, and equitable agreements on how best to address the threat of climate change. Concern about equity and social impacts points the need to build endogenous capabilities and strengthen institutional capacities, particularly in developing countries, to make and implement collective decisions in a legitimate and equitable

manner.

6.3 Consequential equity has two components: the distribution of the costs of damages or adaptation and of measures to mitigate climate change. Because countries differ substantially in vulnerability, wealth, capacity, resource endowments, and other factors listed below, unless addressed explicitly, the costs of the damages, adaptation, and mitigation may be borne inequitably.

6.4 Climate change is likely to impose costs on future generations and on regions where damages occur, including regions with low greenhouse gas emissions. Climate change impacts will be distributed unevenly.

6.5

The intertemporal aspects of climate change policy also raise questions of intergenerational equity because future generations are not able to influence directly the policies being chosen today that could affect their well-being, and because it might not be possible to compensate future generations for consequent reductions in their well-being. Discounting is the principal analytical tool economists use to compare economic effects that occur at different points in time. The choice of discount rate is of crucial technical importance for analyses of climate change policy, because the time horizon is extremely long, and mitigation costs tend to come much earlier than the benefits of avoided damages. The higher the discount rate, the less future benefits and the more current costs matter in the analysis.

6.6

The Convention recognizes in Article 3.1 the principle of common but differentiated responsibilities and respective capabilities. Actions beyond "no regrets!" measures impose costs on the present generation. Mitigation policies unavoidably raise issues about how to share the

17

In common language equity means "the quality of being impartial" or "something that is fair and just."

18

"No regrets" measures are those whose benefits, such as reduced energy costs and reduced emissions of local/regional pollutants equal or exceed their cost to society, excluding the benefits of climate change mitigation. They are sometimes known as "measures worth doing anyway."