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HE Minister Yongyuth, Excellencies, Distinguished Participants, Members of the Asia News Network, Ladies and Gentlemen,

I am very pleased to be invited to speak at this important conference on Asia's Emerging Response to Climate Change.

I am very grateful to the Nation and the Asia News Network for their kind invitation to the conference. International media has been playing a very important role in raising the profile of the issue of climate change. Today's conference is yet another proof that the media of Asia is playing its own vital role in mobilizing the collective   wisdom of the leaders of Asia in meeting the challenge of climate change and at the same time in alerting the people of Asia to the crucial problem of climate change on which the future of humanity, particularly that of Asian people so critically depends.

Introduction

As you are aware, the most recent report of the IPCC(Intergovernmental Panel on Climate Change) confirmed that global mean temperature has increased by an average of 0.74 degrees C during the last 100 years as a result of the rapid accumulation of greenhouse gases(GHG) in the atmosphere. Needless to say, we keep on emitting more and more GHG into the atmosphere and Asia plays no less important role in this emissions.

Due to a series of recent events such as IPCC Reports, Al Gore's documentary of 'Inconvenient Truth', Stern Review and others, the perception of politicians, government officials, business leaders, civil society and many others has recently gone through a dramatic transformation. The recent nomination of the IPCC and Al Gore for the Nobel Peace Prize 2007 has also contributed to raising the global awareness of climate change.

The Secretary-General of the United Nations Mr. Ban Ki-moon has recently been to Antarctica and Amazon rain forest as a messenger of early warning on global warming. During his visit, he saw up-close how some of the most delicate and precious treasures of this earth are being threatened by our own actions.  He also went to be present at the press conference of the fourth and final meeting of the IPCC in Valencia, Spain on 17 November 2007.

The Secretary-General identified climate change as a major global challenge and decided to take a leadership role in helping the international community to tackle the problem. For this purpose, he appointed his Special Envoys on Climate Change in May this year who would help him deal with this critical issue as the United Nations.

I was appointed as one of three Special Envoys together with Mrs. Gro Harlem Brundtland, former Prime Minister of Norway and Dr. Ricardo Lagos, former President of Chile.

I was very much honored to be so appointed but at the same time, was very much awed by the enormity of the responsibility to deal with the crucial issue of climate change on which the welfare and the very existence of our future generations so much depend. We have traveled much and contacted many world's political leaders and high officials to solicit their support for the informal High-Level Event on Climate Change initiated by the Secretary-General on the margins of the General Debate of the United Nations General Assembly, that is, on 24 September 2007.

The High-Level Event, 'The Future in Our Hands; Addressing the Leadership Challenge of Climate Change' was successfully held with 80 heads of state and government, and almost equal number of cabinet ministers attending. It was a meeting of a largest-ever group of world leaders gathered together to discuss climate change. It was a ground-breaking, historical event where the leaders have shown that climate change needs political leadership at the highest level. Not only the political leaders but also the local government, business community and civil society were represented, demonstrating that everyone has a role to play.

The Secretary-General's initiative to host the High-Level Event was not meant as an occasion for negotiations but rather it was an event to express the political will of world leaders to tackle climate change through the most appropriate global venue, the United Nations. Individual countries, group of countries, or regions may work hard to address the problem but they will not be able to deliver the extent of emission reductions that the world needs. It has to be through the United Nations and that is why we need a comprehensive and robust agreement under the UNFCCC(UN Framework Convention on Climate Change) which is to have its 13th COP (Conference of Parties) in Bali, Indonesia on 3-14 December this year.

Climate Change in Asia

Let us look at the picture of our region. Asia is responsible for 34% of global warming gas emissions and its share is expected to rise in the coming years. While Asia's share of responsibility is increasing, Asia is expected to suffer most from the impacts of climate change.

Asia and the Pacific accounted for two-thirds of global casualties from climate change disasters. Poor developing countries and small island countries are the major victims as the high socio-economic costs of climate change are often the results of poor infrastructure and inadequate capacity to cope with climate change.

In spite of the rapid economic growth in the region, Asia still has two thirds of world poor, 600 million people without safe drinking water and 800 million people without access to electricity. Therefore the top priority of the countries in the region is the eradication of poverty through the highest possible growth. However, the GHG emission of the region increased by 30% over the last decade and is expected to grow even further.

Therefore it is an urgent task for the leaders of Asia to identify an effective strategy to pursue rapid economic growth required to reduce poverty while controlling our own CO2 emission in order to globally contribute to minimize the damage from climate change.

Need for Paradigm Shift

The adoption of the strategy of 'two birds with one stone', that is to grow fast and at the same time to reduce the GHG emission, is not a small challenge. It requires a fundamental paradigm shift and drastic perception change. On a broad policy level, we have to shift the old paradigm of 'quantitative growth' to the new paradigm of 'qualitative growth'.  This implies that we have to change our existing paradigm in order to enhance the ecological quality of economic growth.

Many politicians and government officials, economists and business leaders have long been obsessed with the growth of GDP, the overriding paradigm of the day. Media report has also long focused on the quantitative aspect of economic growth.

 

However, the efforts to go beyond GDP paradigm have recently been increasing. OECD is leading international discussions to explore new indicators and paradigm beyond GDP. The climate change regime after the Kyoto Protocol, the so-called Post-Kyoto climate regime requires the 'beyond GDP' paradigm.

In order to explore a new paradigm of 'quality of growth', we have to address the market failure aspect of current GDP paradigm. Climate change is one of the best examples of externality, i.e. the failure of market, and in order to address this problem of externality, we have to find a way to internalize the ecological cost of climate change into the market price of energy consumption. Many people are concerned that the rising energy price is a cost to the national economy but if we consider the cost of climate change, this assumption may not be always true.

Market Mechanism

I strongly believe that we must and can create a win-win synergy between climate action and economic growth. A well-designed market mechanism can support a virtuous cycle of improving energy efficiency which will in turn enhance climate action ultimately leading to higher 'qualitative'(green) growth.

Market could be a more flexible mechanism in controlling the emissions than a mandatory tapping and direct control on the quantity of GHG emissions. Then, our challenge would be how to design a market mechanism to present climate change action as a business and investment opportunity which will ultimately stimulate further economic growth, employment and technological innovation.

Very few people that that we have enough financial resources and technology necessary to tackle climate change. The truth is that if we are well prepared, there are more than enough money and technology to address the climate change. We know that there are too much money floating around the world looking for higher yields and  large scale speculations are going on in real estate and stock markets. Real estate prices, for example, are skyrocketing everywhere around the world, probably including Bangkok. What is lacking is a mechanism that can attract and absorb these speculative money and technology into actions to address climate change.

In actual fact, we already have a market mechanism, the Joint Implementation (JI) and Clean Development Mechanism(CDM) under the Kyoto Protocol. Under the CDM, developing countries can initiate emission reduction projects and sell carbon credits generated from the CDM projects to the buyers from developed countries. Joint

Implimentation is a mechanism between the sellers and buyers in  Annex I developed countries.

The CDM, for example, is already functioning as a market for developing countries to initiate and proactively engage in GHG emission reduction projects. The revenue from selling carbon reduction credits works as an incentive to developing countries.

The CDM was originally designed as a developed country compliance mechanism that has to be initiated by developed countries. However, the nature of CDM has changed as an incentive mechanism for emission reduction projects of developing countries since April 2005 when the first CDM project initiated by a developing country was approved by the CDM Executive Board. Now, the number of CDM projects initiated by developing countries is rapidly increasing.

Out of 844 registered CDM projects as of November 2007, Southeast Asian countries have only 53 projects mainly by Indonesia, Malaysia and the Philippines. Thailand has only 5 CDM projects as of today.

However, the current CDM structure has to be improved if it is to function as a full-fledged market mechanism which can enhance the opportunity for a positive-sum game between climate action and greener economic growth. Project additionality requirements are effectively limiting the scope of CDM by excluding many potential CDM projects. Due to such a limited scope and complex procedures, many developing countries have not become beneficiaries of the CDM.  It is necessary that  the project additionality criterion be removed and the CDM procedures streamlined in order to give more benefits to the developing countries.

Project additionality criterion was introduced to exclude 'anyway projects' from the idea that the CDM projects should not be tainted by commercial interests but be sorely designed for the purpose of addressing climate change. However, in reality, most of the projects have certain commercial components and it is difficult to draw a line from where the CDM projects start and 'anyway projects' end.

In order to make the CDM to function as a market mechanism to provide incentives for emission reductions, there is no reason why one should differentiate the nature of projects. If the CDM plays the role of market and engages vibrant dynamism and participation of the private sector, it should be given the role to play properly. Once the CDM is reformed to be a full-fledged market mechanism for emission reduction projects on a broader range of areas, the CDM can function as an efficient channel of transferring financial resources as well as technology to developing countries. By initiating CDM projects,  the developing countries can reduce their GHG emissions while improving the ecological quality of economic growth.

Post-Kyoto Regime

The 13th Conference of the Parties to the UN Framework Convention on Climate Change is to start in Bali, Indonesia in less than two weeks time. The international media will cover the event fully and the world will be anxiously awaiting for a hopeful news from there. However, unfortunately, we do not yet see any light at the end of current tunnel of deadlock between the developed and developing countries on the Post-2012 Climate Regime.

Many from the developed countries share the view that the imposition of quantitative limitation and reduction targets on developing countries is the only available option to ensure emission reductions from developing countries. However, the target is only applicable when we can make a fairly reliable projection on the long-term emission trajectory as in the case of developed countries. For developing countries where the emission trajectory is very hard to predict, it is very difficult to set an appropriate emission reduction target.

Indeed, many developing countries are reluctant to accept any reduction target not necessarily because they are unwilling to cooperate for climate action but because of the difficulty of making a projection on their long-term trajectory. Any wrong projection, they believe, will compromise and limit their economic growth. They believe that the target approach could be quite counter-productive if they can not make a credible and accurate projection for the future emissions. Wrong target could be even worse than no target. Therefore, it is most likely that we end up with hot air or growth capping unless we are capable of making precise long-term projection for major developing countries, which I believe is highly unlikely.

None of us can correctly predict what the price of oil will be in 5 or 10 years time. Without knowing the exact price of oil in the next 5 to 10 years, we will not be able to make a precise projection of long-term carbon emissions of developing countries. Therefore, it is the argument of the developing countries that the target approach is not only politically unacceptable but also technically impracticable due to the difficulty of making precise projections.

To Improve CDM

We then have to explore a market approach which can generate net global reductions from developing countries without imposing any target.  One was of generating net global reductions from developing countries could be the discounting of the carbon credits generated from the CDM projects.  Any developing countries can make their own contribution to the global emission reductions by selling only a certain portion of carbon credit generated from the CDM projects. Unsold carbon credits are net global emission reductions.

If a CDM project developer in Thailand, for example, reduces 2 million CO2 equivalent tons of emission by initiating  a CDM project and sells all carbon credits to the buyer from a developed country, this transaction does not generate any net global reductions. It is because the buyer is entitled to increase the emission in the developed country as much as the reductions made by the CDM project developer in Thailand.

However, if the Thai project developer should sell only 1 million CO2 tons of carbon credit, the unsold 1 million CO2 tons will be net global reductions. One may wonder why the Thai project developer should not sell all of 2 million CO2 tons as the carbon credit will bring more income.

As in any market, as the number of CDM projects rapidly increases, the supply of carbon credits is also expected to increase and the price of carbon credit is likely to fall. Controlling the supply of carbon credit by not selling all of it could stabilize the price of reductions credit in the carbon market.  The discounting, therefore, is not just a financial sacrifice on the part of project developer but by ensuring the price stability of carbon credit will also benefit the developing countries where the CDM projects originated.

Thus, if we are able to reform the CDM structure properly, the CDM can function as an incentive mechanism for emission reductions in developing countries, reducing some pressure on developing countries for mandatory capping.

It is needless to mention that the basic assumption of making such an improved CDM discount market to function presupposes that the developed countries would continue to accept deep reduction targets even after 2012 so that there is a strong demand for carbon credits from developed countries. If developed countries were to agree on accepting the reduction targets after 2012, then it would be feasible politically and technically to adopt a market mechanism to generate a net global reductions from developing countries by reforming the current CDM architecture.

The UN and Way Forward in Bali

The UNESCAP has been in the forefront of trying to develop the idea of green growth for the last two years and also to reform the architecture of the CDM to function as a credible market mechanism to general net global emission reductions. I strongly believe that the innovative ideas of the UNESCAP could provide some practical solution to the challenges that we are facing now. I would like to express my appreciation to the UNESCAP for their efforts and wish that they will continue to do their innovative works.

The 13th Conference of the Parties to the United Nations Framework Convention on Climate Change( 13th COP of UNFCCC) will start in Bali, Indonesia in less then ten days time. The parties to the Kyoto Protocol will also be meeting at the same timew. These are crucial meetings that will shape the future negotiations for a Post-2012 regime.  A breakthrough is needed in order to launch the negotiation on a solid footing and within a specified time frame.

We are hoping that we will be able to agree, at least, on a road map for negotiations in Bali. As we have to conclude the agreement at government level by the end of 2009, there isn't much time. I sincerely hope that the nations of Asia and the Pacific will be active in Bali with positive and feasible ideas and action programs.