Monday, August 17, 2009

Interview: Mr. Constant Van Aerschot, Co-Chairman, Energy Efficiency in Buildings (EEB) project of WBCSD

The World Business Council for Sustainable Development (WBCSD) is a CEO-led, global association of some 200 companies dealing exclusively with business and sustainable development. The Council provides a platform for companies to explore sustainable development, share knowledge, experiences and best practices, and to advocate business positions on these issues in a variety of forums, working with governments, non-governmental and intergovernmental organizations.
Members are drawn from more than 35 countries and 20 major industrial sectors. The Council also benefits from a global network of about 57 national and regional business councils and regional partners.
The $15 million four-year Energy Efficiency in Buildings (EEB) project of WBCSD is the leading industry-only group that envisions a world where buildings consume zero net energy. The project is chaired jointly by Lafarge and United Technologies Corporation and has 12 other members.
On a recent visit to Seoul, Mr. Constant Van Aerschot, co-chairman of the project, who is also Director, Construction Trends, Lafarge gave me a few insights into the latest report that has been issued by the Council. The following are excerpts from the interview.
Saving energy is the lowest cost way to cut greenhouse gases. Much building energy is wasted because of poor design, inadequate technology and inappropriate behaviors. Businesses need to apply expertise and finance to develop and promote new approaches to energy efficiency, but transformation will not be achieved through the market alone.
Building professionals, owners and users do not grasp the urgency and remain unmotivated to act. Government action is necessary to improve the transparency of energy consumption in buildings and to stimulate the transformation of business models to quickly change energy consumption throughout the building sector – in every country, in existing buildings as well as new ones and in residential as well as commercial property.
All building sector stakeholders need to adopt a sense of urgency and a new mindset in which building energy is a top priority. Businesses will only succeed if they align with a sector transformation, adopting disruptive technologies and business models. Policy-makers need to introduce strong regulatory frameworks that support the market transformation.
New modeling by the WBCSD shows how energy use in buildings can be cut by 60 percent by 2050 - essential to meeting global climate change targets - but this will require immediate action to transform the building sector.
Buildings worldwide account for a surprisingly high 40% of global energy consumption, and the resulting carbon footprint, significantly exceeding those of all transportation combined. Large and attractive opportunities exist to reduce buildings’ energy use at lower costs and higher returns than other sectors. These reductions are fundamental to support achieving the International Energy Agency’s (IEA) target of a 77% reduction in the planet’s carbon footprint against the 2050 baseline to reach stabilized CO2 levels called for by the Intergovernmental Panel on Climate Change (IPCC).
At the same time, substantial investments will be required to achieve this target. These will require the combination of actions called for in this report, including building energy codes, investment subsidies, labeling and reporting mechanisms, increased and trained workforce capacity, and evolving energy-efficiency designs and technologies. All are intended to raise energy awareness globally and influence consumer and investor behavior and choice.
The study’s recommendations are based on a unique data inventory of the building stock in six of the world’s largest economic regions (Brazil, China, EU, India, Japan and USA) accounting together for 70% of the world’s GDP, and divided between residential and commercial and existing and new building types. Financially driven behaviors against energy-efficiency technologies were modeled to show costs and savings under multiple scenarios. This degree of data and sophistication has never been achieved before.
EEB modeling shows that increasing the price of energy or carbon only slightly increases the implementation of energy efficiency in buildings. At today’s energy prices, carbon footprint reductions would only increase from 52% to 55% with an incremental carbon cost of $ 40/ton.
“We value human life to an extraordinary degree and have put in place building life safety codes and inspection mechanisms over a century or more. The experience in the United States has been that these add 5% to building costs, and we should think comparably about building energy codes and related mechanisms worldwide.
Strong barriers exist in the building sector. Removing them will reduce climate policy costs overall and will be particularly important in alleviating the impact on consumers.
EEB has considered high-level scenarios but has taken a bottom-up, market-driven approach to understanding the barriers to lower energy use, based on the most detailed view ever of the current state of energy demand in the building sector. The project developed a unique computer model that simulates decisions about energy investments in a specific building subsector to identify the likely mix of design and construction options under alternative policy packages.
To achieve an energy-efficient world, governments, businesses and individuals must transform the building sector through a multitude of actions, which include increasing energy awareness globally, he said.
The study and analysis modeled three scenarios for the world’s response to the climate challenge in buildings:
• Complacency and inaction leading to a failure to tackle climate change
• Inadequate action resulting in only incremental improvements in energy efficiency and a substantial failure to curb climate impacts
• Coordinated, intensive action that transforms the building sector and contributes proportionately to solving climate change.
The third scenario is understandably the only option that can result in the energy and carbon footprint reductions needed. A mix of measures tailored to specific geographies and building subsectors, including increased energy awareness globally, is required for a complete solution. Additional approaches include building energy codes, labeling and reporting mechanisms, appropriate energy prices and carbon costs, investment subsidies, increased and trained workforce capacity, and evolving energy-efficient designs and technologies that use passive and active approaches.

Sunday, August 16, 2009

Interview: PCNC Chairman Kang Man-soo

The Presidential Council on National Competitiveness focuses on heading regulatory reform and deregulatory measures to create a business-friendly environment for both domestic and foreign companies, strengthening Korea's economic growth potential, and expanding social capital.
Amid falling inbound investment due to the global financial crisis, the Korean government is taking steps to attract more foreign direct investment (FDI). A couple of months ago, the PCNC, presided over by President Lee Myung-bak, announced new measures aimed at attracting more FDI. The new measures include increasing the size of the government's cash grants to foreign investors and temporarily removing the minimum investment requirements imposed on those wanting state subsidies.
Under the current law, the current level of cash grants equals about 5 to 10 percent of total funds invested by a foreign company. Also, to be eligible for cash grants, foreign firms need to have invested $10 million or more.
The government will scrap these rules in order to offer benefits to more firms and will increase the cash grants to account for about 10-30 percent of total funds invested by foreign firms.
To strategically attract those foreign firms that will also benefit the Korean economy better, the government will first select 100 foreign firms that are “strategically important” to the Korean economy and offer them incentives in return for investing here.
Meanwhile, cash grants for firms that have or plan to build research centers here will also be expanded. FDI has long been an important means to help the domestic economy and create employment. With these steps, the PCNC is sending out clear signals that foreign investors are welcome in Korea.
To understand more about the Council’s work and the impact of its policy decisions, I interviewed Mr. Kang Man-Soo, Chairman of PCNC. The following are excerpts:
Korea has a brilliant track record of economic growth. However, we are experiencing low investment associated with decelerated growth of below 5% since 2000's. Subdued employment and rapid population ageing have also become major challenges to mid- and long-term prospects of the Korean economy. Moreover, underlying but significant issues such as strengthening the rule of law, expanding social trust, improving the productivity of the public sector, and promoting productive labor relations need to be addressed. In this context, the PCNC was established along with the inauguration of President Lee Myung-bak in February, 2008 as a key advisory body to the President.
PCNC focuses on heading regulatory reform and deregulatory measures to create a business-friendly environment for both domestic and foreign companies, strengthening Korea's economic growth potential, and expanding social capital by making advancements in laws, regulations and institutional infrastructure based on global standards. I was appointed as the Chairman in February of this year, following my term as the Minister of Strategy and Finance.
PCNC is comprised of government members; heads of business associations; representatives from the ruling party, labor unions, consumer groups; foreign business leaders; and experts from various sectors of the economy. In particular, we value the representation of foreign businesses at the PCNC, and the President of the EUCCK is also a member of the PCNC.
Since the establishment of the PCNC, meetings attended by the President have been held every month. During these meetings, new institutional reform and deregulatory measures are presented and discussed among its members and relevant government ministers.
PCNC has about 30 members representing all sectors of the economy. In addition to the monthly plenary meeting, 4 sub-councils in the areas of regulatory reform, legal and institutional advancement, industrial competitiveness, and public sector reform, were created to promote in-depth discussions. PCNC members participate in one of these sub-councils, and conduct studies on key national competitiveness issues in the respective areas.
In addition, PCNC is able to operate advisory committees for selected issues that require more expertise, continuous feedback and review. Such committees invite experts from various sectors outside PCNC members. One of them is the Advisory Committee on the Romanization of Korean. It was established to revise the current romanization system which is seen by most foreign businesses in Korea as being complicated and misleading. Measures for adopting a more internationally recognized Romanization system was recently discussed at the PCNC meeting and work is in progress.
The vision of the PCNC is to build a first class advanced country. To do so, we will strengthen competitiveness for a new economic paradigm by expanding domestic demand, maintaining a current account surplus, and strengthening economic potential.
In order to achieve this vision, the PCNC identifies 5 key missions, which are: tackling the crisis, sustaining growth, promoting future growth engines, mobilizing global capacity, and accumulating social capital.
History has shown us that countries that have equipped themselves with new innovative ideas have always come out of crises more competitive than before. The PCNC will continue to implement measures to overcome the challenges of the global economic crisis, and prepare for the dawning of a new post-crisis economic paradigm.
This unprecedented global economic crisis has left us in a survival game filled with doubts and uncertainty. International organizations such as the IMF and OECD project the Korean economy to recover faster than other countries. In addition, recent quarter-on-quarter growth is showing signs of recovery. However, I believe that we have yet to be fully optimistic for recovery, and outlooks on the aspects of recovery and duration of crisis are still uncertain.
We have to be very cautious about prospects of the Korean economy since fiscal stimulus such as massive tax cuts and front-loaded spending are major engines of recovery. The stimulus measures are not able to replace private spending and investment on a sustainable basis. In particular, Korea's economic outlook will depend highly on the recovery of the global economy including the EU and the US, due to our high dependence on the external sector such as exports.
Therefore, the Korean government will focus on policies to sustain the recent trend of economic recovery, while preparing a "Plan B" for the worst case scenario.
The government plans to continue implementing efforts to expand domestic demand, restoring growth and economic vitality. Such efforts will include, among others, continued deregulation and tax cuts to promote private investments, corporate and financial restructuring, and job creation and sharing.
Although it is unclear when we will fully recover from the crisis, I want to emphasize that Korea has always taken crises and turned them into opportunities.