Basic Data Collection Study on Low-emission Public Transport System in Lao PDR FINAL REPORT 4 DEVELOPMENT DIRECTIONS OF LOW EMISSION TRANSPORT SYSTEM IN LAO PDR 4.1 Global Trends 1) Overview 4.1 There is growing recognition about climate change and the need for concerted actions among countries across the world. The main culprit is greenhouse gases (GHG). Petroleum consumption of a burgeoning motor vehicle population is a major contributor to GHG emissions. The weather patterns are also foreseen to change dramatically due to global warming. This will lead to rising temperatures, increase in the frequency and intensity of rains, and decreased crop production. 4.2 The global response is to develop alternative fuel sources for motor vehicles. Brazil took the lead 30 years ago in the use of bio-fuels for cars; to date, there is no car on their streets that run on pure gasoline anymore. Other countries have piloted CNG and LPG, with limited converters or adopters. In the last decade or so, many developed countries like the USA, Japan, and Germany have given priority to the development of battery-powered cars, hybrids or plug-in EVs. A few are experimenting with hydrogen- powered cars. For the next two decades, the consensus is toward a varied mix of power for automobiles, with petrol-fed vehicles losing its dominance, EVs rising, and other types becoming more significant. No one, however, is expecting the transition to be short, or for the conventional petrol-based internal combustion engines to disappear. 4.3 Another global trend is the rising cost of petroleum due to the twin pressure of dwindling oil reserves and increasing demand. This, of course, reinforces the impetus toward alternative power trains for motor vehicles. In the short- to medium-term period, however, the price of petrol would fluctuate greatly, rather than exhibit a constant upward trend due to the economic crisis and recession in developed countries. 2) Low Emission Transport Initiatives of Developed Countries 4.4 Industrialized countries with global reach in automotive manufacturing are leading the charge toward alternative propellants for motor vehicles. They are cognizant of the preceding global trends that are impacting their products. On the supply side, their governments are subsidizing the massive R&D spending to develop the cars of tomorrow. Business as usual, i.e., continue manufacturing ICE vehicles, could mean eventual loss of market share, if not irrelevance and technological obsolescence. On the demand side, their governments have granted liberal tax incentives, including rebates and cash grants, to encourage consumers to buy alternative energy vehicles such as EVs. Some countries have even gone to the extent of issuing mandatory emission limits and fuel efficiency targets that can only be met by introducing alternative energy vehicles into the product mix. 3) Implication for Lao PDR (1) Climate Change 4.5 The global imperative is to reduce GHG emissions largely due to carbon dioxide generated from the burning of fossil fuels. To a great extent, Lao PDR is still an insignificant contributor. Its GHG footprint is still small, aside from being blessed with hydropower. While other countries can only claim very little renewable in their energy mix, 4-1 Basic Data Collection Study on Low-emission Public Transport System in Lao PDR FINAL REPORT Lao PDR can claim almost 100%. As can be seen in Figure 4.1.1, the carbon emission per capita of Lao PDR is one of the lowest. It is only 1/16 of the world’s average, 1/32 of Japan’s, and 1/62 of the USA’s. Figure 4.1.1 CO2 and GDP per Capita in Selected Countries Source: World Bank Development Indicators 4.6 Global warming, however, could put one of the country’s most important resource (i.e., hydropower1) at risk, i.e., lower generation during very dry seasons interspersed by overflows during heavy rainfall, compounded by reduced forest cover (down to about 40%). Its arable land would be vulnerable to flooding and landslides. Under the Lao PDR government’s seventh Five-year Development Plan, it aims to reverse forest denudation and restore it to 70% by 2020. Boding well for EV prospects, the government has lined up additional hydro plant capacities to ensure surplus power for domestic needs and exports. 4.7 The promotion of low emission transport often omits the fact about power sources. GHG emissions of EVs/PHEVs are highly dependent on the types of power plants which supply electricity to these vehicles through the grid. Emission reductions are maximized when the electricity comes from renewable or cleaner energy sources. 4.8 In Lao PDR, most of the power plants that are connected to the national electricity grid are hydropower, with a total installed capacity of 2,556 MW in 2011. That represents 99.9% of total capacity in Lao PDR. The diesel power generators connected to the grid are at best for emergency purposes; therefore, from the view point of the generation capacity (MW), the grid CO2 emission factor (kgCO2/kWh) can be deemed as almost zero, because hydropower does not emit any CO2 emission. It is more than three times the global benchmark of 30% renewable as set by UNIDO. This fact is significantly important in maximizing emission reductions through the introduction of low emission transport. Even if it diversifies its power mix and add coal power plants, however, increasing EVs/PHEVs may lead to minimal reduction of emissions compared with ICE vehicles. 4.9 Grid electricity emission factors in other countries are around 0.9 (China), 0.5 (Thailand), 0.4 (EU and Japan), 0.3 (California), and 0.2 (Austria) (in kgCO2/kWh). In such countries, emission reductions are much less than in Lao PDR. Therefore, Lao PDR is in a better position of obtaining larger emission reductions from EV/PHEV projects as long as it keeps its main power sources clean and green (see Figure 4.1.2). 1 Export of electricity averaged 11.6% of total exports, by value, from 2005-2009, equivalent to about USD132 million. Hence, lower hydropower production means losses in exports for Lao PDR. 4-2 Basic Data Collection Study on Low-emission Public Transport System in Lao PDR FINAL REPORT Figure 4.1.2 Comparison of CO2 Emissions from Grid Electricity Generation and EV Driving among Selected Countries Source: JICA Study Team worked out based on Tokyo Electric Power Company (TEPCO), 2011 Guidelines to Defra / DECC's GHG Conversion Factors for Company Reporting, July 2011, eGRID2012 version 1.0, US EPA, 2012“List of Grid Emission Factor”, Institute for Global Environmental Studies (IGES), June 2012 4.10 Current statistics show that electricity is imported from Thailand during dry season and exported to Thailand in rainy season. To be more precise, the imported amount should be taken into account in calculating emission factors. A review of the Power Development Plan 2010-2020 of Lao PDR suggests self-sufficiency after 2015. Therefore, in this study, it is assumed that all electricity is generated by hydropower, without imports from fossil-burning plants. 4.11 The manufacturing of EVs and their batteries, however, is not emission neutral. In their countries of origin, their emission factors are not zero. If they are eventually produced in Lao PDR, and using clean electricity from hydropower, the life cycle emissions from EVs—from original manufacture to use—will become significantly low. In this case, emission reduction compared with those of gasoline or diesel vehicles can also be maximized. For the country itself, however, there is no emission contribution from imports of foreign-manufactured EVs and batteries. 4.12 Within Lao PDR, the use of EVs and their emission impact may differ from one region to another. For a village or town that is not connected to the national grid and that relies on electricity generated from fossil-burning diesel generators, emission reductions will be negligible. The total life cycle emission from EVs might even be higher than conventional gasoline or diesel vehicles. Thus, in some areas of the country, EVs should be an exception unless powered from solar cells, mini-hydro plants, or other renewable sources. 4.13 In 1990, an inventory of GHGs concluded that Lao PDR was a net sink of carbon dioxide (CO2) with a net CO2 annual removal of 121,641 Gg (121.6 million tons) compared to 24.18 million tons of CO2 equivalent (tCO2e) emitted all over the country. A second inventory, which is still under preparation, indicates that the favorable situation has turned for the worse. The indicative figures showed total emission at 54.9 million tons of CO2 equivalent (tCO2e), while the removal was only 2.0 million tons). The precipitous drop on the removal side of the equation was due to loss of forestry cover plus changes in land uses. The emission from the energy sector stood at 1.0 million tons (a mere 1.97% of the total), of which the transport sector accounted for 0.59 million tons, or 51% of the 4-3 Basic Data Collection Study on Low-emission Public Transport System in Lao PDR FINAL REPORT energy sector. 4.14 Clearly, the climate change mitigation strategy of Lao PDR has to focus on agriculture, forestry, water and water resources, and health. On a nationwide basis, very little needs to be done in the transport sector, except to make sure that its future emission remains manageable. That can only be realized if the motor vehicles being added are energy-efficient with declining emissions per unit. In short, the average fuel consumption per kilometer per vehicle must continuously decline. The situation in urbanized areas, especially Vientiane, is more critical because of the concentration of emissions and the threat of traffic congestion.