Phylipsen Climate Change Consulting

June 2013
Developing an Energy Efficiency
Voluntary Agreement Mechanism in
Vietnam
Updating international lessons learned and preliminary
design for Vietnam
G.J.M. Phylipsen



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Contact: D.Phylipsen@PhylipsenConsulting.com


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Glossary, abbreviations
Voluntary agreement terminology
Voluntary Agreement (in the current context )voluntary agreements between authorities and
energy users, aiming to improve energy efficiency. Usually there are some
advantages offered by the authorities to the participants, such as energy tax
exemptions, subsidies on energy efficiency measures, etc.
Voluntary agreements is a generic term that can range from unilateral
declarations of efforts to agreements with negotiated quantitative targets
(also referred to as negotiated agreements)
Negotiated Agreement Also known as voluntary agreement (VA) as a more generic term.
Negotiated agreements are a subset of VAs (and in the current context
voluntary agreements between authorities and energy use, aiming to
improve energy efficiency) with (quantitative) targets that have been
negotiated between the various parties to the agreement.
Usually there are some advantages offered by the authorities to the
participants, such as energy tax exemptions, subsidies on energy efficiency
measures, etc.
LTA, Long Term Agreement Long Term Agreements on energy efficiency established between
government and industry in the Netherlands. LTA1, LTA2, LTA3 refer to the
successive first, second and third generation LTAs in the Netherlands.
Sometimes (e.g. in the LTA Uptake project) used as a generic term for
voluntary or negotiated agreement.
Benchmarking agreement Specific type of negotiated agreement in the Netherlands, where targets
are defined by benchmarking Dutch industrys energy efficiency
performance against that of the most efficient in the world.
LEE Long-term agreement on Energy efficiency for ETS companies
Successor of the Dutch negotiated agreements for companies that are
covered by the EU Emissions Trading System.
CCA Climate Change Agreements, negotiated agreements in the UK
Agreement scheme,
programme
The agreement scheme or programme in a country may include several
agreements for different sectors, all having some main features in common.
The main targets, time-frame, administration, monitoring, etc. are usually
defined for the agreement scheme.
Agreement preparation
procedure
The period of the agreement planning when the targets and commitments
are negotiated. The preparation begins when the possibilities of
establishing an agreement scheme are assessed and ends when the
agreement documents are officially signed.
Key players The organisations involved in establishing and running an agreement
scheme. Usually representatives from authorities, industry (or other
agreement sector) and the administrative body (may be an energy agency).
Confederation of industries and sector associations are usually involved.
Agreement parties The organisations that have commitments in the agreement. The number of
parties depends on the structure of the agreement. Usually there are
commitments for the participating companies, authorities, confederation of
industries and sector associations.
Participant Individual company or organisation joining the agreement, committing to
improve energy efficiency.
Company Term used for industrial enterprise joining in an agreement.
ETS companies Companies covered by an Emissions Trading System (ETS), such as the EU
ETS
SME Small and medium sized industrial company.
SOE (Fully) State-Owned Enterprise
Joint stock company Company in which part of the shares are owned by the government
Energy audits Assessments analysing the energy use and possibilities for energy saving,
reporting energy saving measures.


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Energy management A systematic and usually documented procedure for the participants for
monitoring, evaluating and improving energy efficiency.
Monitoring and reporting A systematic procedure for the participants to report on their energy
consumption to the administrator or other body that is responsible for
monitoring the overall achievements within the agreement scheme.
Evaluation A study carried out by an independent body on the features, coverage,
aims, results and other achievements of the agreement scheme in order to
determine needs for improvements in the existing agreements or in the
following generation of agreements.
Vietnamese terminology
VNEEP Vietnam National Energy Efficiency Programme adopted in 2006 for the
period 2005-2015, developed by MOIT
VNEEP1, VNEEP2 refer to the respective phases
LEEC Law on Energy Efficiency and Conservation, adopted by MOIT in 2010
MOIT Vietnamese Ministry of Industry and Trade, responsible for energy
efficiency issues in Vietnam
DOIT Department of Industry and Trade, provincial version of MOIT
MOF Vietnamese Ministry of Finance
Designated enterprises Enterprises with an annual energy use above, designated in the Law on
Energy Efficiency and Conservation as a key target group for which specific
energy efficiency obligations are set out in the law.



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Contents

Glossary ................................................................................................................................................... 3
1 Introduction ..................................................................................................................................... 6
1.1 Energy efficiency policy in Vietnam ........................................................................................ 6
1.2 Voluntary agreements on industrial energy efficiency in Vietnam ......................................... 7
1.3 The current report ................................................................................................................... 8
2 Lessons learned from International experience .............................................................................. 9
2.1 Update on international experiences in EU Countries ............................................................ 9
2.1.1 The Netherlands ............................................................................................................ 10
2.1.2 Denmark ........................................................................................................................ 11
2.1.3 The United Kingdom ...................................................................................................... 12
2.1.4 Other countries ............................................................................................................. 13
2.2 Experiences with voluntary agreement in developing countries .......................................... 15
2.2.1 China .............................................................................................................................. 15
2.2.2 South Korea ................................................................................................................... 17
2.2.3 Indonesia ....................................................................................................................... 18
2.2.4 Specific lessons learned regarding the developing countries analysed ........................ 20
2.3 Conclusions ............................................................................................................................ 20
3 Preliminary conceptual design of a Vietnamese VA ..................................................................... 23
3.1 Important elements of the conceptual design ...................................................................... 23
3.2 Participants, roles & responsibilities ..................................................................................... 23
3.3 Target-setting ........................................................................................................................ 29
3.4 Monitoring, verification & compliance ................................................................................. 32
3.5 Incentives & sanctions ........................................................................................................... 33
3.6 Decisions still to be made and potential choices .................................................................. 35
4 References ..................................................................................................................................... 37
Annex 1: Country VA comparisons from 2010 report ........................................................................... 40
Annex 2: VA development & implementation process ......................................................................... 44
Annex 3: Developing country experiences with VAs ............................................................................. 48




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1 Introduction
Vietnam is undergoing rapid development, with a rapid growth of the industrial sector and a
corresponding growth in energy consumption. Energy conservation targets have been defined at the
national and sectoral level. Working with industry on voluntary actions to improve energy efficiency is
seen as a promising option, given successful experiences in other countries. Here, we briefly describe
the context for such voluntary agreements in Vietnamese energy policy, before outlining the objective
and outline of the current project and report.
1.1 Energy efficiency policy in Vietnam
Vietnams economy has changed radically over the last several decades, transforming from an
agricultural society relying primarily on traditional biomass fuels to a mixed economy, while
increasingly relying on modern commercial fuel and electricity for household use, transport and the
rapid growth of industry.
This development has recently been accompanied by an increased attention for the demand-side of
the energy balance. During recent years, the government of Vietnam initiated a series of policy
initiatives in the area of energy efficiency:
(a) In 2003, the government issued the Decree on Efficient Utilization of Energy and Energy
Conservation;
(b) In 2006, the Prime Minister approved the Vietnam National Energy Efficiency Program (VNEEP)
for the period 20062015, prepared by the Ministry of Industry and Trade (MOIT); and
(c) In 2010, a Law on Energy Conservation and Efficient Use was approved by the National
Assembly, which entered into force in 2011.
VNEEP has set a national energy savings target (in annual % change compared to a baseline), to
which industry should contribute. The policy instrument of voluntary agreements (VA) is seen as a
way to achieve the targeted energy savings in industry.
The overall objective of VNEEP is to achieve savings of 3%-5% of total national energy consumption
during Phase 1 (2006-2010) and 5%-8% during Phase 2 (2011-2015). During Phase 1, a main focus
was on legal and institutional reforms, including the establishment of the Energy Efficiency and
Conservation Office (EECO) within MOIT and the adoption of the Law on Energy Conservation and
Efficient Use (DANIDA, 2012). VNEEP2 specifies the objective of reduction in energy intensity in
energy-intensive industry of at least 10%, with specific quantitative objectives for the average
specific energy consumption to e achieved in 2015 for the production of cement, steel and textile
(VNEEP2, 2012). Similar targets will be defined for additional sectors in the near future.

The Law on Energy Conservation and Efficient Use mandates designated production enterprises to
submit plans, conduct audits, and appoint energy management staff. Important steps to improve
industrial energy efficiency are foreseen to include:
Working with designated enterprises as industrial partners;
Establishing a network of top energy-consuming enterprises;
Committing these enterprises to voluntary action plans to improve energy efficiency; and
Improving access to financing for more energy-efficient and environmentally friendly industrial
processes, equipment, and technologies.



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The developments in Vietnam in this area are supported by a large World Bank/GEF-funded project,
entitled Clean Production and Energy Efficiency in Vietnam (CPEE). The CPEE project specifically
aims to provide assistance in formulating an energy efficiency action plans for industry sectors,
developing the energy service industry and third-party service providers, and capacity building for
energy efficiency program management and supervision. The current project falls within the first
focal area of the CPEE.
1.2 Voluntary agreements on industrial energy efficiency in Vietnam
Voluntary agreements (or rather negotiated agreements) between government and industry can be a
promising policy instrument to address industrial energy use (or greenhouse gas emissions). Such
agreements originated in the Netherlands, subsequently becoming popular in many countries in
Europe as well as in the U.S., Canada, Australia, New Zealand, Japan, South Korea, and China.
Underlying cause for this popularity is the cooperative nature of the instrument, which usually leads
to increased support and buy-in from industry, more flexibility, less regulation and thereby making
negotiated agreements potentially a more effective as well as cost-efficient policy instrument
[European Commission, 2009].
In Vietnam, a voluntary agreement program is planned using a two-stage approach:
(a) Formulation of industrial sector strategies and action plans;
(b) Demonstration of the feasibility of the approach in the Vietnamese context by conducting a
number of pilot voluntary agreements.
The pilot voluntary agreements are intended to become the building blocks for a future national
voluntary agreement program covering at least the designated energy users enterprises in Vietnam.
In 2010, a first analysis was made of how voluntary agreements in industry could be introduced in
Vietnam as an instrument to support Vietnams energy efficiency policy
1
. In this assessment, the
extensive experience with voluntary agreements in the Netherlands as well as the subsequent roll-
out to many countries in Europe was described. On the basis of this experience, lessons learned
were identified regarding roles and responsibilities in the development and implementation of
voluntary agreements and the roles and responsibilities in such a process. The analysis concluded
with a road map for a successful implementation of voluntary agreements on industrial energy
efficiency in Vietnam
2
.
The current project picks up where the 2010 project left off, with the objective to develop a
voluntary agreement programme in Vietnam, which can subsequently be road-tested in selected
pilots. The project includes the following activities:
Task 1: Update of lessons learned from international experiences with voluntary agreement
(including developing countries) and preparation of a preliminary conceptual design of the
Vietnamese VA programme;
Task 2: Design of the Vietnamese VA programme;
Task 3: Preparation of guidelines for implementation of the Vietnamese VA programme;
Task 4: Development of a draft voluntary agreement template.
At the same time, parallel projects are carried out by other consultants to:

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Phylipsen, G.J.M., 2010, Industrial Energy Efficiency Policy in Vietnam: a roadmap for establishing voluntary agreements,
Phylipsen Climate Change Consulting, Utrecht, commissioned by the World Bank.
2
Annex 1 and 2 of this report contain the cross-country comparisons of important design characteristics for VAs and the
recommended process steps toward a successful VA programme from the 2010 report.


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Assess the potential to improve energy efficiency in specific industrial sectors to support target-
setting in additional sectors;
Develop financial incentives to support energy efficiency improvement actions by industry.
1.3 The current report
The current report reflects the work done within Task 1 as described above. It forms the first
deliverable within the project, and will form the basis for the first stakeholder consultation in
Vietnam.
Section 0 describes the lessons learned from the international experiences with voluntary
agreements in the EU (updating of the 2010 report) as well as in a number of developing countries.
On the basis of this experience, a number of considerations for designing and implementing
voluntary agreements in Vietnam are given. These considerations are taken on board in the
preliminary conceptual design of the voluntary agreement programme, developed in Section Error!
Reference source not found.. Elaborate factsheets describing the voluntary agreements
implemented in a number of developing countries not covered in the 2010 report are included as an
Annex to this report (China, South Korea and Indonesia
3
).


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Countries selected in consultation with the Vietnamese government (the CPEE Project Management Unit)


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2 Lessons learned from International experience
In this section, the lessons learned from international experiences with voluntary agreements on
industrial energy efficiency are updated, specifically by adding information on such experience in a
number of developing countries. Section 2.1 provides a brief update of the international experiences
with voluntary agreements in countries in Europe as described in the 2010 report, while Section 2.2
specifically looks at experiences in developing countries. In Section 2.3, lessons learned from both
developed countries and developing countries experiences for the implementation of voluntary
agreements in Vietnam are described. These lessons will feed into the conceptual design of the
Vietnamese Voluntary Agreement programme, formulated in Section Error! Reference source not
found..

2.1 Update on international experiences in EU Countries
The 2010 report on the feasibility of introducing VAs in Vietnam analysed the experience with VAs in
the Netherlands, Belgium, Denmark, Finland, Norway, Sweden, Ireland and the UK. The analysis
focussed on important design characteristics, such as the roles and responsibilities of the various
stakeholders, the process of target-setting, compliance arrangements and the support provided by
the government to industry in the context of the agreements. A cross-country comparison of these
characters is included in Annex 1 (from the 2010 report). In general, the agreements in Denmark, the
UK and the Netherlands
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are seen as the most successful, due to a balanced set of sufficiently strong
incentives and sanctions and a robust and transparent monitoring and compliance regime.
Developments in Europe with regard to voluntary agreements in recent years have been limited. This
is in part because VAs are a relatively mature policy instrument in Europe, in use since 1990. More
importantly, though, attention in Europe these days is focussed more on emissions trading as the
main policy instrument to address industrial energy use and emissions, instead of VAs
5
. The
European Emissions Trading System (EU ETS) is an EU-wide system with mandatory participation of
all companies throughout the European Union in the sectors covered by the system. Countries within
the EU, therefore, do not have the choice to use VAs as a policy instrument to address energy use
instead of the EU ETS, they can only use VAs in addition the EU ETS. However, as both commitments,
sanctions and compliance regimes under the EU ETS are generally more stringent than under the VA
programmes, the added value of VAs has come to be seen as limited and changes in the VA
programmes have been limited to reduce the burden on companies covered in both schemes (reduce
duplicate commitments or reporting requirements for ETS companies), or to companies that are not
covered by the EU ETS (ensuring level playing field with ETS companies).
Changes that have occurred since the 2010 report include:
The Netherlands: Adoption of the LEE agreement for Energy-intensive ETS companies as a
successor of the Benchmarking Agreement;
Denmark: Limitation of the scope of the CO
2
tax (and the corresponding tax exemption
in the VA) to account for the EU ETS;
United Kingdom: Extension of the CCAs for 10 years with slightly changed rules;

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Especially in the early period of the agreements.
5
Note though that the currently low carbon prices due to structural over-supply of emission allowances as a result of the
economic crisis may increase attention for supporting energy efficiency policies again, as little impact on emissions is
expected from the ETS given the current price levels. Note though that discussions at this moment seem to focus on
(energy or carbon) taxation, rather than instruments such as voluntary/negotiated agreements.


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Below these changes are briefly described and their relevance for the current project is indicated.

2.1.1 The Netherlands
The LEE agreement (Long-term agreement on Energy efficiency in ETS companies, MEE convenant in
Dutch) is the successor of the Benchmarking agreement and is intended for energy-intensive
industry. LEE participants fall wholly or partly under the EU Emissions Trading System. The
agreement was signed in 2009 and is based on the LTA3 structure. This means that obligation under
the agreement is no longer to achieve the top-of-the-world in terms of energy efficiency
performance, as was the case under the Benchmarking agreement. Instead, LEE participants agree to
implement energy efficiency improvement measures with a payback period of up to 5 yr. Like with
the LTA3, measures can not only be implemented within the company itself, but also across the
supply chain. The change in approach was said to be done for two reasons (ANL, 2009):
Recognising the EU ETS as the main driver of efficiency improvements for companies in the
Benchmarking agreement;
Recognising that further efficiency improvements may be difficult within companies own
operations when they belong to the top-of-the-world in terms of energy efficiency.
Formal evaluations of both the LTA3 agreement (2012) and the LEE agreement (2013) are scheduled
but results are not available yet (ANL, 2012). An independent evaluation carried out in 2010
suggested the results of the Benchmarking agreement were disappointing, with an average annual
improvement of 0.5% and the distance to the top-of-the-world in fact increasing, rather than
decreasing (CE, 2010). Energy efficiency improvements were found to be the lowest in the sectors
with the lowest energy taxation levels. As the energy tax exemption for industry in the Netherlands
applies to all companies that participate in the VAs, one of the recommendations of the evaluation
was to make any tax exemption condition on achievement of the companys VA target. In general,
more vigorous incentives or policy instruments were deemed necessary to continue the success of
the VA programmes in the Netherlands.
The annual report on progress to targets for the LEE agreement in the Netherlands shows that the
volume effect is responsible for the largest impact on energy savings, i.e. energy consumption is
largely reduced as a result of the economic crisis, and only to a limited extent due to energy
efficiency measures (ANL, 2012). For the LTA3, the volume effect even leads to an increase in total
energy consumption.


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Figure 1 Effect of different developments on total energy consumption of LEE participants in 2011 (ANL,
2012) (dissavings are negative savings, i.e. increases in energy consumption)

Three conclusions from the 2010 report can be re-confirmed on basis of the above discussion that
may be relevant for the development of a Vietnamese VA programme:
The strength of the incentive, as well as the details of its design, are important for the
effectiveness of the VA programme;
The definition of the target of the programme must be consistent with its broader objective to
make sure that target achievement also results in meeting the broader objectives (e.g. efficiency
improvement versus limiting total energy consumption) and the methodology used to
determine the effectiveness of the programme must also be suitable for assessing this.
The effectiveness of the VA programme may be time-dependent, i.e. where VAs may be
effective in an early stage of energy efficiency policy development in a country, its effectiveness
may become more limited later on in the process, when substantial effort has already been
undertaken. At this point, other more stringent or forceful policy instruments may be more
effective.
2.1.2 Denmark
The Danish voluntary agreement programme offers energy-intensive industry the possibility to be
exempted from a CO
2
tax in exchange for carrying out energy audits and implementing identified
profitable energy efficiency measures. Its aim is to promote energy efficiency in these sectors, while
limiting the effects on competitiveness associated with the CO
2
tax.
In January 2010, the voluntary agreement programme was changed to reflect the role of the EU ETS
in addressing emissions from energy-intensive industry that are covered by the ETS scheme (DEA,
2011). The CO
2
tax on fuels for processes in production companies covered by the ETS was removed,
as these fuels are now regulated through the ETS. The CO
2
tax for non-ETS companies was increased
and a basic deduction was introduced in order to mimic the allocation of free emission allowances
for companies in the ETS system. With this, the Consequently, companies can no longer get a rebate
on the CO
2
tax on fuels (coal, oil and natural gas), but only on the CO
2
tax on end use electricity
(which is now called energy-saving tax). Thereby, the basis of rebate on the CO
2
tax on fuels was
strongly reduced and the voluntary agreement scheme was limited to electricity use in heavy
industrial processes and to space heating in industry.


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Until 2010, about 230 voluntary agreements were in place in Denmark, covering about 2/3 of fuel
consumption and between 1/3 and 1/4 of electricity consumption in Danish industry, corresponding
to about 8-9% of the national gross energy consumption. Under the revised programme, there are
about 110 voluntary agreements covering electricity use and space heating (DEA, 2011).
No evaluations of the effectiveness of the revised scheme have been carried out so far. However, it
seems likely that the overall effectiveness will be reduced, as the regulating effect of the ETS with its
currently low energy prices is limited. The change in the Danish system is of limited relevance for the
design of a scheme in Vietnam, though it re-emphasises the importance of a coherent, consistent
and synergetic energy policy and the need for sufficient incentives.
2.1.3 The United Kingdom
The UK Climate Change Agreements (CCAs) allow eligible energy-intensive businesses to receive up
to a 65% discount from the Climate Change Levy (CCL) in return for meeting energy efficiency or
carbon-saving targets. The discount for electricity will increase to 90% from April 2013. The
Department of Energy and Climate Change (DECC) administers the current CCA scheme, which will
end in March 2013. A new CCA scheme has been put in place since 1 April 2013, administered by the
Environment Agency, which is scheduled to run till 31 March 2023 (DECC, 2012).
There are two types of CCA agreements: umbrella agreements and underlying agreements.
Umbrella agreements set commitments for eligible industry sectors, these are negotiated between
the sector associations and the Department for Energy and Climate Change (DECC). Underlying
agreements contain targets allocated by the sectors to the operators in each sector. The new scheme
applies to 51 sectors with umbrella agreements, with about 4,300 underlying agreements covering
some 9,900 facilities. All the sectors that were previously eligible to hold a CCA remain eligible,
though a number of sectors have merged taking the total from 54 to 51.
Changes between the old and the new CCA regime are relatively small, and entail amongst others the
following (SMMT, 2013):
Higher discount rate for the Climate Change Levy upon joining the CCA for electricity use
6
;
Lower threshold in CCA emission coverage for whole site eligibility for the CCL discount
7
;
Reporting to the Environment Agency instead of DECC with a different reporting period
(reporting frequency remains unchanged annually);
Reporting can now also be done directly, not only through the sector organisation;
Penalties will be introduced for incorrect or late reporting;
Publication of results will now also take place on the individual participant level, not only at the
sector level as was done in the old CCA scheme.
A different type of buy-out mechanism will be in place for compliance
8
.
The change in the UK system is of limited relevance for the design of a scheme in Vietnam. Worth
noting in that regard are the strengthening of incentives and penalties in the new scheme (discount
rate, eligibility threshold, penalty on misreporting, company level publication of performance),

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to reflect the adoption of a carbon price floor. In the 2011 Budget it was decided to adopt a minimum carbon price or
"carbon price floor" for electricity generation companies, in order to provide certainty for low-carbon investment. From 1
April 2013, the proposed carbon price floor will take the form of a tax on carbon dioxide emissions. This will be an
additional tax payable by electricity generators which use fossil fuels. Currently such generators are exempt from the
climate change levy (CCL) but the proposals will amend the CCL to remove this exemption. The government proposes to tax
fossil fuels at rates which take account of their average carbon content and these rates will be known as the "CCL carbon
price support rates". (HMRC, 2012)
7
Under the old CCAs the whole site was eligible for a CCA (and therefore the CCL deduction) if 90% of the emissions were
from an energy-intensive installation covered by the CCA, now this is reduced to 70% coverage.
8
In the old scheme, allowances could be purchased to help meet the target. Instead, in the new scheme, a fee can be paid
12 GBP/t to cover the shortfall.


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increased transparency and data access and a streamlining of roles and responsibilities (dedicated
intermediary as implementing agency, stronger role for individual companies vis--vis the sector
associations).
2.1.4 Other countries
As a further update, the below table adds France, Germany, Switzerland, Australia, New Zealand,
Canada, Japan and South Korea to the overview of country experiences in terms of participants,
incentives and compliance arrangements (LBNL, 2010). Analyses suggest a differentiation in both
geographical scope and over time. Whereas European countries over time have moved from more
voluntary towards more directive policy instruments (negotiated targets, more sanctions on non-
participation and non-compliance, stronger financial incentives) a shift completed by the transition
to the mandatory emissions trading schemes, countries outside Europe are positioned more towards
the voluntary range of the policy spectrum (unilateral targets, limited sanctions, mostly non-financial
incentives such as information, technical support, recognition)
9
.

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Note though that in recent years also Australia has been moving towards more stringent policies, making the Grenhouse
Challenge Programme partly mandatory and introducing a Carbon Price Mechanism (evolving into an ETS).



Table 1 Overview of main characteristics of voluntary agreements in a number of countries: participants, incentives & sanctions (LBNL, 2010)




2.2 Experiences with voluntary agreement in developing countries
Below a summary of the key characteristics and main lessons learned from the experiences with
voluntary agreements in the selected developing countries China, South Korea and Indonesia is
described. More details (and references) can be found in the respective factsheets included in Annex
3 of this report.
2.2.1 China
In China, a large project was carried out between 2003 and 2005 to develop voluntary agreements on
industrial energy efficiency [LBNL, 2004]. The project, funded by the Energy Foundation, aimed to
pilot such voluntary agreements in the steel sector in Shandong province, followed by a subsequent
roll-out to other regions and sectors
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. Involved were Shandong Economic and Trade Commission
(ETC), the State Economic and Trade Commission (SETC), the China Energy Conservation Association
(CECA) and two steel companies. The project carried out extensive capacity building activities among
all stakeholders, including on the policy instrument of voluntary agreements, on the assessment of
baseline energy consumption and energy conservation potentials, comparison of performance
(benchmarking) and monitoring and reporting progress towards achieving energy conservation goals.
One of the problems identified within China was that the instrument of voluntary agreements did not
match well with the (policy) culture in China, which is strongly command-and-control driven. Industry
was not used to act pro-actively or to negotiate with the government about its obligations.
Ultimately, the lesson learned from the project was that industry would only enter into a voluntary
agreement with the government, if the government would oblige them to do so. This would, of
course, defeat the whole purpose of voluntary agreement, which is to achieve better results to
increased support among industry due to the voluntary nature of the instrument and the
involvement of industry in the target-setting. In absence of government instructions to participate,
there was no interest from the side of the companies to participate.
Because of this lesson learned, ultimately, the intended voluntary agreement programme evolved
into the Top-1000 programme, using the pilot model of energy conservation agreements between
government and industry to achieve Chinas national energy conservation targets set out in the 11
th

Five Year Plan in 2006. Participation in the Top-1000 programme was however stipulated through a
regulation and targets were largely determined by government, with limited room for negotiations.
Enterprise-level targets were set by Chinas National Development and Reform Committee (NDRC),
taking into consideration their general situation such as which industrial sector they belonged to
since the potential energy savings vary by sector, as well as the general technology level of the
enterprise, if known. The targets were not based on detailed assessments of energy-savings potential
of each enterprise or each industrial sector. This approach was taken due to time constraints.
Top-1000 enterprises were required to undertake the following activities:
Establish a sound energy monitoring and statistical system;
Regularly submit energy utilization status reports providing information on energy consumption,
energy efficiency, and cost-effectiveness of energy savings and energy-efficiency measures;

10
Other projects were also carried out for e.g. UNIDO, aiming to build capacity on industrial voluntary agreements in other
sectors.


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Conduct energy audits to analyse the existing situation, identify key issues and potentials, and
provide feasible and practical energy-saving measures;
Submit initial energy audit reports to provincial governments for review;
Develop energy conservation plans based on energy audits and formulate energy conservation
plans annually.
Top-1000 enterprises could apply for financial incentives that were provided for the Ten Key Projects
program
11
. Enterprises and regions
12
that did not meet the targets would not be given annual
rewards or honorary titles, leaders in state-owned enterprises would not receive annual evaluation
awards, and officials would not be promoted without meeting the energy conservation targets. For
enterprises that failed, a notice of criticism was circulated, approval of any energy-intensive projects
or additional industrial land use may be suspended, and no favorable exemption policies will be
applied. If a state-owned enterprise fails the evaluation its leader cannot be given any type of
awards, no matter how well the enterprise is doing in other aspects.
The use of energy-saving agreements signed by high-level representatives from government and the
enterprises has been very effective for stimulating action in the Top-1000 program. Top-1000
enterprises invested heavily in technology innovation and implemented over thousands of energy-
saving projects
13
. Energy audits were conducted at nearly all the enterprises in the program, but
capabilities and audit quality varied widely. In terms of the program goal of improving energy
efficiency, unit energy consumption decreased for major products in most sectors since the launch of
Top-1000. However, due to limited data availability, it is difficult to assess how much of these
reported savings are directly attributable to the Top-1000 program and how much would have
occurred in its absence.
A notable weakness in the Top-1000 program and other industrial programs is the lack of public
reporting and third party verification of energy use and savings. With the established reporting
system it would be relatively easy to make more of the data accessible in an aggregated or
anonymous manner to protect confidential plant-level. Verification by organizations other than the
enterprises or supervising government offices is needed to ensure that savings are real and that the
set goals can be achieved.
The program target of 100 Mtce final energy savings represented only 15% of total required energy
savings in the 11th FYP, yet the Top-1000 enterprises represent the highest energy consumers in the
economy. A more ambitious goal likely could have been set based on assessment of potential savings
in industrial sub-sectors. Implementation experience thus far identified the need for greater training
and capacity buildingat industrial enterprises, energy service and technology providers, and
government agenciesto conduct audits, reporting, and energy-saving activities. Supporting policies

11
The goal of the Ten Key Projects is to increase energy efficiency through adjusting and optimizing the economic structure,
promoting energy-efficient technologies, and establishing a strict management system and effective incentive mechanisms.
Projects relevant to industrial entities included in this program include coal-fired industrial boiler (kiln) retrofit projects,
district cogeneration projects, waste heat and pressure utilization projects, petroleum conservation and substitution
projects, motors energy efficiency projects, and energy system optimization projects.
12
On the government side, achievement of the energy-saving targets and energy conservation measures was part of the
provincial government evaluation system in which the responsible government officials were evaluated annually each year
on whether or not the targets under their jurisdiction had been achieved.
13
More than 95% of the enterprises established an energy management office, while the rate of equipping with energy
measuring instruments varied from 60% to 90% at different levels of the factories.


17
for the Top-1000 program, such as energy efficiency standards for industrial products, are being
developed as the program progresses, and more is needed to realize greater improvements.
Currently, China is piloting various emissions trading schemes, addressing also the industrial sector,
at the local and regional level. A national ETS scheme is under discussion.
2.2.2 South Korea
South Korea has had a succession of policy instruments to address energy use and GHG emissions in
industry, which developed towards increasing government involvement and a more compulsory
nature.
The Voluntary Agreement programme for Energy-saving and GHG reductions was established in
1998. Companies that join the programme managed by the Korea Energy Management Corporation
(KEMCO) need to prepare an energy efficiency improvement action plan and commit to achieve an
energy-efficiency improvement/GHG emission reduction target
14
. Every year, companies submit a
progress report to KEMCO. The VA initially focused on companies using energy over 5,000 TOE/year,
from 2004 the system expanded to include companies using over 2,000 TOE/year. The number of
participating businesses increased from 15 in 1998 to 1300 in 2009 (NC, 2012).
After a business has shown its interest to a regional centre of KEMCO to participate in the voluntary
agreement, a target agreement is concluded between the local government and the business. It was
recommended but not compulsory that the energy-efficiency target be more than 5% energy savings
for 5 years compared to the total amount of energy consumption in the year before the agreement
(LBNL, 2010).
Additional obligations for companies participating in the voluntary agreements include:
Present and achieve energy saving and/or greenhouse gas emission reduction goals,
implementation schedules, implementation methods, etc.
Submit an implementation plan to KEMCO, including current status of business, record of saving
in recent years, plans for the next 5 years, energy saving systems, etc.
Submit recorded achievement to KEMCO on annual basis via a business report. No verification is
required.
In exchange for meeting its targets, companies can take advantage of low-interest loans and tax
incentives to promote energy conservation and GHG emissions reduction as well as technical
support
15
. As of 2007, a total of 1,353 companies participated in the VA (KEMCO, 2007), reducing
their energy use with 564PJ from 1999 through 2006, representing an emission reduction of 43.2 Mt
CO
2
.
Based on the experiences in the VA programme, the responsible Ministry of Knowledge Economy
decided that a more rigorous approach was needed. So-called negotiated agreements were

14
It was recommended but not compulsory that the energy-efficiency target be more than 5% energy savings for 5 years
compared to the total amount of energy consumption in the year before the agreement.
15
The voluntary agreement program is supplemented with the Energy Saving through Partnership (ESP) program. The ESP
Council enables industrial companies to share new energy-saving technologies and information with each other. It
organizes workshops and conferences to discuss best practices and provides the latest information on energy-efficient
technologies and practices.


18
introduced with a reinforced role for the government in setting the target
16
. Participation is
mandatory for companies consuming 837 TJ annually (> 400 companies). The revised program
provides more incentives for achieving the target and applies a penalty on non-compliance [LBNL,
2010]. The so-called Emission Target Management Scheme (ETMS) started operating as of January
2012.
For the ETMS similar obligations are defined as for the voluntary agreements, but target agreement,
implementation plan and reporting are submitted to the relevant ministry, rather than KEMCO, and
are to be verified. Starting from a sector targeted reduction, business can take into account their
needs and circumstances, such as future investment plans, in their target setting. Resulting targets
are based on the actual average emissions of the business for the latest three years, to be negotiated
every five years.
The ETMS is seen as a preparation towards the introduction of the Emissions Trading System in 2015.
The Law to introduce the Emissions Trading System (ETS) was passed in May 2012. The ETS will apply
to 490 companies that account for 68% of the countrys GHG emissions across all sectors of the
economy, with allocation of emission allowances largely for free. As Korea highly values the
possibilities it would have on the international carbon markets international standards on the
monitoring, reporting and verification of emissions and emission reductions will be adopted.

2.2.3 Indonesia
In Indonesia, experience with voluntary agreements is still relatively limited, and efforts to address
industrial energy use and GHG emissions have largely focussed on the cement industry. An extensive
technical assistance project was carried out in 2009-2010 to assess the feasibility, and support the
development & implementation, of an emission reduction scheme in the Indonesian cement sector
[Phylipsen, 2009; GHD, 2010]
17
. The results were largely endorsed by the Indonesia government in
the 2010 International Climate Change Sectoral Roadmap for the industrial sector roadmap (ICCSR,
2010) published by BAPPENAS (the Indonesian National Planning ministry). The roadmap identified
the cement sector as a priority sector and recommended negotiating a Climate Change Cooperative
Agreement for the sector for 2010 2014, e.g. modelled on the UK Climate Change Agreements on
the Dutch Long-Term Agreements.
The Roadmap states that the agreements must contain target-setting process, benchmarking,
energy audits, energy savings action plans, the appointment of energy managers at each facility,
information and training workshops, measuring and monitoring progress towards targets, annual
reporting, program evaluation and incentives and supporting policies, such as a CO2 tax rebate as a
reward for meeting emission reduction targets. In 2012, a regulation from the responsible Ministry
of Industry was adopted in which emission reduction targets were defined for the cement sector. The
relation between the technical assistance project, the sectoral roadmap and the ministerial
regulation is not fully clear.

16
Note that usually negotiated agreements are voluntary agreements (i.e. with voluntary participation) in which the
targets are negotiated between contract parties (industry and government). In South Korea, participation is mandatory (i.e.
the programme basically is no longer a voluntary agreement), while targets are still negotiated between the two parties.
17
Funded by the French development agency AFD


19
In the feasibility assessment, carried out within the technical assistance project, different types of
targets for the cement scheme were analysed (energy efficiency, energy conservation, emission
reduction, absolute targets (PJ or t CO
2
saved), relative targets (PJ/t product, t CO
2
/t product saved)
as well as different types of policy instruments that could be used to achieve the schemes target
(voluntary agreements, mandatory standards, emission trading systems). In the subsequent phase
(ending in December 2010), the project:
Carried out data gathering activities at the plant-level, which was combined with capacity building
with the cement companies related to monitoring, reporting and verification of energy, emission,
production and material use data;
Identified technology implementation rates at the plant-level, as well as remaining
implementation potentials and the associated emission reductions and costs;
Developed marginal abatement cost curves at the plant-level and the sector-level and used these
to assess the costs of different emission reduction targets discussed for the scheme;
Identified models companies could achieve cost-effective emission reductions (pooling, trading,
target differentiation, etc);
Identified required changes in legislation to support the companies in meeting the targets (e.g.
changing waste legislation to allow the use of waste fuels or alternative (waste) materials,
changing product specification requirements to allow alternative materials to be used in cement);
Supported the development of incentives to support companies in meeting the targets and of
sanctions for non-compliance;
Prepared an implementation plan for establishing the scheme;
Prepared a draft text of a regulation establishing the scheme;
Since the project was finalised, developments are somewhat unclear. Continued activities aimed to
involve the Indonesian cement sector in the WBCSD/WRI Cement Sustainability Initiative (CSI), with
seed funding from AFD available for the initial phase. The CSI is an international initiative in which a
large part of the global cement industry participates to monitor and benchmark its performance
against its competitors. Involvement of this initiative would provide the Indonesian cement sector
with a low-cost, low-effort access to a credible and transparent MRV system until a national system
could be developed. It is as yet unclear whether this activity was successfully completed or not.
The 2012 regulation establishes emission intensity reduction targets for the cement sector of 2% in
2015 on a voluntary basis and 3% between 2016 and 2020 on a mandatory basis compared to 2009
levels. The targets are flat rate, i.e. the same % reduction applies to all plants, and no differentiation
is made between plants that are more efficient than others and those that are less efficient. At the
moment it is not clear whether participation in the scheme is voluntary or mandatory, which
incentives and compliance provisions are foreseen and what other obligations under the scheme
exist for the participants.
Due to its recent adoption, limited conclusions can be drawn yet regarding the effectiveness of the
regulation and its targets. Personal communication with Indonesian analysts suggests that the
industrys response to the targets in the regulation has been limited, especially for the state-owned
companies. One important conclusion is that with the implementation provisions of the regulations
lagging the adoption of the legal text, for both the MOI and especially for the MERM regulation, the
targets and obligations seem to exist mainly on paper. No clear time schedule is available at which
such provisions will be put in place, making it unlikely that the short-term targets will be met.


20

2.2.4 Specific lessons learned regarding the developing countries analysed
The three developing countries analysed here are very different in size, level of development and
policy culture. However, interestingly enough, they show a comparable trend in terms of the
development of policy objectives and instruments to address industrial energy use and emissions.
Each country started with voluntary participation and/or voluntary targets (either as a policy
intention or as an actually implemented policy), before moving to mandatory participation and/or
mandatory targets, followed by (preparations for) carbon market-based instruments such as
emissions trading. This trend has also been seen in other countries in Europe and other regions,
though the mandatory target phase was often omitted here.
Here, it must be noted that emissions trading (or other market-based instruments) are often seen in
developing countries as a source of additional international income (through sales of emission
reductions to developed countries), rather than as a cost-effective policy instrument to reduce
domestic energy consumption and GHG emissions. Also, care must be taken to avoid a rushed
transition to a market-based system, as its complexity and financial implications puts additional
requirements on the capacity of the stakeholders involved.
The Chinese experience shows that national characteristics and culture may determine which
elements of a voluntary or negotiated agreement process are most useful to adopt to arrive at an
efficient energy efficiency policy. It also demonstrates a number of interesting incentives, whose
effectiveness is likely to be cultural-specific. The China programme, furthermore, emphasises the
importance of sufficient information on saving potentials and costs in advance of the target-setting
process for establishing ambitious but realistic targets.
Experiences in South Korea show the risk of a limited government involvement, as well as the
importance of oversight (including verification). As the Indonesian example shows, it is very
important to combine target-setting and development of regulations with the establishment of
implementation provisions and infrastructure so as to move beyond paper targets into real-world
emission reductions.
The experience in all three countries emphasises the importance of sufficiently strong incentives and
sanctions to stimulate participants in acting on the agreed targets.

2.3 Conclusions
In the 2010 report, a number of lessons learned were identified from the experiences with
negotiated agreements described there with regard to prerequisites and general success factors for a
voluntary agreement programme. Main conclusions were that it is important that a culture of
cooperation between government and industry exists and that goals need to be negotiated and
clearly defined, measured by a reliable monitoring system and backed up by meaningful sanctions.
These conclusions are also reconfirmed by the additional analyses carried in the current report, with
especially the need for sufficiently strong incentives for participation, reporting and target
achievement being highlighted.


21
The seven golden rules for negotiated agreements defined by the LTA Uptake project are also
supported by the experiences in developing countries assessed here. These golden rules are:
A good negotiation position of the government;
Clear and quantified targets;
Clear timetables;
Long lasting government support;
For large energy-intensive companies;
Physical energy efficiency monitoring (i.e. monitoring using physical energy efficiency indicators
rather than monetary ones);
Clear monitoring guidelines;
Independent verification.
In the context of developing countries, also the negotiation position of industry as a variation to the
first golden rule above deserves attention, as both the availability of sufficient information, data
and technical expertise and the power position vis--vis government may be limiting factors in
successful, balanced negotiations.
The role of sector associations varies greatly between countries, depending on the size of the
industrial sector, the capacity and resources of both sector associations and companies and the
relations between industry and government as well as between sector associations and their
members
18
. In most EU countries, the VA programmes offer the possibility of agreements with the
sector association, either instead of, or in addition to, company-level agreements. In the
Netherlands, the role of sectoral associations has reduced over time, especially for energy-intensive
companies, from sectoral agreements and targets only, to both sectoral and company-level
agreements & targets to only company-level agreements and targets. In emissions trading systems,
targets are only set at a company level, though (European-level) sector associations played an
important role in lobbying national and EU governments to influence target-setting and in providing
information used in the target-setting process (benchmarking). In developing countries, sector
association roles in the VA programme were more limited. China and South Korea, sector
associations did not play a significant role, though sectoral energy savings targets were taken into
account in company-level target setting. In Indonesia, the sector association is considered a key
stakeholder, but its role is still unclear and targets are set at the individual company-level. The
association did play a crucial role in the preparatory project, motivating its members, assisting in data
gathering, raising awareness, etc.
In most countries, the involvement of local authorities has been limited. Either local authorities have
not been involved, or their role is limited to environmental permitting issues
19
. The exception in
Europe is Belgium, where the Flemish and Walloon region each developed their own VA programmes
with very different characteristics. Among the developing countries, the Chinese Top-1000 Enterprise
programme has a strong role for provincial and regional authorities. This includes both the
implementation and oversight of the national Top-1000 programme itself (for the enterprises
designated at the national level for participation), as well as the expansion of the programme to

18
For more details, see Annex 1, Annex 3 and the 2010 report
19
Coordination of energy efficiency provisions in the environmental permit with the provisions in the VA, implementing
preferential treatment in permitting procedures in case this is one of the incentives offered to VA participants, withdrawal
of environmental permit if this is a sanction under the VA on non-compliance.


22
include more enterprises (Top-10,000 enterprises, provincial Top-1000 programmes), for which the
regional authorities were also responsible for target-setting. Note that for the EU ETS, also EU
countries with regional governments had a stronger involvement of their local authorities. Here,
countries like the UK, Germany and Spain had devolved (some of) the implementation and
compliance activities to the regions, while policy making and political decision-making was done at
the national level.
Summarising, initiating a negotiated agreement is easier when there is good co-operation between
authorities and industry. The agreement scheme needs to have effective carrots and sticks, a defined
long-term timeline and adequate transparency. The goals should be challenging but not discouraging,
while the monitoring procedure should be reliable and should guarantee confidentiality.
There are also risks associated with negotiated agreements, the major one being the definition of
targets that are not demanding and reflect little more than Business-as-Usual (BaU) developments.
This can happen especially in the case of unilateral commitment, if targets are not negotiated, or if
the government and/or industry has insufficient information to establish the saving potential and its
costs or if the government is unduly biased towards industry arguments. An open negotiation
process, where other stakeholders are invited to comment on the target, avoids the conclusion of
closed deals cut between the public authority and industry, which may endorse little more than the
BAU (Bertoldi, 2007).



23

3 Preliminary conceptual design of a Vietnamese VA
Here we provide insight into a number of main elements that are likely to be a part of the voluntary
agreement on industrial energy efficiency in Vietnam that is to be designed in subsequent tasks in the
current project. Together these main elements form a preliminary conceptual design of the
Vietnamese VA programme, which will be discussed with stakeholders during the first visit to
Vietnam. It must be noted that in many areas, decisions on the design are still to be made at a later
stage, when stakeholder input has been received or elements of the VA have been further elaborated.
For a number of important areas, such decisions are identified here, and possible options to choose
from are outlined to provide further insight into what a future Vietnamese VA programme may look
like.
3.1 Important elements of the conceptual design
Based on the analyses carried out in the 2010 report as well as the previous section, the following
can be identified as necessary elements for a successful VA on industrial energy efficiency in
Vietnam:
A negotiated agreement, with targets negotiated between governments and prospective
participating sectors and/or companies;
Covering energy-intensive industrial sectors;
With target-setting to be based on assessments of energy efficiency improvement or energy
savings potentials and costs;
Targets set (and monitoring of progress to target) to be based on physical and quantifiable
measures, not monetary or qualitative measures;
With a long-term time horizon, with predefined moments for evaluation, revision and renewal;
Government incentives will be provided to support companies in fulfilling their obligations;
Uniform and transparent monitoring & reporting rules to be set upfront by government;
Regular reporting of monitoring results and progress to targets to the oversight organisation;
Application of sanctions on miss-reporting and non-compliance to be applied by the oversight
organisation, with predefined criteria for non-compliance;
Here the above elements are discussed in more detail, following the same structure as used in the
2010 report:
Participants, roles & responsibilities;
Target-setting;
Monitoring, verification & compliance;
Incentives & sanctions.

3.2 Participants, roles & responsibilities
From the Vietnamese government side, it has already been decided that the Ministry of Industry and
Trade (MOIT, Directorate-General for Energy) will be the responsible authority, in line with the Law
on Energy Efficiency and Conservation (LEEC, 2001). This law assigns MOIT the role of State
Management for energy efficiency and conservation (Art.44). As such, MOIT is in charge of (Art.45):


24
Issuing legislative documents, strategies, policies, programs, national plans on energy efficiency
and conservation and organize the implementation;
Coordinating with Ministries, ministerial-level agencies, Peoples Committees at provincial level
for State management on energy efficiency and conservation;
Organising the national energy database system;
Disseminating legal regulations on energy efficiency and conservation;
Organising scientific research, technology transfer and application in the field of energy efficiency
and conservation
Inspecting, monitoring and handling of complaints and resolving violations in energy efficiency
and conservation activities in accordance with the law.
At the local (provincial) level Peoples Committees have the following responsibilities of for energy
efficiency and conservation (Art.46):
To formulate plans for energy efficiency and conservation in accordance with and combined in the
local social-economic development plans.
To organize the implementation of mechanism, policies and plans for energy efficiency and
conservation.
Compliance and enforcement of the obligations under the Law on Energy Efficiency and Conservation
at the provincial level are in the hands of the provincial Departments of Industry and Trade (DOITs).
They also provide technical support (e.g. with energy action plans), sometimes through regional
Energy Conservation Centers.
Text Box 1 describes the typical roles and responsibilities for government in (negotiated) voluntary
agreements, distinguishing between the national authorities and an optional intermediary agency. As
can be seen from the roles and responsibilities listed, the government role is more strategic and
policy-oriented (policy development & evaluation, objectives, targets, incentives), while the
intermediary agency is more implementation-oriented (technical support, MRV, annual performance
assessment & compliance). The two roles are not always separated out into two different
organisations, but it has its benefits to do so as the required expertise can be quite between roles. In
addition, data confidentiality issues may be less if company-level data are submitted to an
intermediary, with only aggregated reporting with policy relevance to the ministry.
In Vietnam, it seems to make sense to have MOIT responsible for all tasks during the development &
piloting of the phase. During the pilot phase, an assessment could be made whether it would make
sense in the Vietnamese context to have a separate implementing agency during the roll-out and
operational phase of the VA programme. If that is considered to be appropriate, the development of
such an agency, and the institutional capacity building, could be part of the piloting phase. At the
local level there seem to be energy efficiency centres that could play a role in technical support
(PMU, 2013). It is at the moment not clear whether such a centre also exists at the national level that
could play the role of the intermediary.
It also needs to be considered whether also in the VA programme there is a role for the Peoples
Committees or the provincial DOITs. Advantages could be that these may be closer to the industries
located in their region, having more knowledge on and contacts within the companies. Also, activities
could build upon existing roles under the Law on Energy Efficiency and Conservation. On the other
hand, many regional organisations involvement could potentially lead to different approaches in
different regions, with the risk of inconsistencies in target-setting, provided incentives and


25
compliance efforts. It would also require a significantly larger capacity building effort compared to a
more centralised approach.


26


The authorities
The tasks and responsibilities of the government in negotiated agreement can include:
Target-setting & legislative framework
Setting goals and objectives for the agreement scheme;
Developing and harmonising legislation in which an agreement is granted an official status of
public/private agreement;
Ensuring through this legislation: compliance with existing legislation, financial incentives, the
role of other key players.
Incentives & support
Providing resources and/or financial support to the sector associations, the intermediary
and/or independent experts to assist the enterprises within the agreement scheme;
Providing fiscal incentives to support enterprises in their efforts to improve energy efficiency
(these may be tax exemptions, subsidies for energy audits and for energy-saving investments);
Promoting the agreement scheme on a general level;
Participating in the development and upkeep of the monitoring system (by providing financial
support);
Participating in development and demonstration projects together with other parties;
Participating in the development of the agreement scheme together with other parties;
Communicating to other key players and the general public the relevance and advantages of
negotiated agreements as an energy policy instrument, its goals and periodic results.
Evaluation
proposing developments and modifications of the agreement scheme
analysing, evaluating and reporting the effectiveness of the agreement scheme
implementing an evaluation of the agreement scheme after a certain time period
Agency or intermediary
Typical agency or intermediary tasks and responsibilities include:
Participating in the development of the agreement scheme together with other parties;
Providing guidance, training and support to participants;
Providing tools to participants on energy scans, auditing, energy management, benchmarking,
energy efficiency planning etc;
Validating individual energy action plans;
Developing and running the LTA scheme monitoring and reporting;
Data collection, processing and evaluation;
Database operation, classification and validation of data;
Monitoring, evaluation and reporting to other key players;
Participating (providing active support in implementing pilot projects) in pilot projects (e.g.
regarding expansion themes, introduction of energy management);
Promoting the agreement scheme to new interested companies or sectors);
Organising annual national events (workshops) aimed at presenting results and new initiatives;
Subcontracting third parties or experts for assistance with tasks listed above if necessary;
Text Box 1 Typical role and responsibilities of government in negotiated agreements


27


On the side of participating sectors, contract parties in the agreement can be companies and/or
sector associations. As shown in the country analyses, the most successful agreements combine
contracts with individual companies with contracts with sector associations. Sector associations can
Sector Associations
Within a negotiated agreement scheme sector association tasks and responsibilities can include:
Proposing sector agreement goals (based on each sectors targets);
Proposing criteria for energy-efficient technology implementation (e.g. payback period < 5
years);
Proposing developments and modifications to the agreement scheme based on a harmonised
national/ regional legislative framework;
Participating in discussion forums regarding agreements;
Guiding and training participants in the wide scope of agreement subjects;
Proposing or coordinating the determination of sector-specific measure lists;
Encouraging their members to join the agreement;
Keeping an up-to-date record of participants and contact persons;
Actively inform their members about the development and implementation of the agreement;
Motivating, assisting and supporting its members in actively fulfilling their agreement
obligations;
Providing support and assistance on the implementation of the agreement and on energy
efficiency improvements to the participants;
Ensuring provision of monitoring and reporting data, relevant to the agreement scheme;
Appointing a representative to the board of the agreement;
Defining annual sector reporting and data collection, or subcontracting it to (several)
representative members or a third party;
Providing advice to the enterprises on the reporting procedure;
Participating in development and demonstration projects together with other parties;
Participating in the development and modification of the agreement scheme together with
other parties;
Participant (company)
Tasks and responsibilities of individual participants or companies can include:
Ordering an energy audit to be carried out on the facility and/or processes;
Setting up an energy-management system;
Training corporate staff in energy-management issues;
Defining energy efficiency targets and key figures for follow-up;
Drawing up and implementing an energy conservation plan;
Striving for continuous improvements in energy efficiency;
Taking energy issues into account when purchasing new equipment and systems;
Implementing profitable energy-saving measures;
Monitoring energy use and energy-saving improvements and reporting annually;
Reporting (annually) on improvements and/or difficulties faced by the company;
Participating in pilot projects;
Participating in cooperation forums;
Participating in possible national and international benchmarking schemes;
Text Box 2 Typical roles & responsibilities of industry in negotiated agreements


28
play an important role in the agreement, as described in Text Box 2, to motivate individual
companies to participate in the agreement and comply with its obligations, to raise awareness,
provide information and technical support and build capacity. For example, in Indonesia the cement
sector association was a strongly motivating force behind the development of the emission reduction
scheme. The association can bundle the companies interests within a sector to provide a stronger
position in the negotiations with the government on the agreement targets and the incentives
offered. In addition, the association has an important role in case the agreement (also) contains a
sectoral target, or if the company-level targets are derived from a sectoral target (such as Indonesia
and South Koreas EMTS scheme).
A successful role of sector associations in the VA is conditional on them having sufficient standing
with and influence on their members, sufficient technical know-how, and a good relationship with
government. What is also important that the associated is (perceived to be) representative of all its
members, independent of their size or whether they are state-owned or private companies. From
preliminary information on the Vietnamese contexts this is still uncertain whether the sector
associations would be able to fulfil such a role in the VA programme. One point of attention in this
regard is the fact that sector associations management in Vietnam is regularly carried out by retired
government staff (PMU, 2013), as this may potentially mean a risk of insufficient technical know-how
or difficulties in representing industrys interest in negotiations with the government.
The Law on Energy Efficiency and Conservation requires companies to conduct regular energy audits,
adopt specific energy saving measures, regularly report on energy usage, and assign energy
management officers to be responsible for formulating and implementing energy saving action plans.
Moreover, Article 9 of the Law requires industrial companies to develop annual plans for energy
savings; gradually eliminate inefficient technologies; and apply technical norms, standards and
regulations. Various government circulars, decrees and decisions
20
have been issued, elaborating
these various elements. Preliminary information suggests, though, that implementation of the law is
somewhat lagging (PMU, 2013)
21
, with the development of financial incentives by the Ministry of
Finance (MOF) not yet completed and enforcement of the Laws commitments not fully in place. As
observed with the Indonesian programme, implementing the laws provisions into an effective
operational practice is crucial for a successful implementation of any programme.
In terms of the participating sectors, 4 sectors have been chosen as pilot sectors for a VA programme
in Vietnam: Chemicals (fertilizer, rubber, and paint), Food & beverages, Plastics and Paper
22
. Within

20
Decision 1294 establishing a list of designated energy users and the responsibilities associated with this list (PM Decision
2011)
Decision 3/2013 establishing the requirements for energy efficiency labelling of equipment and phasing out of inefficient
equipment (PM Decision, 2013)
Governments Decree 73/2011 defining how to deal with violations in the area of the efficient use of energy (Government
Decree, 2011)
MOIT Circular 9/2012 on the elaboration, implementation and reporting on energy action plans and energy audits (Circular,
2012)
21
This was also confirmed by interviews held with various sector associations during the mission to Vietnam, which
indicated that they had heard about the Law on Energy Efficiency and Conservation, but had not engaged with it yet and/or
did not know how to deal with it.
22
The cement, steel and textile sectors were already covered to a certain extent in VNEEP2 (with specific energy intensity
targets), and the steel sector is also addressed by an AFD-funded project to develop a roadmap for energy efficiency in the
steel sector.


29
the CPEE project assessments of energy saving potential will be carried out for these sectors and
energy efficiency action plans will be developed. Currently, the first two sectors are being analysed,
to be finish by September, with the remaining sectors to be covered by the end of the year. The
voluntary agreements are intended to be developed first for these industries, though some other
industries for which energy saving action plans are now developed also under support from other
donors may be added (e.g. steel) (PMU, 2013b). From these sectors, 5 plants will be chosen for the
VA pilot, after which role out to other plants/and or sectors is planned.

3.3 Target-setting
To define the right target for a Vietnamese VA programme, its ultimate objective needs to be clearly
defined. The objective of a voluntary agreement programme on industrial energy efficiency may
seem obvious, i.e. improve industrial energy efficiency, but actually there is a lot more to this
discussion than that.
The underlying question is What are the motivations for the Vietnamese government for wanting to
improve its industrial energy efficiency? And there are a large number of possible different answers
to that question:
To reduce costs and improve industrys competitiveness position;
To reduce reliance on imported energy sources and the associated economic/geopolitical costs;
To reduce the reliance on domestic fossil fuels with its associated human health (e.g. mining) and
environmental costs;
To improve the security of electricity supply in the country
To increase the access to energy for larger parts of the economy and/or society;
Etc.
Identifying the exact motive(s) for implementing any energy efficiency policy is very important to
make sure that the policy in the end actually contributes to the overall policy goal. In the context of
negotiated agreements, this means that the target for the agreements will need to be defined in a
way that is consistent in with the overall policy goal and motives
23
. This could e.g. determine whether
a target should be defined in terms of absolute energy savings or as a relative improvement of
energy efficiency (per unit of product); as final energy or primary energy or CO
2
emissions; as targets
for different energy carriers (electricity, imported oil, coal); how renewable energy is treated in the
scheme
24
, etc.

23
As an example, the Dutch voluntary agreements (LTA) were successful in meeting the agreements specified objectives
(2%/yr energy efficiency improvement), but the overall policy objective of reducing total energy consumption and CO
2
emissions was not met.
24
Or measures that reduce energy consumption in the chain, i.e. by making either the production or transport of input
materials more efficient or the production or use of products (e.g. lighter cars that are more fuel efficient). Such measures
are included in the latest Dutch voluntary agreements.


30
As could be learned from the international experience with VAs, and the golden rules for successful
programmes derived from that, it is crucial that targets for a VA programme are concrete,
quantified, defined in physical terms
25
and that they are ambitious but realistic.
The national energy savings target for Vietnam, defined in the National Target Programme is defined
as an annual % change compared to a baseline. As industry is expected to contribute to this national
target, so it is likely that an industry target is defined in a similar way as well. This industry target
could then, in turn be distributed over industrial sub-sectors, including the pilot sectors to be
covered by the VA programme. If this has not been done already as part of the political process in
Vietnam, there are several approaches to determine such a distribution, e.g. based on share in
energy consumption, contribution to GDP, based on the assessment of sub-sectoral mitigation
potentials & costs, etc.
However, in this context it is important to further define the target, and to consider the potential
consequences associated with a chosen definition:
An energy savings target (in %/yr) compared to a baseline suggests that total energy consumption
(GJ) needs to be reduced compared to a baseline energy consumption. Given the strong growth
expected in Vietnam, it is likely that this is a projected baseline (a BaU scenario) and not a historic
baseline. In this regard it is important to realize that projections are by nature very uncertain, and
that a change in projected baseline could have significant consequences for the ambition level of
the programmes target. All of a sudden, such a target may turn out to be prohibitively high or on
the other hand very easy to achieve, when developments diverge from the projection. An
alternative here is to define a target based on specific energy consumption (energy per tonne of
product) in reference to a historic base year level. This avoids the uncertainties inherently
involved in projections, without putting restrictions on sector growth.
The definition of the target can also have consequences for the types of energy savings measures
that are incentivised. For example, a target defined in final energy consumption may result in a
shift from fuels to electricity, while actually resulting in a higher consumption of primary energy
carriers. A target defined in energy consumption per tonne of paper is likely to stimulate also
measures that increase the amount of recycled paper, while using energy consumption per tonne
of (intermediary product) pulp will only incentivise savings measures in pulp production.
If the aim is phase out old, outdated technology or processes (as suggested by the Law on Energy
Efficiency and Conservation) targets can also be defined in technological terms, e.g. as minimum
efficiency standards for energy generation and CHP or generic technologies (motors, drives,
compressors), product specifications (minimum content of recycled paper or of alternative
materials in blended cements) or the required phase out of inefficient technologies (certain kiln
types cement production), etc.
If the competitiveness of industry is important, measures could also be defined in terms of
payback period, e.g. all energy saving measures with a payback period of less than x years must be
implemented
26
.
Of course, the latter two options mentioned above can also be used as supportive measures of a
more generically defined savings targets (% improvement per year).

25
I.e. no energy efficiency indicators defined in monetary terms, e.g. energy consumption per unit of value added. This is
important as economic trends (prices of energy, materials, labour, capital as well as product prices) can strongly influence
such indicators, without any way of identifying how changes in energy efficiency contribute to the change in indicator.
26
As was done in the Dutch agreements.


31
The height of the target to be set (the number, not the type of target as discussed above) should be
informed by information on the energy saving potentials and associated costs in order to assure that
targets are ambitious but realistic. The insight provided by such information should also help
companies in assessing the risks & benefits of entering into a VA, thereby increasing participation
rates and support among industry. For government, such insights help in determining their
negotiating position towards industry, as they are better able to judge industry claims.
Assessments can be done at a sector level and/or at a company level. Often, a sector-level
assessment is done as a starting point for a sector-level target. Company-level assessments are then
done to determine the company-level target, or to help implement the target and follow the
progress towards target achievement. In the Law on Energy Efficiency and Conservation (Art33),
designated energy-using units are obliged to develop and implement annual and 5-year energy
efficiency/conservation plans and to report the results of implementing those plans to the State
competent authorities (LEEC, 2010)
27
.
Within the CPEE project, upfront assessments will be done for the selected pilot sectors by a team of
national and international consultants. A local consultant will carry out the assessment of energy
saving potentials and costs. On the basis of this, the international consultant will advise MOIT on
cost-effective energy efficiency measures and technologies to improve energy efficiency in view of
international good practices. The international consultant will also assist MOIT in the preparation of
energy efficiency action plans for the selected sectors (TOR, 2012). The local consultant will use
preliminary energy audits carried out at selected facilities to benchmark the energy efficiency
benchmarks of subsectors and sectors as a whole. Based on this, the international consultant will
propose targets for cost-effective energy efficiency improvements in the selected sectors for the
short term (1-5 years) and medium term (6-10 year).
In VNEEP2, targets have already been defined for cement, steel and textile production. Here, the
target has been defined as an average specific energy intensity level to be reached in the target
year
28
. It is to be expected that similar targets will be proposed for the pilot sectors on the basis of
the work within the CPEE project. Here is must be noted, that such targets can only be derived for
sectors with uniform products. For sectors with a variety of different products this is more
complicated. Furthermore, the question is whether the sector targets under VNEEP2 can be applied
at an individual company level, as the products can differ between companies or change over time,
which affects specific energy consumption
29
. An additional question to be raised in this context is
how the ambition level of the targets in VNEEP2 (and others to be developed) will relate to those to
be agreed upon in the VAs, as it seems undesirable to replace existing mandatory targets with the
same targets under a voluntary programme.

27
The same article also requires companies to establish internal rules and procedures for implementing the plans and to
appoint an energy manager, while Art34 requires the companies to carry out regular energy audits.
28
Cement: average energy consumption of 87 kgOE/ton of cement in 2015;
Steel: average energy consumption of 160 kgOE/ton of finished steel products in 2015;
Textile: average energy consumption of 695 kgOE/ ton of fibre in 2015.
29
E.g. the clinker content of cement, the type of finished steel products (primary, secondary, slabs, hot-rolled, cold-rolled,
wire)


32
It is important for companies to have long-term certainty regarding policy development and energy
savings targets they will be subject to. This does not mean that no changes can be made over time,
but it does require upfront knowledge about when such changes are likely to occur and how
decision-making about new targets is likely to be done. In the context of a VA programme, this
means that it should be made clear at the time of programme development when the programme is
going to end, or when decisions about a potential extension are to be made; when evaluations of
individual companies performance as well as the programme as a whole are to be evaluated; and
how success and the potential need for revisions is going to be determined.
3.4 Monitoring, verification & compliance
International experience has shown that regular, independent and transparent monitoring of
progress to targets and enforcement of non-compliance are crucial to the success of VA programmes
(as with many other energy conservation or emission reduction policies).
According to the Law on Energy Efficiency and Conservation, designated energy users are required to
develop annual energy efficiency and conservation plans and to report these to the State
Management (MOIT) annually. State management is responsible for carrying out oversight with
regard to these reports, to require adjustments of the plans and their implementation where
necessary and to apply penalties on non-compliance.
At the moment, it is not standard practice for companies to monitor energy use or to assess their
performance or their energy conservation potential and no monitoring protocols seem to be in use
(PMU, 2013). Stakeholder consultation suggests that for large companies (especially state-owned
enterprises) this is more common, but for smaller companies this is not the case. Substantial effort is
being put into the development of energy auditors.
A recent DANIDA-funded project focusses on the development of a monitoring and evaluation
system for VNEEP (DANIDA, 2012). However, in the DANIDA report monitoring does not refer to the
monitoring of energy consumption/efficiency at the company or installation level (and the
assessment of progress to target at that same level), but at the effectiveness of VNEEP at the
programme level. In that context, key indicators such as the number of labelling programmes
implemented or the number of energy action plans or energy management system models
implemented in industry are to be monitored to allow the evaluation of the programmes progress
towards its overall objectives as well as its components
30
. As such, this framework can be very useful
in the set-up of the evaluation of the performance of the VA programme down the road, and the
institutional set-up can likely be built upon. It cannot, however, be used as a basis for the plant-level
monitoring of energy use that is required to assess compliance with agreed targets under a VA
programme.
An important step in the VA development will be to operationalize the general monitoring and
reporting provisions included in the Law into clear implementation provisions, the build of capacity

30
MOIT is reportedly working on elaborating monitoring and evaluation guidelines on the basis of the DANIDA project. At
this moment it is unclear whether this activity has the same programme-level evaluation focus or whether the guideline
(also) cover the installation-level monitoring of energy efficiency.


33
(and where necessary institutions) and the development of detailed rules and guidelines. This
strongly relates to some of the questions raised in Section 3.2 regarding the role and responsibilities
of the various parties involved, especially the extent to which an intermediary organisation will be
involved on the side of the government as well as the role of the sector organisations in the VA
programme.
Detailed rules and guidelines may include:
Detailed guidelines on the system boundaries for target-setting and monitoring (what is included
in the target and what not, and what should therefore be covered in the monitoring report);
Detailed monitoring & reporting guidelines, including what to monitor and report, how often and
any prescribed formats, templates, tools and conversion factors;
Detailed guidelines on how to measure progress to target, including potential correction factors
allowed or force majeure provisions;
Criteria for non-compliance;
Detailed description of sanctions on non-compliance and how they are applied. Are appeals
possible? What are the consequences of not meeting a sectoral target for individual companies?
Rules on how are data stored and who will get access to them, and what information is published;
3.5 Incentives & sanctions
An important lesson that can be drawn from the international experience is that incentives and
sanctions have a crucial role in a successful VA programme. In general, the agreements in the UK,
Denmark and the Netherlands are considered the most successful, in part of the strong incentives for
participation and compliance. Conversely, experiences in China and Indonesia show that without
proper incentives there is limited interest in participating in the VA, and insufficient action is taken to
comply with the targets.
An especially strong incentive for participation has been found to be the exemption of an energy or
carbon tax upon participation in a VA programme, i.e. an energy/carbon tax is put in place for the
targeted industries, but companies that participate in the VA do not have to pay the tax (or are
eligible for a discount on the tax). This incentive is a part of the VA programmes in the UK (discount
on the Climate Change Levy), Denmark (exemption from the CO
2
tax) and the Netherlands
(exemption from the energy tax). If the exemption or discount is made conditional on target
achievement (such as in the UK), this also provides a strong incentive for compliance with the agreed
targets.
Of course, it should be assessed whether imposing such a tax is feasible and appropriate in the
Vietnamese context. The potential existence of energy subsidies could be a barrier here. In principle,
though, the idea is that no-one would have to pay the energy tax, as everyone participates in the VA
and meets its obligations under the programme. If any revenues are collected from the tax, these
could be used to fund other incentives provided under the programme.
Other incentives that have been proven important in other VA programmes include:
Technical support, e.g. support with energy audits, energy action plans, monitoring;
Financial support in the form of subsidies, preferential loans, early depreciation, etc;


34
Administrative support, e.g. favourable treatment in permitting or other application procedures,
removal of legislative barriers (including e.g. in waste legislation or product policies that hinder
certain energy saving measures) or exemption from other (planned) regulation
31
;
Awareness raising and public recognition, e.g. public awards or labels that recognise good
performance or naming & shaming in case of lagging performance.
The Law on Energy Efficiency and Conservation sets out the Vietnamese governments policies
regarding incentives for energy efficiency in Articles 5 and 41 (LEEC, 2010), which include:
Financial and other incentives to promote energy efficiency;
Encouragement for using energy efficient equipment and machines;
Grants and subsidies from the National Energy Efficiency Target programme (VNEEP)
32
;
Incentives related to corporate income tax and import & export tax for energy efficiency products
and productions;
Soft loans from the Vietnam Bank for Development, the Vietnam Environment Protection Fund
33
,
the National Foundation for Science and Technology Development
34
and VNEEP.
Tax incentives specified in the Law require further issuance of legal implementation documents
(government degrees, Prime Ministers decisions or ministerial circulars). At present, such
documents do not exist (TOR, 2013). This is confirmed by the lagging of implementation provisions as
indicated by PMU (PMU, 2013).
Within the CPEE project a consultant has been assigned the task of carrying out a general assessment
of the existing financial structures for energy efficiency investment in Vietnam, including fiscal
schemes, incentives and other instruments and the efforts of industrial enterprises, financial
institutions and energy efficiency service providers in financing industrial energy efficiency
investments. Based on an assessment of current barriers, and a review of relevant international
experience, the Consultant is expected to recommend strategies and solutions for MOIT and other
government agencies to address the identified barriers and problems, and facilitate the financing of
energy efficiency investments.
First results highlight the use of a fuel tax to fund the Vietnam Environmental Protection Fund (Qadir,
2012). One of the preliminary recommendations of the study is to develop different sources of
concessional/preferential funding for loans and to make sure that SMEs eligibility for such loans is
not forgotten while prioritising energy-intensive industries. Further analyses of experiences in
Vietnam with energy efficiency investments (Qadir, 2012b) conclude that in cases where financing is

31
E.g. the threat of imposing standards or financial penalties as an alternative to a voluntary agreement programme has
been used in many countries to motivate industry to participate in the VA.
32
The program determined a list of project areas that are eligible for receiving grants and subsidies from the Programme.
The grants and subsidies can be awarded to enterprises for their energy efficiency projects. Total fund amount for the
specified period is 930 billion VND, of which the central government budget provides 350 billion VND.
33
VEPF provides subsidies, grants, co-financing and loans to organizations, enterprises and individuals to carry out eligible
activities, which meet definite selection criteria in the areas covered by the Fund. The Fund is allowed to mobilize resources
elsewhere, such as environmental fees, fees from CER sale, grants and contributions from organizations and individuals in
Vietnam and abroad. By November 2011, the Fund provided 800 billion VND in loans to 133 projects, including energy
saving projects. In addition, the Fund also provided subsidies and grants of more than 23 billion VND to 111 other projects.
34
The Foundation was established by the Government in 2003 as a non-profit organization, with initial funding of 200
billion VND. Energy efficiency is one of the financing areas of the Foundation. In 2010, The Foundation received a transfer of
near 1.7 million USD from GEF-UNDP Project Promotion of energy efficiency in small and medium enterprises in Vietnam
to maintain the credit guarantee fund for energy efficiency investments of small and medium enterprises.


35
available, it is difficult & expensive, due in part to high risk premiums, interest rates, & procedures
involved to encourage adoption.
Given the above, it is important to keep in mind that providing financial incentives can only be an
important motivating force for entering into a VA, if those incentives are not available to non-VA
participants (or with less beneficial conditions). In addition, while financial incentives are very
important, it is also important to have balanced set of incentives, i.e. which also includes technical
support and administrative support or public recognition. These alternative or complementary
incentives have the added benefit of being less costly for government. The same can be said for
imposing sanctions on non-compliance, which can include withholding the incentives established for
the VA, but also financial penalties or public naming & shaming. Regarding the latter, some of the
incentives & sanctions used in the Chinese Top-1000 programme may be of interest in the
Vietnamese context, because of the cultural similarities between the countries.
With regard to technical incentives, the Law on Energy Efficiency and Conservation also contains
requirements for companies to carry out energy audits, to develop energy efficiency plans and to
monitor their performance which can be built upon for a VA programme. The government is charged
with overseeing the implementation of the plans and to issue penalties in case of non-compliance. It
is as yet unclear to which extent the technical capacity exists to carry out these commitments, both
within industry and within government. It is likely that also further elaboration is required on what
exactly constitutes non- compliance before this part of the law can be enforced.
3.6 Decisions still to be made and potential choices
Section 3.1 sets out the main elements of the conceptual design of the VA programme in Vietnam.
The subsequent sections have outlined a number of decisions that need to be made before the VA
programme can be further developed. This includes the following:
Intermediary (government) organisation
Will (over time) an intermediary organisation be established to carry out the implementation and
compliance tasks on the government side or will all government tasks be carried out by MOIT,
also on the long run
Role for local governments
Is a role foreseen for local governments in either providing support or carrying out oversight, or
will this be organised at the national level?
Role for sector associations
Will sector associations be a party to the agreement, and if so will they have a facilitating/
supporting role or will there also be a sectoral target in the agreements?
Policy objective
What are the broader aims behind the VA programme on industrial energy efficiency and what
are the consequences for the type of target to be defined (absolute, relative, based on
projections, defined in technical or economic terms).
Time horizon for the agreements and targets
Would a 10-year agreement period, with an interim target after 5 years be feasible? Would
participants have to be in compliance every year, or can this be assessed over multiple years?
Feasibility of different types of incentives
Are there economic or political reasons that limit the use of energy taxes as an incentive for
participation and compliance? Are there other limitations to incentives (cultural, budgetary, legal,
capacity, etc)?


36
Compliance culture
What consequences does the compliance culture in Vietnam have for the design of the VA
programme, in terms of incentives for participation and compliance and sanctions and in terms of
how to organise the oversight and enforcement?
Of course, in addition to the above questions, additional information will be needed to come to a full
design of a VA programme. The assessments of energy conservation potentials and costs being
developed for the targeted sectors are indispensable for the (negotiations on) target-setting. In
addition, targets cannot be negotiated without clarity about the incentives provided to the
agreement participants. Definition of the incentives cannot be done until the consultancy assignment
on financial incentives has been completed.




37
4 References
ANL, 2009, Long-term Agreement on Energy Efficiency for ETS enterprises (LEE) agreement text,
AgentschapNL, Utrecht, http://www.agentschapnl.nl/content/convenanttekst-meerjarenafspraak-
energie-efficiency-voor-ets-ondernemingen-mee
ANL, 2012, Covenants results brochure concerning long-term agreements on energy efficiency,
Agentschap NL, Utrecht, November 2012. http://www.agentschapnl.nl/content/resultaten-
meerjarenafspraken-energie-efficiency
Bertoldi, P., 2007, Voluntary Agreements for Energy Efficiency: Review and Results of European
Experiences, Reprinted from Energy & Environment, VOLUME 18 No. 1 2007.
CE, 2010, Convenant Benchmarking Energie-efficiency: resultaten en vrijstellingen energiebelasting,
(Benchmarking agreement: results and energy tax exemptions), CE Delft, Delft.
DANIDA, 2012, Monitoring and Evaluation System for the ietnam National Energy Efficiency and
Conservation Programme, prepared by N. Chapman and P. Linh for DANIDA.
DEA, 2011, Danish Voluntary Agreement Scheme, memo from the Danish Energy Agency,
Copenhagen, 27 October, 2011, http://www.ens.dk/da-
DK/ForbrugOgBesparelser/IndsatsIVirksomheder/TilskudtilCO2afgift/Documents/the%20danish%20vo
luntary%20agreement%20scheme%20240612.pdf
DECC, 2012, https://www.gov.uk/government/policies/reducing-demand-for-energy-from-industry-
businesses-and-the-public-sector--2/supporting-pages/climate-change-agreements-ccas
European Commission, 2009. Energy efficiency Voluntary Agreements,
http://ec.europa.eu/energy/efficiency/agreements_en.htm
GHD, Ecofys, 2010, Implementation of an emission reduction scheme in the Indonesian cement sector,
GHD, Jakarta, authors: B. Manna, D. Phylipsen, V. Lingga, E. Bystricky, B. Borkent, S. Wartmann,
commissioned by AFD.
Government Decree, 2011, Governments Decree Defining Handling of Administrative Violations on
Economical and Efficient Use of Energy, No.: 73/2011/ND-CP, Hanoi, August 24, 2011.HMRC, 2012,
Draft guidance on the Carbon Price Floor, Her Majestys Revenue & Customs department, UK
government, London, www.hmrc.gov.uk/climate-change-levy/cpf.pdf
KEMCO, 2007, Energy Programs in Korea, Korea Energy Management Corporation (KEMCO), Seoul,
http://www.kemco.or.kr/up_load/file/a_2.pdf (as quoted in (LBNL 2010)).
LBNL, 2004, Designing Energy Conservation Voluntary Agreements for the Industrial Sector in China:
Experience from a Pilot Project with Two Steel Mills in Shandong Province, by: L. Price, E. Worrell, J.
Sinton, LBNL, Berkeley CA.
LBNL, 2010, Evaluation of Efficiency Activities in the Industrial Sector Undertaken in Response to
Greenhouse Gas Emission Reduction Targets, LBNL, Berkeley, CA, prepared for the California Air
Resources Board.


38
LEEC, 2010, Law on Energy Efficiency and Conservation, 50/2010/QH12, Vietnam National Assembly,
Hanoi, 17 June 2010.
LTA Uptake, http://www.ltauptake.eu/index.asp?id_content=75
LTA Uptake-1, 2008, European uptake of successful implementations of Industrial SME LTAs as a part
of Voluntary Agreements; WP2 Deliverable 1: Review and assessment of the existing LTAs, Motiva Oy.
LTA Uptake-2, 2008, European uptake of successful implementations of Industrial SME LTAs as a part
of Voluntary Agreements WP2 Deliverable 2: Toolkit requirements, Motiva Oy.
MOIT Circular, 2012, Circular Providing for Elaboration Of Plans, Report on Implementation of Plans
on Economical and Efficient Energy Use; Implementation of Energy Audit, No: 09/2012/TT-BCT,
Hanoi, April 20, 2012.
NC, 2012, Koreas Third National Communication under the United Nations Framework Convention on
Climate Change Low Carbon, Green Growth, The Republic of Korea, Submitted 20 march 2012.
Phylipsen, D., and C. Delatte, 2009, Feasibility of an emission reduction scheme in the cement sector
in Indonesia, Ecofys, Utrecht, commissioned by Agence Francaise de Developpement.
PM Decision, 2011, Prime Ministers Decision Promulgating the 2011 List of Key Energy-Using
Establishments, No. 1294/QD-TTg, Hanoi, August 01, 2011.
PM Decision, 2013, Prime Ministers Decision Amending and Supplementing a Number of Articles of
the Prime Ministers Decision No. 51/2011/QD-TTg of September 12, 2011, Promulgating the List of
Devices and Equipment Subject to Energy Labeling and Application of the Minimum Energy Efficiency,
and the Implementation Roadmap, No. 03/2013/QD-TTg, Hanoi, January 14, 2013.
PMU, 2013, PMU response to consultants questions that address potential gaps in Vietnam for
developing VAs, 29 March 2012.
PMU, 2013b, personal communication with PMU, various dates.
Price, L., C. Galitsky, K.J. Kramer, A. McKane, 2008, International Experience with Key Program
Elements of Industrial Energy Efficiency or Greenhouse Gas Emissions Reduction Target-Setting
Programs, LBNL, Berkeley Ca.
Qadir, S., 2012, Draft Report of International Experiences for Barriers to Financing IEE, Lessons
Learned, Existing Financial Mechanisms, & Relevance for Vietnam: Working Draft Deliverable #1,
prepared within the context of the CPEE project.Qadir, S., 2012b, Draft Report on New Financial
Instruments & Options for Scaling Up & Financing of IEE in Vietnam: Working Draft Deliverable #2,
prepared within the context of the CPEE project.
SMMT, 2013, Energy Efficiency Regimes, UK Sector Organisation of Motor Manufacturers and
Traders, London, http://www.smmt.co.uk/energy-efficiency-regimes/
TOR, 2012
- CLEAN PRODUCTION AND ENERGY EFFICIENCY PROJECT - Terms of Reference for an International
Individual Consultant for the Formulation of Energy Efficiency Action Plans for the Beverage and


39
Seafood Processing Industries - Package C-1.1-4, Vietnam Ministry of Industry and Trade, WB,
GEF, Hanoi, 28 Dec 2012.
- VIETNAM CLEAN PRODUCTION AND ENERGY EFFICIENCY PROJECT - Terms of Reference for an
International Individual Expert Consultant for Formulation of Energy Efficiency Action Plan for the
Chemicals Industry - Package C1.1-2, Vietnam Ministry of Industry and Trade, WB, GEF, Hanoi, 29
May 2012.
TOR, 2013, CLEAN PRODUCTION AND ENERGY EFFICIENCY PROJECT - Terms of Reference for the
Assessment and recommendations for financing support mechanisms for industrial energy efficiency
investments in Vietnam - International Individual Consultant - Package C2.2,
VBE, 2010, official website of the Benchmarking Agreement: http://www.benchmarking-
energie.nl/index.php3.
VNEEP2, 2012, Prime Ministers Decision on the Approval of the National Target Program on Energy
Efficiency and Conservation Phase 2012 2015, Ref: 1427/Q-TTg, Hanoi, 02 October 2012

World Bank, 2010, Vietnam; Expanding Opportunities for Energy Efficiency, authors: R. Taylor, J.
Singh and U. Ang Co, World Bank, Washington, 2010.
World Bank/GEF, n.d., PROPOSED PROJECT STRUCTURE: MOIT/WB/GEF Vietnam Energy Efficiency
Project, World Bank, GEF, Washington D.C.




Annex 1: Country VA comparisons from 2010 report
Table 2 Overview of sector focus in negotiated agreements in different countries [LTA Uptake, 2008]. Note
that currently, the UK also has negotiated agreements for smaller energy users (the CRC).

Table 3 Overview of the type of negotiated agreements in terms of contract parties in different countries
[LTA Uptake-1, 2008]. Note that in this table LTA is used as a generic term for a negotiated agreement.

Table 4 Obligations defined for negotiated agreement participants in various countries [LTA Uptake, 2008].
Note that in this table LTA is used as a generic term for a negotiated agreement.



Table 5 Drivers for participants to join a negotiated agreement in various countries [LTA uptake, 2008]


41

Table 6 Overview of financial incentives offered by authorities in various countries as part of their negotiated
agreements [LTA Uptake, 2008]

Table 7 Elements of negotiated agreements laid down in laws in various countries [LTA Uptake, 2008]. Note
that in this table LTA is used as a generic term for a negotiated agreement.





42
Table 8 The role of energy audits in (support of) negotiated agreements in a number of countries [LTA
Uptake, 2008]. Note that in this table LTA is used as a generic term for a negotiated agreement.


Table 9 Tools available to negotiated agreement participants in various countries [LTA Uptake, 2008].












43
Table 10 Tools available to parties involved in negotiated agreement administration in various countries
(authorities and sector associations) [LTA Uptake, 2008].


Table 11 An overview of the definition of sanctions in the negotiated agreements in various countries [LTA
Uptake, 2008]





44
Annex 2: VA development & implementation process

Development & implementation process for negotiated agreements
The LTA Uptake project distinguishes the following phases in the development and implementation
of negotiated agreements (also depicted in Figure ES-1):
Phase 0: Preparation
Phase 1: Initiation
Phase 2: Negotiation
Phase 3: Implementation
Phase 4: Evaluation

Preparation phase
During the preparation phase the key players are identified and the possibilities for establishing a
negotiated agreement programme are evaluated. The key questions in this phase are:
What are the overall energy efficiency targets in the national policy framework?
Are negotiated agreements a possible tool to fulfil the set targets?
What are the costs and benefits of establishing an agreement scheme?
At the end of this phase there should be a clear decision: to go or not to go forward in establishing
an agreement scheme.

Figure ES-1 Steps in the development and implementation of negotiated agreements (adapted from the LTA
Uptake project).

Initiation phase
The initiation phase in the development of negotiated agreements includes the preliminary
negotiations when the impacts and costs of the possible agreement scheme are evaluated in more
detail and the roles and timelines in the planning process are discussed. The actual content of the
agreement is not yet under discussion at this phase.


45
Negotiation phase
The negotiation phase concentrates on drafting the agreement, defining its structure and content,
and the fine-tuning needed when finalising the agreement documents. This phase also includes a
more thorough cost-effectiveness and impact assessment. The development phase ends in the
signing of the agreements, after which the implementation phase begins. There are other activities
during this phase going on parallel to the actual agreement development, including the marketing of
the agreement scheme and the preliminary development of monitoring and reporting system.
Implementation phase
The implementation phase is the operational lifetime of the agreement. It starts when the
agreements have been signed and ends when the scheme is either terminated or modified into the
next generation of agreements.

Evaluation phase
The evaluation phase begins well before the end of the agreement lifetime. There may be several
evaluations during the agreement period if the lifetime is 8-10 years or longer. The results of the
evaluation can be used to modify targets, approaches and processes midway or in the preparation of
the next generation of agreements.


Work Plan for the development of negotiated agreements in Vietnam
It needs to be recognized that the above process was designed from a developed countries
perspective. In practice this means that a number of adjustments need to be made to reflect the
difference in available information, expertise and experience with e.g. the measurement of energy
efficiency (and related data requirements), the assessment of energy efficiency improvement
potentials and the design and evaluation of effective energy efficiency policies in developing
countries. Most importantly, an additional step will be needed before the preparation phase, i.e. a
so-called pre-planning phase. The aim of this pre-planning phase will be to identify the gaps in
Vietnam that need to be filled in order to allow a successful completion of Phase 0 (preparation) to
Phase 4 (evaluation).
The pre-planning phase for Vietnam needs to include the following:
An analysis of the industrial sector to:
Establish the baseline of current practices, capabilities and resources (in relation to negotiated
agreements on energy efficiency) within industry in Vietnam;
Identify the existing gaps in data availability, knowledge levels and capacities;
Decide on the role the different industry stakeholders can play on both the short term and, given
sufficient capacity building on the longer term;
Allow the selection of a pilot group of companies as foreseen in the World Bank/GEF project.
An analysis of the policy framework Vietnam to:
Identify the general policy and compliance culture
Identify the various policy development, implementation and enforcement entities exist that
could play a role in the agreement scheme and potential areas of overlap
Identify the existing data gathering and processing infrastructure available for policy design &
evaluation purposes



46
Establishment of scheme objective and underlying motives
Identifying the exact motive(s) for implementing any energy efficiency policy is very important to
make sure that the policy in the end actually contributes to the overall policy goal. In the context of
negotiated agreements, this means that the target for the agreements will need to be defined in a
way that is consistent in with the overall policy goal and motives. This could e.g. determine whether
a target should be defined in terms of absolute energy savings or as a relative improvement of
energy efficiency (per unit of product); as final energy or primary energy or CO
2
emissions; as targets
for different energy carriers (electricity, imported oil, coal); how renewable energy is treated in the
scheme, etc.
Preliminary identification of capacity building needs
On the basis of the information in the pre-planning phase, a first picture of the most urgent capacity
building needs will arise. This is likely to include:
The need to establish or strengthen data gathering, processing and verification procedures and
institutions, especially related to energy end use data;
The understanding of how to and capability to measure and monitor energy efficiency in industry
sectors, and the impacts of e.g. economic structure, product mix and price developments;
The understanding of how to and capability to assess and evaluate energy efficiency
improvement potential and the associated costs;
The understanding of how different types of policy instruments affect barriers to energy
efficiency improvement, their respective advantages and drawbacks and the need for a mix of
instruments for optimal effectiveness;
The understanding of how to and capability to how to monitor the effect of policies on energy
efficiency and how this should be taken into account in policy design;
It is recommended that at the end of Phase 0, when the key stakeholders have been identified and a
clearer picture of the candidates for a pilot exists, a step is added in comparison to the LTA Uptake
recommend procedure, i.e. to formulate a capacity building programme.
After the pre-planning phase, largely the LTA Uptake process can be followed, although, in some
areas it might be somewhat over-dimensioned or overly structured for a country like Vietnam. In this
case, the perfect can be the enemy of the good and can in fact scare stakeholders away because the
amount of work involved can be perceived as overly troublesome. The process described should
therefore be applied flexibly, so that specific Vietnamese circumstances and current developments
can be taken into account.
Establishing a pilot scheme
The LTA Uptake project includes a possible pilot in Phase 2, but indicates that in countries where no
experience exists with voluntary agreements the pilot could be started earlier. This is certainly
advisable for Vietnam, not only because of the lack of experiences with negotiated agreements, but
also given the additional gaps that are expected in terms of data infrastructure and the early stage in
terms of the attention for energy efficiency and the development of energy efficiency policy.
In the MoI/World Bank/GEF project the main focus is on the pulp & paper, textile and brick sectors,
though this does not necessarily mean that the group of pilot companies need to be from within
those sectors. Sector characteristics that are generally favourable for a negotiated agreement, and a
pilot programme, include a small number of companies, an energy-intensive nature, a considerable


47
potential for improving energy efficiency and a relatively simple production process (to facilitate
maximum learning in the pilot phase). This would favour e.g. the cement sector and to a somewhat
lesser extent the steel industry or the brick industry. The steel sector will be addressed in a separate
initiative funded by the French Development Agency AFD. Therefore, in advance the cement sector
seems to be a suitable candidate for the pilot scheme, but that will need to be confirmed (or revised)
during Phase 0-1, as it also depend on the interest of the sector as well as other considerations that
may not be obvious at this stage.





Annex 3: Developing country experiences with VAs
Country China
Name of the
programme
Top-1000 Energy-Consuming Enterprises Program
Short description
of programme
One of the key initiatives for realizing Chinas national 20% energy intensity reduction goal (reduction of energy/GDP by 20% by 2010
relative to 2005) during the 11
th
Five Year Plan period (2006-2010) was the Top-1000 Energy-Consuming Enterprises Program (Top-1000
Program), which established energy-saving agreements between government entities and Chinas 1000 largest energy-consuming
enterprises. The Top-1000 Program is modelled on international target-setting programs (also called voluntary or negotiated agreement
programs) and is a scaled up version of a pilot program in which voluntary agreements were signed between two steel mills and the
provincial government in Shandong Province.
Programme
administrator
National Development and Reform Commission

Target Type of target Energy savings absolute reduction from a growth baseline
Quantified target? Yes Program goal of 100 Mtce (2.9 EJ) savings between 2006 and 2010 from the expected
2010 energy consumption of the 1000 enterprises
How established? Targets were set by NDRC for each enterprise in order to support the provincial-level targets and to reach the
overall savings target of 100 Mtce (2.9 EJ) for the Top-1000 Program. At the beginning of the program, NDRC
set preliminary targets for each enterprise taking into consideration their general situation such as which
industrial sector they belonged to since the potential energy savings vary by sector, as well as the general
technology level of the enterprise, if known. The targets were not based on detailed assessments of energy-
savings potential of each enterprise or each industrial sector. This approach was taken due to time constraints.
Time horizon Programme 5 years from 2006 to 2010.
Individual agreements Same

Scope Sectoral scope Large-scale enterprises in nine major energy-consuming industries in the following sectors: iron and steel,
petroleum and petrochemicals, chemicals, electric power generation, non-ferrous metals, coal mining,


49
construction materials, textiles, and pulp and paper.
Minimum threshold? Energy consumption minimum of 180,000 tce (5.3 PJ) in 2004
Exemptions? None
Provisions for roll-out? The Top-1000 was implemented at the national level (following a sectoral, provincial pilot). Later, the Top-1000
programme was expanded to the Top-10,000 programme, and provincial governments expanded beyond the
number of companies participation in the Top-1000 programme within their territory.
Participants Enterprises Enterprises
Government Department of Resource Conservation and Environmental Protection of the National Development and Reform
Commission (NDRC), the National Bureau of Statistics (NBS), the State-owned Assets Supervision and
Administration Commission, the Office of National Energy Leading Group, and the General Administration of
Quality Supervision, Inspection and Quarantine
Other? N/A
Roles &
obligations
Enterprises Top-1000 enterprises were required to undertake the following energy management activities:
Establish a sound energy measuring and statistical system
Regularly submit energy utilization status reports providing information on energy
consumption, energy efficiency, and cost-effectiveness of energy savings and energy-efficiency
measures
Conduct energy audits following the Chinese energy auditing standard (GB/T 17166-1997) to
analyze the existing situation, identify key issues and potentials, and provide feasible and
practical energy-saving measures
Submit initial energy audit reports to provincial governments for review
Develop energy conservation plans based on energy audits and formulate energy conservation
plans annually
Government National government:
established and publicized the guiding principles and goals of the program
published a list of the Top-1000 enterprises by name
The National Bureau of Statistics (NBS):
established an information system for Top-1000 enterprises
tracked, collected and reviewed data submitted by the enterprises
organized training on data collection and reporting
analyzed the progress of the program


50
The energy saving authorities of the province, district, or city:
collaborated with related organizations to lead and implement the Top-1000 program
tracked, supervised, and managed the energy-saving activities of the enterprises
Local authorities:
oversaw the enterprises in their energy management, energy auditing, and energy reporting
requirements
monitored enterprises through audits and sampling
promoted the use of new mechanisms such as target-setting agreements
encouraged enterprises to meet energy saving targets and attain international advanced levels ahead
of schedule
Other Provincial energy conservation centers served as the mediator between the Top 1000 Energy-Consuming
Enterprises and the national government for targets and progress reports. In January each year, each Top 1000
energy-consuming enterprise was also required to report on their progress to the provincial energy
conservation centers. After performing a review with an expert committee, each provincial center was required
to send a full provincial report to the provincial government and NDRC.
Incentives &
Sanctions
Sanctions on non-
compliance
Achievement of the energy-saving targets and energy conservation measures was part of the provincial
government evaluation system in which the responsible government officials were evaluated annually each
year on whether or not the targets under their jurisdiction had been achieved.
Energy savings target responsibility contracts between the government and key energy-consuming enterprises
provide a formal underpinning for the relationship between the supervising government and the specific
enterprises on the attainment of energy efficiency improvements during the FYP. The plants were required to
meet the energy-savings targets and outline the targets in their responsibility contracts.
Regions and enterprises that did not meet the targets would not be given annual rewards or honorary titles,
leaders in state-owned enterprises would not receive annual evaluation awards, and officials would not be
promoted without meeting the energy conservation targets. For enterprises that failed, a notice of criticism
was circulated, approval of any energy-intensive projects or additional industrial land use may be suspended,
and no favorable exemption policies will be applied. If a state-owned enterprise fails the evaluation its leader
cannot be given any type of awards, no matter how well the enterprise is doing in other aspects.
Consequences on non-
participation
Participation by the 1000 largest energy-consuming enterprises was mandatory.
Support incentives Top-1000 enterprises could apply for national incentives that were provided for the Ten Key Energy
Conservation Projects (Ten Key Projects) which were a key element of Chinas Medium and Long-Term Plan


51
for Energy Conservation () and were subsequently incorporated into the 11
th
FYP.
The goal of the Ten Key Projects is to increase energy efficiency through adjusting and optimizing the economic
structure, promoting energy-efficient technologies, and establishing a strict management system and effective
incentive mechanisms. Projects relevant to industrial entities included in this program include coal-fired
industrial boiler (kiln) retrofit projects, district cogeneration projects, waste heat and pressure utilization
projects, petroleum conservation and substitution projects, motors energy efficiency projects, and energy
system optimization projects.

For qualifying projects, enterprises received financial rewards of 200 RMB ($29) for every tce saved per year
for enterprises in East China to 250 RMB ($36) for every tce saved per year for enterprises in the poorer
regions of Mid or West China. The rewards and rebates are paid to enterprises that have energy metering and
measuring systems that can document proven savings of at least 10,000 tce (0.29 PJ) from energy saving
technical transformation projects. Provincial governments have also encouraged enterprises to use the
national-level funds as well as established provincial-level funds in support of energy efficiency investments.

Data gathering,
monitoring &
reporting
Data availability prior
to programme
Annual energy consumption of enterprises
Specific data gathering
needs for establishing
the programme
Initially, NDRC set preliminary targets for each enterprise taking into consideration their general situation such
as which industrial sector they belonged to since the potential energy savings vary by sector, as well as the
general technology level of the enterprise, if known. The targets were not based on detailed assessments of
energy-savings potential of each enterprise or each industrial sector. This approach was taken due to time
constraints.
Monitoring done by Companies
Are monitoring
protocols prescribed
Yes
Reporting required? Yes Enterprises regularly submitted energy utilization status reports providing information on energy
consumption, energy efficiency, and cost-effectiveness of energy savings and energy-efficiency
measures to the National Bureau of Statistics (NBS).

In January each year, each Top 1000 energy-consuming enterprise was also required to report on
their progress to the provincial energy conservation centers. After performing a review with an expert
committee, each provincial center was required to send a full provincial report to the provincial


52
government and NDRC.

NBS established an information system for Top-1000 enterprises, tracked, collected and reviewed
data submitted by the enterprises, organized training on data collection and reporting, analyzed the
progress of the program.
Independent
verification required?
Yes See above re: provincial energy conservation centers. In addition, evaluation teams from the Energy
Research Institute and other organization made visits to selected enterprises around China in the
Spring of each year for spot-check verification.

A notable weakness in the Top-1000 program and other industrial programs is the lack of public
reporting and third party verification of energy use and savings. Because an online reporting system
has been established, it would be relatively easy to make more of the data accessible in an
aggregated or anonymous manner to protect confidential plant-level. Verification by organizations
other than the enterprises or supervising government offices is needed to ensure that savings are real
and that 12
th
FYP goals can be achieved.
Are results published? Yes/No Detailed reports were published in 2007 and 2008; sporadic, less-details reported since then.
Programme
evaluation
Is the programmes
effectiveness
evaluated?
Yes Supervision experts use an Evaluation Score Card to evaluate the performance of each key energy-
consuming enterprise. Evaluation against the quantitative targets accounts for 40 of the 100 scoring
points total. Progress on different kinds of energy conservation activities accounts for 60 points.
These include progress in developing internal energy efficiency management systems, in delivery of
energy efficiency technical improvements and investment, in compliance with energy efficiency-
related regulations, especially elimination of backward equipment and adherence to standards, and in
advancement of auditing, measurement, and collection and analysis of statistics.
Every 5 years, the programmes progress against the targets is evaluated. In 2011, NDRC reported
that the energy savings from the Top-1000 program were 150 Mtce.

Lessons learned The Economic and Trade Commission of Shandong Province undertook a target-setting energy-efciency agreement pilot project with
two iron and steel enterprises in 2003 which was modelled after successful international industrial voluntary agreement programs,
taking China-specic conditions into consideration (Price et al., 2003). The main participants in the pilot project were two iron and steel
enterprises in Shandong ProvinceJinan Iron and Steel (Jigang) and Laiwu Iron and Steel (Laigang) - the Shandong Economic and Trade
Commission (ETC), the State Economic and Trade Commission (SETC), and the China Energy Conservation Association (CECA).2 The
agreements had a base year of 2002 and set performance targets for 2005 (Price et al., 2003). Over this period, Jinan Iron and Steel
saved 292,000 tce (8.6 PJ) and reduced energy consumption per ton of steel by 9.5%, while Laiwu saved 130,000 tce (3.8 PJ) and reduced


53
its energy intensity by 9% (Wang, 2007). The pilot was considered a success due to the achievement of the targets along with the
knowledge gained related to establishing targets, energy management within the companies, making energy-efciency investments, and
establishing energy-efciency policies at the provincial level (Hu, 2007). The pilot was used as a model for the Top-1000 program to close
contracts between government and industry regarding energy conservation commitments. One important lessons learned, though, was
that the voluntary nature of the voluntary agreements does not work well in the Chinese cultural context. Initial attempts to roll out the
pilot VA to other companies were thwarted by a lack of interest from the side of the companies. They would only enter into the
voluntary agreement if the government told them they had to enter into the agreement. Companies were/are still largely state-owned
and more accustomed to be told what to do. Therefore, the top-1000 program was implemented through a regulation stipulating
participation.
A recent international review of this program found that overall the Top-1000 Enterprises Program appears to be successful, but made
recommendations for improvement if the program is extended into the 12
th
FYP period (Price et al., 2008; Price et al., 2011). In terms of
the program goal of improving energy efficiency, unit energy consumption (physical energy intensity) decreased for major products in
most sectors since the launch of Top-1000. However, due to limited data availability, it is difficult to assess how much of these reported
savings are directly attributable to the Top-1000 program and how much would have occurred in the absence of the program. Many
Top-1000 enterprises already had energy intensities better than the national average and somein steel, coal mining, synthetic
ammonia, and glasssurpassed international advanced levels. Greater public availability of data would enable further analysis on
program effectiveness.
The use of energy-saving agreements signed by high-level representatives from government and the enterprises has been very effective
for stimulating action in the Top-1000 program. With the list of Top-1000 enterprises made public and promotion of government officials
contingent on meeting targets, substantial attention and resources were directed to the program. Top-1000 enterprises invested heavily
in technology innovation and implemented over thousands of energy-saving projects. Many provinces extended the program to a wider
scope of enterprises, indicating potentially longer lasting benefits of the program. More than 95% of the enterprises established an
energy management office, while the rate of equipping with energy measuring instruments varied from 60% to 90% at different levels of
the factories. Energy audits were conducted at nearly all the enterprises in the program, but capabilities and audit quality varied widely.
In terms of data reporting, training on the on-line reporting system was conducted for all enterprises, more than half of the enterprises
were found to have strong statistical capabilities, while 20% had notably weak capabilities.
In the Top-1000 Program, targets were set by NDRC for each enterprise in order to support the provincial-level targets and to reach the
overall savings target of 100 Mtce (2.9 EJ) for the Top-1000 Program. Initially, NDRC set preliminary targets for each enterprise taking
into consideration their general situation such as which industrial sector they belonged to since the potential energy savings vary by
sector, as well as the general technology level of the enterprise, if known. The targets were not based on detailed assessments of
energy-savings potential of each enterprise or each industrial sector. This approach was taken due to time constraints. Since the Top-
1000 Program was designed in support of the 11th Five Year Plan which began in 2006, it would have been necessary to start the target-
setting process three or four years prior to follow international practice, which was impossible given both the time pressure and the


54
large number of participating enterprises.
The program target of 100 Mtce final energy savings represented only 15% of total required energy savings in the 11th FYP, yet the Top-
1000 enterprises represent the highest energy consumption in the economy. A more ambitious goal likely could have been set based on
assessment of potential savings in industrial sub-sectors. Implementation experience thus far identified the need for greater training and
capacity buildingat industrial enterprises, energy service and technology providers, and government agenciesto conduct audits,
reporting, and energy-saving activities. Supporting policies for the Top-1000 program, such as energy efficiency standards for industrial
products, are being developed as the program progresses, and more are needed to realize greater improvements.
Best practice internationally is to set energy-saving targets based on an understanding of what the enterprise or the sector can actually
achieve. In the Netherlands, UK, and Japan, studies of the energy-saving potential of industrial sub-sectors informed both the
government and the enterprises. In the UK, companies went further and estimated their own energy-efficiency potential and provided
this information to their trade associations who then negotiated sector-based targets with the government. Target-setting in China
should be based on an assessment of the actual potential of either the Top-1000 enterprises individually, or the key sectors included in
the Top-1000 program.
A notable weakness in the Top-1000 program and other industrial programs is the lack of public reporting and third party verification of
energy use and savings. Because an online reporting system has been established, it would be relatively easy to make more of the data
accessible in an aggregated or anonymous manner to protect confidential plant-level. Verification by organizations other than the
enterprises or supervising government offices is needed to ensure that savings are real and that 12
th
FYP goals can be achieved.

Sources:
Institute for Industrial Productivity (IIP). Industrial Efficiency Policy Database: China. http://iepd.iipnetwork.org/policy/top-1000-energy-consuming-enterprises-
program
Levine, M.D., Price, L., Zhou, N., Fridley, D., Aden, N., Lu, H., McNeil, M., Zheng, N., Qin, Y., Yowargana, P., 2010. Assessment of Chinas Energy-Saving and
Emission-Reduction Accomplishments and Opportunities During the 11th Five-Year Plan. Berkeley, CA: Lawrence Berkeley National Laboratory (LBNL-3385E).
http://china.lbl.gov/sites/china.lbl.gov/files/LBNL-3385E.Ace_Study_Report_FINAL.Rev_.pdf
National Development and Reform Commission (NDRC), 2011b. Review of the Eleventh Five-Year Plan: Top 1000 Program Exceeded Targets. September 30,
2011. http://www.gov.cn/gzdt/2011-09/30/content_1960586.htm


55
Price, L., Levine, M.D., Price, L., Zhou, N., Fridley, D., Aden, N., Lu, H., McNeil, M., Zheng, N., Qin, Y., Yowargana, P., 2011. Assessment of Chinas Energy-Saving
and Emission-Reduction Accomplishments and Opportunities During the 11th Five-Year Plan, Energy Policy 39(4): 2165-2178.
http://china.lbl.gov/sites/china.lbl.gov/files/Ace_Study.EP_.April_.2011.pdf
Price, L., J. Sinton, E. Worrell, D. Phylipsen, H. Xiulian and L. Ji, 2002, Energy use and carbon dioxide emissions from steel production in China, in Energy,
Volume 27, Issue 5, May 2002, Pages 429-446
Price, L., Xuejun Wang, Jiang Yun, 2010. "The Challenge of Reducing Energy Consumption of the Top-1000 Largest Industrial Enterprises in China", Energy Policy,
Vol. 38 Issue 11. http://china.lbl.gov/sites/china.lbl.gov/files/Top-1000.Energy_Policy_November2010.pdf
Price, L., Wang, X., Jiang, Y., 2008. Chinas Top-1000 Energy-Consuming Enterprise Program: Reducing Energy Consumption of the 1000 Largest Industrial
Enterprises in China. Berkeley, CA: Lawrence Berkeley National Laboratory (LBNL-519E). http://china.lbl.gov/sites/china.lbl.gov/files/LBNL_519E._Top-
1000_Energy_Consuming_Enterprises_Program._Jun2008.pdf
Price, L.K., E. Worrell, Jiang Yun, W. Nuijen, K. Blok G.J.M. Phylipsen, M. Kerssemeeckers, 2003, Shandong Province Steel industry Pilot: Possibilities for
implementing a voluntary agreement on energy efficiency in China, Lawrence Berkeley, National Laboratory, Chinese Energy Conservation Authority, Novem,
Ecofys, Berkeley, commissioned by the Energy Foundation.
World Bank, 2010. Accelerating Energy Conservation in Chinas Provinces, Washington, DC: World Bank http://go.worldbank.org/1W2EFBV600



56
Country South Korea
Name of the
programme
Voluntary Agreement for Energy Saving and GHG Emission Reduction programme
Subsequently replaced by the Emissions Target Management Scheme (mandatory system with negotiated targets; and the Emissions
Trading Scheme (for the companies covered in the latter system. For those that are not, the ETMS remains in place).
Short description
of programme
The Voluntary Agreement for Energy-saving and GHG reductions was established by the National Energy-saving Committee in 1998. This
Committee was established on the basis of the Energy Use Rationalization Act, institutionalized in December 1979. As part of the Act, five-
year Basic Rational Energy Utilization Plans are formulated, including national and sectoral energy intensity reduction targets and energy
efficiency targets. The Voluntary Agreement (VA) program is the main instrument to achieve the targets for industry.
Companies that joined the program needed to prepare an energy efficiency improvement action plan and commit to achieve an energy-
efficiency improvement/GHG emission reduction target. It. Every year, companies submit a progress report to KEMCO.
In exchange, companies can then take advantage of low-interest loans and tax incentives to promote energy conservation and GHG
emissions reduction as well as technical support. The VA initially focused on companies using energy over 5,000 TOE/year, from 2004 the
system expanded to include companies using over 2,000 TOE/year. The number of participating businesses increased from 15 in 1998 to
1300 in 2009. (source: 2)
In March 2011 the Directive on the Operation of Emission Target Management Scheme (March 2011) was adopted which introduced the
mandatory Emission Target Management Scheme (ETMS) as of January 2012 to strengthen the VA programme. In this system the
Ministries have identified the businesses that have to take up a reduction target (participation is mandatory) and report on their
achievements compared to the target. The reduction target is negotiated between the company and the relevant Ministry (see details
below) on the basis of sectoral reduction targets and the expected business operations. The system functions as a preparation towards the
introduction of the Emissions Trading System in 2015.
The Law to introduce the Emissions Trading System was passed in May 2012. The ETS will apply to 490 companies that account for 68% of
the countrys GHG emissions across all sectors of the economy. Companies will be allocated 100% free allowances in the 1
st
period (3
years), 97% in the 2
nd
period (3 years) and less than 90% in the periods thereafter (5 year-periods). 100% free allocation is given to trade-
exposed carbon-intensive sectors to be identified using the same criteria as used in the EU ETS.
Programme
administrator
VA: Korea Energy Management Corporation (KEMCO), a government agency acting as the implementing organisation for energy efficiency
policy. (Formally: mitigation of greenhouse gas emissions by expanding and deploying new and renewable energy technology and
improving energy efficiency).
ETMS: Ministry of Environment, supported by the Greenhouse Gas Inventory & Research Center for Korea (GIR)

Target Type of target VA: Energy saving and/or greenhouse gas emission reduction goals
ETMS: GHG emission reduction target
Quantified target? Yes VA: Determined for each business separately.
ETMS: Determined for each business separately, based on sector standards


57
How established? VA: After a business has shown its interest to a regional centre of KEMCO to participate in the voluntary
agreement, a target agreement is concluded between the local government and the business. It was
recommended but not compulsory that the energy-efficiency target be more than 5% energy savings for 5 years
compared to the total amount of energy consumption in the year before the agreement (source: 6)
ETMS: targets are negotiated between the business and the relevant ministry. Starting from a sector targeted
reduction, business can reflect their needs and circumstances, such as future investment plan, onto their target
setting. Resulting targets are based on the actual average emissions of the business for the latest three years and
will be negotiated every five years.
Time horizon Programme VA: Since 1998, replaced by ETMS
ETMS: Since 2012, to be replaced by ETS
ETS expected from 2015
Individual agreements VA/ETMS: Companies agree on the targets for a five-year agreement

Scope Sectoral scope VA: Energy-intensive industry, energy producers and large energy consumers
ETMS: Energy and industrial sector (412 entities, incl. steel, cement, electricity, and paper producers),
building/transportation sector (51 entities), waste sector (27 entities)
Minimum threshold? VA: companies with energy consumption over 2,000 TOE/year and using at least 500 toe of fuel annually
ETMS: companies with GHG emission over 125,000 t CO2 eq. or facilities with GHG emission over 25,000 t CO2
eq. (2012 as reference year)
Exemptions? No information obtained on exemptions
Provisions for roll-out? The VA was followed by the ETMS, which is explicitly designed as an intermediate step towards an ETS.
Participants Enterprises Individual businesses and business groups, producing, supplying or consuming energy.
Government VA: Ministry of Knowledge and Economy
ETMS/ETS: Ministry of Environment
Other? VA: KEMCO
ETMS/ETS:
a) The Greenhouse Gas Inventory & Research Center for Korea for tracking GHG emissions and providing MRV
data.
b) Other Ministries for specifying the entities, target setting and evaluating actual reductions for their relevant
sectors. (Ministry of Knowledge and Economy for Energy and Industrial process activities, Ministry of Agriculture
and Forestry, Ministry of Land, Transport and Maritime Affairs for the building sector and transportation,
Ministry of Environment for Waste)


58
Roles &
obligations
Enterprises VA:
- Present and achieve energy saving and/or greenhouse gas emission reduction goals, implementation
schedules, implementation methods, etc.
- Concludes a five-year target agreement with the local government
- Submits implementation plan to KEMCO, including current status of business, record of saving in recent
years, plans for the next 5 years, energy saving systems, etc.
- Submit recorded achievement to KEMCO on annual basis via a business report (no verification required)
ETMS: Similar activities, but target agreement, implementation plan and reporting are submitted to the relevant
ministry and are to be verified.
Government In both the VA and the ETMS the government:
- sets a target together with the business,
- provides support in the form of funds and tax incentives
- performs monitoring and evaluation to achieve the goals in collaboration with businesses (in VA this tasks is
implemented by KEMCO, see below)
In addition, in preparing for the ETS the government:
- Has organised more than 100 consultations with actors in the private sector
- Provides consulting services for small and medium-sized enterprises to help them set up an inventory and
energy management system.
- Provides financial incentives in the form of loans through energy service companies for energy efficiency
improvement projects.
- Will implement crediting for early mitigation actions taken by industries (up to 3%)
- Provides training of verification bodies
- Will include market stability measures such as allocation of Government reserves, temporary price cap/floor,
allowing for banking of allowance within and between commitment periods, allowing for borrowing of
allowances within commitment periods up to 10%.
Other VA: KEMCO is responsible for:
- Evaluation of the implementation plan submitted by the business, discussion with business on the
implementation plan. KEMCO can make suggestions and provide support, but will not demand changes on
the basis of evaluation results.
- Providing technical support for target setting, formulation of implementation plan, consultation on process
technologies and energy saving technologies
- Analysis and evaluation of business reports on annual achievements
- Selection of excellent business places (reward on best achievements among participating industries)


59
ETMS/ETS: see section participants on role GIR
Incentives &
Sanctions
Sanctions on non-
compliance
VA: no information on sanctions is available, but most likely voluntary agreement will be disbanded and
consequences on non-participation will apply (see below)
ETS: A Fine will be imposed on businesses when the standard is not met. The penalty was set at up to 3 times the
average market price in the previous year, with a maximum of KRW 100,000 (U$113)/tCO2 eq. Discussions have
been held to lower the fine, but in the end the initial fine still seems to be in place. (sources 2, 3 and 4)
Consequences on non-
participation
VA: Non-participants will not have access to support measures available within the programme
ETS: See sanctions on non-compliance
Support incentives VA: The government (partially via KEMCO) provides various incentives for business to participate:
- Financing for energy use rationalization funds: max of KRW 25bn per business place and KRW 50bn per
business; repayment deferred for 3 years, repayment for 5 years in instalments, variable interest rates at
around 3%
- Tax deduction: 20% of investments in energy saving facilities can be deducted from income tax or corporate
tax.
- Less energy audits: for businesses that are selected as excellent business in the VA program the 5-year
period in which mandatory energy auditing is required once is extended by 1 year (less for smaller
businesses)
35

- Exemption low-sulphur fuel use obligation: Businesses that indicate in their plan that they are planning to
install desulfurization facilities are exempted from the obligation to use fuel with sulphur content of 0.5 (0.3)
% during the work period.
- Environmental bonus points: Businesses evaluated as environment-friendly receive bonus points in KEMCOs
evaluation of best performing participants.
- Technical support: KEMCO provides technical support for target setting, formulation of implementation plan,
consultation on process technologies and energy saving technologies
- Media support: KEMCO provides media support to enhance the image of participating businesses
- Rewards: best performing participants are rewarded as excellent business places and receive financial
support for on-site studies on domestic energy saving facilities (i.e. based in Korea).
ETMS/ETS: The government provides:
- Support for businesses vulnerable to competitive disadvantage
- Financial incentives and tax credits for green technologies

35
Industries consuming over 200,000 TOE are said to be partly audited every 3 years


60

The voluntary agreement program was supplemented with the Energy Saving through Partnership (ESP)
program. The ESP Council enabled industrial companies to share information with each other through workshops
and information on energy-efficient technologies and practices.

Data gathering,
monitoring &
reporting
Data availability prior
to programme
VA: Since 1993 Korea has developed five-year Basic Rational Energy Utilization Plans. Koreas first national
greenhouse gas inventory was prepared by KEEI for its first national communication reported to the UNFCCC in
1998. These are all at a sectoral level, however.
ETMS/ETS: extensive amount of data available from the National Greenhouse Gas Inventory
System as well as from the mandatory performance reports that targeted businesses were to submit no later
than March 2012.
Specific data gathering
needs for establishing
the programme
VA: businesses had to start gathering data on their own emissions, reduction measures and achieved savings.
ETMS: The plan Low carbon, green growth required the establishment of a national integrated GHG inventory
system. Prior to that each Ministry conducted its own sectoral estimation, after which these estimations were
combined to provide the national inventory.
Monitoring done by VA: participant, with assessment/analysis by KEMCO
ETMS: participant, verifier and sectoral ministry
Are monitoring
protocols prescribed
No
Yes
For VA
For ETS (based on statements on following international standards)
(unclear for ETMS, no further information is available at this stage)
Reporting required? Yes VA: to KEMCO. Includes record of savings in recent years compared to energy saving and/or
greenhouse gas emission reduction goals, implementation schedules and implementation measures.
ETMS/ETS: to sectoral Ministry. Monitoring requirements follow international standards, mainly
those of the EU ETS (no further information is available at this stage).
Independent
verification required?
No
Yes
No independent verification required in VA
In ETMS/ETS independent verification is required, following international standards, mainly those of
the EU ETS
Are results published? Yes Results have been included in the 5-year government Basic Rational Energy Utilization Plans and in
the National Communications. In the VA reporting was mainly on targets and results obtained on a
sectoral level. For the ETMS/ETS the presidential committee on Green Growth published sectoral
targets for 2012, 2013, 2015 and 2020. No information could be obtained in English on results on
company level.
Programme Is the programmes Unknown No information could be obtained in English on evaluation of the programmes. The 2010 Handbook


61
evaluation effectiveness
evaluated?
on Energy and Climate Change from KEMCO apparently includes a reference on the cumulative
spendings and achievements of energy saving agreement, referring to a total investment of 7,1492
trillion won, 6,404 trillion of energy savings and 57,961,000 tCO2 reduction. (source 5)

Lessons learned Based on the lessons learned from the VA programme, the Ministry of Knowledge Economy and KEMCO revised the VA into the EMTS
programme. Objectives were to strengthen the programme by giving the government a stronger role in setting the target and by making
participation mandatory. The new program also provides more incentives for achieving the target and has a penalty for non-compliance
(source: 6).
In line with the aims published in the plan Low Carbon Green Growth Korea has decided to implement an emissions trading system, and
the EMTS programme is seen as an intermediate system to smoothen the process towards the ETS.
From various publications from implementing bodies it can also be learned that Korea highly values the possibilities it would have on the
international carbon markets and that it has among others for that reason decided to adopt international standards on the monitoring,
reporting and verification of emissions and emission reductions.

References
1. Korea Energy Management Corporation (KEMCO), Voluntary Agreement, http://www.kemco.or.kr/new_eng/pg02/pg02090100.asp (accessed April 5,
2013)
2. Koreas Third National Communication under the United Nations Framework Convention on Climate Change Low Carbon, Green Growth, The Republic of
Korea, Submitted 20 march 2012.
3. United Nations ESCAP, Low Carbon Green Growth Roadmap for Asia and the Pacific: Case Study - Republic of Koreas Emissions Target Management
Scheme (not dated).
4. Yong-Gun Kim, Emissions Trading Scheme in Korea, Korea Environment Institute, 13 March 2013,
https://www.google.nl/url?sa=t&rct=j&q=&esrc=s&source=web&cd=12&ved=0CDAQFjABOAo&url=https%3A%2F%2Fwww.thepmr.org%2Fsystem%2Ffiles
%2Fdocuments%2FYGK_Korea_ETS.pdf&ei=UM9jUbXfG6qf0QWD0IAQ&usg=AFQjCNF11jt4FBCN4kNpmwQxPbrMAc2NCw&bvm=bv.44990110,d.d2k
5. SeungWoo Kang et al, National greenhouse gas reduction policy trends from voluntary agreements to negotiated agreements and its implications,
published in M. Matsumoto et al (eds.), Design for Innovative value towards a sustainable society, Proceedings of Ecodesign , pp 942-945 , accessed at
http://books.google.nl/books?id=kfMnrHoNNa8C&pg=PA942&lpg=PA942&dq=korea+voluntary+agreement&source=bl&ots=kGGkRetbqo&sig=9K8UykS6ya
t8kpo9byZDoLcctuo&hl=en&sa=X&ei=vJRdUezLCMSU0QWMtIGACA&ved=0CGEQ6AEwCQ#v=onepage&q=korea%20voluntary%20agreement&f=false
6. LBNL, 2010, Evaluation of Efficiency Activities in the Industrial Sector Undertaken in Response to Greenhouse Gas Emission Reduction Targets, LBNL,
Berkeley, CA, prepared for the California Air Resources Board.



62
Country Indonesia
Name of the
programme
Emission reduction scheme for the cement sector
Short description
of programme
In 2009-2010 French development agency AFD financed a number of technical assistance projects to support the Indonesian government
in the development of an emission reduction scheme for the cement sector. The technical assistance projects (Phylipsen, 2009;
GHD/Ecofys, 2010) entailed:
A feasibility study for an emission reduction scheme;
An analysis of similar initiatives around the world, including a survey of benchmarking initiatives;
An assessment of the suitability of various policy instruments to achieve the target (both voluntary and mandatory);
An assessment of different types of targets for the programme (energy, emissions, absolute, relative, trading);
Capacity building on MRV with cement companies;
Data gathering with cement companies (production, energy, emissions, technologies, reduction measures, costs);
Development of marginal abatement cost curves at the installation-level and sector-level;
Assessment of the cost of different ambition levels for the programme target;
Supporting the development of policy incentives and required legislative changes;
Development of a draft regulation text;
Development of an implementation plan;
Stakeholder consultation.

In 2010, BAPPENAS (the Indonesian National Planning Agency) published the International Climate Change Sector Roadmap for the
industry sector, in part on the basis of the first of the above-mentioned technical assistance projects. It identifies the cement sector as a
priority sector and recommended negotiating a Climate Change Cooperative Agreement for the sector for 2010 2014, e.g. modelled on
the UK Climate Change Agreements on the Dutch Long-Term Agreements. The Roadmap states that the agreements must contain target-
setting process, benchmarking, energy audits, energy savings action plans, the appointment of energy managers at each facility,
information and training workshops, measuring and monitoring progress towards targets, annual reporting, program evaluation and
incentives and supporting policies, such as a CO2 tax rebate as a reward for meeting emission reduction targets.

A ministerial regulation was adopted in 2012 that sets emission reduction targets for the sector for 2015 and 2020 (MOI, 2012). The
regulation sets targets for improving the emission intensity (per tonne cement) for 2015 (on a voluntary basis) and 2020 (on a mandatory
basis). Implementation provisions are yet to be established.

Currently, aside from the emission reduction targets in the ministerial regulation, the cement sector is also considered as one of the pilot


63
sectors for developing a market-based instrument (such as emissions trading) in Indonesias Market Readiness Plan, developed under the
World Banks Programme for Market Readiness. At the moment it is unclear what form such a market-based instrument would take, and
how it would relate to the emission reduction targets in the regulation.
Programme
administrator
To be decided though the responsibility would likely fall under the Ministry of Industry (MOI).
The GHG mitigation targets set in the regulation are administered by MOI

Target Type of target In the technical assistance project, different types of targets (energy efficiency improvement, energy
conservation, emission reduction, emission intensity improvement) were assessed.
In the ministerial regulation, targets are defined at the plant level as % improvement of emission intensity (per
tonne of cement) compared to a base year level (2009).
Quantified target? Yes 2% improvement of emission intensity (per tonne of cement) by 2015 over 2009 levels on
a voluntary basis;
3% between 2016 - 2020 on a mandatory basis.
How established? Unclear.
The ICCSR assessed emission potentials at the sector level, while the technical assistance project developed both
installation-level marginal abatement cost curves, but it is unclear how the targets relate to these assessments.
Judging by the quantitative targets in the regulation, these were not so much based on the work carried out in
the technical assistance project (where the targets assessed were more ambitious), but on the basis of a
preceding analysis (5% reduction in energy intensity by 2015 compared to 2005, Wayudi, 2009).
The regulation also has not adopted the differentiation of targets proposed in the technical assistance project,
which would have taken into account early action
36
, rather than the current flat rate reduction target in the
regulation.
Time horizon Programme Targets in the regulation run to 2015 (voluntary target) and 2020 (mandatory target)
Individual agreements Targets in the regulations apply at the plant level, so assumed to be the same as above.

Scope Sectoral scope Cement sector
Minimum threshold? NA

36
This was proposed to be done by interpolating current (2010) performance of each plant (in CO2/t of product) to a long-term (2030) uniform carbon intensity (i.e. same value for all plants).
Each plants differentiated 2020 target would then be based on the point on the interpolation line in 2020. This would combine arguments of awarding early action for the low-intensity plants
(having to reduce less beyond current performance) as well as preventing high cost on the short term for high-intensity plants (having a longer time frame in which to achieve the same level of
performance as the low-intensity plants).


64
Exemptions? In principle none
However, it is not fully clear how emissions from waste fuel are counted (as carbon neutral or not), and whether
process emissions are included in the regulation targets.
In the technical assistance project, both options were assessed for waste fuels (in line with the CSI monitoring
protocol, that reports both gross and net emissions, i.e. including and excluding waste fuel emissions). Targets in
the project included both waste fuel emissions and process emissions.
Provisions for roll-out? None
Participants Enterprises In the technical assistance project, both individual cement companies and the sector association were involved,
and an intermediary (aggregating) role was foreseen for the cement association. The ICCSR also adopted this role
for the cement sector.
The regulation mentions the association as a key stakeholder (together with the companies and the national and
local governments), but its role is not specified. The targets are set at individual company/plant level.
Government Ministry of Industry (MOI). The regulation mentions the local governments as key stakeholders (together with
the companies, the cement association and the national government), but its role is not specified.
Other? Unclear
Roles &
obligations
Enterprises Other than reducing emissions to meet their target, enterprise obligations are as yet unclear. The MOI regulation
does mention the obligation to implement energy management systems. This obligation has, however, already
been in place since 2006 in a separate regulation on energy conservation (MERM): all facilities with energy use
>6000 toe/yr have the obligation to implement energy management (MEMR, 2009). Companies must appoint an
energy manager, conduct energy audits and implement the recommendations from the audits. However, it is
indicated that implementation of the regulation has not yet reached full scale and that supporting mechanisms
are needed.
Government The regulation is issued by the Ministry of Industry. MOI is also responsible for
i. Capacity building for emissions reduction activities.
ii. Implementation of Environmental and Energy Management.
iii. Development of technical guidelines and procedures to calculate emissions intensity.
iv. Development of incentive mechanisms for emissions reduction activities.
v. Formulation and harmonization of related policies.
vi. Development of Measurement Reporting Verification (MRV) system in cement industry.
vii. Socialization of related policies.
viii. Implementation of MRV system.


65

Here too, implementation of the regulations provisions has largely not happened yet.
(in the technical assistance project also roles were foreseen for the Ministry of Environment (for waste
legislation), Ministry of Energy (technical assistance) and the Ministry of Finance (financial incentives).
Other Unclear
Incentives &
Sanctions
Sanctions on non-
compliance
Unclear
Consequences on non-
participation
Unclear
Support incentives Unclear

Data gathering,
monitoring &
reporting
Data availability prior
to programme
In the technical assistance project, extensive data gathering was carried out for the purpose of target-setting and
to build capacity for later MRV activities. This included:
- Data gathering in accordance with the monitoring protocol of the WBCSD/WRI Cement Sustainability
Initiative (CSI) at the plant level. This includes data on energy consumption (by fuel type, incl waste fuel) and
electricity consumption for the different process steps, the use of raw materials and the production (of both
clinker and cement).
- Analysing emission reduction potential and costs at the plant level, using the BEST tool developed by LBNL.
This tool identifies current implementation rates of a large number of emission reduction technologies, and
the additional potential for implementation, with the associated costs at various target levels. These analyses
were used to develop marginal abatement cost curves at the plant level and the sector level, and to estimate
the cost of different target levels discussed for the scheme.
It is unclear whether additional data gathering has taken place in the context of the regulation.
Specific data gathering
needs for establishing
the programme
See above
Monitoring done by In the technical assistance project this was foreseen to be done by the participant. Discussions about the
Indonesian cement companies and the cement association joining the CSI were actively pursued by AFD with
seed funding available for the first period.
The ICCSR also underlines the value of the CSI for swift access to data, while MOI works with the cement sector
to develop methodologies. The latter has so far not been done yet. It is currently unclear whether all Indonesian
cement companies have joined the CSI.
Are monitoring ? Under the technical assistance project, this was going to be the CSI protocol, until a national protocol


66
protocols prescribed? was developed (e.g. under the Norwegian LOI).
MOI is stated to be responsible for the development and implementation of the MRV system,
suggesting certain rules or guidance (will) apply. This part of the regulation has not yet been
implemented, so no dedicated monitoring protocols are available yet.
Reporting required? ? Under the technical assistance project, this was going to be done to/in line with the CSI, until a national
system was developed. Reporting was recommended to be done at an installation-level (or company-
level, depending on how the target was defined) to MOI, or preferably an independent 3
rd
party under
the responsibility of MOI (e.g. an energy agency or comparable).
MOI is stated to be responsible for the development and implementation of the MRV system,
suggesting certain rules or guidance (will) apply. This part of the regulation has not yet been
implemented, so no specific reporting requirements are known yet.
Independent
verification required?
? Under the technical assistance project, this was going to be the CSI protocol (where PWC has a verifying
role) until a national system was developed.
MOI is stated to be responsible for the development and implementation of the MRV system,
suggesting certain rules or guidance (will) apply. This part of the regulation has not yet been
implemented, so no specific reporting requirements are known yet.
Are results published? ? Under the technical assistance project, this was going to be done in line with the CSI, until a national
system was developed, meaning that the results would be available anonimised at the plant level as
part of the entire global or regional plant population to the public. Indonesian results would only be
published at a sectoral level.
Unclear what the requirements are under the regulation.
Programme
evaluation
Is the programmes
effectiveness
evaluated?
- No evaluation is available yet from the ministerial regulation due to its recent adoption. It is not clear
whether an evaluation is planned or required by law.

Lessons learned Due to its recent adoption, limited conclusions can be drawn yet regarding the effectiveness of the regulation and its targets. Personal
communication with Indonesian analysts suggests that the industrys response to the targets in the regulation has been limited, especially
for the state-owned companies. One important conclusion is that with the implementation provisions of the regulations lagging the
adoption of the legal text, for both the MOI and especially for the MERM regulation, the targets and obligations seem to exist mainly on
paper. No clear time schedule is available at which such provisions will be put in place, making it unlikely that the short-term targets will
be met.
With regard to the relation between the activities carried out within the technical assistance project and the regulation, it seems that the
targets seem to be based more on the basis of previous analyses and decision-making, rather than the project analyses. Also,


67
considerations regarding awarding early action and remaining mitigation potential were not taken on board incorporated in the target-
setting, adopting a flat rate reduction target. Considerations about absolute targets vs relative targets and its benefits and risks in terms of
flexibility and environmental outcome have been taken into account by adopting emission intensity targets.

References:
BAPPENAS, 2010, Indonesia Climate Change Sectoral Roadmap, Industry Sector, March, 2010.
GHD/Ecofys, 2010, Emission Reduction Scheme in the Cement Industry in Indonesia, GHD, Jakarta, commissioned by Agence Franaise de Developpement (AFD).
MEMR, 2006, Government Regulation on Energy Conservation, No 70/2009,Ministry of Energy and Mineral Resources,
MOI, 2012, Ministerial Regulation of the Ministry of Industry (PermenPerind) No. 12/2012
Phylipsen, D., and C. Delatte, 2009, Feasibility of an emission reduction scheme in the cement sector in Indonesia, Ecofys, Utrecht, commissioned by Agence
Francaise de Developpement.
Wayudi, Agus, 2009, , presentation on the consultation workshop of the AFD technical assistance project towards an emission reduction scheme in the
Indonesian cement sector, Jakarta, 29 July 2009.