Long Term Strategy for Carbon Neutrality

1.1. Global and local context of climate change .............................................................................................. 6

1.2. Developing Cambodia’s long-term strategy............................................................................................. 6 2. Cambodia’s Vision for Carbon Neutrality....................................................................................................... 8

2.1. LTS4CN objectives and scenarios................................................................................................................. 8

2.1.1. The BAU scenario ................................................................................................................................ 8

2.1.2. The LTS4CN scenario......................................................................................................................... 9

2.2. Economic costs and benefits ....................................................................................................................... 15

2.2.1. Public sector costs ........................................................................................................................... 16

2.2.2. Public financing plan....................................................................................................................... 16

2.3. Technology and capacity needs ................................................................................................................. 17

2.3.1. Agriculture sector ............................................................................................................................ 17

2.3.2. Energy sector ..................................................................................................................................... 18

2.3.3. FOLU sector ........................................................................................................................................ 21

2.3.4. IPPU sector.......................................................................................................................................... 23

2.3.5. Waste sector ....................................................................................................................................... 24 3. Socioeconomic Benefits ...................................................................................................................................... 26

3.1. Costs and benefits of LTS4CN actions ..................................................................................................... 26

3.2. Total economic costs and benefits ............................................................................................................ 29

3.3. Public sector costs ........................................................................................................................................... 31

3.4. Implications for investment, economic growth, gender and jobs................................................ 33

3.5. Adaptation and wider social and environmental benefits .............................................................. 36

3.6. Benefits of adaptation for economic growth ........................................................................................ 37

3.6.1. Sector adaptation co-benefits analysis.................................................................................... 37 4. Governance, Measurement, Reporting and Verification ....................................................................... 45

4.1. Governance structure..................................................................................................................................... 45

4.2. MRV indicators and tracking ....................................................................................................................... 46

4.2.1. MRV framework................................................................................................................................ 46

4.2.2. Reporting responsibility ............................................................................................................... 47 i Foreword The Kingdom of Cambodia, as a country vulnerable to the impacts of climate change, understands the urgency of ambitious climate action. Although Cambodia bears very little responsibility for the historical and current climate crisis, we have consistently responded to international calls for action on climate change and contributed to the efforts, in line with our capacities and responsibilities under the United Nations Framework Convention on Climate Change. As announced by Samdech Akka Moha Sena Padei Techo Hun Sen, Prime Minister of the Kingdom of Cambodia, during the 2020 United Nations Climate Ambition Summit, this “Long-Term Strategy for Carbon Neutrality (LTS4CN)” is yet another testament to our consistent, strong commitment and political will to address climate change. We are proud to be among the very first members of the Least Developed Country group to submit this long-term strategy. This is a highly significant step for a developing country like Cambodia. This also reflects leading by example on climate change action on the part of Cambodia, a strong supporter of multilateral action on climate change. This LTS4CN essentially aims to serve as a roadmap or vision document based on a comprehensive analysis and modelling of all relevant economic sectors, and it looks several decades ahead. It outlines priority mitigation actions for each sector to achieve the country’s goal of a carbon neutral economy in 2050. The strategy largely builds on existing commitments of the Royal Government and proposes a trajectory consistent with the Updated Nationally Determined Contribution. It takes into consideration the balance between emissions reductions, economic growth, social justice, and climate resilience. Economic analysis shows that the investments to be made under this strategy have the potential to create 449,000 additional jobs, and deliver an additional 2.8% of annual GDP growth by 2050 for Cambodia. We can achieve carbon neutrality by 2050 through continued efforts to address the forest sustainability and land use; decarbonize our power sector and pursue higher energy efficiency; as well as promote low-carbon agriculture, industrial processes, and waste management. The vision set out in this document will be regularly updated and may be amended as needed to reflect any evolving trends or unforeseen events. It provides an overall policy direction, while the exact commitments and programmes of the Royal Government will continue to be articulated in our Five-Year National Strategic Development Plans and corresponding sector plans. We believe that this LTS4CN will help Cambodia to achieve carbon neutrality, which will be our major contribution to the sustainable development in Cambodia and the world. It is worth acknowledging here our inter-ministerial team who diligently took up the challenge to develop this LTS4CN through a year-long process of intensive discussion and consultations among international and national experts, concerned ministries, and key relevant stakeholders. Our acknowledgement also goes to all our valued partners who have contributed to the development of this important document, including, but not limited to, the Cambodia Climate Change Alliance programme (funded by the European Union, Sweden, and the United Nations Development Programme), the United Kingdom, the World Bank, the Food and Agriculture Organization of the United Nations, Global Green Growth Institute, and Agence Française de Développement. Cambodia’s Long-Term Strategy for Carbon Neutrality ii It is imperative that the implementation of this LTS4CN requires strong cooperation and supportsJ and we look forward to working with all stakeholders to make this long-term vision a realityr ,()l/~ (j-~ ' Cha r of the National Council for Sustainable Development Minister of Environment Cambodia's Long- Term Strategy for Carbon Neutrality iii Abbreviations BAU Business as Usual CCGT Combined-Cycle Gas Turbine CEGIM Climate Economic Growth Impact Model CNG Compressed Natural Gas FOLU Forestry and Other Land Use GDP Gross Domestic Product GHG Greenhouse Gas ILO International Labour Organization IPCC Intergovernmental Panel on Climate Change IPPU Industrial Processes and Product Use LTS4CN Long-Term Strategy for Carbon Neutrality LNG Liquified Natural Gas MAC Marginal Abatement Cost MRV Measurement, Reporting and Verification MtCO2e Megatons of Carbon Dioxide Equivalent NDC Nationally Determined Contribution REDD+ Reducing Emissions from Deforestation and Forest Degradation, fostering conservation and sustainable management of forests, and enhancing forest carbon stocks SAM Social Accounting Matrix tCO2e Tons of Carbon Dioxide Equivalent Cambodia’s Long-Term Strategy for Carbon Neutrality iv Executive Summary An innovative visioning exercise for Cambodia By presenting this Long-Term Strategy for Carbon Neutrality (LTS4CN)1, Cambodia demonstrates her commitment to the Paris Agreement on Climate Change and presents a policy scenario to realize a vision of a carbon neutral and resilient society within the next 30 years. The LTS4CN is a new type of policy tool for Cambodia. As a visioning exercise, it is not meant to replace or supersede existing national and sectoral strategies of the Government but rather to guide future policy and investment decisions by all concerned stakeholders. The LTS4CN will possibly be reviewed every five years, in line with the framework for updating Nationally Determined Contributions (NDCs) under the Paris Agreement. This will provide an opportunity to refresh the LTS4CN and reflect the latest trends in policy, technology, and financing as well as any unforeseen external events. Developing the strategy was a collective effort that included contributions from relevant ministries and agencies as well as technical experts. A two-stage greenhouse gas (GHG) emissions modelling approach applied sector models to the agriculture, forestry and other land use (FOLU), industrial processes and product use (IPPU), energy, and waste sectors. A combined pathway model indicated the socioeconomic impacts of proposed measures. The process started with defining relevant existing policy targets and action plans in national and sectoral strategies as well as in the Updated NDC issued in 2020. An intensive round of consultations led to the identification of priority mitigation actions for each sector. Different scenarios were developed to explore how these actions can reduce emissions and help achieve carbon neutrality, compared to business as usual (BAU). An economic modelling estimated the socioeconomic costs using the marginal abatement cost model. Adaptation benefits were elaborated for suggested mitigation actions. A credible scenario for carbon neutrality by 2050 The LTS4CN modelling suggests that Cambodia could achieve carbon neutrality in 2050 with the FOLU sector providing a total carbon sink of 50 megatons of carbon dioxide equivalent (MtCO2e). The energy sector is expected to be the highest emitter in 2050 at 28 MtCO2e, followed by the agriculture sector at 19 MtCO2e. The waste and IPPU sectors are projected to emit 1.6 and 1.2 MtCO2e, respectively (Table 1). 1 Carbon neutrality for this strategy is considered as Net Zero Greenhouse Gas Emissions. 1 Table 1: GHG emissions projection by sector in 2050, BAU and LTS4CN scenarios Emissions reduction in Emissions balance in Sector BAU scenario, MtCO2e LTS4CN scenario, MtCO2e LTS4CN scenario, MtCO2e Agriculture 34.9 -15.6 19.3 Energy 82.7 -54.3 28.2 FOLU 21.2 -71.4 (-50.2) IPPU 10.7 -9.1 1.6 Waste 6.5 -5.3 1.2 Total 156.0 155.6 0,3 *The FOLU sector uses the national forest definition and soils have been included into the calculations. The LTS4CN proposes a trajectory for decarbonization that is largely aligned with the updated NDC trajectory. It incorporates some carbon sinks not previously considered in the NDC, however, including an updated sink factor for forests remaining forests (in line with the second Forest Reference Level Report), and for plantations and forest soils. This leads to a lower estimate of total GHG emissions, at around 35 MtCO2e less in 2020 compared to the NDC. Cambodia’s vision for carbon neutrality is largely founded on the continued implementation of existing commitments in the FOLU sector. Execution of the REDD+ Investment Plan 2 will drive reduced rates of deforestation as well as an expansion of afforestation and reforestation activities. The FOLU sector is expected to provide a significant carbon sink leaving room for other sectors to incrementally transition towards carbon neutrality. 180.0 160.0 GHG emissions in MtCO2e 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 BAU Balance LTS4CN Balance Figure 1: GHG emission projections, BAU and LTS4CN scenarios During the first decade of the strategy, emissions reductions are achieved in the FOLU sector by starting implementation of the REDD+ Investment Plan. Once it is fully financed, it is expected to reduce the deforestation rate by 50 percent in 2030 compared to the REDD+ baseline specified in the updated NDC (reduce 50percent of historical emission). From 2030 onwards, reforestation and afforestation efforts will continue with a raised level of ambition to ensure that the carbon sink from 2 REDD+ refers to reducing emissions from deforestation and forest degradation, fostering conservation and sustainable management of forests, and enhancing forest carbon stocks. Cambodia’s Long-Term Strategy for Carbon Neutrality 2 forests continues to grow. The FOLU sector is expected to be carbon neutral from 2031. Afforestation and reforestation efforts will be compatible with growth in the agricultural sector because of expected gains in productivity and climate resilience. Deforestation is assumed to stop by 2045, with the FOLU sector becoming both resilient and sustainable, transformed by agroforestry and reforestation as two dynamic mitigation actions. Land dedicated to sustainable plantations and agroforestry is assumed to constantly increase to reach 1.6 million hectares under afforestation and reforestation mitigation actions and 1.1 million hectares of native forest restoration. 3 These combined actions will result in a carbon sink of 50 MtCO2e in 2050. In the energy sector, emissions reductions until 2030 come from energy efficiency and conservation through the implementation of the National Energy Efficiency Policy 4 in buildings, industry, and public services. This will limit growth in energy demand even as demand for energy services rises rapidly. Additionally, policies will be developed and put into place to incentivize switching to electricity for cooking and passenger vehicles, and to coal alternatives in the industrial sector. Major long-term infrastructural changes in the energy sector will be studied and prepared in this first decade. After 2030, energy sector emissions reductions will come from more stringent energy efficiency standards and continued fuel switching to low-carbon sources. Initial steps to decarbonize the electricity supply will be taken, with some investments in renewable energy and gas. With natural gas used as a transition fuel in the power sector, investments in infrastructure for imports, storage and transportation will be necessary. In the last decade of the LTS4CN scenario, between 2040 and 2050, the power sector will start a deeper decarbonization journey by adding more renewable energy in the generation mix, reaching a share of 35 percent in 2050. Within the renewable energy share, 12 percent is assumed to come from solar. Investments in grid modernization, flexibility and storage will be required during this transition. In the transportation sector, urban public transportation will become more widespread and electric vehicle penetration will grow in the passenger vehicle fleet. Investments in rail development will start after 2030. Emissions will be also reduced by more moderate use of electric vehicles, increased fuel efficiency for internal combustion engine vehicles and higher penetration of compressed natural gas (CNG) for interregional buses and for trucks. Under the LTS4CN scenario, 70 percent of motorcycles and 40 percent of cars and urban buses are expected to be electric vehicles by 2050. The waste sector will achieve half of its emission savings in the first decade through mitigation measures in solid waste disposal, for example, by diverting organic waste from landfills or introducing the effective management of landfill gas. Other important mitigation measures are linked to reducing open burning and domestic wastewater. A small but increasing share of emissions savings will be achieved through introducing good practices in the biological treatment of solid waste. In 2050, the waste sector is expected to realize nationwide waste collection coverage of 85 percent and will be almost fully decarbonized. The recycling rate will increase to 35 percent; 50 percent of organic waste will be composted or treated. Most urban dwellings will have access to proper wastewater treatment. And the principle of reduce, reuse, and recycle will be mainstreamed into the national development agenda, including through environmental, social and economic plans, policies, strategies, and programmes. Mitigation actions in the agriculture sector are expected to be implemented gradually over the 30- year period. Major reductions will be achieved by reducing methane-intensive rice and livestock production, and promoting composting and producing biogas in livestock management, organic fertilizer, and deep fertilizer technology. Major mitigation actions for the IPPU sector will start in the first decade of the LTS4CN scenario, with emissions projected to peak in the early 2030s before dropping steeply until 2040. Between 2040 and 2050, emissions will fall gradually. Key mitigation actions in the sector are clinker substitution 3 A total of 2.7 million hectares is aligned with the target in the REDD+ Investment Plan. 4 Prepared by the Ministry of Mines and Energy for 2021 to 2030. Cambodia’s Long-Term Strategy for Carbon Neutrality 3 and carbon capture and storage in cement production, recycling of aggregate concrete, increased use of refrigerants with low global warming potential and regular inspection of refrigeration and air- conditioning equipment as well as recovery of spent refrigerants. The LTS4CN pathway delivers net economic benefits reaching 2.8 percent of GDP by 2050 Economic analysis of the LTS4CN suggests net economic benefits for the public and private sectors, in addition to adaptation and wider social and environmental benefits. These net benefits start from the first year of LTS4CN implementation and reach more than US $4.2 billion in 2050, over 2.8 percent of projected GDP. Wider social and environmental benefits including adaptation co-benefits from LTS4CN actions are estimated to be worth more than the economic benefits, at nearly $7 billion in 2050. By 2050, the private sector is projected to invest nearly $1.4 billion each year, mostly in energy, transportation, and the forestry sectors, with some significant investment in the IPPU sector. Benefits in terms of private sector operating expenses are over six times the investment and come from a wide range of actions. Significant benefits come from energy efficiency ($3.4 billion), vehicle electrification ($1.1 billion) and rail and freight haulage ($1.1 billion). These are reduced by $800 million in opportunity costs from protecting forests from conversion to agriculture. Public capital expenditures are relatively small, with some ongoing investment in renewable energy, buses, trains, and forestry, in line with the REDD+ Implementation Plan. There are significant ongoing public operating expenses, dominated by rail and haulage ($500 million) and the loss of a fuel tax from the electrification of vehicles ($200 million). These costs are offset by operating profits from renewable energy. The net contribution of agriculture, waste, and IPPU sectors is small. Implementing the LTS4CN will require substantial public investment over 30 years (Figure 2). A proposed public financing plan suggests devoting 1 percent of new public borrowing to the LTS4CN and making a small shift to divert 3 percent of public spending on economic services to LTS4CN actions. These two measures provide 40-50 percent of financing needs. The financing plan assumes that pricing policies and taxation reform in the transportation sector will be introduced gradually and cover 90 percent of transportation sector costs by 2050. The financing plan also assumes that international climate finance will meet the remainder of public finance needs. This will cover major investment in public transportation and rail freight, support in the forestry sector, and financing for carbon capture and storage, and grid flexibility. International climate finance is essential for Cambodia to implement the LTS4CN scenario. 700 Public sector costs and financing (US Gap for climate finance 600 Policy reform in transport 500 2% of Economic Services spend 400 1% of new borrowing millions of dollars) Total needs 300 200 100 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Figure 2: Public financing needs and financing plan Cambodia’s Long-Term Strategy for Carbon Neutrality 4 Achieving Cambodia’s LTS4CN scenario is an ambitious but feasible goal. Realizing it depends on a comprehensive enabling environment, sufficient access to technology and climate financing, and extensive capacity building, and education. With reducing emissions to net zero by 2050 critical to meeting the Paris Agreement goal of keeping the global average temperature increase below 1.5°C, Cambodia is committed to leading the way. The LTS4CN is an important starting point in providing guidance on how it can reach carbon neutrality by 2050. • Less methane-intensive rice cultivars • Direct seeding practices • Alternate wetting and drying practices Agriculture • Promotion of organic fertilizer and deep fertilizer technology • Feed additives for cattle • Improved fodder management • Introduction of composting technology • Reducing the deforestation rate by 50 percent in 2030 • Stopping deforestation by 2045 Forestry and • Afforestation, improved forest management and forest other land uses restoration • Agroforestry and commercial tree plantation • Full implementation of the REDD+ Investment Plan by 2050 • No new coal generation capacity beyond already committed projects • Use of natural gas as a dispatchable transition fuel • Investments in liquified natural gas (LNG) import, storage and infrastructure • Increase in solar, hydro, biomass and other renewables to 35 Energy percent of the generation mix by 2050, of which 12 percent is from solar • Investments in grid modernization, flexibility and storage Energy efficiency measures in buildings and industry • Fuel switching to electricity for cooking • Substitution of coal in the industrial and power sector • More use of public transportation – 30 percent modal share in urban areas by 2050 • Moderate penetration of electric vehicles – 70 percent for motorcycles and 40 percent for cars and urban buses by 2050 Transportation • Increased fuel efficiency for internal combustion engine vehicles • Rail for freight and passengers • CNG penetration of 80 percent for interregional buses and 80 percent for trucks until 2050 • Clinker substitution in cement production Industrial • Carbon capture and storage for cement kilns • Use of recycled aggregate concrete processes and • Increasing use of refrigerants with low global warming potential product use • Regular inspection of refrigeration and air-conditioning equipment and recovery of spent refrigerants • Reducing open burning by expanding waste collection coverage to 85 percent in 2050 • Implementing a reduce, reuse, and recycle strategy Waste • Landfill gas management • Organic composting • Anaerobic digestion and wastewater treatment Figure 3: Summary of key mitigation actions by sector Cambodia’s Long-Term Strategy for Carbon Neutrality 5 1. Introduction and Background

1.1. Global and local context of climate change Science has made it clear that the Earth’s climate is changing, in every region and across the global climate system. Most of these changes are unprecedented. According to the latest report from the Intergovernmental Panel on Climate Change (IPCC), climate action in the next decades is crucial to limit global warming. Staying below a temperature rise of 1.5°C or even 2°C will be nearly impossible if immediate, rapid and large-scale reductions in GHG emissions do not take place. 5 Improved observational data sets to assess historical warming and better scientific understanding of the response of the climate system have affirmed that human activities are responsible for the majority of global warming since 1850. The Royal Government of Cambodia is committed to combating climate change and accelerating the transition to a climate-resilient, low-carbon, sustainable mode of development. Cambodia has been a party to the United Nations Framework Convention on Climate Change since 1996, the Kyoto Protocol since 2002, and the Paris Climate Agreement since 2017. Accordingly, the country submitted her first NDC in 2015 and the Updated NDC in 2020, highlighting ambitious targets to reduce emissions and strengthen adaptive capacity in line with Cambodia’s national policies and strategies. In the Updated NDC, Cambodia aims to reduce emissions by around 42 percent from 155 MtCO2e under BAU to 90.5 MtCO2e by 2030.6 The first national Biennial Update Report was submitted in 2020, which includes emissions from 1994 to 2016. Total emissions in 2016 reached 163.6 MtCO 2e. The FOLU sector is the largest source of emissions in Cambodia.7

1.2. Developing Cambodia’s long-term strategy Development of the Long-Term Strategy for Carbon Neutrality (LTS4CN) concluded in 2021. It provides a detailed, evidence-driven guide to help Cambodia take long-term climate actions aligned with the Paris Agreement commitment to limiting global warming to 1.5°C. It includes institutional arrangements for long-term planning, development of a monitoring and evaluation framework, and analysis of financial options and socioeconomic impacts of selected priority actions. Developing the LTS4CN included planning (Phase 1) and strategy development (Phase 2). The planning phase encompassed a literature review of key documentation and data sets and a vision- setting exercise based on desk research. The collection of baseline emissions information in five key sectors, namely FOLU, energy, agriculture, IPPU, and waste, was accompanied by an exploration of decarbonization pathways used or proposed in Cambodia so far. Phase 1 involved the development of a plan for the strategy development. The outcomes of Phase 1 were consistent with a vision of reaching carbon neutrality by 2050 through upscaling existing mitigation activities and adding new activities. The study concluded that the main contributors to emissions in Cambodia are the FOLU, agriculture, and energy sectors. Reaching net zero by 2050, therefore, requires more focus on decarbonizing these sectors. In the FOLU sector, the main driver of emissions is the expansion of industrial agriculture, while in agriculture, a key source 5 IPCC, 2021, Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. 6 General Secretariat of the National Council for Sustainable Development, 2020, Cambodia’s Updated Nationally Determined Contribution. Phnom Penh. 7 General Secretariat of the National Council for Sustainable Development, 2020, First Biennial Update Report of the Kingdom of Cambodia. Phnom Penh. Cambodia’s Long-Term Strategy for Carbon Neutrality 6 of emissions is rice cultivation. Energy sector emissions are largely determined by the power mix, road transportation and the level of vehicle electrification.8 In Phase 2, all key stakeholders, under the leadership of the National Council for Sustainable Development, contributed to strategy development as illustrated in Figure 4. Sector analysis Net-zero vision Full scenario Second round of Finalize scenarios identification of meetings with line development and consultations and and report writing key actions ministries modelling validation Figure 4: Overall methodology for Phase 2 of developing the LTS4CN The Department of Climate Change of the General Secretariat of the National Council for Sustainable Development/Ministry of Environment and Cambodia Climate Change Alliance Phase 3 coordinated the development of the LTS4CN with support from development partners such as the United Nations Development Programme, Agence Française de Développement, Global Green Growth Institute, the Food and Agriculture Organization of the United Nations, Sweden, the United Kingdom, the European Union, and the World Bank. A two-stage GHG emissions modelling exercise was employed, consisting of sector models for the agriculture, FOLU, IPPU, energy, and waste sectors, and a combined pathway model including a socioeconomic cost and benefit analysis. Intensive consultation with all relevant stakeholders from line ministries and other key institutions discussed priority mitigation actions and validated data, assumptions, and approaches. This ensured that suggested LTS4CN actions would be feasible and aligned with Cambodia’s development priorities and at the same time targeted to the goal of carbon neutrality by 2050. 8 Carbon Trust, 2021, A Long-Term Low Emissions Development Strategy (LT-LEDS) for Cambodia: Literature Review and Vision-Setting Report. Cambodia’s Long-Term Strategy for Carbon Neutrality 7 2. Cambodia’s Vision for Carbon Neutrality

2.1. LTS4CN objectives and scenarios The LTS4CN outlines a vision of a carbon neutral economy and provides long-term policy direction on how to reduce emissions in the next few decades. The overall goal of the strategy is to describe a pathway towards a country-wide carbon neutral economy by 2050.

2.1.1. The BAU scenario Summarizing findings from sector analysis and modelling, under a BAU scenario, emissions are expected to increase at an annual rate of 1.9 percent up to 156 MtCO2e. Figure 5 illustrates this emissions pathway. The FOLU sector has the highest share of total emissions, at 63percent in the base year of 2016. In 2050, 53 percent of total emissions is expected to come from the energy sector, followed by agriculture at 22 percent and FOLU at 14 percent. The smallest emitters are estimated to be the IPPU and waste sectors, with shares of 7 percent and 4 percent, respectively. The BAU scenario for the LTS4CN differs from the NDC BAU scenario primarily because additional carbon sinks have been incorporated in the analysis. The carbon sink factor for forests remaining forests has been aligned with the second Forest Reference Level Report recently submitted by Cambodia, and the carbon sink from forest soils has been added along with the sink from plantations included in the national forest definition. 180.0 160.0 GHG emissions in MtCO2e 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Agriculture Energy FOLU IPPU Waste BAU Balance Figure 5: GHG emissions projections in the BAU scenario by sector In the agriculture sector, rice cultivation, livestock management (enteric fermentation and manure management), nitrous oxide emissions from managed soils and fertilizer are the main contributors to emissions. Total emissions in the agriculture sector in the base year of 2016, amounted to 18 MtCO2e. Emissions are estimated to almost double to 35 MtCO2e in 2050 assuming current trends continue and no major mitigation actions occur. The main drivers of the agriculture sector are population and economic growth, which lead to increased rice and meat production and consumption. The energy sector was responsible for roughly 8 MtCO2e in 2016. It is the third largest emitting sector after FOLU and agriculture. Emissions are expected to grow exponentially, however, up to 83 MtCO2e under the BAU scenario by 2050, driven by population and economic growth leading to increased Cambodia’s Long-Term Strategy for Carbon Neutrality 8 energy demand. As the BAU scenario follows a conventional, primarily fossil fuel-based and emissions-intensive development path, emissions are expected to increase by a factor of 10. The FOLU sector was responsible for 51 MtCO2e of emissions in 2016, the largest share of emissions in Cambodia. Deforestation is the major cause of emissions. Under the BAU scenario, emissions would decrease to 21 MtCO2e by 2050, with an annual decline by 2.6 percent between 2016 and 2050. The waste sector is the second smallest emitter at 2.8 MtCO2e in 2016. Under BAU conditions, emissions are expected to grow to up to 6.5 MtCO2e by 2050, which includes emissions from solid waste disposal, biological treatment, burning, and wastewater. In the IPPU sector, the mineral industry (cement and glass), pulp and paper, lubricants, substitutes for ozone-depleting substances (refrigeration and air conditioning, and fire protection) as well as the food and beverage industry are the main contributors to emissions. Emissions totaled 1.8 MtCO2e in 2016, mainly from the cement industry (1.4 MtCO2e, 74 percent) and refrigeration and air conditioning (0.4 MtCO2e, 21 percent). According to BAU projections, emissions in 2050 is expected to increase to 11 MtCO2e, with 55 percent from the cement industry and 39 percent from refrigeration and air conditioning.

2.1.2. The LTS4CN scenario Reaching carbon neutrality requires both reducing sources of emissions, such as the combustion of fossil fuels, and increasing carbon sinks, such as by expanding forests, since trees capture carbon from the atmosphere as they grow. Cambodia’s vision for carbon neutrality is founded on the country’s strong political commitment in the FOLU sector. Under the LTS4CN scenario, full implementation of the REDD+ Investment Plan will drive afforestation and reforestation activities. The FOLU sector is expected to become a significant carbon sink in 2050, leaving room for other sectors to incrementally transition towards carbon neutrality. 180.0 160.0 GHG emissions in MtCO2e 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 BAU Balance LTS4CN Balance Figure 6: GHG emissions projections in the BAU and LTS4CN scenarios The LTS4CN scenario suggests that Cambodia could achieve overall carbon neutrality in 2050 with the FOLU sector providing a total carbon sink of about 50 MtCO2e. The waste and IPPU sectors will be the least emitting sectors in 2050 with 1.6 and 1.2 MtCO2e, respectively. The energy sector is expected to be the highest emitter at 28 MtCO2e, followed by agriculture at 19 MtCO2e (Figure 6). Cambodia’s Long-Term Strategy for Carbon Neutrality 9 Table 2: GHG emissions projection by sector in 2050, BAU and LTS4CN scenarios Emissions reduction in Emissions balance in Sector BAU scenario, MtCO2e LTS4CN scenario, MtCO2e LTS4CN scenario, MtCO2e Agriculture 34.9 -15.6 19.3 Energy 82.7 -54.3 28.2 FOLU 21.2 -71.4 (-50.2) IPPU 10.7 -9.1 1.6 Waste 6.5 -5.3 1.2 Total 156.0 155.6 0,3 Compared to the BAU scenario, where carbon emissions are expected to increase to up to 156 MtCO2e in 2050, the LTS4CN scenario would cumulatively avoid about 1,400 MtCO2e of emissions over 30 years (Figure 6). Reaching carbon neutrality is possible if the FOLU sector can develop a significant carbon sink and all other sectors gradually reduce their emissions to the levels suggested in Table 2. Total emissions in the LTS4CN scenario are projected to decline gradually until 2040, with the decrease slowing between 2040 and 2050, as summarized in Figure 7. Figure 13 summarizes major mitigation actions and targets for each sector. 100.0 80.0 GHG emissions in MtCO2e 60.0 40.0 20.0 0.0 -20.0 -40.0 -60.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Agriculture Energy FOLU IPPU Waste LTS4CN Balance Figure 7: GHG emissions projections in the LTS4CN scenario with sectoral shares The LTS4CN scenario introduces eight mitigation actions for the agriculture sector to avoid a total of 16 MtCO2e in 2050. That corresponds to an emissions reduction of 45 percent compared to the BAU scenario. Major decreases of emissions in crop cultivation can be achieved by using less methane- intensive rice cultivars, direct seeding practices, alternate wetting and drying practices, and organic fertilizer and, deep fertilizer technology. In livestock management, mitigation measures are feed additives for cattle, improved fodder management and the wide application of composting technology. Cambodia’s Long-Term Strategy for Carbon Neutrality 10 40.0 35.0 GHG emissions in MtCO2e

30.0 Savings from fertiliser 25.0 Savings from livestock 20.0 Savings from rice 15.0

10.0 LTS4CN net emissions 5.0 BAU emissions 0.0 Figure 8: GHG emissions projections for the agriculture sector in the LTS4CN scenario The FOLU sector consultation and modelling process suggested a “green highway” scenario where forests provide a carbon sink of 50 MtCO2e in 2050 and are the main driver of carbon neutrality (Figure 9). This can be achieved through implementing ambitious sector policies and strategies starting from the early 2020s, including the full implementation of the existing REDD+ Investment Plan until 2050. Five key sectoral mitigation actions under the LTS4CN scenario are reducing deforestation, afforestation and reforestation, improved forest management, assisted natural regeneration9 of native forests and riparian landscapes, and agroforestry. 60.0 40.0 GHG emissions in MtCO2e LTS agroforestry

20.0 LTS restoration LTS forest management 0.0 LTS plantation growth LTS re/aforestation -20.0 LTS deforestation -40.0 BAU emissions -60.0 Figure 9: GHG emissions projections for the FOLU sector in the LTS4CN scenario Cambodia’s LTS4CN scenario for the energy sector can lead to significant emissions reductions by progressively prioritizing three main actions: energy efficiency and conservation, shifts to low- carbon sources and decarbonization of electricity production. The scenario projects the energy sector would emit only 28 MtCO2e by 2050 (Figure 10), an emissions reduction of 66 percent compared to the BAU scenario. Major emissions saving comes from energy efficiency in buildings and industry, the switch to electricity for domestic cooking, and coal substitution and abatement in the industrial, and power sectors. Incremental decarbonization of the power sector is suggested through a moderate share of 9 Assisted natural regeneration is the human protection and preservation of natural tree seedlings in forested areas. Cambodia’s Long-Term Strategy for Carbon Neutrality 11 renewable energy in the generation mix until 2050, while using natural gas as a transitional fuel. That requires substantial investment in combined-cycle gas turbine (CCGT) power plants and LNG import capacity. In the transportation sector, emissions savings can be achieved by developing rail for passengers and freight, urban public transportation, and the electrification of the passenger and, light-duty vehicle fleet. 90.0 80.0 GHG emissions in MtCO2e

70.0 Savings from power genmix 60.0 Savings from transport 50.0 40.0 Savings from industry 30.0

20.0 Savings from buildings/cooking 10.0 LTS4CN net emissions 0.0 BAU emissions Figure 10: GHG emissions projections for the energy sector in the LTS4CN scenario The LTS4CN scenario suggests five mitigation actions for the IPPU sector that could avoid a total of

9.1 MtCO2e of emissions compared to 10.7 MtCO2e under BAU. These priority actions aim to reduce emissions in cement production and use as well as the climate impact of refrigerants. They include promoting clinker substitution and carbon capture and storage in cement production as well as the recycling of aggregate concrete. The refrigeration and air-conditioning market would need to implement use of refrigerants with low global warming potential, accompanied by regular inspection of equipment and recovery of spent refrigerants (Figure 11). 12.0 10.0 GHG emissions in MtCO2e 8.0 Savings from low GWP refrigerants

6.0 Savings from cement LTS4CN net emissions 4.0 BAU emissions 2.0 0.0 2020202220242026202820302032203420362038204020422044204620482050 Figure 11: GHG emissions projections for the IPPU sector in the LTS4CN scenario The waste sector would reduce its emissions to 1.2 MtCO2e in 2050 in the LTS4CN scenario (Figure 12). This can be achieved by improving waste collection rates; implementing reduce, reuse, and recycle principles; producing biogas and compost from organic waste; eliminating open burning; extracting landfill gas and producing refuse derived fuel; and improving treatment of wastewater. Cambodia’s Long-Term Strategy for Carbon Neutrality 12 7.0

6.0 Savings from waste water GHG emissions in MtCO2e 5.0 Savings from open burning 4.0 Savings from biological treatment 3.0 Savings from landfill 2.0 management

1.0 LTS4CN net emissions

0.0 BAU emissions -1.0 Figure 12: GHG emissions projections for the waste sector in the LTS4CN scenario Cambodia’s Long-Term Strategy for Carbon Neutrality 13 • Less methane-intensive rice cultivars • Direct seeding practices • Alternate wetting and drying practices • Promotion of organic fertilizer and deep Agriculture fertilizer technology • Feed additives for cattle • Improved fodder management • Introduction of composting technology • Reducing the deforestation rate by 50 percent in 2030 • Stopping deforestation by 2045 Forestry and other land • Afforestation, improved forest management and uses forest restoration • Agroforestry and commercial tree plantation • Full implementation of the REDD+ Investment Plan by 2050 • No new coal generation capacity beyond already committed projects • Use of natural gas as a dispatchable transition fuel • Investments in LNG import, storage and infrastructure • Increase in solar, hydro, biomass and other renewables to 35 percent of the generation mix Energy by 2050, of which 12 percent is from solar • Investments in grid modernization, flexibility and storage • Energy efficiency measures in buildings and industry • Fuel switching to electricity for cooking • Substitution of coal in the industrial and power sector • More use of public transportation – 30 percent modal share in urban areas by 2050 • Moderate penetration of electric vehicles – 70 percent for motorcycles and 40 percent for cars and urban buses by 2050 Transportation • Increased fuel efficiency for internal combustion engine vehicles • Rail for freight and passengers • CNG penetration of 80 percent for interregional buses and 80 percent for trucks until 2050 • Clinker substitution in cement production • Carbon capture and storage for cement kilns • Use of recycled aggregate concrete Industrial processes • Increasing use of refrigerants with low global and product use warming potential • Regular inspection of refrigeration and air- conditioning equipment and recovery of spent refrigerants • Reducing open burning by expanding waste collection coverage to 85 percent in 2050 • Implementing a reduce, reuse, and recycle strategy Waste • Landfill gas management • Organic composting • Anaerobic digestion and wastewater treatment Figure 13: Summary of key mitigation actions by sector Cambodia’s Long-Term Strategy for Carbon Neutrality 14

2.2. Economic costs and benefits The sector analysis entailed consultations to identify 31 key actions contributing to carbon neutrality. Discussions of a long list of options led to the selection of five to eight key actions per sector that capture the main opportunities for achieving carbon neutrality. Some actions bundle sets of more detailed actions. An assessment of economic costs and benefits of the 31 key actions built on an Extended Cost Benefit Analysis (see more details in separate the Technical Annex). The LTS4CN scenario creates estimated net economic benefits for the public and private sectors of about $5 billion in 2050 (3 percent of projected GDP). Further benefits will include $1 billion in adaptation co-benefits from LTS4CN actions. Wider social and environmental benefits would reach $6 billion, mainly from FOLU actions. Full net benefits start from the first year of the LTS4CN and grow to more than $11 billion in 2050, which is 7.5 percent of projected GDP that year (see Section 3 for more details). This would compensate for about two thirds of the GDP lost due to climate change impacts, as estimated in the Climate Economic Growth Impact Model (CEGIM) for Cambodia. Table 3: Total costs and benefits by public and private capital and operating expenditures Annual costs (orange) and benefits (green), millions of dollars 2030 2040 2050 Private capital 473 743 1,384 expenditures Private net annual costs 812 2,376 6,254 Public capital 159 294 476 expenditures Public net annual costs 59 69 176 Adaptation benefits 346 630 994 Wider benefits (social and 1,393 3,466 5,977 environmental) Total costs and benefits 1,859 5,366 11,188 By 2050, the private sector would be investing nearly $1.4 billion each year, mainly in energy, transportation and forestry, with some significant investment in the IPPU. Private-sector operating expenditure benefits are six times initial investment costs and come from a wide range of actions. Benefits are high from energy efficiency ($3.4 billion), vehicle electrification ($1.1 billion) and rail and freight haulage ($1.1 billion). These are reduced by nearly $800 million, however, due to the opportunity costs of protecting forest from conversion to agriculture. Public capital expenditure is relatively small, with some ongoing investment in renewable energy, buses, trains, and forestry, in line with the REDD+ Investment Plan. There are significant ongoing public operating expenditures, dominated by rail and haulage ($500 million) and the loss of a fuel tax from the electrification of vehicles ($200 million). These costs are offset by operating profits from renewable energy, however. The net contribution of the agriculture, waste, and IPPU sectors is small. Cambodia’s Long-Term Strategy for Carbon Neutrality 15 Table 4: Economic and wider benefits per year Benefits as a percentage of GDP 2030 2040 2050 Economic benefit 0.2 1.3 2.8 Adaptation co-benefits 0.6 0.6 0.7 Wider social and 2.6 3.6 4.0 environmental benefits Total 3.4 5.5 7.6

2.2.1. Public sector costs Public costs are dominated by operating expenditures in the energy and transportation sectors, including costs associated with rail and freight and loss of a fuel duty from electrification. While public transportation fares will gradually increase to reduce the subsidy required for bus operations, this will be more than offset by the steady rise in the loss of a fuel duty due to the electrification of cars. These costs could be reduced or even entirely avoided by introducing other forms of vehicle taxation and building demand for buses and trains so that pricing policies can make bus and rail operators profitable. There are smaller net costs in the forestry sector, mainly from lost forestry royalties, but also from the costs of supporting reforestation, afforestation, improved forestry management and restoration of degraded forest. Costs of public support average $17 million per year in the first 10 years of the LTS4CN scenario, consistent with the REDD+ Investment Plan, which requires $16 million per year.

2.2.2. Public financing plan The LTS4CN will require substantial public investment over 30 years (Table 5). A proposed public financing plan suggests devoting 1 percent of new public borrowing to the LTS4CN and making a small shift in public spending on economic services to divert 2 percent to LTS4CN actions. These two measures provide 40-50 percent of financing needs. The financing plan assumes the gradual introduction of pricing policies and taxation reform in the transportation sector, which will cover 90 percent of transportation sector costs by 2050. The remainder of public finance needs will be met by international climate finance. This will include major investment in public transportation and rail freight as well as support for the forestry sector and financing for carbon capture and storage and, grid flexibility. Table 5: Public financing needs and financing plan Public financing needs, millions of dollars Total 2025 2030 2035 2040 2045 2050 2025-2050 New public borrowing (1 percent) 19 28 38 52 65 83 1,212 Economic services 44 63 85 115 146 186 2,724 spent (3 percent) Policy reform in the 10 33 75 103 111 334 2,727 transportation sector International climate 62 94 118 93 61 50 2,333 finance Total 135 218 316 364 383 652 8,997 Cambodia’s Long-Term Strategy for Carbon Neutrality 16

2.3. Technology and capacity needs Technology and capacity needs are crucial for successful LTS4CN implementation, especially for the Department of Climate Change, the Climate Change Technical Working Group, and sectoral and subnational technical working groups. They are the enablers of adaptation and mitigation actions and commitments. Without proper capacity and technology, it will be difficult although not impossible for Cambodia to achieve carbon neutrality by 2050. The following subsections summarize key technology and capacity needs for each sector.

2.3.1. Agriculture sector Major barriers to LTS4CN actions in agriculture include conflicting land use demands, the clash between regional and sectoral implementation plans, and the significant energy required for manufacturing organic fertilizers. Transformations are required to improve agriculture productivity, increase land use efficiency and enhance planning and implementation, among others. Table 6 details the challenges and required technology and capacity. Table 6: Technology and capacity needs in the agriculture sector Major challenges and Transformation needed Required transformative Responsible barriers policy measures and actors capacity Demand for land in Improvement in Research on high Ministry of agriculture (rice crop agriculture productivity. productivity agricultural Agriculture, cultivation) with technologies; Forestry and population growth; Increasing land use capacity building for Fisheries emissions reduction efficiency (including farmers to enable them to target in the FOLU integrated farming or use high-quality seeds and sector. complex agroforestry). adopt improved technologies and practices. Enhanced commitment of large-scale businesses to Optimization of the use of environmentally sound unproductive land in non- practices. forest areas for cropland expansion, along with the enforcement of bans on the conversion of agricultural lands to other land uses. Provision of incentives for contributions to emissions reductions and other environmental benefits. The clash between Enhanced effectiveness of Policy and programme Ministry of regional and sectoral the planning and alignment among line Agriculture, pathway implementation of the ministries, among regions, Forestry and implementation plans. two pathways. and between ministries and Fisheries; Ministry local governments (vertical of Public works and and horizontal alignment) transport; Ministry and coherent institutional of Health; Ministry arrangements. of Mines and Energy; and Ministry of Planning Cambodia’s Long-Term Strategy for Carbon Neutrality 17 Energy required for Technical and economic Provision of incentives or Ministry of manufacturing organic feasibility assessments to tax benefits for starting Agriculture, fertilizers (crushing, produce organic fertilizer. regional organic fertilizer Forestry and drying and plants. Fisheries transportation) to Promotion of solar- replace inorganic powered organic fertilizer Special provisions and tax fertilizer. If organic manufacturing. benefits for organic fertilizer is produced in fertilizer used by food Cambodia, it will have Promotion of regional manufacturers. an impact on the energy organic fertilizer sector. manufacturing to reduce transportation emissions.

2.3.2. Energy sector The main barriers to the LTS4CN scenario in the energy sector include obstacles to electric cooking, large-scale displacement of coal in industries, challenges to increase clean transportation, develop collective transportation and a sustainable transportation economy, increase variable renewable energy, the use of natural gas in the power and transportation sectors, and develop “behind the meter” distributed energy resources. Table 7 suggests how to address these barriers to achieve necessary transformations. Table 7: Technology and capacity needs in the energy sector Major Transformation Required transformative policy Responsible actors challenges and needed measures and capacity barriers Barriers to Active promotion of Significant investments in the Ministry of Mines and electric cooking quality, efficient power sector and incentives for Energy are significant in electric cooking low- and middle-income terms of device equipment (beyond households to adopt quality Electricite du accessibility, rice cookers) to electric cooking devices will be Cambodge (electric cooking habits, households, graduating necessary to support the switch to utility) and widespread to clean cooking where electric cooking. access to reliable the electric grid is Ministry of Industry, and, affordable reliable. Science, Technology clean electricity. and Innovation Expansion of the electric grid to allow the transition to electric clean cooking. The large-scale Supply chains for Allocation of a budget for research Ministry of Industry, displacement of collection of biomass on biomass densification Science, Technology coal in industries residues (mainly from technologies and torrefaction. and Innovation depends on the processing to limit reliable negative impacts on Provision of incentives or availability of soil fertility) and waste subsidized loans for industries sustainable need to be structured. investing in biomass residue biomass and Investments in drying, processing for the domestic waste that are torrefaction, and market. homogeneous densification and have high technologies are energy content. necessary to realize fuel quality. Increasing clean Development of Ministry of Mines and transportation regulatory frameworks Energy (electric vehicles, and a policy CNG, etc.) across environment to Ministry of Public all transportation encourage electric Works and Transport segments vehicles and requires fueling Cambodia’s Long-Term Strategy for Carbon Neutrality 18 Major Transformation Required transformative policy Responsible actors challenges and needed measures and capacity barriers and maintenance alternative fuels Ministry of Industry, infrastructure. uptake. Science, Technology and Innovation Implementation of a charging station Electricite du network for electric Cambodge vehicles. Private sector Implementation of a CNG/LNG fueling network for trucks that cannot move to electric vehicles. Grid reinforcements and modernization to accommodate electric vehicle loads. Development of competencies and market offerings for vehicle maintenance and distribution. Study of hydrogen or other zero-carbon fuels as long-term alternatives to natural gas for the trucking sector. Development of Planning and financing Government setting a long-term Ministry of Public collective for public vision for transportation and Works and Transport transportation transportation and planning accordingly. and a sustainable passenger and freight Ministry of Industry, transportation rail expansions. Capacity building for local Science, Technology economy. authorities and transportation and Innovation New transportation companies (operators, paradigms, manufacturers, etc.). encompassing new technologies, innovative modes of Development of courses at all travel organization and levels for initial training on green behaviour changes. transportation and continuous learning. Reinforcement of transportation management Support to start-ups or local competencies in urban businesses in the sector. municipalities and/or selection of operators. Incentives and promotion campaigns, including potential Development of subsidies for collective competencies and transportation (rail, public market offerings for transportation). other collective transportation services Set up policies to facilitate the such as carpooling deployment of new transportation modes (example, low emission zone LEZ, car parks, etc.). Cambodia’s Long-Term Strategy for Carbon Neutrality 19 Major Transformation Required transformative policy Responsible actors challenges and needed measures and capacity barriers Increasing Resource mapping and Development of policy targets for Ministry of Mines and variable identification of variable renewable energy Energy renewable energy renewable energy penetration. (wind, solar sources. Electricite du photovoltaic) in Development of a prospectus of Cambodge the power sector Incentives, policy priority sites for project implies major targets and tariff development. investments in structures to Electricity Authority generation encourage renewable Institutionalization of auction of Cambodia capacity, grid energy investments. mechanisms for procurement of modernization renewable energy projects on Ministry of Industry, and flexibility, Human priority sites. Science, Technology and storage. resources/capacity to and Innovation support integrated Development and introduction of renewable energy flexible terms for dispatchable planning, installation generation capacity to allow and operations. ancillary services. Modernized power Development and introduction of system operation time-of-use tariff policies. (generation fleet, dispatch and grid Capacity building for code) and development of government/energy sector officials storage to adapt to on integrated power planning, resource resource mapping and intermittence. regulation/tariffication. Contracts and Labour development policies to tariffication train personnel for renewable methodologies that energy systems operations, clean better account for energy technicians, etc. flexibility in needs and risks related to variability. Competitive renewables and storage procurement. Consumer behaviour change to shift demand to times with high resource availability. Use of natural gas Planning and financing Government vision-setting and Ministry of Mines and in the power of natural gas master plans on the long-term role Energy sector (CCGT) infrastructure of natural gas in the energy sector. and investments. Ministry of Public transportation Training/capacity building for Works and Transport (CNG for heavy- Consideration of the public officials on natural gas duty vehicles) long-term flexibility procurement, operations, Ministry of Industry, will require and resilience of regulations, environmental risks, Science, Technology import, storage natural gas etc. and Innovation and potentially infrastructure with transportation respect to a potential Labour force training for operators infrastructure for shift to zero-carbon at port, storage or transportation LNG. gases such as facilities. hydrogen, and potential threats from Allocation of a budget for research market disruptions or on the long-term potential for climate events. natural gas alternatives such as hydrogen. Cambodia’s Long-Term Strategy for Carbon Neutrality 20 Major Transformation Required transformative policy Responsible actors challenges and needed measures and capacity barriers Capacity development for operations and maintenance of related infrastructure and equipment. Development of a regulatory environment to support import, distribution, pricing and health, safety and environment (HSE) oversight. Development of Development of a Incentives for individuals or Ministry of Land “behind the policy and regulatory developers to integrate distributed Management, Urban meter” environment for energy into building constructions Planning and distributed distributed energy Construction energy resources integration in the built Support to businesses in will contribute to environment. developing distributed energy Ministry of Mines and reducing overall offerings. Energy emissions from Development of a the building market offering Integration of distributed energy in Electricity Authority sector and (specialized equipment building codes and electricity of Cambodia decrease suppliers, real estate distribution regulations. pressure on grid- developers, etc.) for connected distributed energy in Policy intervention in urban generation residential and planning and design (reduce capacity, but commercial buildings. carbon footprints and contribute to large-scale spatial development sustainability, integration Grid and regulatory etc.) creates technical adaptations if excess and regulatory energy is reinjected challenges. into the grid.

2.3.3. FOLU sector For the FOLU sector, gaps in the technical capacity for measurement, reporting and verification (MRV) were identified as emphasized in the 2020 Biennial Update Report and the Updated NDC. Capacity gaps relate to a lack of in-depth understanding of the technical aspects of GHGs and mitigation actions, including the detailed set of modalities, procedures and guidelines under the Enhanced Transparency Framework, GHG inventories, mitigation analysis, climate vulnerability and adaptation assessments, projection methods for emissions and removals, quality assurance and control, and technical support for improving activity data and emissions factors. Also important is improving institutional capacity for monitoring and evaluation to enhance reporting on mitigation, adaptation, and support needed and, received. Table 8 provides an overview. Cambodia’s Long-Term Strategy for Carbon Neutrality 21 Table 8: Technology and capacity needs in the FOLU sector Major challenges and Transformation needed Required transformative Responsible barriers policy measures and actors capacity Speed of project and/or The FOLU sector benefits Leadership and political Ministry of investment from programmes already commitments. Environment implementation. in place. The REDD+ Investment Plan is a key initiative that will require full funding and implementation. Access to climate finance. Targets will require an Capacity building for Ministry of optimal use of funding and developing grants and Environment; new climate finance. investment proposals. Ministry of Agriculture, Forestry and Fisheries; Ministry of Planning; and partners Access to innovations in A major aspect of Capacity building, access to Ministry of satellite imagery and mitigation relies on clear funding and a budget Environment monitoring. zoning and monitoring of allocation for research on forests. effective monitoring systems. Implementation of the Statistical sampling Leadership, capacity Ministry of first National Forest approaches for land use building, experimental Environment; Inventory. changes and accurate research and access to Ministry of emissions factors must funding. Agriculture, account for all of the carbon Forestry and pool. Fisheries Data collection system for Systematic data collection Leadership, capacity Ministry of harvested wood products. on harvested wood building and access to Agriculture, products for local funding. Forestry and consumption and export, Fisheries; including biomass use for Ministry of energy. Environment; Ministry of Planning Other emissions from Accounting for all major Leadership, capacity Ministry of forest conversion and GHGs: carbon dioxide, building and experimental Agriculture, forest fires. methane and nitrous oxide. research. Forestry and Fisheries; Ministry of Environment Growth and yield for Sinks are clearly estimated Leadership, capacity Ministry of natural forests and under specific forest types building and experimental Agriculture, plantations of non-native and plantations. research. Forestry and and native species. Fisheries; Ministry of Environment Exposure to natural With higher forest cover Access to funding and Ministry of disasters and fires. and a focus on innovations to increase the Environment; afforestation, mitigation resilience of the forestry Ministry of strategies will need to sector. Agriculture, reduce impacts on forests Forestry and from natural disasters and Fisheries the risk of fires. Cambodia’s Long-Term Strategy for Carbon Neutrality 22

2.3.4. IPPU sector Several major barriers in the IPPU sector include the long-distance transportation of captured carbon, the use of several products for clinker substitution, the risk of increased emissions from recycling aggregate concrete, and the impact of refrigeration and air-conditioning systems on global warming. Needed transformations could build on technical and economic feasibility assessments to determine carbon capture readiness, the allocation of bare lands away from residential areas for carbon storage, the introduction of novel technologies and national-level research on using refrigerants with low global warming potential. Table 9 summarizes major challenges and outlines required technology and capacity. Table 9: Technology and capacity needs in the IPPU sector Major challenges and Transformation needed Required Responsible barriers transformative policy actors measures and capacity Secure storage of captured Technical and economic Allocation of a budget for Ministry of carbon requires extensive feasibility assessments to research on innovative Industry, isolated land areas apart determine carbon capture cost-effective carbon Science, from industrial and urban readiness in the country. capture and storage Technology and zones. Captured carbon technologies. Innovation; therefore needs to be Allocation of bare lands that Ministry of transported long are away from residential Policy changes for Special Environment distances, which may add areas and are not suited for Economic Zones to significant transportation agriculture or forestry. implement carbon emissions (energy sector). capture and storage. Industry collaboration on a megascale project to Provision of incentives or optimize transportation, subsidized loans for rather than relying on industries willing to individual industries. implement carbon capture and storage. Using several products for Allocation of bare lands for Industrial policy change Ministry of clinker substitution, such waste disposal that are away (mandate for the cement Industry, as reduced coal ash from residential areas and industry) to move Science, powder waste and fly ash waterways, and that are not towards cement with less Technology and etc., requires extra land to suitable for agriculture or clinker composition as a Innovation; dispose of waste. This can forestry. sustainable product. Ministry of cause land and water Environment pollution. Provision of incentives or subsidized loans for cement industries willing to implement clinker substitution. Recycling aggregate Introduce novel Policy changes for Special Ministry of concrete requires a special technologies. Economic Zones to allow Industry, process including crushing recycled aggregate Science, technology, which may be concrete. Technology and energy-intensive and Innovation; increase energy sector Provision of incentives or Ministry of emissions. subsidized loans for Environment; industries willing to and Ministry of recycle aggregate Mines and concrete. Energy The impact of National-level research on Impose restrictions or Ministry of refrigeration and air- using low global warming bans on high global Environment conditioning systems on potential refrigerants. warming potential global warming is through refrigerants. both energy use and Refrigerants refrigerant emissions. Cambodia’s Long-Term Strategy for Carbon Neutrality 23 Major challenges and Transformation needed Required Responsible barriers transformative policy actors measures and capacity Nearly 80 percent of total assessment for life cycle New industrial law to emissions comes from emissions of increase the frequency of energy, while 20 percent refrigeration/air- equipment checks; relates to refrigerants. conditioning equipment. implementation of the Refrigerant fluids are law on managing the chosen for their release of gases. thermodynamic efficiency to extract heat and for Introduction of a their safety in use. national-level Replacing high global methodology for end-of- warming potential life disposal. refrigerants with low potential ones inevitably involves a loss of refrigerating efficiency, which increases energy use. As a result, electricity consumption and emissions may increase.

2.3.5. Waste sector Several main barriers to the LTS4CN in the waste sector include gaps in solid data; the lack of clear government investment policies, incentives and mechanisms; insufficient institutional capacity; and limited public participation and awareness. Necessary transformations, among others, centre on installing weighbridges and matters, developing a central database and conducting waste composition studies. Table 10 provides an overview. Table 10: Technology and capacity needs in the waste sector Major challenges and Transformation needed Required transformative Responsible barriers policy measures and actors capacity Install weighbridges at new Allocation of a budget for landfills and meters at new infrastructure and The sector faces a wastewater treatment plants information technology. Ministry of Public general lack of solid with a proper data collection Works and data. Data are usually system. Establish clear roles and Transport; produced using responsibilities for data Ministry of estimations per capita Develop and organize a collection, reporting and Environment; instead of actual central database that is kept analysis. Ministry of measurements, such as up to date. Industry, Science, tonnage of waste sent Technology and to landfills. There is no Conduct studies on the Innovation; centralized database composition of municipal subnational that can be easily solid and industrial waste administrators accessed. and leakages to the environment, and analyse focal sludge. The lack of clear All proposed technologies Ministry of Develop enabling government investment are proven at commercial Economy and investment policies, policies, incentives and scale. Some are expensive Finance, standardized power mechanisms is and complex to run, Ministry of purchase agreements, an hindering private sector however, requiring the Environment, appropriate fee-in tariff for investment and participation of specialized Ministry of Public electricity and gate fees at participation. international companies. Works and waste processing centres. Clear articulation and Transport implementation of Cambodia’s Long-Term Strategy for Carbon Neutrality 24 Major challenges and Transformation needed Required transformative Responsible barriers policy measures and actors capacity government investment Organize competitive policies and incentives will public procurement to enable international private attract global developers sector participation. and investors. Offer land allocations and concessions for waste management facilities. A lack of institutional Reinforce and clarify the Strengthen and implement capacity to assess and regulatory framework and the regulatory/legislative regulate new focus on capacity building framework (environmental Ministry of technologies, including within government impact assessments, Environment; environmental and institutions, including for licensing process). Ministry of Public social safeguards. subnational administrators Works and Environmental impact with direct oversight Improve monitoring and Transport; assessments are responsibilities for waste regulatory oversight. subnational outsourced only to local infrastructure and administrators firms that may not have operations. Institutional capacity capabilities to assess building. new technologies. Limited public Public participation and buy- Long-term awareness participation and in during the development of campaigns and guidance. awareness hinder policy and infrastructure. Ministry of waste management Ongoing awareness raising Provision of infrastructure Environment; improvement. on environment issues and to facilitate compliance Ministry of Public regulations applying to the (e.g., bins, signage). Works and community. Transport; Implementation of subnational regulations (e.g., issuing administrators fines for repeated non- compliance). Cambodia’s Long-Term Strategy for Carbon Neutrality 25 3. Socioeconomic Benefits

3.1. Costs and benefits of LTS4CN actions Figure presents the evolution of net costs and benefits for each of the 31 actions in the LTS4CN. Ten actions account for over 90 percent of total costs and benefits, covering both public and private costs. Actions with the highest net benefits are at the bottom of the figure; actions with the highest net costs are at the top. Major costs are from lost timber and farming revenues arising from reduced deforestation, along with expenditures on carbon capture and storage and to some extent for public transportation over the first decade. Forest restoration also requires net costs in the same period. Four actions would deliver substantial net benefits. Public transportation benefits arise from reduced vehicle operation costs, and time savings among commuters on all modes of transportation due to lower congestion. Renewable energy is profitable through most of the time. Road and rail haulage and switching to low global warming potential refrigerants are also profitable. The private sector would see very strong benefits from energy efficiency. Afforestation yields steadily growing benefits. The electrification of vehicles in the last decade of the period delivers nearly $500 million of benefits by 2050. Cambodia’s Long-Term Strategy for Carbon Neutrality 26 Figure 14: Costs and benefits of key LTS4CN actions, including public and private capital and operating expenditures A marginal abatement cost (MAC) curve describes both the cost effectiveness of the action (on the y-axis) and the scale of its potential contribution to emission reductions (on the x-axis). This Figure presents a MAC curve for the LTS4CN, with the average cost effectiveness over the period on the y-axis and the potential reduction in GHG emissions by 2050 on the x-axis. Labels for smaller actions are removed to make the MAC curve more legible. The more cost-effective actions appear to the left of the curve. Cambodia’s Long-Term Strategy for Carbon Neutrality 27 Figure 15: The MAC curve for 2050 28 The MAC curve provides a guide to help prioritize actions. It offers only a broad overview, however, and simplifies key issues, including changes in cost effectiveness due to technical innovation and market conditions, and greater expense as actions are scaled up. Despite these shortcomings, some conclusions are possible. • About 15 percent of emissions reductions comes from six actions that are strongly profitable: energy efficiency, rail, refrigerants, renewable energy, electric vehicles, and public transportation; • About 50 percent of reductions can be achieved by actions that are marginally profitable, including, in particular, afforestation, forest management, and rice practices; and • The remaining 35 percent of reductions require actions with net costs. These reductions are dominated by reduced deforestation and carbon storage and capture.

3.2. Total economic costs and benefits The economic analysis suggests that the LTS4CN create net economic benefits for the public and private sector even before accounting for adaptation and wider social and environmental benefits. These net benefits start from the first year of the LTS4CN and grow to more than $4 billion in 2050, over 2.8 percent of projected GDP that year. Public and private sectors: Figure shows that public sector costs start at relatively modest levels and grow steadily through the period, reaching nearly $1 billion or 0.7 percent of GDP in 2050. The private sector experiences strong net benefits from the second year, reaching $1 billion in 2036 and growing strongly for the remainder of the period. The figure also shows, however, that these net benefits require significant private sector investment, which must grow steadily to nearly $1.5 billion in 2050. This investment is profitable but requires clear policy commitments to providing private sector confidence in investing in carbon neutral actions. 29 Figure 16: Total costs and benefits of public and private capital and operating expenditures Costs and benefits by sector: Figure 14 shows the sectoral distribution of net costs and benefits. The economic impacts of actions in the agriculture, waste, and IPPU sectors are small. The overall costs are dominated by FOLU, with net costs in 2050 of about $1 billion. These costs are attributed to the FOLU sector but the largest element is the opportunity cost of foregoing income from the agricultural use of deforested land. The cost of foregoing timber sales from deforestation is also large. Direct forestry costs are significant but smaller than the opportunity costs associated with reduced deforestation. The benefits are dominated by energy and transportation, with net benefits of over $4 billion in 2050, driven largely by economic savings from energy efficiency plus reduced commuting costs associated with public transportation, renewable energy, lower haulage costs, and electric vehicles. Cambodia’s Long-Term Strategy for Carbon Neutrality 30 Figure 14: Total costs and benefits by sector

3.3. Public sector costs Figure 15 shows public sector costs by sector, with substantial funding required in energy and transportation, FOLU, and IPPU. Mid-period funding in the energy sector relates largely to public transportation. The strong increase in the last decade is associated with investment in rail and haulage to support strong economic growth, and the loss of a fuel duty as electrification of transportation expands. Figure 15: Public sector costs by sector Cambodia’s Long-Term Strategy for Carbon Neutrality 31 Figure 19 shows the breakdown of public expenditure requirements by key actions. The largest requirements are for operating expenditures in the energy and transportation sectors, which require over $350 million in funding in 2050, with large funding requirements for rail and haulage. The loss of a fuel tax is partially offset by gains from competitive renewable energy generation. Public transportation subsidies are initially high but the analysis assumes that these costs are increasingly offset through cost-recovery fare policies. Carbon capture and storage requires steadily increasing funding; no accounting is made for possible reductions in its costs. Figure 19: Public sector costs by action There are smaller net costs in the forestry sector, mainly from lost forestry royalties but also from the cost of supporting reforestation, afforestation, improved forestry management, and restoration of degraded forest. The costs of public support average $17 million per year in the first 10 years of the LTS4CN. This is consistent with the REDD+ Investment Plan, which requires $16 million per year. Cambodia’s Long-Term Strategy for Carbon Neutrality 32

3.4. Implications for investment, economic growth, gender, and jobs This section considers only the net economic benefits from LTS4CN actions, without taking into account the adaptation and wider social and environmental benefits, which are addressed in the next section. Figure presents the potential loss in GDP arising from climate change with no global commitment to carbon neutrality. This assessment comes from the CEGIM. It suggests that GDP in 2050 would be lower by over $15 billion or 10 percent of GDP if mitigation is limited to the levels assumed in the IPCC mid-range climate change scenarios.10 If global commitments to carbon neutrality are realized, this will not eliminate all GDP losses; the extent of loss avoidance is unclear, however. Some losses arise because of emissions that have already taken place. Achieving carbon neutrality by 2050 would reduce cumulative new emissions by half (if reductions are achieved in a linear fashion), compared to a mitigation policy freezing emissions at current levels. If GDP losses from past emissions account for one third of the total loss, and global carbon neutrality halved remaining losses, GDP loss would fall by about $5 billion in 2050. Figure 20: Implications of LTS4CN for economic growth The assessment above considers only the effects of mitigation actions on reducing GDP loss arising from climate change. Economic analysis shows substantial net economic benefits from LTS4CN actions. It assumes that total annual public and private investment in these actions rises to $18.6 billion by 2050 and accounts for between 5-8 percent of total national investment 10 For floods, droughts, rainfall variability and sea level rise, it used the A1 scenarios in the IPCC Special Report on Extreme Events, and for heat stress, the RCP4.5 scenarios in the IPCC Fifth Assessment Report. Cambodia’s Long-Term Strategy for Carbon Neutrality 33 over the period. The analysis suggests that net annual benefits from this investment would rise to over $6 billion by 2050, which implies an average rate of return on investment of 20-25 percent. In recent years, Cambodia has achieved high growth rates of over 7 percent of GDP with investment levels of about 25 percent of GDP, suggesting that routine non-LTS4CN investment be delivering rates of return on investment similar to those achieved by the LTS4CN investment. Although there is considerable uncertainty around the accuracy of available data, evidence suggests it would be possible to reallocate some domestic investment from routine development to LTS4CN actions without a significant loss of growth. The substantial economic gains from mitigation are thus achievable without significant net economic costs. Based on available evidence, the average return on investment for routine development is about five percentage points higher than for LTS4CN investment, at about 28 percent compared to 20-25 percent. There would, therefore, be a modest reduction in growth from diverting funds from routine development to LTS4CN investment, before considering mitigation, adaptation, and wider benefits. Achieving the financing plan presented in the previous section would mean 26 percent of LTS4CN investment would be funded by international climate finance, without reducing domestic investment in routine development. This would roughly compensate for the difference in returns on investment. The scale of international funding envisaged in the financing plan is consistent with the argument that developing countries should be compensated for the net costs of their contribution to global mitigation. The CEGIM analysis suggests that a package of adaptation measures could reduce losses and damages arising from climate change by 22 percent or about $3.3 billion.11 If global carbon neutrality plans are implemented (worth about $5 billion to Cambodia in 2050) and Cambodia adopts the adaptation measures described in the CEGIM analysis (worth about $3.3 billion), the potential loss of GDP arising from climate change could be about 55 percent less than the $15 billion projected in the CEGIM analysis, 12 without significantly reducing growth from investment in the economy. Figure presents an estimate of the potential value of carbon emissions delivered by LTS4CN actions, if they are valued at the social cost of carbon of $100 per tCO2e.13 This analysis suggests larger reductions in the loss of GDP may be achievable, although given uncertainties around the appropriate value of the social cost of carbon, this comparison is useful mainly as a source of confidence that the LTS4CN economic analysis is not exaggerated. Labour and jobs: The economic benefits from LTS4CN actions could take the form of either increased profits or increased income associated with new jobs and greater wages. Since the case studies reviewed in the economic analysis do not provide enough evidence to assess whether benefits come from profits or income, a detailed modelling of the impact on jobs and incomes is not possible. A first indication can be provided by using evidence in the Cambodia Social Accounting Matrix (SAM), which distinguishes between returns to income and capital for 26 sectors, including agriculture and forestry (56 percent to labour), manufacturing (60 11 These adaptation measures are mostly different than the LTS4CN actions. The benefits are thus separate from the adaptation co-benefits from LTS4CN actions. 12 The net economic benefits from the LTS4CN. 13 The social cost of carbon is estimated by dividing the expected global loss of GDP arising from climate change by the emissions reductions required to avoid that loss. The Biden Administration in the United States of America is currently reviewing evidence on the social cost of carbon but it is expected to rise substantially from the level of $50 per tCO2e used in the Obama Administration to a level greater than $100 per tCO2e. Cambodia’s Long-Term Strategy for Carbon Neutrality 34 percent to labour), and transportation/services (51 percent to labour), with a national average of 45 percent to labour. Statistics from the International Labour Organization (ILO) show average salaries in 21 sectors in 2019, with a national average of $266 per month and $173 per month for agriculture and forestry, $254 for manufacturing, $259 for energy, and $170 for water and sanitation. Using these statistics, it is possible to estimate the number of jobs created by the economic benefits of each LTS4CN sector. The analysis does not count jobs created by actions that have net costs because the costs will be reflected in lower incomes elsewhere in the economy. For example, all FOLU actions do create jobs in forestry but some also involve substantial net costs. In particular, reducing deforestation generates some jobs, such as in enforcement, but it results in the loss of agricultural income from the inability to cultivate land that would otherwise have been converted into agriculture. The analysis suggests that the direct economic benefits from LTS4CN actions would deliver 157,000 jobs by 2050, using the following assumptions: • Only the LTS4CN actions that deliver net benefits are considered; • The share of benefits obtained by labour is based on the SAM; and • All sector salaries rise in line with the CEGIM projections for per capita GDP. All of these jobs are in sectors with average incomes that are less than the national average, generating a net contribution to reducing equality. About 80 percent of the jobs are in the energy and transportation sector. Since it has wages only slightly below the national average, the net impact on inequality would be modest. If resources for LTS4CN investment were used for routine development, outside the LTS4CN, and if they achieved returns similar to the average for Cambodia in recent years, total economic benefits would be slightly higher than direct benefits from LTS4CN actions. As a higher share of benefits would go to profits and average wages would be higher, the total number of jobs created would be slightly higher at about 183,000 in 2050, compared to 157,000 for LTS4CN investment. Table below expands the analysis to include not only jobs created by the direct economic benefits from LTS4CN actions. When jobs from wider mitigation and adaptation benefits are added, LTS4CN actions generate 449,000 jobs in 2050, or 145% more than routine investment. Table 11: Jobs created by the LTS4CN compared to routine investment LTS4CN investment Routine Direct Adaptation Mitigation Total investment benefits and wider benefits* benefits Benefits in 2050 (millions of 5,539 6,971 5,398 17,907 7,758 dollars) Labour share (%) 51 45 45 45 Average salary in 2050 (dollars 18,172 19,074 19,074 19,074 per year) Jobs created in 2050 (hundreds 157 164 127 449 183 of thousands) Note: * Assumes one third of CEGIM loss in GDP from climate change is averted with global carbon neutrality by 2050. Cambodia’s Long-Term Strategy for Carbon Neutrality 35 Impact on gender equality: The impact of the LTS4CN on gender equality is difficult to assess without more detailed evidence on incomes in subsectors and the possibilities for designing actions to promote gender equality. An illustration of the potential impact, however, is provided by comparing the impact of reduced deforestation (the only action with net annual private sector costs) with the impact of energy efficiency (which delivers just over half of total annual private sector benefits). The costs from reduced deforestation involve loss of farm income, where women will be more affected than men because they account for 53 percent of agricultural labour. In contrast, benefits from energy efficiency in manufacturing are over twice the costs of deforestation, and women account for 67.5 percent of manufacturing labour. New jobs for women in manufacturing will be much better paid than those lost in agriculture. Table 2 presents the analysis and shows that the combined effect of the two LTS4CN actions will increase incomes by over $600 million in 2050 and create over 22,000 new jobs. Women will receive 77 percent of the net increase in income and 86 percent of the net increase in jobs. Table 12: Changes in jobs and income for men and women based on lower deforestation and greater energy efficiency in 2050 Lower deforestation Greater energy Total effect of efficiency in both actions manufacturing Women Men Women Men Women Men Total benefits in 2050 –784 1,787 1,003 Labour share of value 56 60 added (%) Change in incomes –439 1,072 633 Share of employment (%) 53.1 46.9 67.5 32.5 Change in gross income –233 -206 724 348 491 143 Sector average income in 11,342 13,332 18,215 18,855 2050 (dollars per year) Change in jobs –20,558 -15,447 39,734 18,481 19,176 3,034 Sources: SAM for the labour share of value added and the ILO for sector incomes and sector average income, updated using CEGIM per capita incomes. The pathway model estimates 53 percent of energy efficiency benefits are in manufacturing. For more, see: ILO and Asian Development Bank, 2103, Gender Equality in the Labor Market. The above analysis considers only the impacts on incomes and jobs from the direct economic costs and benefits of the two LTS4CN actions. There are three further ways in which the LTS4CN will affect gender equality. • Actions have adaptation co-benefits. Since women are more vulnerable to climate change than men, they are likely to benefit more from adaptation; • Actions have wider social and environmental benefits, mainly related to forestry (i.e., better health, non-timber incomes, and flood reduction). These will be shared by both men and women but will benefit women more because they are more engaged in activities linked to natural resources; and • Finally, if the LTS4CN is matched by equivalent global reductions in emissions, there will be very large benefits from reduced economic losses and damages due to slower climate change. Women again will benefit more than men given their greater vulnerability to climate change.

3.5. Adaptation and wider social and environmental benefits Adaptation benefits: A monetary value for adaptation benefits was estimated based on a classification system developed. It is assumed that a high classification will increase benefits Cambodia’s Long-Term Strategy for Carbon Neutrality 36 by 50 percent. This is because most adaptation benefits are associated with resilience to extreme and irregular rainfall patterns. The IPCC Special Report on Extreme Events suggests that the frequency of these events would roughly double by 2050 in Cambodia.14 Therefore, the average increase over the period in benefits from a public action with high adaptation relevance is 50 percent, compared to 30 percent for a mid-level of relevance and 10 percent for low relevance. Wider social and environmental benefits: Wider benefits are estimated based on a comprehensive literature review of case studies reporting on the valuation of social and environmental benefits. This review is summarized in the separate technical Annex. The evidence is patchy. While several studies attempt valuation, they often produce quite widely varying results. Total wider social and environmental benefits are estimated to be worth more than the economic benefits, at nearly $7 billion in 2050. Over 90 percent of these benefits are associated with forestry and almost all the rest with energy efficiency. Key features of the wider benefits are as follows. • Forestry delivers critical watershed benefits related to the retention of water in the soil. This reduces erosion, which decreases dam siltation and improves water quality. It also reduces downstream flooding. For established natural forests, these benefits are estimated at over $500 per hectare a year. Plantations and recovering forest areas also deliver watershed benefits but to a lesser degree. • Forestry delivers important biodiversity benefits with studies suggesting that one-off loss of these benefits from deforestation amount to about $2,000 per hectare. • The economic analysis includes only potential incomes from timber extraction. Wider benefits from tourism and non-timber forest products are also possible, with values of over $300 per hectare reported in various studies. • The main wider benefits from energy and transportation relate to the health benefits from reduced pollution. Global studies provide some indications of the average national cost of pollution linked to emissions. When these are adjusted to reflect Cambodia’s per capita income, they suggest an average of $4.6 per tCO2e. Economic analysis uses this figure for power generation. Emissions from transportation are likely to have significantly higher health costs because people are much more exposed to concentrated levels of pollution. • The Extended Cost Benefit Analysis case studies and international literature review provide some evidence for further specific wider benefits. Health benefits from electrification of cooking are about 10 times higher than average health benefits. Buses and trains cut the number of accidents. Waste actions reduce water pollution.

3.6. Benefits of adaptation for economic growth

3.6.1. Sector adaptation co-benefits analysis An analysis of adaptation co-benefits looked at each sector and related mitigation actions in the LTS4CN. To measure impacts on the country and local levels, an assessment of relevance 14 IPCC, 2012, Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation. A Special Report of Working Groups I and II of the Intergovernmental Panel on Climate Change. Cambodia’s Long-Term Strategy for Carbon Neutrality 37 now and in the medium-term 2050 scenario was included. Some impacts that are not immediately relevant can become very significant with the progression of climate change. It was assumed that extreme events become more frequent in line with the conclusions of the IPCC 2012 Special Report on Extreme Events. The report found that the frequency of most irregular climatic events (from floods to droughts to unseasonal rainfall) will roughly double by 2050. Exposure to climate change will be mainly through the changing frequency of extreme events and rainfall variability. The results of the analysis are reported in the following tables by sector. A scale shows the expected impact of each measure (low, moderate, medium, high, and top). The last column indicates specific NDC actions related to proposed adaptation benefits. Agriculture sector Table 13: Adaptation co-benefits in the agriculture sector NDC Relevance Relevance No Mitigation action Adaptation co-benefit action (now) (2050) number Conservation of biodiversity and ecosystem services as part of an Less methane-intensive integral adaptation strategy 1 rice cultivars to assist human Medium High 63 communities facing the adverse effects of climate change. Minimize the risks (drought, soil loss, etc.) during extreme climatic High High to top 2 events by promoting resilient cropping systems. Reduced exposure to climate related extremes 2 Direct seeding practices and slow onset events Medium High 2 affecting agriculture and dependent livelihoods. Support in suppressing opportunistic agricultural pests and invasive species favoured by higher Low Medium 2 temperature and humidity due to climate change. Introduction of innovative sustainable techniques in crop rotation to strengthen their life cycle, reducing the High High to top 7 use of chemicals, water consumption and soil erosion. Increased crop breeding for Alternate wetting and greater heat and water 3 Medium High 7 drying tolerance as well as food security. Drought preparedness High to increases adaptive capacity Top 85 top for water management in Cambodia’s Long-Term Strategy for Carbon Neutrality 38 response to reduced levels of precipitation. Enable more consistent High to stream flows that can Top 85 top deliver irrigation water. Potential for scaled-up climate-resilient agricultural production through increased access to Low Medium 85 solar irrigation systems and other climate resilient practices. Daily spreading of Reduced vulnerability to 4 manure and use of climate-related erosion in Medium High 7 digesters cropping systems. Value addition can reduce Improved feed quality sensitivity to climate 5 Medium High fodder management extremes and changes in 11,13 agriculture. Increased soil fertility, which can help farmers Promotion of organic 6 deal with increased Medium High N/A fertilizers temperatures and climate variability. Energy sector Table 14: Adaptation co-benefits in the energy sector NDC Mitigation Relevance Relevance No Adaptation co-benefit action action (now) (2050) number Increased energy security and 1 Building sector less reliance on primary energy High Medium 50,51 imports, e.g., fuels, coal, etc. Increased adaptive capacity and resources of local communities affected by climate Medium High 50,51 change. Improved ability and capacity of vulnerable populations to protect themselves during climatic Medium High 50,51 events. Better-insulated buildings reduce both energy consumption and the impact of climate change- Medium High 50,51 induced heat waves. Decreased stress on systems that supply needed goods and services, given the intensification 2 Industry N/A of resource and energy use, in High High to top particular through energy efficiency actions. Through energy efficiency, improved insulation moderates internal temperatures during Medium High 39 extreme heat/cold events. Potential reduction in heat island effect/internal heating and Low Medium 39 cooling load from panel shading. Cambodia’s Long-Term Strategy for Carbon Neutrality 39 NDC Mitigation Relevance Relevance No Adaptation co-benefit action action (now) (2050) number Increased use of public transportation can provide additional transportation options 3 Transportation and reduce redundancy in Low Medium 56 transportation systems during emergency events. Electric vehicles as additional emergency transportation for large populations in the event of Low Medium 56 evacuations or other major climatic events. Electric vehicles can potentially be utilized as back-up batteries Low Medium 56 in emergency situations. Reduction of exposure to fluctuating fossil fuel costs and Power escalating carbon costs for 4 High generation vulnerable populations Medium 24,25 disproportionately impacted by climate change. Facilitation of inclusiveness within the energy transition as a major pillar of adaptation Low Medium 24, 25 (distributed generation, local renewable producers). Charcoal forest fire prevention and biodiversity protection since fires become more common with higher temperatures and longer 5 Biomass supply dry spells. By limiting onsite Medium High 63 burns of biomass material, it could be repurposed as an energy input. FOLU sector Table 15: Adaptation co-benefits in the FOLU sector NDC Relevance Relevance No Mitigation action Adaptation co-benefit action (now) (2050) number Increased forest resilience to Stop climate change and reduced 1 deforestation vulnerability of local High High to top 63 populations. Preservation of natural assets as a source of economic returns in the long run and reduced Medium High 63 future expenditure to mitigate adverse events. Prevent soil erosion and reduce flooding risks. High High to top 63 Reduced risks from landslides. High High to top 63 Favours water retention, moderate evapotranspiration Medium High 63 and river restoration. Cambodia’s Long-Term Strategy for Carbon Neutrality 40 NDC Relevance Relevance No Mitigation action Adaptation co-benefit action (now) (2050) number Preserving natural corridors enables species migration and supports the maintenance of Low Medium 63 ecosystem and genetic diversity. Reduced heat stress and animal mortality. Low Medium 63 Increased species composition (e.g., the mix of hardwood and softwood species), age structure and harvest regime, Medium High 63 and reduction of species emigration and extinctions. Avoiding biotic disturbances such as the spread of pests and pathogens favored by climate change, while increasing Low Medium 63 connectivity in ecological networks. Improved forest management High/Middle/ and protection and the Low development of sustainable 2 sequestration ecosystem services, which can High High to top 63 forest result in avoided deforestation or reforestation. Conserving water in natural systems to alleviate the effect of High High to top 63, 35 droughts or prevent floods. Ecosystem protection through the restoration of natural 3 Agroforestry habitats affected by climate High High to top 1, 4 change; restored hydrological balance in river basins. Agroforestry can underpin poverty reduction and improve food availability for marginal Medium High 1,4 rural communities more affected by climate change. Increased filtering of stormwater and improved air quality assisting in adapting to Medium High 1,4 climate change. Maintaining groundwater and surface water quality and quantity; reducing and delaying High High to top 1,4 flood flows. Cambodia’s Long-Term Strategy for Carbon Neutrality 41 IPPU sector Table 16: Adaptation co-benefits in the IPPU sector NDC Mitigation Relevance Relevance No Adaptation co-benefit action action (now) (2050) number New materials can help to prevent overheating in warmer Clinker 1 climates, keeping buildings cool substitution Low Medium N/A when temperatures rise due to climate change. Using several products for clinker substitution, such as coal ash power, would reduce waste Medium High N/A and land needed for disposal. Replacing clinker with industrial waste or by-products prevents Low Medium N/A such waste ending up in landfills. Increased range of available adaptation options as well as Carbon capture their effectiveness in reducing or Low 2 and storage Medium avoiding risk from increasing N/A rates or magnitudes of climate change. Promoting the use of locally Introduce available mineral resources 3 alternatives for contributes to energy efficiency N/A Low Medium cement in buildings given thermal mass, fire resistance and durability. The use of alternative raw materials will reduce the use of primary raw materials whose Medium High N/A availability can decline through climate change. Use of substitutes for 4 ozone-depleting N/A N/A N/A N/A substances (i.e., F-gases) Promote sustainable Increased energy security and 5 energy practices less reliance on energy imports Medium High N/A in manufacturing Improved insulation moderates internal temperatures during Medium High N/A extreme heat/cold events Increased stakeholder awareness (building designers, users and owners) about risks and N/A potential impacts on the Medium High environment posed by variable weather patterns and observed and projected climate changes. Climate-friendly Reduction of exposure to cooling of public fluctuating fossil fuel costs and 6 sector buildings escalating carbon costs for High High to top N/A vulnerable populations Cambodia’s Long-Term Strategy for Carbon Neutrality 42 NDC Mitigation Relevance Relevance No Adaptation co-benefit action action (now) (2050) number disproportionately impacted by climate change. Large-scale public-private risk reduction and economic diversification through Low Medium N/A government insurance for the non-diversifiable portion of risk. Waste sector Table 17: Adaptation co-benefits in the waste sector NDC Mitigation Relevance Relevance No Adaptation co-benefit action action (now) (2050) number Waste management prevents surface and groundwater Solid waste 1 contamination from toxic wastes disposal Low Medium 84 that is higher in periods of intensive rain. Biogas and fertilizers from waste can increase agricultural yields Medium that may decline due to climate High 8 change. Biogas can increase energy security and reduce reliance on N/A Medium High energy imports. Biogas can reduce the exposure to fluctuating fossil fuel costs and escalating carbon costs for vulnerable populations Medium High N/A disproportionately impacted by climate change. Reduced soil erosion, which can Biological otherwise be higher during 2 treatment of periods of intense rain that will High High to top N/A solid waste become more common due to climate change. Improved crop yields through using compost. Medium High 8 Compost can increase soil fertility and replenish organic matter and High High to top N/A nutrients. Improved moisture retention of soil (resulting in lower irrigation Medium High N/A requirements). Incineration Improved soil conditions in areas and open N/A 3 degraded by climate change and burning of Low Medium used for waste burning. waste Benefits from energy production High (see Action 1). Medium N/A Cambodia’s Long-Term Strategy for Carbon Neutrality 43 NDC Mitigation Relevance Relevance No Adaptation co-benefit action action (now) (2050) number Adaptive water management in Wastewater waste treatment can help adjust to 4 treatment and uncertain hydrological changes Medium High 82 discharge due to climate change. Adaptation benefits from compost production (see Action 2). Medium High N/A Cambodia’s Long-Term Strategy for Carbon Neutrality 44 4. Governance, Measurement, Reporting and Verification

4.1. Governance structure The institutional arrangements for implementing the LTS4CN build on existing national coordination arrangements. The roles and responsibilities of each stakeholder are presented in Table 18. Table 18: Roles and responsibilities of stakeholders Stakeholder Roles and functions in LTS4CN implementation National Council for Coordination and integration Sustainable Development Capacity building and knowledge management Stakeholder engagement Ministry of Planning, Ministry Support to the integration of the LTS4CN implementation at national and of Economy and Finance subnational planning and budgeting Support to MRV development and implementation Sector-lead LTS4CN planning and implementation in respective sectors ministries/government Provision of information to the National Council for Sustainable institutions Development Non-governmental LTS4CN implementation organizations Provision of information Provision of support Engagement in policymaking Representation of vulnerable groups Private/finance sector LTS4CN implementation Engagement in policymaking Provision of information Development partners Provision of support Engagement in policymaking Academia Provision of research, development, innovation and information Engagement in policymaking Cambodia’s Long-Term Strategy for Carbon Neutrality 45 Stakeholders are represented in the following organogram. Figure 21: Stakeholder roles and responsibilities

4.2. MRV indicators and tracking

4.2.1. MRV framework MRV helps transparently demonstrate progress in implementing the LTS4CN in line with the targets of Cambodia’s Updated NDC. Cambodia has developed an integrated and detailed MRV system for her updated NDC that comprises tracking and reporting on progress towards adaptation and mitigation, finance received, and required capacity support. The system assists in the coordination of NDC implementation, provides a collective and easy way to update progress made, serves as an effective communication and engagement tool, and provides access to all information relevant to reporting under the Paris Agreement. In developing the system, particular attention was paid to integrating cross-cutting issues in the tracking, such as those related to youth, gender, and private sector engagement. The MRV framework for the LTS4CN will build on existing government systems, while strengthening capacity and data collection capability where possible. It will be integrated into the online NDC tracking system with reporting conducted in parallel. The long-term process will be tracked with specific sectoral headline indicators (Table 19) and results indicators that will be selected later. Cambodia’s Long-Term Strategy for Carbon Neutrality 46 Table 19: Main sectoral headline indicators Sector Indicator Frequency Waste Total GHGs emissions from the waste sector (MtCO2e): solid waste Annual disposal, biological treatment, open burning, wastewater Percentage of emissions reduction by the waste sector against BAU: solid Annual waste disposal, biological treatment, open burning, wastewater Agriculture Total emissions (MtCO2e) from the agriculture sector Annual Percentage of emissions reduction by the agriculture sector against BAU Annual IPPU Total emissions (MtCO2e) from the IPPU sector Annual Percentage of emissions reductions by the IPPU against BAU Annual Energy Total emissions from the energy sector (MtCO2e) Annual Percentage of emissions reductions by the energy sector against BAU Annual FOLU Total emissions from the FOLU sector (MtCO2e) Annual Percentage of emissions reductions by the FOLU sector against BAU Annual TOTAL Total emissions (MtCO2e) for waste, agriculture, IPPU, energy, and FOLU Annual Percentage of emissions reductions (waste, agriculture, IPPU, energy, Annual and FOLU)

4.2.2. Reporting responsibility The LTS4CN will likely be reviewed every five years in line with the framework for updating NDCs. This will ensure the transparency, accuracy, and comparability of information on emissions reductions leading towards carbon neutrality by 2050. Relevant sector leads and ministries will contribute to tracking LTS4CN implementation. They will need to communicate outcomes to the National Council for Sustainable Development to support national reporting. The Council is responsible for collecting and submitting Cambodia’s national reporting related to the Paris Agreement. Cambodia’s Long-Term Strategy for Carbon Neutrality 47