The Challenge of Low-Carbon Development - World Bank Internet ...

• Scale up high-impact investments for solutions thatwork.• Use feedback and learning as a source of value for theWBG and its clients.The first point, with associated recommendations, wastreated in Phase I. The other two are discussed here.Be a venture capitalist of technologies, broadlyunderstoodIn both the public and private spheres, the WBG can supportthe transfer, adaptation, piloting and demonstration ofinnovative technologies, policies, and financial practices—as it has, for instance, with energy service companies, busrapid transit, solar photovoltaic systems, and agroforestry.As in the case of private investments, these demonstrationscarry risks but can offer high returns. What counts for clients,the WBG, and the world, however, is the return onthe portfolio in development, poverty reduction, and GHGmitigation. The vision is to prepare a pipeline of developmentsolutions that can be pursued on a large scale by theWBG and other funders, as climate finance expands.A first challenge is to accept some prudent risks in pursuitof a high-return portfolio. For World Bank clients, thismeans using GEF or other concessional funds to supportthe earliest and riskiest ventures. Risk is further mitigatedby starting small and staging successively larger pilots anddemonstrations, from test site to province to nation. Withincreasing experience and comfort, the scale expands andthe risk declines. For WBG staff and managers, it is importantthat demonstration and pilot projects’ objectives beframed in terms of learning. For instance, if the project’sgoal is to test the financial viability of an innovation andthe test shows convincingly that it is not viable, it should beconsidered a successful project.But a more fundamental change in incentives may be necessary.In IFC, for instance, a venture capital team has secureda niche within IFC’s generally conservative and risk-averseculture. This could be inspirational for the World Bank.A second challenge is to design projects effectively forleaning and diffusion. Pilot or demonstration projectsmust have a clear notion of what is being demonstrated, towhom, and how; demonstration should be formulated asa goal and appropriately measured. For instance, the RegionalSilvopastoral Project used experimental techniquesto rigorously document the private gains from some kindsof agroforestry, and industry groups used this informationto get government support to scale up. But some projectsfailed to recognize that private firms are reluctant to shareproprietary information. So, for instance, the beneficiariesof technology licenses in the Efficient Boiler Project did notshare their boiler designs with competitors. In contrast, pilotESCOs in the Energy Conservation Project were obligedto share their experience with others, and the model diffusedrapidly.In sum, the social networks and information mechanismsfor demonstration and diffusion should be as importantin project design as the hardware being demonstrated. So,too, is the capacity building, which is an integral part oftechnology transfer. The distinctive features of pilot, demonstration,and technology transfer projects argue for additionalsupport for preparation and supervision in fundingand on-call expertise.There is a clear case and large scope for WBG involvementin technology transfer at the national level. The case is lessclear for WBG involvement in new technology developmentat the global level. Candidate technologies would be thosewhere WBG support could make an appreciable differenceto the global market, helping to push costs down. Of specialinterest are technologies that are beneficial for poor peopleand difficult to protect from copying (and therefore attractlittle private research and development)—for instance, inagriculture and land use. The proposed new WBG effortto support concentrated solar power is a plausible area ofsupport because a large proportion of the suitable resourceis located in client countries, the technology is suitable formanufacture in client countries, and the proposed effort islarge enough to globally push the industry along the costcurve.Specifically:• The World Bank and IFC should create incentives andmobilize resources to support effective pilot, demonstration,and technology transfer projects that have aclear logic of demonstration and diffusion. This willinclude mobilizing GEF and other concessional fundsto mitigate World Bank borrower risk, reshaping incentivesfor staff and managers, providing adequateresources for the design and supervision of complexprojects, and making available specialized expertise intechnology transfer and procurement through a real orvirtual technology unit.Scale up high-impact investmentsIn the process of scaling up, the WBG can work with clientsto choose the sectors and instruments that offer the greatestreturn on investment. This evaluation finds that the WBGcould place more emphasis on energy efficiency. It is generallycheaper than renewable energy and has fewer potentialnegative environmental impacts. If coordinated with gridexpansion, it can be an important contributor to energyaccess. It plays a prominent role in the 2010–30 time-sliceof most long-term climate stabilization scenarios. And it isapplicable to all countries—it is the poorest who can leastafford inefficiency. There are many aspects of energy efficiencythat are in need of further piloting, but there areample candidates for scale up.82 | Climate Change and the World Bank Group