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

Specifically, the WBG could:• Place greater emphasis on large-scale energy efficiencyscale-up, as measured by savings in energy and reducedneed for new power plants. This includes support forefficient lighting and for exploration of the scope foraccelerating the global phase-out of incandescent lightbulbs. It includes continued and expanded support forreductions in T&D losses. And it includes proactivesearch by IFC for large-scale, catalytic investments inenergy efficiency. There is scope to coordinate WorldBank support for demand-side energy efficiency policieswith IFC support for more efficient manufacturingand more efficient products.The WBG should, wherever possible, help clients findcleaner, domestically available alternatives to coal power.As is clear from the findings here and in Phase I, no-regretsalternatives can include energy efficiency, hydropower, andnatural gas. Moreover, the WBG faces strategic choices instaffing and programming between building up expertisein “sunrise” sectors of broad applicability (energy efficiency,land use management for carbon, energy systems planning)versus “sunset” sectors (coal power).But should the WBG completely forswear coal? Consider,as an analogy, the 1991 Forest Strategy’s ban on commerciallogging in primary moist tropical forests. IEG’s review (IEG2000) found that the strategy prevented Bank staff from engagingthe sector in proactive ways to improve economicand environmental management of tropical forests. Theban was rescinded in the 2002 Strategy, without triggeringlogging investments. Analogously, it is important that theWBG maintain its “honest broker” ability to help countriesengage in systemwide energy planning. A perverse resultwould occur if disengagement from coal had a chilling effecton the WBG’s ability to engage in policy and planningdialogue that could promote low-carbon alternatives.IEG recommends that:• The WBG should help countries find alternatives tocoal power while retaining a rarely used option to supportit, strictly following existing guidelines (includingoptimal use of energy efficiency opportunities) andbeing restricted to cases where there is a compellingargument for poverty or emissions reductions impactsthat would not be achieved without WBG support forcoal power.The WBG cannot tackle coal substitution alone. Complementaryfinancing for renewable energy, and investments intechnology research and development, are needed from thedeveloped world to provide better options for WBG clients.Protected areas deter tropical deforestation, providing localenvironmental benefits and conserving biodiversity as wellas reducing carbon emissions. These impacts are greaterwhen sustainable use of the forest is permitted, and greaterstill for indigenous areas. This suggests compatibility of socialand environmental goals. Environmental service paymentscan, in principle, achieve much the same results inforests where protected areas are not an option. However,payment for environmental services impacts have been dilutedby limitations of finance and unfocused targeting ofpayments. Consequently, IEG recommends the following:• The WBG should continue to explore, in the REDDcontext, ways to finance and promote forest conservationand sustainable use, including support for indigenousforest areas and maintenance of existing protectedareas.In terms of WBG instruments—• MIGA’s upcoming FY 2012–15 Strategy should outlineMIGA’s role and scope for MIGA to provide political riskinsurance to catalyze long-term financing for renewableenergy projects, building on its expertise and existingportfolio of climate-friendly guarantee projects.• The World Bank should enhance the delivery of itsguarantee products by taking actions to improve policiesand procedures, eliminate disincentives, increaseflexibility, and strengthen skills for the deployment ofthe products. It should assess the potential for greateruse of partial risk guarantees to mobilize long-term financingfor renewable energy projects, particularly inthe context of feed-in tariffs or other premiums to supportinvestment in renewable energy.• The Carbon Partnership Facility and other post-Kyotocarbon finance efforts should focus on demonstratingtruly catalytic ways to overcome barriers to lowcarboninvestments. They should also have clear exitstrategies.Reorient incentives toward learning and feedbackThe WBG is valued by clients for its knowledge. It producesand publishes an impressive array of research, analyses, reviews,and toolkits, drawing in part on its experience. Yetby failing to gather feedback from operations, it squandersvaluable sources of knowledge—knowledge that couldimprove its products and advice in economically measurableways—by failing to learn from its project experience:• Hundreds of millions of dollars are allocated in guaranteesor loans for energy efficiency, without systematicfeedback on how and where these interventions are inducinginvestments.• CFL distribution projects are being scaled up to multimillionbulb efforts without systematic feedback fromearlier projects on which interventions are most effectiveand sustainable. 1• Protected area and community forest projects lack systematicmonitoring of forest conditions (including carbonstorage and biodiversity), of the welfare of forestConclusions and Recommendations | 83