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

Appendix KEvaluation Summary from Climate Change and the WorldBank Group—Phase IClimate change threatens to derail development, even as developmentpumps ever-greater quantities of carbon dioxideinto an atmosphere already polluted with two centuries ofWestern emissions. The World Bank, with a newly articulatedStrategic Framework on Development and ClimateChange, must confront these entangled threats in helpingits clients to carve out a sustainable growth path.But this is known territory—many of the climate changepolicies under discussion have close analogues in the past.This phase of the evaluation, focused on the World Bank(and not the International Finance Corporation or the MultilateralInvestment Guarantee Agency), assesses the WorldBank’s experience with key win-win policies in the energysector—policies that combine gains at the country levelwith globally beneficial greenhouse gas (GHG) reductions.The next phase will look across the entire World BankGroup at project-level experience in promoting technologiesfor renewable energy and energy efficiency and at someissues related to climate change in the Bank’s transport andforestry portfolios.Within the range of win- win policies, this report examinestwo that have long been discussed but are more relevantthan ever in light of record energy prices: removalof energy subsidies and promotion of end-user energy efficiency.Energy subsidies are expensive, damage the climate,and disproportionately benefit the well off. Their reductioncan encourage energy efficiency, increase the attractivenessof renewable energy, and allow more resources to flow topoor people and to investments in cleaner power. Thoughsubsidy reduction is never easy, the Bank has a record ofaccomplishment in this area, especially in the transitioncountries. About a quarter of Bank energy projects includedattention to price reform. Improvements in the design andimplementation of social safety nets can help to rationalizeenergy prices while protecting the poor.End-user energy efficiency has long been viewed as a winwinapproach with great potential for reducing emissions. Itbecomes increasingly attractive as the costs of constructingand fueling power plants rise. About 5 percent of the Bank’senergy commitments by value (about 10 percent by number)have gone to specific efficiency efforts, including end- userefficiency and district heating. Including a broader rangeof projects identified by management as supporting supplysideenergy efficiency would boost the proportion above20 percent by number. Few projects tackled regulatoryissues related to end- user efficiency, though the Bank hasinvested in some technical assistance and analytical work.This historical lack of emphasis on energy efficiency is notunique to the Bank and reflects the complexity of pursuingend- user efficiency, a pervasive set of biases that favorelectricity supply over efficiency, inadequate investments inlearning, and inattention to energy systems in the wake ofpower sector reform.The record levels of energy prices in 2008, although theyhave been relaxed, provide an impetus for the Bank and itsclients to choose more sustainable long- term trajectories ofgrowth. The mid-2008 oil price was equivalent to the 2006price, plus a $135 per ton tax on carbon dioxide—the kindof level that energy modelers say is necessary for long-termclimate stabilization. To help clients cope with the burdenof these prices, and take advantage of the signals they sendfor sustainability, the Bank can do four things:1. It can make promotion of energy efficiency a priority,using efficiency investments and policies to adjust tohigher prices and constructing economies that are moreresilient.2. It can assist countries in removing subsidies by helpingto design and finance programs that protect the poorand help others adjust to higher prices.3.It can promote a systems approach to energy.4. And it can motivate and inform these actions, internallyand externally, by supporting better measurement of energyuse, expenditures, and impacts.Goals and ScopeThis evaluation is the first of a series that seeks lessonsfrom the World Bank Group’s experience on how to carveout a sustainable growth path. The World Bank Group has118 | Climate Change and the World Bank Group