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

most places. Before we get there, we are in an interregnumwhen policy making is quite complex. What the situationneeds are credible agents that provide the vision to bridge thegap, leadership in this crucial task, and the capacity to mobilizeand channel resources responsibly. As suggested in thisreport, the WBG can and must contribute to this leadership.The WBG RoleThe report finds that there are multiple and overlappingreasons for WBG involvement and action. First, it is evidentthat when environmental externalities are taken intoaccount, unregulated markets will not optimize socialwell-being. Second, given past regulatory practices and therising costs of sustainable energy services associated withclimate change and with other environmental and resourceproblems, there is good reason to believe that greenergrowth built on less extensive exploitation of this resourcebase can increase productivity and development. Third, thehistorically low resource prices associated with prior industrialgrowth have failed to motivate innovation of systemsthat use resources in smarter ways. Looking systematicallyat these opportunities through integrated planning is theresponsibility of agencies such as the WBG, which makeinvestment capital available, especially in poorer countrieswith less institutional capacity to perform this analysis.The IEG report highlights that the problem of responsibleleadership in this field is compounded by the inability ofthe multilateral system over the past years to agree on aregime for giving meaningful price signals and complementaryincentives for managing carbon risks. It has beenrecognized in principle that climate change is a true threatto development and poverty alleviation, and there is agrowing (although not yet sufficiently large) willingness topay for global mitigation services. Yet there are not inclusivesanctions imposed on greenhouse gas emissions thatwould signal to all nations that resource use must changeor provide the funds for climate-specific transfers to put asignificant positive incentive behind cleaner technologiesin less developed countries. In the absence of such agreedinternational policy guidance to markets, it is especiallyimportant that established global coordinating agents usefinancial markets to internalize the shadow costs of carbonand the prospective returns of green investment into theirinvestment portfolios. We believe that the WBG—with itsaccess to world capital markets, the ears of policy makersin all countries, and a credible engagement in both developmentand environmental issues—is a strong candidatefor this position. There are many other important agents,including governments, industry, and the United Nations.However, in the current situation, there is a particularneed for the WBG to consider its exceptional position toarticulate and promote the long-run investment horizon,the production of global public goods and services, and thesystemic planning perspective that few other financial bodiesare able to define and pursue.Although the report does not make the overall portfolio ofWBG energy investments a principal subject of criticism,we urge that this question of WBG perspective receivemore direct attention. The bottom line is that virtuallyall forms of energy supply entail some serious issues, andhence optimization of demand through effective management,overview of tariff structures, reduction of grid losses,and other methods of increasing energy productivity should@ CorbisStatement of the External High-Level Review Panel | xxv