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

would allow industrialized countries to seek cost-effectiveopportunities for GHG reduction in developed or transitioncountries. This was in line with the UNFCCC’s principleof “common but differentiated responsibilities andrespective capacities.” It would take advantage of low-costoptions to retrofit aging infrastructure in transition countriesand to install cleaner greenfield equipment in rapidlygrowing developing countries.This approach was piloted in the Activities ImplementedJointly Program, in which the World Bank participated.It evolved into the Kyoto Protocol, which was adopted in1997 (but did not enter into force until 2005).The Kyoto Protocol assigned GHG emissions allowancesto industrialized countries. To exceed its emissions limit,a country was obliged either to purchase allowances fromanother industrialized country or to purchase a carbonoffset from a developing or transition country (see box5.2). The World Bank’s Prototype Carbon Fund (PCF;whose staff had been involved in GEF and the ActivitiesImplemented Jointly Program), put in place after Kyotoand launched in 1999, was intended to pilot the concept ofcarbon offsets and help catalyze this avenue for investmentin GHG mitigation.The 2001 WBG Environment Strategyincluded win-win approaches andmobilization of concessional funds.The dual-track approach—win-win opportunities complementedby mobilization of concessional funds—was includedin the 2001 WBG Environment Strategy and hasbeen pursued since. An independent review (Nakhooda2008) assessed 54 Country Assistance Strategies issuedover 2004–07 and found that 32 discussed GHG mitigationin a sectoral context. At the 2004 Bonn InternationalConference on Renewable Energies, the WBG committedto expand its lending for renewable energy (excluding largehydropower) and energy efficiency by 20 percent per yearover 2005–09 from a baseline of $209 million. The Banksurpassed its commitment by a large margin (see chapter2). In 2007, the Bank endorsed an Investment Frameworkfor Clean Energy and Development. The frameworkhad a broader scope than its name suggests, emphasizingelectricity access and including climate adaptation as wellas mitigation. The mitigation component focused on mobilizationof concessional funds for investments in cleantechnologies and promotion of carbon trading.Meanwhile, the UNFCCC process began to focus on the eraafter 2012, when the Kyoto provisions expire. The 2007 BaliAction Plan emphasized mitigation, adaptation, and financialand technological support for developing countries.It opened the negotiations to include reducing emissionsfrom deforestation and forest degradation (REDD), a majorsource of emissions not addressed in the Kyoto Protocol.And it called for setting a long-term global goal for emissionsreductions. The Bali Action Plan was widely expectedto culminate in a new international agreement at the 2009Copenhagen climate meetings.Development and Climate Change: A Strategic Frameworkfor the World Bank Group was adopted in 2008. Althoughthe SFDCC recognizes the primacy of the UNFCCC in theclimate area, its goals are to support sustainable development,including “climate-related economic opportunities,”and to “facilitate global action.”The SFDCC emphasizes six action areas (box 1.1), alignedwith the Bali Action Plan. Four of these areas are concernedwith mobilizing finance, from traditional and novel sources,and with supporting technology investments. The frameworkcommits the WBG to increase the share of energylending devoted to low-carbon projects (including largehydro) from 40 percent in 2009 to 50 percent in 2011, byincreasing financing of energy efficiency and new renewableenergy by 30 percent per year. It coincides with the mobilizationof the $6.2 billion Climate Investment Funds, a newsource of financing for pilot projects aimed at initiatingtransformational changes. The core of the Climate InvestmentFunds is the $5.1 billion Clean Technology Fund, providingfinancing for demonstration, large-scale deployment,and transfer of low-carbon technologies. These funds wereseen as transitional devices, pending mobilization of muchlarger-scale financing as part of a new climate agreement.The 2008 strategic framework emphasizessix action areas, four of which concernfinance and investment.However, the 2009 meeting in Copenhagen did not resultin a comprehensive, binding climate agreement. This leavesthe WBG to operate in a partial vacuum.If there were an agreed, funded operationalization of theUNFCCC goal of GHG stabilization that spelled out roles,responsibilities, and funding sources, the WBG and itsclients would be better able to make development choicesconsistent with a low-carbon growth path. Absent suchan agreement, each development choice is fraught withambiguity, as in the controversy over coal-fired power generation(see chapter 4). And it is not clear when, if ever,anticipated multibillion dollar per year climate financingsources may come into being.Evaluation QuestionsBefore the SFDCC, the WBG had limited objectives explicitlyrelated to climate change. Where such objectives exist,IEG can assess performance against them. Activities withIntroduction | 5