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Energy and the Environment

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 Overview                                Carbon Finance
 Energy Efficiency                   Future Focus


Demand for energy, a fundamental driver of economic development, is growing fast in the East Asia and the Pacific. Each stage of the energy production and consumption process impacts the environment in several ways. For example, energy production causes landscape changes (e.g. dams) and consumption is a major cause of air pollution and acid rain. In the EAP region, there are many energy related environment problems, some of the most serious of which are urban and transboundary pollution and global climate change.

The region's energy supply is dominated by coal in China and oil in other EAP countries. The need for diversification is recognized: the most commonly held energy objective among governments in the region is to develop a more efficient, diversified, and environmentally responsible energy sector. Emissions per unit of production are declining in many EAP countries due to reforms, such as stricter emissions standards, a shift away from heavy industry, improvements in energy efficiency and fuel quality, and the opening up of electricity and coal markets. However, with current rates of economic growth and associated increases in energy consumption, the region is faced with ever- increasing levels of energy pollution.

Energy Efficiency

A substantial part of the World Bank's active energy portfolio is promoting energy efficiency improvements. For example, in Vietnam, the World Bank is supporting initiatives to improve the efficiency of energy supply and consumption by addressing demand-side issues. EAP countries are also starting to take advantage of the financing opportunities for energy efficiency through the Clean Development Mechanism. A World Bank-supported project in the Philippines is financing the country's first wind farm, thus supporting the use of renewables in lieu of fossil fuel in power generation. In China a project is underway to transform methane, which results from coal generation, into thermal energy, thus capturing one of the most harmful greenhouse gases and putting it to productive use.

The Asia Alternative Energy Program (ASTAE) provides support for a broad portfolio of renewable energy and energy efficiency projects and activities throughout Asia.

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Carbon Finance

For the period 1999-2000, the UNFCCC reported that 18.7 percent of global carbon dioxide emissions from fossil fuel combustion originated in the developing countries of East Asia. The World Bank supports a number of initiatives in the region to reduce carbon and other greenhouse gas (GHG) emissions including the Kyoto Protocol’s Clean Development Mechanism (CDM).  CDM allows industrialized “Annex I” countries, with obligations to reduce their emissions in the Kyoto Protocol’s first commitment period (2008-2012), to invest in GHG emission reduction projects in developing “non Annex I” countries. Annex I countriescan then claim the resulting Certified Emission Reductions (CERs) from the investments against their on Kyoto obligations.  

The World Bank has helped developing countries establish the necessary institutions and procedures that allow public and private players to enter the carbon market and linked private sector buyers of carbon credits with projects in developing countries. The World Bank has become trustee of several carbon funds and facilities on behalf of Annex I governments and has also launched the Community Development Carbon Fund (CDCF) and the BioCarbon Fund (BioCF) to enable smaller and rural communities to benefit from carbon finance. Recently, the World Bank established the Umbrella Carbon Facility (UCF) to allow for the aggregation of funds at a scale that would permit the purchase of large volumes of CERs.

Green Arrow HFC-23 Project

In December, 2005, two Chinese companies signed emission reductions purchase agreements with the World Bank’s Umbrella Carbon Facility for the largest emission reductions project on record. Through the €775 million (US$930 million) contract, the two private chemical companies, Jiangsu Meilan Chemical Co. Ltd., and Changshu 3F Zhonghao New Chemicals Material Co. Ltd, in Jiangsu Province in The People’s Republic of China are expected to reduce emissions of about 19 million tons of carbon dioxide equivalent annually.

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Future focus

The World Bank will continue to address energy related environmental issues, and in the future it will focus on:

  • Reducing exposure to indoor air pollution by supporting access to cleaner and renewable forms of energy, particularly in rural areas, and supporting improved stoves programs.
  • Promoting cleaner fuels for transport, energy production and domestic fuel use (e.g. through the Clean Air Initiative).
  • Supporting renewable energy, end-use efficiency, and clean coal technologies.
  • Supporting good environmental management and pollution abatement in the energy sector.
  • Developing carbon finance opportunities in the energy sector.

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