Interview with Ken Chomitz

Ken Chomitz it the author of the  "Climate Change and the World Bank Group" evaluation report. This interview was posted on the World Bank's intranet on January 5, 2009.  Photos courtesy of the World Bank's External Affairs group.

January 6, 2009—IEG recently released the first evaluation in its Climate Change and the World Bank Groupseries. In a Today interview, Kenneth Chomitz, senior advisor in IEGWB, discusses the report, which focuses on the Bank’s Win-Win Energy Policy Reforms from 1991–2007.

What are Win-Win Reforms, anyway?

‘Win-win,’ ‘no regrets’—there are a lot of labels, but the concept is straightforward. Some policies offer big domestic savings to countries, and at the same time reduce emissions of CO2. 

There are a lot of policies with this potential—we focused on two on which the biggest hopes have been pinned. The first are policies to reduce energy subsidies, which in 2005 were running at an estimated quarter trillion dollars a year. Subsidies encourage wasteful use of energy and discourage renewable energy use, which means that they result in needless emissions.   

Second are other policies that encourage more efficient use of energy, such as building codes, appliance standards, and demand-side management of power. It sounds boring, I know, but this is big stuff: improved energy efficiency could satisfy half the new energy demands of the coming decades, at lower cost than building polluting power plants. 

Why is this important for the climate?

CO2 buildup drives climate change.  Global CO2 emissions are accelerating. At current trends, the world is 30 years or less from hitting a threshold beyond which many people think the impacts might be catastrophic rather than merely very bad. Grabbing the win-win opportunities won’t solve the problem, but it is a good start and there are huge opportunities for the Bank to help.

What has the World Bank done to support price reform?

The Bank has done a fair amount, considering how difficult it is to dismantle entrenched subsidies. Not all countries are interested in engaging on this topic, but about a quarter of energy investments over 1991–2007 involved some kind of support for price reform.  Many of the transition countries, such as Romania, have managed to increase per capita incomes while reducing per capita emissions. This was facilitated in part through price reform.

Doesn’t price reform hurt poor people?

It can, but it needn’t. In general, energy subsidies make for a very inefficient, poorly targeted social welfare system. Most energy subsidies are disproportionately taken up by better-off people—the ones with cars and air conditioners. So there’s room to fund a better safety net by rechanneling some of the subsidies. Indonesia has demonstrated this approach, slashing kerosene subsidies while instituting direct cash payments to poor people.

And how has the Bank done on the second issue, supporting energy efficiency in developing countries? 

The Bank and the IFC have invested in efficiency hardware, such as district heating systems, and in energy efficiency finance, with a significant ramp-up in recent years.  There’s been less emphasis in the past on support for national policies that encourage efficiency.

Is there a contradiction between supporting poverty reduction while helping to mitigate climate change?

It’s important to understand that providing basic energy access for the two billion people living off the grid would have only a tiny effect on overall CO2 emissions.  So, at that basic level there’s no contradiction. As countries move up the ladder of wealth, however, there’s a strong tendency for emissions to rise proportionally to income.  But countries can buck that trend.

How? And what’s the role of the Bank?

There’s scope to delink emissions from growth. Countries can pursue energy efficiency much more vigorously. We think that the Bank can go farther in supporting policy environments favorable to efficiency—the China heat reform and energy efficiency project is a promising example.

Helping countries rethink their pricing policies and revamp their social safety nets is a natural role for the Bank. The current moment is opportune for this, with energy prices low but the memory of high prices fresh. But even with favorable policies, there will still be a need for massive investments in clean technologies, a challenge that the Bank is beginning to face.

What is the best way to promote those technologies?

Well, we’re looking at that.  During the next phase of the evaluation, we’ll be reviewing the Bank Group’s extensive experience in deploying renewable and energy efficiency technologies, looking for lessons that could help to inform the new Strategic Framework on Development and Climate Change. We’ll be looking also at mitigation issues in transport and forestry, and at the emerging experience with adaptation.

Interview contributed by Melanie Zipperer, senior communications officer, IEG