2006 Spring Meetings

Briefing on Clean Energy& Development:
Towards an Investment Framework
Monday, April 24, 2006 / 12:45 – 14:00 pm

MEETING NOTES

Presentation by Bob Watson (World Bank)

Mr. Watson began by informing that his presentation would focus on the objective and key points of the paper on Clean Energy.  The global community needs to work to meet the energy needs that are essential for economic growth and fighting poverty, while at the same time leaving a smaller environmental footprint. But the costs for developing countries to adapt to projected climate change are likely to lie in the $10 billion to $40 billion per year range, of which about a third is associated with public finance.

The paper discusses the issues underlying the development of an Investment Framework for Clean Energy and Development.  The paper was produced was prepared as a follow-up to the G-8 Gleneagles Summit’s Communiqué and Plan of Action for Climate Change (July 2005).      

The paper takes a global perspective rather than a Bank-centric one, covering three interlocking and complementary issues: (i) the need for, and investment requirements of, meeting modern energy needs for developing countries over the long term in a manner that provides attention to efficiency and local environmental considerations; (ii) the additional steps needed in the energy, transport, and industrial sectors to address climate change mitigation through the reduction of greenhouse gases; and (iii) the impact of climate change and the need for developing countries to adequately adapt to changes in climate and weather variability. These three issues are critical to the World Bank’s core mission of poverty reduction and the realization of many of the Millennium Development Goals, and build upon existing World Bank strategies.

The paper recognizes that meeting developing countries’ energy needs is both an urgent and difficult challenge, which requires domestic policies that provide incentives for efficiency in energy production, delivery, and use and incentives for public and private resource mobilization. The report also recognizes that climate change can undermine development and that dealing with climate change will require the development and implementation of climate-friendly technologies as well as adapting to climate change. Consistent with the principle of “common yet differentiated responsibilities,” the report recognizes that funding for energy-related climate change must be additional.

The paper also points out that strengthening energy security is essential to alleviate some of the macroeconomic concerns of developing countries by diversifying supply and rationalizing energy use. Improvements in the effectiveness of energy use should be assigned a high priority because of its three-fold impact of improving energy security, reducing costs, and decreasing environmental impacts.

It states that an extensive array of clean and efficient energy supply and demand technologies exists and that low-cost, high impact approaches to providing clean energy should be addressed first. Adapting to climate change will require the transfer of existing technologies, new technologies, and the revision of planning standards and systems.

The Framework outlines a two-track approach:

1. To review existing financial instruments and explore the potential value of new ones. This will complement ongoing Bank Group activities in energy sector reform, energy access, developing the carbon market, and developing and applying methodologies to address climate variability and change.   
2. A second track of activities, to be developed over the next two years, would i) generate new knowledge on technology options, and evaluate the environmental, social, and economic impacts of climate change, and ii) propose programs of action for selected countries including, as relevant, assessing and addressing any transitional costs.

The paper suggests follow-up work, which would be carried out in collaboration with the other donor agencies, governments, finance and energy sectors, export credit agencies, and civil society, and include   outreach and communications. This would involve country dialogues, financing analysis, and detailed research on adaptation.

Presentation by Jamil Saghir (World Bank)

Mr. Saghir talked about three issues that closely relate to climate change and energy: energy security, energy and poverty, and water security. On energy security he linked the concept with poverty reduction, pointing out that the poor are the most vulnerable to changes in price and supply of energy. Recent high oil prices have affected poverty indicators across a wide range of developing countries. There has been a 4-6% increase in poverty as a result of high oil prices. In order to ensure better energy security, three issues have to be addressed. These are the diversification of sources of energy, increasing the efficiency of energy, and managing volatility of prices.

As regards energy and poverty he warned that if we continue with ‘business as usual’ by 2030, an estimated 1.4 billion people will still be without access to electricity.  He added that there is a clear link between the need to provide energy access to the poor and the ability to achieve the Millennium Development Goals, however less than 5% of total Official Development Assistance (ODA) goes to energy in Africa. In order to meet this gap, the private sector will need to be attracted to invest in the sector.

Concerning water security, the volatility brought on by climate change requires one to have water planning adapted to droughts, floods, and other natural disasters in order to achieve on energy security. He stressed that the link between water for energy, food, drinking, and water security would have to be recognized.

Presentation by Jon Sohn (WRI)

Mr. Sohn started his presentation by mentioning his overarching concern with the possibility that the Bank’s Environmentally and Socially Sustainable Development (ESSD) Network might be disbanded as a part of re-organization plan for the Bank.  He expressed appreciation for the quality of the work carried out by ESSD and its former Vice President, Ian Johnson, and made a direct appeal to the President of the World Bank to retain this network under any new reorganized structure in the Bank.

He then commented on the Clean Energy Paper, by stating that he agrees with paper’s contention that a regulatory framework has to be agreed to reduce carbon emissions, and that good governance is required in the electricity sector.  However, in trying to address two different issues – access to energy and climate change – the focus of the paper becomes muddled, as the two issues are fundamentally different.  Furthermore, the paper’s ambition is also questionable in trying to achieve a scenario that is described by the International Energy Agency (IEA) as ‘business as usual’. Another concern with the paper is that it does not place a whole set of environmental and social risks that accompany the options for energy supply on the table. But these risks have to be dealt with alongside climate change. He called on the Bank to play a stronger role in pushing G8 governments to financially commit resources for these clean energy initiatives and follow the example being given by the Bank.

Presentation by Mr. Otaviano Canuto (World Bank Executive Director)

In his presentation, Mr.Canuto pointed to the unfair situation facing the poor with regard to climate change and energy. First, while the poor are most adversely affected by climate change, they are least able to engage in discussions on the issue. Second, considering the poor are among those who have least contributed to climate change, it is unfair that they should bear the brunt of the problem.  He commended the authors of the paper for their work in laying all the technological and financial options for increasing energy access and reducing climate change on the table. However, he said that a shortcoming of the paper was that it did not give adequate consideration to ethanol and other bio-fuels, given the remarkable achievements with these products in Brazil. He argued that in examining the best energy options, consideration should be given to bio-fuels as they had less social and environmental risks and clear development advantages.

Presentation by Timothy Richards (General Electric)

Mr. Richards welcomed the report’s conclusions that many low and zero emission technologies are already available for deployment.  He stated that different technological options for producing energy are acceptable depending on the context and energy needs of each country, thus requiring the development of a portfolio of technologies. In order to determine how best to accelerate the deployment of these technologies, one needs to put oneself in the shoes of an investor to understand why investing in certain options is more or less attractive. He argued that an effective Bank strategy should also recognize the need for targeted approaches for private investors on the one hand and publicly owned utilities on the other  It is necessary to examine how to bring down the cost of electricity from cleaner technologies in order to make them competitive with traditional fossil fuel alternatives He called on the Bank to buy down the costs of different options, an action justified by the environmental, energy security and health benefits of cleaner technologies  and to support policy environments that facilitate accelerated low emissions technology deployment.

In a lively question and answer session, a number of questions were raised on a wide range of issue including the following: lack of dialogue between the Bank and its partner countries on climate change and energy; role of US - Australia unilateral initiative on multilateral climate change mitigation strategies; need to develop energy technologies in developing countries; role of large dams; mainstreaming activities on energy and climate change in development programs; and need for development of bio-fuels.

On the issue of dialogue with partner countries, a Bank representative countered the view that the Bank was not discussing issues of climate change with key partners such as China, pointing to recent dialogue sessions with China, India, Brazil, South Africa and Mexico.

Regarding a concern that the US and Australian unilateral initiatives on climate change were damaging to the United Nations Framework Convention on Climate Change (UNFCCC), a Bank representative recognized the limited impact of such voluntary initiatives as that carried out by the US and Australia, but stated that this initiative could only be complimentary to the UNFCCC and should be welcomed.

With regard to the concern that the Bank was not doing enough on to develop technologies for energy in developing countries, a Bank representative acknowledged that more could be more done in this area, while another Bank representative pointed to the increasing growth of South-South cooperation in development of energy technology.

On the notion that large dams had not failed to solve the problems of access to energy in developing countries, but had rather caused unintended social and environmental impacts, a Bank representative responded by saying that the Bank had learned from its many funding experiences in this area and was determined to improve its performance and sensitivity to environmental and social aspects.  Further large hydroelectric dams still represents a clean and sustainable form of energy for many developing countries, and can be properly employed if affected communities are appropriately consulted and all social and environmental safeguards are carried out and respected.

On the question of whether climate change and energy concerns and activities would be mainstreamed in Poverty Reduction Strategy Papers (PRSPs) and World Bank Country Assistance Strategies (CAS), a number of Bank representatives cautioned that it would be wrong to make climate change a conditionality for developing countries, as they should not have pay the burden for climate change. Furthermore one argued that the Bank’s main role was to carry out analysis on the different options, provide the negotiators of the Climate Change Convention with this information and encourage dialogue on different energy options. Another Bank representative pointed out that as this year was the first time that the Bank’s Development Committee and Fund’s International Financial and Monetary Committee had discussed energy and climate change in the last ten years, it may take some time before energy and climate change begin to feature strongly in Country Assistance Strategies and PRSPs.

In the closing remarks a Bank representative on the panel emphasized the value of getting feedback from civil society and business on the Bank’s work on climate change and energy, and stated that further opportunities for dialogue would be welcomed.  The Chair of the session, Lord Hunt, reiterated in his closing remarks that these kinds of policy dialogues were crucial to allow all to come to grips with policies and political barriers affecting access to energy and climate change. He announced that a debate on the Investment Framework, involving legislators from the G-8 countries plus China, Brazil, South Africa, Mexico, and India will take place in St.Petersburg, Russia, in early July before the G-8 Summit.  Business leaders, civil society organizations, and the media will be also participating in this activity co-organized by Globe International and the COM+ Alliance (http://www.complusalliance.org).

List of participants in the discussion

Photos

More Information:
2006 Spring Meetings Civil Society Dialogues Program - main page
2006 Spring Meetings - general information for CSOs