However, to the extent that the plant displaced subcriticalcoal plants, it may result in emissions reductions <strong>of</strong> about10 percent—significant, but far less than the 40 percent differentialrelative to the existing coal fleet average that IFCcites in the project’s Environmental and Social Review.It is likely that IFC’s funding was required for the plantto secure financing, and its successful closure has helpedreduce doubts within the domestic banking industry aboutthe viability <strong>of</strong> such large competitively bid projects. Thusit is plausible that the project may help catalyze the Indianpower sector’s movement away from subcritical to moreefficient supercritical technologies. This provides a cleardemonstration <strong>of</strong> the WBG dilemma: the investment hassupported what will be one <strong>of</strong> the largest point sources <strong>of</strong>CO 2on the planet, but may well have reduced them incrementallycompared to a scenario without IFC involvement.Appendix tables E.1 and E.2 summarize the five cases.<strong>The</strong> WBG had little direct impact on technology choice.Kosovo was the only case in which the WBG supported exante planning, but a definitive technology recommendationwas not made. In the other cases, technology was largelyor entirely predetermined by project sponsors before WBGinvolvement. Hence, the main potential channel <strong>of</strong> WBGinvolvement was through the decision on whether to supportthe project—and whether that decision was critical tothe fate <strong>of</strong> the project. This was likely in the case <strong>of</strong> TataMundra and possible for Maritza. <strong>The</strong>re was no impact inthe cases <strong>of</strong> Lanco (which would have taken place anyway)or the Afsin-Elbistan A thermal power plant in Turkey.<strong>The</strong> WBG has little direct impact ontechnology choices.Did the WBG explore cost-effective alternatives to theseplants? (All these plants were appraised before the SFDCC.However, the IFC plants were subject to Performance Standard3, which requires investigation <strong>of</strong> alternatives.) <strong>The</strong>best case is that <strong>of</strong> Kosovo. <strong>The</strong> Kosovo analysis and the relatedsoutheast Europe analyses explicitly considered damagesfrom local air pollution and the systemwide impacts <strong>of</strong>a shadow price on CO 2.Nonetheless, a recent <strong>World</strong> <strong>Bank</strong> study points to very lowelectricity tariffs in Kosovo, and high rates <strong>of</strong> nonpaymentby customers, with the result that “35–60 percent <strong>of</strong> the totalfinal energy consumption in households is technicallyor economically lost” (Renner and others 2009). Technicallosses alone are estimated at 18 percent. So there couldbe cost-effective ways to reduce excess demand, in partthrough increased technical efficiency or by boosting pricesand collections to financially sustainable levels. In the case<strong>of</strong> India, the government reports that overall transmissionand distribution system losses are 27 percent (thoughlower in the areas served by the plant under construction).<strong>The</strong> scope for efficiency improvements in India appears tobe large and likely insufficiently tapped.Kosovo and southeast Europe analysesdemonstrate an approach for consideringdamages from local air pollution andincorporating the shadow price <strong>of</strong> CO 2.Do plant-level efficiency improvements, such as those arguablyachieved in India, promote or undermine systemwidelevels <strong>of</strong> energy intensity and CO 2intensity? It is difficultto answer this question quantitatively, but the channels <strong>of</strong>impact can be sketched out and in some cases the level <strong>of</strong>impact indicated.First, as seen in the case <strong>of</strong> the Indian power plant, WBGsupport could help reduce perceived risk <strong>of</strong> a new technologyin a new setting, catalyzing its adoption and reducingCO 2emissions against a business-as-usual scenario atsome plants. Second, such support could in theory reducethe price <strong>of</strong> coal power relative to gas or hydropower. Thiscould induce a country to shift, at the margin, to greaterinvestment in coal, counteracting the new technology’sefficiency gains.However, this risk appears to be implausible in the case <strong>of</strong>a shifts to supercritical, ultrasupercritical, or IntegratedGasification Combined Cycle coal technologies. <strong>The</strong>setechnologies save fuel costs relative to subcritical coal, buthave higher capital costs and so, on balance, produce powerat about the same cost. Promotion <strong>of</strong> these technologieswould therefore be expected to reduce emissions but not toappreciably induce shifts from gas or hydropower to coal.Most difficult to assess is the symbolic or leadership impact<strong>of</strong> the WBG in supporting or disengaging from coal power.However, there are analogies in other sectors. <strong>The</strong> WBG hassupported global phase-out <strong>of</strong> leaded gasoline, prohibition<strong>of</strong> project support for tobacco, and phase-out <strong>of</strong> gas flaringand venting. <strong>The</strong> leaded gasoline phase-out has had considerablesuccess. Tobacco and lead control <strong>of</strong>fer large domesticbenefits, facilitating acceptance <strong>of</strong> the WBG role. <strong>The</strong>gas flaring initiative also potentially <strong>of</strong>fers domestic benefitsand has nominal support from many country partners.Does the WBG have a compelling role in support for makingcoal power plants more efficient? It is clear that “retail”WBG support makes little difference, one way or the other, toglobal generating capacity because <strong>of</strong> the vast scale involved.It is conceivable that such support might be essential toparticular low-income countries with poor credit and noalternative power sources. It is conceivable also that supportfor regulatory changes or pilots that promote efficient coal64 | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
technologies could accelerate diffusion <strong>of</strong> those technologieswithin particular middle-income countries, possiblywith high leverage in reducing CO 2emissions. Recentlyapproved <strong>World</strong> <strong>Bank</strong> projects to rehabilitate Chinese andIndian coal generators use this rationale.Choices at the country level—whether financed by the WBGor not—would be illuminated by systemwide analyses <strong>of</strong> expansionoptions. Such assessments would consider efficiencyoptions, assign costs to domestic pollution, and exploredifferent shadow prices for CO 2. Such analyses would clearlyshow when there are no domestically affordable alternativesto coal power and would help to defuse controversy. Thisapproach is consistent with that <strong>of</strong> the SFDCC, but with anemphasis <strong>of</strong> the additionality <strong>of</strong> WBG support in effectingpoverty reduction or technology diffusion benefits.Decisions about coal should usesystemwide analyses that considerefficiency alternatives, local pollution costs,and shadow prices <strong>of</strong> CO 2.Technology Promotion and TransferGreat hopes are pinned on technology, a cornerstone <strong>of</strong>both the Bali Action Plan and the SFDCC. Developingcountries hope not only to acquire hardware—such as windturbines and solar panels—but also to gain the capability tomanufacture and innovate, sparking industrial growth.At the global level, new technologies are conventionally understoodto follow a path from laboratory research, throughpiloting and technical demonstration, to commercial demonstration,and finally widespread deployment and diffusion,with continual improvements and innovations alongthe way. With increasing cumulative production, firmslearn and costs decline, tracing a learning or experiencecurve. This reflects the solution <strong>of</strong> technical problems andthe advantage <strong>of</strong> economies <strong>of</strong> scale (box 5.1).At the global level, technology costs declinewith increasing production.<strong>The</strong>re is debate about where to draw the line betweenpublic and private support and between coordination andcompetition. <strong>The</strong>re is general agreement, however, that expensivebasic research, such as that underpinning nuclearfusion, must be government supported. Public sponsorship<strong>of</strong> pilot or demonstration plants, with data providedto all in the industry, also makes sense as a public good.<strong>The</strong> existence <strong>of</strong> a declining cost curve suggests that thereare increasing returns to concentrating resources in a fewtechnologies—a “big push” could produce a competitiveproduct. However, many worry that public sector groupsare ill equipped to pick winners in this manner.<strong>The</strong>re is debate about where in thetechnology development cycle to draw theline between public and private support.Similarly, there has been a vigorous debate about the role<strong>of</strong> intellectual property rights (IPRs) in energy and climatetechnologies. What is the proper balance betweenrewarding innovators and accelerating access to new ideas?A growing literature on this topic notes that patents, oreven trade secrets, are only one facet <strong>of</strong> technology transferand typically represent only a small proportion <strong>of</strong> energytechnology costs. Possibly more important are transfer <strong>of</strong>tacit knowledge and learning by doing.Complementing the global technology development cycle isthe process through which technologies diffuse across andwithin nations. <strong>The</strong> WBG has been active in this technologytransfer process. It encompasses piloting, where globallyavailable technologies are tested against and adaptedto local conditions; demonstration, to convince producers,investors, and users <strong>of</strong> the technology’s reliability and costBox 5.1Technology Learning (or Experience) CurvesMany studies have shown that manufacturing costs decline with an industry’s cumulative production. <strong>The</strong> reasonsinclude debugging and refinement <strong>of</strong> processes and economies <strong>of</strong> scale.Learning rates are expressed as the percentage decline in unit costs with each doubling <strong>of</strong> cumulative industryproduction. According to a review by Neij (2008), learning rates in renewable energy range from 2.5 percent forgeothermal and 5 percent for bi<strong>of</strong>uel to 15 percent for wind and 20 percent for solar photovoltaics.<strong>The</strong>se statistical results are useful for summarizing experience, but they do not tell us how learning works. Costscan decline as a result <strong>of</strong> true learning as manufacturers tune their equipment and procedures, research and development,economies <strong>of</strong> scale, or increased competition among producers or component suppliers. <strong>The</strong> rate <strong>of</strong> costdecline is not predetermined, but can be influenced through these different channels.Source: Neij 2008.Special Topics | 65
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Executive SummaryUnabated, climate
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IEG PublicationsAnalyzing the Effec