ForewordClimate change is one <strong>of</strong> the biggest long-term risks toglobal development. That threat has originated largely owingto the greenhouse gas emissions <strong>of</strong> developed countries,which continue to emit far more per capita than developingcountries and which are obliged by the Climate Conventionto take the lead in fighting climate change. But developingeconomies also add to pressure on the limited remainingspace for atmospheric carbon dioxide, and their actions,too, matter importantly.No comprehensive global agreement yet spells out howthe Climate Convention’s goal <strong>of</strong> stabilizing atmosphericgreenhouse gas levels will be accomplished and financed.Clearly, developed countries will need to throttle backtheir emissions. <strong>The</strong> challenge for developing countriesis to create a cleaner path to rapid growth than has prevailedin earlier growth episodes, avoiding needless localenvironmental damage and taking advantage <strong>of</strong> emergingtechnologies and financing opportunities. In the absence<strong>of</strong> a global agreement, the <strong>World</strong> <strong>Bank</strong> Group (WBG) hasto chart its course, focused on today’s urgent developmentneeds yet mindful <strong>of</strong> long-term risks.<strong>The</strong> Strategic Framework on <strong>Development</strong> and ClimateChange walks this tightrope. While putting developmentfirst, it urges the WBG to seek “no regrets” actions thatadvance development with cobenefits in climate changemitigation, while mobilizing funds to defray the added costs<strong>of</strong> low-carbon growth. <strong>The</strong> Framework has accelerated aproliferation <strong>of</strong> innovative efforts in energy, forestry, transport,and other fields. This evaluation, which focuses mostlyon the pre-Framework period, begins the work <strong>of</strong> sortingout the results <strong>of</strong> those efforts.Because the WBG is a small player in the climate arena, ina world <strong>of</strong> immense needs, it must be as efficient as possiblein catalyzing development and greenhouse gas mitigation.It must first be cognizant <strong>of</strong> where the “no regrets” optionslie. If hoped-for climate finance materializes on a large scale,clients and funders will want hard, reliable information onthe most effective ways to fund low-carbon development.<strong>The</strong>y will also want to understand the trade-<strong>of</strong>fs and complementaritiesamong social, economic, and climate goals.So a sound, evidence-based results framework—focused onmeasures <strong>of</strong> economic and carbon outcomes—is critical.<strong>The</strong> WBG has the potential to make a difference greaterthan its size suggests. It can provide support for policies thatenable low-carbon growth. It can contribute to transferringand adapting innovations in technology, finance, and institutions,developing a portfolio <strong>of</strong> high-return options thatcan be scaled up and widely deployed. And it can financeand deploy the innovations it has incubated. To do so, itwill need to tap the immense value <strong>of</strong> its experience withcountries and partners across the <strong>World</strong> <strong>Bank</strong>, the InternationalFinance Corporation, and the Multilateral InvestmentGuarantee Agency, learning rapidly from its successesand failures and constantly improving its efforts.Vinod ThomasDirector-General, Evaluationviii | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
Executive SummaryUnabated, climate change could derail development, with aone in four chance <strong>of</strong> a six-degree Celsius hike in temperaturethis century. Although industrialized countries are historicallyresponsible for the build-up <strong>of</strong> heat-trapping greenhousegases (GHGs), the United Nations’ goal <strong>of</strong> stabilizing atmosphericGHG levels requires urgent and concerted worldwideefforts. Choices and investments made in the next twodecades—in buildings, power plants, transport systems, andforest use—will irreversibly shape the global climate’s future.This evaluation seeks lessons for development and climatechange mitigation from the <strong>World</strong> <strong>Bank</strong> Group’s (WBG)far-reaching portfolio in energy, forestry, and transport.<strong>The</strong> assessment is not exhaustive but covers subsectors thatrepresent the great bulk <strong>of</strong> evaluable WBG activity withpotential GHG cobenefits. Over the period 2003–08 theWBG scaled up annual investments in renewable energyand energy efficiency from $200 million to $2 billion andhelped mobilize more than $5 billion in concessional fundsfor GHG reduction. In 2008 it adopted the Strategic Frameworkon <strong>Development</strong> and Climate Change (SFDCC),which triggered a spate <strong>of</strong> investment and analytic activity,too new to assess. Yet the WBG’s resources are smallcompared with the multitrillion dollar investments neededfor low-carbon growth. How can the <strong>Bank</strong> have the greatestimpact, both for development and for GHG mitigation?One important way the WBG can achieve leverage isthrough advice and support for favorable policies: removal<strong>of</strong> energy subsidies and <strong>of</strong> other biases against renewableenergy and energy efficiency. This topic was covered inPhase I <strong>of</strong> this evaluation series (IEG 2009).A second way is to act more like a venture capitalist—inthe public sphere as well as for private investments—by supportingthe transfer and adaptation to local conditions <strong>of</strong>existing technologies, policies, and financial practices. Bytaking modest risks in pilot projects, the WBG can identifya high-return portfolio <strong>of</strong> development solutions that canbe deployed on a large scale, as climate finance expands.<strong>The</strong> WBG has been successful in this kind <strong>of</strong> technologytransfer—but only when demonstration and diffusionmechanisms were well thought out. Global EnvironmentFacility (GEF) support has been crucial in mitigating clients’perceived risk, and expanded concessional funds willbe needed for larger-scale demonstrations. Support formore advanced technologies has usually been unsuccessful,though there could be niches such as land use where theWBG has a role.Third, the WBG can refocus on high-impact sectors andinstruments. Energy efficiency stands out among areas forintervention. Early results suggest, for instance, that distribution<strong>of</strong> compact fluorescent lightbulbs <strong>of</strong>fers economicreturns that dwarf those <strong>of</strong> most WBG investments whileproviding significant cobenefits in carbon dioxide (CO 2)reduction, exemplifying the Strategic Framework’s call for“no-regrets” investments. To meet power demands, theWBG’s scarce human and financial resources will be bestspent helping clients find domestically preferable alternativesto coal power, such as through increased energy efficiency.Coal support should be a last resort used only whenlower cost and concessionally financed alternatives havebeen exhausted and when there is a compelling case thatWBG support would reduce poverty or emissions.Among forest interventions, indigenous and protected areasthat permit sustainable use have reduced tropical deforestationby up to two percentage points a year (compared withunprotected areas), thus promoting social, environmental,and climate goals. Among instruments, carbon financeneeds to be redirected away from hydropower, where ithas minimal impact on project bankability, to applicationswhere it can have more leverage. Long-duration loans arecritical for support <strong>of</strong> renewable energy. Guarantees havenot transformed the market for energy efficiency lendingbut could be increasingly important for renewable energyas investors seek reassurance that favorable policies will bemaintained over the long run.To pursue this agenda, the WBG should orient itself stronglytoward results and closely monitor performance. In this fastchangingarea, being able to understand what is working,what’s not, and why is a source <strong>of</strong> value for the institution,for its clients, and for the world.Evaluation FrameworkThis evaluation reviews a broad range <strong>of</strong> WBG activity inthe adoption and diffusion <strong>of</strong> emissions-reducing technologiesand practices. It addresses three main concerns:• What actions will deliver the greatest overlap betweenGHG mitigation and local development?• Where and how does the WBG have the highest leveragein promoting those actions?• How can the WBG best use feedback from ongoing experienceto improve performance?Executive Summary | ix
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Table 2.6Hydropower Investments by
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costs for remaining unelectrified a
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World Bank experienceTwo factors ac
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Box 2.5On-Grid and Off-Grid Renewab
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Energy EfficiencyThe first phase in
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Box 3.1ESCOs and Energy Performance
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have had limited causal impact on t
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measurement of achieved economic re
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Since the early 1990s, public entit
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part with a $198 million IDA credit
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Chapter 4eVAluATioN HigHligHTS• B
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orrowers have demonstrated the abil
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technologies could accelerate diffu
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A second issue, inherent to any adv
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goal of promoting wind turbine impr
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ConclusionsThe WBG’s efforts to p
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Table 5.1Carbon Funds at the World
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demonstration initiative. The Commu
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Impacts on technology transferThe 2
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Chapter 6Photo by Martin Wright/Ash
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Figure 6.1800Economic and Carbon Re
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Specifically, the WBG could:• Pla
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Table 6.1Summary of Sectoral Findin
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Table 6.1Sector Intervention Direct
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Appendix ARenewable Energy Tables a
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Table A.4Grid-Based Biomass/Biogass
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Table A.5 (continued)Negative examp
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Figure A.4A. Hydro/biomass capacity
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Appendix bWorld Bank Experience wit
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Table C.2Completed Low-Carbon Energ
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TAble C.4Reviewed energy efficiency
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the new capacity. Transmission syst
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Table E.2Climate obligationsCoal Pl
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Table F.2GHG objectiveModeNumber of
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IEG eliminated a few cases of doubl
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Table H.1Project andlocationBioener
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Appendix ICarbon and Economic Retur
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Appendix JRecent WBG Developments i
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y providing value to standing fores
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never had an explicit corporate str
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overnight. The Bank can provide ass
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Chapter 51. From the chief economis
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Hartshorn, G., P. Ferraro, and B. S
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______. 2007. World Development Ind
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IEG PublicationsAnalyzing the Effec