Appendix KEvaluation Summary from Climate Change and the <strong>World</strong><strong>Bank</strong> Group—Phase IClimate change threatens to derail development, even as developmentpumps ever-greater quantities <strong>of</strong> carbon dioxideinto an atmosphere already polluted with two centuries <strong>of</strong>Western emissions. <strong>The</strong> <strong>World</strong> <strong>Bank</strong>, with a newly articulatedStrategic Framework on <strong>Development</strong> and ClimateChange, must confront these entangled threats in helpingits clients to carve out a sustainable growth path.But this is known territory—many <strong>of</strong> the climate changepolicies under discussion have close analogues in the past.This phase <strong>of</strong> the evaluation, focused on the <strong>World</strong> <strong>Bank</strong>(and not the International Finance Corporation or the MultilateralInvestment Guarantee Agency), assesses the <strong>World</strong><strong>Bank</strong>’s experience with key win-win policies in the energysector—policies that combine gains at the country levelwith globally beneficial greenhouse gas (GHG) reductions.<strong>The</strong> next phase will look across the entire <strong>World</strong> <strong>Bank</strong>Group at project-level experience in promoting technologiesfor renewable energy and energy efficiency and at someissues related to climate change in the <strong>Bank</strong>’s transport andforestry portfolios.Within the range <strong>of</strong> win- win policies, this report examinestwo that have long been discussed but are more relevantthan ever in light <strong>of</strong> record energy prices: removal<strong>of</strong> energy subsidies and promotion <strong>of</strong> end-user energy efficiency.Energy subsidies are expensive, damage the climate,and disproportionately benefit the well <strong>of</strong>f. <strong>The</strong>ir reductioncan encourage energy efficiency, increase the attractiveness<strong>of</strong> renewable energy, and allow more resources to flow topoor people and to investments in cleaner power. Thoughsubsidy reduction is never easy, the <strong>Bank</strong> has a record <strong>of</strong>accomplishment in this area, especially in the transitioncountries. About a quarter <strong>of</strong> <strong>Bank</strong> energy projects includedattention to price reform. Improvements in the design andimplementation <strong>of</strong> social safety nets can help to rationalizeenergy prices while protecting the poor.End-user energy efficiency has long been viewed as a winwinapproach with great potential for reducing emissions. Itbecomes increasingly attractive as the costs <strong>of</strong> constructingand fueling power plants rise. About 5 percent <strong>of</strong> the <strong>Bank</strong>’senergy commitments by value (about 10 percent by number)have gone to specific efficiency efforts, including end- userefficiency and district heating. Including a broader range<strong>of</strong> projects identified by management as supporting supplysideenergy efficiency would boost the proportion above20 percent by number. Few projects tackled regulatoryissues related to end- user efficiency, though the <strong>Bank</strong> hasinvested in some technical assistance and analytical work.This historical lack <strong>of</strong> emphasis on energy efficiency is notunique to the <strong>Bank</strong> and reflects the complexity <strong>of</strong> pursuingend- user efficiency, a pervasive set <strong>of</strong> biases that favorelectricity supply over efficiency, inadequate investments inlearning, and inattention to energy systems in the wake <strong>of</strong>power sector reform.<strong>The</strong> record levels <strong>of</strong> energy prices in 2008, although theyhave been relaxed, provide an impetus for the <strong>Bank</strong> and itsclients to choose more sustainable long- term trajectories <strong>of</strong>growth. <strong>The</strong> mid-2008 oil price was equivalent to the 2006price, plus a $135 per ton tax on carbon dioxide—the kind<strong>of</strong> level that energy modelers say is necessary for long-termclimate stabilization. To help clients cope with the burden<strong>of</strong> these prices, and take advantage <strong>of</strong> the signals they sendfor sustainability, the <strong>Bank</strong> can do four things:1. It can make promotion <strong>of</strong> energy efficiency a priority,using efficiency investments and policies to adjust tohigher prices and constructing economies that are moreresilient.2. It can assist countries in removing subsidies by helpingto design and finance programs that protect the poorand help others adjust to higher prices.3.It can promote a systems approach to energy.4. And it can motivate and inform these actions, internallyand externally, by supporting better measurement <strong>of</strong> energyuse, expenditures, and impacts.Goals and ScopeThis evaluation is the first <strong>of</strong> a series that seeks lessonsfrom the <strong>World</strong> <strong>Bank</strong> Group’s experience on how to carveout a sustainable growth path. <strong>The</strong> <strong>World</strong> <strong>Bank</strong> Group has118 | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
never had an explicit corporate strategy on climate changeagainst which evaluative assessments could be made.However, a premise <strong>of</strong> this evaluation series is that many<strong>of</strong> the climate-oriented policies and investments underdiscussion have close analogues in the past, and thus canbe assessed, whether or not they were explicitly oriented toclimate change mitigation.This report, which introduces the series, focuses on the<strong>World</strong> <strong>Bank</strong> (International <strong>Bank</strong> for Reconstruction and<strong>Development</strong> and International <strong>Development</strong> Association),and not on the International Finance Corporation(IFC) or the Multilateral Investment Guarantee Agency(MIGA). It assesses its experience with key win-win policiesin the energy sector: removal <strong>of</strong> energy subsidies and promotion<strong>of</strong> end-user energy efficiency. <strong>The</strong> next phase looksat the expanding project-level experience <strong>of</strong> the <strong>Bank</strong> andthe IFC in promoting technologies for renewable energyand energy efficiency; it also addresses the role <strong>of</strong> carbonfinance. A parallel study examines the role <strong>of</strong> forests in climatemitigation. <strong>The</strong> climate evaluation’s final phase willlook at adaptation to climate change.MotivationOperationally, the <strong>World</strong> <strong>Bank</strong> has pursued three broadlines <strong>of</strong> action in promoting the mitigation <strong>of</strong> GHG emissions,the main contributor to climate change. First, it hasmobilized concessional finance from the Global EnvironmentFacility (GEF) and carbon finance from the Clean<strong>Development</strong> Mechanism to promote renewable energyand other GHG-reducing activities. Second, and to a muchmore limited extent, it has used GEF funds to stimulate thedevelopment <strong>of</strong> noncommercial technologies. Third, andthe subject <strong>of</strong> this evaluation, it has supported win-winpolicies and projects—sometimes with an explicit climatemotivation, <strong>of</strong>ten without.<strong>The</strong>se actions not only provide global benefits in reducingGHGs, but also pay for themselves in purely domestic sidebenefits such as reduced fuel expenditure or improved airquality. <strong>The</strong> win-win designation obscures the costs thatthese policies may impose on particular groups, even whilebenefiting a nation as a whole. This presents challenges fordesign and implementation.Two sets <strong>of</strong> win-win policies are perennial topics <strong>of</strong> discussionin the energy sector: reduction in subsidies andenergy-efficiency policies, particularly those relating toend-user efficiency. This report looks at these, and at anotherapparently win-win topic: gas flaring. Flaring is interestingbecause <strong>of</strong> its magnitude, the links to pricing policyand to carbon finance, and the existence <strong>of</strong> a <strong>World</strong> <strong>Bank</strong>–led initiative to reduce flaring.Findings<strong>Development</strong> spurs emissions.A 1 percent increase in per capita income induces—onaverage and with exceptions—a 1 percent increase in GHGemissions. Hence, to the extent that the <strong>World</strong> <strong>Bank</strong> is successfulin supporting broad- based growth, it will aggravateclimate change.But there is no significant trade-<strong>of</strong>f between climate changemitigation and energy access for the poorest.Basic electricity services for the world’s unconnected households,under the most unfavorable assumptions, wouldadd only a third <strong>of</strong> a percent to global GHG emissions,and much less if renewable energy and efficient light bulbscould be deployed. <strong>The</strong> welfare benefits <strong>of</strong> electricity accessare on the order <strong>of</strong> $0.50 to $1 per kilowatt-hour, while astringent valuation <strong>of</strong> the corresponding carbon damages,in a worst-case scenario, is a few cents per kilowatt-hour.Country policies can shape a low-carbon growth path.Although there is a strong link between per capita incomeand energy-related GHG emissions, there is a sevenfoldvariation between the most and least emissions-intensivecountries at a given income level. Reliance on hydropoweris part <strong>of</strong> the story behind these differences, but fuel pricingis another. High subsidizers—those whose diesel pricesare less than half the world market rate—emit about twiceas much per capita as other countries with similar incomelevels. And countries with longstanding fuel taxes, such asthe United Kingdom, have evolved more energy-efficienttransport and land use.Energy subsidies are large, burdensome, regressive, anddamage the climate.<strong>The</strong> International Energy Agency’s 2005 estimate <strong>of</strong> a quarter-trilliondollars in subsidies each year outside the Organisationfor Economic Cooperation and <strong>Development</strong> mayunderstate the current situation. While poor people receivesome <strong>of</strong> these benefits, overall the benefits are skewed towealthier groups and <strong>of</strong>ten dwarf more progressive publicexpenditure. Fuel subsidies alone are 2 to 7.5 times as largeas public spending on health in Bangladesh, Ecuador, theArab Republic <strong>of</strong> Egypt, India, Indonesia, Morocco,Pakistan, Turkmenistan, República Bolivariana de Venezuela,and the Republic <strong>of</strong> Yemen. At the same time, subsidiesencourage inefficient, carbon-intensive use <strong>of</strong> energy andbuild constituencies for this inefficiency.<strong>The</strong> <strong>Bank</strong> has supported more than 250 operations forenergy pricing reform.Success has been achieved in the transition countries—inRomania and Ukraine, for example, where energy pricesAppendix K: Evaluation Summary from Climate Change and the <strong>World</strong> <strong>Bank</strong> Group—Phase I | 119
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Figures1.1 GHG Emissions by Sector
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Executive SummaryUnabated, climate
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technologies could accelerate diffu
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