were adjusted toward market levels, and the intensity <strong>of</strong>carbon dioxide emissions dropped substantially. Subsidyremoval can threaten the poor, however. Recent efforts toassess poverty and welfare impacts systematically appearto have informed the design and implementation <strong>of</strong> pricereform efforts, though not necessarily with direct <strong>Bank</strong> involvement.Examples include Ghana and Indonesia, wherecompensatory measures were deployed in connection withfuel price rises.<strong>The</strong> <strong>Bank</strong> has rarely coordinated efficiency improvementswith subsidy reductions to lighten the immediate adjustmentburden on energy users.An exception is the China Heat Reform and Building EfficiencyProject, which links improved insulation with heatpricing. A growing number <strong>of</strong> projects sponsor nationwidedistribution <strong>of</strong> compact fluorescent light bulbs, but this hasbeen done in response to power shortages (Rwanda, Uganda)or to stanch utility losses (Argentina, Vietnam), rather thanto facilitate subsidy reduction.Despite emphasis on energy efficiency in <strong>Bank</strong> statementsand in Country Assistance Strategies, the volume and policyorientation <strong>of</strong> IBRD/IDA efficiency lending has beenmodest.Although the IFC has recently increased its investments inenergy-efficiency projects, <strong>World</strong> <strong>Bank</strong> commitments forefficiency were about 5 percent by value <strong>of</strong> energy financeover 1991–2007. This includes investments in demand-sideefficiency and district heating, and may also include somesupply-side efficiency investments. By this definition, about1 in 10 projects by number involve energy efficiency.Including a broader range <strong>of</strong> projects identified by managementas supporting supply-side energy efficiency wouldboost the proportion above 20 percent by number over theperiod 1998–2007. Globally only about 34 projects undertakenover the 1996–2007 period had components orientedto demand-side energy-efficiency policy. Among these,many attempts to promote efficiency have had limited successbecause the <strong>Bank</strong> has engaged with utilities, whichhave limited incentives to restrict electricity sales.<strong>The</strong>re are several reasons why end-user energyefficiencyprojects, and especially policy-oriented projects, appear tobe under- emphasized in the <strong>Bank</strong>’s portfolio.<strong>The</strong> <strong>Bank</strong> has carried out some successful and innovativeefficiency projects. But internal <strong>Bank</strong> incentives workagainst these projects because they are <strong>of</strong>ten small in scale,demanding <strong>of</strong> staff time and preparation funds, and mayrequire persistent client engagement over a period <strong>of</strong> years.<strong>The</strong>re is a general tendency to prefer investments in powergeneration, which are visible and easily understood, overinvestments in efficiency, which are less visible, involvehuman behavior rather than electrical engineering, andwhose efficacy is harder to measure. A general neglect <strong>of</strong>rigorous monitoring and evaluation reinforces the negativeview <strong>of</strong> efficiency.<strong>The</strong> <strong>Bank</strong>- hosted Global Gas Flaring Reduction Partnership(GGFR) has fostered dialogue on gas flaring, but it isdifficult to assess its impact on flaring activity to date.Associated gas (a by-product <strong>of</strong> oil production) is <strong>of</strong>tenwastefully vented or flared, adding more than 400 milliontons <strong>of</strong> carbon dioxide equivalent to the atmosphere annually,or about 1 percent <strong>of</strong> global emissions. A modestlyfunded public-private partnership, the GGFR has succeededin highlighting the issue, promoting dialogue, securingagreement on a voluntary standard for flaring reduction,and sponsoring useful diagnostic studies. But only fourmember countries have adopted the standard. <strong>The</strong> GGFRhas emphasized carbon finance as a remedy for flaring, butthe use <strong>of</strong> project-level carbon finance is a mere bandagefor policy ailments that require a more fundamental cure.RecommendationsIn mid-2008, real energy prices were at a record high. Whilethis is burdensome for energy users, it opens an oppor tunityfor the <strong>Bank</strong> to support clients in making a transition to along-term sustainable growth path that is resilient to energyprice volatility, entails less local environmental damage,and is a nationally appropriate contribution to globalmitigation efforts.Clearly the <strong>World</strong> <strong>Bank</strong> needs to focus its efforts strategicallyon areas <strong>of</strong> its comparative advantage. This wouldinclude supporting the provision <strong>of</strong> public goods and promotingpolicy and institutional reform at the country level.Furthermore, the <strong>Bank</strong> can achieve the greatest leverage bypromoting policies that catalyze private sector investmentsin renewable energy and energy efficiency, including thosesupported by IFC and MIGA. <strong>The</strong> analysis in this reportsupports the following recommendations:Systematically promote the removal <strong>of</strong> energy subsidies,easing social and political economy concerns by providingtechnical assistance and policy advice to help reformingclient countries find effective solutions, and analyticalwork demonstrating the cost and distributional impact <strong>of</strong>removal <strong>of</strong> such subsidies and <strong>of</strong> building effective, broadbasedsafety nets.Energy price reform can endanger poor people and arousethe opposition <strong>of</strong> groups used to low prices, thereby posingpolitical risks. But failure to reform can be worse, divertingpublic funds from investments that fight povertyand fostering an inefficient economy increasingly exposedto energy shocks. And reform need not be undertaken120 | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
overnight. <strong>The</strong> <strong>Bank</strong> can provide assistance in charting andfinancing adjustment paths that are politically, socially, andenvironmentally sustainable. Factoring political economyinto the design <strong>of</strong> reforms and supporting better- targeted,more effective social protection systems will be elements <strong>of</strong>this approach.Emphasize policies that induce improvement in energy efficiencyas a way <strong>of</strong> reducing the burden <strong>of</strong> the transitionto market- based energy prices.Historically, energy efficiency has received rhetorical supportbut garnered only a small share <strong>of</strong> financial supportor policy attention. This is beginning to change with suchmoves as China’s commitment to drastically reduce its energyintensity and India’s Energy Conservation Act. Butthe <strong>Bank</strong> can do much more to help clients pursue thisagenda. If a real reorientation to energy efficiency and renewableenergy is to occur, the <strong>Bank</strong>’s internal incentivesystem needs to be reshaped. Instead <strong>of</strong> targeting dollargrowth in lending for energy efficiency (which may skeweffort away from the high-leverage, low-cost interventions),it needs to find indicators that more directly reflectenergy savings and harness them to country strategies andproject decisions. It needs also to patiently support longer,more staffintensive analysis and technical assistanceactivities.Increased funding for preparation, policy dialogue, analysis,and technical assistance is required.Promote a systems approach by providing incentives toaddress climate change issues through cross-sectoral approachesand teams at the country level, and structuredinteraction between the Energy and Environment SectorBoards.To tackle problems <strong>of</strong> climate change mitigation and adaptation,the <strong>Bank</strong> and its clients need to think, organize, andact beyond the facility level, and outside subsectoral andsectoral confines. One avenue for this is through greater attentionto systemwide energy planning. Integrated resourceplanning, once in vogue, has been largely abandoned in thewake <strong>of</strong> power sector privatization and unbundling. Yetcurrent planning methods are inadequate in integratingconsiderations <strong>of</strong> end-use efficiency and in balancing therisks <strong>of</strong> volatile fuel prices and weather-sensitive electricityoutput from wind and hydropower plants. Water management,urban management, and social safety nets are otherareas where cross sectoral collaboration is essential to promotingwin-win policies and programs.Invest more in improving metrics and monitoring for motivationand learning—at the global, country, and projectlevels.Good information can motivate and guide action.First, building on the <strong>Bank</strong>’s current collaboration with theInternational Energy Agency on energy efficiency indicators,the <strong>Bank</strong> could set up an Energy Scoreboard that willregularly compile up-to-date standardized informationon energy prices, collection rates, subsidies, policies, andperformance data at the national, subnational, and projectlevels. Borrowers could use indicators for benchmarking;in the design and implementation <strong>of</strong> country strategies,including sectoral and cross- sectoral policies; and in assessing<strong>Bank</strong> performance.Second, more rigorous economic and environmental assessmentis needed for energy investments and those thatrelease or prevent carbon emissions. <strong>The</strong>se assessmentsshould draw on energy prices collected for the Scoreboard;account for externalities, including the net impact on GHGemissions; and account for price volatility. Investment projectsshould also be assessed, qualitatively, on a diffusionindex, which would indicate the expected catalytic effect <strong>of</strong>the investment in subsequent similar projects. It is desirableto complement project-based analysis with assessment <strong>of</strong>indirect and policy-related impacts, which could be muchlarger.Third, monitoring and evaluation <strong>of</strong> energy interventionscontinue to need more attention. Large-scale distribution<strong>of</strong> compact fluorescent light bulbs is one example <strong>of</strong> an interventionthat is well suited to impact analysis and wherea timely analysis could be important in informing massivescale-up activities.Appendix K: Evaluation Summary from Climate Change and the <strong>World</strong> <strong>Bank</strong> Group—Phase I | 121
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Phase II: The Challenge of Low-Carb
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CLIMATE CHANGE AND THE WORLD BANK G
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Table of ContentsAbbreviations . .
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Figures1.1 GHG Emissions by Sector
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AcknowledgmentsThe report was prepa
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Executive SummaryUnabated, climate
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esettlement plans has been ineffect
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of some technologies, such as landf
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Scale up high-impact investmentsEne
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should have been strengthened in th
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Major monitorable IEGrecommendation
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Major monitorable IEGrecommendation
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Chairman’s Summary: Committee onD
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most places. Before we get there, w
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attention. In a couple of decades,
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GlossaryAdditionalityBankabilityBas
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Joint ImplementationA mechanism und
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Chapter 1evALuAtiOn HiGHLiGHts• T
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of interventions, from technical as
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growth, poverty reduction (includin
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Chapter 2eValuaTION HIGHlIGHTS• W
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Table 2.2Evaluated World Bank Renew
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Figure 2.2Breakdown of 2003-08 Low-
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Table 2.4 Commitments to Grid-Conne
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Box 2.1The Economics of Grid-Connec
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on average (Iyadomi 2010). (Reducti
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and industrial policy. An increasin
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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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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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The WBG urban transport portfolio (
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include the forest carbon projects
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for Costa Rica for the period 2000-
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After 20 years of effort, systemati
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orrowers have demonstrated the abil
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Chapter 5EVALuATioN HigHLigHTS• O
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Consequently, the efficiency with w
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technologies could accelerate diffu
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A second issue, inherent to any adv
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