The Challenge of Low-Carbon Development - World Bank Internet ...

Statement of the External High-LevelReview PanelThe High-Level Review Panel (Panel) has been asked tocomment on the Phase II report of the Independent EvaluationGroup’s (IEG) evaluation Climate Change and theWorld Bank Group. The Phase I evaluation was devoted toassessing the role of policy actions in support of low-carbongrowth and stressed the importance of energy price rationalization.Like the Phase I report, this report places specialstress on the need for systems thinking in key sectors suchas energy, transport, and forestry. The Panel appreciatesboth the extensive amount of work and the scope of the assessmentassembled by the two reports together and separately.Summarizing World Bank Group (WBG) activitiesand giving a comprehensive review of the changing role ofthe Bank and future options is difficult because of the sizeand diversity of the Bank. The challenge of preparing such areport is compounded by the decline in the use of cost benefitanalysis over recent decades that has been documentedin another recent IEG report (IEG 2010a).We find the current report to be written with exemplaryclarity. As far as we have been able to ascertain, it gives bothan even-handed overview of the changing WBG practicein this area and a level-headed analysis of the options andalternatives ahead.The report is at once supportive and critical of the variousdimensions of the WBG activities and represents an elementof an ongoing evolution of the thinking about the work alreadyunder way, or in need of further implementation,in the multiple activities of the WBG. The Panel also bothsupports and criticizes the reviewed practices of the WBGand equally recommends a continuing evolution of WBGperspectives in its adaptation to the pressing needs for climatefinance. In this comment, we want to reinforce the keymessages in the report: that the WBG can and should play acentral role in the multilateral and national responses to theworldwide development/climate problems before us.We believe that the tensions between development andclimate are a chimera: the damages from climate changewill counteract the development aspirations of low-incomecountries. To mitigate climate damages is a vital developmentgoal. Again, in agreement with the report, we believethat the newer and integrated strategies for low-carbongrowth can, if well and consistently pursued, minimize orovercome these tensions. Finally, we emphasize that theWBG, as other institutions that grew up before the challengesof climate resilient development were apparent,must alter its practices of investment and capacity buildingto adapt to the different politics and technologies that noware present. We hope our comment will be read in the samespirit as the IEG report, reinforcing and extending the workwe are charged to review.The Challenge of Climate Change andLow-Carbon (Green) GrowthA number of features set the management of climate risksapart from most developmental and environmental problems.It spans centuries, forcing us to rethink intergenerationalequity issues between and within countries. Ifunchecked, climate change might threaten the developmentaspirations of the poor. If approached creatively, it opensdevelopment opportunities. Rapid economic growth inthe last decades has substantially reduced poverty in somecountries, but now the very sustainability of this growth isseriously threatened by climate change unless we changeour growth strategies. Some implications of the long-runlow-carbon strategy are clear, such as the virtual phase-outin this century of fossil fuel use. This will require a highprice on carbon emissions or other aggressive policy measuresand incentives, with inclusive participation acrossthe world. Others aspects of these alternative developmentstrategies in the areas of forestry and innovation suggestquite immediate interventions to preserve depletable assetsor lay the foundations for the commercialization and diffusionof newer technologies that cannot be deferred.Although the short-run capital, operational, and transitioncosts of managing climate change risks are sizable, they arestill dwarfed both by the benefits of and by the resourcesavailable from a century of growth. Green growth and winwinopportunities are increasingly recognized by nationalleaders as real options, but coal is often the cheapest currentinvestment and the (shadow) carbon prices currentlydiscussed are, as shown by the IEG report, inconsequential.In the multilateral climate negotiations, the distribution ofthese costs is deeply contentious and it will take some timeto resolve. Eventually we will live in a world where all productiveresources, including the climate regulating functionsof the atmosphere have a price—just like land does today inxxiv |Climate Change and the World Bank Group