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

Yet WBG experience shows that the returns from investmentin technology development may often be lost withoutassociated programs to encourage and facilitate widetechnological diffusion. Some projects have incorrectly assumedthat private beneficiaries of technology would shareproprietary technology with competitors. As discussed inthe IEG report, other lessons on fomenting technology innovationand diffusion can be garnered from projects thatfail because of multiple, conflicting objectives, inexperiencedentrepreneurs, unfamiliar technology, an uninterestedtarget market, and the difficulty of procurement whentechnology suppliers are few and costs are poorly known.The Panel suggests that the WBG devote particular attentionto the analysis and selection criteria for programs tocompensate private actors for technology and diffusionrisks in its future climate finance portfolio. Analytical clarityby the Bank may also help dispel confusion about theseissues, often found in the multilateral climate negotiations.We believe that the role of capacity building, though mentionedin the report, could be given even more emphasisas an integrated part of WBG programs and as a separatestandalone activity.The WBG needs to demonstrate a comprehensive lowcarbondevelopment pathway for developing countries.In promoting low-carbon development, it should applya strategic approach, rather than simply supporting projectsbased on sector-specific priorities. The IEG correctlyhighlights how difficult this is, in the absence of a globaldeal that requires governments to account for the externalcosts of climate risk. Naturally, one can focus on combatingperverse subsidies and on pursuing currently availablewin-win options, but these will not be enough. The climatedevelopmentdilemma is that many green options are noteconomically profitable, especially in the short term, orthey threaten governments with substantial transitional orpolitical costs.However, the report also suggests that a portfolio of lowercarbon actions across many sectors—including energy, industry,transport and forestry—can mitigate overall developmentcosts and bring ancillary benefits from improvedlocal environmental services and energy security. And overthe long term, technical progress will reduce the costs ofcurrently noncommercial technologies, yielding systematicproductivity gains. Prospective economic gains from innovationimply that it is most important to avoid land usepatterns and technology investments that have almost irreversiblelock in. Cases illustrated in the report include optionsto use energy efficiency savings to increase electricitysupply and forestall the need for more current investmentin power plants with 50 years useful life, and to avoid urbanarchitectures (buildings, roads, and so forth) that “require”(or at least promote strongly) heating, cooling, or passengercar transport. As many nations currently lack the capacityto implement more systemic and forward-looking developmentplanning, there can be a particularly high return toWBG support in building and institutionalizing intellectualand political capacity in climate science, climate economics,and technology strategy.Specific FindingsIn addition to the main points raised above, the Panel agreeswith many of the recommendations of the IEG report. Wecannot comment on all sectors or recommendations, butwe would particularly like to emphasize a number of specificadditional issues.Energy efficiencyAlthough the emphasis on large-scale energy efficiencyscale-up goes in the right direction, further study is neededon the relative importance of efficient lighting and reducingpower losses in transmission, for WBG intervention.Incandescent bulbs and power loss are problems for bothdeveloped and developing countries. The potential scopefor WBG intervention in developing countries, particularlyin household and building sectors or other areas where opportunitiesfor decentralized actions are needed but substantial,needs to be systematically analyzed. In addition,many ESCOs are already playing a role in implementingprofitable efficiency opportunities, such as phasing out incandescentbulbs. The WBG needs to explore how better tocomplement and leverage the role of ESCOs by providingthem concessional funds. Likewise, the potential for WBGintervention to reduce power loss in developing countriesneeds to be measured, and the carbon saved per dollar byreducing power loss needs to be compared with that of otherprojects. Large-scale gains are also available in the industryand transport sectors. These gains are often more simple toorganize because the scale of savings offers reduced transactioncosts, and so they may deserve top priority in manydeveloping countries.Finally, the Panel emphasizes its particular appreciationthat the IEG report consistently highlights and analyzesthe separate roles of renewable and energy efficiency. Weagree both with the importance of the scale-up of energyefficiency programs and with the practice of measuring andevaluating results by energy saved and generating capacityavoided rather than by funds dispersed, which can easilylead to inefficient effort.Transportation and urban designAnother major field covered is urban architecture. The focuswhen it comes to urban issues is rightly and well placedon transit, although rising demands for local indoor climatization(cooling and heating as well as other demands forurban energy) could perhaps have been given some morexxviii |Climate Change and the World Bank Group