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

Figure 1.2Agriculture14%Industry8%Low-Cost GHG Abatement Potential,Non-OECD Countries, 2030Forestry11%Waste5%Energy supply11%Buildings38%Transport13%Source: Metz and others 2007.Note: Cost< $20/ton of CO 2. Estimated economic potentials for GHGmitigation at a sectoral level in 2030 for different cost categoriesusing the SRES B2 and International Energy Agency World EnergyOutlook (2004) baselines. Total abatement potential is 9.2 Gt CO 2e.GHG = greenhouse gas; OECD = Organisation for EconomicCo-Operation and Development.global mitigation costs affordable. (There is, however, noagreement yet on how those costs might be apportioned.)The long-run goal of stabilizing the levelof atmospheric GHGs cannot be achievedwithout mitigating actions in all majoremitting nations.The need for action is urgent. If installed today, inefficientcoal-fired power plants, poorly insulated buildings, andpoorly targeted energy subsidies will be needlessly pumpingGHGs into the atmosphere through mid-century. ThoseGHGs will linger in the atmosphere for many decades longer,intensifying warming and increasing the chance that theclimate will pass a critical threshold—leading to acceleratedwarming, dieback of the Amazon forest, or other climaticdisruptions.There are many routes to mitigationHow might mitigation take place? GHG emissions arise inmany ways, in many sectors. To motivate the sectors coveredin this evaluation, consider first the current patternsof emissions.In the developing world, 83 percent of emissions come, inroughly equal proportions, from power generation; industrialprocesses (including steel manufacture, cement production,oil refining); deforestation; and agriculture (largely methanefrom rice paddies and livestock). Transportation accountsfor another 7 percent. However, energy and transport emissionsare expected to grow rapidly as economies expand.Emphasis on energy efficiency now buys timefor renewable energy costs to fall and for developmentof advanced energy technologies.Costs and benefits of mitigation differ by sector and are thesubject of intense investigation. The consensus estimate ofthe Intergovernmental Panel on Climate Change is summarizedin figure 1.2, which shows low-cost abatementopportunities. Like many other analyses, this one pointsto increased energy efficiency (in buildings and industry)as the largest and most economically attractive option formitigation over the next few decades.An emphasis on energy efficiency in the next few decadesbuys time for solar and wind power to become more costcompetitive with fossil fuels and to develop and deploy advancedlow-carbon energy technologies (such as carboncapture and storage and nuclear fusion) in the second halfof the century. Energy efficiency helps preclude constructionof coal power plants that might otherwise stay in servicefor 40 years or more.Because mitigation is a global public good, it makes economicsense to compensate countries, firms, farms, andother actors for their contribution to mitigation. The questto use global demand for climate stability as a means offinancing climate-friendly development has shaped bothUnited Nations and WBG approaches to climate change.Global Mitigation Context and the WBGThe WBG’s approach to climate change has coevolvedwith the international climate regime. One line of coevolutionwas with the Global Environment Facility (GEF),which was established in 1991 as a pilot program withinthe Bank. The GEF mobilized donor funds to addressclimate change, biodiversity loss, and other global environmentalproblems. Recognizing that climate and biodiversityare global public goods, the GEF’s approach wasto pay countries for the incremental costs of supplyingthese goods.The GEF rapidly realized that its funds were too limited toplug the funding gap (project by project) and shifted to activitiesaimed at catalyzing replicable win-win actions. TheGEF became an independent agency in 1994, but the Bankremained its trustee and largest implementing agency. Thishas been an important avenue for fostering attention to climatechange inside the Bank and to developing a cadre ofstaff and managers with climate expertise.The WBG’s approach to climate change hascoevolved with the international climateregime and carbon market development.Another line of coevolution was with the carbon market.The UNFCCC, which became effective in 1994, didnot specify how its mitigation goals would be accomplished.Attention turned to an economic approach that4 | Climate Change and the World Bank Group