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

Energy EfficiencyThe first phase in this evaluation series (IEG 2009) assessed projects related todemand-side efficiency policy and to energy pricing. It highlighted the importanceof removing poorly targeted energy subsidies as a win-win policy that can promoteenergy efficiency, poverty reduction, fiscal balance, and GHG reductions.Since then, the Bank has codirected a G20 study to examinepolicies to reduce energy subsidies (IEA and others 2010).The previous evaluation also urged increased attention forthe intersection between efficiency investments and pricingreform. Such attention is now evident in the VietnamPower Sector Development Policy Operation (2010).Energy Efficiency in the First PhaseEvaluationDistrict heating was one area of World Bank activity reviewedin the Phase I report. Concentrated mostly inEastern Europe, this has been a large area of energy efficiencyemphasis. Over the period 1991–2008, there were41 projects with $2.1 billion in commitments. Of the 25closed projects, about three-quarters had outcomes thatIEG rated moderately satisfactory or better. To a largeextent these were “engineering” projects focusing on supply-sideefficiency improvements. However, some includedpolicy elements such as tariff reform. Some ongoingChinese projects are combining supply-side interventionswith promotion of far-reaching reforms that provide consumerswith the means and incentive to reduce excessiveenergy use.In its review, IEG found 34 projects initiated over 1996–2007 that had policy content that related (under a broaddefinition) to end-user efficiency. These included nine thatsupported the creation of appliance or building standards.Although the projects were successful in supporting adoptionof codes, there was been less attention over this periodto sustained support for implementation and enforcement,and very little monitoring and evaluation of impacts. Therewere about a dozen projects that supported demand-sidemanagement, usually through a utility.Complementing the earlier volume, this chapter reviewsseveral energy efficiency business lines that are large involume or have potential for scale-up: transmission anddistribution (T&D) loss reduction, financial intermediaries,direct IFC investments in industrial energy efficiency,and promotion of efficient light bulbs (table 3.1 puts this inthe context of all low-carbon investments from 2003–08).Using Financial Intermediaries to OvercomeBarriers to Energy Efficiency InvestmentsIn China, Eastern Europe, and Russia, a history of commandeconomies and low energy prices had fosteredindustries and housing that were wasteful of energy. Startingin the 1990s, the World Bank and IFC moved in parallelto equip financial intermediaries to promote energyefficiency in these regions. These efforts were mostly supportedby GEF and had GHG reduction as a goal. This sectionreviews 11 such projects (table C.4, which includesall but two of the energy efficiency financial intermediaryprojects initiated by 2005). 1Diagnosis of barriersThe projects had similar diagnoses of energy efficiencybarriers:• Banks do not understand energy efficiency financing. Inthis view, banks either did not understand that the savingsflow from energy efficiency improvements couldback a loan or did not know how to appraise that flowor the exaggerated the risk of these loans.• End users—factory or housing owners—do not understandtheir energy efficiency savings potential or howto realize it.Although the World Bank and IFC hadsimilar diagnoses of barriers to energyefficiency, they arrived at differentprescriptions.34 | Climate Change and the World Bank Group