The Challenge of Low-Carbon Development - World Bank Internet ...
The Challenge of Low-Carbon Development - World Bank Internet ... The Challenge of Low-Carbon Development - World Bank Internet ...
Since the early 1990s, public entities, utilities, and developmentagencies have use several (overlapping) design featuresto encourage CFL adoption: subsidizing bulbs, usingbulk procurement, imposing quality standards, offeringcertification, and mounting advertising campaigns.WBG portfolioSince 1994, the WBG has supported residential CFL programsin more than 20 countries; the Bank has coveredsome 50 million CFLs primarily through bulk distributionor market-based projects. Many projects have receivedGEF or carbon fund support, though many recent projectsaimed at rapid crisis mitigation have been implementedwithout GEF assistance.The WBG has supported residential CFLprograms in more than 20 countries.In the early 1990s, WBG-GEF projects supported CFLdistribution in Jamaica, Mexico, Poland, and Thailand. InPoland, though CFL sales increased and significant powersavings were attained, market transformation effects werenot fully sustained, as the project lacked effective mechanismsto sustain quality levels (GEF 2006a).Based on results from these projects, IFC undertook theGEF-supported Efficient Lighting Initiative (ELI), whichcarried out market-based programs in Argentina, the CzechRepublic, Hungary, Latvia, Peru, the Philippines, and SouthAfrica. ELI supported public education, targeted subsidies,demand-side management programs, and the developmentof standards and labeling for CFLs.After a lull, there was a surge in World Bank projects in2007–09. Many of these were emergency projects to addressdrought-induced hydropower shortages in Africa. Most ofthese new projects are bulk-purchase and distribution forresidential CFLs. Bulk-purchase projects have become favoredbecause of their ability to reduce unit costs of bulbsthrough bulk discounts, their substantial and immediatereductions in peak electricity demand, and the ability to accesscarbon financing.Economic, CO 2, and environmental impactsCFL project appraisals are generally back-of-the-envelopeexercises that calculate savings based on assumed numberof bulbs, wattage of new versus old bulbs, and hoursused per bulb. These ex ante calculations suggest ERRs inthe hundreds of percent together with more modest CO 2savings.Few of the WBG-supported projectshave applied rigorous monitoring andevaluation.Photo by Dominic Sansom, courtesy of the World Bank Photo Library.Well-developed methodologies exist for monitoring theseoutcomes and calculating impacts, as a result of decadesof demand-side management programs in developedcountries (Vine and Fielding 2006). However, few WBGsupportedprojects to date have applied rigorous monitoringand evaluation methods. ELI mounted a large monitoringand evaluation effort, but long-term impact monitoring wasnot undertaken, and the interim results were never publiclyreleased. Most other projects have undertaken limitedex-post monitoring, and few attempt to compare projectversus control group areas. Hence, the impact assessments(table C.3) must be read with great caution.Early projects claimed positive impacts but faced barriersto sustainability: commercial prices of CFLs remained highand quality often low. Yet in Sri Lanka, despite a high bulbfailure rate, a subsidy demonstration project with 100,000bulbs led to a successful follow-up where 511,000 bulbswere purchased at commercial rates. Survey results foundthat 58 percent of customers thought the utility’s endorsementof CFLs was important or very important in determiningtheir decision to purchase CFLs (SRC 1999).42 | Climate Change and the World Bank Group
ELI deployed a variety of tools to encourage commercializeduse of CFLs, combining limited-term subsidies, standardsand labeling, public education, and targeted creditschemes. Although the credit schemes were generally unsuccessful,the $15 million project claimed direct reductionsof 2,590 GWh and 1.9 billion tons of CO 2. The projectclaims also to have catalyzed reductions in CFL prices. Itis not possible to validate these claims—for instance, thereare no statistics on CFL prices and diffusion in comparisoncountries—but the project would have a high return even ifthese impacts are overstated by a factor of 10.In a follow-on project, the Bank and IFC, with GEF funding,commissioned the China Standard Certification Centerto operate the ELI Quality Certification Institute, whichdevelops quality standards and licenses manufacturers whocomply to use the ELI label. Some Bank projects use ELIstandards for procurement practices; so far the impact ofELI standards on commercial markets is unclear.The best-documented completed Bank project wasundertaken by Electricity of Vietnam over 2004–07, withGEF funding. The project included a CFL component thatdistributed 1 million bulbs to rural customers at a costof $1.8 million, along with other energy efficiency activities.Bulbs were purchased using bulk supply contracts atan average price of $1.07 per lamp and sold to customersby Electricity of Vietnam at an average price of $1.56 perlamp. In comparison, existing retail prices were $2.00–3.00 per lamp. Many utilities lack incentive to participatein programs that reduce electricity sales, but Electricity ofViet Nam was strongly motivated because it is mandatedto serve low-income and peak-hour customers at pricesbelow its cost (average marginal revenue from power saleswas 4.5 cents/kWh as opposed to average marginal cost of8 cents/kWh).The best-documented CFL project resultedin energy savings of 46 GWh per year at acost of $1.8 million.An ex post evaluation (IIEC 2006) found a peak load reductionof 30.1 MW, energy savings of 45.9 GWh per year, andexpected lifetime energy savings of 243 GWh. Average customerpower bill savings were estimated to be 15.2 percent.Failure rates of CFLs were relatively low (0.5 percent), andthe utility replaced failed lamps. A substantial subsequentrise in CFL sales was attributed to an accompanying publiceducation and CFL promotion campaign. The benefits fromincreased private sales potentially exceed the benefits fromthe primary distribution campaign. Although this markettransformation impact is difficult to validate, it is plausiblegiven the extremely large increase (80 percent and 150 percentincreases in first-year sales for the two largest sellers).CFL projects have also been a cost-effective response to energyemergencies, saving both costs of providing additionalcapacity and the fuel cost of running diesel generators. Forexample, during a 2007 power crisis in Ethiopia, $5 millionwas spent on 4.6 million CFLs, which were expected to save315 GWh per year for 4 years. Meeting the same demandfor 4 years using leased diesel generators would have cost$20–$115 million in leasing costs and $152 million in fuelcosts (EEPC 2009) and resulted in about 750,000 tons ofadditional CO 2emissions.Unlike incandescent lights, standard CFL bulbs contain asmall amount of mercury (about 0.001–0.025 grams, comparedto 0.5–3.0 grams in a mercury thermometer. 3 Bysome calculations, use of incandescent bulbs triggers moremercury release into the atmosphere because of the mercurycontent of coal. Mercury concerns have not played amajor part in CFL project design. These projects typicallytrigger environmental category B for safeguards, 4 but onthe basis of other, larger, power sector components. MostCFL projects do not explicitly mention mercury issues, butthe most recent Bank CFL projects (Rwanda 2008, Senegal2008, Benin 2009, and Mali 2009) incorporate designs forcollection or disposal mechanisms. Bank projects in Ethiopia(2006, 2007) are studying CFL disposal options for Sub-Saharan Africa.Coordination with policy reformThe first phase of this climate evaluation (IEG 2009)pointed to the potential to combine electricity pricing reformwith promotion of CFLs and other efficiency devicesas a way of cushioning the transition to environmentallyand financially sustainable pricing. Although many recentenergy projects include both CFL distribution andtariff reform (for example, in Benin, Cote d’Ivoire, Mali,and Togo), this has tended to occur because both CFLsand tariff reform are practical responses to power supplyshortages. In these cases, CFLs have been “sold” as a peakload reduction tool, rather than as a tool to mitigate tariffincreases. Thus the potential for policy coordination remainsunexplored.The potential for combining CFLdistribution with tariff reforms remainslargely unexplored.Incentives for staff and managersThese projects offer high returns, but they may not be attractiveto Bank staff and management in an environmentthat measures results by volume of disbursements. As anexample, compare a $5.7 million GEF-funded energy efficiencyproject in Vietnam that included a $1.8 millioncomponent for a residential CFL component to a $335 millionhydropower generation project in Ethiopia, funded inEnergy Efficiency | 43
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Since the early 1990s, public entities, utilities, and developmentagencies have use several (overlapping) design featuresto encourage CFL adoption: subsidizing bulbs, usingbulk procurement, imposing quality standards, <strong>of</strong>feringcertification, and mounting advertising campaigns.WBG portfolioSince 1994, the WBG has supported residential CFL programsin more than 20 countries; the <strong>Bank</strong> has coveredsome 50 million CFLs primarily through bulk distributionor market-based projects. Many projects have receivedGEF or carbon fund support, though many recent projectsaimed at rapid crisis mitigation have been implementedwithout GEF assistance.<strong>The</strong> WBG has supported residential CFLprograms in more than 20 countries.In the early 1990s, WBG-GEF projects supported CFLdistribution in Jamaica, Mexico, Poland, and Thailand. InPoland, though CFL sales increased and significant powersavings were attained, market transformation effects werenot fully sustained, as the project lacked effective mechanismsto sustain quality levels (GEF 2006a).Based on results from these projects, IFC undertook theGEF-supported Efficient Lighting Initiative (ELI), whichcarried out market-based programs in Argentina, the CzechRepublic, Hungary, Latvia, Peru, the Philippines, and SouthAfrica. ELI supported public education, targeted subsidies,demand-side management programs, and the development<strong>of</strong> standards and labeling for CFLs.After a lull, there was a surge in <strong>World</strong> <strong>Bank</strong> projects in2007–09. Many <strong>of</strong> these were emergency projects to addressdrought-induced hydropower shortages in Africa. Most <strong>of</strong>these new projects are bulk-purchase and distribution forresidential CFLs. Bulk-purchase projects have become favoredbecause <strong>of</strong> their ability to reduce unit costs <strong>of</strong> bulbsthrough bulk discounts, their substantial and immediatereductions in peak electricity demand, and the ability to accesscarbon financing.Economic, CO 2, and environmental impactsCFL project appraisals are generally back-<strong>of</strong>-the-envelopeexercises that calculate savings based on assumed number<strong>of</strong> bulbs, wattage <strong>of</strong> new versus old bulbs, and hoursused per bulb. <strong>The</strong>se ex ante calculations suggest ERRs inthe hundreds <strong>of</strong> percent together with more modest CO 2savings.Few <strong>of</strong> the WBG-supported projectshave applied rigorous monitoring andevaluation.Photo by Dominic Sansom, courtesy <strong>of</strong> the <strong>World</strong> <strong>Bank</strong> Photo Library.Well-developed methodologies exist for monitoring theseoutcomes and calculating impacts, as a result <strong>of</strong> decades<strong>of</strong> demand-side management programs in developedcountries (Vine and Fielding 2006). However, few WBGsupportedprojects to date have applied rigorous monitoringand evaluation methods. ELI mounted a large monitoringand evaluation effort, but long-term impact monitoring wasnot undertaken, and the interim results were never publiclyreleased. Most other projects have undertaken limitedex-post monitoring, and few attempt to compare projectversus control group areas. Hence, the impact assessments(table C.3) must be read with great caution.Early projects claimed positive impacts but faced barriersto sustainability: commercial prices <strong>of</strong> CFLs remained highand quality <strong>of</strong>ten low. Yet in Sri Lanka, despite a high bulbfailure rate, a subsidy demonstration project with 100,000bulbs led to a successful follow-up where 511,000 bulbswere purchased at commercial rates. Survey results foundthat 58 percent <strong>of</strong> customers thought the utility’s endorsement<strong>of</strong> CFLs was important or very important in determiningtheir decision to purchase CFLs (SRC 1999).42 | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
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