Transcript An Integrated Approach to Energy Access and Climate Change

The Clean Energy Investment
Framework:
An Integrated Approach to Energy
Access and Climate Change
Kristalina Georgieva
Director, Strategy and Operations
Sustainable Development Network
World Bank
Joint NTF-PSI and TFSSD seminar on
Energy access and climate change: The role of the private sector and the World Bank Group
Oslo, May 8th, 2007
1
Outline


An integrated approach to energy access and
climate change
The Clean Energy Investment Framework
– Energy Access
– Mitigation of climate change effects: the low- carbon
economy agenda
– Adaptation to climate change

Suggested areas for Norway’s engagement
2
An Integrated Approach to
Energy Access and Climate
Change
3
Integrating Environmental and Social
Concerns

Making environmentally responsible investments while
addressing social dimensions of energy access and climate
change
– Access: 1.6 billion people lack access to electricity, with acute
needs in Sub-Saharan Africa
– Growth: rapid increase in energy demand still met mostly
through conventional technologies
– Affordability: matters both for energy access and shift to
clean energy (e.g. pro-poor reforms of national power
sectors, reducing costs of renewables)
– Balancing climate mitigation with adaptation: need to help
communities strengthen their preparedness and adaptation
capacity
4
Integrating Public and Private Sector
Actions


Governments’ commitments crucial for a meaningful
policy response to climate change
Nothing big could be achieved without private sector
contribution
– Huge financing gaps
– Need for technological innovation

Enabling environment needed to remove numerous
barriers faced by private investors
5
Combining IFC and Bank Strengths
IFC:
World Bank:

Relationship with and  Relationship with and
access to private
access to senior policy
companies
makers

Market and technology  Multisectoral approach to
development
development

Strong influence on

Leader in sustainability
investment finance
among MDBs (first carbon
(The Equator Principle)
neutral int’l institution)

Technical assistance to  Strong track record in
businesses in the
combining knowledge and
developing world
financial services, and in
piloting new instruments6
World Bank Clean Energy For
Development Investment Framework
3 Pillars:

Increase Energy Access in Sub-Saharan
Africa
 Transition to a Low Carbon
Economy

Adaptation to Climate Change
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Energy Access
8
Scaling-up needs new business model



‘Business-as-usual’ is not delivering results fast enough
Countries should “step-up their game” by:
– Making clean energy a clear priority in their policy
commitments
– Ramping up the capacity on planning and implementation
– Acting regionally to optimize resources and investments
Development partners can be more effective by:
– Harmonizing approaches
– Being flexible on conditionality
– Delivering assistance within a country low carbon growth
strategy (rather than in fragmented, project-by-project
manner)
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A comprehensive ‘Action Plan for Energy
Access in Africa’
Needs to be Met
Energy for
Growth
Powering the
MDGs
Basic Needs
Potential Implementation Tracks
1)
Increase energy coverage for enterprises,
households & agriculture
2)
Enhance generation capacity for cleaner energy,
including via regional projects
3)
Provision of energy services for key public
facilities such as schools and clinics
4)
Equip unconnected households with affordable,
modern lighting
5)
Push for cleaner, sustainable cooking & heating
technologies
10
What is the World Bank
Doing?
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Increasing Lending for Energy and
Targeting Electricity Options in Projects
Modern
lighting
and off-grid
access
solutions for
remote and
poor homes
Enhancing
social
services
with
grid/off-grid
options
Core urban - direct
on-grid service
Peri-urban areas
proximate grid
access
intensification
12
Scaling up Lending Commitments
in sub-Saharan Africa
800
700
600
500
400
300
200
100
0
2002
2003
2004
2005
2006
2007
Prov
Lending Commitments US$ million
Note: 2007 projections are with constrained IDA resources
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Lighting Africa – Joint World
Bank/IFC Initiative
Goal: Rapid scale-up of access to clean, reliable and
affordable lighting & basic energy services for 250 million
people across Africa by 2030
See Russel Sturm (IFC) Presentation in the afternoon session
14
Accelerating the Transition to
Low- Carbon Economy
15
Current CO2 Emissions and Contributions
CO2 Emissions Per Capita, 2002
CO2 Emissions 1950-2002
1500
USA
India
Brazil
Australia
China
Japan
Korea
1200
900
600
6
5
Tons per Capita
1800
4
3
2
1
300
In
dia
az
il
In
do
ne
si a
Br
Ch
in a
Ja
pa
n
a
Ko
re
al i
a
Au
str
US
0
A
0
19
50
19
55
19
60
19
65
19
70
19
75
19
75
19
80
19
85
19
90
19
95
20
00
20
02
MtC
‘
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Reducing Emissions






Rehabilitation of old, inefficient power plants using advanced
technologies, e.g., supercritical , co-generation to supply heat to
district heating system
Energy efficiency technologies and programs to promote energy
efficiency, both on supply and demand sides.
Coal-fired power plants with IGCC and carbon capture and storage
(CCS)
Renewable energy programs - solar, wind, geothermal, bio-energy
or hydro
Urban and cities development, e.g., municipal waste and
wastewater management
Land-use programs that lead to biological sequestration
17
Financing Mitigation in Developing
Countries: Possible Sources
Options:
1. Voluntary actions
2. International grants, e.g., Global Environment Facility
(GEF)
3. Carbon trading
 But, GEF’s role is limited. Should be increased by factor
of 10 or more to play a significant role in transitioning to
a low-carbon economy.
 Carbon trade potential is huge: between US$20 and
$120 billion per year to developing countries. But longterm global regulatory framework needed.
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Mind the Gap: Less Than Half of Financial
Resources Needed Currently Available

$ 160 billion/year is needed to meet the electricity
needs of the developing world

Another estimated $30 billion/year is required to
shift electricity production to low carbon path

$ 80 billion is presently available
–
–
–
–
$32
$18
$19
$11
billion
billion
billion
billion
–
–
–
–
internally generated (e.g., company funds)
private investments
government funds
international donors and IFIs
SOURCE: INTERNATIONAL
AGENCY AND
PRICEWATERSCOOPERS
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Constraints Faced by the Private Sector




Higher investment costs: projects are not financially
viable; relatively little equity and debt capital for
cleaner technologies
Long lead times and untested technologies: private
markets get nervous, limits available investment
Regulatory uncertainty: limits mobilization of long-term
capital
Carbon finance insufficient: unmitigated risks
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Constraints Due to Public Policy



Policies and regulatory systems in
contradiction with mitigation objective
Weak policy framework for technology
transfer
Investment climate not supportive
21
What is the World Bank Group
Doing?
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Financing Low Carbon Projects
The World Bank Group:






Has a low-carbon portfolio that represents 37% of the overall
energy portfolio today
Has committed to increase its energy efficiency and renewable
energy portfolio by at least 20% per year until the end of the
decade
Is developing methodologies to measure the carbon intensity of its
portfolio, starting with energy and transport (in cooperation with
Norway)
Is a world leader in carbon finance, with over $2 billion under
management, and two important innovations under preparation (a
Low Carbon Growth Fund and an Avoided Deforestation Carbon
Fund)
Promotes PPPs in gas flaring (Norway is a partner) and has
mobilized over $1,7 billion private capital investments
Collaborates with GEF on energy efficiency and renewable energy
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World Bank Group Commitments for Renewable
Energy and Energy Efficiency, FY 2006
IN US$ MILLIONS
RENEWABLE
ENERGY
HYDRO
>10 MW
ENERGY
EFFICIENCY
TOTAL
World Bank (IBRD/IDA)
135.7
118.6
115.3
369.5
World Bank (GEF and Carbon
Finance Unit)
54.7
6
1.2
62
IFC (own funds)
17.4
67
309
393.4
IFC (GF, Carbon Finance and other
trust funds)
13
0
20.1
33.1
MIGA
0
0
1.8
1.8
220.8
191.6
447.4
858.8
SOURCE OF FUNDS
TOTAL
NOTE: IBRD INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, IDA INTERNATIONAL
DEVELOPMENT ASSOCAITION, IFC INTERNATIONAL FINANCE CORPORATION, MIGA MULTILATERAL INVESTMENT
GUARANTEE AGENCY
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Scaling up Our Knowledge
Support



Development and implementation of sector
strategies for energy efficiency, renewable
energy and transportation
The formulation of low-carbon growth
strategies for the G+5 countries (Brazil,
China, India, Mexico and South Africa, other
countries to follow: e.g., Indonesia)
New financial instruments
– Green Investment Scemes
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Adaptation to Climate Change
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Impacts of Drought and Rainfall
Variability on Economic Growth
Kenya
Ethiopia
Ethiopia: Rainfall, GDP and Agric. GDP
80
rainfall variability, Ag GDP and GDP
-80
-2
-100
-4
0
rainfall variation around the mean
-80
2000
-5
-10
-15
-40
-60
1999
1997
1998
1996
1995
1994
1992
1993
1991
1989
-20
1990
0
1988
4
-201978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
2
-40
0
-60
5
1986
0
20
1987
6
10
1985
8
40
1984
20
15
10
1983
40
20
60
GDP
1982
60
Ag GDP
percentage
rainfall variability
25
GDP growth
Ag GDP growth
-20
-25
-30
year
World Bank
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Impacts of Climate Change on Live
Expectancy
WHO estimated mortality attributable to climate
change in the year 2000*
*Compared
to 1961-1990 baseline. Source Patz et al. Nature 2005
¶Cardiovascular
diseases, malaria, diarrhoea, inland and coastal flooding, and malnutrition
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Major social implications

– Rural poor: Scarcity of natural resources – lead to dislocation and
potential conflict over scarce resources
– Urban poor: urban slums with poor property rights and little
opportunity to insure very vulnerable
– Pressure on social as well as biological diversity – indigenous peoples
and ethnic minorities
– Increased difficulty for poor people to manage risk with traditional
risk instruments (increased frequency of shocks-droughts, floods)
– On the other hand much indigenous knowledge on managing climate
variability – building on this resilience important ways forward
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Barriers to Climate Resilient
Development

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Immediate needs predominate in national priorities
Misunderstanding of the urgency
– We have decades before climate change matters
Uncertainty of potential impacts
– Little penetration of existing information
Information & tools
– How do we use the information if we have it?
– Professional & legal standards
Negotiation position – Who bears the cost?
– Some are not ready to engage until
significant funding guaranteed?
Engagement of (national) private sector
– We have a focus on “communities”, but where is the supporting
framework for SMEs, individual operators/farmers etc?
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Adaptation Action Plan
Core Activities in the CEIF
Understand nature and degree of risks
 Core set of commonly needed current and projected climate
data
 Screening tool to identify threats & opportunities arising from
climate variability/change
Build capacity to manage risks
 Country assessments
 Sector analyses (agric/water/rural infrastructure; coastal cities;
livelihoods)
 Insurance and other modes of risk transfer
Invest in adaptive measures to minimize and mitigate risks
 Pilot “climate-proofing” of development projects in Africa and
elsewhere
 Technical analysis for vulnerability reduction in Latin America &
Caribbean
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Possible areas for Norway’s
engagement in
the clean energy agenda
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1. Norway at the forefront in promoting environmentally
sustainable policies and solutions
- The Brundtland Commission
- Action Plan for Environment in Development Cooperation
- Prime Minister’s goals for new climate policy
2. The Norwegian private sector is committed to
environmentally friendly and sustainable operations
- Petroleum Sector
World leader in technological and
environmental fields
- CO2 Capture
Pioneer in environmentally friendly
capture and storage
- Renewable Energy
World class expertise in hydropower,
wind power and solar energy
3. Public sector’s role as a facilitator for energy efficient
market solutions
- Public-private cooperation in facilitating environmentally
friendly and sustainable business operations
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Capitalizing on Norway’s leadership on
environmentally and socially sustainable development
approaches for the clean energy agenda



Knowledge and expertise
Continuing support for analytical work and pilot projects
(major contribution to innovation in energy access and
climate change this fiscal year with the NTF-PSI)
Co-financing
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