Many companies represented here already are investing in renewable energy, improving efficiency and expanding research and development of climate-friendly products.
This trend in the corporate sector has gone global. Earlier this year, a coalition of NGOs as well as major companies—that included Du Pont, Caterpillar and General Electric—called for a groundbreaking national policy to tackle climate change.
A few years ago, it would have been difficult to imagine these companies coming together to discuss climate change—today, they are demanding action.
They are part of an emerging global consensus that the international community needs to do something—sooner rather later—to pursue a low carbon path and leave a healthier planet for our children.
Global Energy Demand
The challenge of fighting global poverty is immense: today, 1 billion people worldwide are surviving from one day to the next on less than $1 a day. It’s a staggering figure.
Yet, if we look at recent history, we know there is hope. In the last 25 years, some half a billion people have escaped poverty worldwide. Much of this progress has been driven by rapid economic growth in the two big emerging economies of China and India.
That growth would have been impossible without increased energy consumption in these countries. And, there is no question that this growth needs to continue—so that those who are still trapped in poverty have a chance for a better future.
So, energy demand in developing countries will only increase. But, we need to be prepared to respond to this rising demand with a smaller carbon footprint.
Today 1.6 billion people worldwide don’t have access to electricity. In rural areas of the developing world, particularly South Asia and Sub-Saharan Africa, as many as 4 out of 5 people live without electricity.
With these statistics in mind, we need to ask ourselves: How do we reduce both poverty and carbon emissions?
Poor countries have argued they should not have to pay the price for fossil fuel dependent growth in the rich countries. And they are right.
Rich countries need to lead by example. Today, OECD countries are moving forward with plans to renovate and replace virtually their entire power plant infrastructure. The decisions made in capitals across Europe and North America today will affect generations to come—so it is essential that they make the right choices and invest in clean technology and move towards low carbon strategies.
Rich countries will also need to lead with direct support to developing nations.
We need to reduce poverty and reduce carbon emissions.
But, instead of viewing emission reductions as a costly activity that simply reduces the burden of climate change, we should also view as an opportunity to generate funds to invest in a different energy path—one that not only makes less use of carbon but which diversifies the world’s energy sources, preserves the world’s forests, and enables a long term shift away from finite fossil fuels toward greater reliance on renewable energy and on technological innovations.
Roadmap for Investments: Clean Energy Investment Framework
Moving to a low carbon path, however, will require more than investments alone.
It will also require a long-term equitable global regulatory framework to reduce greenhouse emissions:
-a framework in which rich countries show leadership by supporting developing countries in exchange for the global benefit of greener, smarter growth;
-a framework that provides certainty to stimulate research and development in transformational technologies;
-and, a framework that allows carbon markets to thrive and bring financial flows to developing countries to the tune of $100 billion within a few decades.
Emerging Opportunity
Whatever solution emerges for reducing carbon emissions, one thing is clear. We will need to generate significant resources to help developing countries grow while reducing the impact on the environment.
The UK’s Environment Secretary David Milibrand recently suggested carbon trading could generate resource flows in the order of $200 billion a year, half of which will go to the developing world, that is to say about $100 billion per year.
$100 billion is an enormous amount of money and certainly exceeds what is currently spent on Official Development Assistance, but it is dwarfed by what the world spends on fossil fuels. It is only 7 percent of the $1.5 trillion that the world spends each year just on oil alone.
There are better uses for those funds. Instead of importing fossil fuels, we could be investing in innovation that will allow us to meet our energy needs from more diverse resources without damaging the environment.
So clean energy should not be perceived simply as a cost. It should be seen as an opportunity to invest in a different future…an opportunity to diversify our energy sources and expenditures.
Towards a Low-Carbon Path: World Bank Role
At the World Bank Group, we have been doing our part to close the funding gap in the developing world for expanding access to energy.
With Gordon Brown’s leadership at the Gleneagles Summit in Scotland two years ago, the G8 Countries asked the World Bank to produce a road map for accelerating investments in clean energy for the developing world, in cooperation with the other international financial institutions.
The Clean Energy Investment Framework (CEIF) identifies the scale of investments needed:
-To increase access to energy, especially in Sub-Saharan Africa;
-To accelerate transition to a low carbon economy and
-To adapt to climate variability and change.
Over the last three years, the World Bank total energy support has been ramped up to $3-4 billion per year—an increase of 40% over the previous three year period. Last year, 37 percent of this lending was directed to low carbon initiatives.
Yet given the huge demands, more needs to be done to leverage private sector financing—both to close the gap and spur innovation.
Let me briefly talk about four areas where we have been actively supporting climate-friendly solutions.
1. Investing in Efficiency and Conservation
First, despite efforts to diversify, it is clear that most developing countries will need to rely heavily on carbon based fuels for the foreseeable future so we are focusing on opportunities to improve efficiency and conservation and the use of fossil fuels.
As large emerging economies like China and India pursue rapid growth, we are working with them to develop strategies and financing plans that reduce their carbon footprints.
For instance, we are partnering with Chinese banks to convince the local private sector of the business case of energy efficiency. For the first time, three key players in the Chinese economy – utilities, suppliers of energy efficiency equipment, and commercial banks – have come together to create a new financing model, a market-based solution, to promote energy efficiency.
Through our analytical work, we are supporting China’s efforts to restructure its district heating sector and are working with the Chinese steel industry to save energy through redesigning current production processes.
We are helping Mexico, Brazil, China and India to pilot more energy efficient modes of urban transport.
We are also promoting Green Investment Schemes, which link emission trading revenues to low carbon investments in Latvia, Ukraine, Bulgaria, and initiating similar work in Russia.
Strong partnership with the private sector is especially important.
To give you one example, as part of the Global Gas Flaring Reduction Partnership, we are helping oil producing countries and companies to increase the use of natural gas, which will otherwise be flared or burned and damage the environment.
This partnership mobilized $1.7 billion in private capital investments for gas flaring reduction projects in Ecuador, Indonesia, Nigeria, and Russia that offset some 6 million tons of CO2 emissions.
This partnership model could be useful for promoting other climate friendly technologies. Given the very large coal reserves in countries like the US, China and India, techniques such as Integrated Gasification Combined Cycle (IGCC) coupled with Carbon Capture and Storage (CCS) can help us make use of a valuable resource for development—but do it in a way that leaves a small carbon footprint.
With research and development, incentives can be created to speed-up the commercialization of both IGCC and CCS. Could a public-private partnership accomplish this? We will look to this conference for insights.
As we scale up our efforts, we will need to look at innovative financial tools, including guarantees and other instruments that can leverage the private sector and respond to the specific needs of our partner countries. Our Carbon Finance work will be an important part of this.
Today, the World Bank is managing nearly $2 billion in nine carbon funds and facilities of which $1.4 billion has already been committed.
These funds are supporting low-carbon investments which range from the destruction of industrial gases to the capture of methane in landfills. The investments are also aimed at improved energy efficiency in steel production, bagasse co-generation, renewable energy (wind, geothermal, hydropower), land use change, and combating deforestation.
And now, in consultation with governments and private sector participants in these funds, the Bank is designing a new carbon finance facility that would purchase emission reductions beyond the regulatory period of the Kyoto Protocol (2008-2012).
2. Investing in Renewable Energy
The second focus of our effort expanding investment and access to renewable energy.
We know that there is no silver bullet. But, here too, we know that the private sector is key to innovation.
Wind, solar, geothermal, hydro, and bio-energy are all part of a diversified energy path. These technologies can reach areas where it is impractical to build and maintain a centralized power grid.
We are promoting geothermal energy in Kenya and small hydropower in rural areas in Uganda. In Nepal, we are supporting a biogas program that replaces firewood for cooking in rural households, thus reducing indoor air pollution.
We are working on the commercialization of fuel cells in Africa. In a number of countries we are supporting advanced biomass power generation.
In India, Kenya and Morocco, we are promoting the use of solar panels for electricity, especially in remote locations.
In Guinea-Bissau, a Bank project underway uses cashew shells to generate electricity. We think this will open the door to an industry where 10 Megawatts of power can be generated from bio-mass, and directly support the cashew industry—which is responsible for two-thirds of the country’s GDP.
In 1992, renewable energy accounted for only 0.1 percent of India’s total generation capacity. We supported India by providing $108 million in credits and raising $200 million from the private sector to promote renewable energy and strengthen relevant institutions. By 2002, India’s share of renewable energy increased to 3 percent, while still a small percentage that is a thirty fold increase in just over a decade.
In Brazil, I had the opportunity to visit a sugar ethanol plant outside of Sao Paolo. They are producing ethanol on a large scale and with exceptional efficiency. It is no surprise that bio-fuels are at the top of President Lula’s agenda.
There may be countries in Africa with the right combination of climate, land, and water that might make bio-fuel production a real possibility. We know that what is successful in Brazil, may not be successful in other places. Brazil’s remarkable production efficiency and natural conditions cannot be replicated easily, but it is something that should be assessed.
More broadly, second generation technologies hold promise and we look forward to supporting strong R&D programs.
We are ready to provide technical assistance and advice to support adoption of bio-fuels where they are economically and environmentally sustainable.
3. Combating Deforestation
A third focus of our efforts lies in preserving forests. We know that around 20 percent of greenhouse gas emissions result from poor land management, especially deforestation. This not only threatens the environment—it also destroys wildlife and erodes the natural wealth of the poor.
Together with both our official and non-governmental partners, we are developing a pilot Forest Carbon Facility that will help countries combat deforestation and be rewarded with carbon finance.
The proposed pilot fund would set the stage for a future, large-scale carbon market. It would build a country’s capacity to harness the future carbon market and pilot performance-based payments to avoid deforestation and improve natural resource management, in particular forest management.
4. Adaptation
Fourth, we are working with our partner countries to help them adapt to some of the negative impacts of climate change.
Developing countries, and particularly the world’s poorest people, are hardest hit by changes in climate and extreme weather events such as floods, droughts, heat waves, and rising sea levels. They are often least prepared to cope.
The World Bank was among the leaders in addressing adaptation to climate risk by pioneering insurance work in the Caribbean, in Latin America, and in South Asia. Just last month, we launched a Caribbean Catastrophic Insurance Facility with support from a multi-donor trust fund. The challenge now is to replicate these lessons more widely, especially in Sub-Saharan Africa and the Pacific Islands.
We are also discussing with our partners ways to promote development that is sustainable and resilient to climate variability—we call it ‘climate-proofing’ our development investments.
Reaching for the Double Dividend
We recognize that we need to walk the talk in our own operations, and we are doing something about it. We have made the World Bank Group Headquarters carbon neutral. We also believe it is time, in coordination with our partners, to develop a system that can estimate the carbon intensity of our projects.
I’m encouraged to see that a number of private companies at this conference are also moving in the same direction.
Today, we are faced with compelling evidence that our consumption of fossil fuels is hurting the environment—and the longer we delay action, the more costly it will be. Business as usual is not an option.
Today, we have the opportunity to move towards a climate-friendly development path and secure a cleaner, more stable future for our children and grandchildren.
If governments, the private sector, and international development institutions work together, we can turn the emerging global consensus on climate change into concrete actions. We can fund innovation and find solutions.
And we can look more confidently toward a very different future—one where we don’t have to choose between prosperity and a healthy environment, because both will be within our reach.
