World Bank dialogue on the clean energy investment framework

World Bank-IMF spring meetings, 24 April 2006

27 April 2006 | Minutes

Bob Watson, chief scientist for the World Bank, introduced the three elements of the Bank’s clean energy investment framework: energy for development, a low carbon economy, and adaptation to climate change.

  • Energy for development does not pose a “technology challenge” but a financing gap of some $300 billion per year. Modern renewable energy will be “small-scale for 20 to 30 years” according to Watson, requiring consideration of small and large-scale hydro, and nuclear energy for some countries.
  • The move to a low carbon economy, requiring some $10 to $200 billion per year, will require a “long-term, stable, post-Kyoto regulatory framework”, large grants and making markets work.
  • Adaptation to climate change will require $10 to 40 billion per year.

Financing for the three elements will require both an examination of existing financial instruments, and the creation of several new instruments including a clean energy fund, a project development fund and a venture capital fund.

Jamal Saghir, head of the Bank’s energy and water department, stressed that water security was an issue at least as important as energy security.

Jon Sohn, head of US-based NGO World Resources Institute, said that the positive elements of the new framework included the call for a global regulatory framework, the emphasis on good governance in power provision (requiring the involvement of CSOs), and the inclusion of the adaptation agenda. Under challenges, he highlighted four issues:

  • The presence of both energy access issues and climate change mitigation threatened to muddle overall goals.
  • The use of the International Energy Association ‘business-as-usual’ scenario was questioned.
  • Choice of technology should be based on the principle of country dialogues and should be “technologically neutral”.
  • An examination is needed of the role of the World Bank itself.

Octavio Canuto, Brazilian Executive Director to the Bank, stressed that this was an opportunity for the Bank to re-engage with middle-income countries by facilitating south-south investment in energy efficiency and adaptation techniques. He described the discussion of the paper at the board of governors meeting as a “tower of babel”, with each country making a pitch for its favoured energy technology. Canuto then made his own appeal for greater attention to biofuel.

Timothy Richards, of General Electric, had a four-point agenda for action:

  • Develop a long-term price for carbon
  • Get governments to address policy barriers
  • Address state-owned enterprises – this may require grants to ‘buy down’ the price of clean energy forms compared to state-subsidised dirty energy
  • Capacity building

Question and Answer

Robin Broadfield, GEF: There is no traction with China. The US-led “duplicate dialogue” is destructive.

Bob Watson: The US-led initiative is voluntary and complementary, though he is nervous that any voluntary mechanism will not work on its own.

Jamal Saghir: The biggest support for the paper came from the G plus 5 (India, China, Mexico, Brazil and South Africa). The World Bank has just completed energy 2020 for China, and China is asking for more work on clean coal.

Petr Hlobil, CEE Bankwatch: The existing portfolio is focused on energy security, not of the south, but of the north. Indian development of wind technology has been despite, not because of the World Bank, which has chosen to focus on coal.

Octavio Canuto: Agreed that energy security has been wrongly equated to energy security in the north. The Bank must work to enhance local development through energy provision, and must never be seen to undermine the UN common but differentiated approach.

Raquel Cruz, Friends of the Earth El Salvador: Is there a spanish version of the paper available? What does the World Bank think of the problems with and the resistance to hydro-electric projects in Central America?

Bob Watson: It is up to the Development Committee whether to translate the paper. Large dams are appropriate if consultation has been done and if environmental and social policies have been followed.

Jamal Saghir: We shouldn’t be picking technologies at this level. Technology choice must be country specific, and should consider the findings of the World Commission on Dams.

Daphne Wysham, IPS: What is the climate impact of WBG lending? Are IEA scenarios appropriate?

Bob Watson: We are not saying that IEA scenarios are appropriate or climate-friendly. They are only used for energy for development estimates. The Bank will work with all modelling groups, such as the Stern group and the IPCC. It is up to the international community to decide appropriate stabilisation levels, and the Bank’s technocratic task to then come up with alternative scenarios to meet the agreed-upon levels.

Bruce Jenkins, Bank Information Center: Who will lead on energy intergration into Poverty Reduction Strategies and Country Assistance Strategies?

Jamal Saghir: Most PRSPs do not even mention energy. It is up to countries and donors to take a lead.

Octavio Canuto: We must handle this with care. We don’t want to make CASs a christmas tree, and there should be no conditionality.

Final comments:

  • Timothy Richards: want an action-oriented approach on the IGCC
  • Lord Hunt (chair): you’d have thought the World Bank would have something to say on airplane fuels
  • Jon Sohn: avoid short-term project debates and talk about broad energy debates
  • Bob Watson: country ownership and dialogue over the next two years
  • Jamal Saghir: we’re learning as we go along
  • Lord Hunt: The G8 dialogue process has parallel working groups. There will be a website up shortly. Five legislators from each G8 country, key business leaders and CSOs will be meeting one week before the G8 in St. Petersburg.