Download World Bank`s Approach to Energy Sector

World Bank Energy Sector
Lending: Encouraging the World’s
Addiction to Fossil Fuels
Heike Mainhardt-Gibbs
Bank Information Center –
March 2009
World Bank and Climate Change

Difficult task of providing energy access to the poor while
protecting them from climate change
–
Country specific and politically sensitive

Clean Energy Investment Framework pledges to transition to a
low-carbon economy

8 out of 9 people harmed by climate change will be living in
countries that are currently classified as ‘developing.’
Importance of the World Bank

Global GHG reduction targets dependent on overall
development path, especially energy sector

World Bank plays significant role in developing countries:
–
–
–
–
–
Direct energy and extractive industries investments
Key institution determining development models
Development policy loan programs (regulations, tax policies,
investment codes, etc.)
Technical assistance/expertise
Convening power between governments and companies
Aim of Study




Assess World Bank Group’s core portfolio of energy
sector financing
Determine trends in funding for different energy
sources
Assess against goal of transitioning to a low-carbon
development path
Estimate contribution to global GHG emissions
Main Findings




Approach to energy sector does not provide
transition to low-carbon economy
Gains in renewable energy and energy efficiency
do not compensate for highly imbalanced
financing in favor of fossil fuels
Financing for fossil fuels on the rise, especially for
coal
Significant contribution to global GHG emissions
What is the most valuable and appropriate role of
the World Bank?
Suggestion: If the Bank is truly going to
benefit the poor, it must significantly change
and improve the development model for
developing countries - not simply lead them
down the same carbon intensive, unstable
economic path of developed countries.
World Bank Group Financing for Fossil Fuels,
Renewable Energy and Energy Efficiency
$6,000
$5,000
F os s il F u els
$3,000
L arg e H ydro
R en ewables w/o L g
H ydro
E n erg y E ffic ien c y
$2,000
$1,000
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
$0
19
2007$, Millions
$4,000
World Bank Group Financing for Fossil Fuels
(million $)
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
World Bank
577
618
599
592
544
255
291
313
758
575
199
IFC
521
229
935
373
794
488
499
409
590
824
2,988
1,098
847
1,534
965
1,338
743
790
722
1,348
1,399
3,187
185
205
239
230
193
312
155
75
118
152
0
1,283
1,052
1,773
1,195
1,530
1,055
945
797
1,465
1,551
3,187
1,593
1,288
2,125
1,398
1,760
1,188
1,035
845
1,505
1,551
3,137
Sub-total
MIGA (guarantees)
Total
Total Adjusted for
Inflation (2007$)
Fossil Fuels on the Rise

FY06 – FY08 represents an increase for
three consecutive years, which did not take
place any other time

FY08 highest year, exceeding next highest
by 48% or $1 billion
World Bank Group Financing Three-Year Average
(2007$)
FY2006
million $
Fossil Fuels
Coal
Large Hydro Power
Energy Efficiency
New Renewable Energy
New RE & EE*
1,505
119
180
399
176
576
percent
change
78%
1283%
-46%
91%
15%
59%
FY2007
million $
1,551
140
777
206
435
641
FY2008
percent
change
3%
18%
333%
-48%
147%
11%
Three-year Average
percent
million $ change million $
3,137
1,041
1,529
1,108
485
1,593
102%
642%
97%
438%
11%
148%
2,064
433
829
571
366
937
percent
change
61%
648%
128%
160%
58%
73%
Three-year Average Trends

Important gains in new renewable energy and
energy efficiency (73%)

Low baseline for new RE and EE relative to oil and
gas

Overall funding amount – fossil fuels 2 times new RE
and EE combined and 5 times new RE sources

19% more for coal then for new RE
New RE by Institution, FY05-08 (2007$)
GPOBA ($8.5 Million)
1%
MIGA ($86.9 Million)
7%
World Bank ($466.2 Million)
39%
IFC ($278.7 Million)
23%
Carbon Offsets ($148 Million)
12%
GEF ($213.6 Million)
18%
Breakdown of IFC Energy Sector
IFC Current Energy Sector Generation Commitments
million $
% share
Coal
1,173
29%
Oil
427
11%
Gas
879
22%
Hydro
738
19%
Wind
58
1%
Geothermal
65
2%
Other renewable
45
1%
So urce: Co ncentrating So lar P o wer (CSP ) Financing and the Clean Techno lo gy Fund
P res entatio n by Dana R. Yo unger, Wo rld Bank Infras tructure De partment
Climate Inves tment Funds CTF Trus t Fund Co mmittee
CO2 Emissions of World Bank Fossil Fuel Lending
(FY2008)
When the fossil fuels involved in the Bank
projects are combusted:

97.42 MMTCO2 annually; and

2,072 MMTCO2 project lifetime emissions
7% of World annual CO2 emissions from the energy sector

Note: Does not account for relevant policy lending, technical assistance, or several fossil fuel
projects lacking data.
Comparison to Country and Regional Annual
Energy Sector CO2 Emissions (2005 country estimates, US EIA)
Country / Region
Portugal
MMTCO2
64.97
Israel
Chile
Korea, North
Philippines
Austria
Vietnam
WBG FY08 Annual
Iraq
Romania
Greece
Nigeria
Czech Republic
World Total
65.01
66.19
73.50
78.06
78.17
80.38
97.42
98.13
99.34
103.16
105.19
112.83
Country / Region
Africa
Central & South
America
India
Japan
Middle East
Russia
WBG FY08 Lifetime
Eurasia
Europe
China
United States
North America
Asia & Oceania
MMTCO2
1,042.92
1,096.16
1,165.72
1,230.36
1,450.81
1,696.00
2,072.00
2,577.82
4,674.75
5,322.69
5,956.98
6,987.78
10,362.49
28,192.74
Main Conclusions

Bank is still spending five times as much on fossil fuels as for
new renewable energy sources

Continued emphasis on fossil fuels commits many countries to
carbon intensive energy sources for 20-40 years

Increase in coal projects makes low-carbon transition difficult
(coal emits almost twice as much CO2 as natural gas per unit of
energy)
Main Conclusions

None of the Bank’s climate change initiatives address
assistance to fossil fuels – no incentives/strategies to reduce

Future developing country GHG reduction targets will be more
costly

Oil and gas projects aimed at export to developed countries do
not encourage UNFCCC Annex I countries to reduce their GHG
emissions from fossil fuels
World Bank’s Approach to Energy Sector:
Moving Forward

Fully recognize and correctly change role in
energy sector as it relates to climate change
–
–
GHG emissions contribution – throughout value
chain
Furthering world’s reliance on fossil fuels (long-term
commitments, exports to Annex I countries)
–
Ensure benefits to and protection of the poor
World Bank’s Approach to Energy Sector:
Moving Forward

Carefully reassess approach to fossil fuel
projects
–
–
–
–
GHG emissions reporting
Costs associated with CO2 damages included in
cost-benefit analysis
Evaluate availability of private sector funding
Comprehensively assess alternative energy
options and benefits/costs to the poor
World Bank’s Approach to Energy Sector:
Moving Forward





Provide political leadership – convince countries it is in their
best interest
Push the envelope to help developing countries leap frog to
better energy technologies (e.g. super critical coal technology
does not equal a low carbon project)
Hire more staff (especially IFC) with renewable energy
expertise
Report more accurate data on energy sector activities
Revise Energy Strategy and IFC Performance Standards to
provide incentives to reduce fossil fuel development