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Farewell World Bank. You’re on the Right track. And you have a Big Job Ahead!

Andrew Steer's picture


Andrew Steer in Indonesia

Today is my final day at the World Bank.

When I first entered the doors of 1818 H Street three decades and seven Presidents ago, the big buzz in the cafeteria was Cost Benefit Analysis and Basic Needs. President McNamara had  demanded that every project document identify in detail how many of the poorest 25% it would directly and indirectly benefit, and how. The secret to rapid career progress was expertise in shadow pricing (which was appropriate in light of the massive distortions in goods, labor, currency and capital markets in most of our client countries).

But those shadow prices certainly didn’t include the value of environmental externalities. The entire cadre of environmental specialists for the whole institution consisted of one person. (It wasn’t me.)

Last week at the Rio+20 Conference I met up with an old friend, Emil Salim, who for many years was the longest serving Environment Minister in the World, and is still, well into his eighties,  chief environmental advisor to President Yudhoyono of Indonesia. We reminisced about a meeting he and I were at in 1982, when he asked the President of the World Bank for help in dealing with the acute environmental problems associated with Indonesia’s rapid growth. The polite reply he received was “The World Bank is a development agency, not an environment organization. We don’t do this kind of work.”

The wisdom of children...and prophets

Andrew Steer's picture

UN Photo/Maria Elisa Franco

We’re changing planes in Panama on our way to the Rio+20 Earth Summit.  As we taxi out to take off the pilot tells us that we’ll need to wait for 15 minutes while we burn off 300 pounds of fuel, since the plane may be too heavy to take off.

My 11 year-old daughter, who is sitting next to me, says “Isn’t this very silly? It’s wasteful and bad for the climate. Why do they do it?” 

We’ve brought Charlotte, together with her 10 year old brother, Ben, on this trip so they can see how country leaders struggle with the big issues, and also because they ask the right questions, and help keep us grounded. I explained to her that the fuel on international flights is totally untaxed by international agreement, and that subsidies on fossil fuels amount to over $400 billion each year, including over $70 billion in rich countries. And that governments spend more than 20 times more paying people to consume more fossil fuels than they spend on research to develop renewable energy.

“That’s stupid”, says Ben, who is not as polite as his sister. It’s like telling your kids not to smoke, and then paying them each time you see them smoking.

They’re right, of course. And one of the rare bright spots in Rio was the airtime given to fossil subsidies by civil society and the private sector. The B20 (the business shadow of the G20) Working Group on Green Growth, of which I am a member, urged G20 leaders to publish subsidy levels each year, and set a time-bound schedule for their elimination. Not so easy for political leaders to grasp this nettle, of course, having seen several countries, most recently Nigeria, find their efforts to raise energy prices hit with violent opposition. I discussed with Charlotte how smart politicians, such as in Indonesia and Iran, have found ways to use a share of the revenues saved to provide cash compensation to the poor. “Makes sense”, she said.

LED bulbs, potted plants and electric cars - the story of climate innovation in Vietnam

Anthony Lambkin's picture

We raised glasses and cheered to the future success of Mr. Minh’s company. I had just visited his manufacturing facility where his company ASAMLED produces light-emitting diode (LED) lights for a variety of applications. A 40 person start-up and the only LED lighting company to manufacture over 90% of the final product locally, ASAMLED had the makings of Vietnamese clean tech success story. But as the day rolled on, we began discussing the real challenges the company and industry face. Starting an energy efficiency business in a country where energy is cheap and Chinese importers (who he called ‘screw-driver innovators’) are plenty, is not easy.

He told me how ASAMLED was conducting market tests with dragonfruit farmers. Using LEDs at night, dragonfruit production could jump from four harvests a year to nine – good news for the Vietnamese farmers who supply 40% of the fruit’s market in Europe. But he explained research like this was expensive and difficult to do with limited resources. According to him, the World Bank-run Climate Innovation Center could help him advocate his technology, inform consumers and access funding to market test a host of new LED applications.

Tar sands: The story behind the headlines

Alan Miller's picture

The complexity of climate change issue is a challenge for most mainstream media, which increasingly seek the shortest possible sound bite to interest an audience with a very limited attention span. Yet a recent example illustrates the importance of looking past the headlines to understand the importance and true meaning of scientific announcements.  The article featured the optimistic headline: “New study finds oil sands fuels would cause imperceptible temperature rise.” 

This declaration understandably attracted considerable attention from climate policy-watchers because Canadian oil sands (also commonly referred to as “tar sands” reflecting the heavy, molasses like quality of the substance) are the resource proposed for transmission via the controversial Keystone XL pipeline recently denied a permit by the Obama Administration. (Oil sands deposits have also been found in Russia, Venezuela and Kazakhstan, but a majority of identified reserves and virtually all commercial production are in Canada.)  

Some advocates for developing the oil sands see their use as essentially a national energy security issue, maintaining the pipeline is an important step forward toward fulfilling the long cherished dream of US energy independence, not to mention the potential to reduce or at least stabilize gasoline prices: ``Is US Energy Independence Finally Within Reach”, National Public Radio, March 7, 2012.

To be sure, the promise of lower gasoline prices and energy security are strong considerations. But an ongoing debate continues as to whether or not this economically attractive resource can be extracted, refined, and distributed without unacceptable environmental harm. This is why an otherwise academic analysis by Neil Swart and Andrew Weaver at the University of Victoria in British Columbia proved newsworthy. They calculated the global temperature rise that would result from the carbon dioxide released by burning currently proven reserves of Canadian oil sands: Neil Swart and Andrew Weaver, “The Alberta oil sand and climate,” Nature Climate Change, Feb. 19, 2012.

Disruptive Innovation needed, submit your ideas now

Jean-Louis Racine's picture

Henry Ford once famously said that if he had asked his customers what they wanted they would have asked him for a faster horse. If he had listened to his customers, the Ford Motor Company may never have existed, or would be called the Ford Faster Horse Company. The automobile became what is called a “disruptive innovation” meaning that it radically displaced the incumbent technology (the horse and carriage) by not listening to the demands of mainstream consumers, but trying to uncover their real needs.

This is the approach the World Bank is now prototyping in Indonesia: Trying to uncover the real clean energy needs of rural communities by understanding their underlying energy-related problems rather than simply asking them what technologies they want. The Indonesia Green Innovation Pilot Program is prototyping a new approach to fostering green disruptive innovation. The first stage of the program is being launched this week, and consists of identifying possible challenges – or problems – linked to energy in rural communities. In keeping with the logic of disruptive innovation, the program does not start with a market demand study, or a survey of clean energy solutions in the market, but with uncovering stated and unstated needs that affect the population of a rural community in their everyday lives. This is being done in three ways: One is through field research by a team of designers from Inotek and Catapult Design, a second way is through consultative workshops in Jakarta and in the rural communities,  and a third is through a “call for challenge” where the program is using a crowdsourcing approach to collect problems linked to energy in rural Indonesian communities. If you are in any way familiar with rural Indonesia and its energy challenges, the program invites you to submit a challenge through this website.

Crystal gazing with McKinsey on resources for the future

Alan Miller's picture

In 1980, the biologist Paul Ehrlich and business school professor Julian Simon famously wagered on the likelihood of resource scarcity over the coming decade. Based on his expectation that population growth would lead to a rapid growth in demand for basic resources, Ehrlich bet that the prices of five commodity metals would increase; Simon, argued that rising prices incent human innovation and consequently that resource prices should be stable or declining. In the decade that followed, despite population growth of 800 million, the prices of all five commodities chosen by Ehrlich declined and he paid the bet. In July 2011, the investor Jeremy Grantham noted that if the bet had been extended to 2011, Ehrlich would have won – by a lot. 

McKinsey Global Institute, a research arm of McKinsey & Company, recently revisited the debate about economic growth and resource scarcity with the release of a major study, “Resource Revolution: Meeting the world’s energy, materials, food, and water needs”. One of the lead authors, McKinsey partner Jeremy Oppenheim, recently visited the World Bank in Washington DC to describe the report’s conclusions and discuss its implications for development strategy, particularly for the World Bank. His presentation captivated a large audience and provoked a lively discussion.

The key findings of the report can be summarized in two categories – challenges and opportunities. The former starts from the projected increase of up to 3 billion more middle class consumers in the next 20 years, driving up demand at a time when finding and extracting resources is becoming increasingly difficult and expensive, while also resulting in enormous environmental pressures.

The good news is the existence of sufficient technically and economically feasible efficiency improvements and alternative technologies to meet nearly 30 percent of predicted demand and offset much of the projected growth. Some of these measures are already identified and well understood, such as improving the efficiency of buildings and irrigation – a “resource productivity revolution”. These measures would, however, not be sufficient to alleviate poverty and avoid global warming in excess of the two degrees Centrigrade widely considered the threshold.

To meet these goals, McKinsey outlines an additional level of ambition with respect to clean energy and carbon sequestration.

What did Durban deliver?

Andrew Steer's picture

At 4.30 on Sunday morning, after 36 hours of overtime (a record), the 194 country members of the UNFCCC pulled a rabbit from the hat. Special flights had been put on by South African Airways as a way to encourage delegates not to leave.

Putting the Puzzle Together

Three big pieces of the jigsaw needed to fall into place in order to clinch the `Durban Platform’. First, a new commitment period of the Kyoto Protocol, without which developing countries would have walked. Second, a road map towards a truly global deal to be effective by 2020 at the latest, without which the EU wouldn’t sign on to a new Kyoto. Third, the launch of the Green Climate Fund, without which developing countries wouldn’t sign on to such a global road map.  

Putting the pieces together required compromise and was accompanied with brinksmanship, emotion, and millions of words spoken, usually repeating what had already been said. The outcome, however, is highly positive for the long term prospects for a deal, and delivered all that could reasonably be hoped for (see my earlier blog: Will Durban Deliver?).

Thus, in a nutshell, delegates left Durban having agreed on:

  • A new commitment period under Kyoto for the EU and 11 other countries beginning January 1, 2013.
  • An agreement to negotiate a global deal by 2015, which would be effective from 2020 with "legal force" applying to all countries.
  • A Green Fund launched, with regional groupings to nominate board members in the coming three months. Board selection will be very important since most operational details yet to be designed.

Making carbon finance work for the poor

Rachel Kyte's picture

During this week in Durban, we announced two new financial initiatives designed to help the least-developed countries access financing for low-carbon investments and enable them to tap into carbon markets after 2012 - the Carbon Initiative for Development (Ci-Dev) and the third tranche of the BioCarbon Fund (BioCF T3).

The funds, focused on agriculture and access to energy, are designed to strengthen links to private sources of capital via carbon markets for some of the world's poorest communities.

The new instruments will help client countries to buy carbon credits from a range of projects including household biogas systems in Nepal, cook stoves in Africa, reforestation in the Democratic Republic of Congo, soil carbon in Kenya, and municipal solid waste in Uganda.

Ci-Dev, aiming to raise USD 120 million, is a partnership of donor and recipient countries, where public and private sector are pledging their support to capacity building and carbon market development in the poorest countries of the world.

The second initiative, the BioCF T3, will focus on reforestation and agriculture projects.

The agriculture projects are another example of the climate-smart agriculture we have been talking about all week – and deliver a triple win of increased food security and resilience through reduced soil erosion and increased land fertility as well as the access to new carbon markets.

Can the world avert locking itself into an unsustainable future?

Vijay Iyer's picture

“The world is locking itself into an unsustainable future.” That’s the headline on the press release for this year’s World Energy Outlook(WEO). This conclusion, coming from the sober, serious International Energy Agency (IEA), sure grabbed attention at a panel discussion I moderated here in Durban Monday.

In presenting the Outlook, Laura Cozzi, IEA’s Senior Economist, laid out the WEO’s three scenarios for the future. Two of them, the ‘Current Policies’ scenario — that is, business-as-usual — and the ‘New Policies’ one, that is, governments cautiously implement commitments already made — do not get us where we need to be by 2035. Only one of them does that, the third, so-called ‘450 Scenario’, which sets out an energy path consistent with a 50%-chance of holding global temperature rise to two degrees Celsius. Past and current choices have the world ‘locked into’ a high emissions path. Laura showed that the 450 scenario takes the world to a situation of ‘no carbon space left’ for new energy generation by 2017. At that point, either only zero-carbon new energy generation can go forward or, if not, for every power plant commissioned, an equivalent dirtier one will have to be shut down. 

It provoked a lively discussion. Dr. Leena Srivastava, Executive Director of India’s Energy and Resources Institute, pointed out that the ‘lock-in’ is caused not just by current patterns of production, but also by lifestyles and patterns of consumption. This resonated with the other two panelists: Dr. Subho Banerjee, Deputy Secretary of the Australian government’s Climate Change and Energy Efficiency Department, as well as Dr. Lu Qiang, of Beijing’s Energy Research Institute, a think-tank under China's National Development and Reform Commission. They reminded the audience that policy must influence patterns of consumption along with energy generation.

Low Emissions Development: Making the sum greater than individual parts

Aditi Maheshwari's picture

As COP17 enters its second week in Durban, the most striking element for me has come from outside the negotiating rooms: the clear sense of momentum around taking action on the ground, and doing so sooner rather than later. Countries are being opportunistic and seizing the day, while the global deal continues to be worked out. The driving force behind this action is the challenge of delivering on domestic priorities such as energy security and access; productivity and competitiveness growth etc. Lower emissions and the climate imperative are a welcome co-benefit but not the main goal. Nearly 90 countries have registered plans with the UNFCCC to address the emissions intensity of their growth by 2020. This includes more than 50 developing countries (a quarter of which are low-income countries) that are pushing forwards with Low Emissions Development (LED) through outlining nationally appropriate mitigation actions.

This demand for LED has prompted a ‘thousand flowers blooming’ supply of initiatives to support developing countries in their planning and implementation. On Saturday I attended a dialogue on LED hosted by the World Bank that was a genuine conversation and sharing of ideas on how to improve coordination i.e., shift the supply of support from resembling scattered flowers towards becoming the same flowering plant. More than a hundred delegates including senior negotiators, heads of organizations, think tanks, and country practitioners actively participated in the discussion.

Support is coming for all stages of the process from the tools and analysis through to policy and program development and piloting implementation. Many organizations (CDKN, GGGI, CPI, Africa Climate Policy Centre, UNEP Risø, ClimateWorks, CMCI, IDB, CCAP, The Climate Group) active in this space outlined their work and identified opportunities where they would like to see increased collaboration, coherence, and partnerships.

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