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Time to engage the private sector on climate finance

Alan Miller's picture

I was at the Climate Investment Funds meetings in Cape Town last week with several other representatives from development banks, NGOs and governments to discuss results, impacts and the future of this financial mechanism. One of many themes cutting across meetings in Cape Town was the importance and challenge of engaging the private sector in climate finance. The private sector is by far the largest source of investment, the dominant provider of technology, and often essential for implementation of mitigation and adaptation measures. However, based on the discussions this week, it’s apparent there is much to learn about what is actually expected or sought from the business community. Here are some of my observations from the meeting:

  1. In my experience references to “the” private sector are common but largely meaningless and often confusing in failing to distinguish between entities as different as major multinational manufacturers, international financiers, and locally- based entrepreneurs. Some speakers even used the term more broadly to encompass markets, including policies directed at consumers.
  2. There are some unavoidable tensions between emphasizing country plans and priorities and the promotion of markets for climate-friendly products and services. This is particularly true in smaller and poorer countries. Control of donor resources is fundamental for many governments but sometimes difficult to reconcile with the flexibility, consistency, and speed required by investors. Public-private partnerships (the focus of a Cape Town session) is one solution but not always appropriate or workable.   Finding models which can blend the two, as in the collaborative IFC/World Bank Lighting Africa project, will be increasingly important. The World Bank was able to build a relationship with energy ministries while IFC focused on helping businesses. Together, they have been able to address a wide range of issues from regulatory systems to that of supply chain development.

Green jobs for Africa

Daniel Kammen's picture

At a meeting of the Clean Investment Funds Partnership Forum in Cape Town there was a telling comment in a session I chaired on climate change science when a participant from the Ministry of Energy in Ethiopia got up and said, “I am glad we are talking about the tools that are available for community planning for low-carbon development, but everyone in the rural areas of East Africa sees that the climate is changing.  My mother tells me every season the rains and temperatures are different then when she was young.”

So what to do?

Putting more energy in and money towards the manufacturing of innovative green technologies is key: exploiting the wind or sun without solar panels and turbines is like trying to catch fish without a net or rod.  Africa is poised to manufacture the ‘nets’ for clean energy.

Opportunities exist at many scales of activity: from village-level programs to manufacturing improved efficiency woodstoves, to building the hardware and knowledge systems to construct local ‘mini-grids’, to national efforts and global partnerships for large-scale manufacturing.  The multinational development community can help, and is ramping up activities like the Scaling Up Renewable Energy (SREP) program that was a focus of partnership meeting on the Climate Investment Forum.   China is investing heavily in Africa at the moment, and local manufacturing and national capacity building can be part of that equation.

I chaired a session on Scaling up Manufacturing at which the panelists told remarkable stories about these opportunities.  Stimulating the green energy industry creates jobs, said Dan Gizaw, a founder of Canton, Michigan-based Danotek, a company that manufactures permanent magnet generators for wind turbines. Gizaw is from Ethiopia, and the company established manufacturing facilities there. “Manufacturing wind turbines and turbine components locally, has a job creating advantage you don’t have when you import them. We have created 475 jobs with our factory.”

Online Resources for Low-Carbon Energy and Development

Daniel Kammen's picture

An important series of meetings on the Climate Investment Funds, hosted by the African Development Bank, began June 20 in Cape Town, South Africa. At one of the first events, discussion focused on how individual households, communities, cities, companies, and nations find and use tools to develop low-carbon, pro-growth, gender-sensitive, pro-access energy solutions. A key factor in this process is access to:

  • information on technologies and policies
  • tools to build integrated plans for the energy sector at small and large-scale.

At a session on lessons drawn from energy efficiency and renewable energy experiences, I promised to share a preliminary list of websites and online tools to assist local groups and communities gain control of the energy planning process. Here it is:

Low-Carbon Energy and Development Planning Tools

World Bank Low Carbon Development Portal –This comprehensive website provides direct access to a wide range of low-carbon development studies at the community, city, region, national, and global levels, including low-carbon studies (both documents and models) in Brazil and Mexico, rural communities in Nicaragua, as well as Nigeria and Kenya. 

HEAT and TRACE - This portal provides access and documentation for a number of individual models, including:

  • HEAT (Hands-on Energy Adaptation Toolkit),
  • TRACE (Tool for Rapid Assessment of City Energy)

ESMAP (Energy Sector Management Assistance Program) - A general portal for myriad reports and models (including HEAT and TRACE) via the Energy Sector Management Assistance Program at the World Bank Group

HOMER Energy (Hybrid Renewable Energy Optimization Tool) - The HOMER energy modeling software is a powerful tool for designing and analyzing hybrid power systems, which contain a mix of conventional generators, cogeneration, wind turbines, solar photovoltaics, hydropower, batteries, fuel cells, hydropower, biomass and other inputs.  It is used by tens of thousands of people worldwide. For grid-tied or off-grid environments, HOMER helps determine how variable resources such as wind and solar can be integrated optimally into hybrid systems.

Time to clear the smoke

Daniel Kammen's picture

In many parts of the world, a picture of a woman sitting in front of a smoky cookstove preparing a family meal remains an iconic picture of life today. For many families, the three- stone fire or a traditional stove as a cooking device has not changed over centuries.  This need not be the case, and in a growing number of nations, that traditional pattern is changing.

Serious research on improved cookstoves dates back to the 1950s. However, large-scale field programs focused largely on the inefficiency of designs. While the stoves may appear simple, the socio-cultural systems in which they operate, and their impacts on so many aspects of household and regional health and economics, is far from simple. Many approaches have been tried, with some successes and many failures.

Over the last few years, a more complete view of the full human and environmental health impacts of indoor air pollution and the global impact of the fuel and stove cycle has emerged. Poorly managed fuel systems encourage use of unsustainably harvested fuel such as charcoal produced from illegal and ecologically damaging informal production network.

The World Bank is looking at opportunities to improve not only cookstoves themselves, but also the full stove fuel cycle as a way to address energy poverty, human health, and the global greenhouse gas problem. I was delighted to see a new publication that looks at this nexus between health, environment and GHG benefits called Household Cookstoves, Environment, Health, and Climate Change: A New Look at an Old Problem. This report takes stock of existing knowledge on the subject and points out new opportunities by identifying `game-changers’ in the stove technology and fuels.

Trading methane for housing

Kai-Uwe Barani Schmidt's picture

Three global leaders coming together to deal with climate change was the headline grabbing moment for the recent C40 summit in Sao Paulo (read A tale of three men and 40 cities). Away from the cameras and sound bites was a field trip to Heliopolis, one of Sao Paulo’s biggest slums to drive home the messages that were being discussed in the conference.

As our bus convoy reached the construction site of Heliopolis, we saw round buildings resembling refinery towers. These were brand new apartment buildings for hundreds of Sao Paulo residents who currently live in the Heliopolis slum without proper access to basic services.

And while the round design of the buildings was eye-catching, the real catch is the way this project is being financed: A good portion of the finance comes from carbon finance credits that the city gets through a waste recycling project called Bandeirantes Landfill Gas to Energy Project (BLFGE) in which the methane of biomass waste (which accounts for 60% of Brazilian waste) is converted into energy. This way of generating energy qualifies for carbon credits.

The `how-to' of renewable energy

Daniel Kammen's picture

Last month, I blogged about the Special Report on Renewable Energy Sources and Climate Change Mitigation of the Intergovernmental Panel on Climate Change (IPCC), for which I was a coordinating lead author. In that report we found that by 2050, roughly 80 percent of global energy demand could be met by tapping renewable sources. The IPCC’s best-case prediction is contingent on a big caveat, however. It is that government policies must “play a crucial role in accelerating the deployment of Renewable Energy (RE) technologies.”

Fair enough, but which policies work best? Which can be replicated widely? Which sectors need more radical new approaches? Given the complexity of energy technologies, and markets, modes of power generation, transmission, distribution, consumption, metering and billing, and the multiplicity of policies—feed-in tariffs, subsidies, ‘feebates’, renewable portfolio standards, and so on— policy makers are often scrambling for guidance.

As author for the Policy and Deployment chapter of the IPCC report, as well as a member of the Summary for Policymakers’ team, I am pleased to suggest a useful source: a recent Discussion Paper No. 22 produced by my World Bank colleague Gabriela Elizondo Azuela, along with Luiz Augusto Barroso, Design and Performance of Policy Instruments to Promote the Development of Renewable Energy: Emerging Experience in Selected Developing Countries.

Elizondo and Barroso studied grid-connected RE policy options used in six countries—Brazil, India, Indonesia, Nicaragua, Sir Lanka and Turkey. They find that sound governance is an essential condition for the success of policy incentives that aim to accelerate the integration of renewable energy. “For example,” Elizondo says, “legal and regulatory frameworks for grid connection and integration have to be in place before RE policy is introduced.” In the IPCC report we called this the ‘enabling environment’.

Eat your charcoal, child

Flore de Préneuf's picture

Many on this blog have written about the triple win of improved livelihoods, increased climate resilience and carbon capture. That vision of climate-smart agriculture and sustainable forest management is one of hope and necessity against a backdrop of food price volatility and climate extremes. Last week I was able to spend time studying the said “backdrop” – in the Eastern province of Kenya, where farmers who have last seen rain in March 2010 are cutting down trees to survive.

I spoke to farmers in Mboti, a community of about 100 families scattered in a world of thorny white bushes, red earth and isolated trees. Even in good times, they are brave people living on rain-fed agriculture in a region that gets much less average precipitation than Kenya's lush and populous highlands. They live on the edge – coexisting and sometimes competing with nomadic herders for salty water drawn from boreholes, one jerrycan at a time. 

But the farmers' endurance has been stretched to the limit. The heavy rains of November didn't materialize (it drizzled) and the April showers never did either. Priscilla Mwangangi, a 60 year-old widow, plowed her fields this spring hoping she could sow millet and sorghum, but instead spends her time minding a mound of charcoal which she feeds by chopping down acacia trees around her property. One big bag of charcoal sells for 400 Kenyan shillings – about $5.

80% of all energy could be from renewables by 2050...with the right policies

Daniel Kammen's picture

In just one day, the sun delivers about as much energy as has been consumed by all human beings over the past 35 years. So why haven’t we exploited more than a tiny fraction of this potential? There are many reasons: cost, storage, transmission, distribution, entrenched subsidies and technological challenges are but a few of them.

But the reasons not to take advantage of renewable energy are falling away. A report published this week by the Intergovernmental Panel on Climate Change (IPCC) found that close to 80% of the world’s energy demand could be met by tapping renewable sources by 2050, if backed by the right enabling public policies. I served as a Coordinating Lead Author for the Policy and Deployment chapter of the report, as well as member of the Summary for Policy Maker’s team, and I can attest to how much rigorous analysis and effort comparing data and sources went into this process and document.

The same Special Report on Renewable Energy Sources and Climate Change Mitigation found that the technical potential of renewable energy technologies “exceeds the current global energy demand by a considerable amount—globally and in respect of most regions of the world.”

These encouraging findings were released Monday, May 9, after being studied carefully, examined, and then approved by member countries of the IPCC in Abu Dhabi, United Arab Emirates.

Shutterstock Images, LLC 

Can East Asia do for Green what it’s done for Growth?

Andrew Steer's picture

East Asia has shown us how economies can grow at a pace unparalleled in human history. What made it happen? Key ingredients included high savings rates and a willingness to invest them for the long term in people and infrastructure, leaders who kept their eyes on the long-term transformation of the economy, and a lot of serious attention to how investors respond to incentives.

But aren’t these some of the same ingredients we’ll need to make growth green?

This was one of the topics we discussed this week at the first Annual Conference on East Asian Development in Singapore organized by the Bank’s East Asia Pacific region and Singapore’s Institute for Policy Studies.  This brought together senior policymakers and academics from throughout the region. Is it possible that the Region that brought us growth, could also be the leader in making that growth green?

But first, just how green has East Asia’s growth been so far? To over-simplify, the region has made pretty good progress in reducing the environmental damage per unit of output, but this hasn’t been able to keep up with the astonishing growth of the output. So, real GDP is up by near 400% since 1990, while energy use is up by 150%, sulfur dioxide emissions up by about 60%, and carbon dioxide up by nearly 200%.

This is a lot better than it might have been – but the environment is still getting worse at a serious rate. And this says nothing about water stress, loss of biodiversity and a host of other issues. (On a positive note, particulate emissions are down by 50%, and lead in fuel has almost disappeared).

Does East Asia need to lower its growth to ensure that the environment doesn’t deteriorate further?  No, but it will require the same degree of commitment and long term focus that inspired the strong growth in the first place – but this time by internalizing environmental costs.   

The revival of cookstove research

Daniel Kammen's picture

It may come as a surprise to know that half of the global population uses biomass (wood, agricultural wastes and dung) and coal for cooking.  For Sub-Saharan Africa where electrification rates outside of South Africa are only 28%, biomass and coal are the primary cooking fuels for over three fourths of the population. Combustion of unprocessed biomass fuels, especially in open or poorly ventilated stoves, emits high concentrations of pollutant mixtures – particulates, and carbon dioxide, methane, and carbon monoxide – associated with a number of respiratory and other diseases and is the leading cause of death among infants and children worldwide.

 

Since the task of cooking is mainly done by women and girls, it is they who face daily exposure to levels of pollution which are estimated to be the equivalent of consuming two packets of cigarettes a day (Kammen, 1995; Ezzati and Kammen, 2001).

 

Smoke from domestic fires kills nearly two million people each year, and sickens millions more. This places indoor air pollution as almost as critical a health threat as poor sanitation and AIDS, and a greater threat than malaria. Without systematic changes, household biomass use will result in an estimated 8.1 million Lower Respiratory Infection (LRI) deaths among young children in Sub-Saharan Africa alone, between 2000 and 2030 (Bailis, Ezzati, Kammen, 2007).

 

All of these factors highlight the critical need to evaluate the effectiveness of cookstoves at not only reducing emission, but in impacting health.

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