An abundance of natural resources is both an opportunity and a challenge for developing countries. A number of resource-rich, low-income countries receive amounts of foreign aid that are similar to or larger than their actual or potential revenues from natural resources. A new policy research working paper by Octave Keutiben and me develops a growth model to look at some ways in which the donors may help governments of such countries to use their resource revenues productively and minimize the magnitude of risks created by resource rents. The paper’s key conclusion is that making aid countercyclical helps to achieve higher economic growth, and so does conditioning disbursements on enhancement of public capital.
It is estimated that 1.3 billion people in 2009 were still without electricity. Many rural households in the developing world continue to cook with wood and biomass (mainly dung), and spend a lot of time collecting and preparing fuel for domestic use. Across the world, these time (and resulting health) burdens are thought to be higher for women and the children under their care.
One popular argument is that by relieving time burdens spent in collecting and preparing fuel, household electricity results in rural women engaging in market-based work — judged to be a good thing since women’s empowerment has been linked to having one’s own income. In fact, a number of studies show that the introduction of household electrical appliances accounts for a large share of the increase in married American women’s labor force participation in the 20th century. For the developing world, a recent paper by Taryn Dinkelman finds similar and large effects on female employment (and not on male employment) for South Africa, which are attributed to the use of electric stoves and other time saving appliances.
The International Energy Agency (IEA) estimates that 1.3 billion people, mainly in Sub-Saharan Africa and in developing Asia, are without access to electricity. According to the IEA, an estimated $48 billion per year is needed to finance the volume of investment required to provide universal access to electricity by the year 2030. And this is a huge challenge, especially for the world's poorest nations.
President Obama on his recent Africa trip has hence announced a 7-billion project to increase electrical infrastructure. This is a much needed move as ,with scarce public resources, little assistance from the private sector, and limited aid, most of the developing these countries attempt to address their investment needs by creating regional power markets. Integrated power pools allow for the better use of existing infrastructures and realization of projects that would otherwise be oversized for an isolated country. For instance, the hydro potential of the Democratic Republic of Congo alone is estimated to be sufficient to provide three times the much power currently consumed in Africa. Large hydroelectric projects, such as the Grand Inga in the region of the Congo River and the projects for the Senegal River basin, could benefit all countries in the region. The challenging question, however, is how to finance and manage these projects.
The following post is a part of a series that discusses 'managing risk for development,' the theme of the World Bank’s upcoming World Development Report 2014.
Crude oil is arguably one of the single most important driving forces of the global economy, and changes in the price of oil have significant effects on economic growth and welfare around the world. Indeed, the level of oil dependency of industrialized economies became particularly clear in the 1970s and 1980s, when a series of political incidents in the Middle East disrupted the security of supply and had severe effects on the global price of oil. Since then, oil price shocks due to such exogenous events have continuously increased in size and frequency (cf. Figure 1). While oil demand tends to be slow moving, mainly driven by economic growth and to some extent climate policies, the prospects of future oil supply are highly uncertain – not least considering persistent political instability in exporting countries and the uncertainty regarding the discovery of new reserves. As a result of such uncertainties, oil prices could undergo further (increasingly) drastic fluctuations in the future.
There is a continuing controversy over what constitutes energy poverty and whether it is synonymous with income poverty or lack of access to electricity. Several approaches are used to define and measure energy poverty, taking into account both demand and supply of alternative energy sources, including biomass, LPG, and electricity. But as yet, no consensus has emerged for measuring and monitoring energy poverty and explaining why and how it differs from income poverty.
Like income poverty, energy poverty may be defined by the minimum energy consumption needed to sustain lives. But unlike income poverty—based on the concept of a poverty line defined by the minimum consumption of food and non-food items necessary to sustain a livelihood—energy poverty lacks a well-established energy poverty line to determine the minimum amount of energy needed for living. Current indicators used by such organizations as the World Bank and the International Energy Agency (IEA) measure energy poverty indicators as outputs (e.g., lack of electricity connections) rather than outcomes (e.g., electricity consumption and associated welfare gains).
International aviation and maritime transport account for about 5% of global carbon emissions. It may increase to more than 10% by 2030. Even so, these sectors were excluded from the Kyoto protocol. Aviation and shipping enjoy substantial tax privileges, by paying no excise taxes, turnover taxes, nor VAT. Shipping also enjoys extremely low corporate tax rates. This has lead to growing emissions and low tax revenue generation from the sectors, while the sectors enjoy more advantages than other comparable economic activity. This situation stems in large measure from these sectors’ international status: they do not naturally belong to any one particular country. Nor are they part of any; international agreements that limit taxation in aviation or extreme tax competition in shipping.
This week, amidst fireworks and stultifying Washington heat, five Policy Research Working Papers were published. They cover weakly relative poverty measures, PPPs in electricity generation, carbon emissions, universal health care, financial literacy, and economic analysis of projects in a greenhouse world.
When I moved from Norway to Washington with my family almost seven years ago, I went from paying more than $8 per gallon for gasoline in Oslo, to around $3 per gallon in the U.S. Our house is close to a bus stop for getting to the Metro, but the bus service is unreliable. Here is a first-hand illustration of how the price of gasoline affects people’s behavior. It is inexpensive to drive, so relatively few people are strongly dependent on bus service; with limited ridership there is less call for more reliable bus service and less money available to provide it. Where it is more expensive to drive, there is greater demand for higher-quality service and lower demand for more fuel-intensive cars. And fewer people want to live far away from their jobs or schools, or in very large dwellings that are costly to heat and cool. Our work in energy and environmental economics confirms how economically sound energy pricing is crucial for inducing more efficient behavior.
Small but sometimes radical new steps toward greener energy and green growth are happening on our stressed planet, but we don’t hear enough about them, nor do we sufficiently explore and share policy lessons.
Examples include ‘smart grid’ R&D activities that deploy sensors to gather data on incoming electricity from wind, solar and other renewables with varying power outputs, better management of outages, factoring in the needs of electric vehicles, and installing more energy-efficient power meter usage in homes and offices. At the other end of the spectrum, Husk Power Systems, a company operating in Bihar, India has devised a novel single fuel gasifier for rural electrification based on discarded rice husks – one of India’s most common waste products. Thanks to the risk husks, 60 mini-power plants have now been installed. They power about 25,000 households in more than 250 villages in rural India.
This entry is the first of a series of posts written by members of the World Bank's Development Research group's Environment and Energy team on economic and policy issues involving energy and climate change mitigation.
Issues relating to energy are among the most important and difficult challenges confronting the world today. Providing sufficient energy to meet the requirements of a growing world population with rising living standards will require major advances in energy supply and efficiency. Doing this while mitigating the risks of climate disruption will be an even more challenging undertaking. It will require a significant shift in the historic pattern of fossil-fuel use and a major transformation of the global energy system. Especially in the developing countries, the choice of technology, policy, and economic levers that will be used to transform and expand their energy systems will have profound implications for their growth, international competitiveness, and economic security and prosperity. This overview focuses on the challenges related to electricity supply; subsequent blogs will address other parts of the energy system.