Needed: Pragmatic Energy Leadership for a Livable Future


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Beijing Smog. Ilya Haykinson/Flickr Creative CommonsRight now, as you read this, wherever you are, we are in uncharted territory. Our global population of 7.1 billion is headed for more than 9 billion by 2050. With our growing numbers and aspirations for shared prosperity comes a growing demand for energy to power homes, businesses, industry and transport. Our continuing reliance on fossil fuels is generating pollution and a dangerously high amount of greenhouse gas emissions – this past summer, the concentration of CO2 in the atmosphere passed levels not seen in 3 million years.

If you were in Beijing last week, you felt the impact in your lungs: Just 16 days into the new year, the city woke up to its first “airpocalypse” of 2014, the latest in a series of dangerously high smog days. Beijing’s mayor announced plans the same day to cut coal use by 2.6 million tons and ban heavily polluting vehicles.

That was an important local step, and we are seeing forward-thinking cities and national governments make similar moves as they develop the architecture for a cleaner, low-carbon future.

This week at the World Future Energy Summit in Abu Dhabi and then at Davos, I am talking with government and private sector leaders from around the world about the global energy and climate challenge, what it means for their people and future national prosperity, and how we can all efficiently, economically, and at a global scale clean up the energy supply to maintain a livable world. We need to muster political will to make policy and investment moves now.

The reality is that demand for energy is on a path to double by 2050. Without changes to our energy supply and how we use it, the result will be higher greenhouse gas emissions that could lead to a 2°C temperature increase in the next 20 to 30 years, with spiraling effects including more intense storms, droughts, and damage to food and water security. This will also affect energy system security.

We need pragmatic solutions that are fact-based, sensible, and effective to reverse the path that has taken us into dangerous territory.

That means addressing a root cause of climate change – energy based on high-carbon fossil fuels – and shifting to a low-carbon energy path. It’s not easy, and it will mean leaning on transition fuels like natural gas and capturing, storing and using carbon, on our way to a clean economy, but it is beginning to happen around us. How do we take emerging stories of success and bold leadership from anecdote to everyone's story?

The Sustainable Energy for All initiative, led by UN Secretary-General Ban Ki-moon and World Bank Group President Jim Kim, is leading the international charge with three goals: achieve universal access to modern energy, double the share of renewable energy, and double the rate of improvement in energy efficiency by 2030.

To make those happen and build a sustainable, clean-energy future, it’s important to get the policies right now.

First, put a price on carbon. A predictable, robust price on carbon gives companies an incentive to invest in low-carbon energy sources and technology and reduces demand for fossil fuels. That, along with fiscal and other policies to support energy efficiency and renewable energy, can help bring low-carbon technologies to scale, which lowers their cost as we have seen with solar. Thirty-six countries have or are planning to launch carbon markets in coming years; China launched five pilots for emissions trading in four cities and one province last year and has two more planned with an aggressive target for a national system. China may be the world’s largest energy consumer today, but it’s also a leader in energy savings, and it’s taking action.

A carbon price provides certainty and levels the playing field. Corporate leaders are increasingly recognizing the risks that climate change poses to their sectors, business models, supply chains, and resources. Several are already using their own shadow prices on carbon for planning, according to CDP’s latest review.

Second, create a climate that attracts investment in clean energy and resilient infrastructure. That starts with mandates, policies, incentives, and building codes that require greater energy efficiency and use of clean energy. Shifting from brown economies to green is a hard slog, but it also carries immediate payoffs in reduced energy waste and increased livability, as the energy-intense economies of Eastern Europe are discovering.

In our study on how to achieve the Sustainable Energy for All objectives by 2030, we estimate that it will take at least $800 billion more a year, above what is currently invested in access, efficiency, and renewable energy, to reach those goals. The public can’t carry this alone – the UN estimates that about 80 percent of all financing need to deal with climate change will have to come from private sources.

The money is there, though investors mention a few lingering barriers: lack of understanding of the opportunities, limited capacity to appraise risks and limited appetite for risk, lack of creditworthy energy utilities, and limited leveraging of concessional resources. How to bridge that gap is one issue being discussed this week.

Another policy to get right: phase out fossil fuel subsidies. The world spent $1.9 trillion subsidizing fossil fuels in 2011, about 8 percent of total government revenues, according to the IMF. Taxpayers end up footing the bill for companies that are emitting and polluting. It’s a strain on public funds. It discourages energy efficiency. And it’s regressive – on average, the richest 20 percent of households in low-and middle-income countries capture six times more benefit from subsidies than the poorest. Shifting from taxing what we earn to what we burn is the topic in more and more capitals around the world.

Water is one very tangible reason for driving energy efficiency. Energy generation uses water; pumping and filtering water and getting it to home faucets and farm fields requires energy; and water is limited. We’re launching a new global initiative this week called Thirsty Energy to help countries assess their water-energy challenges and work across ministries to manage the risks and develop solutions.

As you can see we have a lot of work to do, all of us, but there are opportunities in every economy, high income or low, emerging or developed, in governments, utilities, energy or water companies, banks or other investors, and civil society, to lead. And that's what we need now.

Rachel Kyte
Group Vice President and Special Envoy, Climate Change

Photo: Beijing smog. Ilya Haykinson/Flickr Creative Commons


Rachel Kyte

Vice President and Special Envoy for Climate Change

Join the Conversation

Nigel Williams
January 27, 2014

If the World Bank beleives we need to take action why is it funding fossil fuel projects without carbon capture?

Rachel Kyte
January 27, 2014

Our Energy Directions Paper provides answers to several of the questions here (online at <a href="; rel="nofollow"></a&gt;). On fossil fuels, the World Bank Group finances greenfield coal only in rare circumstances where there are no viable alternative energy sources or financing available. We are exploring several ways to reduce greenhouse gas emissions from the energy sector, including investment in renewable energy, off-grid, and energy efficiency. While CCS has the potential to curb greenhouse gas emissions, costs are currently prohibitive in most circumstances. We manage a CCS trust fund with a work program that includes developing regional regulatory frameworks and assessing economic and financial instruments, and supporting for pilot and demonstration activities. Innovation, as a few commenters mention, is crucial across sustainable development as we deal with climate change, including in the generation, transmission, and use of energy. 

Danilo P. Manayaga
January 23, 2014

Algae has the highest productivity of capturing CO2 per unit area and be able to produce the desired fuel we need on this planet. All CO2 producing enterprise shall be mandated to support CO2 sequestration projects all over the world if they cannot reduce their CO2 production. In the Philippines there is still 2 million hectares of idle agricultural land that can be used to produce bioenergy crops or Algae cultivation, we need Capital to do this.

Karsten Berg
January 23, 2014

Thank you Rachel for your constructive synthesis and re-orientation. But I have a big problem. If it is so clear what the entire world needs to do NOW, why we still keep TALKING about this?

January 23, 2014

I agree with you, would just add to stress on national governments to help promote innovation and reward generators who come up with innovative ideas (incentives based model) that leads to outputs.

Oliver Kerr
January 23, 2014

"We need pragmatic solutions that are fact-based, sensible, and effective to reverse the path that has taken us into dangerous territory."
An excellent manifesto. Why, then, does the Bank not consider advocating nuclear power as a pragmatic option? Carbon pricing, investment in renewables and energy efficiency, and ending harmful fossil fuel subsidies are an important part of the solution. Yet they would appear to fall short of the urgency demanded by the situation if we are indeed serious about 'turning down the heat' and avoiding a four degree warmer world, whilst at the same time doubling energy supply.

May 23, 2019

Look at the after effects of Chernobyl and Fukashima in Japan. To me nuclear doesn't qualify as a clean technology. We don't keep our nuclear plants up to code here in the states. The devastation caused by a nuclear reactor meltdown just doesn't look like good renewable energy to me!

February 17, 2014

These conditions should make energy conservation and efficiency a priority to every human being. It should be a mandatory practice, smog filled cities are surely an occurrence that people should not want to experience. Hopefully, the growing trend of all things green will continue and we can prevent this scenario from repeating in other parts of the world.