Climate change: removing bad subsidies to fund adaptation?

This page in:

Let’s start by cleaning up what we mean by clean technology. The definition used at IFC/EMPEA Private Equity Conference yesterday, was that it optimizes the use of natural resources, while reducing ecological impact and adding economic value by significantly lowering cost and improving profitability. I think this works well as a definition. So in emerging markets today, clean tech offers innovations and opportunities that make commercial sense without any regulatory support and despite the subsidies baked into natural resource prices. Efficient use of any resource brings returns to the bottom line.

In emerging markets some clean tech innovations from the developed world will do well, some will not - they will be too expensive. But even more will be home grown and there will be growing opportunities for south-south and south-north technology transfer. Don Ye of the China Environment Fund has spoken compellingly on this and has had enormous success in this area. Clean tech then is not necessarily high tech.

The power challenge for developing countries is to increase the efficiency of available energy when large sections of the population remain unserved. Providing power to the bottom of the pyramid will unleash the trapped economic activity of the poor and will create markets for the energy efficiency sector itself. Solar power lighting systems for villages or, even at the household level, a solar lantern will help improve education levels and quality of life. Watch IFC's website for announcements on a new wave of energy efficiency housing and utility finance in the coming weeks.

But beyond clean tech, see the CERES report on Corporate Governance and Climate Change: Making the Connection. It uses a checklist to benchmark 76 US and 24 non-US companies on how they are addressing climate change through board oversight, management execution, disclosure, emissions accounting, and planning. Success factors: boards and executives work together to address climate change, the CEOs see climate change as a near term priority, and management teams look for practical solutions within their businesses - with an eye on a carbon neutral economy.

Could regulation help a rising tide raise all boats - yes. Is a bad subsidy bad for outcomes - yes. But the news is that despite the inaction of governments, industry leaders are already pushing ahead based on their analysis of risk and reward. My Bank colleagues have big numbers for the costs of adaptation for developing countries - can we fund this by removing and re-applying monies going into bad subsidies?


Rachel Kyte

Vice President and Special Envoy for Climate Change

Join the Conversation

The content of this field is kept private and will not be shown publicly
Remaining characters: 1000