Result Briefs April 23, 2018

Supporting Climate-Smart Development for the Global Public Good

Climate action from middle-income countries (MICs) is vital considering growing populations, increasing demand for energy and growing levels of greenhouse gas emissions. The World Bank Group (WBG) plays a key role in supporting countries to meet and exceed their climate commitments and finance climate action. Through the WBG’s Climate Change Action Plan, we are supporting countries to meet their Paris Agreement commitments. In fiscal year 2017 (July 1, 2016 – June 30, 2017) alone, the WBG committed $12.8 billion to over 200 climate-related projects and increased the share of climate co-benefits in our lending to more than 22 percent, up from 18 percent two years ago, getting us closer to our target of 28 percent by 2020.

Challenge

In late 2017, 15,000 scientists warned that if the world doesn’t act soon to curb carbon emissions, there will be no turning back from catastrophic climate change, bringing “untold human misery.” At the same time, the UN’s World Meteorological Organization reported that concentrations of carbon dioxide in the atmosphere had surged in 2016 to the highest level in 800,000 years. Levels of carbon dioxide, which had leveled off between 2014 and 2017, are now back on the rise. Unless urgent action is taken, climate change could push an additional 100 million people into poverty by 2030. Extreme weather events are becoming more frequent, more intense and costing more.

Under the Paris Agreement in 2015, countries around the world submitted Nationally Determined Contributions (NDCs) or national climate change action plans which laid out goals to reduce their greenhouse gas emissions. However, as MICs have grown so have emissions – total greenhouse gas emissions from MIC countries represent around 59% of the global total.

The world’s ability to tackle and overcome the climate challenge relies heavily on its ability to drive action in middle income countries. That is why the World Bank Group is working closely with MICs to support their efforts to move towards low-carbon growth paths. The World Bank Group is responding to demands from countries for cleaner energy sources, more efficient mass transit systems, green buildings, improved energy efficiency, as well as working to maximize sources of finance for climate action.

The financing required for the transition to a low-carbon, climate-resilient global economy can be counted in the trillions. Over the next 15 years, the world will require about $90 trillion in new infrastructure – two thirds of that will be in developing or middle-income countries. And if this infrastructure is going to be sustainable and serve the needs of people in these countries over the long term, it must be low-carbon and climate resilient. To meet the financing challenge, forward-looking public policy, private sector involvement and innovation, and a greener financial sector are all critical.  Climate action is a vast opportunity for sustainable global development, with investment potential in the trillions.   The IFC has estimated that the NDCs of 21 emerging market economies alone represent $23 trillion in investment opportunities.

Approach

The World Bank Group is committed to helping countries meet the climate challenge. Since the Paris Agreement was adopted, the Bank Group has been focused on helping countries deliver on their NDC and other climate commitments. This includes driving for policy change that creates the incentives for climate action (e.g. carbon pricing, removing fossil fuel subsidies, renewable energy laws etc). The World Bank Group is supporting countries in the following ways:

1. Country-level climate action:

  • Through its Climate Change Action Plan 2016-2020 (CCAP) we are working towards meeting ambitious goals, including helping client countries add 30 gigawatts of renewable energy, putting in place early warning systems for 100 million people, and developing climate-smart agriculture investment plans for at least 40 countries.

2. Mobilizing Finance:

  • The WBG has committed to increase climate financing to 28 percent of the Bank Group’s portfolio by 2020, in response to client demand.
  • In FY17 alone, the WBG committed $12.8 billion to over 200 climate-related projects and increased the share of climate co-benefits in our lending to more than 22 percent, up from 18 percent two years ago.
  • The climate change co-benefits of International Bank for Reconstruction and Development (IBRD) lending approved between FY11 and FY17 reached approximately $20 billion.
  • The World Bank and IFC are among the world’s largest issuers of green bonds. As of March 2018, the World Bank had issued a total of 217 green bonds worth over $10 billion and IFC had issued a total of 103 green bonds worth over $7.25 billion.

3. Partnerships:

  • Invest4Climate: A new platform convened by the World Bank Group and the UN in 2017, aims to bring together national governments, financial institutions, investors, philanthropists, and multilateral banks to identify climate investment opportunities, support policy reform and crowd in private investment for climate action.
  • NDC Partnership: The WBG supports this partnership of 66 countries, 31 from IBRD/IDA countries, and multiple supportive organizations to mobilize technical and financial support to help countries achieve their NDCs. Under the Partnership, the WBG has created a support facility that allows countries to receive technical, analytical and capacity development assistance to further progress towards their NDCs.
  • The Carbon Pricing Leadership Coalition (CPLC) brings together leaders across national and sub-national governments, the private sector, and civil society to help put in place effective carbon-pricing policies that maintain competitiveness, create jobs, encourage innovation and deliver meaningful emission reductions.
  • Multilateral Development Banks MDBs: The WBG is working together with the other MDBs on common approaches to monitor and track their climate finance flows to client countries, as they increase their climate financing in mitigation and adaptation. Collectively, the MDBs increased their climate financing in developing countries and emerging economies to $27.4 billion in 2016.  The MDBs are continuing to increase the work to align their financial flows with the Paris Agreement, supporting the implementation of the NDCs and facilitating activities that transition development towards low greenhouse gas emissions and climate resilient development.

Results:

The World Bank Group has played a key role in driving climate action at the country level for the benefit of client countries.

Climate action at the country level:

China: In the past 10 years, the WBG-China energy relationship has focused on energy efficiency and renewable energy development. The World Bank Group has successfully introduced market-based mechanisms to promote energy efficiency, supported the establishment of an enabling environment for increased investment in renewable energy and energy efficiency, and promoted renewable energy technology improvement for higher quality and lower costs. During this period, the Bank has financed $1.9 billion in the energy sector, including IBRD, GEF, and carbon financing, of which $1.6 billion or 86 percent was for energy efficiency and renewable energy.

  • Starting in 2005, the World Bank and partners helped China introduce then implement a renewable energy law aimed at driving the uptake of clean energy. China now leads the world in installed renewable energy capacity with investments of more than $130 billion a year.
  • The China Renewable Energy Scale up Program (CRESP) program is a strategic long-term partnership between the Government of China and the World Bank and Global Environment Facility (GEF). The program included three GEF supported phases over a period of 15 years. It set out to enable commercial renewable electricity suppliers to provide energy to the electricity market efficiently, cost-effectively and on a large scale.
  • The First Phase of CRESP, included a GEF grant (US$40.22 million) and IBRD loan (US$159 million), and made significant contributions to the scale-up of renewable energy and triggered government investment in supporting renewable energy development on a large scale. CRESP I also played an essential role in rapid growth and quality improvement of the domestic solar and wind manufacturing industry to improve quality and lower prices that have benefitted China and the world.
  • CRESP Phase I (completed in 2011) has led to investments in large-scale wind farms, biomass power plants, and small-hydro power plants, and supported investors on project preparation of an investment pipeline. Its targets of additional renewable energy electricity capacity and production was significantly surpassed. The increased capacity was 50 gigawatts (GW) or 320 percent higher than the target of 11.9 GW.
  • The Bank financed China Energy Efficiency Financing (CHEEF) project ($400 million IBRD loan and $13.5 million GEF grant) helped leverage eight times of IBRD funds, with a total of US$2,640 million investments in energy efficiency in China. The CHEEF project is expected to save energy of 4.4 million tons of coal equivalent and reduce CO2 emissions of 10.7 million tons per year, equivalent to avoid 3 GW of new coal-fired power plants.

India: India has set out to become a global leader in renewable energy and the World Bank is helping it achieve this goal:

  • The World Bank is supporting India’s mission to increase solar generation to 100 gigawatts (GW) by 2022 with $1 billion in lending. After hitting a record low tariff of 4 cents/kilowatt hour for solar power in the state of Rajasthan, the increase in India’s installed capacity from renewable sources like solar exceeded that of conventional sources, such as coal, for the first time in 2016. A new partnership between the World Bank and the State Bank of India (SBI), India’s largest bank, has transformed the market for rooftop solar in the country, making it potentially one of the largest in the world. In just six months, SBI has approved 575 megawatts (MW) of grid-connected rooftop solar installations in India, far exceeding its five-year target of 500 MW.
  • The World Bank’s growing partnership with India’s Energy Efficiency Services Limited (EESL) aims to help the country tackle its huge energy efficiency challenge, including through an LED light bulb distribution program that has driven down the cost of efficient lighting across India. EESL has deployed more than 275 million energy-saving LED bulbs, avoiding 29 million tons of CO2-equivalent emissions per year. It has also distributed 4.2 million LED tube lights, and 4 million street lights in municipalities. Now, India is looking to expand this same approach to high efficiency air conditioners, agricultural pumps, and electric vehicles.

Morocco:

  • With the support of the World Bank Group and other partners including the Clean Technology Fund, Morocco launched its first utility-scale solar energy complex, a critical step in the Moroccan Solar Energy Program. The Noor-Ouarzazate Concentrated Solar Power (CSP) complex expects to achieve over 500 megawatts (MW) of installed capacity, providing power to more than 1 million Moroccans. It is also expected to help Morocco reach its goal of 2 GW of solar power in the country and 42 percent of all electricity from renewable sources by 2020. CSP will ultimately help the country reduce its dependence on oil by about 2.5 million tons and reduce carbon emissions by 760,000 tons per year – which translates to a reduction of 17.5 million tons of carbon emissions over 25 years.

The World Bank and other development partners’ investments in this frontier technology in Morocco has had considerable flow-on effects in numerous countries. CSP plants are now in operation or under development in countries including the United Arab Emirates, Egypt, Israel, India, China, Mongolia, South Africa, Chile, Mexico, Australia, Kuwait and Saudi Arabia.

Argentina:

  • A $480m IBRD renewable energy guarantee is helping mobilize US$3.2bn in investment in the Argentine renewable energy sector. The project is expected to reduce greenhouse gas emissions substantially over 20 years. Benefits include reduced air pollution and fossil fuel use, and a more secure energy supply. The RenovAr renewable auctions, supported by this guarantee, are now bringing in private investors at competitive prices for renewable energy (about 4 to 6 USc/kWh) - lower than the average cost of electricity generation (about 7 USc/kWh in 2015) and decreasing with each round. This will help Argentina benefit from its abundant renewable resources and could ultimately help it achieve its target of 20 percent of its electricity from renewable sources by 2025.

Turkey:

  • The World Bank’s long-term partnership with Turkey - including technical expertise, policy assistance on market structure, regulation and pricing and development policy loans, has helped power the country’s energy transformation and attract private sector interest, especially in renewable energy. For example, ESMAP’s Global Geothermal Development Plan helped leverage a $350 million project to scale up private sector investment in the sector. Through such efforts, the Bank aims to support Turkey’s goal to be 20 percent more energy efficient by 2023, with renewable sources of power accounting for 30 percent of its total energy needs. 

Indonesia:

The World Bank’s support to the development of geothermal power in Indonesia is contributing to the country’s goal of increasing investment in non-fossil fuel based energy systems. Geothermal represents a clean alternative to coal-fired power generation in a country where 30 million people still lack access to modern and reliable electricity. World Bank geothermal support has developed over time, with each project leading to further investment, starting with:

  • Geothermal Clean Energy Investment Project -  This 2011 project, financed by IBRD ($175 million) and the Clean Technology Fund ($125 concessional loan) has funded the construction of two geothermal power plants in North Sulawesi and South Sumatra, respectively. The plants were commissioned on time with considerable cost and time savings due to effective procurement and contract management. The 150 MW new capacity enable electricity access up to 640,000 new customers and will reduce greenhouse gas emission by 1.1 million CO2 annually compared to coal fired generation.
  • Indonesia Sustainable and Inclusive Energy Development Policy Loan (DPL): In 2015, this first Energy DPL for Indonesia, financed by IBRD ($500 million), has helped the government’s efforts to scale up renewable energy, especially geothermal energy, the second largest renewable resource in Indonesia. For example, the new geothermal law and its accompanying regulations are expected to boost investor interest.
  • Now the World Bank is working with Indonesia on a new Geothermal Risk Mitigation Facility to develop more than 1 GW of new geothermal capacity. The facility is expected to help mobilize several billion dollars in private sector funding, unlocking investments through risk mitigation for exploration and early production drilling. Ultimately, the facility could help Indonesia reach its target of increasing the share of new and renewable energy in its primary energy mix to 23 percent by 2025, including an overall addition of 5.8 GW of geothermal capacity.

Brazil: 

The World Bank has worked with the Government of Brazil, and the State of Rio for over 20 years on improving Rio de Janeiro’s suburban rail system – SuperVia. Before the project began, sustainable transit in Rio was constrained by underinvestment in its network of over 225 kilometers and 89 stations. As service deteriorated, ridership dropped. In 1992, the World Bank and the State of Rio started working together to modernize the system. IBRD financed more than 120 energy-efficient trains with air-conditioning. By late 2015, the SuperVia system broke a new ridership record, moving more than 700,000 passengers in a single day. The new suburban train system serves the poorest neighborhoods of Rio’s metropolitan area with reliable, high quality service, and will help reduce emissions.

Bank Group Contribution:

In fiscal year 2017, the WBG committed $12.8 billion to over 200 climate-related projects.

Moving Forward: 

Looking ahead to the UN Framework Convention on Climate Change’s annual Conference of Parties (COP24) in December 2018, the WBG is prioritizing support to countries to deliver on their Paris Agreement pledges and accelerate global climate action. The Bank Group is on track to meet its target of 28% of its lending going to climate action by 2020 and meeting the goals of its Climate Change Action Plan.

Last Updated: Apr 23, 2018