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Speeches & Transcripts November 4, 2021

Remarks by Anna Akhalkatsi on Expectations from COP26 and the Future of Energy in Romania

The recording is available here.

I am very glad to participate in this event and would like to thank the organizers, Energynomics, for their kind invitation. I would also like to greet His Excellency, Ambassador Andrew Noble, all my distinguished fellow panelists, and all participants who are with us today in person or online.

This is an extraordinary moment. While the entire world is still grappling with the fallout of a global pandemic, we all are looking at the leaders who gathered at COP26 to signal their commitment to achieving net zero emissions.

I was asked today to share with you what the World Bank Group’s expectations and hopes are vis-a-vis COP26. If I were to summarize this in two words, these would be – Ambition and Action.

We know that achieving the net zero emissions goals will not be possible without an overhaul of the energy sector the way we know it. This is the sector which is directly or indirectly responsible for about three-quarters of global greenhouse gas (GHG) emissions – but which, at the same time, fuels our economies, moves people and merchandise, and heats our homes.

As we slash emissions, we need to ensure that the growing energy demand from the developing world is met. Eliminating one-third of global emissions requires retiring more than 100 GW of coal capacity each year for the next 20 years. Just imagine, the world needs to roughly close one power plant every day until 2040. But this capacity will need to be replaced with cleaner and reliable energy.

The International Energy Agency (IEA) estimates that solar and wind power capacity would need to grow from 1,400 GW today to 17,000 GW by 2040. To support the integration of renewable energy and provide reliable supply, annual deployment of energy storage will need to increase by two orders of magnitude. For industry, transportation, and buildings, electrification and doubling of energy efficiency are top priorities to reduce emissions while meeting the growing need for affordable energy services.

Yet, fossil fuel subsidies are still increasing globally, carbon is too lightly taxed, and bold decisions to decommission the existing fleet of coal-fired power plants and stop construction of new ones are rare, at least outside of the EU.

So, what we want to see at COP26 in Glasgow is a strong political commitment to a realistic and fair transition to transform not only the energy sector, but the entire economy, acknowledging that this will require major social, economic and technological changes, and investments.

Political declarations need to be underpinned by three things: policy flameworks, financing, technologies.

Policy frameworks with suitable incentives, including in tax and subsidy structures are key to facilitate energy transition. While well-designed power markets and demand-side management, including digitalization, can reduce the costs of electricity, only a third of countries worldwide have developed adequate legal frameworks and policies for renewable energy.

In addition to enabling policies to unlock investment, the road to net zero will require trillions of dollars in additional investments. Grant and concessional resources cannot fill the financing gap – much of the shortfall has to be filled by the private sector. So, the mobilization of public, private, and development financing at scale and the design of sophisticated financial instruments will be needed to unlock high-impact projects.

Development and deployment of the clean technologies and sustainable solutions is the third important ingredient of success. The Glasgow Breakthroughs – a commitment by world leaders and companies to work together to accelerate this process, takes  us in the right direction.

Let me switch to Romania:

Romania has made important progress in the past, and needs further consolidation, reforms and deepening the regional integration to accelerate the energy transition and meet EU Clean Package and EU Green Deal objectives, as well as to benefit from system efficiency gains.

We must commend Romania for the recent decommissioning of the most polluting coal power plant in Romania, the Mintia power plant, after 50 years of service. In addition, two units at the Oltenia Energy Complex, Romania’s largest lignite power producer, will be closed by the end of the year. This is a clear message that shows the country’s clear commitment to energy transition objectives.

Now, the challenge in the power sector is to increase the pace of capacity additions to balance the pressure that stems from decommissioning of old polluting coal-fired plants.

While the sector enabled investments in renewables in the past, the pace has stagnated over the last five years. More policy support is needed to create an adequate enabling environment for private sector participation and support the country’s fair transition away from coal. Beyond the electricity sector, most municipal-level heating utilities are facing financial distress and require support to transition to sustainable heating models, including policy guidance and capacity building.

Energy intensity in Romania is above the European average but declining, while there is a large untapped energy efficiency potential in the country. For example, the draft long term building renovation strategy which was prepared with Bank’s support – identified investment needs of almost €13 billion by 2030 (~€1.3 billion/yr).

Most importantly, the energy sector needs to strengthen its policy and governance framework and increase technical capacity and resources in key institutions. A clear and predictable policy framework will be at the foundation of attracting the needed private capital in the energy sector, which is key for a successful transition towards a green economy.

In Romania, the World Bank is supporting the design and implementation of the energy transition agenda and the optimization of its energy markets, to define a more sustainable future for its citizens. This effort is being coordinated with the European Commission through DG Reform, DG Energy and DG Competition, and the donor community. We soon will be rolling out the World Bank’s new Country Climate Development Report (CCDRs), which will provide important data and diagnostics to identify and prioritize actions that meaningfully reduce GHG emissions, build adaptation and resilience, and support the achievement of NDCs and Long-Term Strategies.

The WBG is today the world’s biggest multilateral financier of climate action in developing countries, having delivered an annual average of over $21 billion in climate financing over the last four years. Going forward, we have committed to provide $25 billion annually on average, through impactful projects and programs that reduce GHG emissions, foster adaptation, reduce poverty and inequality, and improve development outcomes.

The World Bank Group is also strengthening local capital markets and greening domestic financial sectors to help private capital flow for both climate change mitigation and adaptation. Besides delivering on finance, a strong theme of the Bank Group’s participation at COP26 is our effort to ramp up support for green, resilient, and inclusive recoveries from the COVID-19 pandemic, as well as low-carbon transitions that put people at the center.

I mentioned above that we all expect from COP26 Ambition and Action. Tackling climate change is urgent, and the current energy crisis sends a clear call for action to accelerate the energy transition and the decarbonization of the economy in Romania and globally. The World Bank will continue to be a reliable partner for Romania to translate its ambition into action.

Thank you for your attention.