April 5, 2010
By Romina Picolotti* and Jorge Daniel Taillant**
The world’s energy grid, as it stands today, is one of the principal causes of climate change. The World Bank is in an extremely advantageous position to make a substantial contribution to our global climate and energy challenge by devising an appropriate climate friendly energy policy.
The energy-climate dilemma is driven by the supply and demand for unsustainable forms of energy. One of our greatest challenges, as a global society, particularly in our quest to tackle persistent poverty and global social and economic imbalances, is to meet our development needs, while reducing our energy related climate contamination. Presently, the principal sources of the world’s energy grid map derive from fossil fuels, amongst these, petroleum and coal. These happen to also be the principal sources of undesirable green house gases. Further, we generally ignore the environmental externalities implied in the continued choice of fossil fuels to meet our energy needs, which generally negatively impacts developing countries more than industrialized countries.
How hence must States and multilateral institutions like the World Bank address energy policy to help solve our global energy-climate problem while still promoting economic development amongst those countries that need it most?
The principle of common but differentiated responsibilities, central to the Framework Convention on Climate Change, plays a critical role in this energy-climate-development dilemma.
A policy towards making our global energy grid more sustainable must achieve a progressive move towards no or less carbon-intensive solutions to our global energy needs. The solution will need considerable policy reformulation by key energy actors including consumers, and producers as well as financing institutions.
Yet some critical questions will have to be answered, including, Who must diversify their energy production? How and when must they do it? Who must pay for the incremental investment costs? Who will finance these costs? What institutional framework will be used to channel such finance? What will the implications be for global economic development?
Current discussions at the World Bank regarding energy policy largely fail to address the principle of common but differentiated responsibilities that has been established in global discussions around the challenges in addressing climate change.
The current debate, such as the recent US recommendation to the World Bank Group on energy financing, ignores the imperative need for providing fair and equitable solutions to financing the incremental cost of introducing no or low carbon energy solutions. The current debate also ignores the historical responsibility that industrialized countries have to assume the greatest burden for financing the solution to our current and future global climate problem, a problem that has mostly not been caused by developing countries. If we fail to assign historical responsibility to our current climate problem, and we fail to build into our financing solutions this historic responsibility, we risk transferring the financial burden of our global energy solutions to those least responsible for producing the problem in the first place, and more importantly we risk transferring the financial burden of the solution to those that are today least able to afford it.
Guiding Principles for the World Bank’s Energy Policy
The diversification and evolution of our global energy grid towards more sustainable energy solutions is imperious, particularly as we face serious challenges to social, economic and industrial development. At the same time, we must ensure global economic and social development, particularly of developing countries, but we must do it in a way that:
a) introduces low or no carbon solutions without hindering the development of poor countries;
b) allows flexibility in rate structures to consider the needs of the poorest communities;
c) assigns appropriate and differentiated climate financial responsibility to historic polluters;
d) fosters fair economic solutions to energy challenges, particularly to developing countries;
e) promotes poverty reduction and increased per capita energy use in favor of poor communities.
Perhaps the largest challenge in moving a country’s energy production towards more sustainable solutions is the considerable financing and infrastructure investment needs that these solutions entail.
It is key that large multilateral agencies like the World Bank ensure that developing countries obtain technical and financial assistance, subsidies and other grant financing to solve their energy needs in a climate friendly and low or no-carbon intensive way.
To this end, the World Bank must:
* Promote the local generation of technological alternatives to high-carbon energy production in developing countries (this means using local consultants and fostering climate research in local academic and other energy technology institutions);
* Provide finance for home-grown climate friendly solutions to energy needs at the local, national and regional level (this means projects devise and implemented locally);
* Ensure that the local choice of less carbon-intensive energy solutions are financially viable
* within the international financial market for energy investments;
* Ensure grant or subsidized financing to cover incremental costs of low or no-carbon energy
* investments and that these costs are financed principally by past polluter countries;
* Ensure that investment choices by the World Bank systematically consider and opt for best
* available technology in terms of climate-friendliness and not merely on financial viability;
* Offset investments in high carbon energy projects with renewable alternatives elsewhere.
The World Bank can and must play a fundamental role in steering the future of our planet’s global energy grid towards more sustainable energy solutions while decreasing poverty and promoting development. It should do so promoting equity, fairness, recognizing historic responsibility and securing industrialized country grant and other subsidized financing for those that need it most.
*Romina Picolotti presides the Center for Human Rights and Environment (CEDHA). She was Environment Secretary of Argentina from 2006-2008.
** Jorge Daniel Taillant is Co-Founder of CEDHA and President of Soluciones Sustentables, an environmental consulting firm.
For More Information:
Romina Picolotti
[email protected]
Daniel Taillant
[email protected]