The Heat Is Online

World Bank Edges into Kyoto Role

Working Together to Beat the Heat

The World Bank, July 19, 2005


July 19, 2005-At the close of the G-8 summit in Gleneagles, leaders called on the World Bank Group to work on financing a new framework for climate change.


"This is something really brand new for the World Bank," World Bank President Paul Wolfowitz said.


Climate change is both a global and development issue.


"We can't achieve environmental sustainability and move toward a low-carbon economy if we continue relying on today's high-carbon technologies and policies that contribute to air and water pollution and climate change," said Ian Johnson, World Bank Vice President for Sustainable Development, as he elaborated on this call to finance a new framework and foster a broader dialogue on the issue in this interview.


What role will the World Bank play as a result of the G8 Plan of Action on climate change?


Three specific initiatives have come out of the G8 discussions that operate at different levels - from global consensus building around the elements of a future agreement to the specifics of how to increase investment in these sectors in developing economies, which refers to both private sector investment and international financial institutions, including the World Bank's lending.


Dialogue Initiative: The Bank will help facilitate the dialogue to focus on building consensus among the G8 countries, and, more broadly, with the major industrializing countries and developing countries on a potential agreement on long-term climate change management beyond 2012, which is the last year of the Kyoto Protocol.

Investment Framework: The Bank will align multilateral banks, export credit agencies, private sector financiers, and re-insurers around an investment framework for low carbon economic growth, specifically, for finance for energy efficiency, clean energy, and adaptation to climate change and variability.


Bank Lending: The G8 has asked the Bank to increase its lending as part of the attempt to increase public and private finance for low carbon climate friendly economic development, while discussions about a possible agreement on long-term climate change management continue.


How can the Bank put more emphasis on climate change, and incorporate this issue in its work with developing countries?


The Bank Group's policy is based on a balanced approach, dealing with both the need to adapt to climate change and climate variability in developing countries, and to reduce emissions of greenhouse gases (GHG) that cause global warming.


The Bank and our partners will be working to identify ways to lower the carbon intensity of economic activities, which are key for development.


For example, the power sectors that are fueled by coal, oil, and gas are essential, particularly in India and China. The same is true of the very energy-intensive, and therefore carbon-intensive, manufacturing sectors, such as cement, iron, steel, chemicals, motorcar manufacturing and transportation.


Tradeoffs are constantly being made between expanding vehicle transportation and roads versus rail and public transportation. These decisions underpin urban transportation systems, which affect their contribution to GHG emissions and, in the long run, climate change.


We need to move forward with Research and Development into newer technologies and encourage low-carbon policies such as appropriate energy pricing strategies, good governance, and trading programs.


We also need to explore additional financing tools to cover incremental financing needs or incremental risks of adopting the best available technologies in different developing countries. This can be done either through carbon trade or various market-based mechanisms.


Then, in the agriculture sector, we need to help countries adapt to climate change through re-vegetation and restoration of degraded lands through sustainable agriculture, forestry and watershed management.


Developing countries are facing different weather patterns than in the past and are subject to a new kind of uncertainty: dry areas get much drier, wetter areas get much wetter, and there is greater unpredictability of rainfall. This means that new infrastructure needs to be planned accordingly.


We cannot rely on 200 years of past data to prepare ourselves for next 50 to 100 years. We have to think about how hydrological systems will change. You have to invest in research and development in agriculture.


Expanding Bank and donor assistance, and using the resources from the carbon trade market in the agriculture sector can help reduce climate risk to the poorest rural populations in Africa and elsewhere.


Also, developing broader private insurance mechanisms for extreme weather variability, which we have piloted in India and other countries, would reduce risk for small holders in the agricultural sector.


Will it mean an increase in lending for energy efficiency/renewables?


We already have targets to increase our renewable energy lending by 20%. No other financial institutions in the world, including the multilateral development banks, have set such targets.


We are now looking to join efforts with other international and regional financial institutions to increase lending for renewable energy.


Now we are particularly interested in increasing our lending in energy efficiency for the fossil fuel sector, particularly for the use of coal, which is growing dramatically, and has both significant local environmental implications, as well as being the major source of greenhouse gas emissions in the large industrializing economies.