Presentation at the Workshop on

Tools for Greenhouse Gas Analysis: Exploring Methodologies for Development Finance

The World Bank, Washington DC, 14 July 2009

www.worldbank.org/climatechange

Development and Climate Change:

Background

Energy

Transport

Forestry

Key Issues and Challenges

Sameer AkbarClimate Change Team, ENV

Analytical Work◦ Guidelines for Climate Change Global Overlays, 1997

Analytical tool to enable sector-wide analysis of GHG emission impacts and possible mitigation options

◦ The GHG Assessment Handbook, 1998

A reference manual for estimating the net impact of project-based GHG emissions

◦ A Carbon Backcasting Exercise, 1999

To assess the effect of placing a shadow price on carbon emissions in the energy project portfolio of the World Bank

Projects (with Climate Finance) ◦ Have to provide an assessment of how much CO2 equivalent emissions

they are expected to save

Global Environment Facility (GEF), 1991

Carbon Finance under the CDM & JI, 1999

Climate Investment Funds (CIFs), 2009

The Strategic Framework for Development

and Climate Change (SFDCC) for the WB

Group A consensus document of 185 member countries

Endorsed by the Development Committee on October 12, 2008

Involved wide-ranging consultations: ~2000 participants in 76 countries plus via www

Technical Report launched in February 2009

Progress-to-date: Booklet issued for Bonn Climate Change Talks in June 2009

Under the SFDCC, GHG Analysis is meant to,

◦ Build staff and client capacity to understand and apply the

analytical tools to prepare for a carbon constrained future

◦ Gather information to better understand the implication of

possible new approaches

◦ Identify low cost mitigation opportunities across operations

◦ Facilitate analysis of alternatives

◦ Help promote efficient use of emerging climate funds

However, ◦ It should be demand driven◦ Undertaken as analytical exercise◦ Not used for decision making

Developing and testing GHG analysis methodologies and tools, stating with emission-intensive sectors◦ Energy, Transport, and Forestry

Regional projects for pilot assessments to be identified on a demand basis, and undertaken in cooperation with clients

Sharing findings and lessons from methodology developmentand pilots

Co-ordination with other MDBs with a view to harmonizing concepts while preserving approaches appropriate for each institution

Summarize lessons and develop a proposal for World Bank Board consideration on the application of these tools, if/as appropriate ◦ Based on client needs and priorities, and the outcomes of the UNFCCC

deliberations on global climate policy and financing

Timeframe: 2009-2011

Marcelino Madrigal ETWEN

Energy: Sector challenges and WBG support

Fewer than half of African countries will reach universal access by 2050. People without access in Sub-Saharan Africa will rise from 177 million today, to 191 million in 2030 if no action is taken

Many developing countries are experiencing electricity shortages or will do so in the coming years

The transformation of global energy production and consumption is an imperative given the emerging scientific evidence on the pace of climate change.

More countries are increasingly impacted by energy price volatility affecting governments’ budgets, transition by households to more efficient fuels, and the introduction of new technologies

Improve

access and

reliability

Facilitate shift to

sustainable energy

development

Strengthen governance

Improve operational and financial performance

Challenges Strategic support framework

Energy: Past GHG analysis-related work

• 1991. Global Environmental Facility. Long history of climate-finance

oriented methodologies

Energy efficiency in buildings and industry

Off- and on-grid renewable energy projects

• 1998. Greenhouse Gas Assessment Handbook. Methodologies to measure

the net impact of Bank‟s interventions

Methodologies using a net-based approach: comparing “with” and “without”

Bank‟s intervention scenarios. Energy: Among others, methodologies for

conventional power generation, solar, wind, and transmission and

distribution loss reduction projects

• 2009. Climate Investment Funds

Provide additional grants and concessional financing to developing countries to

address urgent climate change challenges. Clean Technology Fund (i.e.,

investment plans)

Source: World Bank

Energy: Current GHG analysis-related activities

• Assistance to Client Countries:

Country low carbon studies

• Support countries in developing national low carbon development

strategies

• Identify GHG reduction opportunities

• Policy interventions GHG accounting

• To understand the impact on GHG emission from different types of policy

reforms and regulations: introducing private participation, electricity

market structure, subsidy reform, and others.

• Project-based GHG accounting

• To understand emissions at the project level for traditional Bank-financed

projects

• Following a net emission approach and other guidelines established by

the SFDCC

Source: World Bank

Energy: Low carbon studies

• Target countries: Brazil, China, India, Indonesia, Mexico, Poland and South Africa

• Emerging results: experience demonstrates that structured engagement on growth and GHG mitigation brings benefits

▫ South Africa: converting 1 million households and businesses to solar water heating reduces peak demand by 700 MW

▫ Mexico: main energy savings in the industrial sector from co-generation and energy efficiency improvements

▫ Indonesia REDD is a large opportunity and financial incentive for [$0.5-2 billion per year]

• Support: TA, capacity and institution building, knowledge dissemination and exchange underpinned by extensive stakeholder engagement

• Cost: $ 7.3 m [inc. $2.8 m from DFID]

Support to developing countries to transition to lower carbon economy

Source: World Bank

Energy: Project-based GHG accounting

• Lending portfolio project types

• New Renewable Energy

• Energy Efficiency

• Policy interventions: reform & regulation

• Large Hydro

• Transmission and Distribution

• Upstream Oil, Gas & Coal

• Thermal Generation

Energy: Project-based GHG, Transmission and Distribution

Understand more the GHG intensity of our T&D portfolio

Regional electricity interconnection projects

Improve supply adequacy and reliability

Bring renewable resources to the market

Increase scales to make more efficient projects viable: hydro power, natural

gas; displacing inefficient fuel oil generation

Improve technical and commercial flexibility, key for variable renewables

National transmission investment to improve reliability and adequacy

Improve reliability and service quality at high voltage levels

Improve system operations with new “smart” technologies

Reduce losses at the transmission level

Increase transmission capacity for renewable energy interconnection and

demand growth

Distribution projects for loss reduction

Improve technical and administrative management

Improve financial performance of T&D

Increase opportunities for more access

Energy: Project-based GHG, key objective and methodology

Objective

Review existing and propose principles for methodologies that can quickly and

reasonably provide estimations of T&D net GHG emissions.

Methodology considerations

Net emission approach, to measure the impact of Bank‟s intervention on

emission as described by SFDCC. (i.e., “with” and “without” Bank

intervention scenarios)

Some key principles: credibility, transparency, feasibility, and ease of

harmonization

Not pursuing climate finance methodologies where additionally tests and

ex-post verification is crucial for certificate awarding

Andreas Kopp ETWTR

1. A narrow carbon accounting approach in transport is likely to be used as a severely selective evaluation device excluding the sector from GHG reducing efforts.

2. Transport sector specifics do not lend themselves to a „technical fix‟; account for characteristics of transport demand are essential for a response to a strong political demand to reduce the carbon intensity of transport.

3. GHG reducing measures reduce other external costs; inclusion of these co-benefits in GHG analysis is essential for effective intervention in the transport sector.

17

18

G = A S i I i F i, j

C a rb o n E m is s io n sfrom T ra n s p o rt

T o ta lA c tiv ity

(p a s s e n g e r o rfre ig h t tra ve l)

M o d a lS tru c tu re(tra ve l b y

m o d e )

M o d a l E n e rg yIn te n s ity

C a rb o n C o n te n to f F u e ls

* * *

I i

M o d a l E n e rg yIn te n s ity

V e h ic le F u e lIn te n s ity

V C i

V e h ic leC h a ra c te ris tic s

E i

T e c h n o lo g ic a le n e rg y e ff ic ie n c y

O R iO n -ro a d im p a c ts(e .g . d r iv e c yc le s ,

tra ff icc o n g e s tio n )

L i

L o a d fa c to r(p a s s e n g e rs o r to n s

p e r v e h -k m )

M S i

M o d a l tra ve ls h a re

Largely identical accounting outcomes are used for

evaluation purposes: UNFCCC Approved baseline

methodology AM0031 “Baseline Methodology for

Bus Rapid Transit Projects”

Limits:

◦ Ad hoc comparison of modes, excluding transport benefits

◦ Accounting in merely physical units, unrelated to economic

values and development objectives

◦ Void of account of drivers of parameters

19

Only one large-scale transport CDM project

registered among 1300, TransMilenio Bogota

Ad hoc modal comparison and assumptions on

consequences of interventions render GHG

„analysis‟ unconvincing

Returns on resources invested in reduction of GHG‟s

in transport appear to be low: e.g. changes in

ridership due to mass transit projects emission

reducing?

20

Transport demand shifts towards high carbon

intensity with increasing income, intensified by

accommodating infrastructure policy

In comparison to other sectors acceptance of low-

carbon opportunities in transport may be or is even

likely to be very low

Incentives have to be provided to ensure that

opportunities of modal or technical shift appear

attractive

21

Secondary effects may dominate expected direct

technical effects, e.g. modal shift

◦ Decreasing load factors reverse technical accounting

parameters.

◦ Induced congestion in technical alternatives lead to

reversal of expected GHG emission effects.

22

Include demand for attributes of transport subsystems into GHG analysis

Analysis of demand for features of transport subsystems allows derivation of value parameter, accounting prices

Accounting prices indicate required intensity of demand management to achieve modal shift or technical change

Accounting prices allow for the commensurability of simultaneous reductions of external costs, co-benefits

23

Co-benefits are of greater importance and motivate

local action, US values 2000, Resources for the

Future

24

Comprehensive assessment of transport policies

and projects report, ESW in FY 10

Identification of least cost data requirements and

rapid assessment

Accompanying field trials

25

Gerhard DieterleARD

Erick FernandesARD

Good progress has been made in developing GHG Analysis methodologies and

tools for the forestry sector.

Developed by the Centro Agronómico Tropical de Investigación y Enseñanza (CATIE)

in Costa Rica.

◦ Scope: afforestation /reforestation (A/R), land conservation (LC), and

sustainable forest management (SFM) activities.

Tool follows the general design principles of the “Tool for ex-ante estimation of

forestry CERs” (TARAM, which applies a set of CDM approved methodologies)

◦ Boundaries are conservative, restricted to geographical boundaries

◦ Upstream and downstream emissions are not included

◦ Emissions from project management are considered

◦ Leakage from only activity shifting

◦ For a number of parameters the user may specify values or use default values (from IPCC)

Draft tools for A/R and SFM projects have been delivered, along with their user‟s

manuals.

Currently seeking regional pilots to implement and test A/R and SFM tools, against

other tools as well

28

Employment Generation

andLivelihood

ClimateChange

Mitigation and

Adaptation

Land-Use Change

• Deforestation causes 20% of carbon emissions

• Dieback of forests in boreal zones and the Amazon?

• 1.6 billion dependent on forests for survival

• 11 million directly employed in forestry in organized sector, 2–3 times more in unorganized sector

• Tens of millions employed in downstream processing

• Growing pressure on land – conversion to agriculture, bioenergy and fiber plantations

• Land-use change becoming key socio-economic issue across industries

• Large scale investments lead to “land grab” and fights over tenure

Impacts of large scale

farming and forest

plantations, Riau,

Indonesia

Source: Uryu, Y. et al. 2008 (used with permission

3030

42%

33%

14%

11%Shifting agriculture

Conversion to

agribusiness and cattle

ranching

Illegal logging

Every year we lose an area the size of England to deforestation

Emissions from deforestation exceed total annual CO2 emissions

from USA or China

Emissions from deforestation far exceed those of transportation

sector – more than every car, airplane and train in the world

Accelerating trend towards large scale investments in agribusiness

and biofuels

Poverty and agricultural conversion are the main causes of deforestation

Investments in institutional capacity, forest governance and information

Increasing forest benefits through investments in: ◦ SFM including forest certification, ◦ Afforestation, reforestation, ◦ Restoration

Investments outside the forest sector◦ Energy◦ Transport◦ Agribusiness◦ Agro-forestry

Forest Investment Lending◦ Community Forest Management (Mexico,

Albania, Laos)

◦ Afforestation/Reforestation (China)

◦ Sustainable Forest Management (Congo DR)

BioCarbonFund

Forest Carbon Partnership Facility ◦ 38 countries/around US$ 138 million

Forest Investment Program◦ Large scale, transformational investments

◦ Currently US$ 349 million

IFC Investments in Forest Industries◦ New IFC Forest Investment Strategy

approved

Considerable progress has been made in developing geospatial and time-referenced tools for both measuring and modeling forestry and associated agricultural GHG accounting and analyses.

Tool for tracking land cover, land use, and surface hydrology (important drivers of GHG sink/source functions) developed with assistance from the University of Washington (Richey et al.) is being tested and refined in WB and GEF operations in nine countries in Africa, East Asia and the Pacific, and South Asia.

Smoke & Aerosols from deforestation & slash & burn agriculture

CongoBrazil

Smoke & Ozone pollution from peat fires

Source: NASA

Source: NASA

Saturated Subsurface Flow

Overland Flow

Quickflow from

Impervious Surfaces

Vertical

Unsaturated

Flow

Channel

Segment

Flow

Channel Segment Flow

Ci Qoutflow

Segment i

Crunoff QrunoffCi,in Qinflow

Csoilwater Qsubflow

Basin Cell

Soil column

Ground surface

Upstream-Downstream Quantitative remote sensing, time sensitive, geospatial data sets

Effects of land use change on the hydrologic regime of the Mae Chaem river basin, NW Thailand (land use change and hydrology as key drivers of GHG sinks and sources)

Source: Thanapakpawin et al (2008) J. of Hydrology

Proposed dams

Existing dams Source: Thanapakpawin et al (2008) J. of Hydrology

*Land Use–Hydrology-Hydropower as key drivers of GHG sinks/sources (Richey & Fernandes (in prep))

Sameer AkbarClimate Change Team, ENV

GHG Analysis within a development context

Gross vs. Net Emissions Estimation

Boundaries and Scopes

◦ Geographic vs. operational vs. co-financing

◦ Construction / upstream / downstream / lifecycle

emissions

Timeframe of emissions

◦ First year / economic life of project / loan

repayment period

Replication / catalytic impacts

Please visit us online:

www.worldbank.org/climatechange

www.worldbank.org/cif

www.carbonfinance.org

www.forestcarbonpartnership.org