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Changes in Carbon Markets and Regulatory Systems from Kyoto to Paris and How the World Bank Group Responded to these Changes (Working Paper)

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This study provides a structured review of the existing literature on changes in international market mechanisms for greenhouse gas reductions and related regulatory systems. The assessment period 1997 to 2016 starts with the signing of the Kyoto Protocol and ends with the entry into force of the Paris Agreement. It can be differentiated into a period of emergence of market mechanisms until 2005 Show MoreThis study provides a structured review of the existing literature on changes in international market mechanisms for greenhouse gas reductions and related regulatory systems. The assessment period 1997 to 2016 starts with the signing of the Kyoto Protocol and ends with the entry into force of the Paris Agreement. It can be differentiated into a period of emergence of market mechanisms until 2005, a gold rush from 2006 to 2011, a fragmentation of markets lasting until 2015, and a brief post-Paris period of relaunch, of a new climate policy agreement. A key aspect of the review is how the World Bank Group responded to changes. The review includes about 300 peer-reviewed articles and about 40 articles from gray literature coming from highly-reputed sources. A large share of the literature examined covers the flexible mechanisms of the Kyoto Protocol with a strong focus on the Clean Development Mechanism (CDM). This is a consequence of the unexpected success of the CDM in the carbon market, at least until 2011–12, as well as the transparency of the mechanism that has facilitated research. As topics and issues related to the international carbon market emerged, the Bank Group tried to address them, focusing on developing countries to enhance their participation in the market. However, there is only limited peer-reviewed literature that assesses the Bank Group strategies and operations. Key changes in markets and regulatory frameworks as well as the responses of the Bank Group can be grouped into four main periods that are briefly discussed below.

IEG Work Program and Budget (FY20) and Indicative Plan (FY21-22)

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To maximize its relevance and value added for the World Bank Group (WBG), IEG will align its work program with WBG strategic priorities. IEG also aims to maintain a clear line of sight with the WBG mission and the Sustainable Development Goals (SDGs), as well as with commitments made in the IBRD and IFC Capital Packages and in the context of IDA replenishments. Furthermore, IEG will keep an Show MoreTo maximize its relevance and value added for the World Bank Group (WBG), IEG will align its work program with WBG strategic priorities. IEG also aims to maintain a clear line of sight with the WBG mission and the Sustainable Development Goals (SDGs), as well as with commitments made in the IBRD and IFC Capital Packages and in the context of IDA replenishments. Furthermore, IEG will keep an increased focus on outcomes, countries, clients, and beneficiaries in its work, and aim to foster a greater outcome orientation throughout the WBG. To achieve this strategic vision, IEG will focus its work program on the key development effectiveness questions that the institution and its clients are most concerned about. For each of these questions, we will strive to answer “why”, “how, “where”, “when”, and “for whom” specific interventions or programs have achieved results or not. By working more closely with operational units and other evaluation initiatives across the WBG, we will seek to significantly enhance IEG’s value added for the Board and WBG management. The work program will be anchored around a series of “streams”, building evidence over time on connected themes and trying to bridge between project, country, sector and strategic impact: Fragility, Conflict and Violence (FCV), Gender, Maximizing Finance for Development, Human Capital, Climate Change, Growth and Transformation. In addition, IEG will work along an ‘effectiveness’ cross-cutting stream, aimed at examining systemic issues in WBG effectiveness, as well as working towards building a stronger outcome focus for WBG operations and strategies.

Papua New Guinea CLR Review FY13-18

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This review covers the period of the Country Partnership Strategy (CPS), FY13-FY16, and updated in the Performance and Learning Review (PLR) dated July 1, 2016. At the PLR stage, the CPS period was extended by two years. Papua New Guinea (PNG) is a lower middle-income country with a Gross National Income (GNI) per capita of $2,340 in 2017. Oil and gas extraction has been the main driver of Show MoreThis review covers the period of the Country Partnership Strategy (CPS), FY13-FY16, and updated in the Performance and Learning Review (PLR) dated July 1, 2016. At the PLR stage, the CPS period was extended by two years. Papua New Guinea (PNG) is a lower middle-income country with a Gross National Income (GNI) per capita of $2,340 in 2017. Oil and gas extraction has been the main driver of economic growth. During the CPS period, GDP growth varied considerably, from 0.3 percent in 2018 to 15 percent in 2014, due to volatility in commodity prices and disruption in the operations of three major mining and petroleum projects from a 7.5 magnitude earthquake in 2018. The country’s Human Development Index increased from 0.52 percent in 2010 to 0.544 in 2017, ranking 153rd among 189 countries in 2017. PNG rejoined the WBG’s Harmonized List of Fragile and conflict affected situation Countries (FCS) in FY17 and FY18. This list had excluded PNG since 2011. The World Bank Group’s (WBG) CPS had three pillars (or focus areas): (i) increased and more gender-equitable access to inclusive physical and financial infrastructure, (ii) gender equitable improvements in lives and livelihoods, and (iii) increasingly prudent management of revenues and benefits. IEG rated the CPS development outcome as moderately unsatisfactory, and the WBG performance as fair. The CLR provides three lessons: First, portfolio improvements require sustained engagement by all project teams, implementing agencies, and the Government, as well as stronger interagency coordination. Second, PNG’s institutional and social fragility places a premium on understanding political economy factors with a bearing on projects, and on monitoring and ensuring awareness of grievance redress mechanisms. Third, partnerships can help expand ASA, increase the WBG’s impact, and test new ideas.

Tajikistan CLR Review FY15-18

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This independent review of the World Bank Group's Completion and Learning Review (CLR) covers the period of the Country Partnership Strategy (CPS), FY15-FY18.The government's National Development Strategy (NDS), 2006-2015, aimed at generating sustainable growth, improving public administration, and developing human resources. The CPS original design was broadly aligned with NDS through its three Show MoreThis independent review of the World Bank Group's Completion and Learning Review (CLR) covers the period of the Country Partnership Strategy (CPS), FY15-FY18.The government's National Development Strategy (NDS), 2006-2015, aimed at generating sustainable growth, improving public administration, and developing human resources. The CPS original design was broadly aligned with NDS through its three focus areas: (1) strengthening the role of the private sector; (2) social inclusion; and, (3) promoting regional connectivity. The CPS design also included cross-cutting areas in gender, governance, and climate change. The CPS sought to help Tajikistan transition to a new growth model. The cost of complying with business regulation dropped, although Tajikistan continues to rank the lowest in the Central Asia region per the 2019 Doing Business report. Tax e-filing has exceeded expectations, but taxpayer satisfaction with new procedures was not assessed. The World Bank collaborated effectively with development partners in areas such as energy, water, and governance. INT received ten complaints and launched three investigations which all closed as substantiated.IEG agrees with the lessons and highlights the following: (i) overambitious objectives and/or under-emphasis of institutional impacted the success of the CPS program; (ii) with greater ownership and commitment, the government can (and does) implement “transformational projects” and achieve significant results; and, (iii) uneven governance standards, weak administration capacities, and inadequate internal review practices are constraints to swift implementation and need to be anticipated and managed proactively.IEG adds two lessons: i) A country program should identify objectives that match the level of ambition of the program and its intended results and impact; and ii) Political economy analysis of the drivers of policy reform is necessary early on to accompany implementation of ambitious goals.

Uzbekistan: Irrigation and Drainage Interventions to Support the Agriculture Sector (PPAR)

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This is a Project Performance Assessment Report (PPAR) by the Independent Evaluation Group (IEG) of the World Bank Group on the Ferghana Valley Water Resources Management Project Phase I and the Uzbekistan Rural Enterprise Support Project Phase II in the Republic of Uzbekistan. This PPAR provides insights into how these two projects identified and addressed critical irrigation sector needs to Show MoreThis is a Project Performance Assessment Report (PPAR) by the Independent Evaluation Group (IEG) of the World Bank Group on the Ferghana Valley Water Resources Management Project Phase I and the Uzbekistan Rural Enterprise Support Project Phase II in the Republic of Uzbekistan. This PPAR provides insights into how these two projects identified and addressed critical irrigation sector needs to improve the country’s irrigation and drainage systems and institutions, both at on-farm and inter-farm levels. The assessment pays special attention to the effectiveness and sustainability of capacity-building support provided to water consumer associations in both projects. Based on such assessment, the PPAR draws common lessons regarding the design and implementation of both projects, which were led by two separate World Bank Global Practices: Water, and Agriculture. The lessons from this PPAR feed into IEG’s forthcoming Evaluation on Strengthening Irrigation Management Models for Sustainable Service Delivery. Ratings for the Ferghana Valley Water Resources Management Project Phase I are as follows: Outcome was moderately satisfactory, Risk to development outcome was substantial, Bank performance was moderately satisfactory, and Borrower performance was moderately satisfactory. Lessons from this project include: (1) Establishing adequate institutional arrangements is critical for sustainable use of improved agricultural technologies and practices such as land leveling and deep ripping. (ii) Sound selection criteria for identifying beneficiaries and areas are crucial for the farmers’ uptake and use of water-saving technologies. Ratings for the Rural Enterprise Support Project Phase II are as follows: Outcome was moderately satisfactory, Risk to development outcome was moderate, Bank performance was moderately satisfactory, and Borrower performance was moderately satisfactory. Lessons include: (1) Coordinated and mutually reinforcing capacity building of financial institutions and farmers is crucial for establishing viable on-farm investments. (ii) Clear concept, measurement, and disclosure arrangements at project appraisal for sensitive data can ensure the availability of results at project completion.

Peru: Sierra Rural Development Project (PPAR)

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This is the Project Performance Assessment Report (PPAR) for the Peru Sierra Rural Development Project (P079165). The assessment will contribute to learning from projects that seek to increase the integration of small-scale producers with market value chains. The loan agreement stated that the project development objective was to assist the Borrower in improving the assets and economic conditions Show MoreThis is the Project Performance Assessment Report (PPAR) for the Peru Sierra Rural Development Project (P079165). The assessment will contribute to learning from projects that seek to increase the integration of small-scale producers with market value chains. The loan agreement stated that the project development objective was to assist the Borrower in improving the assets and economic conditions of rural families in selected areas of the Borrower’s Apurímac, Ayacucho, Huancavelica, Junín, Huánuco, and Pasco regions, and strengthen government capacity to implement an integrated Sierra development strategy. Ratings for the Sierra Rural Development Project are as follows: Outcomes was satisfactory, Bank performance was satisfactory, and Quality of monitoring and evaluation was substantial. Four lessons from the experience of this assessment include: (i) Subproject investments by producer groups are more likely to be viable when the selection of subprojects is competitive and demand-driven, and it entails a substantial producer contribution to subproject cost. (ii) Building partnerships between actors in the market value chain is difficult and, in some circumstances, may not be feasible in the short term. (iii) Subproject investments by producer groups give a one-off boost to poor producer households without necessarily ensuring that they will continue to grow, or that the groups to which they belong will become stronger. (iv) Ensuring complementarity between subproject investments by producer groups and government-financed infrastructure and services, although hard to achieve, is important for maximizing impact.

Conversations: What More Can the World Bank Group Do to Support Environmental Sustainability?

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What More Can the World Bank Group Do to Support Environmental Sustainability
Excerpts from a panel discussion about the how the Bank Group has mainstreamed and measured projects with potential environmental benefits.Excerpts from a panel discussion about the how the Bank Group has mainstreamed and measured projects with potential environmental benefits.

Kyrgyz Republic CLR Review FY14-17

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The Kyrgyz Republic is a lower middle-income country with a GNI per capita of $1,100 in 2016. It is a country with a land-locked and mountainous geography, and rich in mineral and water resources. GDP growth averaged 3.7 percent during the CPS period (2014-17), somewhat below the average during the previous four years (4.0 percent). Gold production and worker remittances have been significant Show MoreThe Kyrgyz Republic is a lower middle-income country with a GNI per capita of $1,100 in 2016. It is a country with a land-locked and mountainous geography, and rich in mineral and water resources. GDP growth averaged 3.7 percent during the CPS period (2014-17), somewhat below the average during the previous four years (4.0 percent). Gold production and worker remittances have been significant drivers of growth, but are subject to volatility and do not lend themselves to sustained growth. Growth helped reduce poverty rates, from the recent peak of 38.0 percent in 2012 to 25.4 percent in 2015. Nevertheless, the country’s Human Development Index improved slightly from 0.656 in 2013 (ranked 125nd among 187 countries) to 0.664 in 2015 (ranked 120th among 188 countries). Inequality (the GINI Index) declined from 28.8 in 2013 to 26.8 in 2016, Policy effectiveness has been undermined by high levels of corruption and frequent changes in Government. Kyrgyz’s rank in Transparency International’s Corruption Perception Index deteriorated from 123rd of 167 in 2015 to 135th of 167 in 2017. During the CPS period, there were five different prime ministers. The World Bank Group’s (WBG) CPS had three pillars (or focus areas): (i) public administration and public service delivery, (ii) business environment and investment climate, and (iii) natural resources and physical infrastructure. The CPS was aligned with the Government’s National Sustainable Development Strategy (NSDS), 2013-2017, specifically with NSDS objectives on public administration, judiciary, social services, financial and private sector development, agribusiness, exports, environmental protection/resource management, energy, transport, and urban development. These objectives were part of the NSDS broad focus on governance, state building, and economic development. WBG’s support was also aligned with a number of specific government programs (e.g., the Governance and Anti-Corruption Plan adopted in 2012).

Armenia: Municipal Water Project (PPAR)

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Armenia enjoys abundant water resources averaging 10.2 billion m3 per year, of which 2.4 billion are used for drinking water. Drinking water is provided by five state water companies1. Demands on water production are high because of excessive levels of non-revenue water (NRW) of up to 85 percent. In 2012, at the time of the appraisal of the Municipal Water Project (MWP), Armenia had recorded Show MoreArmenia enjoys abundant water resources averaging 10.2 billion m3 per year, of which 2.4 billion are used for drinking water. Drinking water is provided by five state water companies1. Demands on water production are high because of excessive levels of non-revenue water (NRW) of up to 85 percent. In 2012, at the time of the appraisal of the Municipal Water Project (MWP), Armenia had recorded significant legislative and institutional achievements in terms of water resources management in cooperation with international institutions, including the World Bank. The water sector reforms were aimed at decentralizing the water resources management function for the benefit of water users and best use of water resources. However, water tariffs have been low since 20092 and revenues insufficient for asset rehabilitation to reduce NRW. The MWP’s project development objective (PDO) was to support improvement of the quality and availability of the water supply in selected areas of the Armenia Water and Sewerage Company (AWSC)—a state water company owned by the State Committee of Water Economy (SCWE). Ratings for the Municipal Water Project are as follows: Outcome is moderately satisfactory, Risk to development outcome is high, Bank performance is moderately satisfactory, and Borrower performance is moderately satisfactory. In terms of lessons, the implementation of the MWP suggests the following: (i) The sustainability of development outcomes is enhanced when the World Bank maintains its strategic and operational engagement over time, especially when social and political risks are high. (ii) The World Bank’s continuous advice and technical assistance, provided in parallel with lending and in coordination with other donors, can result in effective partnership with the government and the private sector. (iii) Tailoring the Enhanced Management Contract to the conditions of the local service area can help achieve results.

A Thirst for Change: The World Bank Group’s Support for Water Supply and Sanitation

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A Thirst for Change
Watch a re-play of the live event - a discussion about how well the Bank Group is equipped to support countries in moving toward SDG 6- which seeks to “ensure access to water and sanitation for all” by 2030- with a particular focus on the financial viability and accountability of service providers. Watch a re-play of the live event - a discussion about how well the Bank Group is equipped to support countries in moving toward SDG 6- which seeks to “ensure access to water and sanitation for all” by 2030- with a particular focus on the financial viability and accountability of service providers.