Climate change is one of the biggest long-term risks to global development. This makes choices and investment made in climate change mitigation and adaption vital for ensuring sustainable and inclusive growth. In recent years, IEG has undertaken a series of evaluations of World Bank Group’s support to climate change and related issues such as water, natural disasters, and environmental sustainability. These evaluations aim to provide an opportunity for the institution to learn from the past experiences and to inform emerging strategies and programs.
Four Myths about Climate Change
Myth No 1: Energy efficiency can't meet energy needs
Energy efficiency doesn't get enough respect. "You can't grow with energy efficiency," say fans of flashy new power plants, "and you can't provide energy access to the poor." Untrue, because people don't really care about energy, but rather about the light, heat, and transport that it animates. Energy efficiency can provide these services cheaper, faster, and with less environmental damage than new generation.
Indeed, we find that many kinds of energy efficiency offer economic returns that dwarf those of most other development projects. In Ethiopia, for instance, a $5m scheme to distribute compact fluorescent light bulbs obviated the need to spend $100m to lease and fuel diesel power plants. Vietnam, too, has met rapidly growing demand for energy in part through efficiency investments. Promoting energy efficiency right now helps defer the need to build long-lived fossil fuel plants, buying time for wind and solar power to become more cost-competitive.
Myth No 2: Protected areas don't help the environment
Protected areas now cover one quarter of the remaining tropical forest. They are intended as a bulwark against deforestation, which accounts for about one sixth of global greenhouse gas emissions. But some sceptics deride them as ineffective "paper parks', defenceless against large-scale loggers and developers. Others fear that protected areas impoverish forest dwellers.
But new research shows that strictly protected areas do discourage deforestation. Moreover, protected areas that allow sustainable use by local people are even more effective at reducing deforestation. Areas controlled by indigenous people are yet more effective, by a wide margin. And in Costa Rica and Thailand, protected areas are associated with reduced local poverty.
Myth No 3: Carbon markets will naturally promote renewable energy investments
Carbon markets are designed to reward investors for reducing greenhouse gases, nudging them away from fossil fuels and towards clean energy investments. Projects that generate energy from landfill gas, for instance, enjoy favourable incentives because methane reduction commands a high price.
But for many hydropower and wind facilities, prevailing prices of carbon have been too low to push investors' returns over a hurdle. And payments for carbon offsets do not address the investor's critical problem of up-front financing for these capital-intensive projects. The result is that carbon payments may end up providing mere icing, rather than leverage, for private capital.
Myth No 4: Technology transfer revolves around intellectual property rights
Developing countries need to acquire a wide range of technologies in order to realise their development ambitions without repeating the environmentally damaging mistakes of the developed countries. Much attention has been devoted to the role of intellectual property rights (such as patents) in helping and hindering technology transfer.
Yet rights aren't the only way to spread clean technology. There is tremendous scope for using pilot and demonstration projects to speed the diffusion of technical and institutional innovations. For instance, a World Bank/GEF demonstration project in Colombia convinced ranchers that retaining some tree cover in their pasture would increase profits, leading to enthusiastic scale-up of this innovation, which had the side benefits of conserving biodiversity and boosting carbon storage.
With atmospheric carbon dioxide concentrations ticking inexorably up, with billions of dollars at stake, we need to transcend these myths.