The WBG should help countries find alternatives to coal power while retaining a rarely used option to support coal power, strictly following existing guidelines (including optimal use of energy efficiency opportunities) and being restricted to cases where there is a compelling argument for poverty or emissions reductions impacts that would not be achieved without WBG support for coal power.
Original Response: Ongoing/Agree The policy proposed is consistent with SFDCC criteria for coal investments. SFDCC criteria for coal investments have been clarified in the Operational Guidance for the World Bank Group Staff: Criteria for Screening Coal Projects under the Strategic Framework for Development and Climate Change which took effect on April 15, 2010. The specific stress on optimal use of energy efficiency opportunities presented in the IEG recommendation seems unnecessary as there are no priority criteria either in SFDCC or the Operational Guidance and all required criteria must be adequately addressed. The Operational Guidance makes clear that coal investments should focus on cases where there is a compelling argument for poverty reduction and a clear need for WBG support.
The WBG Energy Sector Directions Paper reinforces the SFDCCs criteria for screening coal power projects and makes clear that greenfields coal power is to be supported only in rare and exceptional circumstances. As in other recent years, the Bank has not financed any coal power projects.
As noted in the Management update, the Bank continues to provide support for renewable energy, natural gas, and energy efficiency, which broadly help to provide alternatives to coal power.
It would be useful for the Bank to provide specific guidance on how to price carbon and local pollution consequences from coal power, but these fall beyond the scope of the original recommendation.
As it has been four years since the original evaluation, this recommendation is now deactivated.
FY15 was the second year of implementation of the World Bank Group Energy Sector Directions Paper, which adopted, amongst others, the recommendation on coal power generation made in the IEGs 2010 report. Concerning the portfolio of new projects in FY15, there were no coal power projects. Financing for power generation consisted of 93 percent renewable energy and 7 percent thermal; all of thermal was gas-based, least carbon-intensive of all thermal generation.
The World Bank issued an expanded version of Guidance Manual: Greenhouse Gas Accounting for Energy Investment Operations in January 2015. This version added methodologies for rehabilitation of thermal plants, energy efficiency in buildings, energy efficiency in industry and commerce, and district heating.
Treatment of coal power is a sensitive issue. The adoption of the Guidance Note on coal is an important step forward, but its application needs to be informed by specific guidelines on how to shadow-price carbon and local environmental damages, and how to assess system-wide options for energy efficiency. IEG acknowledges that the WBG has boosted commitments to renewable energy and energy efficiency to high levels, and is devoting staff and analytic attention to natural gas, a potential coal alternative. Further progress on this recommendation will be shaped by the way that the issue is addressed in the still-pending Energy Strategy.
The draft energy sector strategy sets as its two goals the expansion of access to reliable modern energy services and a shift to more sustainable energy sector development. Building upon the principles set forth in Development and Climate Change: A Strategic Framework for the World Bank Group (SFDCC), an operational guidance note for screening coal projects has been issued.
The WBG's renewable energy portfolio more than doubled from $2.9 billion in FY06-08 (18 percent of total WBG energy financing in the period) to $6.6 billion in FY09-11 (22 percent). Low carbon projects likewise more than doubled from $6.8 billion to $14.9 billion over the same period, and the share of total WBG energy financing for low carbon projects rose from 42 percent to 51 percent over this period.
As noted last year, treatment of coal power is a sensitive issue, and the adoption of the Guidance Note on coal was an important step forward. Implementation of that Guidance will be key as the WBG moves forward with support for a large coal project and for a mining project that will include a large captive coal power plant. The initiation in FY14 of greenhouse gas accounting at the Bank could help set the stage for a rational transition away from coal. The Bank's role in that transition will depend on the realization of IEG's other findings and recommendations from the Phase I and II Climate evaluations. These include increased emphasis on large scale energy efficiency,effective demonstration and diffusion of renewable technologies such as geothermal power, support for energy price reform that increases the supply of natural gas as a substitute for coal and a complement for renewable power, and well-planned, environmentally appropriate hydropower.
The WBG continues to focus on supporting countries to develophydropower, geothermal, windand natural gas energy resources, togethersolar energy solutions for power generation and distributed services, complemented by energyefficiency improvements, asother non-coal options for energy supply.
The share of low-carbon projects in FY10-12 rose to 58 percent from 42 percent in FY06-08.
In FY2012, there were no projects that involved coal.
IEG agrees that the Energy Sector Directions Paper, which is the Bank Group's main effective strategy document for energy in the absence of an approved Energy Strategy, reinforces the SFDCC's criteria for screening coal power projects and makes clear that greenfields coal power is to be supported only in rare and exceptional circumstances.
As noted in the Management update, the Bank continues to provide support for renewable energy, natural gas, and energy efficiency, which broadly help to provide alternatives to coal power.
Completing and publishing greenhouse gas accounting for all energy investments will help to continue to support this approach, as would specific guidelines for how to price carbon and local pollution consequences from coal power.
The recommendation made in the IEG's 2010 report has been adopted in the new World Bank Group Energy Sector Directions Paper, discussed and unanimously supported by the Board in July 2013. The paper guides the WBG's financing of greenfield coal power by tightening the rules of engagement and using words rare and exceptional: The WBG acknowledges the global challenge of balancing energy for development with its impact on climate change and will help client countries realize affordable alternatives to coal power. The WBG will provide financial support for greenfield coal power generation projects only in rare circumstances. Considerations such as meeting basic energy needs in countries with no feasible alternatives to coal and a lack of financing for coal power would define such rare cases. The Criteria for Screening Coal Projects under the Strategic Framework for Development and Climate Change will apply to all greenfield coal power projects undertaken in such exceptional circumstances.
There were no coal power projects in FY13 and FY14. The energy sector of the WBG is now carrying out greenhouse gas emissions accounting in all power generation projects. Financing for power generation is largely for renewable energy (about four-fifths), and the balance is mostly natural gas, which is the least carbon-intensive of the fossil fuels.