The Committee on Development Effectiveness met to consider the report World Bank Group Support to Demand-Side Energy Efficiency and the draft management response.

The committee welcomed the evaluation, which focuses on the demand side of energy efficiency for households, commercial and industrial firms, and the public sector and complements two earlier Independent Evaluation Group evaluations on energy access and renewable energy. Members highlighted the timeliness of the report given the global energy and climate crisis and the importance of supporting the demand side of energy efficiency for meeting the Paris Agreement alignment and two related Sustainable Development Goals on affordable and clean energy (SDG 7) and taking action to combat climate change and its impacts (SDG 13). While recognizing that the World Bank Group has been broadly effective and coherent in its demand-side energy efficiency (DSEE) interventions, members echoed Independent Evaluation Group’s recommendation and encouraged the Bank Group to scale up its DSEE activities by reorienting its approach from an energy savings focus to a broader decarbonization approach. They emphasized the complementarity of DSEE efforts and the range of climate activities that the Bank Group is currently engaged in. They also urged management to incorporate energy efficiency considerations in all relevant Bank Group operations as part of the Paris Agreement alignment and climate mainstreaming processes. Members encouraged management to look beyond climate and energy benefits when designing projects, and to track socioeconomic development outcomes such as gender inclusion, job creation, firm productivity, and improvement of health.

Members underscored the importance of developing multisectoral approaches to DSEE and noted that there is room to enhance the Bank Group’s cooperation and coordination with other development partners and its dialogue with client countries and to better leverage its global programs and convening powers. They appreciated management’s commitment to strengthening coordination among the Bank Group institutions and across relevant Global Practices and industries, including digital solutions, to build a robust DSEE portfolio.

Acknowledging that energy efficiency projects contribute to reducing greenhouse gas emissions, members alluded to the new scale mechanism where the World Bank intends to provide grants to pay for the verifiable carbon emission reductions and asked management to clarify how carbon markets could be used to incentivize developments in the field. Management acknowledged the crucial role that carbon markets play but noted that work needs to be done to aggregate the benefits of small energy efficiency projects and feed that back into the carbon markets. Pointing to the Independent Evaluation Group’s recommendation that the Bank Group investment projects achieve better outcomes when they are combined with technical assistance or advisory services, members asked how a more efficient and streamlined use of technical assistance funds could be triggered and incentivized in the Bank Group. Management highlighted that the most critical step toward successfully scaling up energy efficiency projects is to have an accurate pricing of energy. They explained that carbon pricing would be required for all Bank Group interventions if the DSEE interventions were scaled up to tackle both direct and indirect emissions and to achieve the Paris Agreement goals. They noted that they are in constant dialogue with client countries in this regard and asked for the help of the Boards of Executive Directors to get donor support in raising more funding.