bank Since the creation of the Green Climate Fund (GCF) in 2010, concerns have grown about the World Bank's potential role in designing policies to determine the allocation of resources for adaptation and mitigation activities in developing countries.
The Bank is criticised because some of its investments have had negative social and economic impacts on populations in countries receiving financial assistance, including affecting the living conditions of indigenous peoples and, in some cases, the violation of human rights. The Bank is also criticised due to the conditionalities imposed on borrower countries. Today the World Bank is the interim trustee of the GCF, meaning it is managing the fund's financial assets for an initial three years. In this role, the Bank must manage contributions and investments, as well as provide services, including commitment accounting, cash transfers and financial reporting. But it is not responsible for allocating funds or preparing, appraising, supervising or reporting on GCF financed activities. Ostensibly, the Bank will carry out these duties until a permanent trustee is chosen through an open, transparent and competitive bidding process. Even so, the Bank has expressed interest in playing a larger role than just managing financial assets in the future. The governing instrument for the GCF states that the World Bank, in its role as interim trustee, will be subject to a review three years after the start of the Fund's operations. However, there is no rule stating that the Bank cannot continue after the review or that it could not eventually be selected as the permanent trustee. For the fourth meeting of the GCF board in late June, the GCF secretariat was asked to prepare six papers on the key issues relating to the Fund's business model framework (BMF) to facilitate board decisions on the operations of the fund. These papers were written with the support of external consultants, among them former and even current World Bank staff. Having these consultants provide guidance on the BMF will have a considerable impact on the decisions the GCF board must make. While it is still unknown how the GCF will use intermediaries when allocating resources, it is likely that financial institutions will step in to help the GCF channel money. The World Bank plans to seek accreditation to become an implementing entity of the GCF. If that is the case, the World Bank, in its role as an intermediary, must be accountable for ensuring money is used for what it was allocated. This means that the World Bank will have to take on a decision-making role to fulfill its duties. It is worth noting that during the third GCF board meeting in March there was exhaustive discussions on the administrative model that the GCF secretariat should adopt. Most board members said the most suitable model would be based on the structure of multilateral development banks (MDBs) - like the World Bank. That is because these institutions apparently attract the most qualified professionals. The board will also make a decision on the structure and organisation of the fund at their June meeting. Before this, an assessment of the structure and organisation of MDBs, including the World Bank, would help the board in considering potential and suitable options for structuring the GCF. The operational rules of the GCF are yet to be decided. Having the World Bank so close to the fund is a concern. Civil society groups fears that the GCF will end up making the same mistakes as many other financial institutions in funding unsustainable projects that generate negative social and environmental consequences. Lidy Nacpil, the regional coordinator of the Jubilee South Asia-Pacific Movement on Debt and Development said: "The World Bank has been at the forefront of financing fossil-fuel projects that have exacerbated the climate crisis. It is now an ironic contradiction that this same institution that has greatly contributed to the climate crisis is to be entrusted with funds that promise to address the very same problem it helped to create in the first place". In any event, there's still no evidence to determine the future involvement of the World Bank, only room for speculation. But it is important to remain on our toes and mindful of any moves that could increase the World Bank's involvement.   This article was published originally here.  
Published in Climate Finance
The World Bank's flagship report on Latin America and the Caribbean explores how the region is exposed to climate change impacts and what it can do to avert its effects, both unilaterally and internationally in the event that countries can reach a global agreement at the UN.
Published in Reading List
Sunday, 28 November 2010 20:47

Mexico’s Carbon Quandaries

By Adam Kotin and Guy Edwards With the Cancún Climate Change Conference kicking off today, the eyes of the world turn anxiously toward the Mexican beach resort where this year’s host seems prepped to glimmer in the spotlight.  Boasting one of the most impressive low-carbon plans among developing nations and several large-scale mitigation projects already underway, the country offers a much-needed illustration of how to put your carbon where your mouth is. But even with the best-laid plans, Mexico faces a rising tide of obstacles, including a lack of investment, archaic legal and regulatory architecture, and rowdy social groups vexed by government plans to push its low-carbon development agenda upon them. To top things off critics fear the Cancún Conference  may fail to fully engage the world’s leaders, as memories of Copenhagen coupled with diminishing confidence in the UN system pervade the global debate. Mexico’s ambitious and progressive plans may not gain the international platform they desire while Cancún’s grandest hotels may avoid having to dust down all the red carpets.
Published in Climate Finance
The World Bank considers mountain ecosystems in the Andes to be one of four climate hotspots in Latin America alongside the coral biome in the Caribbean, wetlands in the Gulf of Mexico and the Amazon basin. These hotspots are comprised of ecosystems that are severely affected by the impacts of climate change. They are considered crucial areas for adaptation and remind us why reducing global emissions is so important. They also carry significant economic costs ensuring that policy-makers will do everybody an incredible injustice if they fail to act now. The following video in Spanish with English subtitles, highlight show a disappearing glacier in the Peruvian Andes affects rural communities: [youtube]http://www.youtube.com/watch?v=y0qDc4hXUSY[/youtube]
 
 
Published in Regional Organisations
The World Bank's Special Envoy for Climate Change, Andrew Steer, told the Americas Conference that the region is at the forefront of climate change efforts in the lead-up to Cancun's COP16 summit later this year. [youtube]http://www.youtube.com/watch?v=m6S_rI3fc8k&feature=player_embedded[/youtube]
Published in Regional Organisations
In this interview we spoke with the World Bank’s Chief Economist for Latin America and the Caribbean, Augusto de la Torre. 1. With Latin America beginning to reverse the trend of punching below its weight, do you think the region can be a global leader on climate change, and if so through which political or economic space(s)? LAC has been “leading by example” for a long time. With respect to energy emissions, LAC is among the regions of the world with lowest emissions per unit of GDP (about half that of middle-income countries’ average), and its emissions per capita are more than 30 percent below the world average. Given its past record of low carbon development, its wealth of natural resources and its intermediate levels of income – when assessed on a global scale – many Latin American countries are well placed to take a leadership role in the developing world’s response to the climate change challenge. 2. In your report, ‘Low carbon, high growth: Latin American responses to climate change’, one of the key messages emphasizes the need to design policies and activities to tackle climate change, which are complementary to the region’s development. The report argues that there are numerous ways in which Latin American emissions could be reduced at low cost while simultaneously reaping considerable development co-benefits. Have you noticed any major or incremental changes in Latin American development thinking which is taking up this new climate-development discourse? Most Latin American and the Caribbean (LAC) countries are beginning to wake up to the dangers of global warming and thinking about how they should respond. Most concrete actions have to date been evolutionary, rather than revolutionary. But there have been some significant measures taken in some countries. The World Bank is supporting Mexico with a $500M Climate Change Development Policy Loan, a first of its kind, aiming at implementing its national climate change action plan. Many of the actions needed for reducing the growth in the region’s emissions are of a “no regret” nature: they would be socially advantageous regardless of their impact on climate change mitigation. In addition, adopting a low carbon development path would benefit the region’s long-term competitiveness to the extent that the world’s technological frontier moves in the direction of low carbon technologies. Most countries are assessing their climate change policies on the adaptation and mitigation sides, and some, like Mexico, are at a fairly advanced stage of developing an operational strategy. They are also leading forces among developing nations in the global climate negotiations. Taking advantage of these opportunities, however, requires an appropriate international policy environment in which a critical mass of high-income countries take a global leadership role. This is important not only to make such a global framework equitable, thereby lending it credibility, but also to generate sufficient incentives and momentum for the private sector to invest in low carbon technologies. For the world to benefit from Latin America’s efficient mitigation contributions, the international climate framework needs to be responsive – and welcoming – to the region’s potential contributions in the areas of forest conservation, renewable energy sources and environmentally sustainable biofuels. Countries in the LAC region are the world’s leaders in implementing incentive-based payment schemes for forest conservation. In 1996, Costa Rica passed the Forest Law 7575, which has recognized that forest ecosystems generate valuable ecosystem services and provided the legal basis for the owners of forest lands to sell these services. Brazil—the largest player in the global biofuels markets with about half of the global ethanol production— has developed the capacity to produce ethanol at a fraction of the cost of producing it in other countries. Because of favorable conditions for cultivation of sugarcane and the uniquely flexible industrial structure for sugarcane and ethanol processing, in periods of high oil prices Brazil’s ethanol industry has been competitive even without government support. Brazil, in fact may be the only country in which the ethanol industry has been able to stand on its own without government subsidy, and even in Brazil, this appears to have been the case only in 2004–2005 (but not 2006 when international sugar prices skyrocketed) and 2007–2008. (The Brazilian industry was also subsidized for many years to get to this point.) Elsewhere, biofuels production has not been financially viable without government support and protection. Biofuels producers in the European Union and the United States receive additional support—over and above farm subsidies and support to producers through biofuels mandates and tax credits—through high import tariffs. It is clear that from the perspectives of emissions, social costs and economic production costs, ethanol from sugar in Brazil is superior to alternatives. Reducing or eliminating the high trade barriers and huge subsidies currently in place in many countries would produce economic benefits for Brazil and its trade partners, and reduce GHG emissions. In assessing the impacts on overall emissions in producing biofuels in different countries, one relevant question is how much land must be shifted from other crops or converted to produce each gallon of biofuels. The ethanol yield per hectare from sugar in Brazil is about twice that of ethanol from corn in the US. This fact has led to the estimate that if the ethanol currently produced in the US were instead produced in Brazil,3 it would require only 6.4 million hectares, instead of 12.8 million, potentially leading to reduction in pressure for indirect land use change and substantial savings in emissions from this source. But the potential for Brazilian sugar-based ethanol to replace less efficient production from other sources is limited by the current high barriers to import of ethanol into the US and other high income countries. Reduction of these trade barriers to imports of Brazilian ethanol could lead to substantial savings in world cost of production of ethanol and a lower level of land use change. 3. Latin American countries have a number of similarities between them including a reliance on exporting primary goods; a strong record on renewable energy; abundant forest reserves and an interest in REDD; and a rapidly expanding middle class interspersed with persistent inequality. Are Latin American regional and subregional organizations, such as NAFTA, the Andean Community of Nations or MERCOSUR, taking advantage of these similarities and forging greater consensus on climate change in the region? Many international organizations – including the World Bank, the FAO, the Inter-American Development Bank, the UN Economic Commission for Latin America – have large work programs on climate change and are actively supporting efforts countries are making to evaluate their climate change policies on the adaptation and mitigation sides, and to develop and implement an operational climate change strategy. Some of these efforts are regional or sub-regional in scope. Under the auspices of the World Bank, we now have in place the first ever multi-country catastrophe insurance pool, the Caribbean Catastrophe Risk Insurance Facility (CCRIF), which will provide participating governments from the region with immediate access liquidity if hit by a hurricane or ea rthquake. Pooling their risk will save the eighteen participating countries approximately 40% in individual premium payments. Exploratory work is underway for a similar facility for the Central American countries. We have also been working with countries of the region to establish or improve their agricultural weather insurance systems, and to develop the capacity to lay off some of the risk in international re-insurance markets, which will be helpful in mitigating the impacts of changing weather patterns on agricultural production. Unfortunately, in a number of countries, the infrastructure for monitoring weather has actually deteriorated over the years. This will need to be rectified, which will require investments, and the local insurance markets will need to be deepened. 4. Has the global financial crisis helped to push tackling climate change further up the political agenda, given the potential to save billions of dollars through energy efficiency programmes and to improve competitiveness? The global financial crisis has had ambiguous effects on the push to tackle global warming. On the one hand, it has diverted the attention toward the shorter term emergency. The urgency, immediacy, and staggering magnitude of the challenges posed by such crisis has competed with the no less daunting challenges of global warming. The capacity of political leaders and of national and supranational institutions to deal with major global threats is, after all, not unlimited. It would be, therefore, naïve to think that the world’s ability to tackle the colossal breakdown of financial markets and resulting economic contraction is free of tensions and trade-offs with the ability to proactively reduce GHG emissions. On the other hand, a number of factors (including the proximity of the Copenhagen Climate Change Conference and a clear change towards climate friendly policies in the U.S.) have helped keep the world’s attention on global warming issues, despite the global financial crisis. Moreover, it is feasible to reconcile efforts to deal with the financial crisis with efforts to confront global warming. Stimulus policies and programs can be designed and implemented with a “green” objective in mind, and some have in fact been designed that way in many a country, especially in public investments. A “green recovery”—that is, a virtuous interaction among job creation, growth resumption, and low-carbon-oriented public investments and policy actions—is a worthy option and arguably the only sensible option for the world community at this juncture. 5. One of the major failings to emerge from the global financial crisis was the inability to internalize systemic risk. Do you believe there are experiences to be gained from the crisis which may help to create greater risk management and resilience strategies for fighting global warming within Latin American governments, particularly finance and planning ministries? I doubt that such is the case. I would rather think that the reverse is more likely – namely, that regulation in different areas that the environment can learn from the latter about effective ways to induce a better internalization of externalities. 6. What potential links are being formed between the work being conducted on the economics of climate change in Latin America and more conventional macroeconomic and financial development topics? Let me focus on financial development. Financial markets are particularly important in responding to the challenges of climate change in several ways. Better insurance markets allow households to reduce their risk exposure from extreme events, which are expected to become more common as the world warms up. We in the World Bank are heavily engaged in providing assistance aimed at developing weather insurance markets in developing countries. Better access to short-term savings instruments likewise allows households to “save for a rainy (or excessively dry) day”, while longer-term financial instruments facilitate borrowing for investments that will be needed to reduce damages from catastrophes. Of course, development of financial markets provides many benefits even in the absence of considerations of climate change, illustrating the more general point that good policy to adapt to climate change is largely congruent with good development policy. Governments also need to be able to respond to weather-induced catastrophes, and new financial instruments are being developed to help them do so. One example is the Caribbean Catastrophe Risk Insurance Facility. Another is the World Bank’s Deferred Drawdown Option lending instrument, which is basically a pre-approved line of credit, which gives a government quick access to liquidity in an emergency. 7. The IADB reports that up to 98 percent of Latin American businesses are micro, small or medium-sized and are said to generate around 60 percent of the region’s employment. At a time when leading economists are calling for a green recovery to the financial crisis, what potential is there in Latin America to create green jobs for the millions of peoples involved in this business sector? Many green investments are consistent with stimulus objectives. The World Bank has recently analyzed the short-term employment generation potential of different types of infrastructure investments and has found that large highways and traditional thermal power plants, for example, generate very little short-term employment for the amount of money spent - in the hundreds to low thousands of yearly jobs for US$1 billion of investment. In contrast, the expansion of water supply and sewerage networks can generate upwards of 100,000 short term annual positions for the same amount of money and rural road maintenance, which gives small businesses and farmers access to markets and which often employ micro-enterprises, may generation 250,000 to 500,000 short-term positions for every US$1 billion of investment. Any major investment that begins with direct labor expenditures before high-value added content is added - such as small hydro facilities or the construction of dedicated bus lanes - will reach into the slackest part of the labor market and will generate the highest shares of direct employment. On the higher end of the value-added spectrum, LAC continues to be a leader in alternative and renewable energy generation, from its large hydro base to the growing use of geothermal, bagasse, wind and even solar. LAC's proximity to the US market and the region's own growing interest in renewable technologies has not been lost on the technology companies. A major integrated solar panel manufacturer in the US is now looking to relocate a part of its manufacturing to Mexico and we may expect that this trend of incorporating LAC into the supply chain for renewable technology will continue. 8. In recent years, Latin America’s carbon intensive sectors such as the mining, hydrocarbons and forestry sectors have helped to fuel the region’s economy aided by booming commodity prices. To stabilize greenhouse gas emissions concentrations to avoid dangerous climate change, over 50 percent of global mitigation potential would be located in developing countries. In the cases of industry, agriculture, and forestry, almost 70 percent of that mitigation potential is in developing countries. How is Latin America responding to this challenge and what synergies or conflicts exist between the trade and climate change regimes for the region? There are several ways in which trade policy can be improved to help address the challenges of climate change. First, all kinds of barriers to food trade could be more effectively disciplined. This would facilitate changing patterns of food trade as climate change alters production patte rns over the long term, as well as spread the effects of short-term supply shocks and ensure that consumers and producers respond appropriately. With a share of close to 11 percent of world agriculture and food exports, LAC is currently a major food-exporting region. But some countries may suffer large losses in productivity, leading to dramatic shifts in food trade patterns inside and outside the region. This issue is therefore of vital concern to the LAC region. One of the lessons of the recent precipitous increases in food prices is that when shortages arise, there is a tendency for countries to react with “beggar thy neighbor” trade policies that insulate domestic consumers and producers from international price movements, and in doing so, shift the adjustment costs onto others. This has included ad hoc reductions in import barriers and increases in export barriers, neither of which is effectively disciplined under current WTO rules. Many governments have also responded to the food crisis by focusing on measures to increase their degree of self-sufficiency in food production. In the future, as climate change makes food production increasingly high-cost in some countries, trying to maintain levels of self-sufficiency will likewise become increasingly costly. This underscores the importance of keeping the trade system open in order to give all countries confidence that they can rely on it to supply their food requirements. Second, barriers to trade in goods and services that help reduce emissions would ideally be eliminated. These are currently being addressed in the Doha Round negotiations, but progress has been limited. Of particular interest to LAC is the reduction of barriers to trade in ethanol. This is of greatest interest to Brazil which is the lowest cost producer in the world, but may be important for other countries in the region where ethanol can be efficiently produced from sugarcane. From the dual perspectives of efficiency and effectiveness in reducing emissions, it is in the world’s interest to ensure that ethanol is produced where this can be done most efficiently, rather than in countries where it requires large subsidies and high trade barriers. Ethanol can be produced in Brazil using about half as much land and at a far lower cost than production from, let’s say, corn in the US. Yet current biofuels trade policies and subsidies in high-income countries have generated huge distortions in agricultural markets, with adverse impacts on poor food consumers worldwide, and at best minimal reductions in carbon emissions. Finally, the WTO’s Committee on Technical Barriers to Trade is already involved in reviewing the increasing number of standards and labeling requirements targeted at energy efficiency or emissions control. It could also play an important role in ensuring that other trade policies – including tariffs levied on the basis of the producing country’s emission reduction commitments or environmental regulations – are not discriminatory and do not unnecessarily restrict trade.
Published in Interviews
For Latino Cambio’s second interview in the run up to the Copenhagen negotiations, we talked with the World Bank’s Lead Engineer for the Latin America Environment Department, Walter Vergara. 1. In 2004 you said ‘the political will for a strong support of adaptation efforts is still weak, and there is considerable confusion.’ In 2009 would you stick by this statement and if so why? Or if not what has changed? The political context has changed for the better and this is reflected in a renewed commitment by the international community. Yet, there is still a lingering lack of information and of course trying financial conditions that continue to impede further progress. On top of this, the challenge has only grown worse with time. 2. Various multilateral organizations including the World Bank, Inter-American Development Bank and CEPAL are working to increase Latin American capacity on climate change. Numerous organizations are also funding work programmes and projects such as the UK’s Department for International Development and the European Union’s EUrocLIMA Initiative. In your opinion how well coordinated are these efforts between the organizations themselves but also with national governments in Latin America? I think folks at all of these institutions want to do it right and are aiming at the best coordination possible; but, let's not underestimate the turf syndrome. We all need to fight for the best possible efficiency in delivery of the limited resources available under the best allocation criteria possible and this requires seamless coordination between institutions. 3. In the World Bank report, ‘Low Carbon, High Growth: Latin American Responses to Climate Change’ there is very little mention of the role of Latin American civil society. The bibliography also includes few if any references to research conducted by Latin American research institutes or think thanks. Why might this be the case? There is substantial work being undertaken by research institutions and some of these is reflected in the report and also in the recently released "Assessing the Potential Consequences of Climate Destabilization in Latin America". Some of the institutes providing first rate analytical and field work are indeed mentioned in these publications and a very limited list includes: IDEAM, the meteorological institute of Colombia, CAN, the Andean Community of Nations, EIA, the School of Engineering of Antioquia, EMAAP-Q, the water supply and treatment company of Quito, INE, the Institute of Ecology of Mexico, UNAM, the Autonomous University of Mexico, SMA, the Secretary of Environment of Mexico City, the Caribbean Community Climate Change Centre in Belize, INPE/CPTEC in Brazil and many others that I fail to list. 4. Much of your recent work at the Bank has investigated the impacts of climate change in the region such as water availability and the loss of biodiversity. Which impact is most likely to affect the greatest number of countries in the region and what is being done collectively to address it? In a recent article, we have tried to answer this question. There are very clear climate hot-spots in Latin America, that tower against other consequences of climate change due to its magnitude, irreversibility and economic and environmental impacts. A short list includes: the risk of climate induced dieback of the Amazon rainforest, the accelerated warming of the Andes cordillera, the collapse of the coral biome in the Caribbean and the subsidence of the coastal wetlands in the Gulf of Mexico. While there are other significant impacts in the region, these are in a category by themselves. 5. Latin America arguably has sufficient experience of low carbon development to lead the developing world in tackling climate change. In your experience how much dialogue is their between Latin America and other developing regions on climate change and low carbon growth? I am afraid not as much as there should be, in part because of the transaction costs involved in disseminating lessons and sharing experiences amongst a large number of mostly small to medium size projects. There should be concerted efforts to disseminate experiences. In the Latin America region of the World Bank, there is growing appreciation of the benefits of what you propose and in the field of adaptation; resources have been allocated to ensure that successful experiences with investments in adaptation are widely shared within our region. 6. As the region is the most urbanized in the world and a number of the impacts of climate change will hit these settlements the hardest, would you agree that the battle to fight global warming will either by won or lost by these urban settlements? The impacts in urban settlements are very serious and have the potential to affect a large population. But, I do not agree with the premise. It is akin to us thinking that the problem with the food system needs to be solved at the supermarket, while the food is actually produced and transported from elsewhere. I am convinced that the key to adaptation lies in an ecosystem-based approach and that success to adapt will be based on our ability to shield and protect the ecosystems that provide the economic and environmental services upon which we rely. But, of course, there can not be a successful adaptation strategy if that does not include a major drive to reduce emissions by the most energy intensive societies such as the United States and China. 7. The mismanagement of natural resources in Latin America has been a constant theme for hundreds of years. Given the region’s reliance on tapping into these resources for their development, do you think the sound and sustainable management of these resources is possible? And if yes how does climate change fit into this resource-development nexus? It is not only possible but absolutely necessary. I am gratified by the growing number of examples, where regional and local governments but also private companies have chosen to invest in the future, through, amongst other examples, avoided deforestation, conservation and restoration efforts, investments in long term basin management and improved efficiency in the use of environmental services. Much needs yet to happen and there are still a large number of battles to fight and eventually win, but progress is being made. 8. Taking into account Latin America is home to the Amazon rainforest and also abundant other forested areas, do you think there is a risk that national governments in the region resent these resources being framed as sources of cheap and easy abatement opportunities as opposed to real options for poverty reduction, reducing emissions and development? As recent assessments and data indicate, this key element of the global water and carbon cycles is being endangered by climate consequences. There is much at stake in the conservation of the Amazon rain-forest and there is a growing awareness that this is an asset on which the global community, the region and the local inhabitants, equally depend. Maintaining the rainforest ecosystem is probably one of the single actions that the global community can undertake to prevent the impoverishment of future generations. Conserving this ecosystem is a requirement for maintaining our biosphere. 9. In your recent publication, ‘Assessing the Potential Consequences of Climate Destabilization in Latin America’, you edit a number of papers which paint a rather depressing picture of how costly and spectacular the impacts of climate change could be in Latin America. For those actors in the region responsible for government planning and policy, what is the report’s key message and how was the report received in the region? The publication does paint a dire situation that is the reality we face today. The key message is that the region has much to lose from runaway GHG emission trajectories, such as we are experiencing today. This calls for political activism to induce energy intensive nations, such as the United States and China to aggressively reduce their emissions, for all countries in the region to improve the management of their natural resources and move to lower carbon development paths and for urgent support of strategies, that centre on ecosystem based adaptation. 10. Finally, let’s consider a scenario. If we jumped to 2100 and take a look at a Latin American region which has lead and participated in a number of international treaties to curb global GHG emissions and adopt a low carbon economy, what would be the key features of the Latin American economies? A zero carbon power grid, low carbon mass transport, built on the basis of cost effective Transit Systems and very efficient vehicle technologies, a massive effort at avoided deforestation and ecosystem restoration, all activities whose management and maintenance engage and employ our next generations.
Published in Interviews
The World Bank's 2009 flagship report on Latin America and the Caribbean (LAC), investigates the exposure of the region to climate change and what it can do to meets those risks and opportunities head on, both by itself and internationally, through a climate agreement being negotiated in December this year.

Crucially, emphasis is placed on the need for good adaptation policies to climate change which are complementary to the region’s development. LAC is well placed to move ‘ahead of the pack’ and take advantage of international cost-sharing mechanisms for deploying low-carbon technologies and build new comparative advantages. Interest in acting decisively now could ensure a faster recovery from the current economic slowdown and improve competitiveness.

The report entitled, Low Carbon, High Growth: Latin American Responses to Climate Change, urges the international community to look to Latin America for innovative solutions and leadership to avoid a climate crisis. The region is not the main source of emissions driving global warming, due to its clean energy matrix and its innovative policies to promote low carbon growth. Latin America produces only about six percent of global energy-related greenhouse gas emissions, or 12 percent of emissions from all sources, including deforestation and agriculture.

The region has piloted new technologies and approaches to reduce emissions:

• Mexico’s 2007 National Strategy on Climate Change adopts long-term, nonbinding targets. In the energy sector, the strategy identifies a total mitigation potential of 107 million tons of greenhouse gasses by 2014, a 21 percent reduction from business as usual over the next six years.

• Brazil is moving towards energy independence through the expansion of alternative energy sources such as hydroelectricity, ethanol, and biodiesel. Its sugar-based ethanol production is financially and environmentally sustainable without diverting land from food crops.

• Public and environmentally friendly public transport policies demonstrated by Curitiba (Brazil) and expanded in Bogota (Colombia) are now underway in dozens of cities in the region.

• Costa Rica has received worldwide recognition for its successful initiatives on payments for ecosystems services.

• Argentina is moving forward with renewable energy in rural areas, which provides affordable and reliable electricity to communities and has an impact on productivity and jobs.

Despite these innovations, LAC has been moving to a higher carbon growth path. Based on current trends, from 2005-2030 the projected growth of per capita CO2 energy emissions in the region is 33 percent (above the world average of 24 percent).

Therefore, a global climate agreement will be useless unless developing countries sign up to emission reductions, particularly the larger middle-income countries, such as Brazil and Mexico. Even if high-income countries acknowledge their historical responsibility for the majority of emissions and reduce them to zero, effectively becoming carbon neutral, this would still not be enough to keep the stock of greenhouse gases below “dangerous” thresholds. A strong Latin American presence at Copenhagen leading other developing countries is therefore imperative.

The report also documents some of the critical impacts of climate change in the region if the international community fails to act:

• By 2100, agricultural productivity in South America could fall by 12 percent to 50 percent.

• Climate-related natural disasters (storms, droughts and floods) cost, on average, 0.6 percent of GDP in affected countries.

• Hurricane damages will increase by 10 percent to 26 percent for each 1oF warming of the sea.

• The Amazon rainforest could shrink by 20 percent to 80 percent if temperatures increase by 2 to 3oC

• Many Andean glaciers will disappear within the next 20 years placing 77 million people under severe water stress by 2020.

• Caribbean corals will bleach and eventually die. Since the 1980s, 30 percent of corals already have died, and all could be dead by 2060.

• Increase in risk of dengue, malaria and other infectious diseases in some areas.

The study finds that keeping LAC on a high-growth and low-carbon path will require a coherent policy framework on three levels:

1. An international climate change architecture that creates enough momentum and is friendly to Latin America’s specific features, including: clear financial incentives to reduce deforestation; the expansion of carbon trading mechanisms to sectors; mobilization of financial flows to Latin America to facilitate deployment of “green technologies;” and the creation of a global market for sustainable bio-fuels, removing tariffs and other barriers.

2. Domestic policies to adapt to the inevitable climate change impacts on the region’s ecosystems and societies, incorporating climate-related threats into the design of long-term infrastructure investments, improving weather monitoring and forecasting, enhancing social safety nets so as to allow households to better cope with climate shocks, and improving the functioning of land, water and financial markets.

3. Domestic policies to exploit mitigation opportunities to make Latin America part of the global climate change solution. Many of the actions needed for mitigation are also good development policies. For example, reducing deforestation has social and environmental benefits; improving public transport can reduce congestion and local pollution with impacts on health, productivity and welfare; and expanding off-grid renewable energy can help reach rural populations without access to electricity.

Analysis:

The report reflects the difficulty of LAC countries embarking on a path to low carbon development. There may be a number of ‘low hanging fruit’ such as improving energy efficiency, which the region can utilize to reduce its emissions and adapt, but unless the region undergoes a fundamental shift across all sectors and government departments, these changes will be incremental at best. The report therefore fails to deliver a compelling narrative that challenges the current development paradigm.

Trade: the absence of any discussion on trade is notable given the commodities boom of recent years that has fueled the region’s economy, especially in the carbon intensive sectors of mining and hydrocarbons. As the region recovers from the economic crisis, a conversation on how climate change and a potential treaty will affect the region’s exports market is needed immediately. To stabilize greenhouse gas emissions concentrations to avoid dangerous climate change, over 50 percent of global mitigation potential would be located in developing countries. In the cases of industry, agriculture, and forestry, almost 70 percent of that mitigation potential is also in developing countries. This has the potential to hit Latin America’s export sectors hard.

Cities: LAC is the most urbanised region in the developing world with 77% of its people living in cities. According to the UN by 2030 the region’s urban population may surpass 600 million. The report focuses primarily on the advances and remaining potential in the transport sector in urban areas. However, it fails to link raising sea levels and the risk to urban areas located on the coast. This omission seems out of sync with the Bank’s World Development Report 2009, which argues that cities and towns will continue to act as dynamos in the global economy. As countries become richer, economic activity b ecomes more concentrated in urban areas. However, if we take into account the revisions for sea level raises this century, the longevity of Lima, Buenos Aires and others may be in doubt and questions the validity of this statement in LAC.

LAC civil society and think tanks: The report fails to mention civil society, which seems at odds with the avalanche of social movements and civil society groups that rocked the political status quo in the wake of the redemocratisation process. Any discussion of responses to climate change void of considering the role of civil society is too blinkered. Secondly, a quick skim of the report’s bibliography reveals no references to Latin American research institutes or other organizations. Rather it is dominated by World Bank literature and academic journals, the majority of which are only published in English.
Published in Market Mechanisms
Billed as an energy efficiency project, the World Bank has approved a US$30 million interest-free loan to strengthen the Honduran energy sector and improve the performance of the national electric power company, Empresa Nacional de Energía Eléctrica (ENEE).

The Power Sector Efficiency Enhancement Project (PROMEF) has three parts:

• Building ENEE’s management and commercial capacity;
• Renewing and rehabilitating distribution equipment, including the removal of polluted transformers;
• Institutional strengthening and corporate governance
The Honduran finance minister Rebeca Santos said, “This operation addresses an energy reorganization strategy launched by the Government, which requires streamlining the state-owned ENEE and further supporting new investments in renewable energy,"

The Inter-American Development Bank points out that Honduras has an energy intensity index of 3.24 which is just above the regional average suggesting any project designed to increase efficiency is an ideal way to save cash during the economic crisis.

Energy intensity reflects the energy efficiency of a country’s economy and is calculated as units of energy per unit of GDP. It can be affected by a number of factors such as climate and the type of technologies used by major industries.

In comparison to Honduras, Uruguay has the lowest energy intensity index at 0.82 in the region, where as Guyana’s 8.7 is the highest ensuring a poor energy efficiency record.

As Honduras’s energy demand continues to grow at roughly 3% per year it is faced with two choices. It can either fork out hundreds of millions of dollars by installing new power generation capacity or it can spend significantly less on improving energy efficiency.

2009 is unfolding in a storm of climate insecurity and financial turmoil highlighting that energy efficiency programmes are an essential and cost effective way of reducing spending, lowering carbon emissions and conserving limited resources.
Published in Climate Finance