Despite the increase in sustainable energy initiatives by Multilateral Development Banks (MDBs), a limited number of loans financed by the World Bank, Inter-American Development Bank (IDB) and Asian Development Bank (ADB) consistently support sustainable energy investments in developing countries.

Investing in Sustainable Energy Futures: Multilateral Development Banks’ Investments in Energy Policy, a report released today by the World Resources Institute (WRI), analyzes energy-related loan programs at the World Bank, ADB and IDB in addition to the newly created Clean Technology Fund (CTF). The report is being launched this week at the annual spring meetings of the World Bank Group and the International Monetary Fund.

“Over the last five years, MDBs have engaged countries on critical elements of sustainable energy and have launched several specialized initiatives to promote clean energy and low carbon technologies,” said Athena Ballesteros, manager of WRI’s International Financial Flows and the Environment Project. “However, if the development banks are going to finance climate change solutions in the future, they need to help developing countries put in place new, and more effective forms of oversight, pricing, and investment incentives that promote long-term investments in sustainable energy.”

Ballesteros added, “In most countries, policies and regulations currently tend to emphasize short-term costs and supply rather than the long-term benefits of clean technologies.”

The report finds that despite increased support for low carbon energy technologies, many loan programs do not address aspects of electricity policy, regulation, institutional capacity and governance that would enable investments in sustainable energy over the long-term. The findings are based on a framework developed by WRI that builds on the Electricity Governance Indicator Toolkit—a set of indicators benchmarking best practice and promoting accountability in the electricity sector.

The report makes the case for systematic attention to the following issues:

- Long-term Integrated Electricity Planning
- Policies and Regulations Encouraging Energy Efficiency
- Policies and Regulations Promoting Renewable Energy
- Pricing Structures Encouraging Efficiency and Reducing consumption
- Subsidy Reform to Reveal the True Costs of Fossil Fuesls and Promote the Viability of Sustainable Energy Options
- Executive Agencies’ Capacity for Sustainable Electricity
- Regulators’ Capacity to Oversee Implementation of Sustainable Electricity Policy
- Utilities’ Capacity to Promote Energy Efficiency and Renewables
- Transparency of Policy, Planning, and Regulatory Processes for Electricity
- Stakeholders’ Engagement in Policy, Planning, and Regulatory Processes

A relatively small number of MDB projects address the elements of sustainable energy listed above. Of the 31 World Bank loans reviewed, only 10 consider 5 of the 11 elements. The IDB considers at least 5 of the elements in 10 of 19 loans and the ADB considers more than 5 elements in 10 of 29 projects.

The report also reviews the investments made by the MDB administered Climate Investment Funds (CIFs), particularly the $4.73 billion Clean Technology Fund. While the Funds address some of these elements, the research concludes attention to them has been uneven. The CIFs represent more public finance than has ever before been dedicated to climate change.

Smita Nakhooda, a senior associate at WRI, said “A greater focus on institutional capacity and governance will be key to supporting developing countries to pursue low carbon energy options that effectively meet development needs without compromising the poor.”

More than half of existing and planned power plants in South and Southeast Asia are located in areas currently considered water scarce or stressed, according to findings in a report released today by the World Resources Institute (WRI) and HSBC’s Climate Change Centre of Excellence.

The new report, Over Heating: Financial Risks from Water Constraints on Power Generation, analyzes water-related risks facing thermal and hydroelectric power plants in India, Malaysia, the Philippines, Thailand and Vietnam. These plants require large amounts of water for cooling and generation.

WRI mapped the water stress level across the region and the location of more than 150 existing and planned facilities of the largest power-generation companies in the region. The analysis found that water shortages pose the highest risk for power generation companies in India.

“Water-related risks are hard to quantify, yet they present a growing risk to power generation,” said Piet Klop, acting director of WRI’s Markets and Enterprise Program. “The next step is to take our analysis to specific companies and their exposure and response to those risks. On the upside, investors have investment opportunities that can come from better understanding water-related risks.”

In India, approximately 62 percent of existing and 79 percent of planned thermal and hydroelectric power plants of the three largest power generation companies (NTPC, Tata Power, and Reliance Infrastructure) are located in water scarce or stressed areas. The country’s water demand is expected to outgrow supply by 50 percent by 2030 and estimates by the World Bank indicate that all available water supplies will be exhausted by 2050.

“The power sector investors and analysts are making long-term bets on water that, in the future, might no longer be reliable,” said Amanda Sauer, a senior associate at WRI. “They need to start assessing their exposure to water-related risks when considering long-term investment strategies.”

The report’s findings suggest that project delays due to water-permitting problems and general shortages may be costly. As part of the study, HSBC’s analysts found that a 12-month delay in commercial operation could lower the rate of return on investment by 1.5 percent. Furthermore, each 5 percent drop in power production due to water shortages could result in nearly a 0.75 percent drop in the project’s rate of return.

“The projected expansion of power generation - whether coal, hydro or gas – is exposed to growing water stress,” said Nick Robins, head of the Climate Change Centre of Excellence (C3E) at HSBC.

Roshan Padamadan, a HSBC analyst at the Centre said, “Investors need to understand how companies are managing these risks, including the specific steps to optimize water use at the plant level.”

Over heating is the second report in a three-part series. The first report, Weeding Risk, looks at climate change and water scarcity impacts on the food and beverage sector in India, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. The third report, Surveying Risk, Building Opportunity, assesses environmental risks to commercial real estate in the region.

China is making progress toward controlling greenhouse gas emissions, according to new research by the Word Resources Institute (WRI).

“In the last five years, Chinese leaders have embarked on policies to increase energy efficiency, using targets, quotas and a few taxes,” said Deborah Seligsohn and lead author of China, the United States, and the Climate Challenge. “While these policies may not provide the environmental certainty of a cap-and-trade system, our analysis shows they can control emissions and may be more suited to the current state of development of China’s financial markets and regulatory structure.”

China’s approach is founded on two main targets: reducing national energy intensity by 20 percent by the end of 2010 and to increasing renewable energy’s share of the national energy mix to 15 percent by 2020.

WRI’s analysis finds that China is on track to meet these two ambitious goals by enacting a broad range of measures. Chinese leaders have recognized that reducing energy intensity-the amount of energy used per unit of GDP-and expanding its energy portfolio improves energy security and air quality, as well as limiting greenhouse gas emissions.

“In 1979, China’s reform and opening policy began with a saying by Deng Xiaoping, ‘It doesn’t matter whether the cat is white or black as long as it eats mice.’ That also holds true for world efforts to control dangerous climate gases,” said Seligsohn. "Countries will use different approaches suitable to their particular circumstances.”

One key program, for instance, requires 1,000 of China’s largest state-owned enterprises to implement comprehensive reductions in energy intensity, and monitors their progress. This “Top 1,000 Enterprises Program” met its goals in the first year and exceeded its targets in 2007.

Another policy is to shut down small-scale inefficient facilities. In 2007, China closed 1,000 cement plants with a combined capacity of 50 million tons, 14.4 GW worth of small power plants, and plants producing 35 million metric tons of steel.In the electricity sector, China has steadily improved the efficiency of its power plants, and the government now requires all new coal-fired power plants to be state-of-the-art commercially available technology.

WRI’s analysis shows that the average efficiency of coal-fired plants is now higher in China than in the United States. China is also on pace to meet very ambitious renewable-energy goals. Installation of new wind power capacity since 2006 has consistently exceeded targets. By 2010, China will have at least 10GW of installed wind power capacity, rising to an expected 150 GW in 2020 - five times the current U.S. level. China’s solar reliance is also growing rapidly: ten percent of Chinese homes have solar water heaters and the number is growing at 20 percent per year.

“WRI’s research shows that China is making substantial progress in controlling its emissions of climate gases, and in monitoring emissions by major companies,” said Seligsohn. “The challenge for U.S.-China collaboration in climate change mitigation is for each country to understand the other’s approaches, and to find creative solutions when those approaches don’t align.”

The report suggests the U.S. could selectively issue free carbon allocations to protect some firms from overseas competitors that enjoy a lower carbon price. Carefully targeted measures can address differences in carbon policies without threatening global trade.

Some quick “reality checks” on common misconceptions about climate change legislation in the United States.

By Jessica Forres and Polly Ghazi

Cap & Trade

Myth: Cap-and-trade will cost jobs

Reality: climate and energy policy will create renewable energy jobs. Putting a price on carbon will make clean energy industries, such as solar and wind power, more competitive and create jobs in these clean tech sectors. According to a WRI report, the Renewable Energy Policy Project suggests national demand for wind and solar power systems could create more than 30,000 new jobs and more than $10billion in total investment in the Southeast U.S. alone. Nationally, clean energy jobs have been growing at two and a half times the rate of the jobs overall.

Reality: climate and energy policy will create energy efficiency jobs. According to a WRI report, The American Council for an Energy-Efficient Economy estimates that a 20 to 30 percent gain in energy efficiency across the country could lead to a net increase of 500,000 to 1.5 million jobs by 2030.

Reality: climate and energy policy will help keep energy dollars within communities/regions. Using local renewable energy and investing in energy efficiency reduces the amount of energy we import from overseas. For example, the southeast spent more the $1 billion in 2006 on coal imports from Colombia, Indonesia, Poland and Venezuela, according to a WRI report. Greater use of renewable energy would keep those dollars invested in local economies.

Reality: climate and energy policy will produce home-grown innovation. The race to create breakthrough clean technologies has already started, and the U.S. is falling behind. Currently, only one of the world’s top five manufacturers for wind technology is American - General Electric. Only one of the ten largest solar panel producers, and two of the top 10 advanced battery manufacturers, are American. By comparison, China’s ambitious renewable energy targets will create 150,000 jobs through the deployment of 120 gigawatts of wind power by 2020 – an amount equivalent to today’s global total.

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Myth: Cap-and-trade will make the U.S. less competitive with other countries
Opponents of climate legislation argue that putting a price on carbon in the United States will affect some industries’ competitiveness and drive jobs overseas. In particular, there is concern that China will take jobs from the United States

Reality: China is examining and planning its transformation to a clean energy economy. Beijing is investing 10 times as much on clean power, as a percentage of gross domestic product, than the United States. According to several leading U.S. businesses, the real competitiveness issue is who will win the race to supply technology to tomorrow’s global clean energy markets. Without strong climate change legislation here in the United States, China will have a clear advantage by virtue of its ambitious clean energy policies. Already, four of the top five wind technology manufacturers and nine of the top ten of the largest solar panel producers is headquartered overseas.

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Myth: Cap-and-trade programs don’t work
Opponents claim that problems encountered early on by the European Union Emissions Trading Scheme indicate that cap-and-trade won’t work.

Reality: The United States has successfully operated cap-and-trade systems. The Federal Acid Rain Program employed a sulfur emissions cap–and-trade system that produced a 50 percent cut in emissions, at much lower cost and greater efficiency than predicted.

Reality: The first phase of the EU trading system did not have enough data to determine how many permits to issue or where to set the cap. As a result, it was over-supplied with permits (allowances) for the level of emissions. Current and future phases of the program include design changes to correct for lessons learned during the initial phase.

Reality: The West, Midwest and Northeast United States, covering more than 20 states and half of the U.S. population, are already discussing regional climate cap-and-trade programs. The Northeast Regional Greenhouse Gas Initiative, established a trading system that has been up and running since January 1, 2009.

The American Clean Energy and Security Act (ACESA)

Myth: ACESA will send your energy bills through the roof

Reality: The overall net impact on the average household—including the benefit of many of the energy efficiency provisions in the legislation—in 2020 would be 23-48 cents per day ($84-$175 per year), according to estimates by the U.S. EPA, DOE (EIA Basic case) and Congressional Budget Office.

Reality: ACESA has designed safeguards to help protect low income households. Over 50 percent of the value of allowances between 2012 and 2025 would be channeled into programs to assist income energy consumers through tax assistance for low-income citizens and natural gas, heating oil and electricity cost relief. In addition, state governments and businesses will receive millions of allowances to cushion the transition to a clean energy economy, which will benefit their citizens and preserve jobs.

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Myth: 85 percent of the allowances allocated will be given away to fossil fuel intensive industries

Reality: According to a WRI analysis on the distribution of emission allowances to aid industries and consumers affected by the transition to a clean energy, low carbon economy, 76 percent of the allowances are directed to consumer assistance and other public benefits between 2012 and 2025. The remainder is given to industry for free or after meeting certain technology deployment requirements.

Climate Change

Myth: Anthropogenic climate change doesn’t exist

Reality: The IPCC’s Fourth Assessment Report released in 2007—reviewed by thousands of climate science experts—confirms beyond any reasonable doubt that climate change is occurring, and to a significant degree is human-induced.

Reality: Climate Science: Major New Discoveries—a WRI compilation of scientific developments since the release of the Fourth Assessment Report in 2007—concludes that climate change impacts are already happening, and at a faster rate than previously projected. For example:
Melting rates for 30 mountain glaciers doubled between 2004 and 2006
More than 28,000 plant and animal species are changing habits due to new climatic conditions
From 1996 to 2006, the rate of Antarctic ice mass loss increased by 75 percent
Renewable Energy and Energy Efficiency in the Southeastern United States

Myth: Southeastern states don’t have enough renewable resources to meet clean energy and efficiency mandates

Reality: Findings from WRI’s research suggest that more than 25 percent of the Southeast U.S. region’s electric power could come from locally-available renewable energy supplies by 2025. Energy efficiency improvements could reduce electricity use more than 10 percent in the Southeast in the next six years

Stressed water supplies in the Southeast United States could be relieved by introducing energy and water conservation policies outlined in a report released today by the World Resources Institute, Southface and Southeast Energy Efficiency Alliance.

Freshwater in the Southeast U.S. The above chart, based on U.S. Geological Survey data, shows that about 65 percent, or nearly 40 billion gallons, of water is withdrawn each day for thermoelectric power in the Southeast United States. Water and Watts, the third report in a three-part series about energy issues in the region, notes that approximately two out of every three gallons of freshwater withdrawn in the Southeast U.S. are sent to thermoelectric power plants, which are mostly coal-fired and nuclear. These plants require about 40 billion gallons of freshwater each day - nearly equal to the total daily freshwater withdrawals required to meet public supply needs for the entire U.S.

“Reducing electricity demands is not only critical to addressing our energy challenges, but also to meeting regional water needs,” said Ben Taube, executive director at the Southeast Energy Efficiency Alliance and a co-author of the new report. “Lawmakers at the federal, state, and local levels should consider policies that create incentives for the efficient use of both water and energy, especially in light of recent droughts.”

Water availability has become a more common source of conflict between states in the region. Alabama, Florida, and Georgia have fought over control of the Apalachicola/Chattahoochee/Flint River Basin and similar issues arose in North and South Carolina over the Catawba River.

Looking ahead, population growth in the Southeast could lead to a 30 percent increase in thermoelectric power generation by 2025. Without policy action to encourage efficiency and water-efficient power production, this higher electricity demand could further exacerbate water scarcity problems.

“Building more thermoelectric power plants that run on nuclear and coal is simply not sustainable,” said Dennis Creech, executive director at Southface, another report co-author. “Fortunately, we see that efficiency upgrades and conservation efforts can reduce demands on both energy and water resources, while saving consumers money on utility bills.”

The report notes that the average household in the region is spending about $250 each year on energy to heat the water they use for dishwashers, clothes washers, showers, and other needs. Upgrading just half the households in the Southeast with WaterSense labeled faucets or faucet aerators, for one example, could save residents an estimated $40 million on their water bills and another $80 million on their energy bills.

Any water efficiency improvements also help reduce demands on city water and wastewater treatment facilities. The energy needed to operate these facilities can amount to as much as 30 percent of a city’s total energy bill.

“These relationships between energy and water should not be overlooked in the Southeast,” said Eliot Metzger, an energy expert at WRI and co-author of the report. “Policymakers should take steps to promote water and energy savings, starting with near-term actions that make good economic and environmental sense.”

Policy and investment opportunities highlighted in the report focus on realizing both energy and water benefits. To start, state regulators must evaluate the impacts of new electric power supplies upon water, and prioritize options, including efficiency, with minimal or no water requirements.

Strong leadership is also needed with energy and water efficiency requirements for public buildings. Several states - including Alabama, Florida, North Carolina, and Virginia - have policies that encourage efficiency in state buildings. Additional policies and procurement guidelines for high efficiency products, like those bearing the ENERGY STAR logo or the U.S. EPA’s WaterSense label, can lead to additional energy, water and cost savings.

Financial incentives can help promote options like solar water heaters, which use heat from the sun to provide 40 to 80 percent of water heating needs. These systems can save homeowners $150 or more in energy costs each year. State tax incentives and additional federal tax credits can help encourage more homeowners to install solar hot water systems.

Finally, states and utilities can also lead information and awareness campaigns to help educate homeowners and businesses about the connections between energy and water use.

Energy efficiency policies in the Southeast U.S. can help reduce electricity use by more than 10 percent over the next six years - saving the same amount of power generated by more than 30 coal-fired power plants, according to a report released today by the World Resources Institute (WRI), the Southeast Energy Efficiency Alliance (SEEA), and Southface.

Projected Southeast Electricity Consumption This chart shows near-term energy efficiency potential in the Southeast, compared to DOE projections for electricity consumption through 2015. The region can save more than 10 percent of total electricity use, which amounts to 80 percent of the expected growth in demand over that period.

“Most buildings in the Southeast needlessly waste energy,” said Dennis Creech, a co-author of the report and executive director at Southface. “Though our region has shown progress in recent years, there remains immense potential to make homes and businesses more energy efficient. Our analyses in Georgia suggest that a 1 percent annual improvement in efficiency would save households $700 million over the next decade with lower electricity and natural gas bills.”

According to Power of Efficiency, the second report in a three-part series about energy opportunities in the Southeast United States, energy efficiency savings can be captured in the near future with prompt policy action by states. For instance, updating and enforcing energy codes for residential and commercial buildings will save consumers money and drastically reduce energy demands.

“Immediate investment in energy efficiency can pay significant dividends for years to come,” according to Ben Taube, a co-author and executive director at SEEA. “Our core mission and efforts show that a regional focus on efficiency will help meet future electricity needs, enhance our economy, and protect the environment.”

Several examples from the region offer good starting points for broader efficiency efforts. One example noted in the report is a program in Virginia that offers a tax credit for developers who construct high-efficiency buildings for low-income residents. Data and billing information showed that these residents reduced their energy costs by more than 25 percent and saved an average of 15 percent on total monthly utility bills.

The authors found that tax credits, loan programs or other financial incentives that reward both utilities and consumers for energy savings are some of the best methods to relieve initial cost hurdles and provide long-term economic savings.

The report notes that a national energy savings target would help accelerate action, citing a recent analysis by the American Council for an Energy-Efficient Economy that shows projected impacts of a federal Energy Efficiency Resource Standard. Such a policy could create more than 50,000 new jobs across the region and save consumers nearly $40 billion over the next 10 years.

“Southeast states have a huge opportunity with energy efficiency,” said Eliot Metzger, an energy expert at WRI and also a co-author of the series of reports. “It’s the cleanest, cheapest energy option on the table and abundant throughout the region.”

More than 25 percent of the Southeast U.S. region’s electric power could come from locally-available renewable energy supplies by 2025, according to findings released today by the World Resources Institute (WRI), Southern Alliance for Clean Energy (SACE), and Southface.

State-by-state renewable energy potential, as a percentage of 2006 total electric power salesPrompt policy action to develop these resources can also create tens of thousands of new jobs, attract more regional energy investment, and help protect regional air and water resources.

“The Southeast has a strong portfolio of renewable energy resources that offers several economic and environmental advantages over traditional electric power generation,” said Eliot Metzger, a project manager at WRI and an author of Local Clean Power, the first in a three-part series of reports about energy opportunities in the Southeast United States.

The report estimates that investments in local renewable energy resources - like biomass, solar, wind, and hydropower - can meet more than a quarter of future electricity needs in the region by 2025. That amount would be sufficient to meet national renewable energy targets currently being discussed as part of upcoming federal energy legislation.

The expansion of current renewable power production from its current level of about five percent will be a critical step towards meeting future electricity needs with cleaner supplies and increasing energy independence.

Stephen Smith, executive director at SACE, another research partner, added, “Right now we are depending on other regions of the country, and foreign countries like Columbia and Venezuela, to supply us with coal. Doesn’t it make more sense to be producing cleaner power, closer to home? Our research suggests we certainly have sufficient resources. It’s just a matter of recognizing and capitalizing on these home-grown energy supplies.”

Renewable power potential is well distributed throughout the region, though differences in total electricity sales mean that states like Mississippi and Alabama can meet much more than 25 percent of electricity needs with renewable resources (see table). Some electric power utilities are starting to develop renewable resources in the region, but additional policy action is needed to drive investment and carefully manage the transition to new energy resources.

“A focus on developing our own renewable energy resources will create good-paying jobs that cannot be exported from our region,” said Dennis Creech, executive director at Southface, which was a partner on this research. “However, we need public policy to remove market barriers and encourage these investments in the Southeast.”

“Additional policy action and investment in a clean energy future translates to new growth opportunities - which for us means the creation of more jobs,” noted Tim Blackwell, president of OneWorld Sustainable, a company specializing in efficiency and renewable energy in the Southeast.

The report offers several recommendations for policies that can advance renewable energy development in the region, including: firm targets for renewable power production; flexible incentives to advance local investments in renewable resources; and comprehensive state-level resource assessments, economic analyses, and regulatory guidance to integrate renewable power into the electricity grid.