Energy and Climate Change

Jaime QuijandriaJaime QuijandriaThe World BankThe World Bank

May 2006May 2006

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Outline

Energy Matrix and Climate ChangeEnergy Matrix and Climate Change World Bank Energy Work ProgramsWorld Bank Energy Work Programs Energy and Environmental Energy and Environmental

ChallengesChallenges Clean Energy For Development Clean Energy For Development

FrameworkFramework Opportunities for Latin America Opportunities for Latin America

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Energy Matrix in LAC

Energy Supply----In Latin America, about three Energy Supply----In Latin America, about three quarters of energy consumption come from oil, gas quarters of energy consumption come from oil, gas and coal, the other fuel sources being nuclear, and coal, the other fuel sources being nuclear, biomass, hydro and other new renewables.biomass, hydro and other new renewables.

Hydropower accounts for over half of installed Hydropower accounts for over half of installed

generation capacity in Latin America, and other generation capacity in Latin America, and other renewables (geothermal, wind, solar, etc) represents renewables (geothermal, wind, solar, etc) represents only 1%. The share of total renewable sources has only 1%. The share of total renewable sources has however declined over the last decade. however declined over the last decade.

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Argentina

BrazilColombia

Chile

Mexico

VenezuelaOther

0%

10%

20%

30%

40%

50%

60%

70%

80%

LAC: Installed Hydro Share

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Energy Access and Investment Needs

Energy Access----Nearly 100 million people in Latin Energy Access----Nearly 100 million people in Latin America (about 20% of the total population) still rely on America (about 20% of the total population) still rely on traditional biomass for cooking and heating. Over 65 traditional biomass for cooking and heating. Over 65 million people do not have access to electricity, including million people do not have access to electricity, including both the rural and peri-urban areas. Also the peri-urban both the rural and peri-urban areas. Also the peri-urban residents with access often experience erratic supply.residents with access often experience erratic supply.

Investment Needs----The World Bank study shows that Investment Needs----The World Bank study shows that an investment of US$215 billion is needed in the LAC an investment of US$215 billion is needed in the LAC electricity sector between 2005 and 2015. To achieve a electricity sector between 2005 and 2015. To achieve a 70% coverage of rural households and 100% coverage of 70% coverage of rural households and 100% coverage of urban households over the next decade, the required urban households over the next decade, the required investment need is estimated to be US$ 56 billion. investment need is estimated to be US$ 56 billion.

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Importance of Energy Sector GHG Emissions in LAC

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World Bank Energy Work Program in LACWorld Bank Energy Work Program in LAC

Recife

Mexico

Lima

Mexico, D F

Buenos Aires

Peru

Ecuador

Quito

Colombia

Bogota

Costa Rica Panama

Venezuela

GuatemalaEl Salvador

Nicaragua

BelizeHonduras

Jamaica

Bolivia

Chile

Paraguay

Argentina

Uruguay

Brazil

GuyanaSuriname

French Guiana

Haiti

The BahamasCuba

San Jose

Port-au-Prince

Kingston

Tegucigalpa

Caracas

Asuncion

La Paz

BrasiliaCuiaba

Resident Missions and Other Field Presence

Dominican Republic“Green” Countries are where World Bank has active energy programs.

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Sub- Sectors that Bank is Involved

General Energy (transmission, General Energy (transmission, rehabilitation, power sector rehabilitation, power sector lending and technical assistance)lending and technical assistance)

Rural ElectrificationRural Electrification Renewable EnergyRenewable Energy Energy EfficiencyEnergy Efficiency Carbon TradingCarbon Trading

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Some Project Examples

the Nicaragua Off-grid Rural Electrification and Bolivia Decentralized the Nicaragua Off-grid Rural Electrification and Bolivia Decentralized Infrastructure for Rural Transformation Projects provide electricity to Infrastructure for Rural Transformation Projects provide electricity to remote villages and dispersed users with renewables. Both projects remote villages and dispersed users with renewables. Both projects use output-based aid schemes with payment tied to actual delivery of use output-based aid schemes with payment tied to actual delivery of specific service level and quality. The innovative nature of this specific service level and quality. The innovative nature of this scheme is that it moves beyond traditional lending schemes toward scheme is that it moves beyond traditional lending schemes toward results-based frameworks. results-based frameworks.

The Colombia Jepirachi Carbon Offset Project contributes to the The Colombia Jepirachi Carbon Offset Project contributes to the reduction of greenhouse gas emissions from the power sector in reduction of greenhouse gas emissions from the power sector in Colombia through the promotion of a 19.5 MW wind-based electricity Colombia through the promotion of a 19.5 MW wind-based electricity generation facility. The project is expected to generate a revenue of generation facility. The project is expected to generate a revenue of US$3.2 million by selling the carbon emission reduction credits. Part US$3.2 million by selling the carbon emission reduction credits. Part of the carbon revenue will be dedicated to co-finance a social of the carbon revenue will be dedicated to co-finance a social program that will contribute to improvements in the welfare of the program that will contribute to improvements in the welfare of the local indigenous community. local indigenous community.

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The energy scenario is, however, evolving

Increasing international oil prices Increasing international oil prices which appear to be sustained and which appear to be sustained and threaten energy securitythreaten energy security

Stronger will to take actions on Stronger will to take actions on climate change climate change

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Challenges to meet dual energy and environmental needs

Meeting the increasing energy demand Meeting the increasing energy demand Access to affordable and reliable Access to affordable and reliable

modern energy services modern energy services Controlling local and regional air Controlling local and regional air

pollutionpollution Combating climate changeCombating climate change

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G8 Call: Clean Energy and Development Investment Framework

The G8 Gleneagles summit requested the Bank to develop a clean energy investment framework in last July to accelerate investment so that developing countries can meet energy demands for growth and poverty alleviation in an environmentally sustainable way.

The Bank is following a two‑track approach: --- by end of this year, analyze our current existing

instruments, the potential role of the private sector, and the potential role of other partners such as the regional banks.

--- for the next two years, do in‑depth country studies to develop technology options and action plans

The Framework were generally endorsed by the Bank shareholders at the Spring Meetings 2006.

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Examples of New Financing Instruments Under Consideration

Clean Energy Financing VehicleClean Energy Financing Vehicle Power Rehabilitation Financing FacilityPower Rehabilitation Financing Facility Project Development FundProject Development Fund Venture Capital funds for technology Venture Capital funds for technology

optionsoptions

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Opportunities for LAC

The five large developing countries were identified LAC is an essential The five large developing countries were identified LAC is an essential part of this new G8 initiative. Consultations with Brazil and Mexico part of this new G8 initiative. Consultations with Brazil and Mexico identified substantial diagnostic and analytic work programs. identified substantial diagnostic and analytic work programs.

The programs for Brazil including scaling-up renewable energy The programs for Brazil including scaling-up renewable energy development through expanded hydro and bioenergy; improvement of development through expanded hydro and bioenergy; improvement of urban and industrial energy efficiency; natural gas development; and urban and industrial energy efficiency; natural gas development; and implementation of the forested area strategy. implementation of the forested area strategy.

The programs for Mexico include energy diversification; energy The programs for Mexico include energy diversification; energy efficiency improvement in buildings and industry; sustainable transport efficiency improvement in buildings and industry; sustainable transport development; and scaling up low-carbon options including expanding development; and scaling up low-carbon options including expanding renewable energy and industrial and refinery efficiency (such as renewable energy and industrial and refinery efficiency (such as cogeneration). cogeneration).

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Promising Low Carbon Technologies for LAC