Global Development: Views from the Center
July 02, 2008
India Sees (Some Of) the Light on Solar Thermal Potential
Posted by Kevin Ummel at 01:20 PM
On Monday, one week in advance of the climate-themed G8 Summit in Japan, the Indian government released its first ever national climate change action plan. In line with previous statements by India and other developing countries, no specific emission targets or timetables were presented. That fact -- which is no surprise to anyone following the issue -- nonetheless seems to be garnering most of the press attention. Far more important and interesting were Prime Minister Manmohan Singh's comments in an associated speech. Said Singh:
We will pool all our scientific, technical and managerial talents, with financial sources, to develop solar energy as a source of abundant energy to power our economy and to transform the lives of our people.
Hear! Hear! This is a forceful and welcome statement, especially since the "scientific, technical, and managerial talents" of India are no small contribution to this fight. The engineering skills found in Indian universities and large corporations such as the Tata Group are some of the best in the world. Deployed in earnest they would poise India for an energy revolution exceeding even the agricultural revolution of 40 years ago in its scale and impact. It appears that India's solar energy initiative would aim to provide at least 10% of the country's power over the next few years, a truly positive development.
Unfortunately, the document outlining India's energy strategy underestimates India's potential to begin implementing solar power right now. The solar thermal section, for example, oddly fails to mention recent advances in flat-panel, Fresnel-based systems, which are likely the cheapest and fastest to install. With U.S.-based Ausra opening a factory in Nevada to produce more than 700 MW of such systems annually, how about a licensed sister factory in Mumbai? After all, Tata Motors is already doing the same on the transportation side, introducing a European-designed, Indian-built compressed air car – reportedly as early as next month. Certainly there is political appetite in the U.S. for such cooperation, as evidenced by the pledge of a recent bipartisan Congressional delegation to India, led by House Speaker Nancy Pelosi, to expand "partnerships for facilitating trade and development of clean energy technologies." Anyone looking to support American 'green-collar jobs' would see a tremendous opportunity in India's ambitious clean tech goals.
So, let's think big: I've tabulated some conservative figures for low-cost solar thermal power potential in India. In fact, the numbers are very conservative: I've assumed that solar arrays are constructed only on currently uninhabited, uncultivated land with zero agricultural (crop or grazing) potential, sparse vegetation, and good solar radiation supply. I've also removed from consideration any reserves or areas of high biodiversity and land exhibiting anything other than lowest-cost construction potential (very flat, no sand dunes, etc.). And finally, I've retained only large, contiguous areas -- land tracts sufficient for 500 MW solar thermal installations (the scale reduces costs even further).
Even in India, where almost all of the land is used to house and feed a burgeoning population, that tight set of restrictions still leaves more than 16,000 square kilometers of potential solar thermal arrays, mostly in the arid northwest (see map). Recent advances in low-loss, high-voltage transmission lines mean it would be possible to provide all of India's electricity from this area. With heat storage, that land could conservatively generate 4 billion megawatt-hours of zero-emission, baseload power per year. This year, total fossil-fueled electricity production in India will likely be a bit above 600 million megawatt-hours. The bottom line is impressive: India's current potential for low-cost, solar thermal power is at least six times greater than current power production from fossil fuels. That potential comes without carbon emissions, local pollutants, or fuel price volatility. And there's another benefit (also not mentioned in the government's report) of particular relevance to India's future: Dry-cooled solar thermal uses 98% less water than coal plants. That little bit of water is used mostly to keep the mirrors clean.
On top of this physical potential are the incredible opportunities for learning and cost reductions with rapid expansion. My colleague David Wheeler and I simulate this process on the global scale in a forthcoming working paper and find the cost of displacing coal power to be far less than most expect (see World Bank Power Projects: Crossroads on Renewable Energy for a preview). With strategic financing from developed world donors, India could quickly -- far more quickly than the government seems to believe -- generate vast amounts of increasingly cheap solar power.
That the Indian government is signaling its desire to be an important player in this transition is a promising sign. Will developed world donors and the World Bank use the proposed Clean Technology Fund to fully exploit this potential? Or will habit, half-measures, and conventional wisdom fail the Indian people and the planet?
June 30, 2008
Lord Stern Calls for New Conditionality -- On Climate and from Developing Countries this Time!
Posted by Nancy Birdsall at 05:30 PM
Lord Nicholas Stern of Stern review fame delivered CGD's Richard H. Sabot Lecture last week. It was superb, as Joel Meister reports. Nick managed the trick of combining technical clarity on the economic issues -- economists can turn to his Ely lecture at the American Economics Association meeting in January of this year for the details -- with passion and a compelling argument for non-economists. New this time was his insistence on the development imperative of addressing climate change, now and urgently.
First he said that in effect the development and climate change issues are joined at the hip; managing one without the other is impossible. Time for the development community to get on board that climate change matters for development prospects, and for the environmental community to get on board that climate change is a development issue. For my taste, Nick could actually have said much more about the massive costs of climate change in the developing world (see, for example, recent CGD work on the disturbing impacts on agriculture and sea level rise.) He did mention the massive migrations of people and the potential for conflict under the so-called "business as usual" scenario.
Second he made the point that only with development and growth will societies in the developing world have the political and economic resilience to adjust to and manage the changes climate change will impose--and to undertake the emissions reductions needed to avert even more catastrophic changes. Developing countries' willingness and ability to cut emissions is crucial to avoiding planetary disaster, as CGD senior fellow David Wheeler has shown in his working paper Another Inconvenient Truth: A Carbon-Intensive South Faces Environmental Disaster, No Matter What the North Does.
Most memorably, Nick addressed the issue of the so-called "grand bargain" between rich and poor countries on climate change. He said that the task of reducing per capita emissions has to fall sooner and more on the rich world. Indeed. Annual CO2 equivalent emissions are about 20 tons per capita in the U.S., 10 tons per capita in Europe, 5 tons per capita in China and in India and other low-income countries, less than 2. What makes sense is for the developing world to present the U.S. and other rich countries with their own conditionality China and India will commit to emissions caps if and when the rich countries have committed to reduce their own emissions, shared their technologies to do so, and helped to cover the costs of adaptation.
Washington development practitioners will understand the allusion to conditionality.
Kemal Dervis, head of the United Nations Development Program and a former CGD visiting fellow who wrote our book A Better Globalization: Legitimacy, Governance, and Reform on collective action problems and UN reform made a similar point in his remarks at a small dinner afterward. China, India and other developing countries cannot be asked to do more at the 2009 climate conference in Copenhagen than to "commit to commit later." For Kemal's own compelling argument as to why the next step on emissions caps must be a commitment from the U.S. and the other rich countries, see his March 6th lecture at the United Nations University World Institute for Development Economics Research (UNU-WIDER).
Lord Nicholas Stern Calls for Action on Climate and Development in Third Annual Sabot Lecture
Posted by Joel Meister at 05:19 PM
Last week the Center for Global Development hosted the third annual Richard H. Sabot Lecture to honor the memory of Dick Sabot, a development practitioner and scholar, and a founding member of CGD's board of directors (transcript available on Tuesday afternoon). Lord Nicholas Stern, IG Patel Professor of Economics at the London School of Economics and author of the Stern Review, spoke on "The Economics of a Global Deal on Climate Change."
Welcoming more than 300 guests to the standing room-only event, Ed Scott, the founding chairman of CGD's board of directors, said that the international prominence of the speaker and the large number of influential individuals in the audience were testimony to Dick's legacy and to the impact of the Center's work. The Sabot Lecture Series features scholars and practitioners who have made important contributions to development. Lawrence Summers and Ngozi Okonjo-Iweala delivered the previous years' talks.
Oliver Sabot linked his father's legacy to the evening's topic:
Just before my father died, the topic that he was working most on, and very passionately in a paper he called "The Dollar and Development," was how our decisions here domestically, or decisions of those domestic decisions in Europe, impact the developing world…And I think that is quite pertinent for our talk we are going to hear today, because it is quite true for climate change as well.
…
That was what my father was so passionate about. Right at the end of his life. That we need to change the way that we think about development. That it is more than just foreign aid…I can't imagine a better tribute to the spirit of my father. And even more so than this annual lecture series, the ongoing work of CGD is an amazing tribute.
Lord Stern's presentation focused on five main points:
- Our atmosphere’s current carbon stock;
- The world’s carbon flows;
- Carbon-intensive sectors of the economy;
- Connecting climate change and development; and
- The prospects for a global deal on reducing greenhouse gas emissions
Describing climate change as "as difficult a subject in economics as you can imagine," Lord Stern argued it is inherently tied to development:
Development and climate change are the two big issues of the 21st Century. And unless we tackle them together we will fail on both of them. Climate change, if it goes on unmanaged will undermine development. Any response to climate change which appears to stall development will fail. It will fail politically and it will deserve to fail. Unless we tackle them both together we are not going to be successful on either…Now, how does all this work? Well, climate change starts with people and it ends in people.
Given the current stock of carbon dioxide in the atmosphere, he said, allowing rising global greenhouse gas emissions to continue unchecked would have disastrous consequences for the planet. Avoiding such scenarios, he argued, will require rapid reductions in emissions, starting now. He asked whether we are willing to invest in our future today to prevent a far-more costly tomorrow.
Lord Stern explained that continued high levels of emissions reflect a 'business-as-usual' mindset, a failure to accurately reflect the global social cost of carbon emissions in our economy and in our daily life. Business-as-usual, he said, "is the biggest market failure the world has ever seen." But rather than resort to central planning, he suggested using market principles to solve the problem.
Calculating a $30 charge per ton of CO2 as a responsible estimate for the social cost of carbon emissions, Stern reviewed many of the potential frameworks for gradually incorporating this cost into the global economy through mechanisms such as a global carbon tax and cap-and-trade. Stern suggested that a successful emissions reduction strategy would cost 1-2% of global GDP per year.
With the power sector accounting for 24% of global carbon emissions, he stressed that the world will need to quickly move to zero-emission electricity production in order to meet critical emissions reduction targets. Coal, the most carbon-intensive energy source, is currently cheaper than zero-carbon alternatives but would no longer be attractive with an added $30 carbon charge, he said, adding that changes in incentives will be crucial to the rapid deployment of low-carbon clean technologies. (For more on the potential for switching from fossil fuels to renewables, see CGD senior fellow David Wheeler's recent testimony before Congress.)
Lord Stern emphasized that poorer countries are particularly vulnerable to climate change, lacking much of the developed world's human capital and infrastructure. (William Cline, a senior fellow as CGD and the Peterson Institute, offers some sobering predictions in his 2007 book, Global Warming and Agriculture: Impact Estimates by Country.) With the entire development agenda threatened by rising temperatures, Lord Stern recommended increased support for efforts to help developing countries adapt to the negative effects.
Having outlined what's at stake, he discussed the difficulties of reaching a global deal on carbon emissions reductions. Climate change demands a global response, but countries have different levels of historic responsibility (the United States alone is responsible for 25% of the world's emissions). But Stern said that rising emissions in developing countries such as China and India requires commitments from everyone. (CGD senior fellow David Wheeler made a similar point in a recent working paper Another Inconvenient Truth: A Carbon-Intensive South Faces Environmental Disaster, No Matter What the North Does. )
Stern concluded with cautious optimism, arguing that the world has an extraordinary opportunity to address this crisis but that it will require leadership on the international and national level:
We have to face up to the great risks and that will involve our children and grandchildren…Cynicism to the point of saying it is all impossible requires the honesty to describe the risks that follow from that, and they are very large indeed.
…
When you get into public life and decision-making, the decision you have to make is: given what you now know, what would you now do? That is the challenge of public office.
June 23, 2008
Congress Demands World Bank Reform as Condition for Clean Tech Fund Authorization
Posted by Joel Meister at 04:08 PM
The House Financial Services Committee will consider new legislation this week that would contribute $400 million in FY2009 to a multilateral Clean Technology Fund (CTF), administered by the World Bank, to promote low-carbon energy production in developing countries. Scheduled for mark-up on Tuesday, H.R. 6315 was introduced in the House of Representatives by Congresswoman Gwen Moore (D-WI) last Thursday with bipartisan co-sponsorship that includes Financial Services chairman Barney Frank (D-MA).
The bill is the product of a hearing held earlier this month that considered President Bush's pledge to contribute $2 billion to the fund over three years. CGD senior fellow David Wheeler was invited to testify at the June 5th hearing and lauded the Bush Administration for its efforts but cautioned that Congress should not authorize the World Bank to oversee such funds without critical conditions. Though imperfect, the text of H.R. 6315 suggests the committee members took David's advice to heart and incorporated many of his specific recommendations in the final legislation, which could transform the World Bank's energy investments in the developing world.
David's testimony emphasized the need for two policy changes to the current World Bank CTF proposal before any congressional authorization of funds:
- Use CTF funds to invest in projects that will make zero-emissions renewable-energy like solar thermal power cost competitive with energy from fossil fuels like coal; and
- Require the World Bank to adopt carbon accounting as rapidly as possible in projects' cost/benefit analyses
On the first point, the language of H.R. 6315 stipulates (emphasis added):
SUPPORT OF ZERO CARBON AND CLEANER TECHONOLOGIES
The Secretary of the Treasury shall seek to ensure that-
(1) the priorities of the Fund include supporting 'zero carbon' technologies, and improvements in energy efficiency in existing infrastructure that demonstrate an ability to be transformational in support of a country’s path toward low carbon development;
(2) the disbursement of amounts in the Fund demonstrate a preference for 'zero carbon technologies'; and
(3) funding from the Fund is provided to close the gap between higher cost, cleaner technologies and lower cost technologies.
The language's "preference" for zero-carbon technologies is an encouraging sign, in addition to the requirement that efficiency improvement projects "demonstrate an ability to be transformational in support of a country's path toward low carbon development." While the legislation does not go as far as David's testimony, which suggested excluding all proposals for coal-fired power, the language certainly reflects the need for the World Bank to change its oft-cited business-as-usual approach of investing hundreds of millions in fossil fuel projects (see World Bank Clean Technology Fund Would Be Cash Cow for Coal).
David McCormick, U.S. Treasury undersecretary for international affairs, said coal plants would only be a "minor part" of CTF-funded programs in his testimony before the House Financial Services Committee, but recent statements by Bush Administration officials suggest the Bank may be planning to use CTF funds to rapidly expand investments in coal-fired power in India and elsewhere.
David argued that carbon accounting would be pivotal to changing the way business is done at the bank altogether, by requiring the institution to incorporate in project analyses a dollar cost, or charge, for every ton of emitted CO2. As David explained in his testimony:
Several major U.S. investment banks have already extended their conventional cost accounting to include carbon charges in their analyses of energy project proposals. Unfortunately, no such accounting policy currently exists at the World Bank.
…
The per-ton charge required to facilitate a switch to renewable alternatives is well within the range of the estimated social costs of climate change, which will be borne primarily by citizens of the developing world. That the World Bank has no policy for, or experience with, incorporating such considerations into project appraisal is worrying, especially given its role as an investor of donor dollars for projects intended to improve the welfare of the world's poor.
Section 2 of H.R. 6315 attempts to fill this gap in Bank accounting by amending the International Financial Institutions Act to explicitly require the use of greenhouse gas accounting by multilateral development banks "in analyzing the benefits and costs of all projects for which funding is sought from the bank." Section 2 further defines what that analysis would entail:
(b) SENSE OF THE CONGRESS. -- It is the sense of the Congress that adopting and implementing GHG accounting includes --
(1) calculating net carbon flows;
(2) establishing uniform calculation techniques, with provision for modification as professional standards evolve;
(3) making public the calculation techniques and the calculations;
(4) adopting and making public a uniform carbon charge rate which appropriately reflects the global social cost of a unit of carbon emissions; and
(5) performing carbon GHG accounting, including a full carbon charge for each project, defined as the net carbon flow multiplied by the carbon charge rate.
Even if the CTF authorization language fails to exclude outright coal-fired power projects from funding, the carbon accounting requirement would be a significant step forward in making zero-carbon alternatives more competitive with fossil fuels. Once investment project proposals more accurately reflect all of the associated social costs of production and operation, the cost gap between fossil fuels and renewables will shrink, and CTF funds will be much more likely to be invested in zero-carbon alternatives that could make a truly transformational impact. For example, David recently outlined a possible CTF program with carbon accounting that could make solar thermal power competitive with coal in 5-10 years at a cost of $4-8 billion (see World Bank Power Projects: Crossroads on Renewable Energy), well within the range of the current CTF design.
Language may still be added to the bill during the mark-up proceedings on Tuesday, that could potentially strengthen or weaken the bill. But as interested parties monitor the session on Tuesday, the drafters of H.R. 6315 should be commended for an ambitious legislative undertaking whose vision may finally prod the World Bank closer to a catalytic role in addressing our climate crisis.
June 20, 2008
Earth to America: The Price of Gasoline Isn't Too High, It's Too Low
Posted by Kevin Ummel at 01:50 PM
On Wednesday, President Bush joined presumptive Republican nominee John McCain in supporting the reversal of a long-standing ban on offshore oil drilling. Bush believes such action, along with exploitation of oil shale deposits and drilling in the Arctic National Wildlife Refuge, will reduce the price of gasoline for Americans. This follows the push made last month by McCain and Hillary Clinton for a summer "gas tax holiday." While Democrats dismissed the latest proposal as yet another give away to Big Oil and Republicans gear up to push the issue in November, I can still find no politician willing to state the truth: Gasoline prices should be higher, not lower.
No doubt many Americans feel besieged by rising gas prices, which have risen about 35% in the last year and now stand just above $4 per gallon. But alongside that angst, higher gas prices are sparking urgently needed changes in behavior. Public transportation usage is up, driving miles are down, and the Hummer is rumored to be dead. A similar transformation was underway in response to the oil price shocks of the 1970's when, in what will go down as one of history's great "what ifs," the price of oil plummeted, alternative energy research was scratched, and the incredible environmental crisis we face today became inevitable.
Having failed to learn our lesson the first time, the public outcry over gas prices grows stronger. Indeed, it was enough to ensure that Congress will not touch climate change legislation this year for fear of pushing energy prices higher. Since I am fortunate enough to neither need nor own a car, I feel a bit disconnected from all the hubbub. So it is with genuine curiosity that I ask the question: How much does gas really cost?
The answer is different than the one on the pumping station billboard. Let's try to discern the full cost of our addiction to gasoline: the healthcare costs associated with air and water pollution caused by the nasty compounds released from gasoline, the damage to crops, buildings, and forests, and the tax breaks and subsidies to oil companies. Terry Tamminen (energy advisor to California Republican Governor Arnold Schwarzenegger) tallies these social and environmental costs in his book Lives Per Gallon and comes to the following conclusion:
So there it is, the final Devil's invoice, the amount we pay to keep the needle from hitting ‘empty’: well over $100 billion each year and perhaps closer to $1 trillion. That comes to as much as $2,700 for every man, woman, and child in the United States every single year. That works out to $1 per gallon and possibly as much as $6 per gallon added to the actual price of every gallon…For that kind of money, we could provide health insurance for the forty-five million Americans who have none and build fifteen hundred new schools in every state in the union.1
Those figures don't include the sizable military costs of keeping the oil flowing in less than desirable places, nor does it include the impacts of future climate change in the U.S. due to the 20 pounds of planet-warming carbon dioxide released from every gallon of gasoline. But even this conservative estimate suggests that the true price of a gallon of gasoline right now is not $4 but at least $5 and as much as $10. So from an economic perspective, drivers are getting a very good deal. They are paying far less than the true cost of their actions, with the difference being picked up by others -- like families with children made breathless by asthma and those who walk to work while inhaling carcinogens from tailpipes.
What about our petrol-using comrades in other countries? The American aversion to taxation and political demand for vehicular freedom leads to far lower gas prices than in other countries. A recent survey of 155 countries found the U.S. to have the 44th lowest prices. Compared to our brethren in Western Europe, the differences are shocking. Below is one of my favorite graphs, best viewed with the tune "One of these things…" playing in the background.
Europeans were paying the same gas prices 12 years ago that Americans are paying today. The difference is driven primarily by fuel taxes. In Western Europe, about 50% of the price of a gallon of gasoline consists of taxes. In the U.S., it's about 15%. Europeans have long been paying gas prices relatively commensurate with the social cost of consumption. The only downside of such policy, as far as I can tell, is a transportation infrastructure vastly superior to America's.
While the recent price rise has been painful around the world, we must accept that higher oil and gas prices are both economically inevitable and socially imperative. Contrary to the election year pandering of some politicians, government policy should ensure that the price of gasoline can only go up (for example, a sliding tax that establishes an effective price floor). This would prevent a painful replay of the opportunities lost 30 years ago.
Politicians should also keep in mind that only the slope of the graph above -- not the absolute levels -- is a source of concern. The pain caused by the distributional effects of quickly rising energy prices (the poor are hurt more) is an argument not for lower prices but for the taxation of polluting fuels and progressive redistribution of revenues, perhaps as part of comprehensive climate change legislation that auctions off pollution permits. Trying to increase supply through such environmentally nefarious ways as suggested by Bush and McCain only further increases the social cost of our addiction and makes it less likely that the positive behavioral change underway will be maintained.
The bottom line is that by not paying the full price of gasoline (or, indeed, any fossil fuel) we have reaped tremendous but ill-gotten gains for decades. These gains come partly at the expense of people in the developing world who endure depravation most of us can barely imagine, since the costs of climate change, including rapid declines in agricultural productivity (see, for example, Bill Cline's Global Warming and Agriculture: Impact Estimates by Country will be felt first and worst by the world's poorest people. Mitigating these impacts will require that we do what is necessary -- not what is convenient. Gas prices are a test case of America's political mettle. I hope voters reward politicians with the gall to tell that truth.
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1Tamminen’s figures are drawn, in part, from a larger study undertaken by the International Center for Technology Assessment in 2005 (http://209.200.74.155/doc/Real%20Price%20of%20Gasoline.pdf). Including a much wider range of costs, including some that are related to driving in general rather than gasoline usage specifically, they arrive at something like $5 to $15 per gallon on top of today’s retail gasoline prices.
June 09, 2008
House Committee Tells U.S. Treasury to Heed Calls for Redesign of Clean Tech Fund
Posted by Joel Meister at 03:39 PM
Controversy over the World Bank's proposed design for a multibillion dollar Clean Technology Fund (CTF) reached a House subcommittee last week. When the hearing ended, Rep. Luis Gutierrez (D-IL), the chairman of the subcommittee, voiced support for CGD senior fellow David Wheeler's scenario for a successful fund. Wheeler had urged that the CTF be redesigned to rapidly drive down the price of zero-emissions renewable power so that it becomes cheaper than electricity from coal and other fossil fuels -- thereby helping to avert a climate disaster.
The hearing began with David McCormick, U.S. Treasury under secretary for international affairs, explaining the purpose of the fund to members of the House Financial Services Subcommittee on Domestic and International Policy, Trade, and Technology. The CTF, he said, would "reduce the growth of greenhouse gas emissions in developing countries by helping to finance additional costs of deploying clean energy technologies."
Wheeler, one of four expert witnesses, focused his testimony on how the fund would be used. He first invited the committee members to imagine two scenarios for the CTF:
Imagine, if you will, that it is now 2015, seven years after the creation of a multilateral fund for clean technology.
- In Scenario 1, the World Bank's Clean Technology Fund (CTF) has provided developing countries with billions of dollars to make coal-fired power plants and other energy projects marginally more efficient but has done little to stem the alarming rise in greenhouse gas (GHG) emissions…We are on course for a planetary disaster.
- In Scenario 2, the U.S. Congress, led by the decisions of this committee, has insisted that the World Bank use the Clean Technology Fund to catalyze deployment of climate-friendly renewable energy on a very large scale…Renewable energy options such as solar thermal power are now cheaper than coal and other fossil fuels and provide a growing share of base load power around the world. Seven years later, we are on course for a major success in the struggle against climate change.
Both scenarios are utterly plausible. The decisions that this committee makes will determine which path we follow. Do we collectively have the strategic vision to seize this enormous opportunity? If we fail, future generations -- including our own grandchildren -- will surely ask: "Why didn't they do something more?"
Drawing on his previous research, Wheeler lauded the Bush Administration for offering $2 billion over three years to help developing countries meet their energy needs without accelerating climate change. But he cautioned that the current CTF design fails to meet this promise. Moreover, he said, the World Bank's continued funding of high-emissions fossil fuel projects (see the Tata Mundra project in India and a similar project in Mmamabula, Botswana) raises doubts about whether it is a suitable organization to administer the fund.
Wheeler explained that the rapid increase in global greenhouse gas emissions demands that the international community use clean technology funds not merely to improve efficiency but to catalyze a transformation in energy costs. "The Clean Technology Fund (CTF) must be focused on making renewable energy cheaper than energy from fossil fuels, particularly coal," he said.
Wheeler's written testimony provides a rough sketch for what such a strategy might entail:
Solar thermal power provides a useful illustration, because it is one of the most promising renewable options for base load power…A recent study indicates that public financing through the CTF can close the cost gap between solar thermal and coal-fired power in a 5 to 10 year program that expands capacity at 500-1000 MW/year (Wheeler and Ummel, 2008). We estimate that total Clean Technology Fund subsidies for this program would be $4 - $8 billion – easily within range for a serious multilateral effort.
(For more on solar thermal, see Wheeler’s slide show: World Bank Power Projects: Crossroads on Renewable Energy)
Wheeler said that a Clean Technology Fund is vital to addressing global climate change, but only if it is designed to achieve rapid reductions in the cost of zero-carbon electricity. He concluded with three recommendations.
- Congress should not agree to provide American taxpayer support for the CTF as it is currently proposed. Instead, Congress should instruct the U.S. Treasury to inform World Bank management that U.S. support will only be forthcoming if the proposal is revised to ensure strategic use of the CTF to make zero-emissions renewable energy cost-competitive with energy from fossil fuels.
- To do this, the CTF must focus on renewables that have the potential to be cost-competitive within a few years, and exclude projects that merely improve fossil-fuel combustion efficiency. In particular, the CTF should exclude all proposals for coal-fired power.
- The revised proposal must include a commitment by the World Bank to adopt carbon accounting as rapidly as possible, certainly no later than within a year of CTF authorization and before any funds are actually disbursed. Without carbon accounting, the World Bank cannot select the most cost-effective projects, track progress on emissions reduction, or fulfill the Clean Technology Fund's mandate of helping developing countries bridge the gap between dirty and clean technology.
The other witnesses -- Brent Blackwelder, president, Friends of the Earth (FOE); Jacob Werksman, program director at the World Resources Institute (WRI); and Andrew Deutz, director of International Institutions at The Nature Conservancy (TNC) -- raised similar concerns over the World Bank's financing of fossil fuels. Blackwelder and Werksman also both expressed support for prioritizing zero-carbon energy production in future projects. On the eve of the hearing, FOE joined 120 environmental groups from around the world in a statement opposing the World Bank's proposal (read the civil society statement).
Notwithstanding some minor differences among the witnesses in degree and focus, Rep. Gutierrez said he was impressed by the level of agreement on the core issue of how the fund should be used:
This is the first panel I've had where…there are differences, but I can see all of you headed in the same direction. [This is] unusual in my sixteen years here in Congress.
Financial services committee chairman Barney Frank (D-CT) also attended the hearing and expressed reserved support for the CTF, mentioning the possibility of a one-year authorization of $400 million. But he also noted that there would be conditions that will need to be worked out, and emphasized the administration and World Bank must "allay the fears" that are "well-grounded in history…not paranoia." Noting concerns over the bank's previous financing of coal-fired projects, Frank cautioned that the committee would be reluctant to authorize the bank's administering of the CTF if it was simultaneously pursuing policies that run counter to the CTF objectives.
In the end, both Congressmen and witnesses expressed optimism over the Bush Administration's interest in combating global warming by promoting clean technology in the developing world. Frank noted that the CTF showed "signs of progress," and Chairman Gutierrez concluded his comments by responding to Wheeler's scenarios for 2015 and expressing hope for the future:
…Mr. Wheeler, we're going to work on the second outcome that you suggested for this money. We're going to take into consideration all of the witnesses, because…as I listen to all four of you, it's the second outcome that you all agree we should work on.
June 06, 2008
CGD's David Wheeler Outlines Strategic Path for Clean Tech Fund in Congressional Testimony
Posted by Joel Meister at 12:36 PM
The U.S. House of Representatives Financial Services Subcommittee on Domestic and International Policy, Trade, and Technology held a hearing yesterday afternoon to examine the Bush administration's proposal to establish a multilateral Clean Technology Fund. CGD senior fellow David Wheeler was among the panel of witnesses invited to testify on the U.S. commitment of $2 billion over three years and whether the World Bank is a suitable home for these scarce financial resources.
We will soon be posting a more detailed summary of the hearing and issues discussed, but click here to view David's written testimony in the meantime. Here is a quick overview of his main recommendations:
I believe that Congress can help make the Clean Technology Fund a successful investment of taxpayer dollars by setting the following conditions for authorization.
- Congress should not agree to provide American taxpayer support for the CTF as it is currently proposed. Instead, Congress should instruct the U.S. Treasury to inform World Bank management that U.S. support will only be forthcoming if the proposal is revised to ensure strategic use of the CTF to make zero-emissions renewable energy cost-competitive with energy from fossil fuels.
- To do this, the CTF must focus on renewables that have the potential to be cost-competitive within a few years, and exclude projects that merely improve fossil-fuel combustion efficiency. In particular, the CTF should exclude all proposals for coal-fired power.
- The revised proposal must include a commitment by the World Bank to adopt carbon accounting as rapidly as possible, certainly no later than within a year of CTF authorization and before any funds are actually disbursed. Without carbon accounting, the World Bank cannot select the most cost-effective projects, track progress on emissions reduction, or fulfill the Clean Technology Fund's mandate of helping developing countries bridge the gap between dirty and clean technology.
June 05, 2008
The Food and Biofuels Debate in Rome
Posted by Kimberly Ann Elliott at 01:18 PM
It was supposed to be an emergency conference on food shortages, climate change and energy…. but when the microphone was turned on for the powerful politicians who had flown in from all over the world, they spoke mostly about economic issues in their own countries and political priorities.
The conference was preparing to issue its concluding statement on Thursday, and delegates said the wording of the section on biofuels was a point of contention. The United States said only 2 to 3 percent of the global increase in food prices was attributable to competition from biofuels. But other countries put the figure far higher.
New York Times, June 5, 2008
The assertion by American officials that biofuels have contributed only 2-3 percent to the rise in food prices is consistent with estimates of the impact on food prices in the United States, where most foods are processed and the value of the crop in the final retail product is a tiny fraction. In poor countries, where minimally-processed staple grains make up a much larger share of calories consumed, the impact of recent food prices is much larger.
Nor is it true, as asserted by congressional defenders of ethanol subsidies, that corn-based ethanol cannot have a large effect on food prices because it uses feed corn, which people do not eat. That is true, but people do eat poultry, eggs, and dairy products from animals fed on corn; increased production of corn also means reduced production of other crops, thus raising their prices, and high corn prices lead people to substitute other food products, again putting upward pressure on other crop prices. Mark Rosegrant of the International Food Policy Research Institute estimates that increased biofuel production contributed 30 percent of the rise in grain prices through 2007. [Resegrant's congressional testimony] (The acceleration of price increases in 2008 is likely due primarily to other factors.)
Moreover, as shown in the chart, the level of biofuels mandated by Congress in last year's energy security act that can be derived from corn would rise sharply and would require roughly 40 percent of total US corn production. It is simply folly to believe that would not have an impact on food prices. Far from defending US subsidies for corn-based ethanol, President Bush should order the Environmental Protection Agency to suspend the biofuels mandate, as requested by some states and by Senator John McCain (R-AZ) and 23 other Senate Republicans in a letter to the EPA last month.
May 20, 2008
Climate Change in Nashville: A Gathering Storm for the World Bank?
Posted by David Wheeler at 11:09 AM
I spent last Thursday with Al Gore and dozens of colleagues at the Climate Change Solutions Summit, near Gore's home in Nashville, Tennessee. Gore led several jam-packed sessions, whose common theme was the search for ways out of the impasse on climate change. Some sessions took the long view, searching for clues in the history of the industrial revolution and successful social reform movements. Others, like my own session, focused on concrete steps that can be taken now. I talked about two keys to success for the UN's Copenhagen climate change conference in December, 2009: transparency and accountability, through global public disclosure of CO2 emissions sources; and a strategically-targeted Clean Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly as possible. The CTF was first proposed by the US, UK and Japan in January, 2008. The World Bank has been assigned temporary management responsibility, but this may not continue after Copenhagen.
In the transparency discussion, I cited CGD's CARMA (Carbon Monitoring for Action) website as a first step toward global CO2 emissions disclosure. My CTF discussion highlighted the disconnect between the World Bank's "transformational" rhetoric on climate change and its continued investment in huge coal-fired power plants, as well as its short-sighted proposal to use the Clean Technology Fund as an additional source of money for business as usual. I got a lot of positive feedback, and many participants (including some who may be powerful in a future Democratic administration) expressed dismay at the Bank's continued support for coal-fired power. One powerful Democrat got angry enough to call for shutting down the Bank.
During my day in Nashville, I was struck by the contrast with a meeting that I attended at the World Bank several weeks ago. At the invitation of the Bank's senior energy-sector managers, I gave a keynote talk (see one version of the slides here or below) on the Bank's energy policy and its implications for climate change. My talks at the Bank and the Nashville conference both focused on using the Clean Technology Fund to promote cost-competitive renewable power. While the content was similar, the reactions were strikingly different.
The Nashville audience regarded the climate crisis as imminent and potentially fatal, so they viewed a transformational CTF as essential. For most of the Bank's senior energy managers, on the other hand, this idea was clearly more of an annoyance than an inspiration. With some notable exceptions, they expressed "polite interest" while invoking several dismissive mantras: Renewable power is too expensive; trying to "pick winners" (e.g. solar thermal power) is not advisable; and the Bank's poverty-fighting mandate demands the cheapest possible power for poor countries. Rough translation: Coal is and should remain king for a long time in China, India, South Africa and other rapidly-industrializing countries that have major coal resources.
Having visited two different worlds in Nashville and the World Bank, I was struck by the potentially-dire implications for the Bank if the Democrats recapture the White House this year. Some of the Nashville participants were influential Democrats, to put it mildly. They clearly believe that the Bank is defaulting on its proper role as steward of the Clean Technology Fund, and some will probably act on this belief as top officials in the next US administration.
Since climate change is my topic, a weather metaphor may help clarify the stakes here. Washington is in the US tornado belt, and violent weather often bears down on DC from the southwest -- the direction of Nashville. Imagine the Bank's senior energy managers in a sound-insulated, air-conditioned room that is disconnected from the environment. Lightening flashes and thunder grumbles in the distance as a violent storm begins forming to the southwest, but they remain unaware. When the storm suddenly breaks overhead, it's too late to do more than dive under a table and hope for survival.
In Nashville, I saw such a storm brewing. If it strikes in November, the World Bank may find itself tossed into the dust bin of history. For my many dedicated, hard-working friends at the Bank, I think it may be time to heed Bob Dylan:
You don't need a weather man
To know which way the wind blows.
May 12, 2008
Lost in Translation: How to Transform Good Intentions into Poor Policy and Ensure a Climate Crisis (A Primer by the World Bank)
Posted by Kevin Ummel at 03:44 PM
Three months ago, the finance ministers of the U.S., UK, and Japan introduced a Clean Technology Fund to be administered by the World Bank in an effort to "help developing countries bridge the gap between dirty and clean technology."1 Smart and strategic use of limited clean technology financing is absolutely critical if we are to avoid catastrophic climate change. In April the bank's first draft proposal for operation of the Clean Technology Fund was greeted with dismay by many, including a CGD colleague who called it "A Cash Cow for Coal." Sadly, the latest revised draft still fails to grasp the urgency of the situation or recognize that standard procedures cannot avert a crisis. This leaves us seriously concerned about the ability of the World Bank to manage the resources that constitute our best (and perhaps last) shot at avoiding planetary disaster.
To the Bank's credit, the current proposal includes all the necessary buzz-words and wonk-speak ("The goal of the CTF is to have transformational impacts."), but what it means in practice and how projects will be evaluated is entirely unclear. The annex on "review criteria" contains no less than 11 possible criterion, including, "high scalability and replicability of low carbon investments, given carbon intensity of GDP and electricity generation, economic growth rates and sector expansion plans." What? My translation: "Given any and all considerations, everything is possible." One gets the sense the Bank doesn't know what to do -- and it doesn’t want to scare off its donors or clients -- so it's casting as wide a project net as possible. This is unfortunate, because only a well-conceived strategy that goes beyond project-level analysis to focus on dynamic programs and technological learning is capable of delivering the mitigation needed to avoid runaway global warming.
Let's be clear about what is needed to limit the probability of catastrophe. Current annual global greenhouse gas emissions are about 53 gigatons of CO2-equivalent (GtCO2e). How much and how quickly this figure must fall depends on your risk tolerance and your definition of catastrophe. I believe there are three climatic "red zones" any reasonable and prudent person would try to avoid: 1) Average temperature increases of more than 2°C above preindustrial levels; 2) Atmospheric CO2 concentrations above 425 ppm; and 3) long-term CO2 concentrations above 350 ppm (we are currently at about 385 ppm).2
It turns out that the action needed to avoid any of these red zones is basically the same over the next 10-12 years.3 The long life of CO2 (20% still remains 1,000 years after release) means that meeting even long-term targets -- never mind short-term temperature thresholds -- requires serious short-term cuts. What kind of cuts? Total greenhouse gases emissions of about 40 GtCO2e in 2020 might give mankind a chance of avoiding the worst. If we assume the relative shares of gases and sources stays fairly constant, then we are looking at CO2 emissions from fossil fuel combustion of no more than 25 Gt in 2020 and probably less. Without any action (i.e. business as usual), global fossil fuel CO2 emissions in 2020 could be 40 Gt or higher.4
If we assume that the U.S. and European Union succeed in implementing current domestic proposals, and other developed countries follow suit, fossil fuel CO2 emissions from the North could -- optimistically -- be 10 Gt in 2020.5 Let's also make the courageous assumption that low-cost energy efficiency improvements financed by the North (in part by clean technology funds) reduce developing world business-as-usual emissions by 15%.6 I have tried to use optimistic assumptions at each step in this scenario and the result even then is fossil fuel emissions in 2020 of perhaps 30 GtCO2 -- still well above our 25 Gt target for a chance of success.
The bottom line is that getting down to something like 25 Gt or lower means introducing clean energy generation technology to the developing world quickly and on a tremendous scale, since that's where 85% of global energy demand growth will occur. Half-measures won't do it. Only widespread private sector adoption of clean alternatives will give us a shot. That means getting the cost of the clean alternatives below that of fossil fuels -- and fast. That has to be the primary objective of clean technology financing: to facilitate the rapid, private-sector uptake of carbon-free energy production. This transition will result in tremendous local health and economic improvements for developing world communities -- exactly the purpose of the World Bank in the first place. And today's high coal prices present a rare and likely temporary opportunity for strategic subsidization of key clean technologies at relatively little cost.
As mentioned earlier, the current results indicators for project approval include everything under the sun. So a reduction in absolute emissions or just the carbon-intensity of a project (see my colleague David Wheeler's blog on the Bank and super-critical coal or even national security concerns could all qualify a project for clean technology financing. This approach is asking for misuse, inefficiency, and climatic failure without a more concrete method for project approval (i.e. shadow pricing of carbon or attainment of strategic cost points for promising renewables -- more below).
The proposal also embodies the standard, country-based approach whereby the Bank responds to requests for financing or helps countries to develop plans of action that qualify for funding. But the optimal use of limited clean technology funds is the financing of projects with the best chance of promoting an energy revolution on a global scale. If the funding is dispersed primarily in response to national or corporate plans, I fear the Clean Technology Fund will become simply a financing mechanism for marginally-greener "sustainable development" instead of a fund designed to avert global catastrophe by quickly pushing high-potential clean technologies down the cost curve.
The atmosphere now requires an institution that acts like a venture capital fund, where emissions abatement is strategically maximized over a short period (say to 2020). An approach focused on the effects of technological learning and demonstration at scale may differ considerably from one that simply subsidizes the lowest-cost, clean alternative from a set of individual projects (i.e. lowest cost per ton of CO2 abated). Wind power (or even super-critical coal in some locales) may be the most cost-effective mitigation effort at present, but if intermittency will result in an expansion bottleneck down the road in a given grid, then the most efficient use of funds today may be the financing of technologies with less-limited potential in the near-term (like solar thermal with heat storage, for example). The primary decision-making should rely upon global analysis of the spatial and technical availability of renewables relative to projected energy demand and the cost-points required for specific technologies to see widespread adoption by the private sector. David Wheeler and I have been making these points in a forthcoming paper and a slideshow (World Bank Power Projects: Crossroads on Renewable Energy) that we have presented in a number of conferences and policy workshops during the past two months.
The lack of clear and specific objectives means there is no coherent thinking about what's actually required to avoid high probabilities of catastrophe. The fund should be seen as an emergency (and, in many ways, last-ditch) response to the climate crisis. I don't sense a real understanding, in either the draft document or our conversations with key Bank staff, of the limited window of opportunity. If the Bank's leaders really internalized the risks involved and the threat posed to its clients in the developing world, they would not allow for anything less than a truly transformational policy guided by a global strategy befitting of an international institution working for the world's poor.
It may be that the World Bank faces fundamental and unavoidable limitations when it comes to promoting truly transformation energy policy. It is institutionally hamstrung in ways that prevent it from acting as a venture capital firm might with similar resources. Yet, a venture approach is precisely what is required. Bank President Bob Zoellick has spoken of the need for the Bank to become "more of a venture fund for development," but we don't see this spirit as central to the current proposal.
The Bank will be releasing a revised proposal in a few days, and we hope it is able to take a more aggressive stance that reflects the state of the climate crisis. If it doesn't, donor countries yet to commit clean technology financing should think carefully about what kind of institution is capable of delivering the needed changes.
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1The initial U.S. contribution is expected to be $2 billion over three years, although the money is unlikely to be appropriated in the current Congress. It is expected that the international component of the UK’s Environmental Transformation Fund ($1.5 billion over three years) and part of Japan’s Cool Earth Partnership ($10 billion over five years) will also be made available to the fund.
2More than 2°C warming is often accepted as the threshold for "dangerous climate change" beyond which the damages and risk of runaway warming increase significantly. The 425 ppm and 350 ppm targets come from Jim Hansen's recent work. 350 ppm is the estimated long-term maximum concentration for maintaining a planet similar to that on which civilization evolved. 425 ppm refers to the estimated concentration at which glaciation of Antarctica began.
3Based on modeling using the SiMCaP EQW-PATHFINDER program developed by Malte Meinshausen and Bill Hare.
4This figure is based on energy demand modeling by McKinsey and Company. It assumes oil and gas prices far lower than present and, therefore, likely underestimates the effects of the ongoing transition to more carbon-intensive coal.
5Emissions figures presented here are based on International Energy Agency (IEA) data. The 10 Gton CO2 figure assumes the EU reduces emission 30% below 1990 levels and the U.S. and other Annex 1 countries reduce emissions by about 20% from 2005 levels by 2020. IEA emissions figures are generally lower than those from other sources, so these numbers are optimistic.
6Figure based roughly on energy efficiency modeling done by McKinsey and Company (http://www.mckinsey.com/mgi/publications/Curbing_Global_Energy/executive_summary.asp). It assumes all energy efficiency improvements with an IRR of 10% are implemented in the developing world and that the effect on total emissions is proportional to the effect on total energy demand.
May 05, 2008
Peter Timmer Peels Back the Layers of Complexity in Global Food Crisis in University of Illinois Radio Interview
Posted by Lawrence MacDonald at 09:32 PM
Still puzzled and concerned about the global food price crisis after reading Arvind Subramanian's smart Q&A? CGD non-resident fellow Peter Timmer peels back the layers of complexity in a thoughtful online audio interview on WILL AM 580, the broadcasting service of the University of Illinois. Timmer, who estimated in an April 21 CGD Q&A that 10 million people could die prematurely as a result of the crisis, argues that the sharp spike in prices in the last six to eight months has a substantial speculative element. But he also warns that current yields are close to the technological frontier. "We are paying the price of two or three decades of neglect of agricultural research," he says, adding that biofuel subsidies are a big part of the problem.
April 21, 2008
Not Too Hot: American Opinion of Global Warming and Why It Doesn't Matter
Posted by Kevin Ummel at 04:03 PM
On the eve of Earth Day, a new Gallup poll finds that Americans "just can't seem to get worked up" about global warming. While 61% believe the effects of global warming have already begun, just 37% worry about it a "great deal."1 The latter figure has remained basically unchanged for the past 20 years. And global warming doesn't fare well when compared to other environmental issues: Only two environmental problems -- urban sprawl and acid rain -- worry Americans less than global warming. This despite the fact that 80% claim to already understand the issue well or very well.
These numbers tend to support a conclusion that I have reluctantly come around to in the last few months as the climatic clock has moved closer to midnight: If humanity succeeds in avoiding planetary disaster, it will not be due to a "great awakening" of populations in the United States or elsewhere. Instead, the best chance of rescue now lies with a minority in the private sector bolstered by a small number of public sectors -- mainly regional (California, for example) or European -- willing to help finance technological change of the necessary scale and speed to save the rest.
The fact remains that most people and politicians in the wealthiest societies -- many of whom are kind, well-meaning, and compassionate in hundreds of other ways -- remain mired in the more immediate, personal struggles of their lives and constituents or the endless and tiring sprint to stay atop the consumption treadmill. And in developing societies like India and China, the desire for more energy is as morally just and understandable as it is silly to stand in the way.
At this point, the successful global warming end-game will not be one in which human behavior is fundamentally changed for the better. I know that is difficult for many in the environmental community (myself included) to accept, especially given the myriad of ecological problems facing the planet -- most of them stemming from the profligacy of our uber-species. If the world were populated by 6.5 billion saints (or a far smaller number of lesser souls), or if the atmospheric point of no return were a century in the future, we might rely upon a new level of awareness and behavior to lead the way. But we are not saints and the red line is less than 10 years away.
Under these circumstances, supplying vast amounts of clean energy extremely quickly and at lower cost than the dirty alternatives is the only way out. Or, to put it differently, if we succeed in avoiding catastrophic climate change, most people on Earth will have little idea how it was done. Other than using electric heating and cooking appliances and charging their car at night, they may well live no differently than today.2
Public awareness campaigns like that launched by Al Gore are valuable for a range of reasons, but the mechanisms by which they primarily operate (personal behavioral change and elections) are too slow given the state of the atmosphere and the required changes. With only 37% of Americans really worried about climate change and a recession looming, I see little chance of a large-scale political movement in this country or many others where emissions are booming. We are like an oblivious toddler dancing on the edge of a very tall cliff. At some point, the wiser parent tires of warning the child to move away from edge, walks over, picks it up, and simply carries it to a place where the self-absorbed fun can continue in relative safety.
Luckily, we have a handful of technologies capable of producing the end-game described above and moving our toddler-like species away from the edge. In fact, I am incredibly optimistic about our chances to avoid catastrophic climate change! When Gore says that we should "approach this challenge with a sense of profound joy and gratitude," I know where he's coming from: With a targeted and purposeful push to drive down the prices of clean alternatives, we could get the large quantities of clean energy required to avoid the worst.
Who will provide that push? I'm banking on a cadre of venture capitalists, institutional investors, and forward-looking governments that pool resources to do something that is unheard of in conventional climate proposals: A concerted effort to pick specific technologies with a chance of beating fossil fuels on cost alone in the very near future.
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1For comparison, even the notoriously cautious IPCC reports at least 80% certainly that recent warming is already severely impacting ecosystems.
2This is particularly true of activities where carbon-free electricity can be used to meet energy needs. Emissions from agricultural expansion present a different challenge, however, and changes in food consumption patterns and population growth may be required.
Trade Policy for a New Deal on Hunger
Posted by Nancy Birdsall at 03:05 PM
This is a joint post with Arvind Subramanian
In a Q&A published today, CGD non-resident fellow Peter Timmer estimates that soaring global food prices and panicky starve-thy-neighbor rice export restrictions in Asia could lead to 10 million or more premature deaths in the region if the current high prices are passed along to poor rice consumers.
This is the latest piece of worrying evidence that rising food prices may signal the onset of a new kind of Malthusian era, in which elevated food prices are a long-term reality driven by three key changes: rapid demand for more and more energy-intensive food in fast-growing Asia, the competition that new biofuels are posing for land; and the effect of climate-change-induced drought on global agricultural supplies.
If that is the case, the world ought to focus on boosting the long-term global supply of food -- including via food-friendly trade policy. A new deal on hunger requires that trade help rather than aggravate food shortages around the world.
What are the key trade policies that are aggravating the current food crisis? The problem now is not subsidies by rich countries that for years kept food production high and suppressed global food prices, hurting small farmers in the developing world. Rather, it is biofuel mandates in Europe and subsidies in the U.S. that are encouraging farmers to supply the biofuel market, raising food prices. Corn-based ethanol production in the U.S. has increased fourfold since 2000 and now takes up about 20 percent of total corn production.
Meanwhile in the developing world, such countries as Ukraine, Argentina, Russia, Egypt, Saudi Arabia, India, Philippines, Indonesia, and South Korea have slashed import duties and reduced other restrictions on food imports and imposed or tightened restrictions on exports of foodstuffs. Each country is trying to keep domestic supplies high on the justifiable grounds of food security. Taken together, however, the aggregate effect is reduced global supply -- and the potential for reduced long term supply -- if governments pay farmers below global prices in producing countries. Meanwhile, the restrictions are driving world prices even higher for food importing countries -- by at least 10 percent and possibly much more according to new estimates -- as the non-poor in exporting countries benefit while the poor in importing countries literally go hungry.1 Without a collective agreement to undo these restrictions, the world's poor, already at terrible risk, will be even worse off.
The contours of trade policies friendly to a New Deal on hunger are clear. Industrial countries should eliminate any practices that reduce global food supply, including all forms of subsidies to biofuels that compete with food production. Developing country food producers should eschew export restrictions. And importing countries can also contribute. To reassure developing country exporters about future access should prices become volatile or even decline, they could agree now to lock in their recent liberalization -- a plus for all agricultural exporters.
We also propose that in a New Deal on Hunger, major developing country producers set aside for now their reasonable objections to traditional rich country agricultural protection -- the bone of contention in the Doha trade round -- at least in the case of food staples (if not cotton and cocoa). Rich countries would ideally reduce this protection on their own (as their taxpayers might well like in the case of domestic production subsidies). But for a hunger deal now their long-perverse agricultural protection is not a central issue -- and leaving it aside has the political virtue of greasing the wheels of a global deal on hunger.
Finally, to address the concerns of the poorest food-importing countries that have been worst hit by food shortages requires immediate action. In addition to traditional emergency food aid, all food exporting countries -- the U.S., Brazil and other big beneficiaries of the current price hikes -- could commit a small proportion of their exports as food aid (or far better contribute the cash equivalent), with this proportion increasing in line with any increase in world prices.
No one should assume these trade measures alone will address the fundamental problem -- that chronic hunger is the result of poverty not just limited food supplies. But trade should help not hinder.
The Doha round of multilateral trade negotiations, even if successful, will not address these policies. The initiative for a New Deal on Hunger must come from elsewhere. As former chief U.S. trade negotiator and current international development czar, Mr. Zoellick is ideally suited to the task. He should secure agreement that trade and development ministers will meet within a month to agree on the trade principles of a new hunger deal, aiming for a full-fledged agreement before the end of the year. Indeed his leadership on this issue, especially in eliminating U.S. protection of corn-based ethanol, would complete his transition from representing U.S. trade interests to the development needs of the world’s poor.
Now is surely the moment to make the needs of the world's poor more central to trade policy. That would be breakthrough never yet achieved by trade negotiators alone.
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1Based on "Export Restrictions and World Prices" by Ivanic, Martin, Mattoo, and Subramanian (forthcoming).
April 17, 2008
Note to ABC: Fire Gibson and Stephanopoulos
Posted by Lawrence MacDonald at 02:42 PM
Even by the low standards of American TV news, the so-called journalists who ran last night's Democratic debate on ABC were a disgrace to their profession. TV critic Tom Shales nailed it in today's Washington Post in a column titled: In the Pa. Debate, ABC is the Clear Loser.
For the first 52 minutes of the two-hour, commercial-crammed show, [Charles] Gibson and [George] Stephanopoulos dwelled entirely on specious and gossipy trivia that already has been hashed and rehashed, in the hope of getting the candidates to claw at one another over disputes that are no longer news. Some were barely news to begin with…
Amen! The tragedy is the missed chance to ask interesting questions that would let voters see how the candidates think on their feet and how much (or little) they know about the urgent problems that confront the U.S. and the world.
Questions are a powerful tool to inform and frame the debate. Here's one I wish had been asked: "Food shortages have led to protests and riots around the world. Explanations include high oil prices, rising global demand, crop failures due to climate change, and bio-fuel subsidies -- including U.S. subsidies for ethanol made from corn. At the same time, many Americans are angry about high gas prices and worried about dependence on foreign oil. What's your view on calls to end U.S. ethanol subsidies?"
Such a question is hardly far-fetched. The issue received lots of attention yesterday at a White House press briefing from serious working reporters who track real issues and do their homework. Too bad ABC didn't get some of them to run the debate!
The good news is that I'm not the only one feeling fed up with the networks and ABC in particular. By mid-afternoon today ABC's website had logged more than 15,000 comments, most of which seemed to be complaining about the moderators. (I’m adding mine and hope you will add one, too!) The live audience in the hall wasn't pleased either. The Huffinington Post has a great clip of Charles Gibson getting booed when he announces yet another commercial interruption just before the final set of questions.
Unfortunately, the other TV news network debates have been only marginally better when it comes to using the debates to help Americans make informed choices about the U.S. role in the world. Is it any wonder that the audience for TV network news is down to a mere 25 million, and falling by about a million a year?
April 11, 2008
The Global Food Crisis: Time for Action, Not Panic
Posted by Kimberly Ann Elliott at 11:55 AM
The New York Times yesterday (and Paul Krugman earlier in the week) called on rich countries to "step up to the plate" in confronting the food crisis in developing countries -- in the short run by increasing their donations of food aid. and in the medium run by getting rid of economically inefficient, inequitable, and environmentally unsound subsidies for biofuels, especially corn-based ethanol.
While the sources of current crisis are many -- adverse weather in key producing areas, rising farm costs due to higher oil and fertilizer prices, speculation in financial markets, rising demand, especially for meat, in China, the diversion of crops from food to fuel, and low stocks -- not all of them are amenable to policy changes, at least in the near term.
Rising demand for food in China, India, and other rapidly growing developing countries is the result of reducing poverty and that, of course, is a good thing! Over the longer run, a big part of the answer is for donors and developing country governments to invest more in improving agricultural productivity, as recommended by World Bank President Zoellick in his speech at the Center last week. In terms of what can be done now, this post focuses on the food aid problem and the need to reform US policy. A future post will examine policies to promote biofuels in the United States and Europe.
Food prices are notoriously volatile but the chart shows the magnitude of the present problem, with prices for key grains surging over the past two years to levels not seen in a decade or more and with more recent increases that are off the charts. The human costs of rising prices can be seen in food riots and rising hunger and poverty around the world.
Farmers are responding by increasing their plantings of grains and a US recession should dampen price increases a bit over the next year or so, but immediate and generous action by donors is desperately needed. The World Food Program's call in February for $500 million in increased food aid funds has already been eclipsed by the accelerating price increases. The World Bank study released just this morning also summarizes other safety net and food delivery programs that governments are adopting and that it is supporting in various ways. Strikingly, however, neither the US Department for Agriculture nor the US Agency for International Development had anything on their homepages this morning about the food crisis or plans to increase US assistance.
Beyond the need for an immediate response, the crisis also underscores the need to reform the way the United States delivers food aid. US policy did not create the food crisis but it is making it harder to address. Food aid budgets everywhere are being stretched thin by the escalation in food prices. But US policy compounds the problem by requiring that food aid must be purchased and packaged in the United States and shipped mainly on US-flagged ships. Thus, a good chunk of the US food aid budget gets diverted to higher distribution and transportation costs, which are also going up as a result of oil price hikes and rising freight costs.
Moreover, if the US Congress does not change the farm bill currently being debated, it could make things far worse. Although the House and Senate versions are slightly different, both require that a certain portion of the food aid budget be reserved for longer-term development projects, meaning that less would be available to respond to emergencies. This provision was always problematic but in the current environment, it could be disastrous.
April 09, 2008
World Bank Clean Technology Fund Would Be Cash Cow for Coal
Posted by Lawrence MacDonald at 08:55 PM
Boy, those folks at the World Bank sure can do process! Hot off the printer, the bank proposal for a so-called "Clean Technology Fund (CTF)" prepared for a meeting next week includes pages and pages of verbiage on process. On page 14 they finally get around to saying how the money would be spent. Read it and weep:
For existing coal-fired plants, the CTF will follow a three-pronged approach: (1) upgrading/rehabilitating plants with a reasonable remaining life; (2) decreasing the duty cycle of existing plants; and (3) early retirement of older units, where such plants account for a large percentage of capacity, with a view to achieving significant increases in energy efficiency.
For new coal-fired assets: Recognizing that coal is forecast to remain an important component of global energy use over the next 30-50 years, the coal-fired projects would be supported where they are least cost, focusing on decreasing CO2 emissions at scale through substantial improvements in plant efficiencies (moving from sub-critical to super and ultra-supercritical technologies as well as IGCC, oxyfuels and cogeneration) and supporting readiness for implementation of carbon capture and storage.
Translation: The new fund would pay for the same old things that the bank has been doing all along, with a little greenwash sprinkled on top. As for the "forecast" that coal will continue to be important for 30-50 years, this is neither supported in the paper nor is it relevant to the purpose of a clean technology fund, which is presumably to support clean technology, not more-efficient dirty technology. (Remember, the atmosphere does not care about intensity of emissions; it responds only to total load.)
Since carbon capture and sequestration (CCS) is an unproven and potentially dangerous technological gamble, the only reliable "forecast" about coal is that continued rapid increases in use will push the planet over multiple climate tipping points (See, for example, Bill McKibben’s Remember This: 350 Parts Per Million), leading to run-away heating, droughts, floods, accelerated sea-level rise, and collapsing agricultural productivity (i.e. not good for development and other human activities!)
It's enough to make American tax payers and others, including the Europeans and the Japanese, who are being asked to ante up billions of dollars for the proposed new fund wonder whether some other organization besides the World Bank might be better suited to manage it.
World Bank president Robert Zoellick talks like he is serious about climate. During his speech at the climate conference in Bali last December he said:
Climate change policies cannot be the frosting on the cake of development; they must be baked into the recipe of growth and social development… We need to help shift countries to a development paradigm based on low-carbon growth and adaptation to new risks.
Yet yesterday the board of the IFC, the bank's private investment affiliate, approved a $450 million investment in the Tata Ultra Mega power project, which would produce nearly 25 million tons of CO2 per year for at least 25 years, making it one of the top 50 sources of CO2 in the world. Just in case somebody might wonder if the IFC is serious about fighting climate change, just days before they also announced a $20 million investment in Evolution One, a private equity fund investing in climate change mitigation in Africa.
Before yesterday's vote eight environmental and development advocacy NGOs wrote to the U.S. representative on the World Bank/IFC board asking that the IFC postpone consideration of the Tata Ultra Mega until low-carbon alternatives, especially rapid-advances in solar thermal, could be properly evaluated. The letter drew on analysis of the changing costs by my colleague David Wheeler. Mr. Zoellick has defended the decision to proceed with the plant on the grounds that India needs the power.
Make no mistake: India urgently needs more electricity. Per capita power consumption is barely four percent of our profligate power usage in the United States; two out of three rural families lack even electric light. With shortages this severe, babies die and kids grow up unable to read. As the planet's leading development institution, the World Bank is right to help India to solve this problem. The question is not whether the bank should be investing in India's power sector, but how.
Other funders including private lenders are already investing massively in new power projects. Several plants that use the same high-efficiency coal combustion technology proposed for Tata Ultra Mega are ready for construction or in advanced planning stages. But efficient coal technology is still extremely dirty, emitting large amounts of health-damaging pollutants such as mercury, sulfur and nitrous oxides, in addition to greenhouse gases.
For poor people in India, this new electricity -- like the new plants being built in China and the coal-fired electricity that powers my computer as I type -- comes at an immense cost in the not-too-distant future. Because much of India already has high average temperatures, further heat increases will devastate agriculture. A recent CGD book by William Cline has shown that under a "business as usual" approach, northwestern India will face a 30 to 40 percent drop in agricultural productivity by 2080 -- within the lifetime of children born in India today. Projections of agricultural impact are similarly dire for much of the rest of the developing world.
Fortunately, there are alternatives that can meet the urgent need for electricity in India and other developing countries without putting future generations in peril. Wheeler has shown that rapidly falling prices of renewable energy technology and rising coal prices mean that the cost gap between zero-carbon alternatives and coal is shrinking fast. Because the price of sunlight never goes up, and the technology for turning it into electricity gets cheaper all the time, the difference between the price of the coal-fired electricity and zero-carbon solar thermal power in the same locale has recently dropped to less than two cents per kilowatt hour (10.5 cents for solar thermal vs. 8.5 cents for coal).
This gap can and should be closed, and the rich countries that are responsible for most of the greenhouse gases already in the atmosphere should pay the difference (in addition to cutting back sharply on our own obscene emissions) for our own sake as well as the sake of people in developing countries.
The U.S. and other rich countries have implicitly accepted this principle. In February U.S. Treasury Secretary Henry Paulson and his counterparts from the U.K. and Japan announced their intention to support a new "Clean Technology Fund," suggesting it could be administered by the World Bank. To get things going, Paulson pledged an initial U.S. contribution of $2 billion over three years. Congress would have to appropriate the money, of course.
It's that promised money that the World Bank is hoping to capture in putting forward this laughable so-called "Clean Technology Fund" proposal. Too bad, for the bank and the world, that the proposal fails so dismally in the central task of actually supporting clean technology. Are there any other organizations out there that would like to manage billions of dollars in clean technology money?
April 02, 2008
Robert Zoellick Outlines World Bank Response to Global Economic Situation
Posted by Lawrence MacDonald at 05:15 PM
Robert Zoellick outlined new approaches that the World Bank will take to help solve global problems today in a major speech delivered at an event organized by the Center for Global Development.
Zoellick's detailed and wide-ranging speech included a proposal for what he called a "one-percent solution" -- for sovereign wealth funds to invest one percent of their holdings in equity in sub-Saharan Africa as a way of tapping long-term global liquidity to boost investment opportunities and development. Other issues he discussed included high global food prices and the prospect of shortages; the need for a global trade deal, and efforts to address the so-called "resource curse," the many problems that face countries that are rich in oil and other high-value commodities.
The speech was well-received by a standing room-only crowd of nearly 200 people including development policy experts, policymakers, researchers and representatives of international NGOs.
The full text of the speech, video, a press release and other materials are available on the World Bank website.
March 25, 2008
Renewable Energy is Focus of U.S. Congressional Delegation Visit to India
Posted by Joel Meister at 03:03 PM
Climate change and renewable energy have been a focus of a senior U.S. Congressional visit to India led by House Speaker Nancy Pelosi, according to the Press Trust of India and other Indian news reports.
Speaker Pelosi said, "Our delegation was very encouraged to hear that the leaders in the Indian business community believe industry can be in the forefront of climate change and energy efficiency initiatives, rather than stand as a barrier to change."
"The spirit of innovation that has driven the economies of the United States and India and the spirit of cooperation expressed during our meeting will help our two countries find solutions to global warming. This visit has strengthened our resolve to pass legislation as soon as possible to protect our planet for future generations," she said.
The bipartisan delegation also met with Rajendra