Multilateral Development Banks can play a leading role in promoting more sustainable energy options.
Governments around the world are struggling
to mitigate dangerous climate change while
securing the energy they need to sustain
economic development. The need to direct future
investment to meet the world’s energy needs away
from polluting fossil fuels, and into more sustainable,
low-carbon options has never been more urgent.
Achieving this goal will require the right policies,
regulations, and institutional capacities to be in
place. It will also require leadership from governments,
and from development institutions. The Multilateral
Development Banks (MDBs), including the
World Bank, Asian Development Bank, and Inter-
American Development Bank have an important role
to play in advancing more sustainable energy for
several reasons.
MDBs can do
much more to ensure that the issues of sustainability
and governance are integrated
into their policy advice and lending.
First, most future growth in energy demand, approximately
90% by 2030 according to the Interntional
Energy Agency, will come from developing
countries, where the MDBs have a long history of
engagement with the electricity sector. Second, these
international financial institutions are already channeling
emergency assistance to developing countries
to weather the economic storm, providing opportunities
to guide the energy and infrastructure sectors on
to a new low-carbon path. The World Bank alone has
set aside US $55 billion over three years for infrastructure
in vulnerable developing countries. Third,
MDBs and in particular the World Bank are assuming
a growing role in helping finance climate change
solutions in developing countries.
Taken together, these circumstances provide a
powerful rationale for MDBs to help countries reach
a sustainable energy future that dramatically reduces
greenhouse gas emissions while responding to the
needs of the world’s poor. However, the MDBs can do
much more to ensure that the issues of sustainability
and governance vital to such a transition are integrated
into their policy advice and lending.
Recent analysis from WRI suggests that MDB investments in
electricity sector policy have often missed opportunities
to address these issues of sustainability. In
particular, issues of governance, such as the capacity
of government, regulatory agencies, and utilities to oversee and implement sustainable energy solutions,
are often overlooked.
MDBs could play a role
in assisting developing countries to transition toward
low-carbon sustainable development. But in order
to be effective, their core electricity sector programs
must more comprehensively reflect the important elements
of environmental and social sustainability identified
in this framework. In particular, these programs
must consistently include support for institutional
capacity, and improve governance.
The inter-related challenges of climate change and
energy security are complex in nature and global in
scale. But the solutions exist if the political will can be
found. There is no room left for “business as usual”
models, or business as usual financing, and the
MDBs should be playing a leadership role.
This piece originally appeared as the Foreword to Investing in Sustainable Energy Futures: Multilateral Development Banks’ Investments in Energy Policy.
David Runnalls is the CEO and President of the International Institute for Sustainable Development.