Friday, September 05, 2008

World Bank "Menu" of Green Opportunities?

Yesterday the Center for Global Development (CGD) invited me to make some remarks on the World Bank's forthcoming Climate Change Strategy.

The previous World Bank president nearly forbade the mention of the term "global warming." But Bob Zoellick is now encouraging the Bank to play a leadership role.

The meeting was well attended, which was encouraging. In addition to senior World Bank and CGD staff, there were experts from the International Finance Corporation, Millennium Challenge Corporation, US EPA, US Treasury, US Department of the Interior, World Resources Institute, NRDC, National Wildlife Foundation, NOAA, World Watch, Johns Hopkins, Deutsche Bank and others.

I made the following points:

1. This is a global emergency.

2. It will take everyone in the room to solve it - not just the World Bank.

3. We cannot deal with it solely or even primarily by top-down mandates.

4. The issue is complex, but nothing will happen unless we cut through the complexity with some simple, clear, and catalytic approaches.

5. I used a World Bank example in Indonesia (the posting of signs in the town square saying what Bank funds were being used for), and the example of our voluntary scoring system on GlobalGiving Green as examples of simple things that can catalyze big changes in behavior.

6. I suggested that the Bank find something analogous. One option would be using a range of carbon shadow prices for their projects - and publishing the results. This would show, for example, that even though coal-fired plants may be cheaper financially, solar installations would be more profitable if the cost of carbon emissions were taken into account. The difference in the financial costs of the two approaches (for example, coal and solar) would be highlighted, and other aid donors could have a look and fund that difference if they wanted to. This approach would give other donors a "menu" of projects that they could subsidize to help fight climate change, and would not force all subsidized decisions to go through a centralized World Bank mechanism.

7. This approach could help mute the resistance the Bank is facing to mandatory use of carbon shadow prices in making actual project decisions. Instead, the Bank would highlight the cost of the cleaner alternatives and allow other donors to fund the gap on a voluntary basis. Different donors would fund different things according to their interests and resources. Rapidly growing private donors could join the fray to supplement the resources of official agencies. This approach may actually result in faster action, more funding, and more innovation than a mandatory, centralized approach that may never even get off the ground.