Daniel Kammen’s posts appear here and on the Development in a Changing Climate blog at the World Bank, where he is chief technical specialist for renewable energy and energy efficiency. He is an adviser to National Geographic’s Great Energy Challenge initiative.

The last few days at COP16 have, in a low-key way, accomplished more than I have seen at the COP meeting for some time (and I have been attending them for over a decade now).

For example, there have been a series of business-led discussions and proposals on how to develop energy-efficiency master plans at all levels—company, municipality and country. An exciting aspect has been the presence of so many innovative industry partners and governments that have not only developed, but started practicing important renewable energy and energy-efficiency solutions.

I had the pleasure of moderating a stimulating event that the World Economic Forum hosted Monday that really got into the nuts and bolts of energy efficiency. This event included small NGO representatives, the venture capital community, Fortune 500 technology companies, utility CEOs from developing nations, and Energy and Environment Ministers from four nations. There have been fruitful discussions on specific mechanisms—from feed-in tariffs, community aggregation of clean energy purchase plans, to very large-scale government procurement of clean energy services.

In almost all of these discussions, not only did the ways to support clean and sustainable energy come through loud and clear, but also calls to be more transparent and balanced in the energy markets. Several private sector companies (even those whose revenues are almost entirely from fossil fuels) and economic leaders from developing nations said that all markets would function better if we reduced the massive subsidies for fossil fuels.

It is in this context that I want to talk about how creating the right climate to start and sustain these innovations depends not only on technological advances, but also on regulations and policy incentives. Many experts made a persuasive case for a price on carbon emissions as a strong incentive for positive change. In fact, most existing climate-related financing mechanisms are designed to mimic the effect that a price for carbon would have, and thereby reflect the true social, economic, and environmental costs of GHG emissions.

Along with creating the right incentives is the challenge of reducing the wrong ones. Among these are many of the existing large subsidies for fossil fuel production and consumption. The World Bank has been involved in carefully documenting these subsidies to support a resolution by the G20 at their 2009 Pittsburgh Summit. Since then, G20 and other countries have moved ahead with reforms. It’s an encouraging start, but the full potential gains will be achieved only if more countries raise their ambition on this issue.

To help them, the Bank has produced A Roadmap for Phasing Out Fossil Fuel Subsidies. This analytical toolkit can help policymakers pose key questions, quickly diagnose problems and identify the right policy responses. Key questions include: Who benefits from a subsidy? And assuming that there is a positive impact on the poor, what are the options for ameliorating those?

Some of the lessons from the report have found resonance at Cancun. These included alternatives like a well-designed rural electrification subsidies, compensation packages for the poorest and moving towards automatic price adjustments at the country level. The next few months promise to be interesting with several key players moving towards implementation of some of these.

Comments

  1. Wyatt
    June 28, 2012, 9:40 am

    Hmm…tarriffs count as a subsidy? Sure, it does encourage domestic extraction, but it does so by making the imports more expensive, reducing overall domestic use.

  2. Anthony St. John
    San Diego
    December 24, 2010, 11:20 am

    Steve, you shouldn’t be surprised by Berkeley Prof. Kammen’s alliance with World Bank (“largest multilateral financier of fossil fuels”) because UC is a subsidiary of BP, as exposed by the L.A. Times earlier this year:

    Big Oil buys Berkeley —
    The BP-UC Berkeley research deal pushes academic integrity aside for profit.
    http://www.latimes.com/news/opinion/commentary/la-oe-washburn24mar24,0,6286060.story

    President Eisenhower warned us about UC in his 1961 Farewell Address:
    “The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.
    http://mcadams.posc.mu.edu/ike.htm

    Tragically, today the world is experiencing the totally out of control consequences of what Ike gravely predicted. Even Ike was marginalized by UC scholars that put the “power of money” at the top of their list of cultural values, instead of protection of Humanity.

  3. Steve Kretzmann
    Washington DC
    December 20, 2010, 4:01 pm

    It’s great to see Dan Kammen wearing his new hat at the World Bank to talk about fossil fuel subsidies. But there are a few points that warrant further examination here.

    First, I find it somewhat amazing (read: not surprising) that the World Bank, which remains the largest multilateral financier of fossil fuels, is somehow evaluating options for subsidy removal internationally. While the Bank has been increasing its financing of efficiency and renewables in recent years (a fact that they should be congratulated for), they have also been increasing their support for fossil fuels. This last year, the World Bank group provided $6.2 billion in support for fossil fuels. See more details here:

    http://www.bicusa.org/en/Document.102425.aspx

    In addition, on page 28 of the report that Dan links to above, there is a sample “decision tree”, which is drawn up to help people evaluate whether or not fossil fuel subsidies are achieving the objective of providing energy for the poor. The first question to be asked according to this tree is “Has the subsidy succeeded in the objective of reaching the poor?” If the answer is no, the subsidy should be phased out.

    Two months ago, Oil Change International evaluated the last two years of World Bank lending on exactly this basis, i.e. “have these projects provided energy for the poor”? The answer, for 26 out of 26 projects, was no. And the really surprising piece was that internal Bank evaluations agreed that all of the coal and oil projects they had supported did not alleviate energy poverty.

    You can read the report here:
    http://priceofoil.org/educate/resources/energy-for-the-poor/

    The Bank’s Energy Strategy is being redesigned over the next few months. If they can manage to read their own reports, maybe the Bank can stop throwing our tax dollars at the dirtiest most profitable industries on the planet, and concentrate instead on their mission of alleviating poverty, which happily can be done quite well by clean, renewable technologies.