Energy and Climate Change

Jaime Quijandria The World Bank

May 2006

Outline

     Energy Matrix and Climate Change World Bank Energy Work Programs Energy and Environmental Challenges Clean Energy For Development Framework Opportunities for Latin America 2

Energy Matrix in LAC

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

 Hydropower accounts for over half of installed generation capacity in Latin America, and other renewables (geothermal, wind, solar, etc) represents only 1%. The share of total renewable sources has however declined over the last decade. 3

LAC: Installed Hydro Share

80% 70% 60% 50% 40% 30% 20%

Argentina

10%

Brazil Colombia Chile

0%

Venezuela Mexico Other

4

Energy Access and Investment Needs

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

 Investment Needs----The World Bank study shows that an investment of US$215 billion is needed in the LAC electricity sector between 2005 and 2015. To achieve a 70% coverage of rural households and 100% coverage of urban households over the next decade, the required investment need is estimated to be US$ 56 billion. 5

Importance of Energy Sector GHG Emissions in LAC

6

World Bank Energy Work Program in LAC Mexico

Mexico, D F

The Bahamas Cuba Dominican Republic

Jamaica

Belize

Kingston

Honduras

Tegucigalpa

Haiti

Port-au-Prince

Guatemala El Salvador Nicaragua Costa Rica Panama

San Jose

Ecuador

Quito

Colombia

Bogota Caracas

Venezuela

Guyana Suriname French Guiana

Peru

Lima

Brazil

La Paz

Bolivia

Cuiaba Brasilia Recife

Chile Paraguay

Asuncion

Argentina

Buenos Aires

Uruguay

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

Resident Missions and Other Field Presence

7

Sub- Sectors that Bank is Involved

     General Energy (transmission, rehabilitation, power sector lending and technical assistance) Rural Electrification Renewable Energy Energy Efficiency Carbon Trading 8

Some Project Examples

  the Nicaragua Off-grid Rural Electrification and Bolivia Decentralized Infrastructure for Rural Transformation Projects provide electricity to remote villages and dispersed users with renewables. Both projects use output-based aid schemes with payment tied to actual delivery of specific service level and quality. The innovative nature of this scheme is that it moves beyond traditional lending schemes toward results-based frameworks. The Colombia Jepirachi Carbon Offset Project contributes to the reduction of greenhouse gas emissions from the power sector in Colombia through the promotion of a 19.5 MW wind-based electricity generation facility. The project is expected to generate a revenue of US$3.2 million by selling the carbon emission reduction credits. Part of the carbon revenue will be dedicated to co-finance a social program that will contribute to improvements in the welfare of the local indigenous community. 9

The energy scenario is, however, evolving

  Increasing international oil prices which appear to be sustained and threaten energy security Stronger will to take actions on climate change 10

Challenges to meet dual energy and environmental needs

    Meeting the increasing energy demand Access to affordable and reliable modern energy services Controlling local and regional air pollution Combating climate change 11

G8 Call: Clean Energy and Development Investment Framework  The G8 Gleneagles summit requested the Bank to develop a clean energy investment framework in last July to accelerate investment so that developing countries can meet energy demands for growth and poverty alleviation in an environmentally sustainable way.  The Bank is following a two-track approach: --- by end of this year, analyze our current existing instruments, the potential role of the private sector, and the potential role of other partners such as the regional banks. --- for the next two years, do in-depth country studies to develop technology options and action plans  The Framework were generally endorsed by the Bank shareholders at the Spring Meetings 2006. 12

Examples of New Financing Instruments Under Consideration

 Clean Energy Financing Vehicle  Power Rehabilitation Financing Facility  Project Development Fund  Venture Capital funds for technology options 13

Opportunities for LAC

 The five large developing countries were identified LAC is an essential part of this new G8 initiative. Consultations with Brazil and Mexico identified substantial diagnostic and analytic work programs.  The programs for Brazil including scaling-up renewable energy development through expanded hydro and bioenergy; improvement of urban and industrial energy efficiency; natural gas development; and implementation of the forested area strategy.  The programs for Mexico include energy diversification; energy efficiency improvement in buildings and industry; sustainable transport development; and scaling up low-carbon options including expanding renewable energy and industrial and refinery efficiency (such as cogeneration). 14

Promising Low Carbon Technologies for LAC

15