World Bank urges new breed of clean energy funding


WASHINGTON (Reuters) - The World Bank is urging its steering committee to approve a new breed of loans and grants that would go to developing countries to help them make power generation cleaner and more efficient.
A report drafted for this weekend's meeting of the International Monetary Fund and World Bank at the request of Group of Eight leading nations already seems to have gained traction among some emerging countries.
Scientists have said greenhouse gas-driven climate change could be responsible for everything from Hurricane Katrina and melting polar ice caps to severe droughts on rich farmland.
High birthrates in developing countries mean energy demands will continue to escalate, adding urgency to the need to act.
The World Bank said developing nations need to invest some $300 billion each year for the next 25 years to meet their energy needs -- largely in electricity -- so the report focused on ways to make projects less environmentally taxing.
"It's quite clear we have a number of technologies but the private sector has walked away," World Bank chief scientist Robert Watson said. "The problem is to induce investment."
The report cited biofuel as well as geothermal power plants and wind-generated energy. It also suggested consumers could use more efficient cooling and heating, insulation and advanced windows in their homes.
Brazil on Saturday offered to share its ethanol-producing technology with its South American neighbors -- as crude oil prices leapt above $75 per barrel on Friday to a new record high -- in hopes of supplementing tight global fuel supplies.
Britain's finance minister, Gordon Brown, laid out his ideas in a speech to the United Nations, calling on rich countries to build a seed fund of $20 billion for clean energy to help developing countries invest in alternative energy sources.
"Each $1 of the World Bank Group that we put into a project leveraged $5 from the private sector, government and others," World Bank water and energy director Jamal Saghir said.
The initiatives the World Bank outlines "could provide up-front funds for securing and offsetting the production costs of implementing promising clean energy technologies," Indonesian Finance Minister Sri Mulyani Indrawati said.
"One challenge in the energy sector is the electricity subsector where the current level of investments are about 50 percent of the needs -- that is, about $80 billion per year out of $160 billion," the report said.
The report focused on the energy sector since that accounts for about 80 percent of greenhouse gas emissions and urged a staged approach, from immediate efficiency-enhancing steps to longer-term research and development financing.
One idea floated by the World Bank is the creation of a grant to help developing countries cut the cost of buying new high-efficiency energy technology and infrastructure.
Another would see existing power plants upgraded, with the gains from more efficient production going to repay the loans that funded the original overhaul.
China, the world's second biggest energy consumer after the United States, relies largely on coal to produce more than 2 trillion kilowatts of electricity.
About 90-gigawatts of Chinese thermal power is running at less than 25 percent capacity making the plants key candidates for loans which would allow the use of temporary generators while the other facilities are taken off-line, Watson said.
The bank also suggested establishing a venture capital fund to finance the development of promising new clean energy technologies as well as bringing them to market.
Dutch Development Minister Agnes van Ardenne said she was concerned the proposals did not focus on very poor countries, adding there are 1.6 billion people without access to power -- 500 million of them in Sub-Saharan Africa.
"I believe that the framework on clean energy and development must be balanced in such a way that those people are being targeted too," Van Ardenne said.© Reuters 2006. All Rights Reserved.