1. Mike Toman, Lead Economist and Manager, Environment and Energy Research Team 18 May 2010

2. MDGChallenge 1) Eradicate poverty & hungerNatural resource degradation 2) Universal primary educationWater/sanitation; energy access 3) Gender equality/empowermentLand use; indoor air pollution 4) Reduce child mortalityWater/sanitation 5) Improve maternal healthWater quality; energy/pollution 6) Combat major diseasesAir & water quality//climate change 7) Environmental sustainabilityNR degradation; BD, CC; governance 8) Global public good partnershipsBiodiversity, int’l waters, CC

3.  Low-carbon growth  “Green stimulus” recovery packages  “Green infrastructure” investment  Meeting basic energy and water needs  Increasing resilience to natural variability  Improved efficiency of existing environmental regulation  Correcting harmful market distortions  New economic opportunities (green supply chains, eco-tourism, green innovation,…)

4.  A guaranteed “win-win” for environment and GDP growth ◦ Real costs of environmental protection yield improvement in quality of life  A direct path to new markets and economic opportunities ◦ Some green technologies are not (yet) market ready; others are missed opportunities  An assured solution to problems of poverty reduction and social equity ◦ South Africa’s electricity “lifeline” policy yields significant benefits but also requires ongoing expenditures; broader “safety net” challenges 4

5.  Complement technology development and standards, implementation targets with pro-environment, pro-inclusive-growth economic incentives  Target incentives for cost-effectiveness  Solid enforced legal structure also key  Policy reforms go beyond the environment and energy sphere

6.  Stronger environmental & natural resource management & investment to enhance growth, reduce poverty  Enhanced quality and availability of communal land and water resources in rural areas  Growth-enhancing investments in technical improvements and infrastructure that also reduce environmental impacts  Includes but goes beyond existing approaches for environmental protection 6

7.  Maintain environmental sustainability ◦ “Meet needs of present without compromising ability of future to meet its needs” ◦ Offset “natural capital” depletion with other social wealth build-up – increased aggregate savings to accelerate growth 7

8.  Reduce market failures and institutional barriers to green markets ◦ Institutional and governance improvements that improve economic incentives for sustainability (investment and consumption) o Addressing economically wasteful and environmental harmful subsidies – energy, water, land use, …with concern for impacts on poor o Targeted, cost-effective fiscal incentives for green investment  Improved national accounting for costs of resource and environmental depletion 8

9.  Enhancing natural resource productivity – “basic needs plus”  Addressing emerging problems as economy grows and diversifies  Taking opportunities in green innovation and new market and employment development  Not just low-carbon development! 9

10. Core Near-Term Policy Issues:  Employment  Fiscal Space  Efficiency of Resource Use  Immediate environmental threats  Stage setting for longer-term sustainability Not listed in any priority order

11.  Stronger and clearer economic incentives are crucial for advancing on all these issues – not just for the environment  Price signals reflecting social costs of resource & environmental impacts are inherent part of incentive system – induce more efficient and sustainable uses  But, there is much more to the story than the pain of higher product prices!

12.  Changes in input demands creates ready demand for more eco-efficient technology – increasing economic rewards, reducing risks & financing barriers ◦ Can be complemented selectively with performance standards, demonstrations to increase scale and lower costs ◦ Signals can be designed to reflect balance of more immediate and longer-term environmental and resource conservation priorities

13.  Can start with most available, low-cost and labor-intensive opportunities ◦ Solar water heating ◦ Green building retrofits ◦ Off-grid power for more remote areas ◦ Installation of efficient water using devices ◦ Audit and assessment functions ◦ Transport congestion reduction ◦ On-site materials recycling, re-use

14.  Financing technology innovation/diffusion, other longer-term green growth options  Increase green job skills  Help for cost of lifeline measures  Measures to reduce highly segmented and distorted labor markets ◦ Research indicates net cost of increasing energy prices may be minimal if accompanied by fiscal and labor market reforms

15.  Improved access for rural/poor credit, transportation infrastructure, education for rural/poor  Cost-effective, market-enhancing economic regulation in energy sector  Reduced institutional barriers to green technology policies – finance, trade, human knowledge 15

16.  Subsidizing some green investment can be costly, especially if not well targeted ◦ Tax breaks reduce fiscal space ◦ Feed-in tariffs for costlier renewables shift cost to all users  Industrial policy to develop green markets and technologies? ◦ Generally has worked only for certain countries in certain circumstances ◦ Important to rely on comparative advantages for managing market and regulatory uncertainties 16

17.  Goal of 50% clean energy lending in relatively near future, including low-emission transport  Improved watershed management (not just end of pipe treatment)  Support for country access to donor green grant funding  Integrating environment into national level development partnership strategies  Technical assistance and knowledge transfer

18.  Africa Climate Resilient Growth Strategy  Assessment of poverty, environment and health linkages in Egypt, Yemen and Djibouti  Expanded Bank assistance in Sub-Saharan Africa for management of protected areas

19.  Range of environment – growth synergies not yet fully mapped out ◦ Tradeoffs between nearer-term stimulus and longer-term growth ◦ Relative growth performance of more or less green strategies ◦ Role of innovation and strategic capacity investment to enhance green growth

20.  ….I have discovered the secret that after climbing a great hill, one only finds that there are many more hills to climb….  ….I dare not linger, for my long walk is not ended.

21. mtoman@worldbank.org Questions and comments very welcome. Thank you!

22. 22 Environmental Health and Pollution Management  24% of disease burden and 23% of all deaths in developing countries from environmental risk factors  Half of malnutrition caused by poor sanitation from lack of access to safe water  Indoor air pollution responsible for 1.5 million premature deaths from respiratory illness; 2.7% of global burden of disease Sustainable Natural Resource Management  Deterioration seen in water, air, forests, grasslands, marine resources, agro-ecosystems  Overfishing: 75% of global fish stocks fully or over- exploited  Damages to protected areas, wetlands, other ecosystem buffers  Climate Change

23. FY09, ENRM portfolio amounted to $13 billion (10% of total) Active Environment and Natural Resource Management (ENRM) Portfolio 23

24. 24 Policies, Governance Institutions, International Cooperation  Limited inter-ministerial coordination for advancing and balancing economic, environmental goals  Limited coordination among levels of government  Shortcomings in natural resource management  Challenges and opportunities of urbanization  Inadequate enforcement  Environmentally and economically harmful policy distortions  Weaknesses in international cooperation

25. 25

26.  Higher profile of env in country strategies  Maintain safeguards management  Increased analysis of environmental opportunities and implementation costs ◦ So far, limited economic analysis of environmental improvements in practice  Increased env policy-based lending 26

27. Studies highlight severe infrastructure gaps: % house- holds with regular access to: All developing countries AfricaNon-Africa low-income countries Electricity632956 Improved water 846079 Improved sanitation 523148 All weather road (rural) 643642 South Africa figures better, e.g. 81% electricity access

28. Africa country grouping Infra Needs (%GDP) Spending (%GDP) Correctable inefficiencies (%GDP) Net gap (%GDP) Middle income 10622 Resource rich 12534 Low income 221039 Fragile states 366525 All Africa15735 Source: World Bank Africa Infrastructure Country Diagnostic, 2010

29. Source: World Bank data base on private infrastructure investment (PPIAF)

30.  WB infrastructure lending increased from $2.5billion in FY2008 to $3.6 billion in FY2009  Separate longer-term economic benefits from near-term stimulus effects ◦ Many green growth investments could have large employment impacts only over the longer term  Economic benefits of “creating new jobs” depends on cost-effectiveness of stimulus 30

31.  Eskom investment – critical need to alleviate power supply problems, longer-term focus on improved efficiency and renewables ◦ Current WB guidance on coal investment  Continued emphasis on biodiversity and tourism benefits from protected areas ◦ Cape Peninsula, Simangaliso Wetland Park  Water –persistent need to improve systemic management and resilience to shocks, increase efficiency of use