Policy Research Working Paper | Environment | World Bank

Impact evaluation of free-of-charge CFL bulb distribution in Ethiopia

2013-03-13T04:00:00.000Z

Electricity infrastructure is one of the most important development challenges in Africa. While more resources are clearly needed to invest in new capacities, it is also important to promote energy efficiency and manage the increasing demand for power. This paper evaluates one of the recent energy-efficiency programs in Ethiopia, which distributed 350,000 compact fluorescent lamp bulbs free of charge. The impact related to this first phase is estimated at about 45 to 50 kilowatt hours per customer per month, or about 13.3 megawatts of energy savings in total. The overall impact of the compact fluorescent lamp bulb programs, thanks to which more than 5 million bulbs were distributed, could be significantly larger. The paper also finds that the majority of the program beneficiaries were low-volume customers -- mostly from among the poor -- although the program was not targeted. In addition, the analysis determines the distributional effect of the program: the energy savings relative to the underlying energy consumption were larger for the poor. The evidence also supports a rebound effect. About 20 percent of the initial energy savings disappeared within 18 months of the program's completion.

The energy transition of the transition economies : an empirical analysis

2013-03-19T04:00:00.000Z

The aggregate manufacturing energy intensity of 28 countries in Eastern Europe and Central Asia had declined by 35 percent during 1998-2008. This study reveals strong evidence of convergence: less efficient countries improved more rapidly and the cross-country variance in energy productivity narrowed over time. An index decomposition analysis indicates that energy intensities declined largely because of more efficient energy use rather than shifts from energy intensive to less intensive manufacturing activities. Income growth and energy price increases were the main drivers of the convergence. They dominated the impact of trade, which led to specialization in energy intensive industries.

Monsoon babies : rainfall shocks and child nutrition in Nepal

2013-03-28T04:00:00.000Z

Do household consumption-smoothing strategies in poor countries entail significant long-run costs in terms of reduced human capital? This paper exploits the timing of monsoon rainfall shocks and the seasonal nature of agriculture to isolate income effects on early childhood anthropometric outcomes in rural Nepal and to provide evidence on the persistence of these effects into later childhood. Findings suggest that a 10 percent increase in rainfall from historic norms during the most recently completed monsoon leads to a 0.15 standard deviation increase in weight-for-age for children ages 0-36 months. This total impact consists of a negative "disease environment effect" of no more than 0.02 standard deviations and a positive "income effect" as high as 0.17 standard deviations. Consistent with this interpretation, excess monsoon rainfall also enhances child stature, but only if the monsoon rainfall shock is experienced in the second year of life. Moreover, this effect on child height is transitory, dissipating completely by age five.

Joining, upgrading and being competitive in global value chains : a strategic framework

2013-04-09T04:00:00.000Z

In recent years, global value chains have played an increasing role in business strategies, profoundly affecting international trade and development paradigms. Global value chains now represent a major source of socio-upgrading opportunities and a new path for development. Trade, competitiveness and development policies should be reshaped accordingly to seize these opportunities and avoid the risks associated with greater participation in global value chains. This paper provides a framework and analytical tools for measuring and improving a country's performance with respect to participation in global value chains. With a clear operational focus, it provides guidance for countries willing to join, maintain participation, and/or move up global value chains. With the ultimate objective to increase the value (the development content) for trade, it also offers strategies to maximize the benefits and minimize the risks of developing countries' participation in global value chains.

Should marginal abatement costs differ across sectors ? the effect of low-carbon capital accumulation

2013-04-19T04:00:00.000Z

The optimal timing, sectoral distribution, and cost of greenhouse gas emission reductions is different when abatement is obtained though abatement expenditures chosen along an abatement cost curve, or through investment in low-carbon capital. In the latter framework, optimal investment costs differ in each sector: they are equal to the value of avoided carbon emissions, minus the value of the forgone option to invest later. It is therefore misleading to assess the cost-efficiency of investments in low-carbon capital by comparing levelized abatement costs, that is, efforts measured as the ratio of investment costs to discounted abatement. The equimarginal principle applies to an accounting value: the Marginal Implicit Rental Cost of the Capital (MIRCC) used to abate. Two apparently opposite views are reconciled. On the one hand, higher efforts are justified in sectors that will take longer to decarbonize, such as urban planning; on the other hand, the MIRCC should be equal to the carbon price at each point in time and in all sectors. Equalizing the MIRCC in each sector to the social cost of carbon is a necessary condition to reach the optimal pathway, but it is not a sufficient condition. Decentralized optimal investment decisions at the sector level require not only the information contained in the carbon price signal, but also knowledge of the date when the sector reaches its full abatement potential.

Municipal vulnerability to climate change and climate related events in Mexico

2013-04-22T04:00:00.000Z

A climate change vulnerability index in agriculture is presented at the municipal level in Mexico. Because the index is built with a multidimensional approach to vulnerability (exposure, sensitivity and adaptive capacity), it represents a tool for policy makers, academics and government alike to inform decisions about climate change resilience and regional variations within the country. The index entails baseline (2005) and prediction (2045) levels based on historic climate data and future-climate modeling. The results of the analysis suggest a wide variation in municipal vulnerability across the country at baseline and prediction points. The vulnerability index shows that highly vulnerable municipalities demonstrate higher climate extremes, which increases uncertainty for harvest periods, and for agricultural yields and outputs. The index shows at baseline that coastal areas host some of the most vulnerable municipalities to climate change in Mexico. However, it also shows that the Northwest and Central regions will likely experience the largest shifts in vulnerability between 2005 and 2045. Finally, vulnerability is found to vary according to specific variables: municipalities with higher vulnerability have more adverse socio-demographic conditions. With the vast municipal data available in Mexico, further sub-index estimations can lead to answers for specific policy and research questions.

Energy intensive infrastructure investments with retrofits in continuous time : effects of uncertainty on energy use and carbon emissions

2013-04-30T04:00:00.000Z

Energy-intensive infrastructure may tie up fossil energy use and carbon emissions for a long time after investments, making the structure of such investments crucial for society. Much or most of the resulting carbon emissions can often be eliminated later, through a costly retrofit. This paper studies the simultaneous decision to invest in such infrastructure, and retrofit it later, in a model where future climate damages are uncertain and follow a geometric Brownian motion process with positive drift. It shows that greater uncertainty about climate cost (for given unconditional expected costs) then delays the retrofit decision by increasing the option value of waiting to invest. Higher energy intensity is also chosen for the initial infrastructure when uncertainty is greater. These decisions are efficient given that energy and carbon prices facing the decision maker are (globally) correct, but inefficient when they are lower, which is more typical. Greater uncertainty about future climate costs will then further increase lifetime carbon emissions from the infrastructure, related both to initial investments, and to too infrequent retrofits when this emissions level is already too high. An initially excessive climate gas emissions level is then likely to be worsened when volatility increases.

A "greenprint" for international cooperation on climate change

2013-05-13T04:00:00.000Z

International negotiations on climate change have been dogged by mutual recriminations between rich and poor countries, constricted by the zero-sum arithmetic of a shrinking global carbon budget, and overtaken by shifts in economic power between industrialized and developing countries. To overcome these "narrative," "adding-up," and "new world" problems, respectively, this paper proposes a new Greenprint for cooperation. First, the large dynamic emerging economies -- China, India, Brazil, and Indonesia -- must assume the mantle of leadership, offering contributions of their own and prodding the reluctant industrial countries into action. This role reversal would be consistent with the greater stakes for the dynamic emerging economies. Second, the emphasis must be on technology generation. This would allow greater consumption and production possibilities for all countries while respecting the global emissions budget that is dictated by the climate change goal of keeping average temperature rise below 2 degrees centigrade. Third, instead of the old cash-for-cuts approach -- which relies on the industrial countries offering cash (which they do not have) to the dynamic emerging economies for cuts (that they are unwilling to make) -- all major emitters must make contributions. With a view to galvanizing a technology revolution, industrial countries would take early action to raise carbon prices. The dynamic emerging economies would in turn eliminate fossil fuel subsidies, commit to matching carbon price increases in the future, allow limited border taxes against their own exports, and strengthen protection of intellectual property for green technologies. This would directly and indirectly facilitate such a technological revolution.

Biodiversity and national accounting

2013-05-13T04:00:00.000Z

Biodiversity, a property of natural areas, provides a range of benefits to the economy including bioprospecting rents, knowledge and insurance, ecotourism fees, and ecosystem services. Many of these values can be broken out in the System of National Accounts, leading to better estimates of the economic losses when natural areas are degraded or destroyed. Developing countries harbor the great majority of biodiversity, and this diversity provides benefits, including knowledge and carbon sequestration, to the whole world. However, protecting biodiversity is particularly costly for developing countries: the opportunity cost of foregoing development of natural areas exceeds 1 percent of gross domestic product in 58 developing countries, versus only four OECD countries. The Global Environment Facility can offset these costs through grant finance, but annual Global Environment Facility finance and co-finance averages only 8 percent of the opportunity costs faced by low-income countries.

Productivity growth in Europe

2013-05-14T04:00:00.000Z

This paper tests whether structural or firm-specific characteristics contributed more to (labor) productivity growth in the European Union between 2003 and 2008. It combines the Amadeus firm-level data on productivity and firm characteristics with country-level data describing regulatory environments from the World Bank's Doing Business surveys, foreign direct investment data from Eurostat, infrastructure quality assessments from the Global Competitiveness Report, and credit availability from the World Development Indicators. It finds that among the 12 newest members of the European Union, country characteristics are most important for firm productivity growth, particularly the stock of inward foreign direct investment and the availability of credit. By contrast, among the more developed 15 elder European Union member countries, firm-level characteristics, such as industry, size, and international affiliation, are most important for growth. The quality of the regulatory environment, measured by Doing Business indicators, is importantly correlated with productivity growth in all cases. This finding suggests that European Union nations can realize significant benefits from improving regulations and encouraging inward and outward foreign direct investment.

Structural change, dualism and economic development : the role of the vulnerable poor on marginal lands

2013-05-22T04:00:00.000Z

Empirical evidence indicates that in many developing regions, the extreme poor in more marginal land areas form a "residual" pool of rural labor. Structural transformation in such developing economies depends crucially on labor and land use decisions of these most-vulnerable populations located on abundant but marginal agricultural land. Although the modern sector may be the source of dynamic growth through learning-by-doing and knowledge spillovers, patterns of labor, land and other natural resources use in the rural economy matter in the overall dynamics of structural change. The concentration of the rural poor on marginal lands is essentially a barometer of economy-wide development. As long as there are abundant marginal lands for cultivation, they serve to absorb rural migrants, increased population, and displaced unskilled labor from elsewhere in the economy. Moreover, the economy is vulnerable to the "Dutch disease" effects of a booming primary products sector. As a consequence, productivity increases and expansion in the commercial primary production sector will cause manufacturing employment and output to contract, until complete specialization occurs. Avoiding such an outcome and combating the inherent dualism of the economy requires both targeted polices for the modern sector and traditional agriculture on marginal lands.

The poverty impact of climate change in Mexico

2013-05-23T04:00:00.000Z

This paper examines the effects of climate change on poverty through the relationship between indicators of climate change (temperature and rainfall change) and municipal level gross domestic product, and subsequently between gross domestic product and poverty. The evidence suggests that climate change could have a negative impact on poverty by 2030. The paper proposes a two-stage least squares regression where it first regresses temperature and rainfall (along with geographic controls and state and year fixed effects) on municipal gross domestic product per capita for 2000 and 2005 The resulting gross domestic product per capita is used in a second equation to estimate municipal poverty on the same years. The authors then incorporate projections of temperature and rainfall changes by 2030 into the estimated climate-gross domestic product coefficients to assess the effects of climate change in economic activity and how this in turn will influence poverty. At the same time, they account for the potential adaptive capacity of municipalities through higher population densities and economic growth. Both would reduce poverty by 31.72 percentage points between 2005 and 2030 with changing climate. However, poverty could have been reduced up to 34.15 percentage points over the same period had there been no climate change. This suggests that climate change slows down the pace of poverty reduction. An alternative reading is that poverty is expected to increase from 15.25 percent (without climate change) to 17.68 percent (with climate change) by 2030. Given the existing population projections for 2030, this represents 2,902,868 people remaining in poverty as a result of climate change.

Greening global value chains : innovation and the international diffusion of technologies and knowledge

2013-05-30T04:00:00.000Z

Using novel data on patents, trade of equipment goods, and foreign direct investments and insights from the economic literature, the paper seeks to lay out the state of knowledge on the role of innovation and the diffusion of technologies in the greening of global value chains as well as some of the main policy issues. A special emphasis is put on developing countries -- distinguishing emerging economies and least-developed countries -- and on climate-mitigation technologies. Emerging economies are already reasonably well integrated in the global economy. As a consequence, technologies flow in through the imports of capital goods and local investments by multinational enterprises owning technologies. Pushing further technology transfer requires strengthening intellectual property rights, lowering barriers to trade and investments and improving technological absorptive capacities. In contrast, their role in innovation is limited. Standard tools of innovation policy - public research and development, public support to private research and development, better access to finance - should develop. But studies also suggest that governments should introduce more stringent environmental policies with proper enforcement at home to go beyond the adoption of foreign technologies. The situation of least-developed countries is very different: they do not import green technologies and low barriers to trade and foreign direct investment or strict intellectual property rights are unlikely to trigger technology transfer. In these countries, the focus should be on building technological capacities.

Calculating the carbon footprint from different classes of air travel

2013-05-31T04:00:00.000Z

This paper develops a new methodology for calculating the "carbon footprint" of air travel whereby emissions from travel in premium (business and first) classes depend heavily on the average class-specific occupied floor space. Unlike methods currently used for the purpose, the approach properly accounts for the fact that the relative number of passenger seats in economy and premium classes is endogenous in the longer term, so adding one additional premium trip crowds out more than one economy trip on any particular flight. It also shows how these differences in carbon attributable to different classes of travel in a carbon footprint calculation correspond to how carbon surcharges on different classes of travel would differ if carbon emissions from international aviation were taxed given a competitive aviation sector globally. The paper shows how this approach affects carbon footprint calculations by applying it to World Bank staff travel for calendar year 2009.

Agriculture as a sector of opportunity for young people in Africa

2013-06-03T04:00:00.000Z

This paper sheds light on how to harvest the "youth dividend" in Sub-Saharan Africa by creating jobs in agriculture. The agriculture that attracts the youth will have to be profitable, competitive, and dynamic. These are the same characteristics needed for agriculture to deliver growth, to improve food security, and to preserve a fragile natural environment. With higher priority accorded to implementation of well-designed public investments in agriculture, continued progress on regulatory and policy reform, and attention to assure inclusion of young people in Africa's agricultural renaissance, the sector's handsome youth dividend can be collected and widely shared.

Is urbanization in Sub-Saharan Africa different ?

2013-06-13T04:00:00.000Z

In the past dozen years, a literature has developed arguing that urbanization has unfolded differently in post-independence Sub-Saharan Africa than in the rest of the developing world, with implications for African economic growth overall. While African countries are more urbanized than other countries at comparable levels of income, it is well-recognized that total and sector gross domestic product data are of very low quality, especially in Africa. When instead viewed from the perspective of effective technology, as suggested in endogenous growth frameworks (and as proxied by educational attainment), the African urbanization experience overall matches global patterns. There are differences, however, at the sector level. Agricultural trade effects that improve farm prices deter African urbanization, while they promote urbanization elsewhere. Potential reasons include differences in land ownership institutions and the likelihood of agricultural surpluses being invested in urban production. Positive shocks to modern manufacturing spur urbanization in the rest of the developing world, but effects are dependent on the level of development. Thus many countries in Africa, with their lower level of development, do not respond to these shocks. Finally, historical indicators of the potential for good institutions promote urbanization both inside and outside Africa.

China: west or east wind -- getting the incentives right

2013-06-17T04:00:00.000Z

With rapid development of wind power in China, the following three issues have become barriers for further scale-up: 1) concentration of wind farms in the Three-North region, which became significantly underutilized because of a limited capability of local power grids to off-take and consume wind-generated electricity and because of a lack of coordinated development of long-distance transmission lines to deliver electricity to load centers in the South and East regions; 2) increasing subsidies and, thus, a burden on final consumers; and 3) resistance of local authorities to develop new projects because the new value added tax policy reform. How to deal with these issues will have significant impact on the future development of wind in China. This note proposes a methodology to enhance a comprehensive approach by taking both generation and transmission into account in crafting the development plan and formulating the incentive policies, which may be useful in addressing these issues.

Multidimensional auctions for public energy efficiency projects : evidence from the Japanese ESCO market

2013-06-17T04:00:00.000Z

Competitive bidding is an important policy tool to procure goods and services from the market at the lowest possible cost. Under traditional public procurement systems, however, it may be difficult to purchase highly customized objects, such as energy efficiency services. This is because not only prices but also other nonmonetary aspects need to be taken into account. Multidimensional auctions are often used to evaluate multidimensional bids. This paper examines the bidding strategy in multidimensional auctions, using data from public energy service company projects in Japan. It shows that multidimensional auctions work well, as theory predicts. The competition effect is significant. In addition, strategic information disclosure, including walk-through and preannouncement of reserve prices, can also promote energy savings and investment. Risk sharing arrangements are critical in the energy service company market. In particular, the public sector should take regulatory risk.

Regulation, trade and productivity in Romania : an empirical assessment

2013-06-18T04:00:00.000Z

Inappropriate regulation can influence productivity performance by affecting incentives to invest and adopt new technologies, as well as by directly curbing competitive pressures. Results of a labor productivity growth model for European Union countries suggest that improving the regulatory environment -- proxied by the Worldwide Governance Indicators regulatory quality indicator -- and boosting effective exposure to competition through increasing trade integration -- expressed as the ratio of exports plus imports to gross domestic product -- have positive effects on productivity growth. In Romania a 10 percent increase in openness to global trade over 1995-2010 would have boosted productivity growth by 9.7 percent per year. A 10 percent increase in openness to European Union trade, in particular, would have led to an annual increase in productivity of 7 percent. Realizing the benefits from trade integration depends to some extent on regulation. In this regard, the effects of regulation on productivity growth are found to be positive, regardless of the indicator used to measure regulation, and both through direct and indirect channels (by increasing the speed at which a country catches up with productivity leaders). Simulation results also show how countries with different levels of regulatory quality would benefit from a regulatory improvement: had Romania improved its regulatory environment to the same level as Denmark in 2010, its annual productivity growth would have been 14 percent higher over 1995-2010.

Technological learning, energy efficiency, and CO2 emissions in China's energy intensive industries

2013-06-18T04:00:00.000Z

Since the onset of economic reforms in 1978, China has been remarkably successful in reducing the carbon dioxide intensities of gross domestic product and industrial production. Most analysts correctly attribute the rapid decline in the carbon dioxide intensity of industrial production to rising energy prices, increased openness to trade and investment, increased competition, and technological change. China's industrial and technology policies also have contributed to lower carbon dioxide intensities, by transforming industrial structure and improving enterprise level technological capabilities. Case studies of four energy intensive industries -- aluminum, cement, iron and steel, and paper -- show how the changes have put these industries on substantially lower carbon dioxide emissions trajectories. Although the changes have not led to absolute declines in carbon dioxide emissions, they have substantially weakened the link between industry growth and carbon dioxide emissions.