2014/11 Supported by k nKonw A A weldegdeg e ol n oNtoet e s eSrei r e ise s f ofro r p r&a c t hteh e nEenregryg y Etx itcrea c t i v e s G l o b a l P r a c t i c e The bottom line Designing Credit Lines for Energy Efficiency Attractive opportunities to invest in energy efficiency are often passed up for lack of Why is this issue important? How do the credit lines work? commercial financing. Donors Investments in energy efficiency depend on the Four design features are critical to success and governments can solve availability of credit Appropriate financing terms. The donor or government agency this problem by setting up Many economically attractive opportunities to invest in energy usually extends the credit line to a participating financial institution dedicated credit lines that allow efficiency are forgone because of various market barriers, notably (typically a bank) at its standard rate and tenor. The financial financial institutions (often local banks) to on-lend funds to the limited availability of commercial financing for energy efficiency institution then on-lends to project developers at terms specified entities wishing to improve their projects. Once a government decides, as a matter of policy, to scale in legal agreements between the donor or government and insti- energy efficiency. The success up energy efficiency, it typically must engage commercial banks to tutions. For example, World Bank credit lines typically require that of a credit line depends to a provide financing to the private end users who will carry out the on-lending occur at market rates to avoid creating market distortions great extent on the selection energy efficiency projects needed to make the national policy a reality. and competitive advantages and that the participating institution of competent and committed Credit lines help banks establish an energy efficiency business provide cofinancing on a one-to-one basis or better (table 1). For financial institutions. A technical line by mitigating the perceived high financial risk of energy efficiency many projects, cofinancing has equaled or significantly exceeded assistance component built into projects and of the energy service companies that carry them out, Bank lending, but in at least one case it was less than 20 percent the credit line helps lower the and sometimes by building into the credit line a technical assistance of the loan amount. Using its standard project-appraisal criteria, technical and financial risk of component to improve understanding of the fundamentals of energy the financial institution will typically finance about 70 percent of a projects. efficiency projects. They also reduce the transaction costs of project project’s total investment costs, requiring the project host or energy finance by standardizing the process of project appraisal and loan service company to finance the remaining 30 percent through equity processing. For project developers, credit lines expand the pool of investments. The participating financial institution will also demand commercial debt financing for their projects. The technical assistance collateral, often 120 percent or more of the loan amount, because it Ashok Sarkar is a component helps lower the perceived technical and financial risks of assumes all repayment risks. In this way, a credit line can leverage senior energy specialist energy efficiency investments. funds both from the financial institution and the project developer. in the World Bank’s Energy efficiency credit lines make funds available to participating When the donor agency providing the credit line is an interna- South Asia region. financial institutions (including local banks). Typically the credit line is tional financial institution, funds for the line are either lent to the Jonathan Sinton is a extended to the financial institution as a low interest rate loan by a participating financial institution via the national government or senior energy specialist in the World Bank’s donor (such as a multilateral development bank or other international directly to the institution with an accompanying guarantee from the Energy Practice. financial institutions) or by government. The recipient institution then government. The exchange rate risk is typically borne by the par- Joeri de Wit is an on-lends the funds to borrowers (industries and other private entities) ticipating financial institution. Repayment occurs through the same energy analyst in the to invest in energy efficiency projects (figure 1). Targeted support for channels followed to disburse the credit line (as shown in figure 1). same practice. energy efficiency investments is warranted because current invest- There is a risk that an energy efficiency credit line may end up ment levels are suboptimal (Taylor and others 2008). subsidizing participating financial institutions, since financing from 2 Designing Credit Lines for Energy Efficiency Figure 1. Typical design of an energy efficiency credit line Credit line with PFI External Credit line with and developer financing Credit line PARTICIPATING PFI cofinancing financing DONOR FINANCIAL International PUBLIC AGENCY INSTITUTION SUB-BORROWER PROJECT financial Low interest Government (PFI) Market or End users “There is a risk that an institution rate Bank concessional rate Dedicated Unit energy efficiency credit line Repayment Repayment Repayment Repayment may end up subsidizing participating financial Technical assistance institutions, since financing • Lack of liquidity in financial • Perception of high financial risk of • Perception of high technical and ADDRESSED from international financial Technical BARRIERS markets for commercial debt energy efficiency projects financial risks of energy efficiency organizations financing of energy efficiency investments among energy users institutions is generally and experts projects • Inadequate expertise and capacity to evaluate energy efficiency projects • Limited interest in using internal less costly than from other and understand financing needs financing for energy efficiency projects sources.” • High transaction costs for processing project financing N.B. Thickness of arrow represents relative size of financial flows to depict leveraging. Public agencies may offer credit lines without the aid of external donors (dashed border). international financial institutions is generally less costly than from often target industry and large firms rather than smaller businesses other sources and participating financial institutions are required to and the residential sector. (This is the case for the World Bank credit lend at market rates. The logic behind the cheaper credit provided lines described in table 1.) In part the bias toward larger enterprises by the international financial institution is that it partially offsets the is a consequence of the risk assessment and financial evaluation costs incurred by participating financial institutions in establishing procedures that financial institutions use to determine whether a the new business line in energy efficiency lending. Since many project developer will be eligible to borrow from it. Borrowers need energy efficiency investments have shorter payback periods than to be creditworthy in the eyes of the lender, and most lenders do not the typical tenors of loans from international financial institutions, recognize cash flow from energy savings as an acceptable form of there is also a risk that funds provided for the credit line could be collateral. The emphasis on asset-based or balance sheet financing used simply to finance the balance sheets of participating financial limits lending to certain borrowers such as larger firms. Public sector institutions once the initial energy efficiency investments are fully agencies have rarely been the target of energy efficiency credit lines, repaid. One potential remedy is to require the participating financial those that KfW offers in Eastern Europe being an exception. Most institutions to roll over funds to new project lending. Another is commercial lenders are reluctant to provide debt financing to public for international financial institutions to shorten the tenor of loans sector agencies; reciprocally, most public agencies lack the inclina- for credit lines. A third solution may be to exploit the potential to tion and capacity to borrow commercial funds on market terms. combine credit lines for energy efficiency and renewable energy. Project eligibility criteria. The criteria for determining project Accurate targeting of end users. The selection of the eligibility can vary greatly depending on the end-use sectors targeted end-use sector to be targeted depends on the policy goals to which by the credit line, the amount of energy the user consumes, and the the credit line is designed to contribute. In practice, credit lines more technical, social, and environmental characteristics of the project. 3 Designing Credit Lines for Energy Efficiency The criteria may also include minimum energy savings or percentage planning tools; and supporting business development among energy savings. Portfolio risk management criteria usually preclude the com- service companies. To date, the most common focus of technical mitment of a large share of the total amount of financing available assistance has been building the capacity of participating financial through the credit line to any single project or company. (It would be institutions. undesirable to have the success of the credit line depend too heavily An example of how these features work in practice is provided in on just a few investments.) box 1. “Portfolio risk management Technical assistance. The type of technical assistance needed criteria usually preclude to support a new credit line depends on the sectors targeted, the What have we learned? the commitment of a large capacity of the participating financial institutions, and the availability share of the total amount of other technical-assistance resources. The range of technical-as- Financial institutions are both the strength sistance activities is broad: conducting market studies; developing and the weakness of credit lines of financing available appraisal procedures to assess energy efficiency cash flows and through the credit line risks; developing financial products for energy efficiency projects; Credit lines are just one mechanism for financing energy efficiency to any single project or training staff of participating financial institutions; supporting pilot investments. Others include demand-side management by utilities, company.” programs; marketing, monitoring and evaluating programs; dissemi- utility-funded consumer financing, energy efficiency funds, risk-shar- nating experience and lessons learned; adapting and disseminating ing programs, energy saving performance contracting, and equity Table 1. World Bank energy efficiency credit lines Is the line Cofinancing specific World Bank (percentage Disbursement Launch Close Number to energy financing (US$ Cofinancinga World Bank Total financing rate Country year year of PFIs efficiency? Target sector millions) (US$ millions) financing) (US$ millions) (percent) China 2008 2013 2 Y Large and medium industry 200 200 100 400 89 China 2010 2014 1 Y Large and medium industry 100 500 500 600 20 China 2012 2016 1 Y Industry, buildings, SMEs and ESCOs 100 200 200 300 0 China 2011 2016 3 Y Industrial 133 134 101 267 11 China 2012 2018 2 Y Buildings 100 100 100 200 0 Tunisia 2009 2014 2 Y Industrial 40 80 200 120 18 Turkey 2009 2014 2 N Industrial 600 550 92 1150 100 Turkey 2012 2016 2 N Industrial 500 150 30 650 44 Ukraine 2011 2016 1 Y Industrial, commercial and municipal 200 n/a n/a n/a 32 Uzbekistan 2010 2016 2 Y Industrial 24 4.8 20 28.8 49 Turkey 2013 2018 3 N Energy-intensive SME subsectors 201 50.25 25 251.25 7 Uzbekistan 2013 2016 3 Y Industrial 99 43 43 142 14 Source: Limaye 2013. Note: PFI = participating financial institution; SME = small and medium-size enterprise; ESCO = energy service company a. Excludes financing from end users. 4 Designing Credit Lines for Energy Efficiency Box 1. Example of credit line characteristics: China Energy Efficiency Financing project (2008–14) In the China Energy Efficiency Financing (CHEEF) project, the World Bank Project eligibility. Investments must be in renovation or rehabilitation. has provided a line of credit to three commercial banks in China—China Any new construction must be within the boundaries of the existing EXIM Bank, Minsheng Bank, and Huaxia Bank—to enable them to finance premises. The cash flow benefit arising from energy savings associated energy efficiency projects. with the project, as reviewed by the participating financial institution, must “The unique feature of Financing terms. The line of credit was structured as a financial be adequate to repay the total investment cost of the subproject within 10 years. The sub-borrower must obtain approval from the appropriate credit lines is their use intermediary lending operation with a sovereign guarantee from China’s Chinese environmental authorities. Ministry of Finance. The World Bank loan was based on the London of an existing delivery Interbank Offer Rate (LIBOR), was denominated in U.S. dollars, and has a Technical assistance. The GEF grant is used to train personnel in variable spread. East of the three banks received $100 million to be repaid participating financial institutions; to develop new financial products mechanism: the lending in 17.5 years, including a grace period of five years. The funds were on-lent for energy service companies; to adapt loan appraisal and underwriting framework of the by the Ministry of Finance to the three banks at the same financial terms criteria to energy efficiency investments; to conduct market-segment and conditions, and were in turn loaned by the banks at market rates to studies to broaden the end-use sectors and technologies in the portfolio; participating financial industrial enterprises and energy service companies. The participating to build partnerships and engage selected bank branches in market institution.” banks are responsible for debt servicing and bear all of the financial development and in generating deals; and to develop market aggregation risks associated with the World Bank loan. The World Bank required each tools for projects and for small and medium-size enterprises. Policy- bank to invest an additional $100 million or more of its own resources in related technical assistance focused on helping the National Development energy efficiency projects overall, while the participating banks required and Reform Commission to develop market-based mechanisms, such enterprises to which they made project loans to contribute about 30 as schemes for trading energy savings certificates; developing and percent of project costs. The banks in turn required loan recipients to implementing high-priority energy conservation programs during the contribute about 30 percent of the project costs. A Global Environment 12th Five-Year Plan (2011-2015); and strengthening the National Energy Facility (GEF) grant was used to provide technical assistance. Conservation Center. Targeted end users. The targeted end users are medium and large The credit line leveraged $462 million from participating banks and industrial enterprises in China having total annual revenues of at least industrial enterprises—a leverage ratio of 1:4. The investments made CNY 30 million ($4.7 million), based on audited income statements no possible by the credit line are expected to save 1.7 million tons of coal more than two years old. Under CHEEF III, sub-borrower eligibility was equivalent (1.2 million tons of oil equivalent) and to reduce CO2 emissions expanded to include industrial enterprises of all sizes, energy service by 4.2 million tons each year. companies (including leasing companies), and owners of buildings. Source: Wang and others 2012. funds. All of these mechanisms work best within a context of clear may restrict the pool of borrowers that can be reached by the credit national objectives for energy efficiency and supporting policies that line. Still, for donors, credit lines entail minimum risk, as the funds are create a market pull for investments in efficiency. guaranteed by the national government. Furthermore, credit lines The unique feature of credit lines is their use of an existing can be instrumental in developing the market for energy service delivery mechanism: the lending framework of the participating providers. financial institution. This delivery mechanism presents both advan- Accumulated experience with energy efficiency credit lines is tages and limitations. Where the existing lending framework has leading to the identification of good practices for design and imple- well-established project-appraisal procedures and institutions have a mentation. In general, as with all types of support mechanisms, a deep fund of professional expertise, implementation of the credit line credit line should be adapted to context, which includes the national may be quick and easy. Where participating financial institutions have economic, financial, legislative, and regulatory framework, as well limited capacity to manage energy efficiency projects, the credit as the specific characteristics of participating financial institutions, line’s effectiveness may be limited, and project-appraisal procedures project developers, and targeted projects. 5 Designing Credit Lines for Energy Efficiency The overall success of a credit line depends to a great extent On the operational front, simplifying project review and appraisal on the selection of competent and committed financial institutions. procedures wherever possible and integrating them into the financial Institutions need management with an interest in and willingness to institution’s own systems can accelerate deployment of the credit engage in energy efficiency as a new business line, as well as good line. The best example of this is JICA’s credit line to SIDBI (India), in access to, knowledge of, and relationships with the target market. which simple eligibility criteria (projects were eligible if they included Institutions should already be familiar with the sectors they intend preapproved technologies or equipment) allowed loan officers to “Concessional funding to target. To deploy credit lines targeting small and medium-sized quickly appraise a project, enabling SIDBI to make a large number of remains a major factor enterprises in India, JICA and KfW worked with the Small Industries sound loans very quickly. in securing the interest Development Bank of India, which had the requisite experience with A last word. It should be kept in mind that a credit line that is such customers. It is essential, too, that the institutions develop or jointly offered for both renewable energy and energy efficiency may of small and medium work with a technical team that is experienced in energy efficiency tend to find more uptake in renewable energy investments than in enterprises in energy technologies and their benefits. The energy efficiency business line energy efficiency investments, possibly because renewable energy efficiency.” should be handled by the department responsible for commercial projects are larger, have proportionally lower transaction costs, and loans to the target clients. Staff in the department should be moti- involve assets that are easier to use as collateral. vated to develop business through performance incentives and other commercial management tools. Technical assistance can help many financial institutions get the References credit line working faster. To create a market conducive to sustained Limaye, D. 2013. “Energy Efficiency Credit Lines: A Synthesis Paper.” energy efficiency investments, capacity building for participating Sustainable Energy Department, World Bank, Washington, DC. financial institutions and for the broader energy efficiency network Taylor, R. P., C. Govindarajalu, J. Levin, A. S. Meyer, W. A. Ward. 2008. is recommended. Technical assistance offered to end users and Financing Energy Efficiency: Lessons from Brazil, China, India and government can help develop the broader energy efficiency market, Beyond. Washington, DC: World Bank. http://elibrary.worldbank. stimulate interest in energy efficiency projects, disseminate the org/doi/book/10.1596/978-0-8213-7304-0 positive results obtained from the credit line, and encourage other Wang, X., R. Stern, D. Limaye, W. Mostert, and Y. Zhang. 2012. banks and local financial institutions to increase their lending for Unlocking Commercial Financing for Clean Energy in East Asia. energy efficiency projects. Washington, DC: World Bank. http://elibrary.worldbank.org/doi/ Concessional funding remains a major factor in securing the book/10.1596/978-1-4648-0020-7. interest of small and medium enterprises in energy efficiency. Because the appraisal criteria of most financial institutions favor This note is based on original work by Ashok Sarkar and Dilip Limaye the financing of larger, more creditworthy energy users with strong (president, SRC Global), with updates and additional material prepared by balance sheets, a credit line targeted at small and medium enter- Joeri de Wit and Jonathan Sinton. The peer reviewers for this note were Jas prises or public sector projects may require credit-enhancement Singh (senior energy specialist in the World Bank’s Europe and Central Asia techniques and much more forceful market-development efforts. region), Gailius Draugelis (lead energy specialist in the Bank’s East Asia and Pacific region), and Luiz Maurer (principal industry specialist, IFC). Get Connected to Live Wire Live Wires are designed for easy reading on the screen and for downloading The Live Wire series of online knowledge notes is an initiative of the World Bank Group’s Energy and self-printing in color or “Live Wire is designed and Extractives Global Practice, reflecting the emphasis on knowledge management and solu- black and white. tions-oriented knowledge that is emerging from the ongoing change process within the Bank for practitioners inside Group. For World Bank employees: and outside the Bank. 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Once a year, the Energy and Extractives Global Practice takes stock of all notes that appeared, reviewing their quality and identifying priority areas to be covered in the following year’s pipeline. Please visit our Live Wire web page for updates: http://www.worldbank.org/energy/livewire e Pa c i f i c 2014/28 ainable energy for all in easT asia and Th 1 Tracking Progress Toward Providing susT TIVES GLOBAL PRACTICE A KNOWLEDGE NOTE SERIES FOR THE ENERGY & EXTRAC THE BOTTOM LINE Tracking Progress Toward Providing Sustainable Energy where does the region stand on the quest for sustainable for All in East Asia and the Pacific 2014/29 and cenTral asia energy for all? in 2010, eaP easTern euroPe sT ainable en ergy for all in databases—technical measures. This note is based on that frame- g su v i d i n had an electrification rate of Why is this important? ess Toward Pro work (World Bank 2014). SE4ALL will publish an updated version of 1 Tracking Progr 95 percent, and 52 percent of the population had access Tracking regional trends is critical to monitoring the GTF in 2015. to nonsolid fuel for cooking. the progress of the Sustainable Energy for All The primary indicators and data sources that the GTF uses to track progress toward the three SE4ALL goals are summarized below. consumption of renewable (SE4ALL) initiative C T I V E S G L O B A L P R A C T I C E ENERGY & EXTRA • Energy access. Access to modern energy services is measured T E S E R I E S F O R T H EIn declaring 2012 the “International Year of Sustainable Energy for energy decreased overall A KNO W L E D G E N Oand 2010, though by the percentage of the population with an electricity between 1990 All,” the UN General Assembly established three objectives to be connection and the percentage of the population with access Energy modern forms grew rapidly. d Providing Sustainable accomplished by 2030: to ensure universal access to modern energy energy intensity levels are high to nonsolid fuels.2 These data are collected using household Tracking Progress Towar services,1 to double the 2010 share of renewable energy in the global surveys and reported in the World Bank’s Global Electrification but declining rapidly. overall THE BOTTOM LINE energy mix, and to double the global rate of improvement in energy e and Central Asia trends are positive, but bold Database and the World Health Organization’s Household Energy for All in Eastern Europ efficiency relative to the period 1990–2010 (SE4ALL 2012). stand policy measures will be required where does the region setting Database. The SE4ALL objectives are global, with individual countries on that frame- on the quest for sustainable to sustain progress. is based share of renewable energy in the their own national targets databases— technical in a measures. way that is Thisconsistent with the overall of • Renewable energy. The note version energy for all? The region SE4ALL will publish an updated their ability energy mix is measured by the percentage of total final energy to Why is this important ? spirit of the work initiative. (World Bank Because2014). countries differ greatly in has near-universal access consumption that is derived from renewable energy resources. of trends is critical to monitoring to pursue thetheGTF in 2015. three objectives, some will make more rapid progress GTF uses to Data used to calculate this indicator are obtained from energy electricity, and 93 percent Tracking regional othersindicators primary will excel and data sources that elsewhere, depending on their the while the population has access le Energy for All in one areaThe goals are summarized below. balances published by the International Energy Agency and the the progress of the Sustainab respective track starting progress pointstowardand the three SE4ALL comparative advantages as well as on services is measured to nonsolid fuel for cooking. access. Accessthat they modern to are able to energy marshal. United Nations. despite relatively abundant (SE4ALL) initiative the resources and support Energy with an electricity connection Elisa Portale is an l Year of Sustainable Energy for To sustain percentage of by the momentum forthe the population achievement of the SE4ALL 2• Energy efficiency. The rate of improvement of energy efficiency hydropower, the share In declaring 2012 the “Internationa energy economist in with access to nonsolid fuels. three global objectives objectives, andathe means of charting percentage of the population global progress to 2030 is needed. is approximated by the compound annual growth rate (CAGR) of renewables in energy All,” the UN General Assembly established the Energy Sector surveys and reported access to modern universalAssistance The World TheseBank and data are the collected International using household Energy Agency led a consor- of energy intensity, where energy intensity is the ratio of total consumption has remained to be accomplished by 2030: to ensure Management Database and the World of theenergy intium of 15 renewable international in the World Bank’s Global agencies toElectrification establish the SE4ALL Global primary energy consumption to gross domestic product (GDP) energy the 2010 share of Program (ESMAP) relatively low. very high energy services, to double Database. measured in purchasing power parity (PPP) terms. Data used to 1 t ’s Household provides Energy a system for regular World Bank’s Energy the global rate of improvemen and Extractives Tracking Framework Health (GTF), which Organization in the energy intensity levels have come and to double the global energy mix, Global Practice. (SE4ALL 2012). based on energy. of renewable The sharepractical, rigorous—yet energy given available calculate energy intensity are obtained from energy balances to the period 1990–2010 global reporting, Renewable down rapidly. The big questions in energy efficiency relative setting by the percentage of total final energy consumption published by the International Energy Agency and the United evolve Joeri withde Wit is an countries individual mix is measured Data used to are how renewables will The SE4ALL objectives are global, economist in with the overall from renewable energy when every resources. person on the planet has access Nations. picks up a way energy that is consistent 1 The universal derived that isaccess goal will be achieved balances published when energy demand in from energy their own national targets through electricity, clean cooking fuels, clean heating fuels, rates the Bank’s Energy and countries differ greatly in their ability calculate this indicator are obtained to modern energy services provided productive use and community services. The term “modern solutions” cookingNations. again and whether recent spirit of the initiative. Because Extractives Global rapid progress and energy for Energy Agency and the United liquefied petroleum gas), 2 Solid fuels are defined to include both traditional biomass (wood, charcoal, agricultural will make more by the refers to solutions International that involve electricity or gaseous fuels (including is pellets and briquettes), and of decline in energy intensity some t of those of efficiency energy and forest residues, dung, and so on), processed biomass (such as to pursue the three objectives, Practice. depending on their or solid/liquid fuels paired with Energy efficiency. The rate stoves exhibiting of overall improvemen emissions rates at or near other solid fuels (such as coal and lignite). will excel elsewhere, rate (CAGR) of energy will continue. in one area while others liquefied petroleum gas (www.sustainableenergyforall.org). annual growth as well as on approximated by the compound and comparative advantages is the ratio of total primary energy respective starting points marshal. where energy intensity that they are able to intensity, measured in purchas- the resources and support domestic product (GDP) for the achievement of the SE4ALL consumption to gross calculate energy intensity Elisa Portale is an To sustain momentum terms. Data used to charting global progress to 2030 is needed. ing power parity (PPP) the International energy economist in objectives, a means of balances published by the Energy Sector International Energy Agency led a consor- are obtained from energy The World Bank and the SE4ALL Global Energy Agency and the United Nations. Management Assistance agencies to establish the the GTF to provide a regional and tium of 15 international for regular This note uses data from Program (ESMAP) of the which provides a system for Eastern Tracking Framework (GTF), the three pillars of SE4ALL World Bank’s Energy and Extractives on rigorous—yet practical, given available country perspective on Global Practice. global reporting, based has access Joeri de Wit is an will be achieved when every person on the planet The universal access goal heating fuels, clean cooking fuels, clean energy economist in 1 agricultural provided through electricity, biomass (wood, charcoal, to modern energy services The term “modern cooking solutions” to include both traditional and briquettes), and Solid fuels are defined the Bank’s Energy and use and community services. biomass (such as pellets 2 and energy for productive petroleum gas), and so on), processed fuels (including liquefied and forest residues, dung, involve electricity or gaseous at or near those of Extractives Global refers to solutions that overall emissions rates other solid fuels (such as coal and lignite). with stoves exhibiting Practice. or solid/liquid fuels paired (www.sustainableenergyforall.org). liquefied petroleum gas Contribute to If you can’t spare the time to contribute to Live Wire, but have an idea for a topic, or case we should cover, let us know! 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ERGY PRACTICE work (World Bank 2014). E G E N O T E S E R I E S F O R T H E E N to electricity, and 93 percent of A K N O W L g regiona l trends is critical monitoring the GTF in 2015. data sources that the GTF uses to Trackin The primary indicator s and the population has access s of the Sustain able Energy for All the three SE4ALL goals are summari zed below. the progres track progress toward Understanding CO Emissions from the Global Energy Sector nonsolid fuel for cooking. is measured to modern energy services THE BOTTOM LINE to Your Name Here t (SE4ALL) initiativ e Energy access. Access connection despite relatively abundan 2 population with an electricity ional Year of Sustainab le Energy for by the percentage of the access to nonsolid fuels. 2 hydropower, the share the energy sector contributes In declaring 2012 the “Internat objectives percenta ge of the population with establish ed three global and the and reported about 40 percent of global of renewables in energy All,” the UN General Assembly using household surveys Why is this issue important? access to modern These data are collected 2030: to ensure universal and the World Become an author has remained emissions of CO2. three- consumption to be accomplished by of renewable energy in in the World Bank’s Global Electrification Database high energy knowledge the share of the 2010 . energy requires very relatively low. Mitigating climate change services, to 1 double ld Energy Database quarters of those emissions rate of improvement Organization’s Househo CO2 intensity levels have come and to double the global Figure 1. CO2 emissions Health Figure 2. energy-related The share of renewable energy in the energy come from six major the global energy mix, sources of CO question s2 emissions to the period 1990–201 0 (SE4ALL 2012). by sector Renewab le energy. emissions by country consumption down rapidly. The big economies. although coal-fired in energy efficiency relative countries setting percenta ge of total final energy mix is measured by the of Live Wire and global, with individual LICs evolve les will opportunities to cut emissions of greenhouse aregases used to plants account for just are how renewab Identifying The SE4ALL objectives le energy resources. Data 0.5% picks upunderstanding of the main sources ofin those a way that is consistent with emis- the overall that is derived from renewab energy balances published 40 percent of world energy when energy demand requires a clear their own national targets in their ability are obtained from calculate this indicator Other Carbonrates for more than 80 percent of differ greatly countries Residential production, they were again and whethersions.recent dioxide (CO2) accounts spirit of the initiative. Because 6% sectors progress Other MICs nal Energy Agency and the United Nations. will make more rapid 15% intensity gas emissions globally, 1 primarily from the burning s, some 10% by the Internatio China improvement of energy efficiency is contribute to your responsible for more than of decline in energytotal greenhouse to pursue the three objective on their Other HICs . The rate of energy sector—defined include toexcel elsewhere, depending Energy efficiency 30% growth rate (CAGR) of energy will continue. of fossil fuels (IFCC 2007). The will 8% in one area while others by the compound annual Energy 70 percent of energy-sector as well as on 41% approxim and heat generation—contributed and compara tive advantages 41 ated Japan 4% energy the ratio of total primary Industry emissions in 2010. despite fuels consumed for electricity respective starting points 20% Russia energy intensity is that they are able to marshal. in 2010 (figure 1). Energy-related intensity, where USA product (GDP) measured in purchas- improvements in some percent of global CO2 emissions the resources and support 7% gross domestic practice and career! up the bulk of such ent of the SE4ALL Other consump tion to India 19% intensity is an at the point of combustion make for the achievem calculate energy countries, the global CO2 Elisa 2 emissions COPortale To sustain momentum transport Road 7% EU terms. Data used to andinare generated by the burning of fossil is needed. global progress to 2030 6% transport fuels, industrial ing power parity (PPP) the International economist objectives, a means of charting balances published by emissions 11% emission factor for energy energy 16% EnergyandSector nonrenewable municipal waste to generate nal Energy Agency led electricity Internatio a consor- are obtained from energy The World Bank and the thewaste, generation has hardly changed United Nations. ent Assistance venting and leakage to establish the emissions SE4ALL Global Energy Agency and the sector at the point and over the last 20 years. and heat. Black carbon and methane Managem tium of 15 international agencies Notes: Energy-related CO2 emissions are CO2 emissions from the energy from the GTF to provide a regional of the for regular This note usesanddata domestic Program (ESMAP) are not included in the analysis presented in this rk note. which provides a system (GTF), of combustion. Other Transport includes international marine aviation bunkers, of SE4ALL for Eastern Extractives Tracking Framewo available Other Sectors rail and pipeline transport; perspect ive on the three include pillars commercial/public World Bank’s Energy and given aviation and navigation, country on rigorous—yet practical, services, agriculture/forestry, fishing, energy industries other than electricity and heat genera- Global Practice. global reporting, based elsewhere; Energy = fuels consumed for electricity and Where do emissions come from? tion, and other emissions not specified as has in the opening paragraph. HIC, MIC, and LIC refer to high-, middle-, access Joeri de Wit is an will be achieved when on the planet heat generation, every person defined The universal access goal of countries heating fuels, energy economistare Emissions concentrated in 1 in a handful to modern energy services provided through electricity, fuels, clean and low-income clean cooking countries. cooking solutions” to include both traditional biomass (wood, charcoal, agricultural The term “modern Source: IEA 2012a. Solid fuels are defined and briquettes), and the Bank’s Energy and use and community services. biomass (such as pellets 2 and come primarily from burning and energy coal for productive electricity or gaseous fuels involve (including liquefied petroleum gas), of and forest residues, dung, and so on), processed Vivien Foster is sector Extractives Global refers to solutions that overall emissions rates at or near those other solid fuels (such as coal and lignite). with stoves exhibiting or solid/liquid fuels paired emissions closely manager for the Sus- The geographical pattern of energy-related CO Practice. gas 2 (www.sustainableenergy forall.org). liquefied petroleum middle-income countries, and only 0.5 percent by all low-income tainable Energy Depart- mirrors the distribution of energy consumption (figure 2). In 2010, ment at the World Bank countries put together. almost half of all such emissions were associated with the two (vfoster@worldbank.org). Coal is, by far, the largest source of energy-related CO2 emissions largest global energy consumers, and more than three-quarters globally, accounting for more than 70 percent of the total (figure 3). Daron Bedrosyan were associated with the top six emitting countries. Of the remaining works for London This reflects both the widespread use of coal to generate electrical energy-related CO2 emissions, about 8 percent were contributed Economics in Toronto. power, as well as the exceptionally high CO2 intensity of coal-fired by other high-income countries, another 15 percent by other Previously, he was an power (figure 4). Per unit of energy produced, coal emits significantly energy analyst with the more CO emissions than oil and more than twice as much as natural 2 World Bank’s Energy Practice. Gas Inventory 1 United Nations Framework Convention on Climate Change, Greenhouse 0.php gas. Data—Comparisons By Gas (database). http://unfccc.int/ghg_data/items/380