U.S. Position Provided by U.S. Executive Director of the World Bank, Whitney Debevoise, 

on the World Bank Group Energy Strategy Concept Note 

From the meeting of the Committee on Development Effectiveness 

July 8, 2009 

As the World Bank Group (WBG) Management undertakes an update of its Energy Strategy, the 

U.S. supports the twin pillars of improving access and reliability of energy supply and supporting 

environmentally sustainable energy paths. 

The process of revising the Energy Strategy is occurring during a period of intense international 

interest in the WBG’s role in climate change as well as of a retrenchment in private investment 

in energy infrastructure, both of which have implications for the access and the climate agenda. 

Although the U.S. recognizes that the update process will unfold over the next year, during 

which the U.S. awaits the outcome of international climate negotiations, it is important that this 

Energy Strategy be pointed in the right direction. Thus, the U.S. would like to offer the 

following comments: 

Improving access 

The World Bank’s access agenda is largely not at odds with the climate agenda, as long as the 

Energy Strategy puts a priority on operations that serve both agendas. Examples include: 1) 

investing in supply-side efficiency (generation, transmission, and distribution), distributed 

generation, and end-use efficiency which allow more people to be served by a given fuel input 

level; and 2) reforming tariffs and improving revenue collection to eliminate incentives for 

electricity overuse while providing safety nets for the poor. 

Greenhouse gas accounting

The U.S. supports acceleration of the World Bank’s efforts to apply Greenhouse Gas (GHG) 

accounting to both public and private sector projects. Analysis of net life-cycle GHG emissions 

may be relatively easy for large point source projects. If so, the WBG could roll out GHG 

accounting for such projects first. At this point, the U.S. is not advocating that the World Bank 

begin to adjust its energy sector investment decisions on the basis of a carbon price applied to its 

economic evaluation procedures. The U.S. acknowledges that developing countries have not yet 

agreed to formal carbon constraints. Recognizing that attention gets paid to what gets measured, 

however, calculating the switching price of carbon for projects with large carbon footprints 

would provide valuable information on the sensitivity of the project portfolio to the social cost of 

carbon, and indicate the level of incremental cost financing needed to internalize those costs. 
Fossil fuel lending

The U.S. is mindful of the debate both within and outside the WBG as to whether the World 

Bank Group should continue to lend for coal-fired power generation. This Concept Note does 

not adequately address the issue; the U.S. expects the Energy Strategy and follow-on guidance 

documents to provide clear procedures and criteria on the subject. The U.S. considers such 

engagement appropriate under certain limited circumstances, such as when a robust process of 

upstream engagement has fully evaluated the commercial availability and financing for cleaner 

alternatives, and has concluded that no appropriate alternative exists, particularly in the poorest 

countries; and when the project is being brought forward in the context of a broader World Banksupported plan to control emissions throughout the sector. The U.S. looks forward to the 

opportunity to discuss these concepts and evaluation criteria with World Bank Management and 

other Board members. 

Allocation of resources 

The Energy Strategy should provide clear guidance and criteria on leveraging financial 

instruments from the World Bank’s own resources and external funding sources with the 

financing needs of low-carbon options. If the World Bank is to play a role in a future financial 

framework on climate change, it is important that the limited climate trust funds available (e.g., 

Global Environmental Facility (GEF), Climate Investment Funds (CIF)) be deployed judiciously 

where none of the World Bank’s internal financing instruments will induce the GHG abatement 

action. For example, energy efficiency projects often have attractive returns when financed 

using only the World Bank’s own resources, whereas some renewable energy projects are only 

attractive if they receive co-financing from the GEF or CIFs. When climate grant finance is 

necessary, project designs should incorporate market penetration plans beyond demonstration 

effects as well as exit strategies. Moreover, incremental cost financing should not be used where 

subsidies distort energy choices. 

Energy sector reform

The U.S. commends the emphasis on improving operational and financial performance of the 

energy sector and strengthening governance to improve the contribution of energy to equitable 

economic development. If the private sector is expected to invest in the energy sector over the 

long term, however, the WBG needs to address investment climate and regulatory issues more 

proactively. At the same time, the U.S. encourages the WBG to use the Energy Strategy to more 

effectively incorporate GHG/climate considerations into assistance for energy sector reform 

given that investments in low-carbon options can be quite sensitive to market design issues. 

Market design and operations affect investment in capital-intensive generation or options with 

some technological risk. Some energy sector reforms may tend to make low-carbon options 

more attractive (e.g., tariff and fuel subsidy reforms); whereas others (e.g. unbundling, wholesale 

competition) may tend to discourage low-carbon options. Better ex ante understanding of these 
implications will allow trade-offs to be considered in choosing among different reform models. 

Similarly, the World Bank should draw upon successes and failures in subsidy reform to help 

target limited resources. 

Transportation Fuels and Extractive Industries

The Energy Strategy should give greater attention to the WBG’s role in transportation fuels than 

is suggested by the Concept Note. The promotion of low-sulfur gasoline and diesel fuels for 

transportation is a key factor enabling the introduction of more fuel-efficient and clean vehicle 

technologies. 

The Energy Strategy should also present a clear statement on the WBG’s role in energy 

extractive industries. This should include support for EITI and EITI++ and cover both 1) public 

sector fiscal transparency and accountability standards; and 2) revenue-transparency 

requirements for private sector operations. 

Institutional changes

WBG management should give careful consideration to how best to motivate the entrepreneurial 

spirit among staff and generate institutional innovations to address the energy challenge. The 

U.S. notes the staff disincentives for small-scale renewable energy and energy-efficiency 

projects. In addition, the Energy Strategy should address means to facilitate cross-sectoral 

interaction (e.g., between energy and environmental specialists), achieve economies of scale in 

the knowledge base by sharing technical information across countries, create financial platforms 

to leverage higher levels of private investment (including portfolio equity), and importantly, 

induce better coordination between the public and private lending sides of the WBG that is 

critical to matching policy reform with infrastructure operations. The World Bank should also 

ensure that it has the staff expertise to pursue a low-carbon energy agenda, both at the center and 

in the regional Vice Presidencies. Where project performance is constrained by lack of host 

country capacity, the WBG should leverage expertise from and coordinate with other multilateral 

and bilateral programs. 

Looking ahead, the draft Energy Strategy distributed for consultation should reflect the very real 

possibility that proposals for an expanded WBG role in climate finance that have been submitted 

by various Parties to the UNFCCC will become part of the Copenhagen agreement. A scenario 

in which tens of billions of dollars are to be channeled through the WBG and other MDBs for 

GHG mitigation in a post-2012 regime would have enormous implications for the World Bank’s 

overall engagement in the sector. Therefore, the U.S. proposes a formal stock-taking and full 

Board discussion of the draft Energy Strategy shortly after Copenhagen. With respect to 

outreach, the U.S. encourages the World Bank to hold the planned international forum in 

Washington early in the consultation process. 
Finally, if the Energy Strategy update process is to be worth its time and expense, the final 

document needs to have a significant and tangible impact on WBG operations. In this regard, the 

U.S. is less interested in the final strategy document serving as an external flagship study than 

articulating clear and practical guidance for the WBG’s engagement in the sector that is 

grounded in regional and country programs, as well as in the Strategic Framework for 

Development and Climate Change. While there is a brief reference to knowledge management 

and building skills, a key accompaniment to the strategy document should be a business plan 

with staffing and training needs, internal incentives, technical guidance documents, and budget 

implications. 

The World Bank has been a leader in the development results agenda. This strategy document 

needs to live up to that standard and demonstrate that the World Bank’s shareholders are making 

a clear set of strategic choices. The Strategy should also incorporate a set of measurable 

performance indicators whose progress should be tracked and then evaluated after an appropriate 

period. The U.S. urges that inputs, outputs, and outcomes be explicitly differentiated.