Why the World Bank Is Taking On Climate Change

The organization believes that increased drought, extreme storms, and rising sea levels are significant threats to economies worldwide.

The Word Bank building in Washington, Friday, Jan. 18, 2008. The World Bank said it would not open its buildings in Washington on Friday because of a bomb threat. 
National Journal
Coral Davenport
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Coral Davenport
Aug. 12, 2013, 2 a.m.

The World Bank, headquartered a block from the White House, was foun­ded after World War II to com­bat glob­al poverty. But over the past year, fight­ing cli­mate change has be­come the bank’s new guid­ing prin­ciple, as eco­nom­ic evid­ence in­dic­ates that glob­al warm­ing will be a driv­ing cause of poverty world­wide in the 21st cen­tury. The bank has be­come a big play­er in cli­mate policy, in­vest­ing bil­lions an­nu­ally in­to cli­mate-re­lated pro­grams — and block­ing money from pro­jects such as coal-fired power plants. In a Novem­ber re­port, the bank de­tailed the dev­ast­at­ing eco­nom­ic con­sequences of a glob­al an­nu­al tem­per­at­ure in­crease of 4 de­grees Celsi­us (7.2 de­grees Fahren­heit) by 2100. In a June study, the bank pro­jec­ted that due to cli­mate change, by the 2030s Afric­an coun­tries could lose up 80 per­cent of cro­p­land and ma­jor por­tions of Bangkok and Vi­et­nam could be flooded. Na­tion­al Journ­al spoke with Rachel Kyte, the bank’s vice pres­id­ent of sus­tain­able de­vel­op­ment, about the eco­nom­ic im­pact of cli­mate change.

NJ: Why is the World Bank now put­ting so much em­phas­is on cli­mate change?

Kyte: We’ve come to the real­iz­a­tion that we can­not achieve our mis­sion, which is to end poverty, un­less we slow the rate of cli­mate change. Cli­mate sci­ence now shows that we’re on course for a 4-de­gree [Celsi­us] tem­per­at­ure rise by 2100, that we’re go­ing to be 2 de­grees warm­er by the 2030s. And that’s go­ing to have dev­ast­at­ing ef­fects on food pro­duc­tion, how liv­able cit­ies are…. It’s go­ing to be ex­traordin­ar­ily dif­fi­cult for the poor, who are the least re­si­li­ent, to be part of the growth and op­por­tun­ity story over the next few dec­ades if cli­mate change is un­abated.

NJ: So cli­mate change is now a driv­ing force of the World Bank’s mis­sion?

Kyte: Ab­so­lutely. There are coun­tries in Africa ex­per­i­en­cing drought every two years as op­posed to every five, or every 10 years. If the eco­nom­ic im­pact of a crip­pling drought is 1, 2, or 3 per­cent­age points of GDP lost in a year and this is hap­pen­ing every two years, these coun­tries are go­ing back­wards rather than for­wards. Cli­mate change is ab­so­lutely cent­ral to our un­der­stand­ing of how we can help these coun­tries grow and prosper.

NJ: How does a fin­an­cial-de­vel­op­ment in­sti­tu­tion do that?

Kyte: It’s a good ques­tion. We work with gov­ern­ments and the private sec­tor … to un­der­stand their as­pir­a­tions around growth and com­pet­it­ive­ness. We need to help them factor in the risks that they will face as a res­ult of the cli­mate im­pacts that can be pre­dicted — in­crease of ex­treme weath­er events, sea-level rise, crop-pro­duc­tion dis­lo­ca­tion. We need to walk them through the risks of cli­mate change and the need to in­vest in their own re­si­li­ence and in low-car­bon de­vel­op­ments.”¦ We need to walk them through the op­por­tun­it­ies that come from avoid­ing the lock-in of a car­bon-in­tens­ive growth mod­el. And we need to walk them through wheth­er there are up-front cap­it­al costs “¦ and where those costs can be met with mo­bil­iz­a­tion of dif­fer­ent fin­an­cial or in­vest­ment re­sources.

NJ: For the de­veloped world, par­tic­u­larly the U.S., how do you make the case that there’s an eco­nom­ic cost to cli­mate change?

Kyte: The ex­treme weath­er events that we are ex­per­i­en­cing glob­ally “¦ bring enorm­ous costs. The suc­ces­sion of storm events, droughts, the cycle of fires “¦ have enorm­ous eco­nom­ic dis­lo­ca­tion. Bey­ond just the ex­treme weath­er events, in which in­sur­ance costs can be cal­cu­lated, there are costs in not plan­ning to ac­com­mod­ate the in­creased in­tens­ity and fre­quency of some of these events. One su­per­storm is one thing, but if you now ex­pect the su­per­storm to hit on a more in­tens­ive or more reg­u­lar basis, not plan­ning for that is an eco­nom­ic folly.

NJ: In his cli­mate-change speech in June, Pres­id­ent Obama called for an end, glob­ally, to pub­lic in­vest­ment in coal-fired power plants, the world’s chief con­trib­ut­or to cli­mate-change emis­sions — a goal the World Bank has in­dic­ated that it will sup­port. But in many de­vel­op­ing eco­nom­ies, coal of­fers the cheapest — and some­times only — way for poor pop­u­la­tions to gain ac­cess to elec­tri­city. How do you jus­ti­fy this?

Kyte: The way we square this circle is that we want sus­tain­able en­ergy for all. We want to close the en­ergy ac­cess gap by 2030 “¦ but we would like the en­ergy mix to be­come sig­ni­fic­antly green­er over the same time peri­od. There are 1.2 bil­lion people who don’t have ac­cess to en­ergy today. They are mostly liv­ing in poor coun­tries.”¦ Ex­tend­ing en­ergy to them, even if we did so with tra­di­tion­al fossil fuels, would only ac­count for less than 1 per­cent of glob­al emis­sions. Get­ting en­ergy ac­cess is crit­ic­ally im­port­ant. Eco­nom­ies don’t grow, people can’t run busi­nesses, people can’t get jobs un­less there’s en­ergy. So we have to provide that. But at the same time, the bur­den of ac­tion in terms of mak­ing the en­ergy sys­tem clean­er lies with coun­tries that are fully de­veloped.”¦ The very poor, they should get ac­cess. They should get af­ford­able en­ergy. We’d like it to be clean, but we don’t think we can bal­ance the books on the back of the poor. And in middle-in­come and fast-grow­ing and in de­veloped coun­tries “¦ it’s about ef­fi­ciency and a trans­ition to­wards a clean­er en­ergy mix.

NJ: The U.S. is the largest his­tor­ic cli­mate-change pol­luter, al­though Pres­id­ent Obama has said he’d now like to make the U.S. a lead­er in ad­dress­ing cli­mate change — start­ing with new reg­u­la­tions on car­bon pol­lu­tion from power plants. How is the U.S. do­ing as a lead­er on cli­mate?

Kyte: The short an­swer is that nobody’s do­ing well enough. We’re on track for 4 de­grees [glob­al av­er­age Celsi­us tem­per­at­ure rise] by 2100 which is well over where we said as a glob­al com­munity we wanted to be”¦.. If you’re con­cerned about your chil­dren’s health, your own health, your grand­chil­dren’s health, if you’re con­cerned about the job your child’s go­ing to get, if you’re con­cerned about where your grand­chil­dren are go­ing to live — this is front of mind. We all agree, whichever way we vote, whichever church, syn­agogue or mosque we pray in, or if we don’t pray at all — we want the next gen­er­a­tion to be bet­ter off than the cur­rent gen­er­a­tion. The sci­ence is show­ing us that we are put­ting that in jeop­ardy every day we don’t make de­cisions about clean en­ergy”¦. The prob­lem is that people ima­gine this is a world where we have to wear sack­cloth, where there’s no joy or op­por­tun­ity. We don’t think that’s true.”¦ We think it’s per­fectly pos­sible, and we’ve pro­duced the eco­nom­ic evid­ence to sup­port it, to grow green­er, and that there will be jobs, eco­nom­ic op­por­tun­ity, and sta­bil­ity and safety if we do so.

NJ: There’s a lot of de­bate in the U.S. about the eco­nom­ic costs of cli­mate policy. In par­tic­u­lar, Re­pub­lic­ans and the coal in­dustry ar­gue that reg­u­la­tions on coal plants or a car­bon price will hurt the eco­nomy and the coal in­dustry in par­tic­u­lar, rais­ing en­ergy prices and cost­ing jobs in coal coun­try.

Kyte: There is al­ways a fear that en­vir­on­ment­al reg­u­la­tion drives down com­pet­it­ive­ness, slows growth, and gets rid of jobs. In fact, en­vir­on­ment­al reg­u­la­tion poises coun­tries to­wards con­tin­ued com­pet­it­ive­ness. Tech­nic­ally it is true, you need to make short-term de­cisions for long-term gain. There may be some short-term dis­rup­tion in cer­tain in­dus­tries and cer­tain parts of the eco­nomy. But there will be long-run op­por­tun­it­ies else­where.”¦ That’s dif­fi­cult to man­age polit­ic­ally, but eco­nom­ic­ally, that can be demon­strated.

Fi­nally, if car­bon is the prob­lem, which it is “¦ then we should be put­ting a price on something which is bad. And if we put a price on it, one has to won­der, with­in the eco­nomy, how much you want to have an ex­pos­ure to a com­mod­ity which is go­ing to have a sig­ni­fic­ant price to it at some point in the near- to me­di­um-term fu­ture. You don’t have to be­lieve eco­nom­ic the­ory for that. You have to look at how some ma­jor cor­por­a­tions around the world, in­clud­ing U.S. cor­por­a­tions, are factor­ing in­to their stra­tegic plan­ning a pos­sible price on car­bon and mak­ing de­cisions about how ex­posed they want to be to car­bon-in­tens­ive in­dustry.

NJ: What about the role of China, which is the largest cur­rent car­bon pol­luter, and also a grow­ing, de­vel­op­ing eco­nomy, hop­ing to lift mil­lions of cit­izens out of poverty?

Kyte: The new Chinese lead­er­ship “¦ is ex­tremely fo­cused on this. That’s been re­vealed in the bi­lat­er­al dia­logue in the U.S. and in our con­ver­sa­tions with them. They are work­ing to un­der­stand the path of urb­an­iz­a­tion and the im­pact that has on emis­sions. They have a large pop­u­la­tion which they want to see prosper and grow. And they are mov­ing away from their de­pend­ence on fossil fuels. They also have sig­ni­fic­ant wa­ter scarcity. They have an ex­traordin­ar­ily com­plex situ­ation with which to deal. But chan­ging the path of growth to make it lower-car­bon is cent­ral to the last [Chinese na­tion­al] five-year plan.”¦ Don’t for­get, they are pi­lot­ing a do­mest­ic car­bon-trad­ing sys­tem with the com­mit­ment to hav­ing a na­tion­al sys­tem. That’s an ag­gress­ive move by them to try to find mar­ket-based mech­an­isms to drill car­bon-ef­fi­ciency through their eco­nomy.

NJ: Any­thing else you’d like to add?

Kyte: There isn’t a situ­ation where one end of the boat goes up and the oth­er end goes down. We’re all in this boat to­geth­er. Cli­mate change is a lev­el­er. If we don’t deal with it as an eco­nom­ic is­sue, it will get the best of us. The im­pacts of cli­mate change are not par­tis­an. They will hit you if you’re in Staten Is­land or in Bat­tery Park, and they’ll con­tin­ue to hit you, again and again and again. I don’t think that has been fully un­der­stood in every de­veloped coun­try, and the soon­er we grasp that, the bet­ter.

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