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Investing in Sustainable Energy Futures

Multilateral Development Banks' Investments in Energy Policy

This report reviews loans provided by Multilateral Development Banks (MDBs) to developing countries for electricity policy from 2006–2008. It examines those policies, regulations, and institutional capacities in the electricity sector that will direct both public and private investment in sustainable energy options.

Key Findings

Executive Summary

The electricity sector lies at the nexus of two urgent global imperatives: powering economic activities and livelihoods and reducing greenhouse gas (GHG) emissions from the use of fossil fuels. The international community is looking to multilateral development banks (MDBs) to help developing countries balance these sometimes conflicting imperatives. Historically, developing countries have drawn on the public financial resources of MDBs to develop electricity infrastructure. The MDBs have propagated their ideas about technology choice, regulatory policy, and service delivery alongside their capital investments in new power lines and plants.

Energy prices do not reflect the true costs of fossil-fuel technologies to public health, to the local environment, and to the planet’s climate system. Decision making in the electricity sector has tended to be both exclusive and opaque, dominated by interests with a stake in “business as usual” practices. As the prices of fossil fuels rise along with our understanding of the environmental and social costs of conventional energy, we need new and better ways to meet energy demand and to support long-term development. Standard energy policy and regulatory mechanisms do not support the renewable energy and energy efficiency necessary to reduce emissions from the energy sector. In most countries, policies and regulations tend to emphasize short-term cost and supply considerations rather than the long-term benefits of the enhanced energy security, environmental performance, and cost savings over time offered by clean technologies.

MDBs are in a position to work with stakeholders in developing countries, including other donors, to pursue low-carbon growth options that also support poverty alleviation. This report examines those policies, regulations, and institutional capacities in the electricity sector that will direct both public and private investment in sustainable energy options. The elements we have proposed do not prescribe a particular mix of technologies or approaches that should be emphasized in any country or region, as this would be neither appropriate nor possible. Every country is endowed with a unique set of energy resources, and the economic, social, and political circumstances that affect how it can meet energy demand are also unique. These elements are instead intended to help any country consider the options for how best to provide electricity services in light of intertwined economic, social and environmental considerations, in order to provide critical development benefits and reduce greenhouse gas emissions.

Enabling Investment in Sustainable Energy

Policies & Regulations

  • Long-term integrated energy planning.
  • Policies and regulations encouraging energy efficiency.
  • Policies and regulations promoting renewable energy.
  • Access to electricity for the poor.
  • Pricing structures encouraging efficiency and reducing consumption.
  • Subsidy reforms to reveal true costs of fossil fuels and promote the viability of sustainable energy options.

Institutional Capacity & Governance

  • Executive agencies’ capacity for sustainable electricity.
  • Regulatory agencies’ capacity to oversee implementation of sustainable electricity policy.
  • Utilities’ capacity to promote energy efficiency and renewables.
  • Transparency of policy, planning, and regulatory processes for electricity.
  • Stakeholders’ engagement in policy, planning, and regulatory processes.

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