Clean Energy as a Path Out of Poverty — A 2015 Perspective

Energy’s role in reducing poverty

Finding a route out of poverty is a major development challenge. People living in poverty need reliable, lasting energy access to improve their livelihoods. At the time of this 2015 analysis, more than one billion people lacked electricity, limiting opportunities to run a business, provide light for children to study or cook more conveniently.

Ending poverty requires greater access to energy while addressing environmental pressures and climate change. Climate change affects countries and communities worldwide, but people with the fewest resources are often the most vulnerable because they have less capacity to adapt.

The challenge is to expand energy production for people who do not yet have electricity while reducing the greenhouse gas emissions that drive climate change. There is no single solution. Poor communities cannot reasonably be denied energy access because developed countries have already emitted large quantities of carbon. Combining suitable policies and programmes with new thinking, technology, political commitment and finance can expand access while accelerating the transition towards electricity systems with no carbon emissions.

Clean energy can serve several development goals

The analysis described five World Bank priorities: supporting low-carbon cities; advancing climate-smart agriculture; encouraging energy efficiency and investment in renewable energy ; supporting efforts to end fossil-fuel subsidies; and establishing carbon pricing so that emissions carry a cost.

The approach seeks to separate economic growth from carbon emissions. Economies must continue growing and sharing prosperity while reducing greenhouse gas emissions.

The article observed countries moving from fossil fuels towards renewable energy , with major investment in hydropower, geothermal, solar and wind generation.

Between 2010 and 2012, global uptake of modern renewable energy grew by 4%, with East Asia accounting for 42% of new renewable electricity generation. Small-scale solar power was changing lives in countries such as Bangladesh and Mongolia by enabling households to install affordable lighting. Under Bangladesh’s sustainable development strategy, more than 3.5 million rural home solar systems had been installed, creating 70,000 direct jobs.

Morocco was presented as an African example of renewable energy development. Its target was for renewables to account for 42% of total electricity capacity by 2020. It had established a specialist solar agency and was developing an integrated grid combining solar, wind, hydropower and biomass. Renewable energy investment in Morocco rose from USD 297 million in 2012 to USD 1.8 billion in 2013, partly because of reduced subsidies for fossil-fuel-based electricity.

Carbon pricing and green finance

At the time, around 40 countries and more than 20 cities, states and provinces used or planned to use carbon pricing to reduce greenhouse gas emissions. These initiatives were valued at nearly USD 50 billion. Businesses were also supporting carbon pricing and investing in clean energy production.

A global focus on low-carbon and carbon-free energy increases the cost of continuing to pollute. With less room for additional carbon in the atmosphere, each tonne of emissions carries a greater economic cost.

Green bonds were also expanding. The World Bank’s International Bank for Reconstruction and Development (IBRD) had issued 100 green bonds in 18 currencies, raising USD 8.4 billion. The investments supported lower-carbon and climate-resilient growth. Two energy-efficiency projects in China financed through green bonds were expected to reduce annual CO₂ emissions by 12.6 million tonnes, comparable to removing 2.7 million cars from the road. The International Finance Corporation (IFC) had issued USD 3.9 billion in green bonds, while the global market was worth approximately USD 38 billion.

The context before the 2015 Paris conference

Ahead of the December 2015 climate conference in Paris, discussion was moving beyond environment ministries to finance ministries, which were assessing the costs of climate impacts and adaptation.

Rising seas, changing weather patterns and migration already posed enormous risks, with potential losses measured in trillions of dollars and hundreds of thousands of lives. More frequent droughts, storms and wildfires, together with pollution, harmed health and placed further pressure on public budgets.

Governments in developed and fast-developing countries therefore needed to improve economic and energy-system efficiency while expanding the cleanest practicable energy access for poorer communities. For developing countries, the opportunity—and challenge—was to build competitive economies without dependence on carbon emissions.

Source: historical analysis by Rachel Kyte, published by the World Bank on 10 August 2015.

Reference: Rachel Kyte — World Bank, 10 August 2015