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首页文档碳中和资料研究报告【推荐】世界银行-现实核查：推进低碳未来的25项政策的经验教训（英）

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REALITY
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Lessons from
25 Policies
Advancing a
Low-Carbon
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Climate Change and Development Series
Reality Check
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REALITYCHECKLessonsfrom25PoliciesAdvancingaLow-CarbonFutureClimateChangeandDevelopmentSeriesRealityCheckRealityCheckLessonsfrom25PoliciesAdvancingaLow-CarbonFuture©2023InternationalBankforReconstructionandDevelopment/TheWorldBank1818HStreetNW,Washington,DC20433Telephone:202-473-1000;internet:www.worldbank.orgSomerightsreserved123426252423ThisworkisaproductofthestaffofTheWorldBankwithexternalcontributions.Thefindings,interpretations,andconclusionsexpressedinthisworkdonotnecessarilyreflecttheviewsofTheWorldBank,itsBoardofExecutiveDirectors,orthegovernmentstheyrepresent.TheWorldBankdoesnotguaranteetheaccuracy,completeness,orcurrencyofthedataincludedinthisworkanddoesnotassumeresponsibilityforanyerrors,omissions,ordiscrepanciesintheinformation,orliabilitywithrespecttotheuseoforfailuretousetheinformation,methods,processes,orconclusionssetforth.Theboundaries,colors,denominations,andotherinformationshownonanymapinthisworkdonotimplyanyjudgmentonthepartofTheWorldBankconcerningthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries.NothinghereinshallconstituteorbeconstruedorconsideredtobealimitationuponorwaiveroftheprivilegesandimmunitiesofTheWorldBank,allofwhicharespecificallyreserved.RightsandPermissionsThisworkisavailableundertheCreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO)http://creativecommons.org/licenses/by/3.0/igo.UndertheCreativeCommonsAttributionlicense,youarefreetocopy,distribute,transmit,andadaptthiswork,includingforcommercialpurposes,underthefollowingconditions:Attribution—Pleasecitetheworkasfollows:WorldBank.2023.RealityCheck:Lessonsfrom25PoliciesAdvancingaLow-CarbonFuture.ClimateChangeandDevelopmentSeries.Washington,DC:WorldBank.doi:10.1596/978-1-4648-1996-4.License:CreativeCommonsAttributionCCBY3.0IGOTranslations—Ifyoucreateatranslationofthiswork,pleaseaddthefollowingdisclaimeralongwiththeattribution:ThistranslationwasnotcreatedbyTheWorldBankandshouldnotbeconsideredanofficialWorldBanktranslation.TheWorldBankshallnotbeliableforanycontentorerrorinthistranslation.Adaptations—Ifyoucreateanadaptationofthiswork,pleaseaddthefollowingdisclaimeralongwiththeattribution:ThisisanadaptationofanoriginalworkbyTheWorldBank.ViewsandopinionsexpressedintheadaptationarethesoleresponsibilityoftheauthororauthorsoftheadaptationandarenotendorsedbyTheWorldBank.Third-partycontent—TheWorldBankdoesnotnecessarilyowneachcomponentofthecontentcontainedwithinthework.TheWorldBankthereforedoesnotwarrantthattheuseofanythird-party-ownedindividualcomponentorpartcontainedintheworkwillnotinfringeontherightsofthosethirdparties.Theriskofclaimsresultingfromsuchinfringementrestssolelywithyou.Ifyouwishtoreuseacomponentofthework,itisyourresponsibilitytodeterminewhetherpermissionisneededforthatreuseandtoobtainpermissionfromthecopyrightowner.Examplesofcomponentscaninclude,butarenotlimitedto,tables,figures,orimages.AllqueriesonrightsandlicensesshouldbeaddressedtoWorldBankPublications,TheWorldBank,1818HStreetNW,Washington,DC20433,USA;email:pubrights@worldbank.org.ISBN(paper):978-1-4648-1996-4ISBN(electronic):978-1-4648-1997-1DOI:10.1596/978-1-4648-1996-4Coverdesign:BillPragluski,CriticalStages,LLC.LibraryofCongressControlNumber:2023910918ClimateChangeandDevelopmentTheClimateChangeandDevelopmentSerieswascreatedin2015toshowcaseeco-nomicandscientificresearchthatexplorestheinteractionsbetweenclimatechange,climatepolicies,anddevelopment.Theseriesaimstopromotedebateandbroadenunderstandingofcurrentandemergingquestionsabouttheclimate-developmentnexusthroughevidence-basedanalysis.TheseriesissponsoredbytheSustainableDevelopmentVicePresidencyoftheWorldBank,anditspublicationsrepresentthehighestqualityofresearchandoutputintheinstitutionontheseissues.Thegroupiscommittedtosharingrelevantandrigor-ously­peer-reviewedinsightsontheopportunitiesandchallengespresentinthe­climate-developmentnexuswithpolicymakers,theacademiccommunity,andawiderglobalaudience.viiContentsForeword...........................................................................................................................xvAcknowledgments.........................................................................................................xviiAbbreviations...................................................................................................................xixChapter1.IntroductionandOverview............................................................................1References.................................................................................................................12Chapter2.ClimatePolicies:PastTrendsandInsightsonImplementation...........13GlobalTrendsinClimatePoliciesacrossTime,Space,andSectors.................13PresentInsightsonClimatePolicyImplementation..........................................17Note...........................................................................................................................37References.................................................................................................................37Chapter3.DecarbonizationPolicyImplementation:IllustrativeCaseStudies....39PlanningforaFuturewithZeroNetEmissions:CostaRica..................40CaseStudy1.DevelopingandImplementingaNetZeroDevelopmentPathwayinaMiddle-IncomeCountry:CostaRica’sNationalDecarbonizationPlan.................................................................................40Context.....................................................................................................................40Policy.........................................................................................................................41ResultsandImpacts................................................................................................42KeyTakeaways.........................................................................................................43PlanningforaFuturewithZeroNetEmissions:Indonesia...................45CaseStudy2.ReducingDeforestationinIndonesia...................................45Context.....................................................................................................................45Policy.........................................................................................................................46ResultsandImpacts................................................................................................48KeyTakeaways.........................................................................................................48viiiContentsPlanningforaFuturewithZeroNetEmissions:UnitedKingdom........50CaseStudy3.TheUnitedKingdomClimateChangeAct:AClimateChangeFrameworkLaw.............................................................50Context....................................................................................................................50Policy.........................................................................................................................51ResultsandImpacts................................................................................................52KeyTakeaways.........................................................................................................55LookingtotheFuture............................................................................................55GettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:BritishColumbia.........................................57CaseStudy4.TaxingCarbonforDevelopment:LessonsfromBritishColumbia....................................................................................57Context.....................................................................................................................57Policy.........................................................................................................................57ResultsandImpacts...............................................................................................59KeyTakeaways.........................................................................................................60GettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:China.............................................................62CaseStudy5.EmissionsTradingSystemsinChina....................................62Context.....................................................................................................................62Policy.........................................................................................................................63ResultsandImpacts................................................................................................64KeyTakeaways.........................................................................................................65GettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:Egypt..............................................................67CaseStudy6.EnergySubsidyReforminEgypt..........................................67Context.....................................................................................................................67Policy.........................................................................................................................67ResultsandImpacts................................................................................................69KeyTakeaways.........................................................................................................71GettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:EuropeanUnion...........................................73CaseStudy7.EuropeanUnion:CarbonBorderAdjustmentMechanism...........................................................................................73Context.....................................................................................................................73ixContentsPolicy.........................................................................................................................73ResultsandImpacts................................................................................................74Facilitating,Enabling,andTriggeringSectoralTransitions:Japan.....75CaseStudy8.IndustrialEnergyEfficiencyinJapan...................................75Context.....................................................................................................................75Policy.........................................................................................................................76ResultsandImpacts................................................................................................76KeyTakeaways.........................................................................................................78LookingtotheFuture.............................................................................................78Facilitating,Enabling,andTriggeringSectoralTransitions:Mexico........................................................................................................79CaseStudy9.Climate-SmartSolidWasteManagementinMexico............79Context.....................................................................................................................79Policy.........................................................................................................................80ResultsandImpacts................................................................................................81KeyTakeaways.........................................................................................................82LookingtotheFuture.............................................................................................83Facilitating,Enabling,andTriggeringSectoralTransitions:Brazil.......84CaseStudy10.ReducingDeforestationinBrazil........................................84Context.....................................................................................................................84Policy.........................................................................................................................85ResultsandImpacts................................................................................................86KeyTakeaways.........................................................................................................88Facilitating,Enabling,andTriggeringSectoralTransitions:theSahel..........................................................................................................89CaseStudy11.ImprovingWaterAvailabilityandRestoringSoilFertilityintheSahel.....................................................................................89Context.....................................................................................................................89Policies......................................................................................................................90ResultsandImpacts................................................................................................92KeyTakeaways.........................................................................................................93Facilitating,Enabling,andTriggeringSectoralTransitions:Egypt......94CaseStudy12.MotorizationManagement:FleetRenewalandRecyclingPrograminEgypt........................................................................94xContentsContext.....................................................................................................................94Policy.........................................................................................................................94ResultsandImpacts................................................................................................95KeyTakeaways.........................................................................................................96Facilitating,Enabling,andTriggeringSectoralTransitions:Peru.......97CaseStudy13.NonmotorizedTransport:CyclingStrategyandInfrastructurePlanforLima,Peru..............................................................97Context.....................................................................................................................97Policy.........................................................................................................................98ResultsandExpectedImpacts.............................................................................100KeyTakeaways.......................................................................................................100Facilitating,Enabling,andTriggeringSectoralTransitions:SouthAfrica..................................................................................................103CaseStudy14.PublicTransportinSouthAfrica......................................103Context...................................................................................................................103Policy.......................................................................................................................103ResultsandImpacts..............................................................................................104KeyTakeaways.......................................................................................................105Facilitating,Enabling,andTriggeringSectoralTransitions:Türkiye........................................................................................................107CaseStudy15.EnergyEfficiencyinTürkiye’sPublicBuildings...............107Context...................................................................................................................107Barriers...................................................................................................................108GovernmentResponse..........................................................................................108Financing................................................................................................................109TheTürkiyeEnergyEfficiencyinPublicBuildingsProject.............................110KeyTakeaways.......................................................................................................112LookingtotheFuture...........................................................................................112Facilitating,Enabling,andTriggeringSectoralTransitions:India.....113CaseStudy16.SolarPowerinIndia..........................................................113Context...................................................................................................................113Policy.......................................................................................................................113ResultsandImpacts..............................................................................................116KeyTakeaways.......................................................................................................117xiContentsFacilitating,Enabling,andTriggeringSectoralTransitions:Colombia........................................................................................................119CaseStudy17.GasFlaringinColombia...................................................119Context...................................................................................................................119Policy.......................................................................................................................119ResultsandImpacts..............................................................................................121KeyTakeaways.......................................................................................................122LookingtotheFuture...........................................................................................122Facilitating,Enabling,andTriggeringSectoralTransitions:India.....123CaseStudy18.PublicTransportSystemsinIndia....................................123Context...................................................................................................................123Policy.......................................................................................................................123ResultsandImpacts..............................................................................................124KeyTakeaways.......................................................................................................125Facilitating,Enabling,andTriggeringSectoralTransitions:Colombia........................................................................................................126CaseStudy19.GreenBuildingMarketTransformationinColombia.....126Context...................................................................................................................126OpeningFinanceforGreenBuildings................................................................126ResultsandImpacts..............................................................................................127KeyTakeaways.......................................................................................................128LookingtotheFuture...........................................................................................128Facilitating,Enabling,andTriggeringSectoralTransitions:China......129CaseStudy20.Climate-SmartAgricultureinGuangdong,China...........129Context...................................................................................................................129Policies....................................................................................................................130ResultsandImpacts..............................................................................................130KeyTakeaways.......................................................................................................131GettingtheFinanceFlowing:Chile..........................................................132CaseStudy21.E-busesinSantiagodeChile.............................................132Context...................................................................................................................132TheExperienceofE-busesinSantiago...............................................................133KeyTakeaways.......................................................................................................134xiiContentsGettingtheFinanceFlowing:Colombia..................................................135CaseStudy22.GreeningColombia’sFinancialSystem.............................135Context...................................................................................................................135Policy.......................................................................................................................135ResultsandImpacts..............................................................................................137KeyTakeaways.......................................................................................................137GettingtheFinanceFlowing:Kenya........................................................138CaseStudy23.PowerSectorReforminKenya..........................................138Context...................................................................................................................138Policy.......................................................................................................................138ResultsandImpacts..............................................................................................139KeyTakeaways.......................................................................................................142EnsuringaJustTransition:SouthAfrica.................................................143CaseStudy24.TowardaJustTransitionandGreenerFutureforSouthAfrica’sCoalSector..........................................................................143Context...................................................................................................................143Policies....................................................................................................................145ChallengesandOpportunities.............................................................................146KeyTakeaways.......................................................................................................147EnsuringaJustTransition:UnitedKingdom,Germany,andtheNetherlands........................................................................................149CaseStudy25.LessonsfromtheUnitedKingdom,Germany,andtheNetherlands................................................................................................149Lesson1.DecliningEmploymentintheCoalSectorIsUnavoidable,DrivenasItIsbyMultipleFactorsandNotJusttheResultofEnvironmentalPolicies.........................................................................................149Lesson2.Well-ManagedCoalTransitionsHaveLesserShort-TermImpactsandCanAvoidLong-TermEffects.......................................................150Lesson3.Long-TermPolicyPackageApproaches,DevelopedwithKeyStakeholders,UnderpinSuccesses......................................................................151Lesson4.EnvironmentalRehabilitationandRegenerationAreKeyEnablersofAlternativeEconomicDevelopment..............................................152Lesson5.NationallyCoordinatedFiscalSupportPlaysanImportantRole..................................................................................................153Notes.......................................................................................................................154References...............................................................................................................154xiiiContentsBox2.1UsingExAnteandExPostAssessmentstoUnderstandDistributionalEmploymentEffects...........................................................................................................37Figures1.1TotalAnnualGlobalCO2EmissionsfromEnergyCombustionandIndustrialProcessesandTheirAnnualChange,1900–2021............................................................21.2ClimatePolicyAnnouncements,byCountryIncomeGroupandbySector...............32.1ClimatePoliciesAnnouncedGlobally,1980–2020........................................................142.2ClimatePolicyAnnouncements,byCountryIncomeGroup......................................142.3ClimatePolicyAnnouncementsGlobally,bySector.....................................................172.4DistributionofClimatePoliciesbySectoracrossIncomeandRegionalCountryGroups.................................................................................................................182.5ObstaclestotheLow-CarbonTransition........................................................................182.6TotalNumberofFormalorLegallyBindingandPoliticalorNonbindingClimatePoliciesAnnounced,1990–2020.......................................................................212.7ShareofGlobalGHGEmissionsCoveredbyCarbonPricingandETSMechanisms,1990–2022...........................................................................................232.8FossilFuelSubsidiesbyFueloverTime..........................................................................242.9FossilFuelSubsidiesbyFuelfortheTop25Countriesin2020...................................252.10Low-CarbonSolutionsbySector:ProgressSinceParisAgreementandaLookForwardto2030........................................................................272.11AnnouncementofPoliciesRelatingtoTechnologyDevelopment,Deployment,Research,andInfrastructureInvestments..............................................292.12DemandSupportPolicyAnnouncements......................................................................322.13GlobalClimateFinance,2011–21....................................................................................342.14ClimateFinanceFlowstoLICsandMICs,2019–20Average......................................343.1CostaRicanGHGEmissionsoverTime,withoutDecarbonizationandwiththeNDP......................................................................................................................433.2KeyMilestonesoftheUKClimateChangeAct2008..................................................513.3TheUnitedKingdom’sEmissionReductionsandGDPGrowth.................................533.4CCCMentionsbyUKParliamentarians.........................................................................543.5DistributionalImpactsofBritishColumbia’sCarbonTax...........................................603.6EvolutionofEgypt’sEnergySubsidies,FY2010–19......................................................693.7EnergySubsidyandHealth,Education,SocialProtectionExpenditureinEgypt,FY2014–18.........................................................................................................703.8TimelineofJapan’s1979ActontheRationalUseofEnergy.......................................763.9EnergyIntensityIndexinJapan,byIndustrialSubsector,1973–2018........................77xivContents3.10TotalFinalConsumptioninJapaneseIndustry,bySource,2000–18.........................773.11MexicoMunicipalSolidWasteTrends,1997–2012......................................................803.12DeforestationintheAmazonandIBAMAInfractionNoticesforDeforestation,2003–21....................................................................................................873.13FinancingEnergyEfficiencyinPublicBuildings:ALadderofOptions..................1103.14NewAnnualEnergyCapacityAdditions,inGigawatts,2015–21.............................1143.15RenewableEnergyInvestmentinIndia,2004–22.......................................................1143.16India’sSolarEnergyExpansion—KeyMilestones.......................................................1153.17FlareVolumeandIntensityinColombia,2012–21.....................................................1213.18China’sFarmGateEmissions,2020...............................................................................1293.19CO2IntensityofPowerinKenya,1990–2020..............................................................1383.20ElectricitySuppliersinKenya,2020..............................................................................1403.21ElectricityGenerationinKenya,bySource,1990–2020.............................................1413.22AccesstoElectricity,Kenya,1993–2018.......................................................................1413.23BreakdownofSouthAfrica’sEnergyMix....................................................................1443.24CoalProductionandEmploymentintheUnitedKingdomandGermany,1958–2018...............................................................................................150Map2.1ClimatePolicyAnnouncementsoverTimeandSpace.................................................16Tables1.1PoliciesandApproachesExaminedinThisReport........................................................63.1RevenueNeutralityinBritishColumbia:TaxCutsandCarbonTaxRevenue..........593.2SelectedIndicatorsforCountriesintheSahel,2021.....................................................893.3ImprovingPublicSectorEnergyEfficiency:DismantlingBarriers...........................1093.4KeyResultsofIndia’sSolarEnergyExpansionDrive.................................................1173.5KeyResultsofColombia’sGreenBuildingExpansion................................................127xvForewordInthepastyear,recordsforextremeweathereventscontinuedtobebroken,asourchangingclimatesweptinanewroundofstorms,heatwaves,flooding,anddrought,bringinglife-changingdevastationtomillionsofpeople.Althoughclimatechangeaffectseverycorneroftheworld,poorpeopleanddevelopingcountriesaremoreseverelyaffectedbyitsnegativeeffects.Inthesummerof2022,flashfloodinginPakistantriggeredbyglacialmeltandmonsoonrainssubmergedvastswathsofthecountry,providingadevastatingexampleofthemagnitudeofclimate-induceddestruction.AsofOctober2022,around33millionpeople—thatis,oneinsevenofPakistan’spopulation—hadbeenaffected.ForcountrieslikePakistan,climatechangeisaseriousriskmultiplierthathinderssustainableandinclusivedevelopmentandwilldosomoreinthefuture.EightyearsafterthehistoricsigningoftheParisAgreement,governmentsacrosstheglobefacetwomutuallydependentchallenges:investinginresiliencetoensureadisaster-resistantfutureandacceleratingthedecarbonizationofenergyandland-usesystems.Withoutdecarbonization,globalemissionswillcontinuetomarchupward,exacerbatingclimateriskforallcountries.Thegoodnewsisthatthenumberofcountriesannouncingpledgestoachievenetzeroemissionscontinuestogrow.Lookingbackoverthepastthreedecades,countrieshavealreadymadesignificanteffortstodecarbonize.SincetheIntergovernmentalPanelonClimateChangepublisheditsfirstassessmentreportin1990,individualpoliciesandregulationsaroundtheworldhavesparkedmyriaddecarbonizationinitiatives.Now,asweforgeapathwaytoreducetheadditionofgreenhousegasestonetzero,weneedtoidentifythepoliciesthathaveprovidedthemosteffectivesolutions.ThisWorldBankreport,RealityCheck:Lessonsfrom25PoliciesAdvancingaLow-CarbonFuture,fillsacriticalgapintheresearchtodate,documentingpolicytrendsfordecar-bonization,withaseriesofcasestudiesacrosssectorsandgeographies.The25casestudiespresentedhereprovidecountrycontextandpolicyorprojectdetails,examineresultsandimpacts,andoutlinekeytakeawaysandlessonslearnedforenablingfurtherreductionsaroundtheworld.Thecasestudiesoutlinedinthisreportgiveusreasontohope.TherapidexpansionofsolarpowerinIndia,agrowingmarketforclimate-smartagricultureinChina,greenerfinancialsystemsinColombia,andtheremovaloffossilfuelsubsidiesintheArabRepublicofEgyptaretheresultofwell-designedpoliciesandsuccessfulimplementationandprovideevidencethat,withtherightmixofpoliticalsupportandxviForewordpolicydesign,wecandecarbonizedevelopment.Thesepoliciesarenotnecessarilythefirst-bestpoliciesadvocatedbyanalystsandeconomists,andsomemaynotbebestpractice.Buttheyarerealpoliciesthathavebeenimplementedincountrieswithverydifferentincomelevelsandpoliticalcontexts,andtheyprovidemanyinsightsonhowcountriescandesignandimplementclimatepolicies—andonthecompromisesthatdoingsocanrequire.TheWorldBankissharingthesecasestudiestoinformcurrentandfutureclimateactions,butourworkdoesnotstophere.Thesecasestudiesofferausefulsnapshotofthecurrentpolicylandscape,buttheywillbeupdatedovertimeaspoliciesevolveandimproveand,hopefully,becomemoreambitiousandmoreefficient.Thecasestudiespresentedherealsohighlightabiggapinknowledge:mostofthemdonothavearigorousexpostassessmentoftheiroutcomesandperformance,whichwouldhelpcountriesimprovedesignandlearnfromeachother.Moreworkisdefinitelyneededtomakesurewelearnfromtheearlymovers,andthiswillbeakeypriorityfortheWorldBankmovingforward.Dr.JuergenVoegeleVicePresidentforSustainableDevelopmentWorldBankxviiAcknowledgmentsThereportwaspreparedundertheguidanceofJuergenVoegele,vicepresidentforsustainabledevelopment,byateamledbyStephaneHallegatteandThomasKerr,composedofCatrinaGodinho,DavidGroves,JiaLi,PenelopeMealy,KatiePolkinghorne,andKhyatiRathore.ThepolicycasestudiesandkeycontributionshavebeenpreparedbyZubinBamji,SandraBaquié,ElizaBarnea,DijiBehr,EdwardBeukes,CeciliaBriceno-Garmendia,AlexandruCosminButeică,GeorgesDarido,FelipeDeLeon,MarizadeOcaLeon,CorinneFigueredo,GershwinFortune,VivienFoster,HarikumarGadde,DefneGencer,DavidGroves,DirkHeine,GraceHenry,RuthHill,MehulJain,SilpaKaza,MinLee,BethanyLinton,AlexanderLotsch,TomMoerenhout,MumbaNgulube,EmekaNwangele,SamuelOkullo,GeraldOllivier,NicolasPeltier,AdamPollard,JosephPryor,WenxinQiao,MartijnRegelink,SarahSantucci,BanditaSijapati,JasSingh,FionaStewart,WilliamSutton,andFelipeTarga.WegratefullyacknowledgetheinvaluablecommentsandadviceprovidedbyourinternalandexternalpeerreviewersDiegoArias,BenoitBosquet,BarbaraBuchner(ClimatePolicyInitiative),SudharshanCanagarajah,LouiseCord,RichardDamania,ChristophedeGouvello,EtienneEspagne,MarianneFay,AnupJagwani,MarcSadler,SeynabouSakho,andMartienVanNieuwkoop.SupportwithcommunicationswasprovidedbyFerzinaBanaji,DonnaBarne,andtheWorldBankcommunicationsteam.WearealsogratefultoLucySouthwoodforherskillfuleditofthemanuscript.BillPragluski,CriticalStages,wasthedesigner.MaryFiskmanagedthebookproductionprocess.Finally,theteamacknowledgesthegeneroussupportoftheClimateSupportFacilityandtheguidancefromJenniferSara,directoroftheClimateChangeGroup,andRenaudSeligmann,directorforstrategyandoperationsoftheSustainableDevelopmentPracticeGroup.xixAbbreviations°CdegreesCelsiusAMANTheNationalPeople’sOrganization,AliansiMasyarakatAdatNusantara(Indonesia)ASCAdaptationSub-CommitteeBAUbusiness-as-usualBBVABancoBilbaoVizcayaArgentariaBCBritishColumbiaBCABorderCarbonAdjustmentBRGMPeatandMangroveRestorationAgency,BadanRestorasiGambutdanMangrove(Indonesia)BRTbusrapidtransitCAGRcompoundannualgrowthrateCAMACOLColombianChamberofCommerceCARRuralEnvironmentalRegistry(Brazil)CBAMCarbonBorderAdjustmentMechanismCCCClimateChangeCommitteeCCDRCountryClimateandDevelopmentReportCCRAclimatechangeriskassessmentCDMCleanDevelopmentMechanismCERscertifiedemissionsreductionsCESLConvergenceEnergyServicesLimitedCNGcompressednaturalgasCO2carbondioxideCO2ecarbondioxideequivalentCOPUNFCCCclimatechangeconference(ConferenceoftheParties)COP2626thUnitedNationsClimateChangeConferenceofthePartiesCOVID-19coronavirusCPIClimatePolicyInitiativeCTFCleanTechnologyFundDCCCostaRicaClimateChangeDirectorate,DireccióndeCambioClimáticodeCostaRicaDETERDeforestationDetectioninRealTimeDPFDevelopmentPolicyFinancingEEenergyefficiencyxxAbbreviationsERCEnergyRegulatoryCommissionESCOenergyservicecompanyESGenvironmental,social,andgovernanceETSEmissionsTradingSystemEUEuropeanUnionEVelectricvehicleFAMEFasterAdoptionandManufacturingofElectric(andHybrid)VehiclesinIndiaFAME-IIsecondphaseFCPFForestCarbonPartnershipFacilityFiTfeed-intariffFOLUforestryandlanduseFYfiscalyearG20GroupofTwentyGDPgrossdomesticproductGEFGlobalEnvironmentFacilityGHGgreenhousegasGtmetricgigatons(billiontons)GtCO2emetricgigatonsofCO2equivalentGWgigawattGWhgigawatthoursHICshigh-incomecountriesIBRDInternationalBankforReconstructionandDevelopment(oftheWorldBank)ICRImplementationCompletionandResults(WorldBank)IDBInter-AmericanDevelopmentBankIEAInternationalEnergyAgencyIFCInternationalFinanceCorporationIMFInternationalMonetaryFundINEINationalInstituteofStatisticsandInformatics(Peru)IPCCIntergovernmentalPanelonClimateChangeIPPsindependentpowerproducersIPTNIntegratedPublicTransportNetworkIRPIntegratedResourcePlanJETJustEnergyTransitionJETFJustEnergyTransitionFrameworkJETIPJustEnergyTransitionInvestmentPlanktCO2emetrickilotonsofCO2equivalent(thousandtons)kWhkilowatthourLAPLatinAmericaCycles,LatinoaméricaPedaleaLFGlandfillgasxxiAbbreviationsLFRlegalforestreserveLICslow-incomecountriesLMICslower-middle-incomecountriesLPGliquefiedpetroleumgasLTSlong-termstrategyMDBmultilateraldevelopmentbankMEEMinistryofEcologyandEnvironmentMICsmiddle-incomecountriesMMEMinistryofMinesandEnergyMoEFMinistryofEnvironmentandForestryMoFMinistryofFinanceMtCO2emetricmegatonsofCO2equivalent(milliontons)MWmegawattMWhmegawatthourNDCnationallydeterminedcontributionNDPNationalDecarbonizationPlanNSMNationalSolarMissionNZEBnear-zeroenergybuildingPCCPresidentialClimateCommissionPLIProduction-LinkedIncentivePMparticulatematterPM2.5/10concentrationsofparticulatematterlessthan2.5or10micrometers,respectively,indiameterPPApermanentpreservationareaPPCDAmPlanforthePreventionandControlofDeforestationintheLegalAmazonPPPpublic-privatepartnershipPRODESProjecttoCalculateDeforestationintheAmazonPVphotovoltaicRErenewableenergyREDD+ReducingEmissionsfromDeforestationandforestDegradation,­conservationofforestcarbonstocks,sustainableforestmanagement,andenhancementofforestcarbonstocksindevelopingcountriesREDZRenewableEnergyDevelopmentZoneRfPrequestforproposalSFCFinancialSuperintendenceofColombia,SuperintendenciaFinancieradeColombiaSTPServiciodeTransportedePersonastCO2emetrictonsofCO2equivalentTWhterawatthourUKUnitedKingdomUMICsupper-middle-incomecountriesxxiiAbbreviationsUNFCCCUnitedNationsFrameworkConventiononClimateChangeUSUnitedStatesZRFZeroRoutineFlaringANoteonCurrencies$AlldollaramountsareUSdollarsunlessotherwiseindicatedCan$CanadiandollarsCol$ColombianpesosEGPEgyptianpoundsRsIndianrupeesS/Peruviansoles¥Chineseyuan11.IntroductionandOverviewAddressingclimatechangeisnolongerabouthigh-levelcommitments:itisabouttransformativepoliciesandaction.Whilecountries’pledgesandtargetsareincreasinglyconsistentwithglobalobjectives,theworldisstillontrackforunprece-dentedclimatechange.The2018–22globalmeantemperatureaverageisnowestimatedtobe1.17±0.13degreesCelsius(°C)abovethe1850–1900average,rapidlyapproach-ingthe1.5°CtargetoftheParisAgreement(UnitedNations2022).Greenhousegas(GHG)emissionscontinuetorise.Althoughglobalenergy-relatedcarbondioxide(CO2)emissionsdippedslightlyin2020duetotheCOVID-19(coronavirus)pandemic,theyreboundedin2021,reachingthehighest-everannuallevelof36.3gigatons(Gt)(figure1.1).Modelsestimatethatcurrentpoliciesareinsufficientandwouldlikelyleadtoatemperatureincreaseof2.6–2.9°C.TomeettheircommitmentsandachievetheParisAgreement’sobjective,countrieswillneedambitiouspackagesofnewpoliciesthatcatalyzeandcoordinatethefulldecarbonizationoftheireconomies.Theywillneedtoinvestindecarbonizingtheelectricitysupply;electrifying,substitutingfuel,andtakingefficiencymeasuresintransport,buildings,andindustry;adoptinglow-carbonagriculturepractices;andpro-tectingandexpandingforestsandothernaturalcarbonsinks(Kuramochietal.2018).Implementingsuchpolicieswillrequirechangesininfrastructure,lifestyle,andbehav-iorandwillincludeactionssuchasswitchingcarsforpublicandactivetransportmodes,designinglow-carbonlivablecities,adoptingplant-basedandhealthierdiets,improvingmaterialuseandrecycling,implementingcirculareconomyprinciples,andpreparingcurrentandfutureworkersforthegreeneconomy.Theeconomicbenefitsoffollowingsuchalow-carbondevelopmentpathwayareincreasinglyevident,butthetransitionrequirespolicyreformsthatfacehardinstitutionalandpoliticaleconomybarriers.TheWorldBank’snewCountryClimateandDevelopmentReports(CCDRs)showthat,whilefollowingalow-carbondevelopmentpathwayrequiresanadditionalannualinvestmentof1to10percentofgrossdomesticproduct(GDP)foraselectsetofcountries,theneteconomicbenefitsofthetransformationoverthenextseveraldecadeswouldbepositive(WorldBank2023).Investingindecarbonizationcouldaddmorethan60millionnetnewjobsglobally(ILO2012).However,thetransitiontowardlow-carbonpathwaysfacesimportantbarriers,includingtheneedforlargeupfrontinvestments,thelackofinstitutionalcapacity,significantdistributionalimpacts(­especiallyincoalregions),andchallengingpoliticaleconomyissues.2RealityCheckThescaleoftheclimatechallengeoftenappearsdaunting,buttherichhistoryofclimatepolicyimplementationexperiencesacrosscountriesprovidesimportantlessonsandpointersforhowtoadvancepoliciesindifferentcontexts.Overthepastthreedecades,countriesaroundtheworldhaveintroducedavarietyofdifferentclimatepolicyresponses.Whilehigh-incomecountries(HICs)pioneeredtheimple-mentationofmanyclimatepoliciesinearlierperiods,middle-incomecountries(MICs)andlow-incomecountries(LICs)areincreasinglyactive.Wenowhavemanyexamplesofclimatepoliciesbeingimplementedinavarietyofdifferenteconomic,cultural,andpoliticalcontexts.Aimingtoleveragelearningsfromthepasttoinformfuturepolicydesign,thisreportprovidesanoverviewofpastclimatechangemitigationpolicytrendsanddis-cussesinsightsfromcasestudiesacrosstheworld.Itbuildsontwosources.ThefirstistheNewClimateInstitute’sClimatePolicyDatabase(NewClimateInstitute2022),whichallowsforanexplorationofglobaltrendsinclimatechangemitigationpoliciesacrosstime,countrieswithdifferentincomelevelsandcontexts,anddifferentsectors.Thesecondisasetof25decarbonizationpolicycasestudiescollectedforthisreportthatcoverscountriesatallincomelevels.Thisreportfocusesonclimatechangemitiga-tionordecarbonizationpolicies,leavingpoliciestoadvanceadaptationandresilienceforafutureanalysis.FIGURE1.1TotalAnnualGlobalCO2EmissionsfromEnergyCombustionandIndustrialProcessesandTheirAnnualChange,1900–2021Source:IEA2022.Note:CO2=carbondioxide;Gt=gigatons.40CO2emissionsinGtAnnualchangeinCO2emissionsinGt3530252015105020–2–11190019101920193019401950196019701980199020002010202019001910192019301940195019601970198019902000201020203IntroductionandOverviewAccordingtotheClimatePolicyDatabase,countrieshaveintroducedmorethan4,500climatepoliciesoverthepastthreedecades(figure1.2).TwoUnitedNationsFrameworkConventiononClimateChange(UNFCCC)COPevents—Copenhagenin2009andParisin2015—weremajorcatalystsfortheannouncementofclimatepolicies,eventhoughthenumberofpoliciesannouncedhasfallenovertheyears.Inlinewiththeiremissionscontributions,higherinstitutionalcapacity,andlargefinancialresources,HICshavetendedtomovesooneronclimatepolicy,butothercountriesareincreas-inglycomingtothetable,especiallybigemitterslikeChina,India,andIndonesia.Intermsofsectors,climatepoliciesrelatingtoelectricityandheattendtoaccountforthelargestshareofcountryclimatepolicies,butagricultureandforestry-relatedclimatepoliciesareoftenprevalentinLICs.Althoughtheannouncementofsector-specificcli-matepolicieshassloweddown,economy-widepolicyannouncementsremainhigh.Theobjectiveofthisreportisnottodrawconclusionsaroundwhichpoliciesaremosteffectiveorefficientinreducingemissions;rather,itaimstoprovideexamplesofreal-worldimplementationofclimatepoliciesinmultiplesectors,mobilizingvariousinstruments.Theyarenotnecessarilyfirst-bestpoliciesorevenbestpractices:tomakethemfeasible,governmentsoftenhadtocompromisewithinstitutionalcapacitycon-straintsorotherpolicyobjectives.Somearejustafirststep,andgovernmentsexpecttoadjusttheirdesignastheydrawlessonsfromthem.Toorganizetheanalysisandthecasestudies,thisreportreliesonasimpletypologyfordecarbonizationpolicies.Thisisderivedfromthe2015WorldBankreportFIGURE1.2ClimatePolicyAnnouncements,byCountryIncomeGroupandbySectorSource:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.3.03.52.52.01.51.00.5Averagenumberofclimatepoliciesannouncedacrosscountriesinincomegroup019801985199019952000200520102015150175125100755025Totalnumberofclimatepoliciesannouncedglobally01980198519901995200020052010201520202020HighincomeUpper-middleincomeLower-middleincomeLowerincomeElectricityandheatTransportIndustryBuildingsAgricultureandforestryShippingEconomy-widea.Byincomegroupb.Bysector4RealityCheckDecarbonizingDevelopment:ThreeStepstoaZero-CarbonFuture(Fayeetal.2015),whichhighlightedtheneedfor(1)astrategicapproachthatconsiderstheendgoaloffulldecarbonizationoftheeconomytodefineshort-termpriorities;(2)packagesofpoliciesthatcantargetthemanymarketandgovernmentfailuresthatimpairdecar-bonization,including—butgoingbeyond—carbonexternality;and(3)astrongfocusonthedistributionalimpactsandpoliticaleconomybarriers.Buildingfromthisapproach,weclassifypoliciesintofivecategories:■■Planningforafuturewithzeronetemissions.Thefirststepistosetuplong-termobjectives—forinstance,to2050—thatareconsistentwiththeendgoaloffulldecarbonization.Fromthere,countriescandesignsector-specific,shorter-termtargets—to2025or2030—andestablishawaytotrackprogressovertime.Monitoring,auditing,reporting,verifying,informationsharing,andtrainingareallcrucialforthesuccessofclimatepolicies.Buildinginsuchlearningandfeed-backchannelsallowscountriestoidentifyandrespondtoemergingissues.■■Gettingthepricesright.Countrieswillneedtoimplementpolicyreforms,includingonpricingandtaxes,todevelopeconomicincentivesthatencourageeffortstowarddecarbonization.Encouragingly,theworldismakingprogressonmarket-basedmechanismssuchascarbonpricingschemesandemissionstradingsystems,anddespitebeingpoliticallyunpopular,somecountriesarealsomanag-ingtoreformfossilfuelsubsidies.However,withlessthan4percentofglobalGHGemissionspricedatorabovetherangerequiredtomeetclimatestabilizationgoalsoutlinedintheParisAgreement,thereisstillmuchworktobedone.■■Facilitating,enabling,andtriggeringsectoraltransitions.Aclimatepolicypackagewilloftenincorporatevariouspoliciesandactions—rangingfromlabelsandregulationstosubsidiesanddirectinvestments—totriggertransitionsinkeysystems,suchastheenergyorfoodsystems.Theydosobyprovidingsup-porttocertaintechnologiesandpractices(oftenreferredtoas“supply-push”)orbycreatingademandforthemandfacilitatingtheirdiffusion(oftenreferredtoas“demand-pull”).Supply-pushpoliciesreducethecostoftechnologydevelop-mentthroughfundingforresearch,development,anddemonstrationactivities,whiledemand-pullpoliciesstimulatedemandforinnovativesolutionsthroughfinancialincentivesforadoptersorbydevelopingcodesandstandards,amongotherapproaches.■■Gettingthefinanceflowing.Tosupportdecarbonizationeffortsaroundtheworld,climatefinanceneedstoquadrupleby2030.Policiestobothgrowandgreenthefinancialpiewillbecrucialtoscalingupnecessaryresources.Policiestoincentivizeandattractfinancingandinvolvementfromtheprivatesectorwillbeparticularlyimportantassourcesofpublicfinancearehighlyconstrained.Inaddition,policiestoencouragegreeninvestmentandmanageclimate-relatedrisks(suchasclimatestresstestsandimprovedgovernanceanddisclosure)willbekey.■■Ensuringajusttransition.Whereclimatepoliciescreatewinnersand­losers,­governmentsneedtoensurethatthemostvulnerablepopulationsareprotected.5IntroductionandOverviewEffectivecivicengagement,communication,andactivemanagementofdistribu-tionalimpactscanhelpbuildsupportforunpopularpolicies.Table1.1summarizesthecasestudiesexploredinthisreportandclassifiesthemwithinthesefivepolicycategories.Ithighlightsthediversityofpoliciesimplementedinvariouscountriesacrossincomelevelsandwithdiversesectoralfocus,includingeconomy-widepolicies.Itfurtherhighlightsthecorrespondingpolicyinstrumentsusedforthecasestudies,primarypolicyobjectives,cobenefitsincurredthroughpolicy­implementation,andtheirpoliticaleconomyconsiderations.Withafewexceptions,thecasestudiesdiscussedinthisreportdonotofferanexpostassessmentoftheirresultsandimpact.Thisisduetoeitheralackofdataor­methodologicalchallengesincausallylinkingpolicyinterventionstoobservedemis-sionschanges.Itisalsobecauseemissionreductionsarenotalwaysthebestresultindi-cator.Forinstance,somepoliciesarecriticalenablersforfurtherclimateactionwithoutnecessarilyreducingemissionsdirectly.Climatechangeframeworklaws,powersectorreforms,greenskilldevelopmentprograms,andlandtenureregularizationsdonotimmediatelyreduceemissions.Nevertheless,theseactionsplayacriticalroleincoordi-natingactionacrossministries,enablingprivateinvestment,facilitatingthetransitionofaffectedworkers,andenforcingpoliciestostopdeforestation.MultipleindicatorsareneededtotracktheresultsandperformanceofclimatepoliciesbeyondtheirdirecteffectsonGHGemissions.Everycountryhasuniquepolicyrequirementsbasedonitsindustrialstructure,economicpriorities,politicalsystem,andnationalcircumstances.Asaresult,deter-miningtheappropriatenationalpolicypackageinvolvesunderstandingitsspecificneedsandcontextsandhowbesttoimplementpoliciestoachievethedesiredoutcome.Thereisnouniquebestpracticeorpolicyrecommendationthatcanbederivedfromtheseexamples.Evenwithoutanexpostimpactassessment,everycasestudyinthisreportoffersvaluablelearningsandinsightsabouttheprocessthroughwhichcountrieshaveimplementedpoliciesorinstruments.Eachcasestudy(1)examinesthecountrycon-text,includingtherationalebehindthepolicyandhowithasbeenpresentedandcommunicated;(2)describesthepolicyanditsdesign;and(3)discussesidentifiedresultsandimpacts,includingnecessarycompromisesinpolicydesign.Thecasestudiesconcludewithasetofkeytakeaways,focusingonhowtonavigatedesignandimplementationchallenges.Therearethreemaintakeawaysfromtheanalysis.First,countrieshaveintroducedavastnumberofclimatepoliciesoverthepastfewdecadesacrossmostsectorsandgeographies.Sector-specificpoliciesareoftenthefirsttobeimplemented,buttheyaregraduallybeingsupplementedwitheconomy-wideapproaches.Keypolicies—suchasremovingfossilfuelsubsidiesandcarbonpricing—areprogressing,butthereissomedistancetogobeforetheymakeasignificantcontributiontodecarbonization.6RealityCheckTABLE1.1PoliciesandApproachesExaminedinThisReportCasestudyPolicyinstrument/programdetailsPrimaryobjectivesandcobenefitsPoliticaleconomyconsiderationsPlanningforafuturewithzeronetemissions1.CostaRicaEconomy-wideLong-TermStrategyandNationalDecarbonizationPlanPrimaryobjectives:Decarbonizeallsectors;governanceCobenefits:Macroeconomicbenefits:employment;povertyreductionPolicydevelopmentprocessstronglyengagedtechnicalandnontechnicalstakeholders,includingforclimatejusticeandjusttransitionconsiderations2.IndonesiaAgricultureMoratoriumonNewForestConcessions(2011)andForestandPeatlandRestorationProgram(2016)aspartofREDD+strategyPrimaryobjective:ReducedeforestationCobenefits:Biodiversityconservation;climatechangemitigation;waterconservationIncludesafeedbackandgrievanceredressmechanism3.UnitedKingdomEconomy-wideUKClimateChangeAct(2008)Primaryobjectives:Decarbonizeallsectors;economy-wideresilienceandadaptation;governanceCobenefits:Collaborationandknowledge-sharingActadoptedthroughpoliticalconsensusandstrongcivilsocietyengagement;continuedpublicengagementtoensureaccountabilityfromthegovernmentGettingthepricesright:economy-widepoliciestopromotestructuralchange4.CanadaEconomy-wideBritishColumbiacarbontaxPrimaryobjectives:Climatefiscalpolicies;decarbonizeallsectorsCobenefits:Economicgrowth;reducedincomeinequality;positiveimpactonaggregateemploymentShiftedtaxburdenawayfromlaborandhouseholds;includedrevenuerecyclingtoaddressdistributionalimpacts;conductedregularpublicoutreach5.ChinaEconomy-wide$Nationalemissionstradingsystem(2021)Primaryobjectives:Decarbonizeallsectors;governance;energyefficiencyCobenefits:ReducedairpollutionIncludedstakeholderengagementandcapacitybuilding6.Egypt,ArabRep.Energy$EnergysubsidyreformwithsupportfromWBandEnergySectorManagementAssistanceProgram(2014–16)Primaryobjectives:ImprovemacroeconomicandenablingenvironmentCobenefits:ReducedGHGemissions;growthofsolarandwindpowergeneration;creatingfiscalspaceforsocialspending;reducedairpollutionIncludedapublicoutreachcampaign;strengthenedsocialprotectionmechanisms;usedtargetedmechanismswithcashtransfers;usedfiscalsavingstoincreasehealthandeducationspendingNote:$=Casestudieswithastronglinktoprivatesectorfinance.Countriesshadedgreen=high-incomecountries;orange=upper-middle-incomecountries;yellow=lower-middle-incomecountries;blue=low-incomecountries.(Continued)7IntroductionandOverviewTABLE1.1continuedCasestudyPolicyinstrument/programdetailsPrimaryobjectivesandcobenefitsPoliticaleconomyconsiderations7.EuropeanUnionEconomy-wideEUCarbonBorderAdjustmentMechanism(October1,2023)Primaryobjectives:ReducetheriskofcarbonleakagebyensuringthatthepriceofimportedgoodsreflectstheircarbonfootprintCobenefits:Promotingfaircompetition;encouragingglobalemissionreductions;incentivizingcompaniestoadoptcleanertechnologies;andgeneratingrevenuefortheEU’sclimateinitiativesBalancingdifferentmemberstates’andsectors’interests;addressingconcernsoftradepartnersandWTOcompliance;managingthepotentialimpactonconsumerprices;andensuringtheeffectivenessofthemechanisminachievingitsclimategoalsFacilitating,enabling,andtriggeringsectoraltransitions(technologysupportpolicies)8.JapanIndustryActontheRationalUseofEnergy(1979)Primaryobjective:DecarbonizeindustryCobenefits:ResourceproductivityJapanisnowlessreliantonimportedenergyresources(andvulnerabletopricefluctuationsandsupplydisruptions),helpingbolsterJapan’seconomiccompetitiveness;alsoincludesprovisionsforpromotingtheuseofenergy-efficienttechnologiesandpracticesinindustry,whichcanhelpreducecostsandenhanceproductivity9.MexicoMunicipalsolidwaste$TheMonterreywaste-to-energyprojectdemonstratedaninstitutionalandmanagementframeworkforLFGcaptureanduseatanexistingfacilityturningwasteintoenergyPrimaryobjectives:Wastemanagement;reducemethaneemissionsCobenefits:Publiccostsavings;generatedcarboncredits;avoidedpollution(cleanenergy);communitybenefitsfromcleanandcheaperelectricityThegovernmentprovidedfinancingandregulatorysupporttohelpensureitssuccess;theinvolvementoftheprivatesectorhasbeencriticalinensuringtheproject’sfinancialviabilityandlong-termsustainability;communityinvolvementhashelpedensurethattheprojectmeetstheneedsoflocalsandaddressestheirconcerns10.BrazilAgriculturePlanforthePreventionandControlofDeforestationintheLegalAmazon,enforcementoftheForestCode,andlaunchofDeforestationDetectioninRealTimesatellitesystemforthereductionindeforestationPrimaryobjectives:ReducedeforestationCobenefits:ReducedGHGemissions;increasedbiodiversity;andecosystemservicesMultistakeholderengagementincludingmonitoring,environmentalcontrolandaccountability,landuse,creationofprotectedareas,andpromotionofsustainableproductionactivities,particularlywithfarmers,whoformalargespecial-interestgroupNote:$=Casestudieswithastronglinktoprivatesectorfinance.Countriesshadedgreen=high-incomecountries;orange=upper-middle-incomecountries;yellow=lower-middle-incomecountries;blue=low-incomecountries.(Continued)8RealityCheckTABLE1.1continuedCasestudyPolicyinstrument/programdetailsPrimaryobjectivesandcobenefitsPoliticaleconomyconsiderations11.SahelRegionAgricultureLow-costtechnologiesandindigenouspracticescoupledwithinformationandtrainingtoimprovesoilqualityandagriculturaloutcomesPrimaryobjectives:Climate-smartagricultureCobenefits:Carbonsequestration;socioeconomicoutcomes;improvedfoodsecurityEngagedlocalcommunitiesviainformationandtraining;includedcashtransfers12.Egypt,ArabRep.TransportEgyptVehicleScrappingandRecyclingProgram(2008)Primaryobjectives:DecarbonizetransportCobenefits:Reducedairpollution;improvedtrafficsafety;economicgrowth;jobcreationOfferedfinancialincentivesforownerstoscraptheiroldvehiclesandpurchasenewones,aswellasprovidedsupportforthedevelopmentoflocalrecyclingfacilities13.PeruTransportSeveralpoliciesthatpromotedinfrastructuredevelopmentplansandinvestmenttoimprovebicycleadoptionincludingLaw29593(2010)toimprovebikingconditionsandpromotecyclingasameansofsustainabletransportation;Law30936(2019)promotesandregulatesbicycleuseasasustainablemodeoftransportandLima’smorerecentBicycleInfrastructurePlanPrimaryobjectives:Decarbonizetransport;improveairquality;improveurbanplanningCobenefits:Economicsavings;socialandhealthbenefitsLimagovernmentofficialsorganizedknowledgeexchangeprograms;representativesfromcivilsociety,mediaoutlets,andbusinesschambersparticipated14.SouthAfricaTransportLaunchedaBusRapidTransportstrategyin2007withrecentupdatesandtheIntegratedPublicTransportNetworkStrategyin13citiesPrimaryobjectives:Decarbonizetransport;improvepublictransportationsafetyandefficiencyCobenefits:ReducedGHGemissions;reducedairpollution;reducedfuelconsumptionPilotsupportedbybusinessandconsultingservicesfacilitatedbythecity15.TürkiyeBuildingsLaunchedtheTurkishEnergyPerformanceofBuildingsRegulationor“BinalardaEnerjiPerformansıYönetmeli”toimproveenergyefficiencyinpublicbuildingprojectsPrimaryobjectives:Greenbuildings;energyefficiencyCobenefits:ReplicatedintheprivatebuildingmarketIncludedtrainingforenergyauditors,designcompanies,andconstructionfirmstolearnfromearlyexperiences,sharegoodpractices,andbuildmarketcapabilities;willshareknowledgewithmarketactorstofacilitatereplicationNote:$=Casestudieswithastronglinktoprivatesectorfinance.Countriesshadedgreen=high-incomecountries;orange=upper-middle-incomecountries;yellow=lower-middle-incomecountries;blue=low-incomecountries.(Continued)9IntroductionandOverviewTABLE1.1continuedCasestudyPolicyinstrument/programdetailsPrimaryobjectivesandcobenefitsPoliticaleconomyconsiderationsFacilitating,enabling,andtriggeringsectoraltransitions(demandsupportpolicies)16.IndiaPower$TheNationalSolarMission(2010),feed-intariffandutilitypowerpurchaseobligations,fiscalincentivesincludingsolarprojectsubsidiesandtaxincentives(forexample,2019PradhanMantriKisanUrjaSurakshaevamUtthanMahabhiyan)Primaryobjectives:DecarbonizeenergyCobenefits:Avoidedairpollutantemissions;improvedelectricityaccess;greenjobsPlatformforbroadcommunicationandengagement;placedemphasisonlocalproductionofsolarpanelsandequipmenttoenhanceself-sufficiencyandpromotedomesticmanufacturing17.ColombiaGasflaringEcopetrolCompany’sClimateChangeStrategytoReduceGasFlaring(linkedtoNDC);GlobalGasFlaringReductionPartnership(2021)Primaryobjectives:DecarbonizeenergyCobenefits:Environmental,health,andeconomicbenefitsofreducedblackcarbonparticulatematter;improveddomesticenergysupplyColombiajoinedtheZeroRoutineFlaringby2030initiativetosupportcooperationbetweenallrelevantstakeholderstofindsolutionstogasflaring18.IndiaTransport$FasterAdoptionandManufacturingofElectric(andHybrid)VehiclesinIndia(FAME-II)scheme(2019–2021)Primaryobjectives:DecarbonizetransportCobenefits:Improvedmobilityaccess;reducedairpollution;jobcreationbyboostingdomesticelectricvehiclemanufacturingProvidesincentivesfordomesticproductionofEVcomponentstogeneratenewemploymentopportunities19.ColombiaBuildings$GreenBuildingCodeandappropriatetaxincentivestobolstertheinterestoftheprivatesectortobuildgreenPrimaryobjectives:Greenbuildings;climatefinanceCobenefits:Energyefficiency;higherresalevalueWorkedwithalocalchamberofcommercetodelivertrainingstodevelopersandmunicipalgovernments20.ChinaAgricultureIntroducedtheGuangdongAgriculturalPollutionControlProject(2013)anddevelopedstandardsandregulationsforsafe,greenagriculturalproductsPrimaryobjectives:PollutionreductionCobenefits:ReducedGHGemissions;promotingtheruralcirculareconomy;reducedcoststofarmers;increasedcropyields;provincialeconomicsavings;avoidedhealthcarecosts;reduceddeforestationTrainingforkeystakeholdersincludingagriculturalofficers,farmers,cooperatives,andenterprises;securedthecollaborationoffarmersandtheprivatesectorbypromotingcostreductionsGettingthefinanceflowing21.ChileTransport$InadditiontotheNationalElectromobilityStrategy,thegovernmentusedpublic-privatepartnershiptoovercomefinancial,operational,andinfrastructurechallengestoe-busdevelopmentPrimaryobjectives:DecarbonizetransportCobenefits:Airpollutionreduction;energycostsavingBuiltacooperativepartnershipbetweenprivatecompanies(busoperators,busmanufacturers,andfinanciers)andthepublicsectortogainsupportNote:$=Casestudieswithastronglinktoprivatesectorfinance.Countriesshadedgreen=high-incomecountries;orange=upper-middle-incomecountries;yellow=lower-middle-incomecountries;blue=low-incomecountries.(Continued)10RealityCheckTABLE1.1continuedCasestudyPolicyinstrument/programdetailsPrimaryobjectivesandcobenefitsPoliticaleconomyconsiderations22.ColombiaEconomy-wide$Climateriskstresstest,regulatoryreforms,andagreentaxonomytoclassifygreeninvestmentsPrimaryobjectives:Climatefinance;riskmanagementgovernanceCobenefits:Growthofgreen-labeledproductsCreatedagreentaxonomywithalargegroupofstakeholders,includingvariousministries,agencies,andinternationalinitiatives23.KenyaPower$RevisingtheEnergyAct(2006),Kenya’sEnergyRegulatoryCommissioninitiatedaLeastCostPowerDevelopmentPlanforthepowersector;thisintroducedinstitutionalandregulatoryreformstoattractprivateinvestmentandsupportprivatelyfinancedindependentpowerproducersPrimaryobjectives:ImprovemacroeconomicandenablingenvironmentCobenefits:Energytransitiontorenewablesources;increasedaccesstoelectricity,economicgrowth,jobs,productivity,incomes,healthoutcomes,andhumancapitaldevelopmentPlanninginvolvedmultistakeholdersteeringandtechnicalcommitteesEnsuringajusttransition24.SouthAfricaCoalCreatedaPresidentialClimateCommission(2021)thathasdevelopednational,sectoral,andregionalJustEnergyTransitionstrategiestostartdecommissioning/retrofittingcoalpowerstationswhilealsoincreasingREsourcesPrimaryobjectives:Justtransition;decarbonizeenergyCobenefits:Environmental;airpollutionreduction;improveddomesticenergysupply;attractforeigninvestment;jobprotectionIn2012,thePCClaunchedtheSocialPartnerDialoguesonPathwaysforaJustTransitionwithgovernment,laborworkers/unions,business,andcivilsocietytobuildacommonvisionfortheJustTransitionandcreatepathwaystoachievethisvision25.UnitedKingdom,Germany,andtheNetherlandsCoalUKCoalPhase-OutPolicy(2015);NetherlandsCoalPhase-OutAct(2019);Germany’sCoalExitLaw(2020)Primaryobjectives:Justtransition;decarbonizeenergyCobenefits:GHGemissionsreduction;airpollutionreduction;environmentalandhealthbenefitsIncludedpoliciessuchasstrengthenedsocialsafetynetsandalternativeemployment;usedinclusiveprocessesthatinvolvedlocalunionsandpublic,private,andnongovernmentalactorstobuildconsensusaroundtheneedtotransitionNote:$=Casestudieswithastronglinktoprivatesectorfinance.Countriesshadedgreen=high-incomecountries;orange=upper-middle-incomecountries;yellow=lower-middle-incomecountries;blue=low-incomecountries.https://datahelpdesk.worldbank.org/knowledgebase​/­articles/906519.EU=EuropeanUnion;EV=electricvehicle;GHG=greenhousegas;LFG=landfillgas;NDC=nationallydeterminedcontribution;PCC=PresidentialClimateCommission;RE=renewableenergy;REDD+=ReducingEmissionsfromDeforestationandforestDegradation,conservationofforestcarbonstocks,sustainableforestmanagement,andenhancementofforestcarbonstocksindevelopingcountries;UK=UnitedKingdom;WTO=WorldTradeOrganization.11IntroductionandOverviewPlanningandcoordinationplayakeyrole,includingthroughcommitmentsandtar-gets,butacombinationoflong-termtargetsandshort-termmilestonesisneeded.Theformerwillhelpsetthetrajectoryandcoordinateexpectations;thelatterwillkeepgov-ernmentsontrackandsendtheshort-termsignalsandincentivesneededtoinfluenceinvestorsanddecision-makers.Second,high-visibilityfailures,orevencitizenunrest,hidealargeandgrowingnumberofclimatepoliciesthatarebeingsuccessfullyimplemented.Casestudiesshowthatpoliticalandpublicbuy-inarecritical,withstrongpublicinstitutions,cross-partysupport,andongoingpublicengagementbeingcrucialelementsforeffectiveimple-mentation.Alargegroupofstakeholders—includingministries,regulators,privatesectoractors,civilsocietyactors,andacademics—needtoworktogethertodesigntools,createpolicies,socializefindings,driveimplementation,andmonitorresults.Inthiscontext,capacitybuildingisessentialtoensurethatofficialsatalllevelsofgovern-mentandrepresentativesinbothpublicandprivateinstitutionsarebetterabletodesignandimplementclimatepolicies.Afollow-upreportwillprovideadeeperanalysisofthekeydeterminantsofasuccessfulimplementationofclimatepoliciesinspiteofthepoliticaleconomychallenges,bearinginmindthatsomepolicyimplementationsuc-cesses(orfailures)maybecontext-specificandcannotbedirectlyappliedtootherjurisdictions.Third,thereisacriticalgapincredible,expostanalysisoftheimpactsofdecarbon-izationpolicyimplementationtoshowtheemissionsreductionsandotherbenefitsthattheyhavedeliveredandderivebestpracticesthatcanbegeneralizedtoothercountries.Thismakesitchallengingtocorrelatethecleargrowthinmarketsforlow-carbontech-nologiesorthedeclinesincarbonintensityoremissionswithspecificpolicies.Itisimportantforgovernmentsnotonlytomonitorpolicyimplementationandoutcomesonemissionsbutalsotoanalyzecostsanddistributionalimpacts.Thiswillallowthemtoadjustpoliciestoaddressnewchallengesorunexpectedandunwelcomedevelop-ments;itwillalsoallowothercountriesandjurisdictionstolearnfromtheirexperienceandimprovetheirownactions.Thisreportisonlyastart.Evaluatingthefullimpactofthecasestudiesfeaturedinthisreportwilltaketime,asmanydescriberecentlyenactedpoliciesthatwillproduceresultsoverdecades.TheWorldBankaimstocontinuecollecting,analyzing,andshar-ingexamplesofsuccessful(andlesssuccessful)climatepoliciesorinterventionstoinformdecision-makingacrosstheworld.Aswithallpolicyprocesses,thelearningjourneyforclimatepoliciesisnevercom-plete;rather,itcontinuestoevolveandadaptinlightofnewapproaches,technologies,andclimatechallenges.Assuch,theinsights,casestudies,andlessonslearnedincludedinthisreportarenotthefinalword.Theyaremoreofastock-takeonwheretheworldiscurrentlyatwithclimatepolicy,whatwehavelearned,andwhatwestillneedto­figureout.12RealityCheckReferencesFay,M.,S.Hallegatte,A.Vogt-Schilb,J.Rozenberg,U.Narloch,andT.Kerr.2015.“DecarbonizingDevelopment:ThreeStepstoaZero-CarbonFuture.”WorldBank,Washington,DC.https://openknowledge.worldbank.org/handle/10986/21842.IEA(InternationalEnergyAgency).2022.GlobalEnergyReview:CO2Emissionsin2021.https://www.iea.org/reports/global-energy-review-co2-emissions-in-2021-2.ILO(InternationalLabourOrganization).2012.WorkingtowardsSustainableDevelopment:OpportunitiesforDecentWorkandSocialInclusioninaGreenEconomy.https://www.ilo.org​/global/publications/ilo-bookstore/order-online/books/WCMS_181836.Kuramochi,T.,N.Höhne,M.Schaeffer,J.Cantzler,B.Hareetal.2018.“TenKeyShort-TermSectoralBenchmarkstoLimitWarmingto1.5°C.”ClimatePolicy183:287–305.https://doi.org/10.1080​/14693062.2017.1397495.NewClimateInstitute.2022.ClimatePolicyDatabase.https://climatepolicydatabase.org/.UnitedNations.2022.“UnitedinScience:WeAreHeadingintheWrongDirection.”Pressrelease13092022,September13.https://unfccc.int/news/united-in-science-we-are-heading-in-the-wrong​-direction.WorldBank.2023.CountryClimateandDevelopmentReports.https://www.worldbank.org/en​/publication/country-climate-development-reports.132.ClimatePolicies:PastTrendsandInsightsonImplementationOverthepastthreedecades,climatepolicyannouncementsgrewsteadily,peakingatthe21stClimateChangeConferenceofthePartiesinParis.AccordingtotheClimatePolicyDatabase,countrieshaveintroducedmorethan4,500climatepoliciesinthistimeframe(figure2.1).TwokeyUnitedNationsFrameworkConventiononClimateChange(UNFCCC)COPevents—inCopenhagenin2009andParisin2015—weremajorcatalystsfortheannouncementofclimatepolicies,butthenumberofpoliciesannouncedhasfallenovertheyears.Whatultimatelymattersfordecarbonizationisnothowmanyclimatepoliciesareannouncedbuthowmuchemissionsarereduced.Somepolicies,suchaslargefossilfuelsubsidyreforms,willhavealargeimpactonemissions;otherstargetsec-torswithsmallemissionsandmayonlyhaveamarginalimpact.Studieshaveshown,however,thatthesearesignificantlyrelated;eachnewpieceofclimateleg-islationreducedannualcarbondioxide(CO2)emissionsperunitofgrossdomesticproduct(GDP),onaverage,by0.78percentnationallyinthefirstthreeyearsand1.79percentinthelongterm(Eskander,Fankhauser,andSetzer2020).Intheabsenceofapolicy-per-policyimpactanalysis,whichwouldfacedifficultmethod-ologicalanddataavailabilitychallenges,weusethenumberofclimatepolicieshereasacrudeproxyforpolicyactionindifferentsectors,usingvariousinstruments.GlobalTrendsinClimatePoliciesacrossTime,Space,andSectorsInlinewiththeiremissionscontributions,higherinstitutionalcapacity,andlargefinancialresources,high-incomecountries(HICs)havetendedtomovesooneronclimatepolicy,butothercountriesareincreasinglycomingtothetable(box2.1).Sincethe1990s,HICsintroducedmoreclimatepoliciesonaverage(figure2.2a),butupper-middle-incomecountries(UMICs)andlower-middle-incomecountries(LMICs)alsoincreasedtheaveragenumberofpoliciestheyannouncedin2005–15;someofthemorepopulouscountries—suchasChina,India,andIndonesia—­introducedacomparablylargenumberofclimatepolicies(figure2.2b).Althoughlow-incomecountries(LICs)havetendedtoannouncerelativelyfewclimatepoliciesoverthepastthreedecades,averagepolicyannouncementsincreasedsignificantlyin2015.14RealityCheckFIGURE2.1ClimatePoliciesAnnouncedGlobally,1980–2020Source:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.Note:COP15=the15thConferenceofthePartiesinCopenhagen;COP21=the21stConferenceofthePartiesinParis.TotalnumberofclimatepoliciesannouncedeachyearCOP15(Copenhagen)COP21(ParisAgreement)300350250200150100500198019851990199520002005201020152020Cumulativenumberofclimatepoliciesannouncedovertime5,0004,0003,0002,0001,0000Climatepolicieseachyear(leftaxis)Cumulativeclimatepolicies(rightaxis)FIGURE2.2ClimatePolicyAnnouncements,byCountryIncomeGroupSource:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.Note:GDP=grossdomesticproduct.HighincomeUpper-middleincomeLower-middleincomeLowerincomeHighincomeUpper-middleincomeLower-middleincomeLowerincomea.Averagenumberofpolicies3.02.52.01.51.00.5Averagenumberofclimatepoliciesannouncedacrosscountriesinincomegroup01980198519901995200020052010201520206123456789GDPpercapita(logarithmscale)Logcumulativenumberofclimatepolicies101112b.Cumulativenumberofpolicies,bycountryUSAAUSDEUCANGBRITACHNIDNINDBRAZAFMEXTURARGRUSCOLBGRURYSAUSVKCRIKAZROUPRTMYSCHLTHAPERBLRPHLUKRVNMNORSWEDNKCHEBELARENZLISRSGPIRLAUTFINKWTISLLUXLIEMCOQATBHSGRLBRNMLTCYPBRBESTLTUTTOHUNMDVDOMPANMNELVAPLWSYCBWASRBFJIGUYGRDSURGABPOLGRCCUBECUGEOMNGDZAPAKTUNUZBZMBTZAEGYTJKETHNPLSENAGONGAMARIRNBTNBGDGHAVUTBOLSLVFSMSLBJORBLZPNGWSMHNDGTMTONMDAIAMIRQMHLBIHPRYMKDALBCPVAZEDMAGNQNRUTKMMUSHRVKNAANDSMRBHROMNATGLBYLCALBNNAMSWZARMMRTCIVNICDJILAOSTPHTIKGZKIRBFABENKHMSYRCMBKENMOZUGARWACODMMRMDGBDIYEMTLSMLISDNMWIGMBNERAFGCAFLBRGINSOMSLETCDLSOGNBTGOZWEVCTTUVLKACZESVNNLDJPNESPKORFRA15ClimatePolicies:PastTrendsandInsightsonImplementationClimatepolicieshavebecomeincreasinglymorewidelyadoptedinallcountriesinrecentdecades(map2.1).Intheearly2000s,itwasmostlyHICsthatannouncedclimatepolicies,buttherehassincebeenarapidincreaseinclimatepolicyannounce-mentsbyLMICs.From2010–15,ChinaovertooktheUnitedStatesinannouncingmoreclimatepoliciesthananyothercountry.Indiatookovertheleadfrom2015–22,announcingnearly50climatepolicies—areflectionofitsdrivetoincreasetheadoptionofrenewables,especiallysolarpower(seeCaseStudy16,whichdetailsothercontribu-toryfactorsandshowshowIndiahasbecomeoneoftheworld’smostattractivesolarenergymarkets).Comparedwithotherregions,Sub-SaharanAfricamadefewerclimatepolicyannouncements.SouthAfricaisanotableexception,announcingmorethan85climatepoliciesfrom2000–22.MorethanhalfofallSub-SaharanAfricancountrieshaveannouncedfewerthanfiveclimatepolicies,andonlySouthAfricaandMalawihaveannounced2050netzerotargets.Othershavesetlatertargetsorarestillindiscussions.AlthoughSub-SaharanAfricacurrentlyonlycontributesaround2to3percentofglobalemissions,anexcessivelock-intofossil-fuel-basedtechnologiescouldbedetri-mentaltoitslong-termgrowthanddevelopmentprospects.Theannouncementofsector-specificclimatepolicieshassloweddown,buteconomy-widepoliciesareontherise.Giventheirsignificantroleindecarboniza-tion,theelectricityandheatsectorshaveaccountedforthelargestnumberofcli-matepolicyannouncementsglobally.Therehasalsobeenasteadyincreaseinpolicyannouncementsrelatingtotransportandbuildingsoverthepasttwodecades(figure2.3).Growthinclimatepoliciesrelatingtoindustry,aswellasagricultureandforestry,hasbeenmoremuted;shipping—anotoriouslyhard-to-abatesector—hasbeenthetargetofveryfewclimatepolicies.Althoughpolicyannouncementshavedeclinedacrossallsectorsinrecentyears,economy-widepolicies,includinggreenhousegas(GHG)reduction,energyefficiency,andrenewableenergy(RE)targets(manyofwhichwereannouncedatCOP21in2015),havebeensteadilyincreasing.Climatepoliciesrelatingtoelectricityandheattendtoaccountforthelargestshareofcountryclimatepolicies,butagriculture-andforestry-relatedclimatepoliciesareoftenprevalentinLICs.Lookingatthedistributionofclimatepoliciesbysectoracrosscountryincomegroups,HICstendtohavehighersharesofclimatepoliciesrelatingtotransportandbuildings,whileLICs(largelylocatedinEastAsiaandPacificandSub-SaharanAfrica)haveagreatershareofpoliciesrelatingtoagricultureandforestry­(figure2.4).Thisgreatersharelargelyreflectsdifferencesineconomicstructureacrosscountriesandthetendencyforagriculturetobeadominantsector(bothintermsofemploymentandGDP)inmanylow-incomecountries.16RealityCheckMAP2.1ClimatePolicyAnnouncementsoverTimeandSpaceSource:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.2000–20052005–20102015–20202010–2015IBRD47263MAY20237060504030201001401201008060402006050403020100403020100NumberofclimatepoliciesannouncedNumberofclimatepoliciesannouncedNumberofclimatepoliciesannouncedNumberofclimatepoliciesannounced17ClimatePolicies:PastTrendsandInsightsonImplementationPresentInsightsonClimatePolicyImplementationNosinglepolicycanensureanefficientandleast-cost,low-carbontransitionbecausetherearemanyobstaclestoovercome.Toimplementaleast-costtransition,govern-mentswillneedasetofpoliciestointernalizetheclimateexternalityandmanageotherobstacles(figure2.5).Theseincludebarrierstoinnovationandeconomiesofscale,net-workeffects,andtheneedforsupportiveinfrastructure—suchaselectricitygrids,metrosystems,andelectricvehicle(EV)chargingstations—imperfectmarkets,andalackofaccesstofinancing.Tomakethetransitionpossibleandcost-effective,govern-mentscanimplementapackageofmeasuresandpoliciesinparalleltomanagealltheothermarketandgovernmentfailuresthatmakethetransitionimpossibleormoreexpensive.Efficiencyisnottheonlycriterionfordesigningclimatepolicies:fairness,equity,andpoliticaleconomyconstraintsarealsoimportant.Policiesarealwaysdrivenbymultiplegoalsandobjectives,andclimatepolicyisnoexception.Policiesthattakeintoaccountotherobjectives—suchasregionalequityornationalorenergysecurity—willbemoreattractiveandfeasible.Particularlyimportantforclimateactionistheconceptofa“justtransition,”whichaimstoensurethatemissionsreductionsdonotleadtounfairimpactsonspecificcommunitiesorregions,especiallythepoorestandFIGURE2.3ClimatePolicyAnnouncementsGlobally,bySectorSource:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.Note:Wherepoliciesrelatetomorethanonesector,theyappearmorethanonce.IndustryElectricityandheatAgricultureandforestryTransportShippingBuildingsEconomy-wideTotalnumberofclimatepoliciesannouncedglobally17520010012515075502501980198519901995a.Totalnumberofpoliciesb.Cumulativenumberofpolicies20002005201020152020198019851990199520002005201020152020Cumulativenumberofpoliciesannouncedglobally02505007501,0001,2501,5002,00018RealityCheckFIGURE2.4DistributionofClimatePoliciesbySectoracrossIncomeandRegionalCountryGroupsSource:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.Averageshareofpoliciesassociatedwithsector0.60.50.40.30.20.10Averageshareofpoliciesassociatedwithsector0.60.70.50.40.30.20.10ElectricityandheatTransportBuildingsIndustryAgricultureandforestryShippingElectricityandheatTransportBuildingsIndustryAgricultureandforestryShippinga.Bycountryincomelevelb.ByregionHighincomeUpper-middleincomeLower-middleincomeLowincomeSouthAsiaEuropeandCentralAsiaMiddleEastandNorthAfricaSub-SaharanAfricaLatinAmericaandtheCaribbeanEastAsiaandPacificNorthAmericaFIGURE2.5ObstaclestotheLow-CarbonTransitionSource:Originalanalysisforthispublication.Theclimatechangeexternality(carbonpricing)Technologylock-inandknowledgespillovers(innovationpolicy)Coordinationfailure,increasingreturns(e.g.,feed-intariffsforsolar)Infrastructuresystemsandnetworkeffects(e.g.,investmentintransit,electricitygrid)Governanceandinstitutions(e,g.,reformsofcapitalandenergymarkets)Behavior,socialnorms,informationasymmetry(e.g.,normsandlabels)19ClimatePolicies:PastTrendsandInsightsonImplementationmostvulnerable.Agrowingnumberofcountriesaredevelopingjusttransition­frameworks,helpingthemestablishasocialmandateandguidingprinciplesforactionbasedonequityandfairness.Theseframeworksofferapeople-firstapproachthatcon-sidershowtoincludeandsupportpeopleandsocietiestoenhancetheequityand­fairnessofclimatepolicydecisionsandoutcomes.Toexploretherangeofpoliciesneededtoensureefficientandfairdecarbonization,thisreportproposesasimpletypologywithfivecategories.ItbuildsontheframeworkproposedintheDecarbonizingDevelopment:ThreeStepstoaZero-CarbonFuturereport(Fayetal.2015),whichexploresthealignmentofdevelopmentanddecarbon-izationforLMICsandidentifiesthetypesofclimatepolicypackagesneededtoachievecompletedecarbonizationofoureconomiesby2100,consideringthemanymarketfailures,imperfections,risks,undesireddistributionaleffects,andpoliticaleconomyobstaclesthatsuchadeeptransitionentails.Buildingonthisreport,weclassifypoliciesinfivecategories:■■Planningforafuturewithzeronetemissions■■Gettingthepricesright■■Facilitating,enabling,andtriggeringsectoraltransitions■■Gettingthefinanceflowing■■EnsuringajusttransitionPlanningforaFuturewithZeroNetEmissionsHavingacommonvisionofhowtoachieveclimateobjectiveswillhelpcountriesdesignappropriatepolicypackages.Developingalong-termstrategy(LTS)forlow-carbon,­climate-resilientdevelopmentcanhelpcountriesdothis.AnLTSprovidesarealisticpathwaytowardlong-termobjectivesandhelpsidentifyusefulmilestonesforshorter-termstrategiesandplans.Althoughitispossibletoreduceemissionsby10or20percentbyactingonlyontheemissionsthatarecheapesttoabate,atransitiontonetzerorequiresactiononallemissionssources,transformationalactionsinmanysectors,andaverydif-ferentapproachtosequencingandprioritization.Ratherthanidentifyingthelowest-costabatements,itisimportanttodesigntheleast-costtransitionwiththerightsequencingandtimingofactionsineachsector.LTSscanbethebasisfordevelopingshort-termclimateplansorstrategies,includingnationallydeterminedcontributions(NDCs).Implementinglong-termclimatestrategiesrequiresacomprehensiveandcoordi-natedeffortinvolvingmultiplesectorsandstakeholders.Thereisnoone-size-fits-allapproach.Governmentsneedtoprioritizeactionsandestablishaclearroadmapwhileconsideringvariouschallenges,includingfinancialandtechnicalconstraints.Theprocessshouldconsiderthecountry’slong-termvision,sustainabledevelopment,20RealityCheckpoliticaleconomy,societalimpacts,stakeholderengagement,governance,environ-mentalimpactsandtrade-offs,adaptationelements,sectoralstrategies,implementa-tionapproaches,monitoringplans,andrevisionprocesses.Withanambitiouslong-termtarget,countriescanbenefitfrominvestingearlyinrelativelyexpensiveemissions-reductionoptionsthathelpmaketechnologiescheaperoreasecostsbydistributingthemoveralongerperiod.ManyREtechnologieshavebecomemoreaffordabletodayduetosuccessiveroundsofgovernmentinvestmentandpolicysupportinearlierperiods.Forexample,theGermangovernment’spolicysup-portin2000allowedpeoplewhoinstalledsolarpanelstoearnapremiumontheenergytheygenerated,drivingahugeboostindemandforsolarpanelswhentheywerestillveryexpensive.WithdemandsoonoutpacingsupplyfromGermanmanufacturers,ChinasawanopeningandbeganexportingsolarpanelstoEurope.Overthenexttwodecades,Chinacontinuedtosupportsolarpanelmanufacturingwithpolicies,suchassubsidiesandfeed-intariffs(FiTs),andrapidlybecametheworld’slargestandlowest-costsolarpanelproducer(DeLaTour,Glachant,andMénière2011).Actingearlyisimportantinsectorsthataredifficulttodecarbonizeorwheretech-nologicaltippingpointsorsocialnormsareseriousbarriers.Inmostsectors,anabrupttransformationwouldbemoreexpensivethanasmoothshifttowardzeronetemis-sions.Insectorsthatareparticularlyexpensiveanddifficulttodecarbonize,suchastransportation,startingearlymakesthetransformationasprogressiveandsmoothaspossible,minimizingcostsinthelongterm.Transitionscanbeimpairedbycomple-mentaritiesindemand(peereffects),increasingreturnstoscale,orlearningbydoing.Forexample,morepeoplewillbuyEVsiftheyseeothersbuythem;alargeshareofEVswillcreateincentivesfordenserchargingstations,whichwillinturnmakeEVsmoreattractive.Suchbigshiftstomovefromacarbon-intensivetoalow-carbonequilibriumrequirealargeinitialeffort.TheClimatePolicyDatabaseshowsthatcountrieshavebeendevelopinglong-orshort-termclimatestrategiesandtargets,buttheyaremorelikelytobepoliticalandnonbinding.Mostformalandlegallybindingpoliciesoccurredintheearlierdaysofclimatepolicymaking(2000–10),particularlywhenitcametoGHGreductionsandREtargets.Sincethen,therehasbeenaproliferationofnonbindingpolicies,particu-larlyaroundthetimeoftheParisAgreement,whenmorethan100countriesannouncednonbindingtargets(seefigure2.6).Twocountriesthatarepioneeringeconomy-widelow-carbonstrategiesareCostaRicaandIndonesia.CostaRicafirsthighlighteditsstrategyforalow-carboneconomy(CaseStudy1)totheUNFCCCin2000,andforthelasttwodecadeshasbuiltitstech-nicalexpertisewithinternationalpartnerstodevelopmodelsandpolicyanalysisfordecarbonization.Theresultisanetzeronationaldecarbonizationplan,submittedasitsLTStotheUNFCCCin2019,whichincludesstakeholderengagementandconsidersclimatejusticeandajusttransition(GovernmentofCostaRica2020).TheLTSwasthe21ClimatePolicies:PastTrendsandInsightsonImplementationbasisforits2020NDCupdate.CostaRicaalsoinstitutionalizedmeasuresintolawandintegratedlow-carbondevelopmentintogovernmentalprocesses.Keylessonsfromitssuccessincludeacleartransformationpathway,stakeholderbuy-in,politicalsponsor-ship,andadequateinstitutionalarrangementsforfinancing,monitoring,andensuringaccountability.AtCOP15,Indonesia(CaseStudy2)pledgedtoreduceitsGHGemissionsby41percentby2030withinternationalassistanceandsetanetzerotargetfor2060.ItsLTSpresentsalow-carbontrajectorythatwouldreach1.6metrictonsofCO2equiva-lent(tCO2e)percapitaemissionsby2050.Toachieveitsgoalofreducingover60percentofemissionsbyforestryandlanduseandmakingthemanetcarbonsinkby2030,thegovernmenthasplacedamoratoriumonnewlicensesforforestconver-sionandpeatlands,establishedtwonewagencies,introducedthePresidentialRegulationontheEconomicValuationofCarbon,andimplementedajurisdictionalFIGURE2.6TotalNumberofFormalorLegallyBindingandPoliticalorNonbindingClimatePoliciesAnnounced,1990–2020Source:WorldBankcalculationbasedondatafromtheClimatePolicyDatabase2022.Note:GHG=greenhousegas.ClimatestrategyEnergyefficiencytargetGHGreductiontargetRenewableenergytargetTotalnumberofpoliciesannounced40a.Formalandlegallybindingpoliciesb.Politicalandnonbindingpolicies0510152025303519901995200020052010201520201990199520002005201020152020Totalnumberofpoliciesannounced12002040608010022RealityCheckemissionreductionsprograminEastKalimantan.IthasalsosignedagreementswiththeForestCarbonPartnershipFacility’s(FCPF)CarbonFund,GreenClimateFund,andNorwaytoaccessresults-basedpaymentstoadvancetheimplementationofREDD+(forReducingEmissionsfromDeforestationandforestDegradation,con-servationofforestcarbonstocks,sustainableforestmanagement,andenhancementofforestcarbonstocksindevelopingcountries).IthasalsosetuptheIndonesiaEnvironmentFundtochannelfutureclimatefinanceanddevelopapipelineofproj-ectsandprograms.Information-gatheringandfeedbackprocessesarekeytosuccessfullyimplement-ingclimatepoliciesandshouldbepartoftheplanningprocess.Arepeatedthemeacrossalmostallthecasestudiesinthisreportistheimportanceofeffectivemonitor-ing,reporting,verification,andinformationsharing.Insomecases,effectivemonitor-ingrequiresspecifictechnologies,suchastheDeforestationDetectioninRealTime(DETER)satellitetechnologythathelpedmonitordeforestationinBrazil(CaseStudy10).Inothercases,countriescansupportmonitoringandevaluationbystrengtheninginstitutionalcapacityandtrainingrelevantpersonnel.GuangdongProvinceinChina(CaseStudy20),forexample,reducedagriculturalpollutionbytrainingagriculturalofficers,farmers,andenterprisesinimprovedlivestockwastemanagementpracticesandhelpingthemdevelopcertificationstandardsandregulationsforsafe,greenagri-culturalproducts.Asclimatepoliciesareintroducedindynamicandadaptivesettings,ensuringcon-tinuallearningandfeedbackiscrucialforensuringthedesiredeffectofaspecificpol-icy.Policyimplementationalsoinvolvesadegreeoflearningbydoing.Eventhoughmuchcanbelearnedfromothercountries’experiences,buildinglearningandfeedbackmechanismsintotheimplementationprocessallowscountriestoquicklyidentifyandrespondtoissuesastheycomeup.GettingthePricesRightGlobalmomentumoncarbonpricingisbuilding,butpoliciesdonotgofarenough.Inthepastthreedecades,theshareofglobalGHGemissionscoveredbycarbonpric-ingandEmissionsTradingSystem(ETS)mechanismshasrisenfrom0.15percentin1990to23percentin2022(figure2.7;WorldBank2022a).AtthetimeofthefirstDecarbonizingDevelopmentReportin2015,39nationaland23subnationaljurisdic-tionshadimplementedorscheduledtheimplementationofcarbonpricinginstru-mentssuchascarbontaxesorETS.Eightyearslater,thesenumbersstandat46and36,respectively(WorldBank2022b).Themomentumisclearlybuilding,butalotmoreneedstobedone.Despiteencour-agingprogress,in2022,lessthan4percentofglobalGHGemissionswerecoveredbyacarbonpriceatorabovetherangeneededtomeettheParisAgreement’sgoals.23ClimatePolicies:PastTrendsandInsightsonImplementationForcountrieslookingtointroducecarbonpricingmechanisms,BritishColumbia’scarbontax(CaseStudy4)standsoutasahelpfulmodel.Introducedin2008,thispolicyhasresultedinincreasedeconomicgrowth,decreasedinequality,andsignificantlyreducedGHGemissions.Designwasacriticalelementofthispolicy’ssuccess.Itwasbroadinnature,applyingtoallfuelspurchasedinthecountry,andrevenueswereusedtoreduceothertaxesinawaythatnarrowedthegapbetweenrichandpoorhouseholds.China’sexperienceimplementinganationalETS(CaseStudy5)providesfurtherlessonsonhowpolicydesigncaninfluencefeasibilityandoutcomes,andthetrade-offbetweenthetwo.Specificdesignchoiceshaveledthepolicytofunctiondifferentlyfromatraditionalcap-and-tradesystem,limitingitsabilitytodriveleast-costabate-ment.However,ithasdeliveredbenefitsintermsofredistributingresourcesacrossprovinces.Limitationsincapacity;trainingforenterprisesinETSrulesandproce-dures;andtheimplementationofaneffectivemonitoring,reporting,andverificationsystemhavealsoresultedindelays,concernsrelatedtodatatransparencyandaccuracy,andlowemissionsallowanceprices.Reformingfossilfuelsubsidiesisanotherimportantelementingettingthepricesrightbutcontinuestobepoliticallychallenging.Followingatemporarydeclinein2020duetothepandemic-drivenfallindemandandprice,globalfossilfuelsubsidiesshotuptoalmostUS$700billionin2021(figure2.8).Althoughmanycountrieshavepledgedtoreduceinefficientsubsidies,governmentshavefeltcompelledtoshieldhouseholdsfromrisingenergypricesastheglobaleconomyreboundedandtheRussianFederation’sFIGURE2.7ShareofGlobalGHGEmissionsCoveredbyCarbonPricingandETSMechanisms,1990–2022Source:WorldBank2022b.Note:ETS=EmissionsTradingSystem;GHG=greenhousegas.ShareofglobalGHGemissionsNumberofcarbonpricingmechanismsinoperation245678910151619212331363840434555586468202515105019901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202224RealityCheckwaronUkraineledtoaglobalenergycrisis.Theseoutlaysareprincipallyconcentratedinoilandpower,butsomecountriesalsohavelargenaturalgassubsidies(figure2.9).Reformingsuchsubsidiesiswidelyadvocatedtohelpaddressthefundingchal-lengesofmostLMICs,butifpoorlyimplemented,thereformscandisproportionatelyimpactthepoorestinsociety.Inrecentyears,effortstoreformfossilfuelsubsidiesinFrance,Chile,andIranhavemetwithprotestsandsocialresistance.Yetmorethan40countrieshadimplementedsubsidyreformsby2020(IEA2021b).Onesuchcoun-tryistheArabRepublicofEgypt(CaseStudy6),whichimplementedenergysubsidyreformstohelpreduceitsbudgetdeficitandcreatethefiscalspacetostrengthensocialassistance,health,andeducation.Effectiveandproactivecommunicationwaskey:thegovernment’spublicmultimediacampaign,launchedalongsideitstariffreform,encouragedtheuseofenergyefficiencymeasurestoreduceimpactsfromhigherenergyprices.Thegovernmentalsoshieldedthemostvulnerablefrompriceincreasesbyincreasingthesocialprotectionbudgetbyaround60percentandintroducingmoretargetedsupportmechanismswithcashtransfers.Facilitating,Enabling,andTriggeringSectoralTransitionsAshighlightedinFigure2.5,thetransitiontowardzeronetemissionsfacesmultiplebarriers,andprovidingtherightincentiveswiththerightpricesisoftennotasufficientpolicy.Additionalpolicieswillberequiredwhenitisimpossibletogettheoptimalprices,forinstanceduetopoliticaleconomychallenges,orwhentherightpricesdonottranslateintotherightincentivesortheexpectedchangesinbehavior.Thiscanhappenformultiplereasons,suchasthefollowing:■■Investmentswithlonglifetimes:intheabsenceofperfectpredictabilityandcredibilityoffuturecarbonprices,investorsmaynotinternalizetheexpectedgrowthincarbonpriceovertimeandmakesuboptimaldecisions.FIGURE2.8FossilFuelSubsidiesbyFueloverTimeSource:OECD2022.US$,billion8001,0006004002000US$,barrel9012060300201020112012201320142015201620172018201920202021CoalElectricityNaturalgasPetroleumOilpriceperbarrel25ClimatePolicies:PastTrendsandInsightsonImplementationFIGURE2.9FossilFuelSubsidiesbyFuelfortheTop25Countriesin2020Source:IEA2023a.Note:GDP=grossdomesticproduct;MER=MarketExchangeRate.QatarEcuadorAzerbaijanPakistanBangladeshTurkmenistanAngolaMeicoUkraineKuwaitLibyaUzbekistanArgentinaKazakhstanIraqVenezuelaUnitedArabEmiratesIndonesiaEqyptAlgeriaRussiaSaudiArabiaIndiaChinaIran,IslamicRep.0816243240412202836US$,billionTotalsubsidiesas%ofGDP(MER)OilElectricityGasCoal■■Marketimperfections:somesectorsareheavilyregulatedanddonotnecessarilyrespondtoachangeinprices,forinstance,wheninvestmentanddispatchdeci-sionsinapowersystemarenotdrivenbypricesbutthroughothermechanisms.■■Technologylock-insandlearningbydoing:forinstance,whenestablishedfossil-fuel-basedtechnologiescompetewithearly-stagecleanalternativesthatneedinvestmentstocatchup.■■Networkeffects:wheninfrastructuresystemsneedtobetransformed,forinstance,toshifttransportationfromindividualvehiclestowardpublictransitandrailtransport,ortomakesurethereisachargingnetworkinplacetoallowthetransitiontoEVs.■■Behaviors:peopleoftendonotmakeafullcost-benefitanalysistoinformtheirdecisions(forinstance,whenbuyingappliances),orsometimestheperformanceofaproductisdifficulttoobserve(forinstance,theenergyefficiencyofabuilding).Insuchcases,thereisapotentialjustificationforoverlappingpolicies,withspecificsector-targetedpoliciesthatcanrangefromlabelsandregulationstotargetedsubsidiesanddirectinvestmentininfrastructure.Whenthepricescanbeadjustedandprovide26RealityChecktherightincentive,theobjectiveofcomplementarypolicieswillbetoensurethatthepricestranslateintoachangeinincentivesandbehaviors.Whenthepricescannotbeadjusted,atleasttemporarily,thenpoliciescansubstitutethepricechange,andideallytransformtheeconomicsystemandpoliticalcontextenoughtomakethepricechangemorepoliticallyandsociallyacceptable.Inallcases,policieswillalsoensurethattherighttechnologiesandinfrastructuresystemsareavailabletoallowpeople,firms,andinvestorstochangetheirbehaviorsandreducetheiremissions.Asaresultofdecarbonizationpoliciesandmarketdevelopments,manylow-carbontechnologieshavebecomemorecost-competitive.Solarpower,onshorewind,andEVsarenowcompetitiveinsectorsrepresentingaround25percentofglobalGHGemissions.By2030,thiscouldriseto70percent(figure2.10).Furthercostreductionsinlow-carbontechnologiesandinfrastructurearefunda-mentaltothetransitiontoalow-carboneconomy,butbarriersremain.Intheenergysector,theworldhasseentremendousprogressinREtechnologies.Thelevelizedcostofsolarenergyhasfallenbyaround90percentoverthepastdecade,andwindpowercostshavedroppedbyaround72percent.AlthoughthecostofREisnowcheaperthanfossil-fueledenergyinmanypartsoftheworld,LMICsstillfacesignificantbarriersin­transitioningtocleanenergy.Obstaclesincludesignificantupfrontinvestmentcosts—althoughsavingsaccrueoverlongertimeperiods—andhighborrowingcosts,whichcanincreasethecostofdecarbonizingapowersystembymorethan30percent(SystemIQ2020).Inthetransportsector,EVshavemaderapidcostimprovementsandareclosetopassingthetippingpointinwhichtheyarecheaperthantheirinternal­combustionengineequivalents(SystemIQ2020).However,similarbarriersexistininstallingthenecessarycharginginfrastructureandprovidingadequatefinancingforhouseholdsandindustriestoupgradevehiclefleets.Althoughtoday’stechnologiesareenoughtoenablecountriestomakemeaningfulemissionsreductionsby2030,reachingzeronetemissionsby2050willrequiresignifi-cantinnovationanddevelopmentoftechnologiesthatarenotyetmarketready.TheInternationalEnergyAgency’sNetZeroby2050roadmapassumesthatmostglobalCO2emissionsreductionsthroughto2030canbeachievedusingtechnologiesthatarealreadyavailable.Butreachingnetzeroby2050intheenergysectorrequiressubstantialinnovationinbatteries,hydrogenelectrolyzers,anddirectaircaptureandstorage(IEA2021a).Technologicalinnovationwillalsoberequiredinhard-to-abatesectorssuchassteel,cement,chemicals,shipping,andaviation,andbothincreasedresearchanddevelopmentfundingandwell-targetedpoliciessupportingtechnologicaldemonstra-tionanddeploymentarecrucialtoensuretechnologicalsolutionscomeonlineintime.Forsometechnologies,successisnotgoingtobeeasy;norisitalwayspossibletoreplicatesuccessinothertechnologies.Thecostsofmanytechnologies—suchaswindturbines,batteries,andelectrolyzers—aredecliningwithincreasedpolicysupportandmarketpenetration,butalltechnologiesdonotshowthesamedegreeofpromise.27ClimatePolicies:PastTrendsandInsightsonImplementationDuetogreaterprojectcomplexityandpublicresistance,longertimesbetweentechno-logicalupgrades,andmorelimitedhistoricalinvestment,nuclearenergyandcarboncaptureandstoragetechnologieshavegreaterlevelsofuncertaintyaroundtheircostimprovementcurves,andpolicymakersshouldaccountforthesehigherriskswhenconsideringinvestmentandpolicysupport(Wayetal.2022).Toensurethattheneededtechnologiesandinfrastructureareavailableandafford-able,countriescanusetechnologysupportanddemandsupportpolicies.TheformeraimstoenhancethesupplyoftechnologiesandinfrastructurebyprovidingincentivesFIGURE2.10Low-CarbonSolutionsbySector:ProgressSinceParisAgreementandaLookForwardto2030Source:SystemIQ2020.PowerLightroadtransportBuildingheatingTruckingAgricultureLandusechangeShippingAviationOilandgasfugitiveSteelCementChemicalsOther2015Conceivable2020PowerLightroadtransportBuildingheatingTruckingAgricultureLandusechangeShippingAviationOilandgasfugitiveSteelCementChemicalsOther2030PowerLightroadtransportBuildingheatingTruckingAgricultureLandusechangeShippingAviationOilandgasfugitiveSteelCementChemicalsOtherConceptSolutiondevelopmentNichemarketMassmarketLatemarketLow-carbonsolutionmaturityIncreasingshareofnewsales/build28RealityCheckthatreducethecostoftheirdevelopment,suchasfundingforresearchanddevelop-mentactivities.Thelatteraimstoaccelerateprogressbystimulatingdemandforinno-vativesolutionsandtechnologies,suchasfinancialincentivesforadopters,orthedevelopmentandenforcingofcodesandstandards.Here,weconsidertrendsandcountryexperiencesinbothpolicycategories.TechnologysupportpoliciesHistorically,HICshavetendedtoplayaleadingroleinresearch,technologydevelop-ment,anddeploymentpolicies(figure2.11).Asgreeninnovationfacesbothenviron-mentalandknowledgeexternalitymarketfailures,therehasalwaysbeenastrongrationalefortechnologysupportpoliciestohelpensureprogressinresearch,knowl-edgeproduction,andtechnology.Withtheirmoreadvancedtechnologicalcapabilities,HICshavetendedtobefrontrunnersinintroducingpoliciesrelatingtoresearch,tech-nologicaldevelopment,anddeployment.TheUnitedStateswasanearlymoverinthisspace,withseveralpoliciesdesignedtopromoteinnovationinREtechnologiesinthe1970s.Primarilymotivatedbyenergysecurityandaffordabilityconcernsfollowingthe1973energycrisis,thesepoliciesplayedacrucialroleindrivingearlyprogressinsolarandwindenergy.Brazilstandsoutasamiddle-incomethatintroducedaresearchanddevelopmentpolicyearlyon,in1985.ItsNationalElectricEnergyConservationProgram,PROCEL,designedtopromoteefficientelectricityuse,hasgenerated92.2terawatthoursofenergysavingsover30years,withsignificantcostsavings(IEA2023b).Morerecently,technologicaldemonstration,development,anddeploymenthavebeencriticalforthesuccessfulimplementationofdecarbonizationpoliciesinUMICs,LMICs,andLICs.Forexample,underpartnershipswiththeGlobalEnvironmentFacility(GEF)andtheWorldBank,theMonterreywaste-to-energyproject(CaseStudy9)gen-erated17megawattsofelectricityandreducedemissionsby5.7metricmegatonsofCO2equivalent(MtCO2e)—ofwhich262,000tonswasmethane—from2004to2020.TheprojectisanearlyexampleofacirculareconomysolutionthatprovidedacleanandcheapersourceofelectricityfortheMonterreymetropolitanarea.Itssuccesswasfacili-tatedbypoliticalwill,localcapacitybuilding,supportiveregulations,verificationoflandfillgasimpact,andotherfactorsthatcreatedafoundationforanintegratedwastemanagementsystem.AnotherexampleisBrazil’sDETERsatellitesystemthatusesgeo-referencedimagerytoidentifydeforestationhotspotsneedingurgentattention(CaseStudy10).Researchshowsithasbeen­successful;deforestationandland-usechangeemissionswerereducedby82percentand65percent,respectively,from2004to2012.However,toensureeffectiveness,enforcingpenaltiesforviolatinglawsrelatedtodefor-estationisvital,astherearemanypoliticaleconomychallengeshere.Technologicaldemonstration,development,anddeploymentcanbeaseffectiveand,inmanycases,moreeffectivewhenusinglow-costtechnologiesandindigenouspractices.IntheSahel,farmersareusingtraditionalpracticessuchasagroforestryand29ClimatePolicies:PastTrendsandInsightsonImplementationFIGURE2.11AnnouncementofPoliciesRelatingtoTechnologyDevelopment,Deployment,Research,andInfrastructureInvestmentsSource:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.HighincomeUpper-middleincomeLower-middleincomeLowincomeNorwayUnitedStatesofAmericaKuwaitChinaArgentinaMexicoBrazilSwedenSwedenAustraliaGermanyCanadaUnitedKingdomJapanFranceItalyRepublicofKoreaSpainVietnamIranIndiaNorwayUnitedStatesofAmericaDenmarkAustraliaGermanyCanadaUnitedKingdomJapanFranceItalySpainKuwaitSaudiArabiaChinaArgentinaBrazilColombiaIndonesiaVietnamIranIndiaRepublicofKoreaNorwayUnitedStatesofAmericaSwedenDenmarkNetherlandsAustraliaGermanyCanadaUnitedKingdomJapanFranceItalySpainSaudiArabiaChileChinaRussianFederationKazakhstanArgentinaTürkiyeMexicoBrazilSouthAfricaColombiaIndonesiaTunisiaIranNigeriaIndiaTanzania197019801990Yearofpolicyannouncement200020102020197019801990YearofpolicyannouncementYearofpolicyannouncementYearofpolicyannouncement200020102020RepublicofKoreaUnitedStatesofAmericaAustriaAustraliaGermanyCanadaUnitedKingdomJapanFranceUnitedArabEmiratesUnitedArabEmiratesItalyRepublicofKoreaSaudiArabiaChileChinaArgentinaTürkiyeMexicoThailandBrazilTongaIndia197019801990200020102020197019801990200020102020a.Technologydevelopmentb.Technologydeploymentanddiffusionc.Researchanddevelopmentfundingd.Infrastructureinvestments30RealityCheckrainwaterharvestingtorestoresoilandcapturerainfall(CaseStudy11).Informationandtrainingarecriticaltoincreasingtheadoptionofthesepractices,asevidencedbysuccessfulinitiativessuchas“zaïschools”inBurkinaFasoandtrainingprogramsinNigerthatresultedina90percentincreaseinadoptionrates.Trainedfarmerscontinuetotransmitknowledgetotheirneighborsuptothreeyearsaftertraining,makinginfor-mationcampaignsandtrainingcost-effectivewaysofboostingtheadoptionofprofit-ableandaccessibletechnologies.Infrastructureinvestmentsarecrucialforallcountries,butthenatureofinvestmentandassociatedpolicychallengeswilldifferacrossdifferentcountrytypes.AsHICsandmiddle-incomecountries(MICs)generallyalreadyhaveenergy,buildings,andtransportsystemsinplace,theywillneedtoupgradeorreplacemuchoftheirinfrastructure.Manycountriesfacesignificantinertia,asthepathdependencyofpreviousinfrastructureandenergysystemsoftenconstrainsfutureinfrastructuredevelopments.Incontrast,LICswithrelativelyundevelopedenergy,transport,andbuildinginfrastructurecanleapfrogemissions-intensiveinfrastructuresystemsofthepastanddesignanddeploycompletelynewsystemsfromscratch.Withaffordableaccesstocapitalandtheappropriateskillsandregulatoryframeworksinplacetodevelopsuchinfrastructure,thesecountriescouldmakesuchinfrastructureinvestmentsattheacceleratedpacerequiredformeetingdecar-bonizationgoals,rapidlyimprovingtheirdevelopmentoutcomes.Severalcasestudiesinthisreporthighlightcountries’experiencesinupgradingandinvestingininfrastructuretoreduceemissions.Forexample,inTürkiye,morethan175,000publicbuildingshavebeenestimatedtohaveanannualtechnicalenergyeffi-ciencypotentialofmorethan10,000gigawatthours,requiringaUS$18billioninvest-ment(EconolerInternational2016).WorkingwiththeWorldBank,theMinistryofEnergyandNaturalResourceshasdevelopedanEnergyEfficiencyinPublicBuildingsProject(CaseStudy15)torenovate400to500centralgovernmentbuildingsandspurthemarketforanationalpublicbuildingrenovationprogram.Sofar,theprojecthascompleted30buildingrenovations,reducingenergyuseby22to74percent.Italsofundedthedevelopmentofanationalprogramforenergyefficiencyinpublicbuild-ings,whichaimstointroduceconsistencyandpredictabilitytothemarket,attractnewsuppliers,drivedowncosts,andallowforscale-up.InLatinAmerica,Lima’sBicycleInfrastructurePlan(CaseStudy13)aimstoleapfrogpreviousemissions-intensiveinfrastructuresystemsbydevelopingaconnectedcyclenetworkofalmost1,400kilo-metersby2040,withaproposaltoadoptabicyclestrategytopromotecycling,particu-larlyamongwomen.TheWorldBank’sLimaTrafficManagementprojectwillfinanceselectedroadsafetyinterventionstoaddressfunding,technicalcapacity,andpoliticalpushbackchallenges.Lima’sofficialsalsoparticipatedintheLatinAmericaCycles(LatinoaméricaPedalea)knowledgeexchangeprogramtolearnfromregionalcyclingprojectleadersandformcross-sectoralalliancestopromotecyclingprojects.Whilepoliciestofacilitateandencouragethedevelopmentoflow-carboninfra-structureoftentaketheformofdirectinvestment,often“softer”institutionaland31ClimatePolicies:PastTrendsandInsightsonImplementationoperationalinterventionscanbeequallyimportantinimprovingtheperformanceofexistinginfrastructuresystems.AkeyexampleisSouthAfrica’seffortstoimproveitsbusrapidtransport(BRT)system(CaseStudy14).Originallydevelopedtosupportthe2010footballWorldCup,SouthAfrica’sBRTsystemhadbecomefinanciallyunsustainable.Pooraccessandlackofintegrationwithothertransportsystemsalsomeantthattheservicewasnotmeetinguserneeds.Inresponse,thecityofCapeTownlaunchedapilotprojecttoimprovebusinessandoperationalefficiency,includingpoolingvehicleswithcentralizeddispatch,centralizedrevenueandcostmanagement,vehicletrackingandfleetmanagementsystems,andimprovedsalarystructuresfordrivers.Impressively,thepilotdidnotrequireadditionalpublicinvestmentinvehiclesorcompanies;itwassupportedcompletelybythecity’sbusinessandconsultingser-vices.Atnegligiblecost(andwithoutjoblosses),thepilotreducedfleetsizefrom78minibusesto40well-maintainedvehiclesandexpandedservicecoveragefromthreetofivelicensedroutes.Italsoimprovedworkingconditionsfordriversandreducedfuelconsumptionandemissionsbyaround45percent,transportingthesamevolumeofpassengerswithfewerkilometersdriven.DemandsupportpoliciesPoliciesincentivizingtheadoptionandscalingupoflow-carbontechnologieshavebeenmorewidelyintroducedacrosscountriesofdifferentincomegroups.Whiletechnologysupportpoliciesareimportantfordevelopingnewtechnologiesandbring-ingthemtomarket,demandsupportpolicies—whichincentivizetheadoptionoflow-carbontechnologies—alsoplayacrucialroleindrivinggreateraccessandaffordability.ManycountriesacrossallincomegroupsintroducedFiTsandpoliciesencouraginggridaccessandgreaterpriorityforrenewablestoincentivizeREuptakewhenitwasmorecostlythanfossilfuels(figure2.12).AkeyexampleisIndia(CaseStudy16),whichhassetambitiousREtargetsandimplementedgovernmentprogramsandpoliciestosupportthegrowthofsolarenergy.ThisincludestheNationalSolarMissionandincentivessuchasstate-dependentFiTs,renewablepurchaseobligations,reverseauctionstoencouragecompetitivebidding,reducedsolarenergytariffs,andnetmeter-ingthatcreditssolarenergyownersbasedonthesurplusenergytheyexporttothegrid.Thegovernmenthasalsoworkedwithdevelopmentfinanceinstitutionsandtheprivatesectortoencourageinvestment.Manycountrieshavealsointroducedemissionsorefficiencystandards,whichaimtoreducethecarboncontentoremissionsintensityofproducts,buildings,andvehicles(figure2.12).AparticularlysuccessfulexampleistheInternationalFinanceCorporation’sEDGEcertificationeffortsinColombia(CaseStudy19).TheEDGEplatformenablesthedesign,costing,andcertificationofgreenbuildingspaceandhasbeenusedtocertify25percentofnewbuildingsinthecountryover2021–22.Effectivetrainingandgovernmentsupporttoprovideappropriatetaxincentiveshavebeenkeytothesuccessofthisproject.32RealityCheckGettingtheFinanceFlowingDespitesignificantgrowthinclimatefinanceoverthepastfewdecades,currentlevelsoffinanceflowingtoLICsandMICsstillneedtoquadrupleby2030.Inresponsetopolicies,climateinvestmentshaveincreasedsignificantlyover2011–21,withpublicandprivateclimatefinancenearlydoublingeachyear.Betweenthisperiod,governmentsandbusinessescommittedacumulativeUS$4.8trillion(figure2.13,CPI2022),morethan85percentofwhichwasdirectedtomitigationefforts,particularlysolarphotovoltaicandonshorewindpower.AlthoughannualaverageFIGURE2.12DemandSupportPolicyAnnouncementsContinuedSwitzerlandUnitedStatesofAmericaDenmarkSwedenAustraliaAustriaGermanyBelgiumNewZealandJapanRepublicofKoreaSpainCzechiaSlovakiaChileChinaBulgariaKazakhstanArgentinaTürkiyeMexicoDominicanRepublicEcuadorColombiaGeorgiaIndonesiaTunisiaAlgeriaMoroccoBhutanVietnamIndiaUzbekistanCameroonPakistanTanzania,UnitedRepublicof197019801990200020102020MozambiqueSyrianArabRepublicSwitzerlandUnitedStatesofAmericaDenmarkSwedenAustriaGermanyCanadaUnitedKingdomJapanFranceItalyRepublicofKoreaSpainCzechiaSlovakiaGreeceUruguayChileChinaMalaysiaRussianFederationBulgariaKazakhstanArgentinaTürkiyeThailandSouthAfricaEcuadorTongaIndonesiaElSalvadorUkraineEgyptTunisiaAlgeriaVietnamIranNigeriaIndiaUzbekistanCameroonPakistanTanzania,UnitedRepublicofTajikistanUgandaSyrianArabRepublic197019801990200020102020a.Feed-intariffsorpremiumsb.GridaccessandpriorityforrenewablesHighincomeUpper-middleincomeLower-middleincomeLowincome33ClimatePolicies:PastTrendsandInsightsonImplementationclimatefinanceflowsinLICsandMICsreachednearlyUS$425billionin2020,thisisstillnowherenearenoughtosupporttotalglobalneedsformitigationandadaptation.AnnualclimatefinancetoallsectorsinLICsandMICsneedstoquadrupletoaroundUS$1.7trillionby2030.Publicactorshavehistoricallyaccountedforthemajorityofclimatefinance;goingforward,scalingupprivatefinancewillbecritical.In2020,publicsourcesprovidedalmost60percentofmitigationfinancetoLICsandMICs,ledbynationaldevelopmentfinanceinstitutions(27percent),state-ownedfinancialinstitutions(12percent),andmultilateraldevelopmentbanks(8percent)(figure2.14).However,withgovernmentsFIGURE2.12continuedSource:WorldBankcalculationsbasedondatafromtheClimatePolicyDatabase2022.SingaporeNorwayUnitedStatesofAmericaSwedenAustraliaGermanyBelgiumIsraelCanadaUnitedKingdomJapanFranceUnitedArabEmiratesSpainRepublicofKoreaPortugalSaudiArabiaUruguayChileChinaMalaysiaCubaSloveniaZambiaZimbabweIndiaMoroccoTunisiaEgyptUkraineIndonesiaMongoliaTongaColombiaSouthAfricaBrazilThailandMexicoRussianFederationArgentinaTürkiyeUgandaItalySwitzerlandNorwayUnitedStatesofAmericaSwedenAustraliaGermanyCanadaJapanFranceRepublicofKoreaSouthAfricaColombiaGeorgiaChileChinaRussianFederationUzbekistanArgentinaTürkiyeThailandBrazilMexicoSouthAfricaPeruIndonesiaIndia197019801990200020102020197019801990200020102020c.Vehiclefuel-economyandemissionsstandardsd.ProductstandardsHighincomeUpper-middleincomeLower-middleincomeLowincome34RealityCheckFIGURE2.13GlobalClimateFinance,2011–21(US$billion)Source:CPI2022.Note:US$850billionin2021isanestimatethatwillbeconfirmedintheClimatePolicyInitiative’sforthcoming2023GlobalLandscapeofClimateFinance;CAGR=compoundannualgrowthrate.20110100200300400500600700800900Globalclimatefinance(US$billion)364359342391471CAGR7%4546055396396658502012201320142015201620172018201920202021FIGURE2.14ClimateFinanceFlowstoLICsandMICs,2019–20Average(US$billion)Source:WorldBankcalculationsusingroundeddatafromCPI2021.Note:LICs=low-incomecountries;MICs=middle-incomecountries.PublicPrivateAdaptation41373264160MitigationMultipleobjectives10EasternEuropeandCentralAsiaEastAsiaandPacificSouthAsiaSub-SaharanAfricaMiddleEastandNorthAfricaLatinAmericaandtheCaribbean292193530331635ClimatePolicies:PastTrendsandInsightsonImplementationfacinghighlyconstrainedfiscalspacesfollowingthepandemic,andLICsandMICshavinghighergovernmentborrowingcosts,ithasbecomedifficultforpublicfinancetomeetpressinginvestmentneeds.Mobilizingandscalingupfinancefromtheprivatesectoristhereforekeytohelpingcountriesaccessthecapitaltheyneedtoachieveclimateobjectives.Policiestoincentivizeprivatesectorparticipationandimprovetheattractivenessoftheinvestmentclimatearecritical.Theprivatesectoroftenfindsitunattractivetoinvestincountriesfacinghigherinvestmentrisk.Combiningpublicandprivatecapitalcanhelpaddresstheserisksandattractgreaterfundingforclimateinvestments.Developmentfinanceinstitutions—includingtheWorldBank—canplayanimportantroleincreatingblendedfinancingstructurestoimprovetherisk-returnprofileofspe-cificprojects.Improvingtheregulatoryandinvestmentenvironmentcanalsohelpattractprivatesectorparticipation.ThecaseofKenya’spowersector(CaseStudy23)providesahelpfulexample.Throughaseriesofregulatoryreforms,Kenyawasabletoattractthenecessaryprivatecapitalandincentivizealmost30independentpowerpro-ducerstohelptriplegenerationcapacity,improvesystemreliability,andreducecarbonintensitybyaround60percent.Inadditiontoattractingnewfinance,weneedtogreenexistingflowsbytakingintoaccountclimate-relatedrisksandopportunities.Greeningthefinancialsystemcreatesanopportunitytomobilizenewinvestmentandlendinginsectorsandactivitiesthatcontributetoclimateobjectives.Greeningthefinancialsystemalsomeansmanagingclimate-relatedrisksthatcouldadverselyimpactthefinancialsector(WorldBank2021).CaseStudy22providesakeyexample.AswellasbeingthefirstLatinAmericancountrytoissuelocalcurrencygreenbondsinitsdomes-ticmarket,Colombiahasinitiatedseveralactionstogreenitsfinancialsector.Theseincluderequiringaclimateriskstresstestthatassessestheimpactofdiffer-entclimatescenariosonthebankingsector,implementingregulatoryreformsforbanksandinvestorstohelpintegrateclimaterisksintoriskmanagement,increas-inggovernanceanddisclosurepractices,anddevelopingagreentaxonomytofacil-itategreeninvestmentclassification.Althoughitisstilltooearlytoevaluatetheirsuccess,theseinitiativesareconsideredimportantbuildingblocksthatwillencour-ageamoresustainablefinancialsysteminColombiagoingforward.EnsuringaJustTransitionToimplementincreasinglyambitiousclimatepolicies,governmentsneedtoprotectthemostvulnerablepopulationsandmanagedistributionalimpacts(box2.1).Reducingdistributionalimpactsandensuringthatthemostvulnerablearenotharmedbypolicydesignandimplementationarecrucialforbuildingsocialacceptanceandsupport.36RealityCheckSomepolicies—suchascarbontaxesorfossilfuelsubsidyreform—cangenerateresourcesthatcountriescanusetoredistributebenefitsandmitigatenegativeeffects.Socialprotection,activelaborpolicy,andotherapproachescanalsohelpensurethatdecarbonizationpoliciesareprogressiveandsupportthetransition.Ajusttransitionapproachinvolvesenhancingtheequityandfairnessofpolicydeci-sionsandoutcomes.Thismeanssharingthecostsandbenefitsfairly,distributingrisksandcapacitiestorespond(distributionaljustice),andensuringtransparentandinclu-sivedecision-makingwithequalaccessibilitythatcompensatesforstructuralexclusion(proceduraljustice).Governmentsarealreadyusingajusttransitionapproachtohelpsmooththetransi-tionawayfromcoalpower.Itisimportanttomanagethesocialimpactsassociatedwithdecommissioningcoal-firedpowerplants.Thisincludesearlyretirementorretrainingtheworkforceandinvestinginaffectedcommunities.ExperiencefromtheEuropeanUnionshowsthatasuccessfulandsmoothtransitionoutofcoalismorelikelywhensupportedbycommunityengagementandinvestmentinpublicinfrastructuretoattractalternativeactivitiesandjobs.Othersectorscouldalsobenefitfromajusttransitionapproach.Forexample,theshifttoEVswilltransformthecarindustry’sglobalvaluechainand,whiletherewillbewinnersandlosers,theoverallnumberofjobswilldecline,asEVshaveasimplerandmoreefficientdesign.Inparallel,iftheworkforcehasappropriateskillsandmobility,greenactivities,suchasafforestation,canbemajorjobcreators.Policycommunicationandengagementcanalsohelpbuildsupportfordecarbon-izationpolicies.InIndonesia,wherebacklashtofossilfuelsubsidyreformscontributedtothedownfalloftheSuhartoregimeinthe1990s,the2005reformsuccesswasbuiltonawide-scale,well-preparedcommunicationcampaignhighlightingthatsavingswouldberecycledthroughacashtransfertocompensatefortheimpactofreforms.Theimportanceofcivicengagementandcommunicationisbeingappliedinsectorandeconomy-widedecarbonizationplanninginvariousforms,includingcitizens’assem-blieslikeCostaRica’sCitizen’sClimateChangeAdvisorCouncil.Policiesthatcreatewinnersalsohelpbuildasupportbasefordecarbonization(GlobalCommissionontheEconomyandClimate2018).Forexample,peoplearemorelikelytosupportandimplementpoliciesthatusedemandsupportinstruments,suchassubsidiesandincentives,thanthosethatusetechnologysupportinstruments,suchastaxesandfines.Thesameappliestononmarketandmarketinstruments(OECD2018).Manygovernmentsfavordemandsupportinstrumentsfordecarbonization.The2022USInflationReductionActisthelargesteverfiscalpackagefordecarbonization,almostcompletelycomposedofdemandsupportinstruments,includingpublicinvest-mentandtaxcreditsforcleanenergy,fuel,andvehicles;conservation;andreducingairpollution.1Overtime,thesepublicinvestmentscancreatecoalitionsthatsupportdecarbonization.37ClimatePolicies:PastTrendsandInsightsonImplementationSometimescompensationandotherapproachesareneededtoeaseoppositionofthoseindustriesthatcouldincurcosts.Governmentscanaccommodatethosegroupsthatarenegativelyaffectedthroughdirectcompensation,asGermanydidwithitsCoalPhase-OutLaw,whichallotsconsiderablepublicresourcestocoalpowercompaniesandcoalminingregions.CaseStudies24and25focusonlessonsfromcoalmineclo-suresinSouthAfricaandEurope.Note1.AsummaryoftheInflationReductionActisavailableathttps://www.congress.gov/bill/117th​-congress/house-bill/5376.ReferencesCPI(ClimatePolicyInitiative).2021.“GlobalLandscapeofClimateFinance2021.”BOX2.1UsingExAnteandExPostAssessmentstoUnderstandDistributionalEmploymentEffectsConcernabouttheemploymentimpactofpoliciescanbeacontentiousandpoliticizedissue.Decarbonizationwillinvolveshiftsinlabordemandawayfromfossilfuelsandemissions-intensiveindustries.Withtherightinformation,policydesigncanhelpmitigatenegativeimpactsandsupportjobtransitions.Exanteassessmentsoftheemploymentimpactsofdecarbonizationhelppolicymakers­betterunderstandaggregateoutcomesandbasicdistributionaleffects.Exanteorprospectivestudiestendtoprojectmodest,oftenpositive,aggregateemploymentimpactsgloballyandinmost­countriesatthenationallevel.Theyalsosuggestthatemploymentimpactsarelikelytobeconcentratedspatiallyandinspecificsectors.Low-skilledworkers,particularlythoseinenergysupplyorenergy-intensiveindustries,willgenerallybemoreaffected.Advancedexantetoolsalsoshowthatthereisoftenamismatchbetweenthelocation,requirements,andqualityofemploy-mentalternativesinsectorsorregionswherejoblossesareprojectedtotakeplace.Expostassessmentshelpaddmoregranularityandcontext-specificinformationaboutdis-tributionalimpactsthatcanhelpdesignmoreprogressiveandjustpolicies.Whiletheaggregateemploymentimpactsofclimatepoliciestendtobemodestandnetpositiveatamacroorprojectlevel,distributionaleffectscanleadtounevenorunfairoutcomes,withimpactsoftenconcen-tratedinaspecificsector,region,orsocioeconomicorculturalgroup.Theimpactsofjoblossescanalsobecompoundedwhenpeoplelosebenefits—suchaspension,healthcare,socialstanding,oridentity—fromtheirpreviousjob,orwherelower-qualityjobsorweaklabormarketregulationsdecreasetheattractivenessofjobscreatedorincreasejobtransitioncosts.AlthoughexpoststudiesprovidesomejustificationforincreasedfocusonhowclimatepoliciescanensurethejusttransitionoftheworkforceandcreationofdecentworkandqualityjobsstipulatedintheParisAgreement,theyalsosuggestthatthefearofwidespreadnegativeemploymentimpactsshouldnotcausecountriestodelayclimateaction.Source:Godinho2021.38RealityCheckCPI(ClimatePolicyInitiative).2022.“GlobalLandscapeofClimateFinance:ADecadeofData.”https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/Global-Landscape-of​-Climate-Finance-A-Decade-of-Data.pdf.DeLaTour,A.,M.Glachant,andY.Ménière.2011.“InnovationandInternationalTechnologyTransfer:TheCaseoftheChinesePhotovoltaicIndustry.”EnergyPolicy39(2):761–70.EconolerInternational.2016.MarketAssessmentReportforEnergyEfficiencyinPublicBuildings.PreparedbyEconolerInternationalonbehalfoftheTurkishMinistryofEnergyandNaturalResourcesundertheWorldBank–GEFSmallandMediumEnterpriseEnergyEfficiencyProject.Eskander,S.,S.Fankhauser,andJ.Setzer.2020.“GlobalLessonsfromClimateChangeLegislationandLitigation.”WorkingPaper27365,NationalBureauofEconomicResearch,Cambridge,MA.https://doi.org/10.3386/w27365.Fay,M.,S.Hallegatte,A.Vogt-Schilb,J.Rozenberg,U.Narloch,andT.Kerr.2015.DecarbonizingDevelopment:ThreeStepstoaZero-CarbonFuture.ClimateChangeandDevelopment.Washington,DC:WorldBank.http://hdl.handle.net/10986/21842License:CCBY3.0IGO.GlobalCommissionontheEconomyandClimate.2018.UnlockingtheInclusiveGrowthStoryofthe21stCentury:AcceleratingClimateActioninUrgentTimes.Washington,DC:NewClimateEconomy.https://newclimateeconomy.report​/2018.Godinho,C.2021.“WhatDoWeKnowabouttheEmploymentImpactsofClimatePolicies?AReviewoftheExPostLiterature.”WileyInterdisciplinaryReviews:ClimateChange13(6):e794.GovernmentofCostaRica.2020.“ContribuciónNacionalmenteDeterminada2020.”https://unfccc​.int.IEA(InternationalEnergyAgency).2021a.“NetZeroby2050:ARoadmapfortheGlobalEnergySector.”InternationalEnergyAgency.https://www.iea.org/events/net-zero-by​-2050-a​-roadmap​-for-the-global-energy-system.IEA(InternationalEnergyAgency).2021b.WorldEnergyOutlook2021.Paris:IEA.https://www.iea​.org/reports/world-energy-outlook-2021.IEA(InternationalEnergyAgency).2023a.FossilFuelsConsumptionSubsidies2022.Paris.https://www.iea.org/reports/fossil-fuels-consumption-subsidies-2022,License:CCBY4.0.IEA(InternationalEnergyAgency).2023b.PoliciesandMeasuresDatabase.https://www.iea.org​/­policies.OECD(OrganisationforEconomicCo-operationandDevelopment).2018.“MakingCarbonPricingWorkforAll:ExperiencesandInsights.”OECDPublishing.OECD(OrganisationforEconomicCo-operationandDevelopment).2022.“SupportforFossilFuelsAlmostDoubledin2021,SlowingProgressTowardInternationalClimateGoals,AccordingtoNewAnalysisfromOECDandIEA.”https://www.oecd.org/newsroom/support-for-fossil-fuels​-almost-doubled-in-2021-slowing-progress-toward-international-climate-goals-according-to​-new-analysis-from-oecd-and-iea.htm.SystemIQ.2020.“TheParisEffect:HowtheClimateAgreementIsReshapingtheGlobalEconomy.”https://www.systemiq.earth/wp-content/uploads/2020/12/The-Paris-Effect_SYSTEMIQ_Full​-Report_December-2020.pdf.Way,R.,M.Ives,P.Mealy,andD.Farmer.2022.“EmpiricallyGroundedTechnologyForecastsandtheEnergyTransition.”Joule6(9):2057–82.WorldBank.2021.“ToolkitsforPolicymakerstoGreentheFinancialSystem.”WorldBank,Washington,DC.WorldBank.2022a.CarbonPricingDashboard.https://carbonpricingdashboard.worldbank.org/.WorldBank.2022b.“StateandTrendsofCarbonPricing2022.”https://openknowledge.worldbank​.org/handle/10986/37455.393.DecarbonizationPolicyImplementation:IllustrativeCaseStudiesThecasestudiesinthischapterprovideexamplesofdecarbonizationpolicyimple-mentation,providingcountrycontextandpolicydetails,examiningresultswherepossible,andoutliningkeytakeawaysandlessonslearned.Thecasestudiescoverawiderangeofsectorsandgeographicsettingstoprovideadiversityofexperiencesforpolicymakerstolearnfrom.Countriesaretakingmanydifferentapproaches;thisisanillustrativelistanddoesnotattempttocoverthefulllandscapeofdecarbonizationpolicymaking.Thesereal-worldpoliciesarefarfromthefirst-bestrecommendation—indeed,manywouldnotbeconsideredbestpractice—buttheirimplementationhighlightsimportantlessonsonhowtodesignandexecutelow-carbonpolicies.Inmostcases,thereisnoexpostassessmentoftheirperformance,outcomes,oreconomiccostsandbenefits.Suchassessmentsaredifficult,especiallyinthecontextofmultiplepoliciesthatareimplementedinparallelandrapidchangesinthecostandavailabilityoftech-nologies.Identifyingacausallinkbetweenapolicyandchangesingreenhousegas(GHG)emissionsoftenremainsoutofreach,withafewexceptionshighlightedinthecasestudies.Thisreport,therefore,cannotconcludeontheefficacyorefficiencyofthesepolicies,anditsvalueaddedisinthedescriptionoftheprocessanddesignofpoliciesthathavebeenimplemented.Wehaveclassifiedthecasestudiesusingthetypologyoutlinedinchapter2,butmostpoliciescombinedifferentdimensionsofclimateactionanddonotcleanlybelonginasinglecategory.Forexample,wehaveclassifiedCaseStudies4and6under“GettingthePricesRight,”buttheybothcombinepricingpolicieswithdemandsupportpoliciestofacilitatetheshiftofhouseholdsandfirmstowardmoreefficientlow-carbonpoliciesandwithinterventionstonavigatethepoliticaleconomyofthereformandensureajusttransition.40RealityCheckPlanningforaFuturewithZeroNetEmissions:CostaRicaCaseStudy1.DevelopingandImplementingaNetZeroDevelopmentPathwayinaMiddle-IncomeCountry:CostaRica’sNationalDecarbonizationPlanContributors:DavidGroves,FelipeDeLeon,andWorldBankstaffContextBuildingonitslongtraditionofsustainabledevelopmentandstrongfocusonecotour-ism,CostaRicabecameanearlychampionofglobaldecarbonizationtolimitglobalwarming.1ItsfirstnationalcommunicationtotheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)in2000highlightsitsearlystrategyforalow-carboneconomy,beginningwithdevelopinganationalGHGinventoryin1995andimplementingrenewablehydropowerandwindprojectstoexpandaccesstoelec-tricityandeliminatefossilfuelpowergeneration(GovernmentofCostaRica2000).In2007,thegovernmentexpandeditscommitmentbyannouncingitsgoaltobecomecarbonneutral.By2011,CostaRicahadbecomeoneofthefirstcountriestoparticipateintheUN’sNationallyAppropriateMitigationActionsprogram,whichprovidedfinan-cialsupporttoreduceGHGemissionsfromitscoffeesupplychain.In2015,CostaRicasubmitteditsintendednationallydeterminedcontribution(NDC),whichquantifiednear-termandintermediatetargetsandactionsforreducingemissionsinaccordancewiththeParisAgreement.ThiseffortbroughttogetheranationalteamledbytheCostaRicaClimateChangeDirectorate(DireccióndeCambioClimáticodeCostaRica),knownastheDCCteam,withsupportfromnationalandinternationalsectorexperts,includingtheWorldBank(PMR2015).TheNDCarticu-latedaninitialsetoftargetsandapproachesforreducingnetGHGemissions,withagoalofreducingnetemissionsto9.37MtCO2e,or25percentby2030,comparedwith2012(WorldBank2016a).TheNDCprocessalsorevealedaneedformorecomprehen-sivemodelingofeconomicdevelopmentand­emissionspathwaystoformulateacom-pletelong-termdecarbonizationstrategy.CostaRica’sgovernmentacceleratedeffortstodecarbonizein2018.Atthistime,thepresidentappointedtheClimateChangeDirectoratewithintheMinistryoftheEnvironmentandEnergytoleadthedevelopmentofanewnationaldecarbonizationstrategy.TheOfficeofthePresidentandFirstLadybecamedirectlyinvolvedindesigning,monitoring,andcoordinatingtheplan(Calfucoyetal.2022).Thiscommitmenttocli-mateactionhelpedbringnotonlytheMinistryoftheEnvironmentbutalsotheMinistryofFinanceandotherlineministries—suchasenergy,transport,andhousing—into­strategicdecarbonizationplanning.This,inturn,attractedinternationalsupport,41DecarbonizationPolicyImplementation:IllustrativeCaseStudiesparticularlyfromthemultilateraldevelopmentbank(MDB)community,forbuildingin-countryanalyticalcapacitytodrivethecomplexplanningprocessestocome.PolicyWithinternationalsupport,CostaRicabuiltinternaltechnicalcapacitywithinitsgov-ernmentandnationaluniversities.ThroughpartnershipswiththeUniversityofCostaRica,theInter-AmericanDevelopmentBank(IDB),theUnitedNationsDevelopmentProgramme,andothers,CostaRicawasabletogarnerresourcestodeveloptechnoeco-nomicmodelsandcapabilitiesforadvancedpolicyanalysistosupportdialoguesonplausibleandbeneficialdecarbonizationpathways(Bataille,Waisman,andVogt-Schib2021).BydevelopingstrongtechnicalcapabilitiesinthecentralDCCteam,theysuc-cessfullyarguedforambitiousclimateactionwithdiversestakeholders,someofwhomdidnotoriginallysharethatambition.Usingthisnewcapabilityandwithinternationalassistance,CostaRicadevelopedawhole-of-economynetzeronationaldecarbonizationplan(NDP),whichitsubmittedasitslong-termstrategy(LTS)totheUNFCCCattheendof2019.Importantly,thisNDPsettheambitiousgoalofnetzeroGHGemissionsby2050—consistentwiththemoreaggres-sive1.5°Cglobalwarminglimit.Takingadvantageofitsextensiverenewablehydropowerresources,CostaRica’sNDPcalledfortheelectrificationofitstransportsector,increasesinenergyefficiencyandelectrificationofbuildingsandmanyindustries,andinvestmentstopromoteamorecirculareconomybycollectingandrecyclingmaterialandfullytreatingwastewater.Remainingemissions,particularlyfromagricultureandlivestock,aretobecompletelyoffsetthroughincreasedcarbonsequestrationfromforests(GovernmentofCostaRica2019).Toachievetheseoutcomes,theNDPdefinedaframeworkwithmorethan70targetsandspecificnear-termactionsfor35agenciesandlineministries,whichservedasthebasisforseverallargepolicy-basedloans(Jaramilloetal.2023).TheLTSteamformulatedandevaluateddevelopmentpathwaysthatwouldleadtonetzeroemissionsbymid-centurywhileprovidingtangiblebenefitstothecountry.CostaRicafolloweda“deliberationwithanalysis”approachinwhichmodelsandquan-titativeanalysisofemissionspathways,costs,andbenefitsunderuncertaintysupportintensestakeholderengagementsanddiscussionsaroundtheanalyticalresultsandrevealedtrade-offs(GrovesandLempert2007).Developingwhole-of-economypath-waysandpresentingtargetsandtimelinestoallemittingsectorsenabledtechnicaldis-cussionswithdifferentsectorstoexplorethenecessarychangesandidentifybarriersandneededenablingconditions.CostaRica’sclimatepolicydevelopmentprocessstronglyengagedtechnicalandnon-technicalstakeholders.TheLTSexplicitlyservedasthebasisfordevelopingCostaRica’sNDCupdatein2020.Itusedanextensivestakeholderengagementprocessusingalocallydevelopedmethodcalled“ClimateConversations”toensurethatitproperlyconsideredclimatejusticeandajusttransitionandthatitaccountedfortheinterestsofabroadrange42RealityCheckofCostaRicans,includingthosefrommarginalizedcommunities(GovernmentofCostaRica2020).DuringtheprocessofupdatingtheNDC,theDCCteamheldninedecar-bonizationworkshopswithsome350sectoralparticipantstoexploretheNDP’sbenefitsandcosts(Grovesetal.2020).TheCostaRicangovernmenthastakentheleadoninstitutionalizingmeasuresintolawandintegratinglow-carbondevelopmentintogovernmentalprocesses.PresidentialsupportwascrucialindrivingtheClimateChangeLawthroughcongress.Severalmin-isters,includingtheministersoffinanceandplanning,attendedmeetingsconvenedbythepresidentandfirstladytoagreeonhowtheycouldsupporttheLTSeffort.Thishigh-levelengagementwasalsoinstrumentalindevelopingandagreeingtothetermsofthepolicy-basedloans,whichprovidedconcessionaryfundingforNDP-alignednationaldevelopment.CostaRicahastakenimportantstepstooperationalizeitsNDP,pursuingawiderangeofactivitiestoshiftitseconomytowardcarbonneutrality.AccordingtoitsfourthnationalcommunicationtotheUNFCCC,itimplemented17policyactionsand17specificmitigationprogramsbetween2015and2020.ItsNDPlaysout23projectsandprogramsand20policiesthatwouldneedtobeimplementedgoingforward.ResultsandImpactsCostaRica’sNDPrepresentsoneofthemostambitiousstrategiesforlow-carbondevel-opmentforamiddle-incomecountry.TheNDPcoversallmajoremissivesectorsandwouldleadtonetzeroby2050underbaselineassumptions.Afollow-onstudy,sup-portedbytheIDB,evaluatedtheNDPunderthousandsofplausiblefutures,reflectiveofdifferentassumptions,andfoundthatthecountrywouldachieveclosetozeroemis-sionsinmostfutures(figure3.1)andthatthenetbenefitsofimplementingtheNDPwouldlikelybehighlypositive,estimatedat$41billionthrough2050underbaselineassumptions.AnalysisoftheNDPsuggeststhatitsimplementationwouldhavehighlypositivemacroeconomicbenefits.Evaluationsshowpositiveeffectsoneconomicgrowth,employment,andpoverty.Onestudyfindsthatdecarbonizationanddigitizationinvestmentscouldresultin135,000netnewjobsby2050.Anothershowsthatimple-mentingtheNDPcouldoffsetlonger-termgrossdomesticproduct(GDP)andjoblossesfromCOVID-19(Grovesetal.2022).Amacroeconomicstudy,focusedontheagriculture,forestry,andotherlandusesectors,findscumulativepositivewealthimpactsinthesesectorsofaboutUS$9billionby2050,andestimatesthatinvestmentscouldliftover4,500peopleoutofpovertyby2050(Banerjeeetal.2022).ArticulatingastrongdecarbonizationplanhashelpedCostaRicamobilizeatleast$2.4billionininternationalconcessionalfinance.AccordingtoareviewoftheeffectsoftheNDPonfinancialresourcemobilization,CostaRicahasreceivedfunds43DecarbonizationPolicyImplementation:IllustrativeCaseStudiesfrom13differentsources,includingseveralMDBsandotherdevelopmentpartners,intheformofgrants,policy-basedloans,anddedicatedexternalfunding(Jaramilloetal.2023).Throughgovernmentalleadership,CostaRicawasabletodriveagreementonaggressiveclimateaction.Themultiprongapproachtostakeholderengagement,withworkshopsacrossdifferentsectorsandgroupsaswellasmeetingswithlargeremittingbusinessesandstate-ownedenterprises,wasessential.Thecloselinksbetweenthecen-traltechnicalandstakeholderengagementteamsstrengthenedtheirabilitytoencour-agediverseinterestgroupstoconsideroptionsoffarmoreambitiousemissionsreductionsthantheyhadinitiallythoughtviable.Thehigh-levelpoliticalbackingalsoplayedanimportantroleinreachinganagreementfromthestate-ownedpetroleumimporterandrefinertotheLTSplansfortransportelectrification.KeyTakeawaysTheCostaRicanexperiencedevelopingandstartingtoimplementitsNDPprovidesseveralkeytakeawaysonhowamiddle-incomecountrycanbuildthenecessaryFIGURE3.1CostaRicanGHGEmissionsoverTime,withoutDecarbonizationandwiththeNDPSource:Grovesetal.2020.Note:EmissionsfromtheelectricitysectorarenegligibleinCostaRicaunderbaselineassumptions.GHG=greenhousegas;MtCO2e=metricmegatonsofCO2equivalent(milliontons);NDP=nationaldecarbonizationplan.SectorsPublicandprivatetransportFreightElectricityBuildingsIndustryWasteAgriculture,livestock,andforestryNetemissions201820202025203020352040204520502018WithoutdecarbonizationNationaldecarbonizationplan2020202520302035204020452050Greenhousegasemissions(MtCO2e)0–5510152044RealityChecktechnicalcapacityandpoliticalandpublicsupporttomovetowardnetzero.Itfurtherhighlightssomekeychallengestothefullimplementationandachievementofanetzero.■■SuccessfulLTSimplementationmustbeguidedbyacleartransformationpath-waythatidentifiesandenablesthemanytargetsandchangesrequiredtoachieveitsgoals.Theconceptofawhole-of-economylow-emissionsdevelopmentpath-waymustbethetechnicalcoreofanLTS,anditselaborationshouldbeacentralaspectofitsdevelopmentprocess.■■Theremustbewidespreadstakeholderbuy-inoftargets,processes,andnar-rativesofchangeovertheshort,medium,andlongterms.Stakeholdersmustunderstandandagreeontheimportanceoftheirroles,asthishelpsensurethatmostoftheirdecisionsarealignedwiththeParisgoals.CostaRicausedinter-nationalexpertiseandresourcestoempowerandstrengthenthenationalteamandhelpitdevelopandrunaseriesofsectoralworkshops,withtheMinistryofEnvironmentandEnergymaintainingcontrolandfullvisibilityofthework.Thisapproachallowedthenationalteamtouseanddefendtheanalysisthroughouttheiterativestakeholderengagementprocess,whichwouldnothavebeenpos-siblewithpurelyoutsourcedanalysis.■■Fullpoliticalsponsorshipatthehead-of-governmentlevelcanensuretheappro-priatebuy-inandgovernancetoenableLTSimplementation.TheunprecedentedchangesimpliedbytheLTSwillbedisruptiveforimportantsectors,resultinginshiftsofactivityandinvestmentawayfromoldmodalitiesandintonewones.ThiscanleadkeygroupstochallengethefeasibilityofsuchrapidchangeandnotalignwiththeministeroragencychargedwithcoordinatingLTSwork.Onlyclearandconstantsupportfromthehighestpoliticalfigurescancounterthis.■■LTSimplementationrequiresadequateinstitutionalarrangementsforfinanc-ing,monitoring,andensuringaccountability.Themechanismsandinstitu-tionsresponsibleforongoingindependentauditingandadviceonLTSprogressshouldbemadeclearandcodifiedinlaw.Findingsandrecommendationsshouldbereportedatthehighestlevelofgovernmentandwidelypublicizedtoencouragecountryleaderstotakefullresponsibilityforsuccessfulimplementa-tion.Thechallengeoffinancingdecarbonizationactionsisalsoanimportantobstacle.Whilethecentralgovernmentsuccessfullysecuredpolicy-basedloansfromdevelopmentbankstosupportclimateaction,muchmorefundingwillbeneeded,particularlyfromtheprivatesector.Finally,localandhouseholdactionswilldrivemuchofthecountry’sshifttolow-carbondevelopment,butmunici-palauthoritiesoftenhavelimitedtechnicalandplanningcapabilities,whichcanmakeitdifficulttoidentifyandscopespecificprojectsthatareinlinewithLTSrequirementsandcanenhancelocalconditions.Newpartnershipsbetweenlocaluniversities,technicalgroups,andlocalgovernmentscanhelpovercomethischallenge.45DecarbonizationPolicyImplementation:IllustrativeCaseStudiesPlanningforaFuturewithZeroNetEmissions:IndonesiaCaseStudy2.ReducingDeforestationinIndonesiaContributor:AlexanderLotschContextIndonesiaisaneconomicpowerhouseinSoutheastAsia.Thisarchipelagonationhasbenefitedfromsolideconomicgrowthinrecentdecades.Itisthe10thlargestglobaleconomyintermsofpurchasingpowerparity,istheonlySoutheastAsianmemberoftheGroupof20(G20),andhasmadesignificantgainsinpovertyreduction.Itisalsoendowedwithremarkablenaturalresources;ashometotheworld’sthird-largest­tropicalforest,itisagloballysignificantcarbonsink.Itseconomicsuccesswasattimesaccompaniedbyoneoftheworld’shighestratesofforestloss.Primarilydrivenbytheproductionofagriculturalcommodities,notablypalmoilandpulpandpaperplantations,deforestationrateswithinthecountry’sforestarea(kawasanhutan)peakedinthelate1990s,andthecountrylost8.49millionhect-aresofforestcoverbetween2000and2020(MinistryofEnvironmentandForestry2021).Duringthosetwodecades,deforestation,landuse,andpeatfirescontributedabout42percenttoIndonesia’soverallGHGemissions.Thislandtransformationheav-ilyimpactedIndonesia’speatlands—thepartiallyfloodedlowlandareasofKalimantan,Sumatra,andPapua—whichhaveoneoftheworld’slargestbiologicalcarbonstocks,estimatedat13.6–40.5Gt(Warrenetal.2017).Mangroveconversionforagricultureandaquacultureincoastalareassimilarlycontributedtohighemissions(WorldBank2021b).(At3.31millionhectares,Indonesiahasaround20percentoftheworld’stotalmangrovestockand,attimes,thefastestabsoluterateofloss[Arifanti2020].)RecurringseasonalfiresamplifiedduringthedryElNiñoyears,includingonpeatlands,havesignificantlycontributedtoIndonesia’semissions.In2015,firesburned2.6millionhectaresofIndonesianland,withdailyemissionsgreaterthanthoseoftheentireEuropeanUnion(EU)economy(WorldBank2016b).Theeffectiveprotectionofcarbon-richecosystemshasbeenstackedagainsttheeco-nomicsoflanduseinIndonesia.Highopportunitycostshavebeenamainbarriertocountertheindustrial-scalelanduseconversionforhigh-valueagriculturalcommod-ityproduction.Intheabsenceofamarketvalueforstandingforestsandavaluationoftheservicestheyprovide,economicforcesareaprincipaldriverofforestconversion,includingforsmallholders(AcostaandCurt2019).Thesearecompoundedbyinade-quatemanagement,weakgovernance,andlimitedenforcementcapacity,especiallyatthesubnationallevel,whicharekeyunderlyingchallengesforbetterlandmanagementandmoreeffectiveprotectionofecosystems.Despitethesesignificantchallenges,46RealityCheckIndonesiahasstartedtoreversethehistoricallynegativepatternsofforestlossinrecentyearsthroughpolicy,regulations,andleveragingresults-basedpayments.PolicyInstitutionalreformshavealignedresponsibilitiesforforestsandclimate,butchal-lengesremain.In2015,thegovernmentmergedtheenvironmentandforestryminis-triesandmandatedthenewMinistryofEnvironmentandForestry(MoEF)toleadthecountry’sclimatecommitmentandoverseelegallydesignatedforestareas.YettheMinistryofAgrarianandSpatialPlanningretainedresponsibilityforotherforestlands(thosedesignatedwithinother-useareas),whichcomplicateslandadministrationandgovernance.Atthesametime,theMinistryofAgricultureimplementsland-relevant,demand-sidepolicies,suchasagriculturaltargets,oftenwithoutfullcoordinationwiththeMoEF.Otherland-relateddecisions,suchasissuingpermits,aretheresponsibilityofthelocalgovernment,whoseincentivesdonotalignwithnationalcommitments,andrevenue-raisingoptionsarelimited.Between2016and2019,thenationalgovern-mentalsoestablishedtwonewagencies,thePeatandMangroveRestorationAgency(BadanRestorasiGambutdanMangrove,BRGM),responsiblefordeliveringpeatlandrestorationtargetsandexpandedtoincludemangrovein2021,andtheIndonesiaEnvironmentFund(BadanPengelolaDanaLingkunganHidup),aunitundertheMinistryofFinanceresponsibleforchannelingfinancingforclimateandenvironmen-talprojects.Thesetwonewagencieshavemandatesthatcutacrosssectorsandprovidemodelsforhowtoalignpolicytargetsandcoordination.ThegovernmentofIndonesiahasmadesignificantinternationalcommitmentsunderthe2015ParisAgreementtoreducethecountry’sGHGemissions,withafocusonREDD+(ReducingEmissionsfromDeforestationandforestDegradation,conser-vationofforestcarbonstocks,sustainableforestmanagement,andenhancementofforestcarbonstocksindevelopingcountries)(GovernmentofIndonesia2016).IntheenhancedNDCsubmittedin2022,thegovernmentpledgedtoreduceGHGemissionsby43.2percentby2030withinternationalassistance(31.9percentwithitsownresourcesunconditionally)relativetoabusiness-as-usual(BAU)scenario.Indonesiaaimstomeetmorethan60percentoftheemissionsreductiontargetthroughactionsinforestryandlanduse(FOLU).TheseareprojectedtoreduceemissionsfromaBAUprojectionof714MtCO2eto214MtCO2ein2030undertheNDC’sunconditionaltar-get(UNFCCC2022).Goingevenfurther,Indonesia’sFOLUNetSink2030planalsooutlinesthegovernment’saimtomakeforestryandlanduseanetcarbonsink(thatis,zeroornegativenetemissions)by2030byrestoring2.7millionhectaresofpeatlands,rehabilitating5.3millionhectaresofdegradedforestlands,andfurtherreducing­deforestationandforestdegradation(MinistryofEnvironmentandForestry2022a).Thesecommitmentsdrawonaseriesofpolicyreformsoverthepastdecade.In2011,thegovernmentplacedamoratoriumonnewlicensesforforestconversioninprimary47DecarbonizationPolicyImplementation:IllustrativeCaseStudiesforests(ameasuremadepermanentin2019);in2016,itplacedamoratoriumonlicensesinpeatlands.Thesemeasureswerecomplementedbymajorlandrightsprograms,helpingaddressincentivesforlandclearing.In2021,itintroducedaPresidentialRegulationontheEconomicValuationofCarbontosupportresult-basedpaymentsthatincentivizeconservationandrestorationactivities.2Tocomplementthemoratoriathroughcommand-and-controlmeasures,theMoEFrevoked3.1millionhectaresofforestconcessionlicensesin2022andrequiredconcessionholderstoprotecthighconservationvalueforestareas.Somelevelofrestorationof1.3millionhectaresofpeatlandshasbeenundertakenbyBRGMtodate,withafurther3.6millionhectaresundertakenbytheprivatesectorwithinconcessionsunderthegovernment’speatlandmanagementregulations(MinistryofEnvironmentandForestry2022b).Indonesiahasalsomappedoutitslonger-termemissionstrajectoriestowardanet-zerotargetin2060.ItsLTSdemonstratedthetechnicalfeasibilityofalow-carbon­trajectory,reaching1.61tCO2epercapitaemissionsby2050underitslow-carbonstrat-egyscenario,alignedwiththeParisAgreement.TheLTSdoesnotprovideapathwaytoachievethe2060netzerotarget,butinsteadreliesonunidentifiedmeasuresornewtechnologiestofillthegap(Chrysoliteetal.2020).Therecognitionofindigenouspeople’sforestrightswasasignificantstepforwardinforestpolicyinIndonesia.In2013,theConstitutionalCourtofIndonesiagaveindige-nouspeopletherighttomanagetheforestsinwhichtheylive,whichledtoarevisionofthe1999ForestLaw.TheNationalPeople’sOrganization(AliansiMasyarakatAdatNusantara,AMAN)filedthecaseandobjectedonthebasisthatgovernmentcouldgrantpermitsforcompaniestoexploitcustomarylandforminingandpalmoil,paper,andtimberproduction(Johnson2013).AMANestimatesthat40millionhectaresofIndonesia’sstateforestshouldbeundercustomarycontrol,butonlyafractionhasbeenmappedorhandedbacktodate.Theprocesshasbeenhamperedbyoverlappinglandclaims,challengesindemonstratingindigenousoccupation,andaslowbureaucracy(Jong2022;Sarietal.2018).Inaddition,thegovernmentimprovedtheenablingenvironmentforREDD+.ActionsincludedformulationofanenablingpolicyframeworkforREDD+atnationallevelandbroad-basedimplementationplansatsubnationallevel.Otheractivitiesincludedevelopingmeasurement,reporting,andverificationsystems;benefit-sharingarrangementsfortheproceedsofresults-basedpayments;andafeedbackand­grievanceredressmechanism.3Internationalsupportcontributedtotheseefforts,includingthroughactivitiesfundedbytheForestCarbonPartnershipFacility(FCPF)ReadinessFundimplementedbytheWorldBank.WithkeybuildingblocksinplaceandexperienceofREDD+pilotsandinitiatives,thegovernmentwasinapositiontoaccessresults-basedpaymenttoadvanceREDD+implementation.IthasbeenimplementingajurisdictionalEmissionReductionsPrograminEastKalimantansince2016,anditsigneda$110millionEmission48RealityCheckReductionPaymentAgreementwiththeFCPFCarbonFundin2019(afirstpaymentof$20.9millionwasmadeinNovember2022).4Ithasalsoattractedsupportandfinancethroughresults-basedemissionsreductionpaymentsfromtheGreenClimateFund($103.8millionforearlyREDD+resultsachievedatnationallevelfrom2014to2016)andthroughbilateralcooperation,mostnotablywithNorway.Morerecently,theBioCarbonFundInitiativeforSustainableForestLandscapeshasindicatedtopayforfutureemissionreductionsgeneratedintheJambiandsupporttheprovince’slong-termlow-emissioneconomicgrowthstrategy.ResultsandImpactsIndonesia’sactionstoreduceforestconversionhavesignificantlylowereditsannualGHGemissionsinrecentyears.Between2000and2006,anaverageof1.13­million­hectaresofforestswereconvertedtootherlanduseannually.Afterapeakin2015(1.09millionhectares),theannualconversionratecamedownto0.11millionhectaresfor2020–21.Accordingly,emissionsfromforestsandlandusegraduallydecreasedfrom743MtCO2ein2015toanannualaverageof490MtCO2efor2016–19andreached165MtCO2ein2020.5Incontrasttoearlieryears(2001–15),theriseinoilpalmpricessince2016doesnotappeartohaveledtoanupswinginforestclearing(Kielyetal.2021).Withthesetrends,IndonesiahasoutperformedBrazilandtheDemocraticRepublicofCongowithrespecttoreducingforest-relatedemissions.Nationalactions,suchastherevokingofforestconcessionlicenses,havebeenfurthercomplementedbyandexpandedinsev-eralprovinces.EastKalimantan,forinstance,hasimposedamoratoriumonnewlicensesformining,forestry,andestatecropsanddevelopedpoliciestoacceleratesocialforestrylicensingandfireprevention.The­effectiveimplementationoftheseandotherpolicieswillbecriticaltosustainthistrendatnationalandsubnationallevels.Tosustaintheprogress,itisimportanttofurtherdeepenandstrengthenthepolicyframeworkfornetzeroemissionfromforestsandlanduse.Thisincludestheexpansionforprotectionforforestandpeatlandareasnotyetcoveredbycurrentmoratoria,aswellasforsubnationalplanstoextendprotectionstoareas­designatedasnonforestareas(whichoftenhaveimportantcarbon-richecosystems,suchasmangroves).Itwillbenecessarytocontinueclarifyinglandtenurestatustoallowforstrongerenforcementbyresponsibleagencies.Thereisfurtherscopetousefiscalincentives(including­intergovernmentaltransfers)toprotectcarbon-richecosystems—­forests,peatland,mangroves—andtodevelopafinancingstrategyfortheimplementationofactionssetoutintheFOLUNetSink2030roadmap.KeyTakeawaysIndonesiawasoneofmanycountriestohaveadvancednationalREDD+policiessincetheconceptbecameaformalpartoftheUNFCCCnegotiationsin2007andwas49DecarbonizationPolicyImplementation:IllustrativeCaseStudieseventuallyenshrinedinArticle5oftheParisAgreement.Thegovernmenthastakenregulatoryactions(moratoria,revokinglicenses)andenhancedcapacityforlandusedecision-making(includingnewinstitutions)thathavereduceddeforestationandpro-motedrestorationandconservation.Majorinitiatives—includingtheWorldBank’sFCPF—havecontributedtothedevelopmentofthefollowing:technicalstandardsforjurisdictionalREDD+(suchasforthedefinitionofbaselinesandprotocolsformeasur-ing,reporting,andverification);robustframeworksforsocialandenvironmentalsafe-guards;benefit–sharing;andlegalandtransactionalmodalitiesthatneedtobeinplacetotransferemissionreductionsinternationally.Mostcountrieshavepursuedjurisdic-tionalimplementation,buildingonexperiencefromearlier,smaller-scaleREDD+projects,andexpecttousetheemissionreductionsachievedinrecentyearstomeettheirstatedNDCtargets.ThesuccessfulimplementationofREDD+acrossanumberoflargejurisdictionsgloballyusingrigoroustechnical,legal,andsafeguardsstandardsisalsonowattractingdemandfromtheprivatesectorandallowsgovernmentstoleverageadditionalfinanceforimplementation—forexample,throughtheCarbonOffsettingandReductionSchemeforInternationalAviation.Yet,whileeffortsoverthepastdecadehavedemonstratedthatREDD+canbeimplementedatscaleanddeliverviableemissionsreductionsthatmeetmarketdemandandrequirements,asignificantscale-upofland-basedmitigationactions,includingREDD+,continuestobecriticaltomeetthetemperaturetargetsoftheParisAgreement(Roeetal.2021;Smithetal.2019).Also,akeyissueinIndonesia,andelse-where,remainsthatthereiscurrentlynoclarityonlonger-termsourcesforfutureREDD+payments,includingfromvoluntaryandcompliancecarbonmarkets.50RealityCheckPlanningforaFuturewithZeroNetEmissions:UnitedKingdomCaseStudy3.TheUnitedKingdomClimateChangeAct:AClimateChangeFrameworkLawContributors:ThomasKerrandGraceHenryTheUnitedKingdom(UK)ClimateChangeActhasledthewayforthedevelopmentofclimatelegislationaroundtheworld.Aworld-firstnational“framework”legislation,theClimateChangeActcreatedacomprehensiveandoverarchinglawthatsetouttheUnitedKingdom’sapproachtoreducingemissionsandpreparingfortheimpactsofclimatechange.Passedin2008,itinitiallyincludedalegallybindingemissionreduc-tiongoalof80percentbelow1990levelsby2050(CCC2020).In2019,thiswasupdatedtorequirenetzeroemissionsby2050,makingtheUnitedKingdomthefirstGroupofSevencountrytoenshrinesuchatargetintolaw(Evans2019).TheactrequirestheUKgovernmenttoundertakeclimatechangeriskassessments(CCRAs)anddevelopadaptationplansthatrespondtotheserisks.6Nationalframeworklegislationcanprovidestabilityanddirectiontoachieve­climategoals.Thisformoflegislationcanhelpcreatetheinstitutionsrequiredtoplan,imple-ment,andsustaincrediblecommitmentsonclimatepoliciesthatlastbeyondpoliticalcycles(WorldBank2020e).Legislationcanenshrinestableandambitioustargetsintolaw,createmechanismsforrealizingthem,andensureproperoversightandaccount-ability.Manyothernationshavesinceadoptedsimilarlegislation,includingDenmark,France,Germany,Ireland,Mexico,NewZealand,andSweden;thiscasestudyanalyzesthefeaturesoftheUKClimateChangeActandevaluatesitsimpactontheUnitedKingdom’sdecarbonizationandadaptationpathways.ContextTheUnitedKingdomhastheworld’sfifthlargestGDP,andthisadvancedeconomicdevelopmenthasallowedittotakeprogressiveactiononclimatechange.Since1990,thecountryhasbeentransitioningawayfromtheenergysourcesthatpreviouslyfueleditseconomicgrowth,decreasingitscoalusebyover90percentfrom2.6milliontera-joulesin1990to218,000terajoulesin2020(IEA2022h).Bothabsoluteandpercapitaemissionspeakedinthe1970sandthendeclined,largelyassistedbythetransitionawayfromcoalanddeindustrialization(Ritchie,Roser,andRosado2020).PublicpressureandpoliticalconsensussupportedthecreationandimplementationoftheClimateChangeAct,whichwasadoptedin2008withsupportacrosspartylinesandstrongcivilsocietyengagement(CCC2020;IPAC2021).Beforethis,scientificevidenceontheeffectsofclimatechangehadbeenmounting(IPCC2007).In2005,theUKgovernmentcommissionedtheSternReviewontheEconomicsofClimateChange,51DecarbonizationPolicyImplementation:IllustrativeCaseStudieswhichconcludedthat“thebenefitsofstrongandearlyactionfaroutweightheeco-nomiccostsofnot­acting”(Stern2006).Atthesametime,environmentalnongovern-mentalorganizationswereincreasingpressureonthegovernmenttogivestatutoryforcetoemissionreductiontargets(CentreforPublicImpact2016).Together,thesefactorscontributedtotheadoptionoftheUKClimateChangeAct2008(figure3.2).PolicyTheClimateChangeActprovidesanoverarchingframeworkandgovernancestructureforclimatemitigationandadaptationintheUnitedKingdom,withthekeyfeaturessetouthere(CCC2020).Long-termgoal:TheactcontainsalegallybindinggoalforreducingtheUnitedKingdom’sGHGemissionsby2050(Provision1),initiallybyatleast80percentbelow1990levels,updatedin2019toreflecttheParisAgreementandrequirenetzeroemissions(GovernmentoftheUnitedKingdom2019).The2050goalsignalsthegovernment’slong-termcommitmenttoalow-carboneconomy.FIGURE3.2KeyMilestonesoftheUKClimateChangeAct2008Source:AdaptedfromFankhauser,Averchenkova,andFinnegan2018.Note:CCC=ClimateChangeCommittee;IPCC=IntergovernmentalPanelonClimateChange.ClimatechangeactpassedCCCestablishedFirstCCCreportrecommendingcarbonbudgets1–3(2008–22)2008Governmentpublishesrstclimatechangeriskassessment20122013GovernmentpublishesrstNationalAdaptationProgramme2006Sternreviewontheeconomicsofclimatechangepublished2010FirstAdaptationSub-CommitteereportpublishedCCCrecommendationforcarbonbudget4(2023–27)2009Carbonbudgets1–3enactedbyparliamentGovernmentpublisheslowcarbontransitionplanforachievingcarbonbudgets1–3Adaptationsub-committeeestablishedFirstCCCprogressreportpublished2007IPCCfourthassessmentreportpublished2011Carbonbudget4enactedbyparliament(subjecttoreview)Governmentpublishescarbonplanforachievingcarbonbudget452RealityCheckIntermediaryshort-termtargets:Theactcontainsinterimtargetscalledcarbonbud-getsthataredesignedtoprovideapathwaytowardthelong-termgoal.ThesecarbonbudgetsarelegallybindinglimitsforGHGemissionsoverfive-yearperiods(Provision4).Thebudgetsarelegislated12yearsinadvancetoenablegovernmentandbusinessplanningtooccur.Thegovernmenthasalegaldutytomeetboththeshort-andlong-termtargets,buttheactdoesnotspelloutpenaltiesfornoncompliance.Intheeventofnoncompliancewiththeselegalduties,membersofthepublicand­organizationswithappropriatelegalstandingcanbringjudicialreviewcases.Continualprocessofadaptationplanning:Theactprescribesaniterativeapproachtoadaptationplanning(Provision56),involvingmandatedfive-yearCCRAcycles,fol-lowedbyupdatedriskmanagementresponsespublishedintheNationalAdaptationProgramme.Independentadvisorybody:TheactcreatedtheClimateChangeCommittee(CCC)asanindependentstatutoryadviser(Provision32).TheCCChastwo­committeeswithpoliticallyimpartialexperts:theMitigationCommittee,whichprovidesrecommendationsonthecarbonbudgetsandmonitorsannualperfor-manceonreducingemissions,andtheAdaptationSub-Committee(ASC),whichadvisesthegovernmentonkeyclimaterisksfacingtheUnitedKingdomandreviewsadaptationprogresseverytwoyears.Itmayalsoprovideadditionaladviceonrequest.AlthoughtheCCChasnoformaldecision-makingpowers,thegovernmentisobligedtorespondtoitsassessmentsandprovideexplanationswheredeviationsfromrecommendationsoccur.Regulargovernmentreporting:Theactassignscleardutiesandresponsibilitiestothegovernment.Onceacarbonbudgethasbeenadopted,thegovernmentmustput­forwarditspoliciesthatwillenablelegislatedtargetstobemet.Thismechanismenablespublicscrutinyandjudicialreviewtooccurifthegovernment’sresponsesappearnon‑compliant.ResultsandImpactsTheUnitedKingdomhasachievedsignificantreductionsinGHGemissionswhilecontinuingtogrowitseconomy(figure3.3).In2020,thesetotaled429MtCO2e,31percentbelow2008levelsand42­percentbelow1990levels(CCC2022;ClimateWatchn.d.).ThisisthelargestreductioninGHGemissionsbyanyG20countrysince1990(CCC2021).Greateremissioncutshaveoccurredfromsourcesthattheactcovers.TheUnitedKingdom’sGHGemissionreductiontargetsonlyaccountforterritorialemissions—thatis,thosethatoccurwithinthenationalboundaries,plusitsshareofinterna-tionalaviationandshippingemissions.TheUnitedKingdom’scarbonbudgetsandtheParisAgreementdonotaccountforconsumptionemissions,whichareadjustedforinternationaltradeandincludeemissionsassociatedwiththeproduction,trans-portation,use,anddisposalofimportedproductsandservices.Territorialemissions53DecarbonizationPolicyImplementation:IllustrativeCaseStudieshavedecreased47­percentbelow1990levels,comparedwith29­percentforcon-sumptionemissions.Reductionsinconsumptionemissionshavealsooccurred,buttoalesserextent.TheClimateChangeActhasfacilitatedstructuredandscience-basedpoliticaldebates.Thereportingprocedures,progressreports,five-yearlycarbonbudgets,andriskassess-mentsprovidestructuretothefrequencyandcontentofclimatedebates.Thisensuresthatimportantclimateissuesgetregularlyaddressedandupdated.CCCfindingsandrecommendationshavealsohelpedpoliticiansholdthegovernmenttoaccountandargueformoreambitiouspolicymeasures.Inthefirst10yearsofoperation,theCCCandASCwerereferencedin856parliamentaryinterventions.Additionally,theproportionofpar-liamentaryspeechesrelatedtoclimatechangethatreferencedtheCCCalmostdoubledfrom2010to2017(figure3.4).ThisdemonstratesthattheCCChasfunctionedasaknowledgebrokerformanyUKparliamentarians.TheUnitedKingdomistheonlyG20countrythathasalignedits2030emissionreductiontargetswitha1.5°Cpathway(Sroujietal.2021).Eachyear,theUnitedNationsEnvironmentProgramme’sEmissionsGapReportpublishesthedifferencebetweencountryemissiontargetsandtargetsthatarecompatiblewith1.5°Clevels(UNEP2021).ThroughtheClimateChangeAct,theUKgovernment’stargetsettingFIGURE3.3TheUnitedKingdom’sEmissionReductionsandGDPGrowthSource:CCC2022.Note:GDP=grossdomesticproduct.–60–40–20020406019901994199820022006201020142018Changesince1990(%)GDPpercapitaProductionemisionsConsumptionemissions54RealityCheckhasbeenbasedonthescientificcarbonbudgetrecommendationsoftheCCC.ThishashelpedeliminategapsbetweentheUnitedKingdom’sambitiontolimitglobalwarmingto1.5°Canditscorrespondingterritorialemissionsreductiontargets.AlthoughtheUnitedKingdomhasmadeprogressinidentifyingandcreatingawarenessofclimaterisks,itsresponsestotheserisksrequirefurtherwork.SinceintroducingtheClimateChangeAct,theUKgovernmenthaspublishedthreecom-prehensiveCCRAs,increasingthecountry’sabilitytoidentifyandraiseawarenessoftheclimaterisksitfaces.Althoughthegovernmenthasmadesomeimprovementsinadaptationplansforfloodanderosionmanagement,waterscarcity,andextremeweatherimpactsonbusiness,progressinotherareas—suchasagriculturalproductiv-ity,pathogenrisks,healthimpactsfromtemperatureextremes,airquality,anddigitalinfrastructure—islagging.The2021CCCassessmenthighlightsthatthegovernmenthasyettodemonstratestrongprogressinclimateriskadaptationinanyofthe34pri-orityareasassessed.Overall,thegapbetweenfuturelevelsofriskandplannedadapta-tioniswidening.TheClimateChangeActhasproventobeanaccountabilitymechanismforwhenthegovernment’sactionsfallshortofitstargets.In2022,threeclimateorganizationsjointlytooktheUKgovernmenttothehighcourttoarguethatithadfailedtoshowhowitspolicieswouldsufficientlyreduceemissionstomeetitslegallybindingcarbonbudgets(ClientEarth2022).Inalandmarkhearing,thecourtfoundthatthegovern-menthadfailedtomeetitsobligationsundertheClimateChangeActandorderedittoundertakeadditionalmeasuresandprovideanupdatedclimatestrategywithquanti-fiedfiguresonhowitspolicieswouldachievetherequiredtargets.Severalotherappli-cationsforjudicialreviewhavebeenrefused.FIGURE3.4CCCMentionsbyUKParliamentariansSource:Fankhauser,Averchenkova,andFinnegan2018.Note:CCC=ClimateChangeCommittee;UK=UnitedKingdom.020406080100120140TotalmentionsofCCCShareofallspeechesrelatedtoclimatechange(%)1412108642020102011201220132014201520162017TotalmentionsClimatechangespeechesthatreferencedtheCCC55DecarbonizationPolicyImplementation:IllustrativeCaseStudiesKeyTakeawaysTheUKClimateChangeActhashighlightedhownationalclimateframeworklegislationcanhelpimprovethestabilityandaccountabilityofdomesticclimategoals.Thedesignandimplementationofframeworklegislationcanvary,resultingindifferentoutcomes.■■Independentexpertclimatecommitteescanbeuseful:TheCCChashelpedUKpoliticiansmakemorescientificallyinformeddecisionsthattakealong-termview.Thistechnicalapproachtodecision-makingissimilartohowmanycoun-triesdealwithmonetarypolicy.■■Politicalandpublicbuy-inarerequired:TheClimateChangeActalonedoesnotachieveemissionsreductions.Itssuccessdependsonpoliticalpartiesrespect-ingtherequirementsoftheactandimplementingtherecommendationsoftheCCC.Thisrequiresstrongpublicinstitutions,cross-partysupport,andongoingpublicengagement.■■Bothlong-termtargetsandshort-termmilestonesarenecessary:TheClimateChangeActhasdemonstratedthatlong-termtargetscanhelpsetthetrajectoryandshort-termmilestonesareneededtokeepgovernmentsontrack.Thesetar-getscanintegrateandcomplementNDCstomaketheNDCslegallybindinginnationallaw.■■Addressingclimateriskscanbecomplex:SinceintroducingtheClimateChangeAct,theUnitedKingdomhasmadesignificantadvancementsinclimatemiti-gationbutprogressonadaptationhasbeenlimited.Thequantifiablemetricsofmitigationtargetsmakeiteasierforgovernmentstobeheldaccountableformitigationthanforadaptationplanning.LookingtotheFutureWideradoptionofevidence-ledclimategovernanceandpolicymakingispossible.TheUKClimateChangeActandCCChavedemonstratedthebenefitsoffacilitating­science-basedclimatedebatesandtargetsetting.Itispossibletodrawfurtherlessonsfromothercountries’climateframeworklegislationtoimproveclimategovernancearoundtheworld.ThenewlyformedInternationalClimateCouncilsNetworkisonepossibleforumforsuchcollaborationandknowledge-sharing(ICCN2021).Governmentsshouldconsiderhowtheycanreduceconsumptionemissions.NationalcarbonaccountingframeworksandGHGemissiontargetsgenerallyfocusonproductionemissionsanddonotconsiderconsumptionemissions(IPCC2019).Fortheworldtolimitglobalwarmingto1.5°C,amoreholisticandlessnationalisticviewofemissionsisrequired.AlthoughtheUKgovernmentinitiallyexcludedinternationalshippingandaviationemissionsfromitscarbonbudgets,itssixthcarbonbudget(2033–37)willincorporateitsshareoftheseemissions,demonstratingprogressinaccountingforemissionsoutsideofnationalboundaries(GovernmentoftheUnitedKingdom2021).Furtherworkisrequiredonconsumptionemissions.56RealityCheckAdaptationplanningalsorequiresgreaterattention.Asglobaltemperaturesrise,therisksofclimatechangebecomegreater.TheUKClimateChangeActshowshownationalframeworklegislationcanimproveclimateriskidentificationandreport-ing;italsoshowsthatadditionalworkisrequiredtotranslatethesefindingsintoaction.Governmentsshouldlooktoincorporateadaptationplanningacrossallsec-torsoftheeconomytosafeguardthecontinuedpotentialofsustainabledevelop-ment.TheWorldBankreportAdaptationPrinciples:AGuideforDesigningStrategiesforClimateChangeAdaptationandResilience(Hallegatte,Rentschler,andRozenberg2020)isausefulguidetoassistgovernmentswitheffectiveadaptationplanning.57DecarbonizationPolicyImplementation:IllustrativeCaseStudiesGettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:BritishColumbiaCaseStudy4.TaxingCarbonforDevelopment:LessonsfromBritishColumbiaContributors:DirkHeineandMarizaMontesdeOcaLeonContextSinceFinlandannouncedthefirstcarbontaxin1990,morethan37countrieshaveintroducedcarbontaxes(WorldBank2022m).Asof2022,ninemorewerescheduledorinconsideration,includinginBotswana,Côted’Ivoire,Indonesia,andMorocco.AcarbontaxappliesapriceincentivedirectlyinproportiontotheGHGemissionsgeneratedbyagivenproductoractivity.ByapplyingthesamepriceperMtCO2eacrossmultiplesourcesorgoods,carbontaxescontributetocost-efficientclimatechangemitigation(Pryoretal.2023).Severalcarbontaxdesignshavebeentriedinpractice,but30yearsofacademiclit-eraturehavefocusedononedesignoptionthathasagoodchanceofaligningclimatemitigationwitheconomicdevelopment.Thatdesignintroducescarbontaxes“upstream,”onthecarboncontentoffuels,atthesametaxrateacrossallemissionssources,andusesrevenuestosubstituteconventionaltaxes,especiallyonlabor.Thereal-worldcarbontaxclosesttothisdesignisthecarbontaxreformintroducedinCanada’sBritishColumbia(BC)provincein2008.TheBCcarbontaxstandsoutasamodelfordecarbonizingdevelopmentbecausethepolicydesignledtoseveralpositiveoutcomes,including:anetincreaseineco-nomicgrowth;adecreaseinincomeinequalityandimprovementoftherural-urbandivide;asignificantreductioninGHGemissions;andincreasedpublicsupportofthecarbontaxreformovertime.Thesepositiveeconomicandenvironmentalimpactsarekeyexpectationsofclimatepolicyinlower-middle-incomecountries(LMICs).ThefeaturesthatmadethispolicysuccessfulinNorthAmericamaygenerateevengreateroutcomesinLMICs.PolicyThefirstcarbontaxintheAmericas,theBCexample,appliestwofundamentalcar-bontaxreformideas.In1992,allcountriesagreedonthePolluterPaysPrinciple(RioDeclaration,Principle16)ofchargingpollutersinproportiontodamages58RealityCheckcausedtosociety.TheBCcarbontaximplementsthisidea,withauniformtaxappliedtoabroadtaxbase.TheexemptionsareforfuelexportedfromBC,fuelusedinselectindustrialprocesses,andmarinedieselusedininterjurisdictionaltransportation,amongothers.Thesecondfundamentalideaunderlyingcarbontaxationistheprincipleofshift-ingthetaxburdenawayfromtaxing“goods,”suchaslaborandincome,andinsteadtaxing“bads,”suchasemissions.Economistshavearguedthatshiftingtaxburdensawayfromdistortionarytaxbases—suchaslaboreffortandprofitsfrominnovation—towardemissionscanhelpaccelerateeconomicgrowth,whilealsoreducingemissionsandraisingmuchneededresources.7Forexample,Swedenintroduceditscarbontaxin1991tohelpshifttaxesawayfromlaborduringitslargestmacrocrisissinceWorldWarII.Duringthe2001crisis,Germanyintroducedaformofcarbontaxation,raisingelectricitytaxeswhileraisingfeed-intariffs(FiTs)forrenewableenergies,tohelpfinanceareductioninsocialsecuritycontributions.Türkiyeraisedfueltaxesto­substituteconventionalmacro­fiscaltightening.TheBCgovernmentclearlycommu-nicateditscommitmentatthestartofthereformthatthetaxwouldnotraisetheoverallfiscalburdenonfirmsandhouseholds;rather,revenueswouldsubstituteother,moredistortionary,taxes.TheBCgovernmentintroduceditscarbontaxdirectlyafterthefinancialcrisisin2008,enablingittoreduceconventionaltaxesandsupporttheeconomybyreducingthetaxburdenonlabor.Itclearlycommunicatedthisfiscalshift,committingfromthestartthatitscarbontaxreformwouldnotleadtoanoverallincreaseinoveralltaxation.In2017,BCreturned35­percentoftherevenuestoindividualsand65­percenttobusi-nesses.Taxcutsincludedthegeneralcorporateincometaxfrom12­percentto11percent,andthetwolowestpersonalincometaxratesby5­percent(table3.1;seealsoHeineandBlack2019).AppliedtoallfuelspurchasedinBC,thetax’sbroadbasecoversapproximately70percentoftheprovince’sGHGemissionsandofferslong-termpredictability(MurrayandRivers2015).ThetaxratestartedatCan$10/tCO2ein2008andgraduallyincreasedtoCan$50/tCO2ein2022.SignalingfuturecarbonpriceslonginadvancewasakeycomponentofBC’sreform,givingtheprivatemarketlong-termpricesignalstoavoidstrandingassets.Ataxrateincreasescheduleservedasacommitmentdevicetohelpshieldcarbontaxesfromfluctuationsinpoliticalattitudes(Carattini,Carvahlo,andFankhauser2018).Fromtheoutset,BC’staxwasdesignedtoincreasebyCan$5annu-allyuntil2012.EvidencefromBChouseholdsurveysshowsthatthisstrategywaseven-tuallysuccessful:atthetimeofthetaxreform,slightlylessthanhalfthepopulationsupportedthereform,butastimepassedandknowledgeoftheworkingsofthereformbecamemorewidespread,supportrosetomorethanhalf.Theremayalsohavebeenpositivespillovers:WashingtonStateisconsideringitsowncarbontaxreform,modeledontheBCexample.59DecarbonizationPolicyImplementation:IllustrativeCaseStudiesResultsandImpactsThesignificantacademicliteraturethathasevolvedevaluatingtheBCexamplebroadlyfindsthatitachievedacombinationofemissionsreductionswithimprovedsocio-economicoutcomes.Extensiveempiricalevidenceconfirmsthatthetaxreducedemis-sionsandinequality,raisedgrowthandemployment,andovertime,receivedmajoritysupportfromcitizens.TheBCcarbontaxhasreducedGHGemissionsandfuelconsumption.ThereisevidenceofareductioninfueldemandfromthetaxaswellasareductioninGHGemissions(AhmadiandYamazaki2020;Metcalf2019;MurrayandRivers2015).Someanalysishasfoundinsignificantresults,pointingatthesizeoftherate(toolow)orthetimeframe(Pretis2022).Thecarbontaxhadbenignimpactsoneconomicoutput.Studiesfindevidenceofnoadverseeconomiceffectandsomeindicationofapositiveimpact(Metcalf2019),includingincreasedoutputby0.8­percent,largelyduetothereductionofcorporateincometaxesencouragingenergysavingsandproductivity-enhancinginvestments(AhmadiandYamazaki2020).TABLE3.1RevenueNeutralityinBritishColumbia:TaxCutsandCarbonTaxRevenueRevenue/taxcategory2016/2017(­millionCan$)Carbontaxrevenue1,220PersonaltaxmeasuresLow-incomeclimateactiontaxcreditof$115.50peradultplus(195)$34.50perchildReductionof5%inthefirsttwopersonalincometaxrates(309)Northernandruralhomeownerbenefitupto$200(84)Children’sfitnesscreditandchildren’sartscredit(8)Other(11)Totalpersonaltaxmeasures(607)BusinesstaxmeasuresProductionservicestaxcredit(340)Generalcorporateincometaxratereducedfrom12%to11%(232)Smallbusinesscorporateincometaxratereducedfrom4.5%to2.5%(230)Scientificresearchandexperimentaldevelopmenttaxcredit(148)Other(159)Totalbusinesstaxmeasures(1,120)Totalrevenuemeasures1,727Source:BritishColumbiaBudgetandFiscalPlan2017.Note:Severalmeasuresareaggregatedinto“other”forsummarizingpurposes.Can$=Canadiandollars.60RealityCheckAggregateemploymenthasincreased,albeitwithdifferentresponsesacrossindus-tries.Althoughthecarbontaxisfoundtohaveapositiveeffectonemploymentof0.75­percentannually(Yamazaki2017),thereisalsoevidenceofdifferingimpactsonspecificindustriesastheyshiftfromcarbon-intensivetocleansectors(Azevedo,Wolff,andYamazaki,forthcoming).Thisfindingsuggeststhatprotectingworkers,ratherthanjobsincarbon-intensivesectors,throughthetransitionisagoodwaytocomplementcarbontaxation.TheBCcarbontaxisprogressive,narrowingthegapbetweenpoorandrichhouse-holds(Becketal.2015).Thisisduetotherevenuerecyclingscheme(figure3.5),show-ingthatthedistributionalimplicationsofsuchataxreformcannotbeestimatedwithoutapreciseunderstandingoftheuseoftherevenues.Thestudyalsohighlightstheimportanceofincomesourcesindrivingdistributionalimpacts:thedifferencebetweenpoorerandricherindividualsarisesmorefromdifferencesinincomesources(forexample,sectorofemployment)thanfromdifferencesinwhattheyconsume.Thisisrelevantbecausemoststudiesofdistributionalimpactsofcarbonpricinghavefocusedonimpactsthroughconsumption,asassessingimpactsthroughincomesismethodologicallychallenging.KeyTakeawaysBC’scarbontaxreformprovidescruciallessonsforLMICsconsideringcarbontaxes,showingthatitispossibletoenhancedevelopmentanddecarbonize.Numerousempir-icalstudiespointtopositiveimpactsoneconomicoutput,aggregateemployment,andSource:Becketal.2015.Note:hh=household.FIGURE3.5DistributionalImpactsofBritishColumbia’sCarbonTax1.0hh1hh2hh3hh4hh5hh6hh7hh8hh9hh100.80.60.40.2Percentofbenchmarkincome[%]0–0.2–0.4–0.6–0.8NorevenuerecyclingWithrevenuerecycling61DecarbonizationPolicyImplementation:IllustrativeCaseStudiestaxprogressivityresultingfromthecarbontaxreform.Yet,designmatters,andnotallcarbontaxesareequal.BC’sreformprovidesreal-lifelessonsofhowawell-­communicated,well-designedtax-burden-shiftingstrategycanallowcountriestoimplementhighcarbontaxratesupfrontwhileimprovingpoliticalsupport.Thedevel-opmentgainsobservedintheliteraturematerializedquicklyforthecitizensintheformoflowerpersonalandcorporatetaxburdensandhigherlaboropportunities,increasingpublicsupportovertime.HowdothelessonslearnedfromthisCanadianprovincetranslatetotheworld?Theglobalpictureismixed.Thenumberofjurisdictionsapplyingcarbontaxeshasrisen,fromtwoin1991to37in2022,withninemorescheduledorunderconsideration(WorldBank2022a).Theaveragecarbontaxratehasalsorisenbutremainslow,at$3/tCO2in2021(weightedforemissions).Despitethisprogress,mostcountries,espe-ciallyinthedevelopingworld,continuetouseenergyexcisetaxesandsubsidies,withanimportantimpactoncarbonintensity.Theimpactwouldbeevengreateriftheywereextendedtoallfuelsandappliedaratealignedtofuelcarboncontent.62RealityCheckGettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:ChinaCaseStudy5.EmissionsTradingSystemsinChinaContributors:SamuelJovanOkullo,JosephDixonCallistoPryor,andHarikumarGaddeAsofApril1,2022,therewere32emissionstradingsystems(ETSs)inoperationglob-ally,coveringnearlyone-fifthofglobalGHGemissions.EconomistspointoutthatETSsandcarbontaxescanbothachievemitigationatleastcostwithapreferenceforonepolicyinstrumentovertheotheremergingwhenaccommodatingforsome­real-worldattributes.ETSsarepremisedontradablepollutionrights,alsoreferredtoasallowancesorpermits.InatraditionalETS,governmentsinstituteacaponthevolumeofemis-sionsforoneormoresectorsoftheeconomyanddistributeallowancesviafreeallocationsorauctioning.Incontrasttocarbontaxes,ETSsdelivergreatercer-taintyoverthedegreeofemissionsreductions,butlesscertaintyoverthecarbonprice.WhereasfreeallocationenablesETSstoachievegreaterpoliticalbuy-inwithoutunderminingmitigationambition,theyarerelativelymorecomplexandcostlytoadministerthancarbontaxsystems.Forexample,ETSsgenerallyrequireamorecomprehensivemonitoring,reporting,andverificationframework;aliquidmarket;andacrediblepricesignal.ThiscasestudyexploreshowanETSoperates,throughthelensoftheChinaNationalETS.Officiallylaunchedin2017,itsfirstcomplianceperiodcoveredtheyears2019and2020,andthefirsttradingofallowancesstartedinJuly2021.China’sETSdif-fersfromothermajor“cap-and-trade”schemes,liketheEUETS,inthatitcapstheemissionsintensityofoutputratherthantheabsolutequantityofemissions.Thismeansthatcomparedwithatraditionalcap-basedapproach,emissionscancontinuetorisewithoutput,creatinganadditionalchallengeforemissionreductionobjectives.Currently,allallowancesinChina’sETSareallocatedfreetoregulatedentitiesbasedontechnologyandfuelbenchmarks.Althoughthishasbeendonetohelpaddressregionalredistributionobjectives,itlikelydistortsemissionreductionincentivesandlowersthescheme’soverallcost-effectiveness.TheevolvingdesignofChina’snationalETS—includingfromanintensity-basedtoanabsolutecap-basedscheme—providestheopportunitytoaddressandimproveseveraldesignelements.ContextChina’sCO2emissionsroseto11.9GtCO2in2021,amountingtoaboutone-thirdoftheglobaltotal(IEA2022c;RitchieandRoser2020).Todecarbonize,China’sstrategyis63DecarbonizationPolicyImplementation:IllustrativeCaseStudiespremisedonthedualgoalsofpeakingemissionsbefore2030andachievingcarbonneutralityby2060.Thesegoals,reaffirmedinOctober2021aspartofthe1+Npolicyframework,underpinChina’sNDCandemphasizethecrucialrolethatChina’snationalETSwillplayinsupportingtheirrealization.ChinafirstannounceditsdecisiontouseanationalETSin2011andhasbuiltcru-cialhands-onexperiencethroughitseightregionalpilots,mostofwhichhavebeenoperationalsince2013.China’sshort-termambitionforitsnationalETSistohelpaccelerateenergyefficiency,withatargetofreducingcarbonintensityby18­percentby2025comparedwith2020.Inthelongterm,theETS(combinedwithrenewableenergymandates)aimstosupportachievingcarbonneutralitytargets,asstipulatedinChina’sseriesoffive-yearplans.Likemostotherdevelopingeconomies,China’skeychallengeishowtoreduceemis-sionswithouthamperingeconomicgrowth.Onekeydesigndecision,therefore,waslaunchingthenationalETSfunctionallyasatradableperformancestandard,meaningtheregulationtargetsintensitybenchmarks,andanycomplianceobligationsbegintosurfaceonlywhenexceedingthosebenchmarks.AseconddesignelementwastoadoptanETSforthepowersectorinitially,beforeexpandingittotrade-exposedsectors,sev-eralofwhicharestillselectivelyregulatedunderthevariousregionalpilots(Yin2021).Third,regulatorsoptedtoinitiallyallocatefreeallowancesratherthanauctionthem.Fourth,complianceforgas-firedpowerplantsiscappedtoonlytheirfreelyallocatedallowances,whilethatforcoal-firedpowerplantsiscappedtotheirfreeallowanceallo-cationplusuptoa20­percentmaximumoftheirverifiedemissions(ICAP2021;MinistryofEcologyandEnvironment2020).Forthesecondcomplianceperiod(calen-daryears2021and2022),regulatedentitiesarepermittedtoborrowagainsttheir2023allowancebudgettohelpoffsetfinancinghardshipsstemmingfromdisruptionstoglobalfuelsupply.Intensitybenchmarkshavealsobeentightenedforthesecondcom-pliancecyclerelativetothefirst(Yin2023a).PolicyThenationalETSschemecoverscoal-andgas-firedpowerplantsthatemittedmorethan26metrickilotonsofcarbondioxideinanyoneyearbetween2013and2019.Thiscomestojustover2,100powerplants.Thesepowerplantsareresponsibleforapproxi-mately4.5GtCO2orjustover40­percentofChina’sCO2emissions.Itisprojectedthatatfullscale,theschemewillcovercloseto80­percentofChina’semissionsandspanmultiplesectors,includingironandsteel,chemicals,andbuildingandmaterials,sev-eralofwhicharecurrentlystillregulatedunderthevariousregionalpilots.TheMinistryofEcologyandEnvironment(MEE)overseestheadministrationandimplementationofthenationalETS,andinsomecases,giveslocalgovernmentminis-triestheauthoritytosupervisemajoremitterswithintheirjurisdictions.Despitefreeallocationsandlimitedcompliance,powergeneratorswithabove-averageintensities64RealityCheckgenerallyneedtopurchaseallowancestobeabletomeettheircompliancerequire-ments.Tosupportthedevelopmentofdomesticcarbonoffsets,ETSparticipantscanuseChina’scertifiedemissionsreductions(Xue2022),thatis,emissionreductionactiv-itiesimplementedbycompaniesoutsidetheETSonavoluntarybasisandtheresultingemissionreductionscertifiedbythegovernment,tomeetupto5­percentoftheirETScompliancerequirements.TherolloutofthenationalETSanditsseveralcomponentscontinuestoexperiencesomedelays.Itsinitiallaunchexperiencedmultipledelaysasthegovernmentremainedconcernedaboutseveralissues,includinginequalityimpactsacrossprovinces,down-streamimpactsofhigherprices,andthecomplexityoftheschemeitself(Yin2021).Althoughsuchdelaysarenotatypicalfornewpolicyrollouts,inChina’scasethesewerecompoundedbyevolvingadministrativearrangementsthatincludedthetransferofoversightfromtheNationalDevelopmentandReformCommission—China’smaineconomicplanningbody—totheMEE;concernsabouttheaccuracyofemissiondata;theunfamiliarityofestablishments,especiallythosethathadnopriorETSexperiencewiththeircomplianceobligationsandreportingrequirements;theCOVID-19(­coronavirus)pandemic;andthesettingupofarobustandtrustedtradingplatform(Singh,Stanway,andXu2021).ResultsandImpactsThenationalETScompleteditsfirsttradingperiodinDecember2021,coveringthecomplianceyears2019and2020.Thesecondcompliancecyclecoversemissionsfrom2021and2022,andallentitieswillneedtosurrenderallowancesandhavetheiremis-sionsvalidatedbytheendof2023(Yin2023b).Atotalof179MtCO2ofallowancesweretradedbetweenJuly14andDecember31,2021,withpricesclosingthatyearat¥54.2,orUS$8.5,permetrictonCO2.Thisrepresentedacumulativeturnoverofcloseto¥7.7billion,orUS$1.3billion(MinistryofEcologyandEnvironment2022).Allowancetradingwassparse,withbunchingtakingplacetowardtheDecember31deadline.Compliancewasreportedat99.5­percent,butissueswiththeaccuracyofemissionsdatasurfaced(XuandStanway2022).SinceJanuary2022,priceshavebeenmostlystable,fluctuatingbetweenUS$8–9/MtCO2.Whilethereissomeoversupplyofallowances,whichcanundermineallowanceprices,authoritiesareyettodecidewhetherallowancesfromthefirstcompliancecyclearebankabletothesecondcycle(ICAP2023).ChinaaimstoraisetheeffectivenessofitsETSthroughdesignimprovements.Substantialdesignflexibilityhasenabledittomanagepricevolatilityoverthesecondcompliancecycle.Toinformthesedesignimprovements,authoritiesaremaintainingaconsultativeapproachwherevariousstakeholdershavewindowsforpublicreviewandcommentonproposals.Trustandinclusivityinthegovernment’sdecision-makingprocess,combinedwiththeinclusionofstate-ownedenterprisesinChina’snational65DecarbonizationPolicyImplementation:IllustrativeCaseStudiesETSarelikelytoensurethatthenationalETS’scompleterolloutcontinuestofacelittleresistance.Stakeholderengagementandcapacitybuildingtobetterunderstandreport-ingrequirementsandcomplianceobligations,especiallyinregionsthatwerenotcov-eredbyregionalpilots,alsocontinuetobecrucialforconfidencebuildingandwillcontinuetobenecessaryasthenationalETSexpands.AlthoughitistooearlytoempiricallyassesstheeffectivenessofthenationalETS,empiricalassessmentbasedontheregionalpilotscanbehelpfulforunderstandingpossibleimpacts.Theseassessments,whicharebasedondatapriorto2020,ingeneralpointtowardagreaterthan10­percentreductioninenterprises’emissionsduetoETSoperation(Cuietal.2020;Caoetal.2021).Thereductionswereachievedboththroughenergyconservationmeasuresandfuel-switchingactivity.TheconsequencesoftheChinesepowermarketstructure—whereelectricitypricesareregulatedandpowermarketsnonliberalized—areunderstoodtohaveloweredtheeffectivenessofETSoperations,mainlybyinterferingwiththecapacitytofullypass-throughallow-ancecosts.This,combinedwiththelowallowancepricesthatwereobservedintheregionalpilots,hascurbedthecapacityforevengreateremissionreductions.Reportedeconomicconsequencesoftheregionalpilotsincludenegativeimpactsonemploy-mentandimprovementsintotalfactorproductivity.ThecurrentdesignofthenationalETSpotentiallylimitsitsabilitytodriveleast-costabatement.Technology-specificintensitybenchmarkscandistortincentivesforemis-sionreductionacrosspowerstationsofdifferentsizesorthoseusingdifferentfuelsandtechnologies,limitingthepotentialfortheETStodeliveradditionalemissionsreduc-tions.Inparticular,theuseofintensitybenchmarkscouldpotentiallyincentivizepowerproductionfrommoreemissiveunits—forexample,byshiftinginvestmentandpowergenerationtolessefficientsmallercoal-firedgeneratorsorunconventionalcoalunitswithlessstringentbenchmarks(Yin2023a).Theeconomicsisclearthatacap-basedschemeismorecost-­effectivethananintensity-basedsystemandthetechnology-fuelbenchmarksdistortingincentives,butaninspectionofplant-leveldataisrequiredtoprovideclarityontheempiricalmagnitudeoftheinefficiencies.KeyTakeawaysChina’sexperiencewithdesigningandimplementinganETS,aswellastheimplemen-tationexperiencefromotherjurisdictions,offerssomeimportanttakeaways.Ultimately,China’snascentnationalETSrepresentsacompromisebetweenambitionandpragma-tism,recognizingtheneedtoaddressmanytechnical,regulatory,distributional,eco-nomic,andpoliticalissuesinaphasedmanner.Designfeatures—includingthecoverageandtechnology-specificbenchmarks—havefacilitatedimplementationandoperabil-ity—butmayhavereducedeffectiveness.ThecountrycanaddresstheseissuesasitreviewsandrefinestheETSovertime.Inthisregard,effortshavealreadybeenmadetostrengthenthird-partyverification,andtherearenowpenaltiesforsubmitting66RealityCheckfabricatedorfalsereports.Toincreaseliquidity,Chinaalsointendstoallowfinancialtradersintothemarket.China’sexperiencewithETSimplementationandadministrationhashighlightedseveralchallenges,notalluniquetothismarket.Theseincludingenterprises’unfamil-iaritywiththeETSrules,concernsrelatedtodatatransparencyandaccuracy,imple-mentationdelays,andlowallowancepricesandtradevolumes.AsChinacontinuestolearnandimprovethedesign,implementation,andadministrationofitsnationalETS,thereareseverallessonsthatcanbelookedatandconsidered.■■Establishingandfullyenforcingarobustmonitoring,reporting,andverificationsystemearlyiscrucialnotonlytoensuresmoothimplementationbutalsotoavoidthepotentialfordatamanipulationandfraud.■■Itwillalsobeimportanttoidentifypolicychangesandreformsearly,harmonizethemwiththeneedforincreasedeffectivenessofETSimplementation,andcom-municatethemclearlytosupportregulatedentities’compliance.Capacitybuild-ingandcontinuoustrainingforenterprisesarealsokey.■■AdjustingtheETS’sdesignandimplementationmodalitiestoalignwiththerap-idlychangingglobalandnationalpolicyenvironmentsaswellasinternationalcommitmentscanbringadditionalchallengesforitsfullandtimelyimplementa-tion,butitisnecessarytofosteraneconomy-widedecarbonization.■■Openingupmarketstomoreactorssuchasthefinancialsectorcanincreaseliquidity,whichcaninturnfacilitateatransparentpricesignal.Butitcanalsoincreasetheriskofmarketmanipulation,whichcouldexacerbateunderpinningissuesinanascentETSmarket.■■Itisimportanttodefineupfronttheroleofoffsets,includingsourcesandrelianceonexistingcreditingmechanisms.Theremustalsobeclarityonthepotentialfordomesticcreditstobeusedasavehicletoattractinternationalinvestmentsinnon-ETSsectors.Thelinkagesbetweenthedomesticandinternationalcarbonmarketsmustbedeterminedattheearliestpossibledate.■■Translatingandtransitioningsubnationalinstrumentsintoanationalframe-workposeschallengesandcomplexities,includinginrelationtogovernanceandinstitutionalresponsibilities.Thismaybemorechallenginginjurisdictionswheresubnationalgovernmentshavegreaterlevelsofautonomy.67DecarbonizationPolicyImplementation:IllustrativeCaseStudiesGettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:EgyptCaseStudy6.EnergySubsidyReforminEgyptContributors:DefneGencer,MinALee,andTomMoerenhoutContextIntheaftermathoftheArabSpring,Egyptfacedbothpoliticalandeconomicchal-lenges,affectedbyagrowingfiscaldeficit,economicslowdown,increasingpoverty,socioeconomictransition,andenergyshortages.In2013,Egypt’spowersectorwasrecoveringonlyabout30­percentofitsoperationalandcapitalcosts,whilegovernmentexpenditureonenergysubsidieshadreachedanestimated22­percentofthebudgetand7percentofGDP,exceedingcombinedexpenditureoneducation,health,andinfra-structure(ESMAP2017).Electricitysupplywasunreliable,withfrequentoutagesthataffectedbothconsumerwelfareandmanufacturingoutput.Atthesametime,substan-tialliquidfuelsubsidiesincentivizedexcessiveproductionandconsumptionoffossilfuels,andthereforeGHGemissions,harmingtheenvironmentandtheclimateanddiscouraginginvestmentinenergyefficiencyandcleanerpowergenerationalternatives.Thiscasestudyprovidesanoverviewofthegovernment’seffortstoreformenergysubsidiesbetween2013and2017anddiscussesmainchallenges,imple-mentationapproaches,andoutcomes.PolicyIn2014,Egyptembarkedonanambitiousandcomprehensiveefforttoreformenergysubsidiesaspartofabroaderefforttotacklelong-standingstructuralconstraintstoinclusivegrowthandmacroeconomicstability.Egypt’sdevelopmentpartnerssupportedtheenergysubsidyreforms,whichwerepartofthegovernment’sbroadermacrofiscalreformefforts.Thethree-yearDevelopmentPolicyFinancing(DPF)series,supportedbytheAfricanDevelopmentBank,theAgenceFrançaisedeDéveloppement,andtheWorldBank,providedatotalof$3.15billioninfinancinginsupportofthegovernment’sprogramthatfocusedonfiscalconsolidation,sustainableenergy,andcompetitiveness.Inaddition,athree-year,$12billionInternationalMonetaryFund(IMF)programapprovedin2016featuredenergysubsidyreformasamainpillar.Inthecontextofthebroaderprogram,thegovernmentrequestedtechnicalandadvisorysupportfromtheWorldBank,partofwhichwasfundedbyaseriesoftechnicalassistancegrantsfromtheEnergySubsidyReformFacilitywithintheEnergySectorManagementAssistanceProgram(ESMAP2017),providedbetween2014and2020.Thestatedgoalofthereformeffortwastoreduceenergysubsidiesto0.5percentofGDPby2019byimposinggradualincreasesinfuelandelectricitypricesand68RealityCheckmaintaininglimitedsupportforliquefiedpetroleumgas(LPG)andelectricityforpoorandvulnerablehouseholds.Thegovernmenttookdecisiveactionfromtheout-setandgraduallyimplementedtheplannedreforms.InJuly2014,thegovernmentimplementedthefirstannualelectricitytariffadjustment,raisingelectricitytariffsby31­percentonaverageandpetroleumandnaturalgaspricesby40to78­percent(WorldBank2016c).Implementationofthefirstannualelectricitytariffadjustmentwasachievedaspartofafive-yeartariffreformplanoutlinedinPrimeMinisterialDecreeNo.1257of2014toreformgasandelectricitysubsidies.Thesecondannualelectricitytariffadjustmentin2015increasedaverageelectricitytariffsbyanother19­percent(WorldBank2016c).Thegovernmentimplementedanannualelectricitytariffadjustmentin2017,rais-ingtariffsby33percentonaverage,atamuchhigherratethantheplanned17­percentincreaseoverthepreviousfive-yeartariffadjustmentplan.Specifically,dieselandgaso-linepricesincreasedby40to55­percentandelectricitytariffsby40­percentonaverage.LPGcostrecoverywasestimatedatonly35­percent,evenafterthetariffadjustment(WorldBank2017).Thistime,LPGpriceswerealsoincluded,doublingtobringpricesclosertocosts,withthelastpriceincreaseannouncedinOctober2021,bringingittoitscurrentpriceofLE70percylinder.Inviewofchallengingmacroeconomiccircumstances,in2017thecabinetapprovedthedeferralofthedeadlineforthepowersectortoreachfullcostrecovery.Startingin2016,insteadofannouncinganelectricitytarifftrajectory,thegovernmentsetasub-sidytargetinitsMedium-TermFiscalFrameworkaspartofthebroadersetofstepsagreedwiththeIMF,andadjustedtariffsannuallytoachievethethen-targetoffullcostrecoverybyFY2018–19.Althoughprojectedat2.5­percentofGDPforFY2016–17,energysubsidiesreached3.9­percent(2.9­percentforfuelsand1­percentforelectricity).Duetothedevaluationofthecurrency,evenwiththeretailtariffsforconsumersinFY2017–18alreadyhigherthanoriginallytargetedforFY2018–19,theoriginalobjec-tiveoffullcostrecoverybyFY2018–19couldnotbereached,andthecabinetapprovedanewsubsidytrajectorytargetingFY2021–22.Thecurrentfive-yearplanextendsfromFY2021toFY2025.Tomitigatethepotentialadverseimpactsfromenergypriceincreases,alongwithbroadermacro­economicpressuresandinflation,thereformswereaccompaniedbyactioninmultipledomains.Tofacilitatetheacceptanceofthereforms,thegovern-mentlaunchedaproactivecommunicationsefforttoexplaintherationaleofthereformsandinformthepublicaboutwhatthereformsentailed.Amongotherimpor-tantcommunicationelements,theeffortsincludedapublicmultimediacampaignemphasizingtheimportanceofenergyefficiencymeasurestomitigatetheimpactofthepriceincreases.Mostimportantly,thegovernmentalsotookconcreteactiontostrengthenthecountry’ssocialprotectionmechanisms.Themainelementoftheeffortwastomove69DecarbonizationPolicyImplementation:IllustrativeCaseStudiesawayfrombroad-basedpricesubsidiestowardtargetedsupport,includingthroughcashtransfers.Thegovernmentincreasedthesocialprotectionbudget­allocationbyaboutLE85billion(approximately$5billion)inFY2017–18,orby60­percentcom-paredwiththepreviousperiod.Thegovernmentalsotookcriticalactiontobroadenthecoverageofthesocialprotectionsystem,whileprovidingbroadersupportthroughskillenhancementandyouthemploymentprograms,alongwithimprovedservicedelivery.ThegovernmentofEgyptcontinuestostrengthenthecountry’ssocialprotectionmechanisms,includingthrougheffortssupportedbycomplementaryWorldBankoperationstodevelop,fund,andstrengthentheTakafulandKaramacashtransferpro-gram.Takaful(“dignity”inArabic)isacashtransferprogramthatisconditionalonschoolattendanceandtheuseofmaternalandchildhealthcareservicestopromotetheaccumulationofhumancapitalamongchildren.Karama(“solidarity”inArabic)pro-videsamonthlyincometopoorpeopleovertheageof65andpeoplewithseveredis-abilitieswhoareunabletowork.Theseprogramsarebasedonaproxymeans-testingquestionnairecross-checkedwithaunifiednationalregistry,linkedwithauniqueidentification­number.Throughouttheirlifetime,theprogramshavereachedapproxi-mately31­millionregisteredapplicantsinthedatabase;about3.11millionhouseholdsare­currentlyenrolled,three-quartersheadedbyfemales.ResultsandImpactsImplementedalongsidecrucialmacrofiscalreforms,Egypt’senergysubsidyreformeffortscontributedtothegovernment’seffortstoeasefiscalpressures,withthebudgetdeficitfallingfrom12.9to8.1­percentofGDPbetween2013and2019(WorldBank2020b).Energysubsidiesdeclinedfrom6.9­percentofGDPinFY2013to1.9­percentinFY2019(figure3.6).Whiletheshareofenergy­subsidiesstoodat1.9­percentinFIGURE3.6EvolutionofEgypt’sEnergySubsidies,FY2010–19Source:WorldBank2020b.Note:FY=fiscalyear;GDP=grossdomesticproduct.5.55.05.76.96.54.02.94.13.41.9012345678FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19ShareofGDP(%)70RealityCheckFY2019—abovethegovernment’soriginaltargetof0.5percentsetin2014—theelec-tricityandfuelpricingreforms,togetherwithothermacroeconomicreformsandstrengthenedsocialassistanceprogramsandaccompanyingdeliverymechanisms,strengthenedEgypt’smacroeconomicresiliencetofaceshocks,includingtheimpactsoftheCOVID-19crisis.EventhoughchallengesposedbytheCOVID-19pandemicaffectedreform­implementation,thegovernmentremainscommittedtotacklingenergysubsidiesthroughgradualincreasesinelectricitytariffsoverthemediumterm.Forexample,inJuly2020,itannouncedanewelectricitytariffinthemidstofthepandemic.Forliquidfuels,itimplementedanautomaticfuelprice–indexationmechanismfor95-octanegasolineinApril2019andapprovedanewpricemechanismforallpetroleumproductsinJune2019(OECD2021).Asaresult,fuelsubsidiesdeclinedbyapproximately65­percentfromJuly2019toMarch2020.Egypt’s2014–17energysubsidyreformsandaccompanyinggovernmentpoliciescreatedthefiscalspacetostrengthensocialassistance,health,andeducation.Beforethereform,energysubsidieshadexceededkeysocialspendingcategoriesformanyyears.Consistentadjustmentsinenergypricesandenergysubsidyreductionshaveyieldedsignificantfiscalsavings,whichthegovernmentredirectedtowardsocialpro-tectionandhumandevelopmentspending.StartinginFY2015,healthandeducationexpenditureexceededenergysubsidies(­figure3.7).Togetherwithbroaderenergysectorreformsbythegovernment,thesesubsidyreformshavehelpedtoencourageprivateinvestment,therebyenablingincreased­electricitygenerationoverthepastfiveyears.InadditiontoimprovedsectorFIGURE3.7EnergySubsidyandHealth,Education,SocialProtectionExpenditureinEgypt,FY2014–18Source:WorldBank2017.Note:~=WorldBankestimate;=MinistryofFinancebudgetforenergysubsidy.Numbersinparenthesesarein$,billions.139(20)400Egyptianpounds(billions)SocialprotectionEducation+healthFY14Increaseinenergysubsidywithout2014–17pricereform~ActualenergysubsidyFY15FY16FY17budgetFY18budget4698(13)5280(10)191133(9)256140(8)35030025020015010050071DecarbonizationPolicyImplementation:IllustrativeCaseStudiesperformance,thegovernment’sreforms,includingelectricitytariffreforms,FiTs,andbroaderregulatoryframeworkencouragingprivatelydevelopedrenewables-basedpowergeneration,canbecreditedwithtwoimportantenvironmentalachievements.Theshareofoil-firedpowergenerationwentdownfrommorethan34,000gigawatthours(GWh)in2014to7,145GWhin2019(IEA2022b),whilewindandsolarpowergenerationoutputincreasedrapidly.In2014,solarpowergenerationstoodat244GWhandwindpowergenerationat1,444GWh—asixfoldgrowthforsolarandalmostthreefoldforwind.Thereformsandsubsequentrenewableenergy(RE)scale-upallowedthegovernmenttoincreaseitstargetsfortheshareofrenewables-basedgen-erationcapacityto42­percentoftotalinstalledcapacityby2035.ReachingthistargetandconsistentlyincreasingREgenerationoutputwouldyieldsubstantiveemissionsreductions.KeyTakeawaysThroughcomprehensiveandgradualreformsundertakenoveraseriesofyears,thegovernmentofEgyptmanagedtosignificantlyreducethefiscalburdenfromenergysubsidiesandimproveenergysectorfinancialviability,consumerwelfare,andeco-nomicproductivity,whileattractingsignificantprivateinvestmentincleaneralterna-tives.TheWorldBank’sImplementationCompletionandResults(ICR)reportfortheEgyptDPFseriesnotedthefollowingkeyfeaturesofthecountry’senergysubsidyreformexperience:■■Stronggovernmentownershipofthereformprogramandclosecross-sectoral­coordination:Thegovernmentinitiatedandledthereforms,mobilizedtherequiredresources,andremainedcommittedthroughoutthereforms,takingstrongactionwhenrequiredbasedonthoroughanalyticalwork—forexample,surroundingthecurrencydevaluationandCOVID-19.Italsoorganizedaninstrumentalgroupforcoordinationandknowledgesharingbetweenkeyagen-cies,tokeepthereformeffortmovingforwardsmoothlyandaddressingissues.■■Transparentandtimelygovernmentcommunicationwiththegeneralpublicregardingthereformprogramandassociatedsupportfrominternationaldonors:Thegovernmentproactivelyengagedwiththepublicandkeystakeholderstoraiseawarenessofthefinancialandopportunitycostsofenergysubsidiesandsupportedevidence-basedpublicdebate.Throughcarefullydesignedmes-sagingandinnovativecommunicationapproaches,ithassupportedbehaviorchangeandfacilitatedacceptanceoftheenergypricereforms.■■Strengthenedsocialassistancemeasuresanddeliverymechanismshelped­mitigateimpactsonvulnerablehouseholds:Thegovernmentadoptedsocialprotectionmeasuresthroughoutthereformprocess,redirectingfiscalsavingsfromtheenergysubsidyreformtostrengthensocialprograms.72RealityCheckThegovernmentexpandedthefoodsubsidysystemwhilealsodoublingthemaximumbenefitundertheSocialSolidarityPension,thecountry’slargestsocialsafetyprogram.Thesemeasuresarecreditedwithpreventingfurtherdeteriorationofhouseholdwelfareamidchallengingcircumstances.■■Broaderenergysectorpolicywasakeyenablerofimprovedoutcomes:Theenergysubsidyreformswerepartofamuchbroadereffortbythegovernmenttoimprovetheenergysector’spolicyframeworkandits­operational,technical,andfinancialperformance.Theseinclude:❏❏Thenewsectordesignstipulatedbyissuanceofthe2015ElectricityLawand2017GasLaw❏❏Fuelswitchingfromhighlysubsidizedandinefficientsources(forexample,fromheavyfueloiltogasinpowergeneration,fromheavyfueloilanddieseltogasinindustryandtransport,andfromLPGtogasinhouseholds)❏❏Resolvingofcross-sectoraldebts/receivablesbetweenpetroleumandelec-tricity,andbetweenrailways,aviation,andpetroleum,whichhelpedimprovetheenergysector’sfiscalsituationandencourageddemandcontrolinindebtedsectors❏❏Improvedenergysupplyefficiency❏❏Improvedbillingsystemsviaprepaidmetersforelectricityandgasanddigi-taltrackingoffueltransport❏❏BettercontrolofunauthorizedsalesofLPGandliquidfuels.73DecarbonizationPolicyImplementation:IllustrativeCaseStudiesGettingthePricesRight:Economy-widePoliciestoPromoteStructuralChange:EuropeanUnionCaseStudy7.EuropeanUnion:CarbonBorderAdjustmentMechanismContributors:AlexandruCosminButeicăandElizaBarneaContextAbordercarbonadjustmentmechanism(BCA)isapolicyinstrumentwherebyagov-ernmentimposesacarbonpriceoncertaincarbon-intensivegoodsthatareimportedfromotherjurisdictionsattheborder.Themainobjectiveistoadjustthecarbonpriceleviedonthoseimportedgoodswiththecarbonpricechargedondomesticallypro-ducedgoods,forexamplethroughacarbontaxoranETScoveringdomesticindustry.Inthissense,aBCAisanextensionofadirectcarbonpricinginstrumentlikeacarbontaxoranETStogoodsimportedfromotherjurisdictionstoprovidealevelplayingfieldandpreventcarbonleakage.WiththeintroductionoftheEuropeanGreenDealandtheadoptionofa2050net-zerotarget,theEUhasincreaseditseffortstoleveltheplayingfieldofclimateambitionaroundtheworldandminimizetheriskofcarbonleakage.OneelementoftheEUstrategyistheCarbonBorderAdjustmentMechanism(CBAM),whichwasadoptedinApril2023,withimplementationstartinginastagedapproachfromOctober1,2023.PolicyInitsinitialphase,theCBAMwillsetapriceoncarbon-intensivegoodsimportedbytheEUinfivesectors:cement,ironandsteel,aluminum,fertilizers,electricity,andhydrogen.ThemechanismwillfunctionasacarbonpriceleviedonimportstotheEUthathaveindustrialemissions,withobligationsforimporterstosubmitCBAMcertifi-catespricedinlinewithEUETSallowancesfrom2026.TheCBAMincludesprovisionforimportstotheEUtobegrantedreducedchargesiftheyhavealreadypaidadirectcarbonpriceintheircountryoforigin.ForcountriesthatexporttotheEU,thiscreatesanincentivetointroduceacarbonpricetocapturetherevenuesdomestically.ThisargumentisstrongerforcountriesthathaveclosetradetieswithEurope.Forinstance,Türkiye’sMediumTermProgramme(2023–25)explic-itlyconnectsitsplansforintroducinganationalETSinTürkiyetotheEUCBAM.TheadoptedregulationenvisagesthatCBAMshouldonlycoverdirectemissionsproducedduringthemanufacturingprocessoftheincludedgoods.Tomaintainadministrativesimplicity,indirectemissions,suchasthoseresultingfromelectricity74RealityCheckconsumptionformanufacturing,heating,orcooling,willnotformthebasisoftheCBAMcharge.TheCBAMcouldbeexpandedinthefuturetoincorporateindirectemissionsfrompurchasedenergyandtheCommissionhastheoptiontoestablishcal-culationmethodsandsystemboundariesforembeddedemissionsatalaterpointthroughdelegatedacts(EuropeanParliamentaryResearchService2023).Thephase-inoftheCBAMwillbeaccompaniedbythegradualreductionoffreeallocationsundertheEUETSbetween2026and2034.In2034,sectorscoveredbytheCBAMwillstopreceivingfreeallocations.Thisphasedimplementationwillallowpro-ducers,importers,andtradersinEUmemberstatestoadjusttothenewregulation.ResultsandImpactsThepolicyhasyettoenterintoforce.InDecember2022,theCouncilandtheEuropeanParliamentreachedapoliticalagreementontheimplementationofthemechanismandinApril2023theCounciloftheEUadoptedtheregulation,whichissettoenteratran-sitionalphaseonOctober1,2023.TheCBAMproposalislikelytoaffectEUindustryinvariousways.EUmanufactur-ersofthefiveproductcategoriescouldseeincreasedoutputandFDIinflowsasthird-countryimportsbecomelesscompetitiveunderCBAM,whilephasingoutfreeallowancesundertheEUETSmaydecreaseexports.EUdownstreamproducersusingthesecategoriesasinputsintheirsupplychainsmayfacehighercostsandreducedcompetitiveness,possiblypromptingthemtoseeklesscarbon-intensivesupplierstoavoidfinancialadjustments.Nevertheless,theEuropeanParliamentexpectstheCBAMtoincentivizethird-partyproducerstoimplementmoreefficientprocesses,whilethephaseoutoffreeallocationsisexpectedtoincreasetheambitionofEUproducerstodecarbonize.TheEuropeanParliamentaryResearchServiceestimatedin2023thattheCBAMwouldreducecarbonleakageby29­percentby2030,withlimitednegativeimpactonGDP.LMICswithmanufacturingsectorexportstotheEUwouldmostlikelybeaffectedbyrisingimportcostsandincreasingpricesonintermediateinputs.Thiscouldleadtoadeclineinoutputandemployment,whichisexpectedtobeverysmallatthemacro-economiclevelbutcouldbesignificantforthemostexposedandcarbon-intensivesec-tors(suchassteelorchemistry)andinthelocationsinwhichtheseindustriesareconcentrated.WhiletheCBAMwouldhaveanimportantroleincounteringcarbonleakageandfosteringcompetitiveness,academicresearchshowsthattheimpactonglobalemissionswillbelimited(FischerandFox2012).75DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:JapanTechnologySupportPoliciesCaseStudy8.IndustrialEnergyEfficiencyinJapanContributors:GraceHenryandThomasKerrDecarbonizingtheindustrialsector(steel,cement,chemicals,aluminum,andothermanufacturing)isvitalforachievingnetzeroemissions.In2019,theindustrialsectoraccountedfor38­percentofglobalfinalenergyuseand26­percentofglobalGHG­emissions(IEA2021a).Todate,therehasbeenlimitedprogressinreducingemissionsfromthesector,whichisconsideredhardtoabateduetothecostandcomplexityofdeliveringdecarbonizedhigh-temperatureprocessheatandcapturingprocessemis-sions.Fossilfuelsstillaccountfor68­percentofthesector’senergymix,andtherehasbeenlimitedadoptionoflowcarbontechnologiessuchasgreenhydrogenandcarboncaptureandsequestration.Mostindustrialdecarbonizationprogresshasbeenmadethroughenergyefficiencymeasuressuchaswasteheatrecovery,combinedheatandpower,andprocessoptimization.Intheyearsahead,thedemandforindustrialgoodsisprojectedtorise,largelydrivenbypopulationgrowthandurbandevelopment(BoccaandAshraf2022).Asaresult,industrialemissionscreateapressingchallengetoglobalwarming,creatingapressingchallengeforgovernmentstodevelopandimple-mentpoliciesthatcansupportandadvanceindustrialdecarbonization.Japan,theworld’sthird-largestproducerofindustrialgoods,isimplementingplansandpoliciesforindustrialdecarbonization.In2019,industryadded$1.46tril-liontoJapan’seconomy(WorldBank2022e)aswellas189tCO2e(IEA2020c).Thecountryhasmadeprogressinreducingtheseemissionsby28­percentsince1990,largelythroughenergyefficiencyimprovements,whichledtoan18­percentdecreaseinfinalenergy­consumptionbetween2000and2019.Furtherreductionsareinthepipeline:asthe­governmenthasannounceditsaimtoachievenetzeroemissionsby2050andreleasedthe“GreenGrowthStrategythroughAchievingCarbonNeutralityin2050”(IEA2021c).ContextDuetoitsadvancedeconomicdevelopmentandlimitednaturalresourceendowments,Japanhashadtodevelopinnovativedecarbonizationstrategies.Withtheworld’sthird-largestGDPandthefifth-largestvolumeofGHGemissions(ClimateWatch2022;WorldBank2022e),itisadenselypopulatedislandnationwithminimaldomesticreservesofconventionalenergysources,suchascoal,oil,andgas(Chengetal.2022).Ithasnointernationalgaspipelinesorelectricityconnectionsandhasbeentroubledby76RealityChecknaturaldisastersaffectingdomesticenergysupplies,creatingchallengestobothenergysecurityandsufficiency.ThishasledJapan’sMinistryofEconomy,TradeandIndustrytocreateinnovativeenergyefficiencypoliciesthathaveprovidedemissionsreductioncobenefitstotheindustrialsector.PolicyThecountry’sdomesticenergychallengeshavecatalyzedwidespreadenergyefficiencymeasures.The1979ActontheRationalUseofEnergylaidthegroundworkforJapantobecomeoneoftheworld’smostenergy-efficienteconomies.Implementedinresponsetothe1979energycrisisandoilshock,theacthasundergonesevenmajorrevisions,allowingittoexpandandimproveovertime(figure3.8;IEA2017).Itsetsenergyperformancestandardsandenergyreportingandmanagementrequirementsforfactoriesandworkplacesthatconsumemorethan1,500kilolitersofoilequivalentenergyeachyear(IEA2021c;LSE2022),representingapproximately70­percentofenergyconsumptionacrosstheindustrialsector.Theactalsosetsoutenergyefficiencybenchmarkingindicators,whichcompaniesareobligedtosubmitprogressreportson,andanonbinding1­percentreductiontarget.In2018,thegovernmentboostedsupportthroughanewtaxsystemthatallowsenergy-efficientcompaniestobenefitfromaccel-erateddepreciationoftheirenergyefficiencyinvestments.ResultsandImpactsJapanhasachievedoneoftheworld’shighestenergyefficiencylevels,butthepaceofimprovementisslowing.TheActontheRationalUseofEnergyandothergovernmentincentiveshavehelpedsomeindustrialsubsectorsstimulateenergyefficiencyimprove-mentsofmorethan1­percentperyear.However,acombinationofamodestFIGURE3.8TimelineofJapan’s1979ActontheRationalUseofEnergySource:AdaptedfromInternationalEnergyAgency2017.Note:Thefigureonlyincludestheupdatesthataremostrelevanttoindustrialenergyconsumption.GWh=gigawatthours;kL=kiloliter.1993Revision1:Introductionofmandatoryperiodicreporting2002Revision3:Expandedcoverageandobligationsfortype1and2factories2008Revision5:Obligationsextendedtowholeenterprisesandstrengthenedmeasuresforhousesandbuildings2018Revision7:Allowanceforjointenergyefficiencyimprovementsamongdifferentbusinessentities1979Enactmentoftheact.Targetedat”type1designatedEnergy-managementfactories”consumption>3,000kLcrudeoilperyearor>12GWhelectricityperyear1998Revision2:Extensionto”Type2designatedenergy-managementfactories”consumption>1,500kLcrudeoilperyearor>6GWhelectricityperyear2005Revision4:Electricityandheatconsumptioncountedtogethertoallowfortheoverallmanagementofenergysources2013Revision6:Newevaluationandratingsystemforthereductionofpeakelectricitydemand77DecarbonizationPolicyImplementation:IllustrativeCaseStudiesbenchmarkingtargetandvoluntarycompliancehasstalledrecentprogress.In2019,nomorethan38­percentofcompaniesinanysingleindustrialsubsectorwerereachingthegovernment’senergyefficiencybenchmarks(Ezawa2021).Improvementsinsteelpro-ductionhavenotablyplateaued(figure3.9),withonly16­percentofelectricfurnacesteelproducersmeetingthebenchmarks.Theenergyintensitybenchmarksarecompa-rabletotheEU’sETS,indicatingthatincreasedenforcementandcomplianceofexist-ingpoliciescouldbringaboutfurtherimprovements(IEA2021c).Energyefficiencymeasureshavehelpedcutenergyintensity(figure3.10),butfur-thermeasuresareneededfordeepdecarbonization.Japan’sindustrialemissionshavedecreasedby28­percentsince1990,despitethecarbonintensityofitsindustrialenergyconsumptiondecreasingbyonly4­percent.AlthoughenergyefficiencymeasureshaveFIGURE3.9EnergyIntensityIndexinJapan,byIndustrialSubsector,1973–2018Source:Ezawa2021.1201008060402001973198019861988199019921994199619982000200220042006200820102012201420162018ManufacturingSteelChemicalsCeramicsPaperMachineryFIGURE3.10TotalFinalConsumptioninJapaneseIndustry,bySource,2000–18Source:InternationalEnergyAgency2021c.Note:Includesnonenergyconsumption.160Milliontonsoilequivalent(Mtoe)1401201008060402020002002200420062008201020122014201620180OilNaturalgasCoalBioenergyandwasteElectricityHeat78RealityCheckhelpedJapandecreaseindustrialenergyconsumptionby18­percentsince2000,thecountrywillneedtogobeyondenergyefficiencymeasurestotransitiontocleanerfuels,decarbonizingpower-sectoremissionsfuels,andupscalingcarboncaptureandsequestrationprojects.Itismakingprogressintheseareasthroughtargetedresearchanddevelopmentspending,theworld’sfirstbasichydrogenstrategy,andgreenpublicprocurementinitiatives.TheseinitiativesbenefitfromJapan’sstronginstitutionalarrangements,includingtheNewEnergyandIndustrialTechnologyDevelopmentOrganization,whichhelpsoptimizetheresultsofresearchanddevelopmentspendingbyfosteringcollaborationbetweentheprivatesector,academia,andgovernment.KeyTakeawaysEnergyefficiencymeasurescanhelpdecreaseenergyconsumption,operatingcosts,andemissions.AlthoughJapan’senergy-savinginitiativeswereoriginallytargetedtowardenergysecuritychallenges,theyhavealsoprovidedcobenefitsinemissionreductionsandresourceproductivity.Energyefficiencypoliciesmayneedtoadaptastechnologiesevolveandambitionsincrease.Japan’sActontheRationalUseofEnergyhashadsevenmajorrevisions,expandingitscoverageandimprovingthemethodologystandardsused.Despitetheserevisions,energyefficiencyimprovementsinsomeindustrialsubsectorshavedeclinedovertime.Thismaybetheresultofdiminishingmarginalreturns,highlightingtheneedforadditionalsupportorcompliancemeasuresonceresultsbegintoplateau.Deepdecarbonizationrequireswidepolicysupport.Japan’sexamplehasshownthatnosinglepolicyisenoughonitsowntoachievecompleteindustrialdecarbonization.Rather,arangeofpolicymeasuresisneededtosupportthesupplyoflow-carbontech-nologiesandthedemandforlow-carbonindustrialgoods.LookingtotheFutureImprovementsinindustrialenergyefficiencycouldhelpaddressglobalenergysecurityconcerns.TheRussianinvasionofUkrainehassparkedaglobalenergycrisis(IEA2022f).Decreasingenergyconsumptionintheindustrialsectorcouldhelpdecreasetheseverityofthiscrisisandprovidelong-termbenefitsthroughcontinuedemissionssavings.Internationalcollaborationcouldhelpaccelerateindustrialdecarbonization.Globalcooperationandbestpracticesharingcoulddrasticallyreducethetimerequiredtoimplementdecarbonizedindustrialsupplychains.Japanhasdemonstratedinterna-tionalleadershipinlow-carboncooperation,throughitsinternationalresearchanddevelopmentadvancements,contributionstomultilateralclimatefunds,andinterna-tionalpartnerships,suchastheJointCreditingMechanism.Addressingtheenergyandclimatecriseswillrequirefurtherinternationalcollaboration.79DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:MexicoCaseStudy9.Climate-SmartSolidWasteManagementinMexicoContributor:SilpaKazaImprovementsinsolidwastemanagementarevitaltolimitingglobalwarming.MunicipalsolidwastecontributestothegenerationofGHGs,mainlymethaneandCO2.Thequantitiesofwastegeneratedgloballyhaveincreasedatanalarmingpaceoverthepastdecadesandareanticipatedtoincreaseby73­percentby2050fromcurrentlevels,morethandoubleestimatedpopulationgrowth(Kaza,Shrikanth,andChaudhary2021).Atthesametime,thestateofwastemanagementcontinuestolaginbothcapac-ityandeffectiveness.Reducingandmanagingmethanefromwastecanbeawin-winforclimateandmunicipalities.Itisestimatedthatupto20­percentofhuman-inducedmethaneemis-sionsstemfromtheanaerobicarisingfromtheanaerobicdecompositionoforganicwaste(CCACSecretariat2021).Itispossibletoavoidthereleaseoftheseemissionsthroughimprovedmanagementorcaptureofmethane,whichcanthenbeusedtopro-ducethermalenergy,gas,orelectricity.Thiscanprovideenvironmentalandeconomiccobenefits,particularlywhenusedtoincreaseenergyaccessordisplacemorepollutingformsofenergy,suchascoal.MexicohasbeenaleaderinLatinAmericabydemonstratinghowlandfillgas(LFG)managementsystemscanimproveenvironmentalandcommunityoutcomes.Between2004and2020,anLFGcollectionandpowerplantinthecityofMonterrey,NuevoLeón,reducedCO2emissionsby5.7MtCO2eanddeliveredmillionsofdollarsinmunicipalitysavingsbyprovidinglow-costelectricitytopowerthemetrosystemandpubliclighting,withrevenuessupportinga“proofofconcept”solarenergysupplytopublicschoolsinalow-incomecommunityintheMonterreymetropolitanarea(SIMEPRODE2020).Theproject,supportedbytheGlobalEnvironmentFacility(GEF)andtheWorldBank,hasservedasapilottosystematicallybuildcapacity,testoperatingmodels,andunderstandregulatoryneedsforwidespreadreplication.ContextLikemanycountries,Mexicohasfacedchallengeswithitssolidwastemanagementpractices.In2001,itonlycollected77­percentofsolidwasteanddisposedoflessthan35­percentsanitarily(WorldBank2001).Mostofthecollectedwasteendedupinopendumps,contributingtoalmostone-quarterofthecountry’stotalmethaneemissionsandglobalwarming,contaminatingaquifersandsurfacewaters,providingabreedinggroundfordiseasevectors,andexacerbatingurbanflooding.80RealityCheckPopulationgrowth,industrialization,urbanization,andeconomicgrowthhaveincreasedthegenerationandconcentrationofsolidwaste,particularlyinmetropolitanareas(figure3.11).ThishasputastrainonMexico’swastemanagementsystems.Withoutanyformalwasteminimizationorrecyclingprograms,additionalchallengeswerecreatedforcollecting,transporting,disposingof,andmanagingsolidwaste(Castrejón-Godínezetal.2015).Municipalities,whichwereresponsibleforaddressingthesechallengesanddeliveringadequatewastemanagementservices,lackedthetech-nical,institutional,andfinancialresourcestomakesuchimprovements.Intheearly2000s,Monterreywasfacingrisingelectricitypricesandgrowingdemandforpublicservices.Mexicofacedacountrywideelectricityshortage,prompt-ingregulatorychangesinsupportofpublic-privatepartnerships(PPPs).Highelectric-itypricesincreasedtheeconomicoutlookforprivatesectorinvestmentsinalternativeenergysources(ELLA2011).Atthetime,theonlywaytoemployindependentREwasbyestablishingapartnershipbetweenelectricityproducersandconsumersatalowercostthanthenationalgrid(WorldBank2007).Consumerswithalargeandstabledemandforelectricitywereidealcustomersinsucharrangements.Together,thesefac-torscreatedidealconditionsforanintegratedsolutiontoMonterrey’swastemanage-ment,electricity,andpublicserviceprovisions.PolicyUnderitsNationalDevelopmentPlan1995–2000,thegovernmentdevelopedastrategytoimproveandstrengthensolidwastemanagementatmunicipalandstatelevelsbyFIGURE3.11MexicoMunicipalSolidWasteTrends,1997–2012Source:Castrejón-Godínezetal.2015.Note:Asmallcityisonewithfewerthan100,000people;amiddlecityhas100,000to500,000people.kg=kilogram.10152025Totalgeneration(milliontons)354045520001997199819992001200320052007200920112002200420062008201020120.750.800.85Percapitageneration(kg/day)0.951.001.050.900MetropolitanzonesMiddlecitiesRuralandsemiurbanlocalitiesSmallcitiesPercapitageneration81DecarbonizationPolicyImplementation:IllustrativeCaseStudiesstrengtheningregulationsandinstitutions,expandingserviceprovision,andmanagingGHGemissions.In1997,MexicodevelopeditsFirstNationalCommunicationandClimateChangeActionPlan,prioritizingthepreventionofuncontrolledLFGreleasefromlandfills.In2000,itapprovedtheKyotoProtocol,makinganationalcommitmenttopromoteclimatemitigation.InternationalsupporthelpeddelivertheadditionalresourcesneededforLatinAmerica’sfirstwaste-to-energylandfillproject.Inthe1990s,MexicohadnoLFGmanagementprojectsandlackedtheinstitutionalcapacityandtechnicalknowl-edgetoimplementthem.TheGEF(2001)providedtheinitialresourcestostarttheMonterreyproject(2001–06),andtheWorldBankbuiltonthisuntil2017.Thesupportaimedto:■■Introducecost-effective,demonstratedtechnologytocollectanduseLFG■■DevelopmunicipalcapacityforLFGcollectionanduse■■DemonstrateaninstitutionalandmanagementframeworkforLFGcaptureanduseatanexistingfacilityinMexico■■DesignareplicationstrategyforcomparablecitiesinMexicoanddisseminatelessonsfromtheMexicanexperiencetootherinterestedpartiesregionallyAstrategicPPPwascreatedtoalignincentives,withthepublicsectorpartnerman-agingthelandfillandreceivinglower-costelectricityfromtheplantoperator,SIMEPRODE.Thelatterwasanautonomous,state-controlledinstitution,whichenabledfullcoverageofthemetropolitanareaandavoidedtheneedtoengagewithindividualentities.SIMEPRODEhadsix-yearstate-administrationtermsinsteadofthree-yearmunicipalterms,allowingforcontinuity,institutionalmemory,andbettercoordinationbetweenpublicentities(WorldBank2014a).Participationininternationalcarbonmarketshelpedprovideadditionalrevenuestreams.MexicohadratifiedtheKyotoProtocolinSeptember2000,makingemissionsreductionprojects—includingMonterrey’swaste-to-energylandfillinitiative—eligibleforfundingthroughtheCleanDevelopmentMechanism(CDM).In2009,thecountrydevelopedguidanceforquantifying,reporting,andverifyingGHGemissionsreduc-tionsassociatedwithLFGundertheorganizationofClimateActionReserve,aNorthAmericancarbonoffsetregistry.Thisestablishedstandardsforthewastemanagementsectorandstrengthenedparticipationincarbonmarkets.ResultsandImpactsTheMonterreywaste-to-energyprojecthashadwidespreadcommunitybenefits.Afterthreeyearsofoperating,theplanthaddelivered181GWhofelectricityandprevented700ktCO2einmethaneemissions.Approximately730,000citizensinsevenmunicipali-tiesbenefitedfromreducedmethaneemissionsandacleanandcheapersourceofelec-tricity.WiththeextendedWorldBankproject,SIMEPRODEandBioeléctricaexpanded82RealityCheckcapacityto17megawatts(MW),reducingemissionsbyanother5.7MtCO2ein2004–20,ofwhich262,000tonswasmethane.Theprojectwasanearlyexampleofacirculareconomysolutionthatusedwastefromurbanareastogenerateclean,affordableelectricityintheMonterreyMetropolitanAreaatacostthatwas10to20­percentlowerthannationalutilityrates.Thispoweredhalfofthecity’spubliclighting,allofthelocalmetrosystem(Metrorrey),andpublicinstitutionssuchastheWaterandSewerageServiceDepartment,theNationalSystemforIntegralFamilyDevelopment,SistemadeDesarrolloIntegraldelaFamiliaorDIF,andtheNuevoLeónstategovernment.By2020,themunicipalityofMonterreyhadsaved$20millionpesosinpubliclighting,themunicipalitiesofSanPedroandApodacahadsaved$11.5millionpesos,andMetrorreyhadsaved$35millionpesos,equivalentto32­percentofitsprofits.Theprojectalsogeneratedcarboncredits,providingadditionalbenefits.TheprojectreceivedCDMfundinginmultiplephasesfor1MtCO2ein2007,and835ktCO2ein2011,demonstratinghowcarboncreditscanmakeprojectsprofitableandprovidingamodelforreplicationacrossMexicoandLatinAmerica(SIMEPRODE2020).Between2007and2012,theCDMhelpedreduceemissionsfromwaste-to-energylandfillsbymorethan19MtCO2eacrossLatinAmerica.KeyTakeawaysThegovernmentofMexico,CDMstakeholders,andtheprivatesectorallhadenviron-mentalandfinancialincentivestoimprovewastemanagement,reduceemissions,andprovideelectricity.Thisalignmentofincentivesallowedthemtosuccessfullyimple-mentanintegratedwastemanagementsolutionandsustainitformanyyears.BlendingfinancebetweenGEF,WorldBank,theprivatesector,andcarbonmarketsenabledtheadvancementofclimategoals,butearly-movingprojectsneedadditionalassistancetoprovetheirconcept.Asthefirstwaste-to-energyprojectofitskindinLatinAmerica,externalfinancing,technicalexpertise,andinstitutionalsupportfromGEFandtheWorldBankwerecrucialtotheproject’ssuccess.Toaddressuncertaintyintheinitialgasestimations,theprojectconductedfieldmeasurementsandusedcon-servativemodels.TheMonterreyprojectandWorldBanksupporthavehelpedreduceinvestmentrisksanduncertaintiesinsubsequentprojects.Althoughimprovingsolidwastemanagementcanbeanexpensiveundertakingformunicipalgovernments,integratedsolutionshavetheirbenefitsandareapublicgood.TheMonterreyprojecthasdemonstratedthatwastecangeneratevalueintheformofelectricityandcarboncredits.Butthiswasonlymadepossiblewithpoliticalwill,localcapacitybuilding,asupportiveregulatoryenvironment,verificationoftheimpactoftheLFGgenerated,andothernecessaryaspectsthathelpedbuildthefoundationforanintegratedwastemanagementsystemtothrive.83DecarbonizationPolicyImplementation:IllustrativeCaseStudiesLookingtotheFutureFurtherworkandanintegratedapproachareneededtoimproveglobalsolidwasteman-agement.Atcurrentrates,globalimprovementsinwastemanagementpracticesarenotenoughtooffsettheadverseimpactsofpoorlymanagedwaste,andinvestmentsneedtoextendbeyondinfrastructure(UNEP2022).Inabusiness-as-usual(BAU)scenario,thegapbetweenwastegeneratedandwastethatismanagedproperlywillwidenfurther.Managingsolidwastestreamsisbecomingmorecomplex.Wastefromelectricalandelectronicequipmentcontainingnewandcomplexhazardoussubstancespresentsthefastest-growingchallengeinbothhigh-incomecountriesandLMICs.Minimizingwasteproductionanddivertingwasteforproductiveusearekey.Advancingcirculareconomyinitiativesthataimtoreduce,reuse,andrecyclewastestreamswillbevitalinreducingtheeconomic,social,andenvironmentalimpactsoftherisingvolumesofglobalsolidwaste.84RealityCheckFacilitating,Enabling,andTriggeringSectoralTransitions:BrazilCaseStudy10.ReducingDeforestationinBrazilContributor:DijiChandrasekharanBehrContextBrazilisanupper-middle-incomecountrythataspirestohigh-incomestatusandjoiningtheOrganisationforEconomicCo-operationandDevelopment.In2021,approximately87­percentofits214millionpopulationlivedinurbanareas(WorldBank2018b).Itisalsohometooneoftheworld’smostuniqueandpreciousecosystems,theAmazonbiome,asignificantglobalcarbonsinkthatinfluencesregionalprecipitationpatterns.Thecountry’scurrentexportbasketisheavilydominatedbyagriculturalcommoditiessuchassoyabeans(10­percent)andnonrenewableresourcessuchasironore(10­percent)andpetroleumoils(9­percent).8Thispresentschallenges,bothintermsoftherateofgrowthandimplicationsforthesustainablemanagementofthecountry’snaturalcapitalandinclusivedevelopmentinrurallandscapes.AsBrazilaimstoachievegrowthanddevelopment,ithastheopportunitytodosoinaclimate-smartmanner.Itsgrossemissionsaredominatedbyagricultureandlandusechange,especiallyfromdeforestation,witharelativelylowcarbonintensityintherestoftheeconomy.Oneofthekeyissuesthatitneedstotackle,however,iscurbingdeforestation.Alow-carbondevelopmentpathsupportsthecountry’sneedtoreduceitsexposuretoclimatechangerisks.Measurestocurbdeforestationandmaintainnativevegetationwouldreducetheagriculture,energy,andothersectors’exposuretotheimpactsofdrought,soilerosion,andheatwaves,giventheecosystemservicespro-videdbytheAmazonandCerradobiomes.TacklingdeforestationinBrazilrequiresaddressingthekeydriversofdeforestation,includingextensivecattleranching,landgrabbing,andillegallogging.ConvertinglandforcropproductionisakeydriverintheCerrado.Estimatesshowthatabout70­percentofdeforestedlandintheAmazonisusedforcattleranching,theresultofweaklawenforcement,poorlandgovernance,and­macroeconomicdrivers,suchascommoditypricesanddemand,andrealexchangerates.Althoughenvironmentalpoliciesaretheresponsibilityofstateandfederal­governments,municipalitiesmustalsobeinvolvedinaddressingthekeydriversofdeforestationthroughtheirlocalpoliciesandcaninflu-encetheextentoflandgrabbingorillegallogging.Brazilhassuccessfullycurbeddeforestationinthepast.From2004to2012,duringthecommodityboom,thecountry’senvironmentalpoliciessucceededincurbing85DecarbonizationPolicyImplementation:IllustrativeCaseStudiesdeforestationratesby84­percent(Fearnside2017).ManyresearcherscreditthePlanforthePreventionandControlofDeforestationintheLegalAmazon(PPCDAm)andenforcementoftheForestCodeforthereductionindeforestation.PolicyLaunchedin2004andoverseenbytheEnvironmentMinistry,thePPCDAmpromoteddrasticconservationreforminBrazil.TheobjectiveofthisplanwastomitigatethetrendofincreasingdeforestationintheLegalAmazoninacoherent,integrated,andeffectivemanner.ThePPCDAmhaddistinctphases,emphasizingaspectsofitsthreeaxes:landplanning,monitoringandcontrol,andpromotionofsustainablelanduseactivities(WestandFearnside2021).Akeylanduseplanningactiontakeninitsthirdphaseof(2012–15)wasrevisingtheForestCodein2012.Robustmonitoringandcontrolarenecessarytoreversetheweaklawenforcementandpoorlandgovernanceunderlyingthedriversofdeforestation.WhiletheProjecttoCalculateDeforestationintheAmazon(PRODES)hasenabledtheuseofsatellitedatatomonitordeforestationintheBrazilianAmazonsince1988,theDETERsatellitesystem,launchedaspartofthePPCDAm,changedthewaymonitoringwasdone.DevelopedbytheNationalInstituteforSpaceResearch,DETERisasatellite-basedsystemthatcapturesandprocessesgeoreferencedimageryonforestcoverin15-dayintervalsandusesthemtoidentifydeforestationhotspotsandareasinneedofimmediateattention.ItthenalertstheBrazilianInstitutefortheEnvironmentandRenewableNaturalResources,whichoperatesasthenationalenvironmentalpoliceandlawenforcementauthority,andstateenvironmentalagenciesondeforestation,allowingfortargetedon-the-groundforestlawenforcement,inspection,andcollectionofenvironmentalfines.PRODESprovidedannualdeforestationratestothepublicanddecision-makersandinformedmeasuressuchastheMunicipalityPriorityList,whichwasconsideredaneffectivemechanismfortacklingdeforestation.Establishedin2007,theMunicipalPriorityListsinglesoutmunic-ipalitieswithintensedeforestationactivityfordifferentialaction,includingrigorousenvi-ronmentalmonitoringandlawenforcement,stricterlicensingandgeoreferencingrequirementsforruralestablishments,changesintheapprovalofsubsidizedcreditcon-tracts,andarefusalbymeatpackingplantstobuycattlefromembargoedfarms.The2012ForestCode,whichgovernstheuseandprotectionofprivatelandsinBrazil,hastwotypesoflegallybindingprotectioninstrumentsforconservationonpri-vatelands.Permanentpreservationareas(PPAs)areareasofvegetationthatarecriticaltothepreservationofkeyecosystemfunctions,andlegalforestreserves(LFRs)area­percentageoflandareathathastobemaintainedwithnativevegetationtoconservebiodiversity,whereclear-cuttingisprohibitedandsustainableforestmanagementisallowed.TheForestCodealsocreatedanewnationaldatabase,theRuralEnvironmentalRegistry(CARinPortuguese),anonlinepublicregistrywhereeverylandownermust86RealityCheckregistertheirruralproperty,includinggeoreferenceddataonallPPAsandLFRs.RegisteringtheirpropertyontheCARalsogiveslandownersaccesstotheirrightsundertheForestCode,includingruralcreditfromfinancialinstitutions(ChiavariandLemeLopes2015).ResultsandImpactsEconometricresearchconductedontheimpactofDETERondeforestationrevealspositiveresults.Between2001–03and2015,forestlossdecreasedby90­percentinindigenouslands,64­percentinprotectedareas,70­percentinruralsettlements,and78percentinfederallands.Reduceddeforestationalsopreservedecosystemservices.Studiesfindthatanincreaseinthenumberoffinesappliedinagivenyearsignificantlyreducedforestclearingsthefollowingyear,whilecroppriceindicesalsoimpact­deforestation.Whencontrollingforpriceeffects,municipality-specificfixedcharacter-istics,andtimetrends,theresultsshowthatBrazilianenvironmentalpolicieshadasizeabledirectimpactondeforestationlevelsandhelpedcurbforestclearings(Mullanetal.2022).Counterfactualdataalsorevealthatsignificantareasofdeforestationwereavoidedduetothepresenceofthecombinationofpolicies(Assunçãoa,Gandoura,andRochad2019).Forexample,theMunicipalityPriorityListpolicy,whileeffective,wasnotenoughtocurbdeforestationonitsown.Rather,itdependedonthepresenceofotherpolicies.Itseffectivenesswasenhancedwhencombinedwitheffortstodesignateclearlandtitling(includingprotectedareas);voluntarysupplychaincommitments;sectoralagreementsinvolvingfederalandstategovernments,companies,banks,andcivilsocietyorganizations,suchastheSoyMoratorium;andthePlanforAcceleratedGrowth.Butwithouttheseotherpolicies,theMunicipalityPriorityListdidnotsignifi-cantlyreducedeforestation.SpatialmonitoringsystemssuchasDETERandPRODESwerecrucial,astheystrengthenedtheimplementationofthesedifferentpoliciesandcontributedtoreducingdeforestation.TheeffectivenessofthePPCDAmdeclinedovertimeasitsimplementationbudgetwassignificantlyreduced.Costingenvironmentalpoliciesisachallengebecauseofthediverseentitiesinvolvedandthecodingofthebudget.ApreliminaryestimaterevealsthatthekeyagenciesinvolvedinimplementingthePPCDAmandotherenvironmentalpoliciesreceived,attheheightofsupport(2012),anannualamountofapproximately$0.64billion;in2021,theyreceived$0.38billion.Compoundingthefinancialchal-lengesaretechnologicallimitationsassociatedwithimplementingDETER,whichcan-notdetectdeforestationwhenthereissignificantcloudcover.Recentanalysisfoundthatdeforestationwashigherduringperiodsofheavycloudcoverthanothertimes(Sales,Strobl,andElliott2022).Thepoliticaleconomyofdeforestationunderminestheeffectivenessofusingspa-tialdata-basedmonitoringandcontrolefforts,suchasDETER.Farmersforma87DecarbonizationPolicyImplementation:IllustrativeCaseStudiesstrongandpowerfulspecialinterestgroupintheBrazilianAmazonthatstronglyopposesgovernmentmeasuresthatconstrainaccessto“free”landorincreasethecostofagriculture.Analyseshaveshownthelinkagebetweenthepresenceofmunic-ipal-levelfarmermayorsanddeforestation(BragancaandDahis2021).Onestudyfindsthat,between2019and2021,politicalinterference,suchasbudgetcuts,employ-mentfreezes,andobstructingdecision-making,hasweakenedmonitoringandenforcementandcreatedabigdiscrepancybetweenthenumbersofdeforestationalertsandfinescollected(­figure3.12;Werneck,Angelo,andAraújo2022).Atthesametime,thenumberofembargoesandconfiscatedillegalequipment—twokeymeasuresforcontrollingdeforestation—alsodecreasedby70­percentand81­percent,respectively.Associatedwiththeweakeningofmonitoringefforts,mayorswhosup-portdeforestationareenablingillegallandgrabbingandlogging.Just53ofBrazil’s5,570municipalitieswereresponsiblefor66­percentofdeforestationintheAmazonbetween2012and2021.Complementingmonitoringandcontrolwithmappinguntitledpubliclandsandmodernizingthelandregistrationsystemwillalsohelpreducelandgrabbing.Mappinguntitledpubliclandswouldgivethegovernmentspatialdatatofacilitatethedesigna-tionofpubliclandsasprotectedareas,includingsustainableuselandsandindigenousterritories;formthebasisforregularizingprivatelandclaims;andhelpdeterminewhichpubliclandscouldbedesignatedforprivateuse.ModernizingBrazil’slandreg-istration,analysis,andvalidationpracticeswouldbeanimportantcomplementaryaction(Stassartetal.2021).SupporttoacceleratevalidationoftheCARwouldhelpFIGURE3.12DeforestationintheAmazonandIBAMAInfractionNoticesforDeforestation,2003–21Source:BasedondatafromINPE2021.Note:IBAMA(InstitutoBrasileirodoMeioAmbienteedosRecursosNaturaisRenováveis,orBrazilianInstituteoftheEnvironmentandRenewableNaturalResources)isthenationalenvironmentalagency.CARs=RuralEnvironmentalRegistries(Portuguese);km2=squarekilometer.30,00025,00020,00015,00010,0005,0006.69427.7726.75519.01414.2867.6996.15911.65112.9118.8456.4537.4647.0005.3845.9693.4176.4184.5715.8914.7663.9025.8845.3854.7644.2533.66710.85113.23510,000Deforestationarea(km2)NumberofCARs9,0008,0007,0006,0005,0004,0003,0002,0001,00002.5342.62910.1297.5366.9477.8936.2075.01202003–042004–052005–062006–072007–082008–092009–102010–112011–122012–132013–142014–152015–162016–172017–182019–202018–192020–21InfractionnoticesLogging88RealityCheckreinforcethiseffort,enablingtheuseofincentivesandinstrumentsinthenewForestCode,includingthetradingforestcertificates.KeyTakeawaysWhileaddressingthemultiplefactorsthatunderliedeforestationintheLegalAmazoniscomplexandrequiresamultisectoralapproach,thereissignificantvalueinhavingarobustspatialmonitoringandcontrolsystem.Effectiveimplementationofaninstru-mentsuchasDETERcanensuretheeffectiveimplementationofthePPCDAm’slanduseplanning,monitoringandcontrol,andsustainablelanduseaxes.Real-timesatellitemonitoringisaneffectivetoolforimplementingpoliciesthatcancurbdeforestation,especiallywhentwinnedwithenforcingpenaltiesforviolatingthelaw.Itisthereforeimportanttoshieldappropriationsassociatedwithgeneratingsatellitemonitoringdata,dispatchthesedatatoinspectionandlawenforcementagencies,andenforcethelawwithoutpoliticalinterference.Asthecostofproducingandprocessinghigh-­resolutionsatelliteimagerydecreases,linkingtoolslikeDETERandPRODESwithpolicymeasuressuchasthePPCDAmandtheMunicipalityPriorityListwouldbemorewidelyreplicable.ItwouldbeequallyvaluabletohaveapowerfultooltoacceleratetheprocessforvalidatingtheCARandremovingillegalregistrationsintheenvironmentalregistrysystem.AwayforwardwouldbetohaveanintegratedCARdatabaseandsystemthatisaccessibletoboththefederalandstategovernmentsandisbasedonuniqueandcomprehensivedataon,amongotherthings,landtenure,landusechanges,andpublicforests(MoutinhoandAzevedo-Ramos2023).This,alongwithDETER,willreinforcetheimplementationofexistingpoliciesandregulations,suchastherequire-mentforenvironmentalcompliancesystemssuchasCARtoqualifyforpublicloans.89DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:theSahelCaseStudy11.ImprovingWaterAvailabilityandRestoringSoilFertilityintheSahelContributors:RuthHillandSandraBaquiéContextSoilsarethedominantterrestrialsinkforcarbon,containingthreetimesasmuchCO2asplantbiomassabovetheground(Manning2008).TheyalsoactasahostforbothorganicandinorganicCO2—assoilorganicmatterandpedogeniccarbonates,respectively—bysequesteringCO2throughphotosynthesis.Assuch,soilshaveanimportantroletoplayaspassiveagentsinremovingatmosphericCO2,similartotheroleofreedbedsinclean-ingcontaminatedwaters.Agroecosystemscandegradeanddepletesoilorganicmatterlevels,butthiscarbondeficitopensuptheopportunitytostorecarbonthroughnewlandmanagementpractices,andinturn,mitigateclimatechange(Lal2004).ThisisparticularlyimportantintheSahel,whereagricultureisalargesourceofemploymentandeconomicactivity(table3.2).Thesectorrepresents40­percentofGDPforBurkinaFaso,Chad,Mali,Mauritania,andNigercombined,andemploysalmostthree-quartersoftheworkforce.Manyhouseholds—particularlypoorerones—dependonfarmingfortheirlivelihoodsandfoodsecurity.Agricultureismainlysmallholdersubsistencedrylandfarmingandisextremelydependentonhighlyvariableseasonalrainfallduetolimitedirrigation.TABLE3.2SelectedIndicatorsforCountriesintheSahel,2021IncomeclassificationGDPpercapita(current$)Population(millions)Landarea(millionskm2)Agricultureemployment(%oftotalemployment)Internationalpovertyrate(%livingon>$1.90aday)HumanDevelopmentIndex(0–1)BurkinaFasoLIC953.121.50.376.230.80.452ChadLIC666.416.91.375.137.80.398MaliLIC885.220.91.262.417.60.434MauritaniaLMIC1735.84.81.030.86.00.546NigerLIC569.823.31.372.541.80.394Sources:WorldBank2022f;UNDP2020.Note:Populationandagricultureemployment(modeledInternationalLaborOrganizationestimate)showmostrecentavailablevalues(2018).Estimatedpovertyrateisbasedonthemostrecentvalueusing2011purchasingpowerparity.HumanDevelopmentIndexranksarefromthe2020HumanDevelopmentReportwith2019datafrom189countries.Theindexisthegeometricmeanofhealth,education,andincomeindexwithavaluebetween0and1,whereavalueabove0.800=veryhigh,0.700–0.799=high,0.550–0.699=medium,andunder0.550=low.GDP=grossdomesticproduct;km2=squarekilometer;LIC=low-incomecountry;LMIC=lower-middle-incomecounty.90RealityCheckAlthoughstructuraltransformationisrequiredtodiversifyhouseholdincomesources,reducingpovertywillalsorequireimprovedagriculturalproductivity.Duetothedominanceofagricultureasasourceofincomeforruralhouseholdsandtheslowpaceofstructuraltransformation,short-andmedium-termopportunitiesforgrowthandpovertyalleviationareprimarilyintheagriculturalsector.Yet,productivityinagri-cultureremainslow.Forexample,inBurkinaFaso,wheremostfarmersproducefoodcrops,productivityremainslowdespitetherelativelylargeaveragelandandlivestockholdings.Thiscouldbearesultofpooraccesstodomesticandinternationalmarkets,lowratesofcommercialization,creditandliquidityconstraints,frictionsinthelaborandlandmarkets,orinformationgaps(DeJanvry,Sadoulet,andSuri2017;Udry1996).AccesstoproductivesoilandwateraretwoofthemainbarrierstoincreasingandensuringmoreequaldistributionofagriculturalproductivityintheSahel.InBurkinaFaso,97­percentoffarmershaveaccesstoland,andtheaveragesizeoflandholdingsisrelativelylargeandequallydistributed,althoughformalownershipislimited.Thisdistributionandtheunequallevelofagriculturalproductivitysuggestthatthesizeoflandholdingsisnottheprimarydriverofincomeinequality.Instead,factorssuchassoilqualityandaccesstowaterandmarketsaremorecritical.Householdshavelim-itedaccesstoirrigation,sorainfallconditionsarestrongpredictorsofyield,andlowandirregularprecipitationpatternsmeanincomeriskishigh(Hilletal.2019).Climatechangewillexacerbateincomeriskifagriculturalproductivitydoesnotincrease.ThelatestIntergovernmentalPanelonClimateChange(IPCC)reportwarnsthatdroughtfrequency,duration,andintensitywilllikelyincreaseinAfrica,particu-larlyintheSahel(IPCC2022).In2030,researchersestimatethat250millionpeoplecouldliveinanAfricanregionwithhighwaterstress.Inturn,climatechangewillimpactyields.OnestudyestimatesthatsorghumandmaizeyieldsinthewesternSahelwilldeclineby1.5­percentonaverageat1.5°Cglobalwarmingandby4­percentat2°Cglobalwarming(Fayeetal.2018).Althoughirrigation,whichcurrentlyrepresentslessthan1­percentofcultivatedland,couldbeasolution,labormarketfailuresmaylimitadoptioninthemediumrun(Jonesetal.2022),andeventualadoptionmayincreasecompetitionandtensionsoverscarcewater.Indeed,theSahelisoneofthemostwater-stressedregionsintheworld,withanunevenlydistributedwatersupplythatcrossesnationalboundaries.PoliciesPoliciestoimproveagriculturalproductivitydonotalwaysleadtolong-termsustain-ablesolutionstolowproductivity.Forexample,currentpolicymixesoftenincludesignificantspendingonfertilizersubsidies.Theimpactsoffertilizersubsidiesarenotstraightforward.Indeed,althoughsubsidiesareoftentargetedtopoorhouseholds,theusualfertilizermixhasnegativecropreturnsifunsubsidized.Thebenefitsofusingfertilizerarealsocompromisedbyextremeweatherconditions,suchasfloodsor91DecarbonizationPolicyImplementation:IllustrativeCaseStudiesdroughts,makingfertilizerusenonprofitableinbadweatheryears(DerconandChristiaensen2011).Asaresult,fertilizersubsidiescouldamplify,ratherthanreduce,households’incomerisk.Subsidiesalsodonotaddressthelong-runchallengeofpoor-qualitysoilsandcanleadtoemissionsofsignificantamountsofnitrogendioxide.Toaddresslowagriculturalproductivity,intheSahel,farmersuselow-cost,efficienttraditionalpractices,suchasagroforestryandconventionalrainwaterharvestingtechniques,tocapturerainfall,reducerunoff,andrestoresoils,aswellassomeofthefollowinginterventions.■■Stonebunds:aninnovationdevelopedfromtraditionalfarmingpractices.Inthelate1970s,farmersinBurkinaFaso’sYatengaProvincebuiltstonecontourbundsfollowingimaginarylinesofequalelevationtoharvestrainwater.Thesewallsslowwaterrunoffandincreasewaterinfiltrationinthesoil,trappingsedimentsandorganicmatterandallowingsoilstoregenerate.Inthe1980s,thedevelop-mentofasimplecost-effectivetooltomeasurewaterlevelsmadedesigningthecontoursaccessibletothosewithnoorlittleeducation.■■Zaïholes:originatinginthesameregionasstonebunds,farmerstraditionallydugagridofplantingpitstoreclaimseverelydegradedlandthatthewatercouldnotpenetrate.Inthe1980s,farmersperfectedthistechniquebyoptimizingthedepthanddiameteroftheholesandaddingorganicmattertothebottom.Theresultingplantingpitsretainwaterforextendedperiodsandconcentratenutrientswheretheplants’rootsare,allowingcropstosurvivedryspellsandsoilqualitytoimprove.■■Half-moonstructures:similartozaïholes,butlargeandshapedasasemicircle.ThisshapemakesthemappropriateforslopedlandwithseverelydegradedsoilinNiger(AkerandKelsey2021).■■Farmer-managednaturalregeneration:alow-costpracticeforgrowingtreesandshrubsdevelopedinNigerinthe1980s.TonyRinaudo,amemberofaninter-nationalmissionaryorganization,andlocalfarmersdevelopedaneffectivewaytoregenerateselectedtreerootsthatlayunderneathclearedfields,selectingthebeststemsandprotectingthembyremovingcompetingstems.Theresultingtreesproducefodder,fuelwood,orfood,protectneighboringcropsbyreducingwindspeedsandevaporation,andsometimesenhancesoilfertilitybyaddingnitrogeninthesoil(Reij,Tappan,andSmale2009).Informationandtraininghelpexpandtheadoptionoflow-cost,efficient­solutions.Despitetheefficiencyofthezaïholeandstonebundpractices,onlyone-thirdofBurkinaFaso’sfarmerspracticesuchanti-erosionmeasuresontheirland.Evidenceshowsthatknowledgebuildingiscriticaltoincreasingtheadoptionrateoftraditionaltechniques.InBurkinaFaso,theuseofzaïholeshasexpandedthankstotheengagementofafewinfluentialfarmerswhoorganizedmarketdays,createda“zaïschool,”ordevelopedanetworkoftrainedfarmersintheirregion.AstudyinNigerusingarandomizedcontroltrialshowsthatinformationalbarriersareamajorconstrainttoadoptinghalf-moon92RealityChecktechniques,andthattrainingfarmersincreasestheshareofadoptersby90­percentonaverage,withtheadditionofcashtransfersmakingnodifferencetotherateofadoption.Thestudyalsofindsthattrainedfarmerscontinuetotransmitthisknowledgetotheirneighborsuptothreeyearsaftertheinitialtrainingandare50­percentmorelikelytohaveneighborsadoptingthetechniquethanfarmerswhowerenottrained.Thisevi-dencesuggeststhatinformationcampaignsandtrainingarecost-effectivewaystoboosttheadoptionofprofitableandaccessibletechnologies.ResultsandImpactsNotonlydotraditionalagriculturalpracticessignificantlyincreaseagriculturalproduc-tivity,theyalsoimprovesoilquality.InNiger,farmer-managednaturalregenerationincreasesyieldsby16to30­percent(Matlon1985),andadoptingthispracticeincreasedtreecoverbynearly5millionhectaresbetween2003and2008.Similarly,inBurkinaFaso,adoptingthezaïholestechniqueincreasesyieldsby300to400kilogramsperhect-areinlowrainfallyearsandbyupto1,500kilogramsperhectareingoodrainfallyears.Overthepastthreedecades,200,000to300,000hectaresoflandhavebeenrehabilitatedthankstothistechnique.Adoptingstonebundsalsoincreasesyieldsbyaround300­kilogramsperhectare,andfarmerscangetevenhigherreturnsbycombiningzaïholes,stonebunds,andfertilizeruse.InNiger,adoptingthehalf-moon­techniqueshasbeenfoundtoincreaseyieldsandreducelandturnover.Trainedhouseholdsculti-vatedanadditional0.3hectaresofrehabilitatedlandbythethirdyearaftertraining.Thesetraditionallandmanagementpracticescontributetoclimatechangemitiga-tionandimprovedresilience.Rainwaterharvesting,croprotations,andagroforestryincreasesoilcarbonsequestrationattherespectiveestimatedratesof839,378,and1,359perkilogramperhectareperyearinAfrica(WorldBank2012).Notonlydoesthismitigateclimatechange,buttheresultinghighersoilorganiccontentimprovestheresilienceofcrops,whichiscrucialforclimateadaptationandfoodsecurity.Theasso-ciatedincreaseinproductivityalsoallowsfarmerstoreducetheiruseofchemicalfertil-izers,furthercontributingtoclimatemitigation.Indeed,chemicalfertilizersarethethirdmostsignificantcontributortototalnon-CO2agriculturalemissionsafterentericfermentationandlivestockmanure(FAO2018).Supportingtraditionalagriculturalpracticescanalleviatepoverty,reduceincomerisk,increaseclimateresilience,andempowerwomen.Givenagricultureistheprimarysourceofincomeformanypoorhouseholds,theincreasedagriculturalproductivityassociatedwithtraditionalfarmingpracticescouldimprovewelfareand,inturn,liftpeo-pleoutofpoverty.Forexample,astudyinNigerestimatesthatfarmer-managednaturalregenerationincreasedcerealproductionby500,000tonsayear,coveringtheneedsof2.5millionpeople,or10­percentofthepopulation.Traditionalagriculturalpracticesalsoweakenhouseholdrelianceonprecipitation,allowingthemtoharvestrainfallandimprovesoilquality.Thisreducestheirincomerisktoweathershocks,whichiseven93DecarbonizationPolicyImplementation:IllustrativeCaseStudiesmorecriticalasclimatechangeandextremeweathereventsbecomemoresevereandfrequent.Someagriculturalpracticescanalsocontributetowomen’sempowerment—forexample,farmer-managednaturalregenerationoffirewood-producingtreesliftstheburdenof­collectingfirewood,whichtraditionallyfallsonwomen.KeyTakeawaysLow-costtechnologiesandpracticescanimprovesoilqualityandagriculturalhouse-holdincomes,reducerisk,andcontributetoclimatechangemitigation.Suchinter-ventions,whichsupporttheproductivityofawidevarietyofcrops,areincreasinglyused,butalargeshareofhouseholdsstilldonotusethem,suggestingthereare­constraintstoadoptionthatneedtobeovercome.Oneoftheseisthelackofinforma-tionandknowledge,whichappearstobeasmallconstrainttoovercome,giventhelargepotentialbenefits.Providinghigh-qualityextensionservicesatscalecanbechallengingandisnotaseasyassubsidizinginputs.Scalingupdependsonacombinationofawarenessbuilding,providingtechnicalinformation,sociallearning,andmotivation,underliningtheimportanceofimplementationpartners.Stakeholderswhobenefitfromcurrentinputsubsidyschemesarealsoresistanttoreform,challengingashiftfromamodelofpro-ductionsupportviainputsubsidiestoonebasedonextension.94RealityCheckFacilitating,Enabling,andTriggeringSectoralTransitions:EgyptCaseStudy12.MotorizationManagement:FleetRenewalandRecyclingPrograminEgyptContributors:GeorgesDaridoandW.NickBowdenContextMotorizationmanagementisamenuofmeasurestomanagemotorvehicleflowsandstocksatallphasesoftheirlifecycletosupportaccessandeconomicgrowthwhilereducingGHGemissions,improvingairquality,andenhancingtrafficsafety(WorldBank2021h).Measuresincludefleetrenewalmechanismswithreplace-ment,recycling,andcertificationsystems;andpoliciesandfinancialincentivestomodernizethemostpolluting,unsafe,andintensivelyusedvehicles.InEgyptaround2010,theaverageageofthemotorvehiclefleetwashigh,andmanyinten-sivelyusedvehicleswerepoorlymaintained,contributingtoexcessiveemissions,breakdowns,androadtrafficaccidents.Thebustlingcapital,Cairo,produces40­percentofthecountry’stransport-relatedGHGemissions,exposingresidentstoasmuchas20timestheacceptableairpollutionlevelseveryday(CarbonPartnershipFacility2023;seealsoUNFCCC2020).Asignificantshareoftheseemissionscomefromolderorpoorlymaintainedvehicles,includingupto40-year-oldtaxis(Hereheretal.2021).PolicyIn2008,thegovernmentofEgyptadoptedanewlawmandatingthatfee-basedtrans-portvehicles(taxis,buses,trucks,andsoon)over20yearsoldwouldnolongerbeeligiblefornewoperatinglicensesorlicenserenewals.Becausethelawdidnotspecifyhoweligiblevehiclesshouldbedisposedof,ownerscouldsellthesevehicles,convertthemforprivateuse,ordismantlethemandselltheenginesforuseinothervehicles.Withoutanationalscrappingandrecyclingprogram,thelawwasnothavingitsintendedeffect.In2010,theWorldBank,astrusteeoftheDanishandSpanishCarbonFunds,enteredintoanagreementwiththeDanishCarbonFundofEgypttopurchasefromtheCDMcertifiedemissionsreductions(CERs)generatedbyvehiclespartici-patinginthescrappingandrecyclingprogram.Thiscarbonfinancetransactionfacili-tatedthesaleandtransferofCERsfromtheMinistryofFinance’s(MoF)programtoDanishandSpanishCarbonFundsparticipantsthroughacommercialcontractreferredtoasanemissionsreductionpurchaseagreement.ThesaleoftheseCERs95DecarbonizationPolicyImplementation:IllustrativeCaseStudieswouldoffsetthecostsincurredbyMoFtosetupaone-stopshopforscrappingandreplacingtaxis.TheEgyptVehicleScrappingandRecyclingProgramsupportedafleetrenewalmechanismthroughwhichtaxi,microbus,trailertruck,andbusownersvoluntarilysurrenderedtheirvehiclesformanagedscrappingandrecycling,inexchangeforfinan-cialincentivestopurchasenewvehiclesfromparticipatingpre-registeredvehicledeal-ersatadiscountedpriceandwithfinancingfacilities(WorldBank2021c).Certifiedrecyclingandscrappingensuredthatoldvehicleswerepermanentlytakenofftheroadsandcomponentssuchastires,oils,andbatteriesdisposedofandrecycledinanenvi-ronmentallysafemanner.Theprogramobjectivewastoreduceemissionsassociatedwiththecountry’sagingfleetoftaxis,microbuses,minibuses,andbusesthroughthepurchaseofCERsandincludedthird-partyauditing.ResultsandImpactsBetween2013and2017,morethan40,000vehicleswereturnedin,scrapped,andrecy-cledthroughtheprograminCairo.Thenewvehicles,whichrepresentedover90percentofthecity’staxifleet,havereducedGHGemissionsbyover300ktCO2easof2017andcounting.MoF’sprojectimplementationsuccesswasbasedonstronginternaltechnicalcapacityandin-houseprogramandadministrativedesign,includingaone-stopshopforownersofeligibletaxis.Theone-stopshopmeantthattaxidriversdidnotlosetheirsourceofincomewhilewaitingfortheirnewtaxitoarrive,whichwouldhavediscour-agedthemfromjoiningtheprogram.Theentireprocess—fromapplicationtosurren-deringtheoldvehicleandreceivingthenewone—took,onaverage,fivetosevenworkingdays.Theefficiencyoftheone-stopshopandtheMoFincentivesweresosuc-cessfulthatthescrappingsitewasoverwhelmed.Thegovernmentthenhadtocreateareservationsystemforamaximumof120vehiclesperdayfortimelyprocessingatthescrappingfacility.Aspartoftheprojectdesign,MoFwasauthorizedtodisburseasub-sidyofuptoLE5,000(about$270)pereligiblesurrenderedvehicleandcoveredthetaxesduefromthesaleofthenewtaxis.Italsowaivedcustomsfeesforimportingvehiclesparts,andMoFnegotiatedlower-interestratesforcarloans(Ali2016).Thenewreplacementvehiclesusedup-to-datetechnologythatreducespollutionthroughlowerfuelconsumptionandcostlesstorun,improvingdrivers’livelihoods.Morethanhalfofthenewvehiclesrunoncompressednaturalgas(CNG),amore­environment-friendlyfuelproducingfewerGHGemissionsthangasolineordiesel.Thegovernmentoutsourcedarecyclingfacilitytoensurethattheoldvehiclesweretakenofftheroadpermanentlyandthatscrappedvehiclecomponentssuchastires,oils,andbat-teriesweredisposedofandrecycledinanenvironmentallysafemanner.Aswellasdecreasingpollution,theupgradedvehicleshaveimprovedworkingconditionsfortaxidrivers(WorldBank2018a).96RealityCheckKeyTakeawaysTheprogramhadasignificantpositiveenvironmentalimpact,providingnewandmoreenergy-efficientvehiclesandreducingCO2,methane,nitricoxide,andnitrogendiox-ideemissionsingreaterCairo.TheprogramisanexampleofhowthesaleofCERscanhelpacceleratethesuccessofgovernmentprograms,successfullyreducingGHGemis-sionsfromtransport,improvingairquality,andcreatingsaferroadconditions.AsofDecember2018,itwastheonlyWorldBanktransportsectoroperationintheMiddleEasttoissueCERsandhadsoldmorethan340,000CERs.AfteritssuccessinCairo,thegovernmentisconsideringreplicatingthemodelinotherlocations.OtherAfricancountries—suchasBurkinaFasoandCôted’Ivoire—havebeeninspiredtodevelopsimilarinitiatives,whichtheWorldBankissupporting.Themodelcouldalsobeusedtoacceleratethepenetrationofzero-emissionvehicles,suchaselectricvehicles(EVs),whichmayhavehighercapitalinvestmentrequirementsinvehicleandcharginginfra-structurebutloweroperatingcostsandotherbenefitsoverthelongterm.97DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:PeruCaseStudy13.NonmotorizedTransport:CyclingStrategyandInfrastructurePlanforLima,PeruContributors:NicolasPeltierandFelipeTargaContextLimafaceschallengesinprovidingpropertransportservicestoitsmorethan11­millioninhabitants(WorldJusticeProject2022).AccordingtotheMinistryofTransportandCommunicationsofPeru,Limahasanexcessivenumberofmasstransportunits(over25,000vehicles)andanoversupplyoftaxis(250,000unitswhenitshouldhavehalf).Although60­percentoftripsinLimatakeplaceonpublictrans-port,privatevehicleusehasincreasedrapidlyinrecentyears,causingsevereroadcongestion,airpollution,androadtrafficaccidents.Limaisrankedamongtheworld’sworstcitiesfortrafficcongestion,andtheannualsocialcostofcongestioninthecityis$7billion(GIZ2014),around1.8­percentofPeru’sGDP.Thishasadverseeffectsontheworkingclass,with38­percentwasting90minutesadaycommutingduetocon-gestion(FederaciónColombianadeMunicipiosandDirecciónNacionalSimit2020).Thecitydesignisbasedonamotorizedsystem,leavingfewoptionsformoresus-tainablemeansoftransport.Thelackofadequateinfrastructure,legislation,andgen-eralcyclingcultureleavesbicyclistsasavulnerablegroupofuserswithouttoolstodefendtheirrights.WorldBanktechnicalandfinancialsupportinrecentyearshasaimedtoproduceseveralinitiativesandpolicysuggestionsthatwillmakeapositiveimpactonLima’strafficandpollutionchallenges,andinsodoing,empowerotherstochoosemoreenvironmentallyfriendlymeansoftransportation.Existingproblemswillbeaggravatedifthetrendtowardcar-dominatedcitiesandmetropolitanareascontin-ues(Lefevre2014).Cyclingisalow-carbonactivity,anditsonlyemissionsarerelatedtobicycle­manufacture.Itproducesonly21gramsofCO2perkilometertraveled,whileprivatecarsemit270grams,andapublictransportbus,101grams(Blondel,Mispelon,andFerguson2011).TheWorldBank’srecentproposalsforacyclingstrategyandinfrastructureplanforLimaincludedevelopmentobjectivestogiveLimaresidentsahealthy,low-carbon,efficient,andresilienttransportoptionbymakingcyclingsafer,moreconvenient,andmoreaccessibletothegeneralpopulation.In2019,only0.9percentofalltripsmadeinLimaweremadebybicycle.Byintroducingnewpolicies,thecyclingstrategyaimstoincreasethisto15­percentby2050.98RealityCheckThisanalyticalworkconductedbytheWorldBankin2020andcommissionedbytheMetropolitanMunicipalityofLimacitesalackofsoundpolicy,infrastructureinvestment,andpromotionfordevelopingsmarterandgreenermobilitysystems,suchascyclingandwalking(WorldBank2021g).Itoutlinesseveraltransportproblems,includingahighrateofcaraccidents,aninefficientpublictransportsystem,anoldfleetcausingairpollutionabovethemaximumpermissiblelimits,anincreaseinnewcarnumbers,andpoorrespectfortheruleoflaw.Theroadnetworkdoesnotprovidesafe,comfortable,direct,andintegratedtransportoptionsduetothelackofdedicatedcyclelanesonarterialroadsandsafetrafficmanagement(motorvehiclespeedsandtrafficvolumes)onlocalroads.Developingandimplementingacyclingsystemiscrucialtodevelopasustainablecity.Localgovernmentsareunderfunded,limitingthefinancialandtechnicalresourcesneededtoimplementcitywideclimate-smarturbantransportinfrastructure.National,regional,andlocalregulationsoftenpromotecar-centricurbandevelopmentandinfrastructure.Althoughthereisagrowingdemandforusingbicyclesinthecity,policiesandinfrastructureinvestmentsaimedatpromotingtheiruseareverylimited.Thisisduetotheincipientdevelopmentofnationalandlocalpoli-ciesandinvestmentincentivesonsustainabletransport,ineffectivestrategiesforinformingthepopulationaboutbenefitsofusingofnonmotorizedtransport,andout-datedlawsandregulationswithlimitedcapacitytoguaranteetheroadsafetyandsecu-rityofcyclists,alongwithinadequateinfrastructure.PolicyA2004–10GEFprojecthelpedPeruestablishafoundationforbetter,cleaner,moreefficient,andsaferurbantransportinLimaandreduceGHGemissions.FullyblendedwithaWorldBankloan,whichfinancedtheimplementationofLima’sfirstbusrapidtransit(BRT)corridor,theprojectfinancedbicycleinfrastructure,promotionactivitiestocomplementtheloan’snonmotorizedtransportactivities,capacitybuildingforsus-tainableurbantransport,andthefirstbicycleinfrastructuremasterplanforLima(WorldBank2013).In2010,thePeruviangovernmentissuedthefirstcountrywidepolicy(Law29593)toimprovebikingconditionsandpromotecyclingasameansofsustainabletransportation.Althoughinnovative,thislawdidnottriggerconcreteactionsintermsofsoundpolicyandinfrastructureinvestmentsatlocalmunicipalities.Almostadecadelater,andwithconcernaboutCOVID-19andcrowdedpublictransportrisks,Limaisstrengtheningitscyclinginfrastructurewithalmost50kilometersofemergencycyclelanesandadditionalbicycleparkingfacilities.Lima’smayorduringthepandemic,JorgeMuñoz,describedthisinitiativeasonethatis“needednotonlyasapreventivemeasureforCOVID-19,butalsotohelpourciti-zenschooseahealthierandmoreeco-friendlyalternative.”ItalsowenthandinhandwiththeYoRespeto(IRespect)campaign,whichpromotedroadsafetyin99DecarbonizationPolicyImplementation:IllustrativeCaseStudiesthecity.RoadsafetyhasbecomeatoppriorityinLima,whichhasupgradedandprotectednewbikelaneswithverticalbollards,rubberhumps,andpaintedmark-ingstoseparatethemfromtheroadwayandinstalleddedicatedbicycletrafficlights.Thecityisalreadymakingmovestowardlong-termchangebeyondtheCOVID-19emergency.InJune2020,theMinistryofTransportandCommunicationsofPeruacceleratedtheapprovaloftheregulationunderanewlawthatpromotesandregulatesbicycleuseasasustainablemodeoftransport(Law30936of2019).Lima’scityauthoritieshaveevaluatedthesuccessoftheirmeasuresandarenowplanningtomaketheiremergencycycleinfrastructurepermanent.Theirexperi-enceshowsthat,withpoliticalwillandtherightpolicylandscape,itispossibletoshifturbanplanningandcitizenmobilityhabitstodeliverlong-termbenefitsinbothpopulationandenvironmentalhealth(WHO2020).Law30936establishesmeasurestopromoteandregulatebicycleuseasasustain-ableandefficientmeansoftransportintermsofroadcapacityandpreservationoftheenvironment.Thislawalsoassignedspecificrolesandmandatesforpublicinsti-tutionsatdifferentgovernmentlevels.TheMinistryofTransportandCommunicationsofPerupreparesandimplementspublicpoliciesforroadinfrastructuredesignandpromotesurbanandruralplanningthatfavorsbicycleuse,incoordinationwithpub-licentitiesatallthreelevelsofgovernment.TheNationalInstituteofStatisticsandInformaticscoordinatesandproducesbasicstatisticsregardingbicycleuseasa­sustainableandefficientmeansoftransportthroughcensuses,samplesurveys,andadministrativepublicsectorrecords.UndertheLimaMetropolitanMunicipalGovernment’sUrbanMobilityManagementOffice,thedeputymanagerofnon-motorizedtransportoverseesthedevelopmentofpoliciestopromoteactivemobilitywithinthemetropolitanarea.BicycleuseinLimahasincreasedsincethestartoftheCOVID-19pandemic,thougharound300kilometersofcyclelanesremainunconnected,withpoor-­qualityinfrastructuredesignandunsafeintersections.TheuseofbicyclesinLimarosefrom3.7­percentoftotaltripsbeforethepandemicto6.2­percentin2021(basedondatafromperceptionsurveys,theactualmodesharemightbe50­percentlower).The­existing300kilometersofcyclelanesarenotyetfullyconnected,andfewserveaslast-mile­connectionstomasstransitstations.JustahandfulofBRTstationshaveintegratedbikeparkingfacilities.Despiterecentachievements(in2019therewere200kilometersofcyclelanes),thereisstillalongwaytogotoimproveLima’scyclinginfrastructuretoconsolidateaconnected,low-stressnetworkandmakeitmoregender-inclusive(womenaccountforjust18­percentofcyclists).Addressingroadsafetyatkey­intersectionsalongarterialavenuesandcollectorstreetsisimportanttoconsolidatethegrowthincyclingdemandforpeopleofallgenders,ages,andabilities.Anotherkeystepistoprovidesafelast-milebicycleinfrastructureconnectivitytomasstransit­stations,schools,markets,andkeypublicspacedestinations.100RealityCheckToreducetrafficcongestion,decarbonizetransport,andincreasephysicalactiv-ity,in2020,theWorldBankprovidedanalyticalandadvisorysupporttoLima’smetropolitangovernmenttoincreasecyclinginthecity.ThisincludedupdatingitsBicycleInfrastructurePlan(WorldBank2020c),developingaconnectedcyclenet-workof1,383kilometersby2040,anddevelopingaproposaltoadoptabicyclestrategywithpolicyrecommendationstopromotecycling,particularlyamongwomen(WorldBank2020d).9Theplansupportedthecity’sCOVID-19responseapproachforpop-upbikelanesduringthepandemic,addingalmost100kilome-tersofnewcyclelanesduringthesetwoyears.Thereareplanstoaddanother114kilometersofcyclelaneswithgrantresourcesfromtheGermangovernment’sdevelopmentbank,KfW.TheWorldBankisalsopreparinganinvestmentopera-tionexpectedtobeapprovedin2023underaprogrammaticapproachtoimprovetrafficmanagementandsupportsustainabletransportthatincludesbuildinganother200kilometersofcyclelanesandimplementingbike-sharesystemsandbikeparkingfacilitiesatmasstransitstations.ResultsandExpectedImpactsFortheupdateofLima’sBicycleInfrastructurePlan,theWorldBanksupportedananalysisoftheexantesocialimpactsofthisplan.Usingastandardsocialcostandbenefitanalysistoassesstherelationshipbetweenthecostofabicycleinfrastructureinvestmentanditsbenefitsforcommunities,ThetotalcostswereprojectedtobeS/1,210million($297,000)andthebenefits,S/22,978million($6.1million),withthesocialbenefitsoutweighingthedirectandindirectcostsofinfrastructureconstruc-tionbyafactorof19.Theanalysisfindseconomicsavingsrelatedwithimprovedtraveltimereliability,reducedtraveltimes,reducedriskofdeathorseveredisease,cleanerair,lesspollutionandcongestion,andhealthierlifestyles.Theplanalsoexpectsforthemodalshareforbikestogrowfrom0.9­percentin2019to11.6­percentby2050andestimatesthattheprojectcouldreduceemissionsinLimaby0.64tCO2eby2030and1.03tCO2eby2050.OtherinitiativesacrossLimahavecomplementedthegovernment’scyclingpolicies,includingtheinitiative“PromotingAccesstoSustainableTransportinLimathroughtheUseofBicyclesasMeansofTransport,”apartnershipbetweentheWorldJusticeProject,theMetropolitanMunicipalityofLima,theMinistryofEnvironment,andthesocialmovementforcycling,Actibisimo.KeyTakeawaysCyclingprojectshaveahighreturnintermsofsocialbenefits,whichtranslateintosignificanteconomicsavings.Presumably,similarinitiativesinothercitiesandcoun-triescouldalsohavenetpositivesocialeffects.Overthepastdecades,severalcitiesaroundtheworldhavemadesubstantialprogressinpromotingcycling.Bogotá,101DecarbonizationPolicyImplementation:IllustrativeCaseStudiesforexample,hasbuiltmorethan600kilometersofcyclinginfrastructure,integratedcycleparkingfacilitiesintoitsBRTsystem,andcontinuestosupportits48-year-oldCiclovíaprogram,whereover1millionpeopleenjoymorethan120kilometersof­car-freestreetseveryweek.Despitetheproveneconomicviabilityofcyclingmobilityprojects,thereareconsid-erableobstaclestoinfrastructureprograms.Thefollowingstrategiescanhelpcountriesandcitiesovercomethesechallenges,improvingthepossibilityofimplementation(WorldBank2021g):■■Prioritizingactivemobilityinnationalandlocalpoliciesbyaligningwithbroadergoalsonclimate,roadsafety,health,equity,andbuild-back-betterstrategies■■Integratingcyclingandpedestrianinfrastructureintothefollowing:long-termtransportplansasakeycomponentofintegratedtransportsystems;standardsfordesigninlocalpracticesforurbaninfrastructure;andnational,regional,andmetropolitanlevelsfinancingschemes■■Gearinginternationalclimatefundingandinvestmenttowardactivemobilityandagreeingoncorporatecommitmentsforincludingactivemobilityprojectsininfrastructureloansfrommultilateraldevelopmentbanks■■Settingaminimumof20­percentofthetransportorinfrastructurebudgetforactivemobilityasthemoststraightforwardwaytofulfillandsustainactivemobilitygoals■■Screeningtransportandroadinfrastructureprojectstoensureadequateandappropriateinclusionofwalkingandcyclingcomponents■■Trainingstaffonbestpracticesforactivemobility,withtheultimategoalof­creatingadedicatedteamorunit■■Encouragingtaxincentivesforprivateinvestors,developers,andsuppliers■■Ensuringplansreflectthelocalornationalpoliticaleconomy■■Realizingopportunitiestofinanceactivemobilityinthedevelopingworldandmakeashiftthatwouldmeettransportneeds,addresstheeconomicconstraints,andrelieveclimatechangeimpactsThemainchallengesaroundbuildingnonmotorizedtransportinfrastructureproj-ectsarefunding,technicalcapacity,andpoliticaleconomyconsiderations.Toaddressthesechallenges,theWorldBank’sLimaTrafficManagementtoSupportSustainableTransportExpansionprojectwillfinanceselectedroadsafetyinterventionstoimproveconditionsforcyclists(WorldBank2022c).Lima’sgovernmentofficialsarealsopartici-patingintheLatinoaméricaPedalea(LatinAmericaCycles,orLAP)knowledgeexchangeprogram.UnderLAP,aprogramfundedbytheSouth-SouthKnowledgeExchangeFacility,Lima’sgovernmentstaffreceivedtrainingdirectlyfromtheircoun-terpartsinMexicoCityandBogotá,regionalleadersintermsofplanninganddesign-ingcyclingprojects.Representativesfromcivilsociety,mediaoutlets,andbusiness102RealityCheckchambersalsoparticipatedintheprogram,directlylearningfromtheexperiencesoftheirpeersintheMexicanandColombiancapitals.Sucheffortsareaimedatincreasingthesupportbaseforcyclingprojectsbydisseminatingthemanysocialbenefitsthatincreasedcyclingringstothecityandformingcross-sectoralandmultidisciplinaryalliancesintheLAPparticipatingcities.103DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:SouthAfricaCaseStudy14.PublicTransportinSouthAfricaContributors:GeorgesDarido,EdwardBeukes,andGershwinFortuneContextThedevelopmentobjectivesforpublictransportprojectsincludeimprovingefficientmobilityandinclusiveaccesstojobs,services,andsocioeconomicopportunities,whilealsominimizingnegativeexternalitiessuchaslocalandglobalemissions,trafficinju-ries,andfatalities.Tothisend,manycitiesareimplementingmasstransitsolutions,includingBRT,whichintegratesdedicatedroadinfrastructure,specializedvehiclesandstations,advancedpaymentandmanagementsystems,andotherfeaturestomaximizetheefficiency,attractiveness,andsustainabilityofbusservices.Themainchallengesincludetrafficcongestion,alackofpriorityforpublicandnonmotorizedtransport,maintainingaffordablefareswhileminimizingpublicsubsidies,andmarketfailuresleadingtopooroperatingandmaintenancepractices,underinvestment,andpoorper-formanceinthesector.ResidentsofSouthAfrica’slargecities,particularlythepoor,sufferfromlongcom-mutesandlargespatialmismatchesbetweenjobsandhousingasalegacyofapartheid.Abouttwo-thirdsofpublictransporttripsinSouthAfricancitiesarebyparatransitbyminibuses,thepredominanttransportmodefortheworkingclassesduetotheirafford-abilityandubiquity.Paratransitisusuallyademand-responsive,self-organizedservicebyanassociationofvehicleownersthatcontractdriversonadailyrevenuetargetsystemandrespondquicklytourbangrowth.Paratransitbusinessmodelsandrelativelyweakregula-tionenforcementcontributetocut-throatcompetition,recklessdrivingbehaviors,andpoor-qualityvehicles,whichinturnleadtoexcessiveemissionsandothernegativeimpacts.PolicyIn2007,theSouthAfricangovernmentapprovedaBRTstrategyforitsmajorcitiesinpreparationforthe2010WorldCup.By2014,thenationalgovernmentwasspendingR5.5billion(around$500million)annuallyonplanning,building,andoperatingBRTs,andsubnationalgovernmentswereresponsibleforoperatingcosts(DepartmentofTransport2022).Over100kilometersofdedicatedbuslaneswereoperatingincitiesincludingJohannesburg,CapeTown,andTshwane,anddozensofbusroutestrans-portedtensofthousandsofpersonsperday.Butthefinancialsustainabilityofthesesystemswasaconcern,asfarerevenuesrelativetooperatingcostswerelowerthanexpected.PooraccessandalackofintegrationmeantthatmanypotentialBRTusers104RealityCheckwereunabletoconvenientlyreachaccesspointsortheirfinaldestinations,andtheywalkedorcontinuedtouseparatransit.Travelpatternswithlargetidalmovementsinpeakhours,andlowridershipinoff-peakandthecounter-peakdirectionalsoham-peredtheefficiencyandsustainabilityofBRTsystems,affectingridershipandincreas-ingtheneedforpublicsubsidy.By2014,thegovernmentrecognizedtheneedtoimproveBRTsystems,includingbyextendingtheirreachandaccessbyconnectingthemtobusandparatransitservices.TheDepartmentofTransportlauncheditsIntegratedPublicTransportNetwork(IPTN)strategyin13cities.Aspartofthisstrategy,thecityofCapeTownwantedtotesttheleversavailabletocreateabetterserviceforusersandamoresustainablebusi-nessmodelforoperators,whilereducingexternalitiesforsocietybyincorporatingparatransittoitsIPTN.Withthesegoalsinmind,in2017,thecitylaunchedaminibustaxitransformationpilotprojectinMitchell’sPlain,adenselypopulatedtownshipsitu-ated27kilometersfromCapeTown’scentralbusinessdistrict.ThepilotincludedfiveoperatingroutesprovidingascheduledparatransitfeederserviceconnectingTafelsig,alocalsuburbofMitchell’sPlain,andtheMitchell’sPlaintransporthub.Thepilotfocusedonmeasurestoimprovebusinessandoperationalefficiency,includingpoolingvehicleswithcentralizeddispatch,centralizedrevenueandcostmanagement,vehicletrackingandfleetmanagementsystems,introducingserviceheadways,replacingdriv-ers’dailyrevenuetargetswithmonthlysalaries,andanaccountingsystem.Thepilotdidnotincludeanypublicinvestmentinvehiclesorcompanies;rather,itwassup-portedbybusinessandconsultingservicesfacilitatedbythecity.ResultsandImpactsSouthAfrica’stransportsectorcontributes12to15­percentofthecountry’stotalGHGemissionsandisoneofthefastest-growingsectorsduetogrowingprivatemotoriza-tion.TheNationalGreenTransportStrategyforSouthAfrica(DepartmentofTransport2018)establishedseveralgoalsfor2030,includinga20­percentrelativeshiftfrompri-vatemotorizedtransporttopublictransport;convertingatleast10­percentofbusesandminibusestoCNG,petrol,orEVs;andsignificantlyexpandingBRTsystemsinlargecitieswhileensuringthesecurity,reliability,andfrequencyofservices.BRTsys-temsoperatingincitiesaroundtheworldhavedemonstratedtheabilitytoreduceemis-sionsbymovingmassivenumbersofpeoplemoreefficiently,attractingpassengersfrommorepollutingprivatemotorizedtransportmodes,andsupportingcompacturbandevelopment.TheJohannesburgReaVayaBRTsystemwasestimatedtoreducepublictransportemissionsby69­percent(around400ktCO2efor2011–21forPhases1Aand1B)throughmodeswitchingandimprovedefficiencyofnewandlargerEuroIVbuses.TheDurbanBRTsystemshowssimilarGHGemissionpotentialreductionsof60percentbyinducingashifttocleanervehicles(principallyEuroVBRTbusesandminibuses)andmoreefficientoperations(Gopaul,Friedrich,andStretch2019).105DecarbonizationPolicyImplementation:IllustrativeCaseStudiesTheCapeTownpilotshowsthatitispossibletoachievebetterservicesandreducefuelconsumptionandemissionsthroughimprovedbusinesspractices,operations,andlaborandvehicleefficiencyatnegligiblecostandwithoutlosingjobs.Thisisatriplewin:forusers,operators,andsociety.Thissmall-scalepilotshowedimpressiveresultsintermsofservicequality,reliability,andemissions.First,itrationalizedthefleetsizefrom78mini-busesto40well-maintainedvehicles(includingthreespares)whileexpandingservicecoveragefromthreetofivelicensedroutes.Second,itimprovedemploymentconditionsfordrivers,movingfromanaverageworkpatternof12-hourdaysina7-dayweekto7.5-hourdayswithscheduledbreaksandonedayoffina7-daycycle.Third,itreducedfuelconsumptionandassociatedemissionsby45­percentbytransportingthesame­volumeofpassengerswithfewervehiclekilometers.Abefore-and-afterpassengersurveyshowedimprovementsinoverallpassengersatisfaction,waitingtimes,pick-up/drop-offlocations,fares,crewconduct,vehiclecomfort,roadsafety,andpersonalsecurity.ThebenefitsofparatransittransformationprojectsandrelatedsectorreformscanbereplicatedinothercitiesandgreatlyexpandedbyincludingfleetrenewalmechanismsandEVs.Thiswillrequiregreaterpublicinvestment,aswellasenablingprivatefinanceandfiscalincentivestosupportagreentransition.Scalabilityalsorequiresattentiontotheparatransitmarketstructure,routelengths,travelbehaviors,andcompetitionwithotheroperators.TheWorldBankiscurrentlyhelpingtheSouthAfricangovernmenttoanalyzethetechnical,financial,andinstitutionalfeasibilityofscalingupsuchpoliciesandthepossibilityofcreatinganationalprogramorfinancialfacilitytosupportfleetrenewal,includingEVsandotheremergingvehicletechnologies.TheWorldBank’sSouthAfricaCountryClimateandDevelopmentReportestimatesthatelectrifying5percentofSouthAfrica’s412,000publictransportvehiclesby2030wouldcost$2.8billionandcreatesome58,000newjobs(WorldBank2022l).KeyTakeawaysImprovingpublictransportinfrastructureandservicesisimportant,notonlyforequi-tableaccesstoeconomicopportunities,butalsoasapathwaytodecarbonizeurbanmobility.Thisisconsistentwithanavoid-shift-improvestrategy(WorldBank2021e)thatsupportscompacturbandevelopmentpatternsbyreducingtheneedforprivatevehicles,shiftingpassengersawayfrommorepollutingmotorizedmodes,andimprov-ingoperationsandtechnologies(WorldBank2021a).AstheSouthAfricacaseshows,acomprehensivestrategyshouldincludemasstransitinvestmentssupportedbysectorreformsandefficientregulationstocreateIPTNsandcontinuousimprovementofexist-ingoperatorswithbetterbusinesspracticesandtechnologies.Studiesshowthatopti-mizingpublictransportplanningandoperationswiththeuserinmindisasimportantasvehiclepropulsiontechnologytoachievingreducedemissionsandotherdevelop-mentobjectives.106RealityCheckMorethan3millionpublictransportandparatransitvehiclesoperateinSub-­SaharanAfricaalone,fromfull-sizebusestominivansandmoto-taxis.Ifcountriescanmodernizeashareofthesevehiclesandimprovetheirbusinesspractices,asshownbytheCapeTownpilot,thereisgreatpotentialforpositiveclimateanddevelopmentimpacts.Investingincleanerpublictransportfleets,improvingparatransitoperations,andsupportingothersustainableurbanmobilitypoliciescanhelpcontainorreduceemissionswhileprovidingbetterservicestousers.107DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:TürkiyeCaseStudy15.EnergyEfficiencyinTürkiye’sPublicBuildingsContributor:JasSinghContextThebuildingsectorconsumesabout30­percentofglobalfinalenergyconsumptionandisresponsibleforabout27­percentofCO2emissions(IEA2022a).Almostallthegrowthinenergydemandinbuildingswillcomefromthedevelopingworld.Asthesecountriesdevelop,constructionandenergydemandfrombuildingswillcontinuetorise.Therisingmiddleclassesdemandlargerhousingunits,moreenergy-usingappli-ances,and,intropicalcountries,airconditioning.Thisallrequiresmoreenergyinfra-structureand,isnotsustainable.Withinthebuildingsector,therearepubliclyownedandoperatedbuildingsandprivatecommercialandresidentialbuildings.Amongtheformer,governmentfacilities—whichcanincludecentralandmunicipaladministrativebuildings,universitiesandschools,hospitalsandclinics,orphanages,museums,andotherpubliclyownedfacilities—are,collectively,thelargestenergyusersinmostcoun-tries.Availabledatasuggestthatthepublicsectortypicallyaccountsfor2to5­percentofacountry’stotalenergyconsumption,althoughthisfigureismuchhigher(upto30­percent)incountrieswithlargeheatingloads(suchasChina,theEU,andtheEuropeandCentralAsiaregion)orlowenergyaccess(asinmanySub-SaharanAfricancountries).Thepublicsectorrepresentsastrategicallyimportantmarketsegmentforenergyefficiency(EE).Publicbuildings,whicharecollectivelylargeandvisibleconsumers,cansetexamplesforEEimprovementsinothersectorsanddemonstrategoodenergyman-agementpracticesandhigh-performancetechnologies.Theinclusionofenergy-­efficientcriteriaforproductspurchasedforpublicoffices,forexample,canstimulatemanufac-turerstoseekthenecessarycertificationsfortheirproductstocompeteinpublic­tenders.ThepublicsectorcanalsouseitspurchasingpowertostimulateEEmarkets;bypur-chasinginlargevolumes,itcanbringdowncostsforallenergyusers.BusinessesandinstitutionscanalsodeveloppracticesthatpromotepublicsectorEE—suchasstandardcontracts,tools,andprotocols—whilepubliccampaignscanshowcasethebenefitsof,andbuildconfidencein,EEamongcitizens.Reducinggovernmentenergycostscanopenupfiscalspacetoinvestinothersocioeconomicpriorities,suchasimprovingthequalityofandaccesstobasicservices,suchashealthcare,education,andinfrastructure.108RealityCheckFinally,publicsectorEEmakesforamoreresilientenergysupplyandlowerslocalandglobalemissions.BarriersUnfortunately,despitehighpotentialandoftenattractivepaybackperiods,thepublicsector,particularlyinLMICs,oftenlagstherestoftheeconomyonefficientenergyuseduetoseveralbarriers.AlthoughthemarketbarrierstoEEingeneralarerelevanthere—lowenergyprices,highup-frontandtransactioncosts,andlimitedaccesstodataandinformation—otherbarriersarespecifictothepublicsector.Theseincludethefollowing:■■Restrictivegovernmentpoliciesandprocedures,frombudgetingtopublicprocurement■■Limitedfinancialresourcesforcapitalupgrades■■Alackofincentives,sincegovernmentagenciesareoftenunabletoretaincostsavingsatall,orfromonebudgetyeartothenext■■Behavioralinertia,aspublicemployeeshaveincentivestodothingsthesamewayandavoidtakingrisks.GovernmentResponseGovernmentshavedevelopedarangeofpolicies,institutionalsetups,programs,andapproachestohelpovercomethesebarriers.Althoughtheytendtorelyonregulations,incentives,ormarket-basedmechanisms,therearesomeuniversallyapplicableapproaches.Itisimportanttotailorsolutionstoeachcountry’s(orlocalgovernment’s)contextandcircumstances.Differencesmightstemfrompolicyandregulatoryframe-works,institutionalsetups,availableresources,incomelevels,culturalnorms,orotherfactors.Asummaryoftestedapproachescanbefoundintable3.3.Intermsoflegalframeworks,policies,andregulations,mostcountrieshaveenactedoverarchingenergyefficiencylegislation,includingbuildingcodesfornewbuildingsandenergyperformancecertificatesforexistingbuildings,whicharecriticallyimportanttosetperformancestandardsandnorms.Manycountriesalsomandateannualreportingonenergyuseforlargerfacilities,periodicenergyaudits(typicallyeverythreetofiveyears)toidentifyEEmeasures,appointmentofenergymanagers,andotherrequirements.Buildingcodesandrenovationprogramsalsorequirestronginstitutionalsupportstructurestosetstandards,enforceregulations,shareinformation,andtrainthemar-ket.Manygovernmentshaveso-callednodalagencies,suchasEEagenciesordepart-ments,toprovideanoverallframeworkforgovernmentprograms,adviseonpoliciesandnorms,providetechnicalinformationandtraining,developtoolssuchasEEcalcu-latorsandmodeltenderdocuments,implementawarenesscampaigns,andotheractionstohelppublicagenciesreducetheirenergyuse.109DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFinancingFinancingisoneofthemostdifficultchallengesforpublicbuildingEE.Thefinancingladder(figure3.13)identifiesoptionsthatpolicymakerscanadapttoprovideproductssuitedtotheircountry’sneeds.Overtime,aslocalmarketsevolve,countriescanmoveuptheladdertomorecommercialfinancingmechanisms.Onceacountryselectsamechanism,itsdesignshouldincludeelementstofacilitatetransitiontoschemesthatarehigheruptheladder.Selectinganddesigningappropriate,locallyrelevantmecha-nismsdependsonseveralfactors,includingthefollowing:■■Legislativeandregulatoryconditions■■Maturityoffinancialandpubliccreditmarkets■■StateoflocalEEservicemarkets,includingenergyservicecompanies(ESCOs)andenergyauditors■■TechnicalandfinancialcapabilitiesofpublicentitiesforEE■■LocalmarketandcontextTABLE3.3ImprovingPublicSectorEnergyEfficiency:DismantlingBarriersBarrierIndicativeactionLackofinformation/awareness,includingopportunities,costs,benefits,andrisksInitiateawarenesscampaignsanddemonstrations;publishanddisseminateinformationsuchascasestudies,procurementguidelines,productcatalogues,andspecificationsLackoftechnicalcapacityforaudits,projectdesign,procurement,implementation,monitoring;trustinEEpotentialCreatenodalagencytoprovidetechnicalassistanceforEEprojects;appointenergymanagers;developtrainingprogramsforfacilityoperatorsandenergymanagers;encouragetheformationandprequalificationofESCOs;developEEanalyticaltools,auditandprocurementguidelines,andmeasurementandverificationprotocolsLimitedincentivestoimplementEE(potentiallossofbudget),trynewapproaches,andtakerisksRevisebudgetingtoallowretentionofenergysavings;issueawardsforagencies/staff;includeEEinmanagementperformancereviews;developrisksharing/financingprograms;setEEtargetsLackofagencyaccountabilityforenergysavingsCreatepublicsector/agencytargetswithmonitoring;setpenaltiesfornonperformance;establishprogramtolabelenergyperformanceofbuildings,benchmarkenergyperformance,andpublishresultsRestrictiveprocurement,contracting,andfinancingrulesRevisepublicpoliciesonpurchaseofEEproducts(forexample,tomandatethepurchaseofproductswithenergyefficientlabelsortomakepurchasingdecisionsbasedonlife-cyclecosting)andservices;developlocalESCOmodels;createpublicEEfundsLackoffundingforup-frontenergyauditsandprojectfundingEarmarkpublicEEbudgets;creatededicatedgrant/subsidyprograms,publicrevolvingfunds;levyademand-sidemanagementsurchargeor“electricitysurcharge”tomobilizefundsforfreeenergyauditsSmallsizeandhightransactioncostsBundlepublicEEprojects;generatemodeldocuments/templatestostreamlineprojects;developESCOumbrellacontracts;practicebulkprocurementofEEproductsthroughcooperativepurchasingagreementsSource:Singh2018.Note:EE=energyefficiency;ESCO=energyservicecompany.110RealityCheckTheTürkiyeEnergyEfficiencyinPublicBuildingsProjectA2016studyestimatedthatthereareover175,000publicbuildings(including­central,regional,andmunicipalfacilities)inTürkiye,withanannualtechnicalEEpotentialofover10,000GWh,requiringabout$18billionininvestments(EconolerInternational2016).Thegovernmentrecognizedthatastrongpublicbuildingrenovationprogramcouldhelpdevelopandspurthemarketfortheestimated10millionpublicandprivatebuildingsacrossthecountry.In2019,theWorldBank,togetherwiththeMinistryofEnergyandNaturalResourcesandMinistryofEnvironmentandUrbanization(nowtheMinistryofEnvironment,UrbanizationandClimateChange)developedanEnergyEfficiencyinPublicBuildingsProjectdesignedtorenovate400to500centralgovern-mentbuildingsanddevelopthemarketforabroadernationalpublicbuildingrenova-tionprogram.Theprojectincludesa$150millionInternationalBankforReconstructionandDevelopment(IBRD)loan,a$46.2millionconcessionalloanfromtheCleanTechnologyFund(CTF),anda$3.8millionCTFgrant(WorldBank2019a).Whiletheprojectincludesmanyconventionalaspectsforpublicbuilding­renovationprograms—suchasselectionofbuildingswithhighenergysavings­potential,energyaudits,technicaldesigns,renovationworks,andmeasurementand­verification—italsohasthefollowinginnovativefeatures:FIGURE3.13FinancingEnergyEfficiencyinPublicBuildings:ALadderofOptionsSource:WorldBank2014b.Note:EE=energyefficiency;ESCOs=energyservicecompanies.GrantsPublicfinancingCommercialfinancingGreatermarketmaturityLessermarketmaturityAdvancedcommercialorprojectfinancing(ESCOs)Vendor,credit,leasingCommericialfinancing,bondsPartialriskguaranteesCreditlineswithcommercialbank(s)Creditlineswithdevelopmentbank(s)PublicorsuperESCOsEErevolvingfundsUtility(on-bill)financingBudgetfinancing,grantswithcofinancinggrants111DecarbonizationPolicyImplementation:IllustrativeCaseStudies■■Deeprenovations:WhiletheprojecthasusedtheIBRDloantosupportconven-tionalrenovations—thatis,thosethatsaveaminimumof20­percentenergyandhavesimplepaybackperiodsoflessthan12years—theCTFloanhasallowedsupportfordeeperrenovationsthatsaveatleast30­percentenergywithlongerpaybackperiods,encouraginglargerinvestmentswiththickerinsulation,triple-panewindows,andnewertechnologiessuchasair-sourceheatpumps.■■Energyservicecompanies:Forasubsetofeligiblebuildings,renovationscanbedoneunderenergyperformancecontracts.Unliketraditionalaudit-design/workscontracts,theseinvolveaninitialauditfollowedbyadesign-buildcontract,withsomepaymentstiedtoverifiedenergysavings.TodefraythehigherrisksanduncertaintiesassociatedwithESCOcontracts,theinitial$10millionworthofESCOcontractsarefinancedbytheCTFloan,subsequentlyreplicatedwith$20millioninESCOcontractsfinancedandscaledupusingtheIBRDloan.■■Near-zeroenergybuildings(NZEBs):TheprojectalsousestheCTFloantorenovate5to10buildingswithhighdemonstrationvaluetoshowcasetheconceptofNZEBintegrateddesignandrenovationtechniques,suchascool/greenroofs,ventilatedfacades,daylighting/shading,waterrecycling/harvesting,advancedcontrols,andnewertechnologies,suchasbuilding-integratedsolarphotovoltaic(PV)andgeothermalheatpumps.TheserenovationswillalsoinformtheintroductionofanationalNZEBstandardandmodelsforthebroaderbuildingsmarket.Todate,theprojecthascompletedrenovationsof30buildings,withaverageenergysavingsof30­percent,witharangefrom22to80­percent.ItalsosuccessfullycompletedTürkiye’sfirstpubliclytenderedESCOcontract—theBursaAnatolianGirls’HighSchool—withabout80­percentsavingsand23­percentelectricitygenerationfrom­rooftopsolar,makingitessentiallyanet-negativeenergybuilding,asannualelectricityconsumptionisbeingfullyoffsetbyrooftopsolarPVgeneration,withsomeexcessPVpowerbeingsoldtothegrid.Another120buildingsstartedrenovationsin2023,includingadditionalESCOcontractsandNZEBpilots.Theprojectalsoincludescriticaltechnicalassistancetocaptureexperiencesandles-sonsfromtheprojecttoprovidetrainingforenergyauditors,designcompanies,andconstructionfirms,tolearnfromearlyexperiences,sharegoodpractices,andbuildmarketcapabilities.Itwillsharecasestudies,modelaudittermsofreferencesandreports,biddingdocuments,measurementandverificationprotocols,andsoonwithmarketactorstoallowreplicationintheprivatebuildingmarket.112RealityCheckKeyTakeawaysAlthoughtheprojectisongoing,thefollowingimportantlessonshaveemerged:■■Developingaclearandtransparentscreeningmethodologyiscrucialtoiden-tifyandprioritizeeligiblebuildingsthatofferthegreatestpotentialforenergysavings.■■Carefulreviewandsupervisionofearlysubprojects—forexample,energyaudits,technicaldesigns,andconstruction—areimportanttoensuresoundmethodolo-gies,consistenttechnicalquality,andadherencetoapprovedtechnicaldesignsandmaterialandequipmentspecifications.■■Developingdigestiblecasestudiesandtargetingoutreachhelpsbuildprojectcred-ibilityandincreasesdemandtojointheprojectinlateryears.■■DeeperrenovationsarepossibleunderWorldBank-financedbuildingrenovationprograms.Althoughtheyhavelongerpaybackperiods,theycansavesubstan-tiallymoreenergy(often50to70­percentsavings)comparedwithconventionalrenovations.■■Developingalternativefinancingandbusinessmodelsisnecessarytoensuresus-tainability,scale,andleverage.Developingarenovationprogramasawaytoinformabroadernationalprogramwithsustainablefinancingmechanismsanddifferentbusinessmodels(thatis,ESCOs)helpsensuresustainabilitybeyondtheprojectperiod.■■Energyefficiencycombinedwithrooftopsolarsystemsallowbuildingstoreachnetzeroenergyandemissions.Demonstratingandthenmainstreamingdeepreno-vationsalongsideon-siteREgenerationcanhelpmakebuildingscarbonneutralwhilebringingtheirenergybillsclosetozero.LookingtotheFutureDespitethesesuccesses,theworkisfarfromover.TheprojectalsoprovidesfundingtodevelopanationalprogramforEEinpublicbuildings,includingschemestointroducerevolvingfinancingtocapturetheenergycostsavingsfromrenovatedbuildingsandusethistorenovateadditionalbuildings.Thiswillbevitaltodemonstratethatbuildingrenovationscanpayforthemselves,allowforscale-up,andhelpbringcommercialfinancingintothebuildingrenovationsmarket.Anational-scaleprogramwillalsointroducegreaterconsistencyandpredictabilitytothemarket,allowingnewserviceprovidersandbuildingmaterialsandequipmentsupplierstoenterthemarket,whichwillultimatelydrivedowncostsforeveryone.113DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:IndiaDemandSupportPoliciesCaseStudy16.SolarPowerinIndiaContributors:ThomasKerr,EmekaNwangele,andMehulJainContextIndia’senergysystemisonthecuspofaparadigmshifttowardrenewables,drivenbyaconcertedpolicyefforttospurwide-scalesolaradoption.Growingfrom4to13percentoftotalelectricitygenerationbetween2014and2022andprojectedtoaccountfor30percentofgenerationcapacityby2040,India’ssolarenergysectorisrapidlygrowing(figure3.14;IEA2021b,2022e;MinistryofPower2022).Since2004,$130billionhasbeeninvestedinIndia’sREsector.Ofthis,solarenergyaccountsfor$71billion,anditsshareofthecountry’srenewableinvestmentportfoliohasrisenfrominsignificantlevelsto83­percent(figure3.15;BloombergNEF2022).India’sfast-growingeconomyandpopulationhaveledtoincreaseddemandforenergyservices.Catalyzedbyimprovedlivingstandards,40­percentpopulationgrowth,increasingelectrification,andadvancingvehicleownership,India’sprimaryenergydemandhasdoubledfrom5,000to10,000terawatthours(TWh)inthepasttwodecades.Itisthethird-largestenergyconsumergloballyandprojectedtoaccountforone-quarterofglobalenergydemandgrowthbetween2019and2040(IEA2020b).Tomeetthisdemand,thegovernmenthasprioritizedutility-scalesolarsystems,homesolarsystems,andmini-gridsforlast-mileelectricityconnectivityinruralcom-munitiesthroughanenablingpoliticalandeconomicframework.Indiahasvastsolarenergyresources,withnearly750gigawatts(GW)ofpotential(Bandyopadhyay2017).Since2010,thegovernmenthasprioritizedsolarenergyaspartofitseconomictrans-formationagenda,usingfavorablepoliciessuchasREtargets,fiscalincentives,FiTs,andreverseauctionmechanisms(figure3.16;Economist2022).PolicyIndiaidentifiedenergyandclimatechallengesandsetREtargets,backedbygovern-mentprogramsandplanning,asleveragepointstosolveitsproblems.Asafirststep,thegovernmentsetouttheNationalActionPlanforClimateChangein2008(RainaandSinha2019),creatinginitiativeswithmeasurableobjectivestoadvancethesolarenergygoalundertheactionplan.ItintroducedtheNationalSolarMission(NSM)in114RealityCheck2010todevelopothersupportingsystemsforsolarenergyadvancement,taskingtheMinistryofNewandRenewableEnergywithimplementingit.Ithastargetedachieving500GWofnonfossilenergycapacityby2030initsNDCand30­percentsolarenergycontributiontotheelectricitymixby2040inthe2070Net-ZeroplanannouncedbyPrimeMinisterNarendraModiatthe26thUnitedNationsClimateChangeConferenceoftheParties(COP26)inGlasgow(GovernmentofIndia2014;IEA2020b).FIGURE3.14NewAnnualEnergyCapacityAdditions,inGigawatts,2015–21Source:JaiswalandGadre2022.201502468101214161820192165486999CoalSolar933620162017Gigawatts2018201920202021FIGURE3.15RenewableEnergyInvestmentinIndia,2004–22Source:BloombergNEF2022.160102030405060708090022004Investment($,billion)%Solarinvestment200520062007200820092010201120122013Year201420152016201720182019202020212022468101214OtherRenewableenergySolarenergy%solar115DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFiscalpoliciesandfinancialincentiveshavehelpedenhanceREinvestment.In2010,thegovernmentcreatedtheNationalCleanEnergyFundthroughacess(fee)oncoal(originally$0.75/metricton,revisedto$5.7/tonin2016)tosupportthenascentsolarenergysectorbycreatinginitialcapitalforRE(IISD2018).Thefederalandstategov-ernmentsalikehavealsoprovidedotherfiscalincentives,includingsolarprojectsubsi-diesandtaxincentives.Forexample,inthe2019PradhanMantriKisanUrjaSurakshaevamUtthanMahabhiyanscheme,manystategovernmentsagreedtoprovide30­percentsubsidiestodeploy10GWsolarenergyplants.AccelerateddepreciationtaxbenefitsfordevelopersalsofeaturedprominentlyinIndia’ssolarenergystrategy,allow-ingthemtodepreciateREassetsatmuchhigherratesthangeneralfixedassetsandclaimtaxbenefitsoneachyear’sdepreciatedvalue.Between2014and2017,theratewassetat80­percent;thiswasrevisedto40­percentin2017.Inaddition,theGovernmentofIndia’sNSMprovideddemandandtechnologysup-portandpoliciesfortariffandcapacitybuilding.Theseincludethefollowing:■■InterstateTransmissionSystemchargewaivers■■Dedicatedsolarparksfornewprojects,toaddressdelaysanddifficultiesinlandacquisitioncausedbycomplexlandpermits,alackofclarityoverlandtitles,out-datedrecords,andfragmentedlandholdings(Behuria2020;IEA2020b,2021d;RainaandSinha2019)FIGURE3.16India’sSolarEnergyExpansion—KeyMilestones20082010201520162020•SetupNAPCCtoaddressclimateissues•Feed-intariffs•Fiscalincentives•Renewablepurchaseobligations•Gridexpansion•Walverofinterstatetransmissioncharges•Must-runstatusetc.•NDCdevelopedfromNAPCCin2014•SetupNationalSolarMissionCreateenablingpolicy2010–20•SetupSolarEnergyCorporationofIndiaLtd(SEC)undertheMNREtoactualiseNSMgoals•Introducedcoalcess•Setatargetfor20GWsolarin2022•UpdateNSMtargetto100GWin2022•Indiahasfastestgrowingsolarenergysector•Involvementofinternationalnance•Businessvalidation,forexample,RewaSolarproject•IndiasolarhaslowestCAPEX•IndiahaslowestsolarLCOE•IndiahasintroducedsolarPLItoboostlocalproduction•SECfacilitatesolarpowertradeIdentifychallengesandsettargets:1.Growingenergydemand2.HighCO2emissions3.EnergysecuritychallengesSource:BloombergNEF2022.Note:CAPEX=capitalexpenditures;GW=gigawatts;LCOE=levelizedcostofenergy;MNRE=MinistryforNewandRenewableEnergy;NAPCC=NationalActionPlanforClimateChange;NDC=nationallydeterminedcontribution;NSM=NationalSolarMission;PLI=Production-LinkedIncentiveScheme.116RealityCheck■■Reverseauctionstoencouragecompetitivebiddingandreducesolarenergytariffs■■State-dependentFiTsof$0.16–0.36perkilowatthour(kWh),andnetmetering,whichcreditssolarenergyownersbasedonsurplusenergyexportedtothegrid■■Renewablepurchaseobligationsforutilitiestobuy10.5­percentoftheirelectric-ityfromsolarsourcesby2022■■Must-runstatuspolicy,prioritizingthepurchaseofREoverfossilenergybygridoperators■■WorkingwiththeInternationalSolarAlliancetoofferfinancialanalysisofsolarenergyproposaltrainingforfinancialinstitutions.Althoughthenationalgovernmentretainedcontroloverlong-termstrategy,stategovernmentsplayedacriticalroleinengenderingthetransition:■■Signingsolarpowerpurchaseagreementstoencourageinvestmentandfacilitat-ingthepurchaseofrenewableelectricity■■Facilitatinglandselectionandapprovalandprovidinginfrastructureforsolarparksforprojects■■Supportinginterstatetransmissionthroughright-of-wayaccessandenviron-mentalclearances■■Providingyouthskillstrainingtobuildtechnicalcompetencyforsolarjobs(NRDC2016).Supportedbythesepolicies,theprivatesectorandinternationalfinancialagenciesprovidedbusinessmodelsforbankablesolarinvestment.Solarassetshavehistoricallybeenconsideredriskyduetotheirhighup-frontcosts,longpaybackperiods,andproj-ectuncertainties(Sarangi2022).Asaresult,banksofferedhigh-interestratesforsolarprojects,makingitdifficulttoaccessprivatecapital.Toaddressthis,internationalfinancialinstitutionsprovidedscalablePPPmodels,asinthecaseofthe750MWWorldBank–financedRewaSolarParkinMadhyaPradesh,aflagshipsolarprojectthatpow-ersametroraillineservingmorethan2.6millioncommutersaday.TheWorldBankprovidedtechnicalandfinancialsupportintheformofconcessionalcreditsthatimprovedinvestorconfidence,whilethestateprovidedinstitutionalsupport,includinglandandpaymentsecurity.Overall,theprojectachievedtariffsthatwere24­percentlowerthanthepreviouslowestnationalsubsidy-freetariff(IFC2020).ResultsandImpactsThankstothisconducivepolicyenvironmentandtheglobaldeclineinsolarenergycosts,India’ssolarenergytransitionisunderway.Theup-frontcapitalexpenditureforutility-scalesolarinIndiahasdecreasedsignificantly,makingIndiaoneofthecheapestplacestodeploygrid-scalesolarpowerintheworld.TheattractivenessofIndia’ssolarsectorhasledtoa$71billioncapitalinflowoverthepasttwodecades,increasingsolarinstallationsfrom65MWin2010tomorethan57GWcapacityin2022(table3.4;IEA2020b,2022e;MinistryofPower2022).117DecarbonizationPolicyImplementation:IllustrativeCaseStudiesTheincreaseddeploymentofsolarhasresultedinavoidedCO2andairpollutantemissions,improvedelectricityaccess,andcreatedjobs.Withacarbonfootprintof4to6gramsofCO2perkWh,comparedwiththepowergrid’s718gramsofCO2perkWh(RitchieandRoser2022),solarpowercanreduceIndia’semissionsby1GtCO2eby2030,inlinewithitsclimatetargets.Solarsystemsalsoimproveelectricityaccess:­government-backedprogramshaveprovided3.4millionsolarlamps,morethan350,000solarhomesystems,andmini-gridsforlast-mileelectricityconnectivityinmanyruralcommunities(Zaman,vanVliet,andPosch2021).Thesectorhasalso­createdgreenjobs,withsolarPV-relatedjobsinIndiareaching163,500in2020(IRENA2021).KeyTakeawaysIndiashowshowcountriescanachieverapidscale-upofclimate-smartsolutionsbyleveragingthestrengthsofdifferentstakeholders.Thegovernmentprioritizedthesec-torbysettingaboldnationaltargetandprovidedbothastablepolicyecosystemandatimelyandadequatesetofincentives.Developmentfinanceinstitutionsprovidedcon-cessionalfinancingtokick-startthemarketandbackedprivateinvestmentsbyappro-priatingthenecessaryriskmitigationinstruments.Finally,theprivatesectorinvestedinIndia’ssolarenergyscale-upandembracedtechnologicaladvancements.Indiaaimstogrowdomesticsolarmanufacturing.In2017,thelargestbilateralsolarexportflowwasfromChinatoIndia,valuedat$2.72billion(Wangetal.2021).UnderstandingthesupplychainissuesthatemergefromIndia’sdependenceonChinaforsolarcells,includingtransportationandshipping,whichincreasesolarpowercostsandtheincreasedgeopoliticalrisksofenergysecuritycausedbyimportdependence(Shiradkar2022),andinlinewithitsplantocreategreenjobs,thegovernmentofIndiahasearmarkedfundingforPVmanufacturingaspartofits$26billionProduction-LinkedTABLE3.4KeyResultsofIndia’sSolarEnergyExpansionDriveObjectiveResultsReducedup-frontcapitalexpendituresolar$5,000/kW(2010)a$596/kW(2020)aReducedlevelizedcostofsolarenergy$0.17/kWh(2010)a$0.038/kWh(2020)a34%lessthantheglobalaverageaIncreasedrenewableinvestment$71billionsince2000bHigherdeploymentandincreasedsolarcapacitytargets100GWsolartargetfor2022cSources:BloombergNEF2022;IEA2022e;IRENA2021.Note:GW=gigawatts;kW=kilowatts;kWh=kilowatthours.a.DatafromIRENA2021.b.DatafromBloombergNEF2022.c.DatafromIEA2022e.118RealityCheckIncentive(PLI)scheme(ETBureau2021).Ofthis,$2.6billionwillbemadeavailabletocatalyzethedevelopmentofdomesticsolarmanufacturingforplantswithmorethan1GWcapacity(Rai-Roche2022).ToaddressREintermittencyandstoragerequirements,thenationalgovernmenthassetoutinitiativestoimprovegridrobustness.In2013,thecountryachievedfullregionalpowersystemconnectivity.In2015,itdesignedtheGreenEnergyCorridorPolicytosynchronizeREgenerationwithconventionalpowerstationsinthegrid.Underthesepolicies,therewassignificantinvestmentingridcapacityexpansion,witharevisedtargetof9,700circuitkilometerstoexport20GWofREgenerationby2022(MNRE2022).Thisnationalgovernment,stateequity,andloan-fundedschemehassurpasseditstarget,adding9,767circuitkilometers.Othertargetsincludeincreasingcapacityfrom75GWin2017to118GWin2022.Thegovernmentisalsoharnessingbatteryandhydropowerstorageforancillarymarketservicesandsponsoringresearchintonewandmoreviablebatterystoragetechnologies.In2021,itannouncedplanstofloat4,000-megawatthour(MWh)grid-scalebatterystoragetenders.Theseeffortshavepositivelyaffectedenergytradevolumesandrenewablepowerdistributionanddecreasedblackoutsduetolowgridcapacity,settingthestageforfutureexpansion.Rapidpowersectortransitionwillcausemoregridoperationalconstraints.Toaddressthesechallenges,demandandsupply-sideflexibility,gridflexibility,storage,andpowermarketframeworkswillbeneeded.Thegovernmentshouldthereforebuildapricingmechanismandacceleratetherolloutofadvancedmeteringinfrastructuretoincentivizeactiveparticipationinenergyconsumptionandmatchpeakproductionandconsumption.Itispossibletoremoveregulatorybarrierstobatteryandhydrostor-agedeploymentbyprovidingtheproperremunerationframeworkfordistributedstor-ageprojectstoincentivizefurtherinvestment.Thegovernmentcanalsointroducemeasurestoenhanceinterstateenergytrade.Inthelongterm,itcanresearchinnova-tivesystems,suchasEVsforstorageusingthevehicle-to-gridframework.Finally,withthereducedcostofsolarpowerinIndia,thegovernmentcanprioritizeresearchintointegratingsolar-poweredelectrolyzerstoproducegreenhydrogenforreliableshort-andlong-termstoragethatcanimproveIndia’sgridrobustness.119DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:ColombiaCaseStudy17.GasFlaringinColombiaContributors:ZubinBamjiandAdamPollardEliminatingroutinegasflaringmustbecentraltodecarbonizationefforts.ThisburningofnaturalgasassociatedwithoilextractioncontributestoclimatechangeandimpactstheenvironmentthroughCO2,methane,andotheremissions(WorldBank2021f).Eachyear,gasflaringcontributesaround400MtCO2etoglobalemissions;accordingtoaWorldBankstudy,itcouldcostasmuchas$100billiontoendallroutineflaring(WorldBank2018c).Reducinggasflaringprovidesenergyconservationcobenefits,allowingthegastobeeitherconservedorusedforproductivepurposes,suchasgeneratingpowerandexpandingenergyaccess.In2021,theGlobalGasFlaringReductionPartnershipesti-matedthatmorethan144billioncubicmetersofgaswereflaredatoilandgas­productionsitesaroundtheworld(WorldBank2022g).Thisisenoughtogeneratesome1,800TWhofenergy,almosttwo-thirdsoftheEU’snetdomesticelectricitygen-erationorequivalenttoSub-SaharanAfrica’sentireelectricitygenerationcapacity.Colombiahasmadesignificantadvancementsinreducinggasflaring.Throughacombinationofgovernmentandbusinessaction,thevolumeofgasflaredinColombiahasdeclinedbyalmost70­percent.ContextColombiaisanemergingmarketeconomywithdomesticoilreserves.Crudepetro-leumisColombia’slargestexport(byvalue)andcontributesalmost$7.5billiontotheeconomyeachyear(OEC2023).Itsoilreservesarelargelymanagedbythenationaloilcompany,Ecopetrol(EIA2022).ThemajorityofColombia’sgasisfoundintheformof­associatedgas,meaningthegasisproducedasaby-productduringcrudeoilextraction.BothoilandgasoperationsinColombiahavebeentroubledbystrikesandprotests.PolicyProactivecompany-ledactionhelpedkick-startprogressonflarereduction.In2010,Ecopetrollauncheditscurrentclimatechangestrategy,whichincludesmonitoringandreportingGHGemissions,reducingemissionsfromthecompany’soperationsandsupplychain,engaginginresearchanddevelopment,andcontributingtothenationalclimatepolicy.Thecompanydevelopedaworkplantoreduceflaringby8MtCO2eby2021andcarriedoutsomeprojectstoreducemethaneleaksfromitsequipment.Since2010,120RealityCheckEcopetrolhasalsocommittedtoreducingitsscope1and2emissionsby25percentby2030comparedwith2019levels,andtoachievingnetzeroemissionsby2050(Ecopetrol2020).EcopetrolhaslinkeditstargetstoColombia’sNDC.Attheendof2020,ColombiasubmittedanupdatedNDC,increasingitscommitmenttoreducingGHGemissionsby2030from20­percentto51­percent,albeitfromaslightlyhigherBAUscenarioemis-sionlevel.Thenew2030targetforGHGemissionsis169MtCO2e,downfrom265MtCO2eintheoriginalNDCsubmittedin2018(UNFCCC2022b).TheNDCnotesgasutilizationasanopportunityforemissionreduction.Governmentlaws,regulations,andinitiativeshavesupportedgasutilizationandflarereduction.TheColombiangovernmenthasenabledprogressbyestablishingadomesticgasmarketandimplementingstrongregulationsthatstrictlyprohibitandmonetarilypenalizeunauthorizedgasflaring.ThishasbeenledbytheMinistryofMinesandEnergy(MME),whichistheprincipalgoverningbodyresponsibleforupstreamoilandgasoper-ations.TheNationalHydrocarbonAgency,AgenciaNationaldeHidrocarburos,operatesautonomouslyundertheMMEandisinchargeofadministeringandregulatinghydro-carbons,includinggrantingflaringauthorizations,settingmeasuringstandards,andmonitoringcompliance.Keylegislationrelatedtogasflaringincludesthefollowing:■■Law10/1961,whichexplicitlyprohibitedgasflaringinproductionfieldsforthefirsttime.Article14requiresalloperatorstoavoidwastinganygasproduced.Iftheoperatordoesnotstopwastinggaswithinthreeyears,thegovernmenthastherighttotakeownershipofgasfreeofchargetoimproveutilization.■■MMEResolution181495/2009,whichconstitutesthemainregulatoryframe-workforexploringandproducinghydrocarbons.Articles52and53prohibitgasflaringandwasting.Article64imposesafineofupto$5,000forviolations.■■MMEResolution41251/2016,whichcoversmeasurementandreportingrequire-ments,includingmonthlyreportingofflarevolumes.■■MMEResolution40687/2017,whichestablishestechnicalstandardsforoffshorehydrocarbonexplorationprojectsandregulatesgasflaringandventingfortheseactivities.■■MMEResolution40066/2022,whichupdatesprovisionsforflaring,venting,andfugitivemethaneemissions,withmoredetailonwhenflaringexemptionsmaybegrantedandgreaterfinancialpenaltiesforinfringements(finesof2,000to100,000timesthelegalmonthlyminimumwageforeachbreach).Colombiahasjoinedaglobalmovementfortacklingunnecessaryflaringandmeth-aneemissions.In2020,EcopetrolendorsedtheWorldBank’sZeroRoutineFlaringby2030initiative.ThefollowingyearduringCOP26,thegovernmentsignedtheGlobalMethanePledge,demonstratingacommitmenttovoluntarilyacttowardreducingglobalmethaneemissionsbyatleast30­percentfrom2020levelsby2030.AdoptingResolution40066/2022hasmadeColombiaoneofthefirstcountriestoregulateflar-ing,venting,andfugitivemethaneemissions.121DecarbonizationPolicyImplementation:IllustrativeCaseStudiesResultsandImpactsAcombinationofstronglegalandregulatoryactionwithproactivebusinessleadershipmeansthatColombiahasmadesignificantprogressinreducinggasflaringoverthepastdecade.Thevolumeofgasflaredhasdeclinedbyalmost70­percent,from1billioncubicmetersin2012to0.3billioncubicmetersin2021(figure3.17).Flaringintensityalsodeclinedsteadilyduringthisperiod,decreasingfrom2.86cubicmetersofgasperbarrelofoilproducedin2012to1.22in2021.Gasflaringreductionshaveprovidedenvironmental,health,andeconomic­cobenefits.Throughthereductionsmadebetween2012and2021,ColombiareduceditsGHGemissionsby1.76MtCO2e,equivalentto2­percentofitstotalemissions.Thesereductionshavealsodecreasedthevolumeofblackcarbonparticulatematterreleasedthroughflaring,whichhasbeenassociatedwithadversehealtheffects.Atasalesvalueof$2.5permetricbillionBritishthermalunit,thecountryavoidedapproxi-mately$75millionoflostvaluein2021,comparedwith2012.AfocusongasutilizationhasbenefitedColombia’sdomesticenergysupply.Unlikemanyotheroil-producingnations,Colombiadoesnothaveanabundantsupplyofdomesticnaturalgas.Itsprovengasreserveshavebeenincontinuousdeclinesince2012,almosthalvinginvolumebetween2012and2020.In2016,ColombiaimportednaturalgasforthefirsttimetomeettheshortfallbetweendomesticproductionandFIGURE3.17FlareVolumeandIntensityinColombia,2012–21Source:WorldBank2021f.TakenfromtheNationalOceanicandAtmosphericAdministration,PayneInstituteandColoradoSchoolofMines,GlobalGasFlaringReductionPartnership,andEnergyInformationAdministration.Note:bcm=billioncubicmeters;m3/bbl=cubicmetersofgasperbarrelofoilproduced.1.23.53.02.52.01.51.00.501.00.80.60.40.202012201320142015201620172018201920202021Flaringintensity(m3/bbl)Flarevolume(bcm)FlarevolumeFlareintensity122RealityCheckdemand(IEA2020a).Thefocusonimprovinggasutilizationthroughflarereductionhasbeenanimportantmeasureforthecountry’senergyself-sufficiency.Accesstonat-uralgashasalsoplayedaroleinthenation’ssustainabledevelopmentgoals.Overthepasttwodecades,Colombiahasmademeaningfulprogressinimprovingaccesstocleancookingfuelsandtechnologies,increasingpopulationaccessratesfrom78­percentin2000to93­percentin2020(IEA2022g).Clean-burninggasstovetopshavecontrib-utedtosomeoftheseimprovements.KeyTakeawaysTheColombiangovernmenthasimplementedwidespreadregulationsaroundmeasur-ing,reporting,monitoring,andcomplyingwithregulationsrelatedtogasflaring.Anautonomousgovernmentbody,theNationalHydrocarbonAgency,hasmonitoredandenforcedcompliancewiththeseregulations,makingthemmoreeffective.Establishingadomesticgasmarkethasprovidedfinancialincentivesforlocaloper-atorstocomplywithregulationsandreduceunnecessaryflaring.Simultaneously,thepresenceoffinancialpenaltiesfornoncomplianceprovidesfurtherincentivesforoper-atorstoconform.Ecopetrol’sproactiveclimatechangestrategiesandcommitmentsdemonstratehowaligningbusinessandgovernmentobjectivesonflarereductioncanaccelerateprogress.LookingtotheFutureReducingunnecessaryflaringcouldhelpalleviatecurrentgasshortages.Russia’sinva-sionofUkrainehassparkedaglobalenergycrisisandalargereductioningassuppliesflowingtotheEU(IEA2022d).Buildingnewprojectsandinfrastructuretoaddresstheseshortageswilltaketime,buttheColombiancasestudydemonstratesthatproac-tiveactiononflaringcanreturnrelativelyfastresultsanddelivergas-savingbenefits.Furtherworkisneededtoachievezeroroutineflaring.In2015,theWorldBanklaunchedtheZeroRoutineFlaringby2030(ZRF)initiativetosupportcooperationbetweenallrelevantstakeholderstofindsolutionstogasflaringthroughappropriateregulation,applicationoftechnologies,andfinancialarrangements.Todate,theZRFinitiativehasgarneredendorsementsfrom87governmentsandcompanies,represent-ingover60­percentofglobalflaring(WorldBank2022o).Furtherworkisneededtocontinueprogressandeliminateroutineflaringby2030.123DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:IndiaCaseStudy18.PublicTransportSystemsinIndiaContributor:GeraldPaulOllivierContextIndia’supdatedNDCtargetsa45­percentreductioninGHGemissionsintensityby2030,comparedwith2005levels(GovernmentofIndia2022).Thetransportsectorcontributesapproximately10percentofIndia’sGHGemissionsandhastheworld’sfastestenergyusagegrowthrate,averaging6.8­percentperyearsince2000(LBNL2022).Oilproducts,mostlydieselandgasoline,supplied95­percentoftotalenergyinthesector,androadtransportenergydemandaccountedfor90­percentofthetotaloildemandin2017(IEA2020b).Heavy-dutyvehicles,suchasbusesandtrucks,consumed55percentoftotalenergywithinIndia’sroadtransportsectorin2010;thisshareisexpectedtoreach67percentby2030(Sharmaetal.2017).Asaresult,thegovernmentofIndiahasidentifiedtheelectrificationofheavy-dutyvehicles—particularlybuses—asaprioritypolicyintervention.PolicyThegovernmentofIndiaistakingupseveralfiscalandregulatorymeasurestoacceler-ateEVmanufacturingandadoptionacrossvehiclesegments(WorldBank2022d).Atotalof$7.1billionhasbeenearmarkedacrossincentives,including$5.8billionforproduction-linkedincentivesforEVmanufacturers,componentmanufacturers,andadvancedchemistrycells,and$1.3billionforend-userincentivesundertheFasterAdoptionandManufacturingofElectric(andHybrid)VehiclesinIndia(FAME-II)scheme.ElectrificationofpublictransportationisakeypriorityunderFAME-II,withabout35percentofthetotalsubsidyoutlayearmarkedforbuses.Electrifyingbusesprovidesthetwinbenefitsofmitigatingemissionsandimprovingmobilityaccessforthemasses,asbusesarethemainstayofmobilityinIndia.ThefirstphaseofFAME-IIforbuseswitnessedprocurementofcloseto3,500busesacross36tendersfloatedbetweenApril2019andMarch2021(WorldBank2022i).PricesunderPhase1ofFAMEIIvariedwidelybetweencities,despiteprocuringsimilartypesofbus.Thiswasdrivenbyvariationsincontractualparameters,thevolumeofbusespro-cured(from25busesinsomecitiesto300inothers),differentprocurementspecificationswithcitiesrequiringdifferenttechnicalandfinancialcommitmentsfromthebidders,andcities’creditworthiness,whichposedvaryinglevelsofcreditrisktothebidders.124RealityCheckBuildingonthelearningsfromPhase1,thegovernmentofIndiaadoptedanaggre-gatedprocurementapproach,withconcentratedlarge-scaledeploymentandstandard-izedprocurementspecificationstoachieveeconomiesofscale.ConvergenceEnergyServicesLimited(CESL),agovernmententerprise,wasentrustedwiththejobofaggre-gatingdemandacrossnineIndianmetropolitancitieswithapopulationofmorethan4million.CESLinvitedcitiestosubscribetothenumbersandtypesofelectricbustheyneededagainstharmonizedprocurementspecificationstobeadoptedacrossallcities.Theavailablesubsidywasallocatedtocitiesinproportiontotheirsubscribeddemand.Fiveoutofthenineeligiblecitiesparticipatedintheprocess,subscribingforatotalof5,450buses,ofwhich3,472buseswereeligibleforsubsidy.Therestweretenderedwith-outsubsidy.Thisinitiativeadoptedagross-cost,contract-basedbusinessmodelwhereinprivateserviceprovidersinvestinthepurchaseofbusandcharginginfrastruc-tureandundertakeoperationsandmaintenancethroughoutthecontracttenure.Thegovernmentbusauthoritydefinesservicelevels,monitorsimplementation,paystheoperator,andcollectsrevenue.CESLfloatedarequestforproposals(RfP)fromcitiestodiscoverthepricesinIndianrupees(Rs)perkilometerforthe5,450busessplitacrossdifferentlots,accord-ingtotechnicalspecificationssuchaslength,floorheight,andair-conditioning.Theeligiblebidderswiththeleast-costquotewouldbetheselectedserviceproviderforeachlot.TheRfPcoversawiderangeoftechnicalandfinancialspecifications,coveringitemssuchaseligibilitycriteria,vehicleandchargerrequirements,operationalrequirementssuchasdepotsandroutes,contracttenure,groundsforearlytermination,paymenttermssuchasassuredkilometersofpayment,periodicityofpayment,paymentguaran-teemechanisms,penaltiesforunderperformanceagainstservice-levelagreements,andarbitrationmechanisms.CESLadoptedacollaborativeandtechnicallysoundapproachtowardharmonizingprocurementspecificationsacrosscitiesandensuringtheirrobustness.Thisreducedthenumberoflotsandmaximizedlotsizeswherevertechni-cally,commercially,andpracticallyfeasible,enablingeconomiesofscale.TheWorldBankprovidedtechnicalsupporttoNITIAayogandCESLinharmonizingthespecifi-cations,andenhancingandcalibratingcontracttermstobalanceriskstoallparties,therebyreducingcosts.ResultsandImpactsTheRfPattractedfoureligiblebidders,post-technicalevaluation.Financialevaluationofeligiblebiddersfoundthatthelowerquotefora12-meterair-conditioned,low-floorbuswasRs47.99(~$0.64)perkilometer,andfora9-meterair-conditionedbus,Rs44.99(~$0.60)perkilometer.Priceswereabout37percentlowerthanprocurementunderPhase1ofFAMEIIwiththesamesubsidy,equivalenttosavingmorethanRs10,800crore(CR)($1.45billion)overthe12yearsofthecorrespondingcontracts.Thiswasmadepossibleduetotheeconomiesofscaleofferedbythelargecontract125DecarbonizationPolicyImplementation:IllustrativeCaseStudiesvolume,improvedprocurementspecificationsthatmadethecontractmorebankable,andthefiveselectedcitiesbeingamongthemorematurebussystemsinIndia,withdepotinfrastructureinplace.Aswellasbeinglowerthanpreviouselectricbusprocurements,thepriceswerealsobetterthanthecostofoperatingon-roaddieselandCNGbusesinthesecities.Thequotedcostsforelectricbuses,excludingsubsidy,was27and23percentlowerthanthecostofthedieselandCNGbusesoperatinginthesecities,respectively.Includingtheavailablesubsidy,theywere35and31percentlower,respectively.However,factorssuchastherecentriseinfuelpricesandlowerbuskilometersperdayduetopassengerdemandnotyetreachingpre-COVIDlevelsareleadingtohigher-than-usualcostsperkilometerfordieselandCNGbuses,soitislikelythatthecostdifferencemaynarrowasfuelpricesandoperationsstabilize.Thatsaid,servicesrunwithelectricbusesareexpectedtoremaincheaper.Together,these5,450busesareanticipatedtodeliverGHGemissionssavingsofover1MtCO2eacrosstheir12-yearlifecycle,indicatingsignificantmitigationpotentialwithoutaccountingforthemodeshifttheyenable.KeyTakeawaysTheresultsoftheaggregatedprocurementpolicymarkaclearinflectionpointinIndia’selectricbusadoptionstory.Forthefirsttime,thepricesquotedforelectricbusesarecheaperthantheirdieselandCNGcounterparts.Suchlowpriceshaveencouragedmorecitiestoadoptelectricbusesastheirprimarychoiceinthefuture.Followingthisnational-levelaggregatedprocurement,thecityofMumbaihasprocuredanother2,100busesatsimilarcosts.Thenationalgovernmentisnowlookingtoscaleuptheaggre-gatedprocurementmodelacrossIndiatosecureabout50,000electricbusesoverthenexttwotothreeyears.Suchlarge-scaleprocurementwillensuretheadoptionofelec-tricbuseseveninruralandintercitybusmarkets,whichrepresent90percentofthecountry’sfleetandbuskilometers.TheGHGemissionmitigationestimatesalsopointtosignificantdecarbonizationofIndia’sbusservicesthroughlarge-scaleelectrification.Busagenciesarenowlikelytoconsiderelectricbusesastheirprimarychoice,onlyopt-ingfordieselandCNGbusesifelectriconesarenotfeasible.126RealityCheckFacilitating,Enabling,andTriggeringSectoralTransitions:ColombiaCaseStudy19.GreenBuildingMarketTransformationinColombiaContributors:CorinneFigueredoandSarahMeganSantucciWhenitcomestogreenbuildings,nomarkethasseenamoreremarkabletransforma-tionthanColombia.Between2021and2022,27percentofnewbuildingsinColombiawerecertifiedgreenwithEDGE,abuildingcertificationtoolthatenablesinvestorsanddeveloperstocalculatethecostofgoinggreen(LozadaAndrade2021).AsofDecember2022,acumulative11.5millionsquaremeters(roughlyequivalentto$11.5billionworthoffloorspace)ofEDGE-certifiedgreenspaceshadeitherbeenbuiltorwereunderconstruction.Colombiaowesthetransformationofitsconstructionsectorinlargeparttostronggovernmentsupportandastronglocalpartner,theColombianChamberofConstruction(CAMACOL).ContextColombiahasasupportivepolicyframeworkandactivecommitmenttoclimatemiti-gationandadaptation.In2015withInternationalFinanceCorporation(IFC)supportandaspartofitsNationalGreenGrowthStrategy,theColombiangovernmentenactedLatinAmerica’sfirstmandatorygreenbuildingcode.Soonafter,italsointroducedtaxincentivesfortechnicalsolutionssuchasinsulationandenergy-efficientaircondition-ingsystems.Bysettingtargetsforenergyandwatersavingsthroughthecodeandoffer-ingincentivestosupportthefinancialviabilityofthesenewpractices,Colombiaachievedaprogressiveapplicationofsustainableconstructionpractices.OpeningFinanceforGreenBuildingsIn2016,IFCinvestedinColombia’sfirstprivategreenbond,issuedbyBancolombiaforatotalof$115million.Usingitsownresourcesalongsidetheproceedsofthegreenbond,thebankofferedareducedinterestrateasanincentivetostrengthenitsgreenbuildingportfolio.Thisgaverisetoanaggressivegreenmortgagesprogramin2017.IFC’sinvestmentalsoencouragedotherbankinginstitutionstofollowsuit.In2017,Davivienda’s$149milliongreenbond,purchasedbyIFC,becamethelargestgreen-bondissuancebyaprivatefinancialinstitutioninLatinAmerica.By2021,fivecom-mercialbanksinColombiawereofferinggreenmortgagesandgreenconstructionfinance:Bancolombia,Davivienda,BancoBilbaoVizcayaArgentaria(BBVA),BancoBogotá,andCajaSocial.ColombiahasthemostfinancialinstitutionsofferingthistypeoffinancialproducttargetingtheconstructionsectoracrossLatinAmerica.127DecarbonizationPolicyImplementation:IllustrativeCaseStudiesIn2017,IFCstartedworkingwithCAMACOLtopromoteEDGE.AnIFCinnova-tion,EDGEprovidesaplatformfordesigningandcertifyinggreenandzerocarbonbuildings.CAMACOLdelivereddozensofEDGEtrainingandcapacity-buildingses-sionstoitsmembers.EncouragedbyaccesstogreenfinanceandwithsupportfromCAMACOL,Colombia’slargestsocialhousingdeveloper,ConstructoraBolivar,hascertifiedover$2billionworthoffloorspaceacrossthecountry.InAugust2022,IFCprovidedaloanofupto$200milliontoBBVAColombiatosupportthebank’slendingprogramforclimate-smartprojects,withafocusongreenbuildingsandanemphasisonprojectsthatachieveEDGE’sadvancedcertification(IFC2019).ThisisthefirstloansupportedbytheMarketAcceleratorforGreenConstructionPrograminColombia.SponsoredbytheUKDepartmentforBusiness,EnergyandIndustrialStrategy,thisprogramaimstoexpandthegreenbuildingmar-ketbyencouragingfinancialintermediariestodevelopnewfinancingproductsforgreenconstruction.IFChasalsoprovideda$40millionloantoVisumRentasInmobiliariasRealEstateCollectiveInvestmentFund(Visum),thefifth-largestrealestateinvestmentfundinColombia.Visumwillusetheloantosupportits2022–24investmentplaningreenconstruction,whichincludesdevelopingaworld-class80,000squaremetercustom-builtdistributioncenterforleadingregionalretailerFalabellaforitsretailoperationsandelectroniccommerce.ResultsandImpactsIFCestimatesthatEDGE-certifiedfloorspacenowexceeds20percentofnew­constructionandrepresentsacumulativeprivatesectorinvestmentofmorethan$11.5billion.Therearenowmorethan157,000EDGE-certifiedhousingunitsacrossthecountry,andtwo-thirdsofthesearelow-incomeandaffordablehousing.Takingintoconsiderationthatalow-incomefamilycanspendupto15percentoftheirmonthlyincomeonutilitycosts,reducingthesethroughmoreefficienthousingisasignificantachievement.ThekeyresultsofColombia’sgreenbuildingexpansionaresummarizedintable3.5.TABLE3.5KeyResultsofColombia’sGreenBuildingExpansionResultDetailsIncreasedEDGEcertificationByJune2021,over20%ofallnewbuildsinColombiawereEDGE-certifiedReducedenergyandwaterconsumptionSomeofColombia’sEDGE-certifiedgreenbuildingsareareusing45%lessenergyand42%lesswater,respectivelyTechnicalassistancetolocalgovernmentsBuildingonitsexperiencesinPeru,IFCishelpingcitiesacrossColombiatoencouragetheconstructionofgreenbuildingsthroughmunicipalincentivesNote:FormoreinformationonEDGE,seehttps://edgebuildings.com/project-studies/foresta-etapa-1/.IFC=InternationalFinanceCorporation.128RealityCheckKeyTakeawaysTherearefourkeyelementstoColombia’ssuccessfulgreenbuildingmarkettrans‑formation:■■Governmentsupport:CreatingtheGreenBuildingCodeandappropriatetaxincentivestobolstertheinterestoftheprivatesectortobuildgreenprovidedthefoundationsforthistransformation.■■Financialinstitutionsofferinggreenproducts:Colombiahasthemostfinancialinstitutionsofferinggreenmortgages,oragreenproductfortheconstructionsector,inLatinAmerica.Theavailabilityoftheseproductshasprovenagamechangernotonlyfordevelopers,whoreceiveattractiveratestofinancetheirprojects,butalsofortheendclients,givingColombianfamiliesbetterinterestratesforfinancingtheirgreenhomes.■■Acommittedlocalpartner:CAMACOL’scommitmenttoforgingagreenrealestatesector,itssolidinstitutionalpositioninColombia’sconstructionindustry,anditsinterestinpromotingEDGEasaneffectivetooltodesigngreenbuildingswasvitaltoeffectivelyreachalargenumberofdevelopers.CAMACOLestimatesthat230constructioncompaniesarecertifyingtheirprojectsasgreen.■■Trainingofdevelopersandprofessionals:Todate,Colombiahas136EDGEexperts,42percentofwhomarewomen(IFC2023).CAMACOLanditsregionalofficeshaveoffereddozensoftrainingstoguidedevelopersandconstructioncompaniestodesignandbuildgreenprojectsinColombia’smajorcities.LookingtotheFutureToachievecompliancewiththeParisAgreement,newbuildingsmustbenetzerocar-bonintheiroperationsby2030,andexistingbuildingsby2050.Despitethegreengrowthoftheconstructionsectorinrecentyears,sustainablebuildingshaveyettobeconsolidatedasageneralpracticeinallterritories.Forthisreason,IFCandCAMACOL,withthesupportoftheColombiaGreenBuildingCouncil,areundertakingacapacity-buildingprogramtohelpmunicipalgovernmentscreatemunicipalbylawsthatofferincentivesforgreenbuilding.ThisprogramgatherstheexperienceIFChasaccu-mulatedinfosteringgreenbuildingincentiveordinancesinPeru.InJanuary2023,IFC’stechnicalsupportresultedintheapprovalofColombia’sfirst-everlocalbylawtoofferincentivesforgreenbuildings,inthecityofEnvigado.129DecarbonizationPolicyImplementation:IllustrativeCaseStudiesFacilitating,Enabling,andTriggeringSectoralTransitions:ChinaCaseStudy20.Climate-SmartAgricultureinGuangdong,ChinaContributors:WilliamR.SuttonandBethanyLintonContextWhileChinahasachievedtremendoussuccessoverrecentdecadesinincreasingagriculturalproductionandfeedingitspopulation,thissuccesshascomeatthecostofsignificantenvironmentaldegradation(WorldBank2022h).AgricultureinChinaisamajorsourceofair,land,andwaterpollution.China’sagri-foodsystemalsogeneratesmoreGHGemissionsthananyothercountryintheworldandaccountsformorethan14percentofitstotalGHGemissions.10ThesectorreleasessubstantialamountsofCO2,methane,andnitrousoxide,whichtrapupto25and300timestheheatofCO2,respectively.Whenitcomestoagriculturalproduction,thelargestsourcesofGHGemissionsaresyntheticfertilizers,livestockmanure,andentericfermentationfromruminantlivestock,at18,18,and24percent,respectively(figure3.18).Pooragriculturepractices—suchasexcessivefertilizerandpesticideuse,andmismanagedlivestockwaste—arealsotheleadingcauseofwaterpollution(WorldBank,forthcomingb),affectingsourcesfordrinking,recreation,crops,andfisheries.Improvedmanuremanagement,dietarychanges,moreefficientfertilizeruse,andreducingwasteinthefoodsystemcouldcontributetoimportantemissionsreductionsfromthesector.FIGURE3.18China’sFarmGateEmissions,2020Source:WorldBankstaffcalculations,basedon2020datafromFAOSTAT(FAO2020).23.5918.8118.0017.9115.465.031.19793.48MtCO2eChinafarmgateemissions2020SyntheticfertilizersOn-farmenergyuseEntericfermentationRicecultivationCropresiduesOtherManure130RealityCheckChina’s12thFive-YearPlancalledforpollutioncontrolfromcropproductionthroughsoilmanagementandefficientuseofpesticides.Theplanalsodefinedimprovedagriculturaltargetsforeachleveloflocalgovernmentaspartoftheirperformanceevaluations.InGuangdongProvince,heavypesticideandfertilizeruse—60to70percentofwhichendedupasresidueoncropsorwasreleasedintotheenvironment(WorldBank2022b)—andwastefromastandingpigpopulationofmorethan20millionhasledtosignificantwatercontamination.Followingpublicdemandforimprovedwaterquality,thegovernmentaskedforWorldBankassistanceindevelopingpolicyreformandgreenerpracticesonfarms.PoliciesAspartofthispolicyreform,theGuangdongDepartmentofAgriculture,alongsidetheWorldBankandGEF,fundedtheGuangdongAgriculturalPollutionControlProjectin2013,whichaimedtoreducenutrientpollutioninlocalwatersuppliesfromcropandlivestockproductionintheprovince.Thiswouldimprovewaterqualityintheprov-ince’sestuarysystemsandthecoastalecosystemsoftheSouthChinaSea,generatingglobalenvironmentalbenefitsintheformofreducedGHGemissions.Theprojectstrengthenedinstitutionalcapacitytoimplementagriculturalpollutioncontrolactivities,includingmonitoringandevaluationmethodologiesandverificationprocedures.Itgeneratedpolicystudiesonvarioustechnicalpackagesrelatedtotheexcessiveapplicationofchemicalfertilizerandpesticide,lowfertilizeruseefficiency,highriceproductioncosts,andtheincreaseinpigmanureandwastepollutioninGuangdongandacrossChina.Theprojectactivitiestargetedagriculturalofficers,farm-ers,cooperatives,andenterprises,trainingtheminlivestockwastemanagement,fertil-izerandpesticideapplication,andhowtodevelopstandardsandregulationsforcertificationofsafeandgreenagriculturalproducts.Althoughexternalfinancialsup-portforprojectactivitiesconcludedin2021,thepoliciesforgreeneragriculturalpro-ductionareongoing.ResultsandImpactsTheinterventionssupportedbytheprojectresultedinmultiplebenefits,includingdemonstratingaruralcirculareconomybyreplacingchemicalfertilizerswithtreatedlivestockwaste.ThisreducedbothwaterpollutionandGHGemissions.Tosourcethisnaturalfertilizerandreducepollution,theprojectsubsidizedthepilotingof­severalnew,greenerpigproductiontechnologiesthateitherusedlivestockwastetogeneratebiogasforenergyonthefarms,usingthesolidsfororganicfertilizer,orinnovativezerodischargepiggerydesignsthatincorporatecompletecaptureandrapidcompostingoflivestockwasteforuseasorganicfertilizer.Theprojectalso131DecarbonizationPolicyImplementation:IllustrativeCaseStudiespromotedmoremodern,compound,slow-release,andorganicfertilizersforfarmerstouseontheircropsinsteadofoverapplyingsingle-nutrientammoniafertilizer.Togetherwithtrainingonhowandwhentoeffectivelyapplyfertilizersformaxi-mizedcropbioavailability,andpromotingmodernfertilizersamongsuppliers,thepoliciesresultedinimprovedpracticesthatdecreasedcoststofarmers,increasedcropyields,reducedwaterpollution,andloweredGHGemissions.Reducingnutrientpollutantsinwaterwaysalsogeneratedtremendouslocalfinan-cialandenvironmentalbenefits.Theseincludedprovincialeconomicsavings,avoidedexpendituresindownstreamwaterqualityimprovement,avoidedhealthcarecosts,reduceddeforestation,andreducingannualaverageGHGemissionsbyalmost84,000mtCO2e.Muchofthiswasbyreducingmethaneandnitrousoxide.PoliciesaddressingpollutantreductionpracticesandlivestockwastemanagementactivitiesdevelopedundertheprojectarebeingupscaledthroughoutGuangdongProvinceandacrossChina.Forexample,GuangdongProvincehasrecentlywrittenupscalinggoodpollutantreductionpracticesdevelopedundertheprojecttothewholeprovinceintoits14thFive-YearPlanforAgricultureandRuralDevelopment.KeyTakeaways■■AgricultureisnotonlyasourceofGHGemissions;itcanalsoserveasasourceofpracticaldecarbonizationactions,evenwhenitinvolvesmanysmallholderfarmers.■■Improvedagriculturalpoliciescanprovidemultiplewinsatonce,mitigatingGHGemissionswhilealsoreducingwaterpollution,increasingcropyields,andreducingcoststofarmers.■■Promotinglocalenvironmentalbenefitscangenerateglobalpublicgoods.Althoughtheproject’smainobjectivewastoreducewaterpollutioninresponsetolocalpublicdemand,italsogeneratedimportantreductionsofglobalclimatepollutants.■■Positiveresultscanbeachievedwithoutaheavy-handedapproach.Ratherthanbanningpollutingpracticessuchaschemicalfertilizeruseorpigproduction,theprojectsecuredthecollaborationoffarmersandtheprivatesectorbyworkingtogreenexistingpractices.132RealityCheckGettingtheFinanceFlowing:ChileCaseStudy21.E-busesinSantiagodeChileContributors:NicolasPeltier,CeciliaBriceno-Garmendia,andWenxinQiaoContextTheintegrationofe-busesinSantiago’spublictransportsystemisdrivenbyChile’sbroadercommitmenttoachievecarbonneutralityby2050,itsNationalElectromobilityStrategy(establishedin2017,updatedin2021),andotherprograms.11Thisisinaddi-tiontonationwideinitiativessuchastheNationalClimateChangePlan2017–22,theEnergyRoute2018–22,andmorerecentlytheapprovalofaDecarbonizationPlaninthecontextofCOP25.Thetransportsectorwasresponsiblefor25percentofChile’sCO2equivalentemissionsin2018,withroadsaccountingfor86percent,65percentofwhichistraceabletotrucksandbuses(MinisteriodelMedioAmbiente2019).Whileoildominatestheenergymix,powergenerationisquicklyshiftingtorenewables,tappingintothecountry’svastresourcesofsolarenergyandabundantunexploitedpotentialforwind,hydro,andgeothermal(IEA2018).Santiago,withapopulationof6.8millionin2018,hasalmost40percentofthecountry’spopulationandisthemostdenselypopulatedcity.Itspublictransportsys-tem,theRedMetropolitanadeMovilidad—knownsimplyasRed,andformerlyTransantiago—recordsanaverageof5.5milliondailytransactions.Knownforrecentdecadesofeconomicandpoliticalstability,Chile’sinequalityremainsasalientprob-lem.Inthiscontext,providingsustainableandaffordablemobilityisahighpriority.TheNationalElectromobilityStrategyseekstocontributetothemitigationofGHGemissionsbyimprovingthemobilityandqualityoflifeforChileans.ItoutlinestheactionsthatChilemusttakeintheshortandmediumtermtoensurethat100percentofallurbanpublictransportbusesandlightandmediumvehiclessoldareelectricby2035(GovernmentofChile2021).Chilefacesoperational,infrastructure,andfinancialchallengestoadoptinge-buses.First,thee-buseshavelowerpassengercapacitypervehiclethanregularbuses(withinternalcombustionengines),sotoachievethesamelevelofsupply,morebusesandfrequencyarenecessary.Thisrequiresnewoperatingplans,moredriversandmainte-nancestaff,andadditionalinfrastructureandfinance.Trainingenoughworkerstooperateandsupportthenewsystemsandtechnologyisalsoachallenge.Second,e-busesrequirecustommodificationsandcharginginfrastructureforurbanopera-tions.Thisincludesdesigning,building,andinstallingchargingdepots,electricinfra-structure,powermanagementsystems,andpossiblyenergystorage.Implementingregulatorysystemsandstreamlinedapprovalprocessestomanageinfrastructure133DecarbonizationPolicyImplementation:IllustrativeCaseStudies­installationsandmaintenancepresentsanotherchallenge.Third,at$450,000perbus,thecostofChile’sfirste-buseswasmorethandoublethedieselEuroVIvehicles.Asthee-busfleetgrewandmanufacturersexpandedintotheLatinAmericanmarket,priceswentdownto$300,000pere-busby2020andareexpectedtodeclinefurtheras­technologyadvances.Akeychallengeisharnessingthefullpotentialofe-buses’loweroperatingexpenditurestooffsetthishighercapitalcost.TheExperienceofE-busesinSantiagoSantiago’spublictransportsystemisbasedonsixbuscompanies:Metbus,BusesVule,ServiciodeTransportedePersonas(STP)Santiago,RedBus,Subus,andExpress.Eachcompanyisassignedagroupofbusservices,integratedthroughaseamlesselectronicpaymentsystemthatusesasmartcardcalledBip!.Theregulatorcollectsandmanagesrevenues.Concessioncontractswereoriginally10years,andthelifecycleofabusfleetisdefinedasatleast1millionkilometersand/or12yearsofoperation,afterwhichthereisanimminentneedtorenewthefleet.Thebusinessmodelusedtoimplemente-busesinSantiagoconsistsofaPPPbetweentheMinistryofTransportandTelecommunicationsandprivateenergycom-paniesEnelandEngie,whoserveasbusoperatorsandinvestors.Fleetprovisionanddepotownershipareseparatedfromtheoperationofbusesinthestreet,introducingtwotypesofcontract:oneforoperations,andtheotherforenablinginfrastructureandassets.Thetransitioninvolvedaproactivegovernmentroleinsupportingfleetrenewalwithbetterandcleanertechnologiesthroughtheadoptionofvehicleandfuelstandardsandvehiclecertification.Chile’sCenterforVehicleControlandCertificationhasatechnicallaboratorytocertifythecharacteristicsofdifferenttypesofvehicles,includ-ingassessingtheemissionsandenergyefficiencyofbusesinthepublictransport­system.Thetransitionalsoinvolvedboldgovernmentactionstofacilitatetheprocess,reduceapprovalandauthorizationtimes,andsupporte-busplanningandregulation.Asaninnovation,financingforthecharginginfrastructureande-buseswasdevel-opedaspartofaschemeinthecorebusinessofEnelandEngie.Theydevelopedleas-ingcontractswiththeprivatebusoperatorcompanieswithmonthlypaymentstocoverfleetprovision,charginginfrastructure,andenergysupply,allowingoperators’quotesforfleetprovisiontobepaiddirectlytothebusprovider(andinvestor).Afinancialentityinchargeofcollectingrevenueandmanagingoperators’paymentsdeductsfromeachoperator’spaymenttheamountcorrespondingtotheleasing­contractithaswiththeenergycompany,reducingtheriskforinvestors.Theprovid-ersandoperatorssignprovisioncontracts,approvedbythestate,thatspecifythatnomatterwhatcompanyoperatesthee-buses,thestateguaranteesthatthebuseswillremaininthesystemuntilthedebtispaid.Managingandmonitoringthee-buses’operationismainlytheresponsibilityofthebusoperatorbutdependsoncontractualagreementsbetweenthedifferentactors,especiallyregardingfleetandelectricinfra-structuremaintenance,butalsochargingmanagementissues.134RealityCheckMetbuswasthefirstoperatortoincludee-busesinitsfleet(285vehicles),operatingthefirste-corridorinLatinAmerica,andwasfollowedbyBusesVule(76vehicles),STP(25vehicles),andRedBus(25e-busesin2020).Thesebusesrepresentapproximately6percentoftheSantiagofleet(411e-busesinatotalfleetof6,849in2019),makingChile’stheworld’ssecond-biggeste-busfleet,afterChina.Undertheexistingplan,thebusfleetwillbeevenlysplitbetweenEuroVIdieselande-busesby2030;consequently,emissionsandparticulatematter(PM)areexpectedtodropsignificantly:nitricoxide,nitrogendioxide,andhydrocarbons(by90percent);CO2(by15percent);andPM2.5andPM10(by70and56percent,respectively).Thiswillhaveadirectimpactonairpollutionandthushealthoutcomesinthecity.Meanwhile,theoverallqualityofthepublictransportsystemhasincreased,withpassengerspreferringe-busesfortheirsmoothride,lowernoiselevels,andgoodairconditioning.Theshiftwouldalsocreateenergycostsavingsof70percent.KeyTakeawaysBuildingacooperativepartnershipbetweenprivatecompanies(busoperators,busman-ufacturers,andfinanciers)andthepublicsectorisvital.Althoughfinancingcancomefromtraditionalsources,creatingadequatepoliciestoincentivizeprivatecompanies,suchasutilities,toinvestcanhelpminimizethefiscalburden.Thegovernment’sroleinminimizingnonpaymentriskscannotbeoveremphasized,eitherasfacilitatororaspolicymaker.Theplanningstageshouldincludeconstructiontimefortheelectricinfrastruc-tureaswellastechnicaloperationaladjustmentstoadapttothecapacityofthenewbuses.Plannersshouldalsoconsidertheselectionofbusroutessuitablefore-buses,intermsofslopeandlength,andpossibleadjustmentstobusesforoperatingoncertainroutes.Pilotprojectsareanessentialelementtoconsiderwhenimplementinge-busfleets,totestthebatteryrangeande-buscapabilitiesforspecificcityconditions.Asalientpriorityistraininge-busdrivers,maintenancetechnicians,andotherpersonnelinchargeofelectricalinfrastructure.Atthesametime,universitiesandtechnicalinstitu-tionsshouldadapttheirdegreesandothercoursestothefuturechallengesofe-mobility.Havingviableandenforceablecontractualarrangementsforfleetandcharginginfrastructuremaintenanceisalsoessential.Maintenanceisanimportantissuetoguar-anteee-fleetavailabilityandtheproperoperationofe-buses.Similarly,thebusperfor-manceshouldbeguaranteedfromthefirstmomentofoperation.135DecarbonizationPolicyImplementation:IllustrativeCaseStudiesGettingtheFinanceFlowing:ColombiaCaseStudy22.GreeningColombia’sFinancialSystemContributors:MartijnGertJanRegelinkandFionaStewartContextColombia’sfinancialsectorisexposedtoclimaterisks,whilealsoplayinganincreas-inglyimportantroleinmobilizingfinanceforclimateaction.ClimatechangecanaffecttheColombianeconomyanddestabilizeitsfinancialsectorthroughthematerializationofbothphysicalrisks,whichemanatefromnaturaldisastersandglobalwarmingandcanleadtoeconomiccostsandfinanciallosses,andtransitionrisks,whichareassoci-atedwitheconomicadjustmentcostsduringthetransitiontowardagreener,carbon-neutraleconomy.Forexample,thelarge-scaleriverinefloodsof2010and2011ledtocombineddamagesof$7billion(2percentofGDP),whichinducedasignificantincreaseinbankloanlossprovisions(Reindersetal.2021).ThedecarbonizationplaninColombiaconsidersa51percentreductionofGHGemissionsin2030comparedwith2010;duringthattransition,banksmayfacewrite-offsonloanstopollutingcom-paniesthatfaceadditionalcostsorcannotcomplywithregulations.Atthesametime,climatechangerepresentsanopportunitytomobilizenewandgreaterresourcesforclimate-resilientandlow-carboniinvestment(DNP2022).InOctober2021,ColombiabecamethefirstLatinAmericancountrytoissuelocalcurrencygreenbondsonthedomesticmarket,raisingCol$750billion(WorldBank2022k).Bankshavealsoissuedgreenbonds,andpensionfundshaveinvestedinthem.PolicyAgainstthisbackground,Colombia’sfinancialsupervisor,theSuperintendenciaFinancieradeColombia(SFC),withsupportfromtheWorldBank,hasinitiatedsev-eralhigh-impactactivitiestofurthergreentheColombianfinancialsector.FollowingitsmembershipoftheCentralBankandRegulatorsNetworkforGreeningtheFinancialSystemandtheintroductionofaclimateactionplan,SFC—withsupportfromtheWorldBankandIFC—hasinitiatedseveralkeyactionstogreenitsfinancialsector,includingaclimateriskstresstest,regulatoryreformsforbanksandinvestors,andagreentaxonomy.Theseactionsaimtostimulateprivate-sectorinvestmentsforColombia’sambitiousclimatetargets,whilealsobuildingresilienceinthefinancialsectoragainsttheimpactsofclimatechangeandclimatepolicy.Tobuildunderstandinginthefinancialsectorofclimaterisks,SFCandtheWorldBankconductedastresstesttoexaminetheimpactofdifferentclimatescenariosonthebankingsector.Thisfirst-of-its-kindexplorationforanemergingmarketfocusedon136RealityCheckthemostrelevantclimatephysicalandtransitionriskscenariosforColombia,suchaslarge-scalefloodingandintroducingacarbontaxtodecarbonizetheeconomy.Inthemostsevereforward-lookingfloodingscenarios,somebankswouldbeaffectedbysig-nificantlosses,withtheresultsunderliningtheneedforadaptationandresiliencemea-sures.Thetransitionriskstresstestassessedtheimpactsofdecarbonizationtargets,includingascenarioenvisioningthelateandabruptintroductionofahighcarbontaxtosupportthe51percentreductioninGHGemissionsby2030.WhileColombia’screditexposuretohighlyCO2-intensivesectorsismoderatefortheregion,assessedimpactsfromtransitionscenariosarenottrivial,withsignificantheterogeneityofimpactsamongbanksandlossesuptoalmost3percentoftotalassets.Andwhileweshouldinterpretresultswithcaution,theypointtotheimportanceofColombia’sfinan-cialsectorregulatorsincorporatingtheserisksintheirsupervisoryapproach.Resultsalsoshowthattimelyandcoordinatedmitigationpolicycanhelpsmoothimpactsonthebankingsector.Informedbytheriskassessment,SFChasalsointroducedclimateriskmanagementguidelinesforthebankingsectorandclimatedisclosureregulationsforinstitutionalinvestors.Inalignmentwithglobalprinciples(BaselCommittee2022)andsoundprac-tices,SFChaspresentedguidelinesforbanksonhowtofurtherintegrateclimaterisksinriskmanagement,governance,anddisclosurepractices.Ithasalsoundertakenasetofactivitiesto­supportthedevelopmentofenvironmental,social,andgovernance(ESG)andclimateriskdisclosureregulationsforinstitutionalinvestors.Thisincludeddevelop-ingESGandclimateriskreportingrequirementsforinstitutionalinvestors,launchedin2021(CentrodeEstudiosRegulatorios2021a,2021b).Theseguidelinesandregulationswillhelpbanksandinvestorsbetterintegrateclimateconsiderationsintotheiropera-tionalframeworks,buildingafinancialsectorthatismoreresilientagainstclimateshocksandthatbetteralignsitsinvestmentswithsustainabledevelopment.In2021,ColombiaintroducedaGreenTaxonomy,whichprovidesaclassificationofgreeneconomicactivitiesandassets(Azizuddin2022).Byhelpinginvestorsdeter-minewhetheraprojectisgreenandalignedwithColombia’sNDCtotheParisAgreement,thetaxonomycansupportgrowthofgreen-labeledproductsinthecoun-try’scapitalmarketsandbankingsector,whilealsoprovidingaframeworktostartmeasuringgreenfinanceflows.Itscreationwassupportedbyalargegroupofstake-holders,includingvariousministries,theNationalPlanningAuthority,SFC,andinter-nationalinitiativessuchastheGreenBondInitiativeandtheSustainableBankingandFinanceNetwork.TheWorldBankalsosupportedthedevelopmentofColombia’ssus-tainablebondmarket,facilitatingasecond-partyopinionontheSovereignGreenBondFramework’salignmentwiththeissuer’ssustainablestrategicprioritiesandcli-mate-changecommitmentsandgoals.137DecarbonizationPolicyImplementation:IllustrativeCaseStudiesResultsandImpactsTheseactionsprovideimportantbuildingblocksforamoresustainableandgreenerfinancialsysteminColombia.Thestrengtheningofclimateandenvironmentalriskmanagementpracticesnotonlysupportstheresilienceofthefinancialsectoragainsttransitionimpactsbutcouldalsoincentivizethereductionofcarbon-intensiveinvest-mentswhileincreasinggreenerinvestments.Ataxonomy—andsubsequentgreenproductsthatareissuedusingthetaxonomy—isfoundationalincreatinganenablingenvironmentofpublicandprivatesectorclimatefinance.Althoughtheinitiativeswerefirstlaunchedin2020andtheimpactonmobilizingfundingforclimateactionremainstobeassessed,thestepstakencloselyalignwithbestpracticefromadvancedmarkets,includingexamplesfromtheEU(WorldBank2021i).SFChasclearlyputsomeoftheenablingpillarsinplacethatwillallowforfurtheralignmentoffinancialsectorflowswithdecarbonizationobjectivesandstrengthenclimateriskmanagementanddisclo-surepractices.FollowingtheestablishmentoftheSovereignGreenBondFramework,theinauguralsovereigngreenbondsissuedonthelocalmarketinSeptember2021raisedCol$750mil-lion,withamaturityof10years.Thegreenbondsecuredacouponof7.56percent,comparedwith7.63percentforaconventionalbondwiththesamefinancialcharacter-istics.Followingsupporttodevelopagreenbondissuanceframework,thenationaldevelopmentbank,FinancieradeDesarrolloNacional,issuedthefirsttranche($40­million)ofanine-year$116millionsecuritizedbondinlocalcurrencytofinancetherenovationoftheTransmilenioBRTbuses.Anofficialsecond-partyopinionprovidercertifieditasagreenandsocialbond,anditwaslistedintheexchangeandpurchasedmostlybylocalinsurancecompanies,pensionfunds,andmutualfunds.KeyTakeawaysThisexample,andtheactionsofSFCinparticular,providekeylearningsforotheremergingmarketsanddevelopingeconomies.First,whilepartofabroaderpicture,thiscasestudyunderlinesthecentralandsystemicrolethatafinancialsectorregulatorcanplayingreeningthefinancialsectorandtheeconomy,notonlythroughitsdirectmicroprudential(risk-based)mandate,butalsobyplayingacatalyzingroleinthedevelopmentofkeyenablersforgreenfinancemarketsanddirectchangebyhouse-holdsandfirms.Second,itunderlinestheimportanceofaclearstrategyandvisiontoguidethework.Andthird,greeningthefinancialsysteminvolvesworkingwithalargegroupofstakeholders.Ministries,financialsectorregulators,financialsectorinstitu-tions,firms,andacademicsallneedtoworktogethertoassessclimateimpacts,designrelevanttools,createclimateregulations,socializefindings,anddriveactionacrossagenciesandthefinancialsector.138RealityCheckGettingtheFinanceFlowing:KenyaCaseStudy23.PowerSectorReforminKenyaContributors:VivienFosterandMumbaNgulubeContextAfterindependence,Kenyareliedprimarilyonhydropowertomeetitsdemandforelectricity.Butthisleftitheavilyexposedtohydrologicalrisks.Asdroughtperiodsintensifiedduringthe1990s,thecountrywaspushedintoasituationofacutesupplyinsecurity,forcingittorampupfossilfuel–basedgenerationbytheendofthedecade,whichincreasedboththecostandcarbonintensityofthepowersupply(figure3.19).Highfossilfuelgenerationcostscombinedwithlowelectricitytariffs,heavygovern-mentinvolvementinstate-ownedenterpriseoperationsandmanagement,and­inadequatecoverageofagingtransmissionanddistributionnetworksresultedinapoorlyperformingandfinanciallyconstrainedenergysector.PolicyItwasundertheseconditionsofacutesupplyinsecurityandpoorfinancialperfor-mancethatthecountry’sfirstwaveofpowersectorreformstookplaceintheearly2000s.GiventhepressingneedtoreleasetheaidembargoinplaceatthattimeandFIGURE3.19CO2IntensityofPowerinKenya,1990–2020Source:WorldBankcalculationsbasedondatafromIEA2019.Note:CO2=carbondioxide.0204060801001201990199520002005CO2Intensityofpower(Index2000=100)201020152020139DecarbonizationPolicyImplementation:IllustrativeCaseStudiesattractprivateinvestmentintothesector,Kenyaoverhauleditsapproachtoplanningandfundingpowergeneration,unbundlingitfromtransmissionanddistributionandputtingthenationalgenerationcompanyKenGeninchargeofallstate-ownedgenera-tioncapacity.Thefirstphasereformsalsoseparatedpolicyandregulatoryfunctionsfromcommercialactivities,introducedcost-reflectivetariffs,andattractedprivatecap-italbyliberalizinggenerationactivities.TheEnergyAct2006initiatedasecondwaveofreform,includingtheestablishmentoftheEnergyRegulatoryCommission(ERC)astheregulatorybodyresponsibleforoverseeingandregulatingtheenergysectorinKenya.TheERCwasgivenpowerstosettariffs,issuelicenses,andmonitortheperformanceofmarketparticipants,includingKenGen.Retainingitslong-standingcapacityforcomprehensiveandtechnicallysoundplanningofthepowersector,Kenyamovedawayfromthemoretraditionalindustrymodeltothecomplexhybridsectorcreatedbythereform,andthird-partyaccesswasestablishedtothegrid.Significantly,theEnergyActvestedresponsibilityforpowerdevelopmentplanningintheERC,whichworksthroughmultistakeholdersteeringandtechnicalcommitteestoproducearollingLeastCostPowerDevelopmentPlanforthepowersector.ResultsandImpactsKenyahasbeenoneofEastAfrica’smostsuccessfulcountriesatattractingprivate-sectorfinancingfordevelopingpowergenerationassets.Thishashappenedintwodistinctways.First,KenGenraisedprivatefinancefromthecapitalmarketbyissuingcorporatebondsandrights,listing30percentofitssharesonthesecuritiesexchangetobolsteritsabilitytosecurecommerciallending,whichaccountedfor15percentofitsdebtasof2021(KenGen2021).Second,bymodernizingthelegalframeworkandestablishingaregulatoryframeworkforthepowersector,Kenyabecameaninvestmentdestinationforindependentpowerproducers(IPPs).Bytheendof2020,28IPPswereoperatinginKenya,supplying26percentofitstotalelectricitysupply(figure3.20;KenyaNationalBureauofStatistics2021).Asof2022,generationcapacityfinancedandinstalledbyIPPshadreachedacumulativetotalof1,172MW(EnergyandPetroleumRegulatoryAuthority2021).AlthoughKenya’searlyIPPsuseddiesel-firedgeneration,overtime,thishasshiftedmarkedlytowardcleanpowergenerationsources.Today,asmuchas70percentofIPP-installedcapacityhasanREsource,includinggeothermal,wind,andsolar.NotwithstandingthegrowthinIPPs,thepublicsectorhasretainedasignificantroleinpowergeneration.ThemajorexpansionofgeothermalenergyinKenyawouldnothavebeenpossiblewithoutpubliclyfundedexplorationbetween2007and2015,andsubsequentinvestmentbyKenGentodevelopgenerationcapacity,astheprivateexplorationofsteamfieldswouldotherwisehaveprovedtoorisky.Intheprocess,KenGenhasbecomeAfrica’slargestdeveloperofgeothermalpowerandranksintheworld’stop10.140RealityCheckThecombinedresultisthatKenya’sgenerationcapacitytripledbetween1990and2022,from829MWto3,076MW.Consideringapeakdemandof2,036MWinNovember2021,thecountry’sreservemarginismorethan30percent.Expandingitsgenerationcapacityhasmadeelectricitysupplymorereliableinmanypartsofthecountry.Themarkeddiversificationoftheenergymixhasalsoimprovedsecurityofsupply.Kenyanowhas949MWofgeothermalcapacityandislessexposedtohydro-logicalrisk.Theincreasedshareofgeothermalgenerationhasalsodisplacedenergyfromthermalplants,whichfellfrom53percentin2000tojust11percentin2019,reducingKenya’scarbonintensityofpowerindexby62percentbetween2010and2019(figure3.21).Further,thecountryisonitswaytoachieving100percentREsupplyby2030,inlinewithitsCOP26commitment,throughacombinationofdevelopingindig-enous­geothermalresources,competitiveauctionsforsolarandwindresources,andenergytradingthroughregionalinterconnections.Expandingthecountry’sgenerationcapacityhasincreasedpeople’saccesstoelec-tricity,settingKenyaonapathtoachieveuniversalaccessbefore2030.Kenya’selectri-ficationexperiencehasbeenexceptionallyrapid,owingtoacombinationofgriddensification,bytargetingmoreconnectionsinneighborhoodswhereinfrastructureisalreadypresent,andoff-gridprograms.Thepopulationwithaccesstoelectricityincreasedfrom15percentin2000to75percent(54percenton-gridand22percentoff-grid;Dubeyetal.2020)by2018(figure3.22).Thissharpincrease,inducedbypowersectorreforms,haspositiveimplicationsfortheeconomyduetothestronglinkbetweenelectrificationanddevelopment.SeveralcasestudiesinSub-SaharanAfricarevealthatincreaseinelectrificationispositivelyassociatedwithincreased­economicFIGURE3.20ElectricitySuppliersinKenya,2020Source:WorldBankcalculationsbasedondatafromKenyaNationalBureauofStatistics2021b.Note:IPP=independentpowerproducer.KenGenpowerplants,73%IPPpowerplants,26%Off-gridpowerplants,1%141DecarbonizationPolicyImplementation:IllustrativeCaseStudiesgrowth,jobs,productivity,incomes,healthoutcomes,andhumancapitaldevelopment(Dinkelman2011;Jimenez2017;Fosteretal.2023;FriedandLagakos2021;SalmonandTanguy2016;WorldBank2015).Onereviewof50studiesonelectrificationreportsthat,onaverage,electrificationleadstoincreasesofaround7percentinschoolenroll-ment,25percentinemployment,and30percentinincomes(Jimenez2017).AnotherfindsthatruralelectrificationinKwaZulu-Natalpositivelyimpactsfemaleemploy-ment,increasingitbyabout10percentagepoints(Dinkelman2011).NewlyelectrifiedcommunitiesalsoexperiencesubstantialshiftsawayfromusingwoodathomeFIGURE3.21ElectricityGenerationinKenya,bySource,1990–2020Source:WorldBankcalculationsbasedondatafromIEA2019andKenyaNationalBureauofStatistics2021a.Note:GWh=gigawatthours;PV=photovoltaic.02,0004,0006,0008,00010,00012,00014,00019901995200020052010201520192020GWhOilBiofuelsHydroGeothermalWindSolarPVFIGURE3.22AccesstoElectricity,Kenya,1993–2018Source:WorldBankcalculationsbasedondatafromtheWorldBankGlobalInfrastructureDashboard.0102030405060708019931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018Percentageofpopulation142RealityChecktowardelectriccookingandlighting,whichimprovesairhomequalityandhealth.Therapidelectrification,however,hasresultedinadeterioratingfinancialpositionofKenyaPowerandLightingCompany,whichisbeingaddressedthroughanewsetofpolicyandinstitutionalreformmeasures.KeyTakeawaysKenya’spowersectorreformhasbeensuccessfulfromavarietyofstandpoints,includ-ingthedecarbonizationofelectricity.Severalimportantlessonsemergefromthisexpe-rience.First,itisimportantforcountriestodevelopthetechnicalcapacityforpowersystemplanningandensurestrictadherencetotheplanthatsupportsleast-costdevel-opmentofthesectorandguidesthechoiceofcleantechnologies.Second,creatingamodernregulatoryframeworkprovidesthenecessaryenablingenvironmenttosup-portprivatelyfinancedIPPs,notablyforRE.Andthird,whiletheprivatesectorisoftenwillingtoinvestinRE,stateactorsretainanimportantroleforaddressingearlydevel-opmentrisksofnewtechnologies,suchasgeothermal.Partiallylistingstate-ownedenterprises,suchasKenGenandKenyaPowerandLightingCompany,allowsthemtoaccesssignificantvolumesofprivatesectorfinance.143DecarbonizationPolicyImplementation:IllustrativeCaseStudiesEnsuringaJustTransition:SouthAfricaCaseStudy24.TowardaJustTransitionandGreenerFutureforSouthAfrica’sCoalSectorContributors:KatiePolkinghorneandBanditaSijapatiContextSouthAfricaisincreasinglyadoptingmeasurestoaddressclimatechange,demonstratingthegovernment’scommitmentstowardalow-carboneconomyandresilientsociety.Thecountryisfacingasevereenergycrisis.Thebreakdownofseveralcoal-firedpowerplantsinlate2021andearly2022causedwidespreadblackoutsandloadshedding,whichhadasig-nificantimpactonthecountry’seconomyanddisruptedthelivesofmillionsofpeople.Toaddresstheenergycrisis,theSouthAfricangovernmentannouncedplanstoinvestinREsourcessuchaswindandsolarpowerwhilealsomakingcommitmentstodecommissioncoalmines.InaccordancewiththeIntegratedResourcePlan(IRP)createdin2019,Eskom,thecountry’sprimaryelectricitysupplier,hasrevealedplanstoshutdown8to12GW(30percent)ofcoal-firedpowergenerationinthenext10years.SouthAfrica’supdatedNDCinSeptember2021raisesthecountry’smitigationambitionfurtherbycommittingtoreduceannualGHGemissionsto398to510MtCO2eby2025and350to420MtCO2eby2030(UNFCCC2021).However,12ofSouthAfrica’s15coal-firedpowerstationsaremorethan30yearsold,andthisinefficientandoutdatedinfrastructuremakesthecountryincreasinglysusceptibletocarbonlock-inandotherhazards(WorldBank2019b).Thegovernmentisawareofsuchrisksandispushingtotransitionawayfromapredominantlycoal-basedeconomyandenergygridasitseekstoincreaseRE.SouthAfricahasthemostcarbonizedelectricalgridofallG20countries,anditspowersystemisthebiggestinSub-SaharanAfrica,representingabouthalfoftheregion’sinstalledcapacity.Theenergymix(figure3.23)isdominatedbyfossilfuels(89percent),ofwhichcoalmakesupover75percentandgasanddieselover10percent.Nuclearcontributesaround5.6percent,followedbyREat5.5percent,butthisnumberhasbeenincreasing.Therearethreemaingroupsofelectricitygenerators:thepublicutilityEskom,whichoperates89percentofSouthAfrica’stotalgenerationcapacity;municipalgenerators,whichoperateabout1percent;andIPPsandprivategenerators,whichoperateabout10percent,includingcogeneration.Inkilowatt-hourterms,IPPscontributelessthan5percentoftotalelectricity.Toupholdnationalcommitmentstowardalow-carboneconomywhilefocusingonimprovingthelivelihoodsofthosemostvulnerabletoclimatechange,South144RealityCheckAfricahasembracedthejusttransitionprinciple.Alreadyoutlinedinvariousnationalplanssince2009,thejusttransitionprinciplewasreinforcedinJune2022withtheendorsementofthecabinetoftheJustEnergyTransitionFramework(JETF),ledbythePresidentialClimateCommission(PCC),amultistakeholderbodythataimstoadviseonthecountry’sclimatechangeresponseandsupportthejusttransitionagendaatapoliticallevel(PwCSouthAfrica2022).However,thePCClacksthemandateandresourcestoimplementJETFatthelocallevel.Moreinclusivemovementsareforming—suchaslocalmunicipalclimatechangetaskforcesandlocalgovernmentclimatechangesupport­programs—buttheyrequiremoresupportandfundingfrominfluentialpowers,includinggovernmentandbusi-ness(ICLEIAfrica2019).SouthAfricahasalwaysreliedheavilyonitsabundantcoalreservesasasourceofenergyandjobs(HodderandRichards2022).In2019,thecoalindustryemployedover92,000people,representingabout19percentoftotalemploymentintheminingsector(Makgetla2021;MineralsCouncilSouthAfrica2022).TheSocialandLabourPlan,introducedin2002tosupportlocaleconomicdevelopmentbyaddressingsocialcon-flictsassociatedwithmining,describeshowminingcompanieswillsharebenefitswithlocalcommunities;yettherehasbeenalackofaccountabilityandenforcement(Strambo,Burton,andAtteridge2019).Over42,000miningjobshavealreadybeenlostinMpumalangaprovincebetween2008and2015,anditisestimatedthatafurther120,000willbelosttofutureplannedcoalmine­closures(Gatticchi2020;Steynetal.2021).Longoverduetransitionplanningintheprovincehasnowtakenplacewith,amongothers,theestablishmentoftheMpumalangaGreenClusterAgencytoadvanceasustainableandinclusivegreeneconomyandcreatesharedvaluesintheMpumalangaFIGURE3.23BreakdownofSouthAfrica’sEnergyMixSource:Akinbami,Oke,andBodunrin2021,basedondatainIEA2023.Note:PV=photovoltaic.Wind,2.0%Nuclear,5.6%Renewables,5.5%Fossilfuels,88.9%Biofuel,0.1%Hydro,2.1%Solarthermal,0.3%SolarPV,1.0%145DecarbonizationPolicyImplementation:IllustrativeCaseStudiesprovince(Steynetal.2021).Thisisoneofmanyexamples,asSouthAfricahasimple-mentedseveralnationalpoliciesthatarehelpingtranslatepolicycommitmentsintoconcreteactions.PoliciesIn2012,thePCCproposedaframeworkforanational-levelsocialdialogue,laterlaunchedastheSocialPartnerDialoguesonPathwaysforaJustTransition.AimedatbuildingtowardincludingthejusttransitioninSouthAfrica’sNationalDevelopmentPlan(NationalPlanningCommission2022).Thesedialoguescalledtogetherthefoursocialpartners—government,laborworkersandunions,business,andcivilsociety—tobuildacommonvisionforthejusttransitionandcreatepathwaystoachievethisvision.Participantsreachedaconsensusontheimportanceofjustmanagementoftheenergy–water–landusenexusforasustainablesocioeconomicfutureinSouthAfricasupportedwithcorruption-freegovernance,socialdialogue,andparticipatorydecision-making.However,severalissuesremainunderdiscussion,includingemissionsreductionpath-ways,stateversusprivateownershipofenergyresources,conservationversusequitableaccesstonaturalresources,thetimingofthecoalphaseout,andthefutureofEskomandareformedelectricityindustry(NationalPlanningCommission2019).TheIRPsetsoutalong-termdiversificationofthepowermixby2030.Theplanhelpsthecountrymovetowardreducingtheenergysector’scarbonfootprint,replacingcoalpowerwithREwhilemeetinggrowingenergydemandandensuringasocioeconomicallyjusttransition.TheIRPaimstoretire12GWofagingcoal-firedpowerplantsby2030whileinstalling18GWofRE(WorldBank2022n).ThegovernmentisalsoacceleratingitsCoalTransitionInvestmentPlanandtheDepartmentofMineralResourcesandEnergy’sJETF.TheEskomJustEnergyTransition(JET)Projectwasselectedasademonstrationproj-ectbythegovernmenttoestablishapathwayforretiringfuturecoalplantsinasustain-ablemanner.Forexample,theprojectwilldecommissiontheKomaticoal-firedpowerplantandrepurposethesitewithrenewables(150MWsolarPV,70MWwind)and150MWbatterystorage.Theprojectwillalsomitigatesocioeconomicimpactsonaffectedworkersandcommunitieswhileenhancingopportunitiestosupportthemduringthetransitionprocess.ExpeditingtherepurposingandrepoweringofitspowerstationsandactivelypursuingalargershareofREgenerationarepartoftheJETProject.ThestrategyalignswithSouthAfrica’sIRP(DepartmentofMineralResourcesandEnergy2019).ThedevelopmentofSouthAfrica’sJustEnergyTransitionInvestmentPlan(JETIP)2023–27iskeyforlonger-termsuccessandplanning.Itincludespriorityinvestmentsoverthenextfiveyearsintheelectricity,EV,andgreenhydrogensectors,focusedonsupportingSouthAfrica’sgoalsofenergysecurity,justtransition,andeconomicgrowth.TheJETIPwaspreparedthroughajointengagementbetweenthePresidentialClimateFinanceTaskTeamestablishedinFebruary2022andtheInternational146RealityCheckPartnersGroupcomprisingFrance,Germany,theUnitedKingdom,theEU,andtheUnitedStates.TosupportimplementationoftheJETIP,theyagreedtochannel$8.5billionoverfiveyearsasacatalyticcontributiontowardaddressingtheJETIPpriori-ties(PresidencyoftheRepublicofSouthAfrica2022).ChallengesandOpportunitiesEskom’scoal-firedplantsareconcentratedinMpumalangaprovince,whichhasnoREplants,makingajusttransitionacomplexchallenge.Havingidentifiedthecommuni-tiesmostatriskinthedistributionalanalysisandidentifiedhowtoengagewithandbuildtrustwiththemthroughinclusionandproceduraljustice,thereisanacuteneedforrestorativejusticeplans(MahachiandRix2016).Restorativejusticelooksat­repairingharmcausedfromthejusttransitionagainstmarginalizedcommunities(Montmasson-Clair2021).Itisrootedinunionmovementsdemandingtherestorationoflostjobs,withunionsagreeingtosupporttheshifttorenewablesandcleanertech-nologyontheconditionthatjoblossesforcoalcommunitiescouldbe(atleast)restoredtopreviouslevels(StevisandFelli2015).OnesolutionisRenewableEnergyDevelopmentZones(REDZs),suchastheeMalahleniREDZinMpumalanga.TheSouthAfricanWindEnergyAssociationemphasizesthatREDZswillplayakeyroleinthejusttransition,astheycreatepriorityareasforinvestmentintheelectricitygridandincreaseSouthAfrica’sgreenenergymapbyenablinghigherlevelsofrenewablepowerpenetration(Bungane2021).Recentboutsofload-sheddingandsubsequentoutcriesfromcivilsocietyandpub-licandprivateenterprisehavealsoplacedfurtherpressureonEskomtoact.AmissedopportunitytosignREcontractsin2014iscausinghighload-sheddingandhasrecentlysentthecountryintoadeclaredstateofdisaster(Nyathi2023).Inresponse,EskomhasissuedanRfPtoleaselandtoIPPsinMpumalangatocreateREprojects.TheprocesswillinvolveauctioningsuitablelandnearpowerstationstodevelopREgenerationsitesthatcandeliverrapidadditionalgenerationcapacitytothegrid.Eskomsaysitviewsthisprocessasvalidationofitscommitmenttobeingpartofthejusttransition(Smith2022).TheNationalDevelopmentPlanalsoincludesacriticalactionthatstatestheneedfor“Newspatialnormsandstandards—densifyingcities,improvingtransport,locatingjobswherepeoplelive,upgradinginformalsettlementsandfixinghousingmarketgaps”(NationalPlanningCommission2022,4).Theseallseemtobestepsintherightdirection,andamonitoringmechanismwouldhelpholdsuchactionsaccountable.Thetransitionprocessisexpectedtohaveasignificantimpactonpeople’swell-beingthroughitseffectsontheeconomicgrowthtrajectory,compositionofGDP,employ-ment,relativeprices,andhealthcobenefits.Forexample,anestimated0.6millionjobswillbelost—mainlyinsectorswithlargeproportionsofunskilledorlow-skilledemployees—withtheimpactsfeltmostacutelybyvulnerablegroups(Kilumelume147DecarbonizationPolicyImplementation:IllustrativeCaseStudiesetal.2022).In2021,over90percentofcoalworkerswerelow-orsemi-skilled,whichwouldmakeitmoredifficultforthemtofindotherjobs(WorldBank2022j).Womenwillalsobewidelyaffected,astheygenerallyworkinindirectjobs,suchasservicesprovidedbysmallfirmstoworkersandfirmsincoal-relatedindustries.Thespatialdimensionoftransitionisequallyimportant—inthecoalbeltofMpumalangaProvince,whichishometoover80percentofthecountry’scoal-firedpowerplantsandcoalmines,anestimated150,000to200,000jobsareatrisk(about18percentoftheemployedprovinciallaborforce);thisincludesabout75,000coalminersand15,000jobsinthetransportsector(WorldBank2022l).However,theexactnumberofjobslostinthecoalsectorwilldependonthenumberofpowerplantsdecommissioned(IASS2022).Municipalityrevenuesandserviceswillalsobeaffected—forexample,ineMalahleni,coalaccountsforalmosthalfoflocalrevenues(TIPS2020).Eskomandcoalminingcompaniesprovidekeypublicservices,suchaswaterandelectricity,tocommunitiesclosetotheirsites.However,arecentstudyfromIASS(2022)showsthatthetransitionfromcoaltoREcouldcreateanestimated150,000to300,000newjobsby2030.KeyTakeawaysAcceleratingthetransitionawayfromcoaliscrucial.Earlyplanningwithpolicy­makersandallstakeholders,includingaffectedcoalcommunities,iskeytoachievingjustice,withaspecificfocusonimplementingrestorativeplansforvulnerable­communitiesincoal-dependentregions.Immediate,deeperbaselinemappingwillenableearlylendingthatprovidescomprehensive,on-the-groundsupportonpending­closures,usinglearningtoimproveonfutureclosuresandnewopportunitiesfor­peopleandcommunities.Establishinganindependentstatutorybody,thePCC,tolead,coordinate,andover-seethejusttransitionprovidedthepoliticalweightrequiredtosteertheprocessacrossvariousgovernmentinstitutionsandstakeholders.ThebroadrepresentationofthePCC—whichcomprisescommissionersrepresentedbygovernmentministers,busi-ness,labor,youth,academiaandresearchinstitutions,advocacygroups,civilsociety,andtraditionalleadership—isequallyimportant,providinglegitimacyintermsofbothrepresentationandcredibility.Likewise,extensiveandrobuststakeholderengagementledbythePCCwhiledraftingandfinalizingtheJETFhelpedcreateasharedvisionofhowSouthAfricacanbuildazero-carboneconomyby2050whileupholdingthethreeprinciplesofprocedural,distributional,andrestorativejustice.Managingimpactswillrequireamultisectoralapproach,withcollaborationandcoordinationbetweenthenationalgovernments,localgovernments,theprivatesector,communitygroups,andsoon.TakingsuchanapproachhasallowedSouthAfricatosecurecommitmentsfromtheprivatesectorandothers.Ajusttransitionprotectspeopleandtheenvironment.Ithelpsworkersandcom-munitiesbuildandaccessneweconomicopportunitiesinthetransitiontocleanenergy.148RealityCheckItalsoensuresthatthosemostimpactedbythetransitionhelpcreatetheplans,policies,andreformsthatwillstrengthentheinstitutionsandmobilizetheinvestmentsneededtoremediatetheland,supportpeopleintheirpost-transitionjobsandlives,andbuildaneweconomicfuture.Deeplyvestedinternational,national,andlocalpoliticalecon-omyissuescanhamperearlyplanningdiscussions,andapoorlymanagedclosurepro-cesswillonlybuildopposition,erodingpublicsupportforfurtherclosures.Properplanningandpreparationareessentialtodemonstratefromtheoutsetthatthereisabetterwaytotransitionawayfromcoal.Ifplannedandimplementedeffectively,thetransitionprocesscancreatesignificantopportunities.Forexample,while0.6millionjobsareexpectedtobelostduringthetransition,1.6millionjobsmaybegained.Thecurrentenergycrisishashighlightedtheneedforalong-termstrategyforenergyproductionanddistributioninSouthAfrica.Inthecomingyears,thecountrywillneedtoinvestinmodernizingitsenergyinfrastructureanddiversifyingitsenergysourcestoensureitcanmeetthegrowingdemandforelectricityandavoidfuturecrises.Thegov-ernmentofSouthAfricawillneedtomakedifficultdecisionsasitaimstodiversifyitsenergysourcesandreduceitsenvironmentalimpact.Itsintegratedpolicymaking,robustregulations,andeffectiveincentivesforlow-carboninvestments—includingpri-vateinvestments—giveitanadvantageinaccomplishingthistask(IEA2021e),whileitsemphasisonenergyefficiencyandregionalintegrationstrengthensitsposition.149DecarbonizationPolicyImplementation:IllustrativeCaseStudiesEnsuringaJustTransition:UnitedKingdom,Germany,andtheNetherlandsCaseStudy25.LessonsfromtheUnitedKingdom,Germany,andtheNetherlandsContributor:CatrinaGodinhoEvidencefrompreviousstructuraltransitionsawayfromcoalrevealsseveralkeyissuesandapproachesthataredecisiveindeterminingthesocioeconomicimpactsofthesetransitions.Althoughinsightsarecollectedandorganizedindifferentwaysacrosstheliterature,thereisagooddegreeofconvergenceonhigh-levellessonsandapproaches.TheseareoutlinedherewithreferencetoongoingcoaltransitionsintheUnitedKingdom(ontracktophaseoutby2024),theNetherlands(by2030),andGermany(by2038).Lesson1.DecliningEmploymentintheCoalSectorIsUnavoidable,DrivenasItIsbyMultipleFactorsandNotJusttheResultofEnvironmentalPoliciesHistoricalandpresent-daycoaltransitionsarenotsolelytheresultofpoliciestargetingthecoalsector.Rarelymotivatedprimarilybyenvironmentalconcerns,theyaremoreoftendrivenbyotherfactors,includingthefollowing:■■Thedecliningperformanceofdomesticcoalindustries,especiallywheresubsi-diesorotherpublicsupportarerationalizedorremoved,orwhereglobaltradedynamicsshift■■Thedecliningcompetitivenessofcoalcomparedwithotherenergytechnologies—­historically,oilandgas;currently,renewables—especiallywheremarketrules,procurement,orotherinstitutionalfactorsselectforleast-costoptions■■Economictransitionsthatleadtooffshoringsomeindustries,reducingenergyorcoaldemandandemploymentshiftsfromprimarytosecondaryandtertiarysectors■■Gainsinefficiency,mechanization,andautomation,whichcanchangethestructureofthecoalsector,especiallyintermsoffinalenergydemandandemploymentThesedriversleadtodecliningemploymentinthecoalsector,evenincaseswherecoalproductionanduseincrease.So,decliningemploymentinthecoalsectorisnotonlydrivenbyenvironmentalorclimateconsiderations.Itissomethingtobeexpected,andplannedfor,inallpossiblescenarios.150RealityCheckLesson2.Well-ManagedCoalTransitionsHaveLesserShort-TermImpactsandCanAvoidLong-TermEffectsEvenwhenaccelerated,coaltransitionstypicallytakedecades,witholder,poor-­performing,oreconomicallyunviableminesandpowerplantsclosingfirst.Withoutproperplanningandpoliciestofacilitatethetransition,shockscanleadtovolatilesociopoliticalconditions,andcoalregionsultimatelysuffereconomicandsocialdecline.The“unmanagedshock”oftheBritishcoaltransitionprovidesexamplesofbothrisks:first,withthedramaticminingstrikesandindustrialdisputesinresponsetocoalclosureplansinthe1970sand1980s;andsecond,inthelong-termnegativeimpactsinformercoalcommunities,whichcontinuetosufferlowerjobdensity,worsehealthoutcomes,andhigherunemployment,deprivation,anddepopulationthanthenationalaverage(Brauers,Oei,andWalk2020).Attheotherextreme,the“manageddelay”approachofGermany’songoing60+yearcoaldecline(figure3.24)—withitsprotectionistpoliciesandpublicsubsidiestothesector—wasmuchmoreexpensive.TheGermanparliamentestimatedthatjustthephaseoutperiodfrom2006to2018,duringwhichhardcoalbutnotlignitewasphasedout,costanestimated€38billion,butthesocioeconomicimpactshavebeenbetter(Oei,Brauers,andHerpich2019).TheDutch10-yearcoalphase-down,bycontrast,showsthatawell-plannedtransitiondoesnothavetohaveseverelong-termadverseimpactsorhighcosts,althoughthesectorwasrelativelysmallandthetransitionwasaidedbysignificantnaturalgasavailability.ButtheDutchadjustmentwasalsowellplanned,withsubstantialsupportforworkerswholosttheirjobs.Assuch,itwassupportedbythetradeunionsand,forthemostpart,wentsmoothly.FIGURE3.24CoalProductionandEmploymentintheUnitedKingdomandGermany,1958–2018Source:Brauers,Oei,andWalk2020.Note:TheUnitedKingdomphasedoutcoalproductioninaround30+years,whileittookGermany60+years,despitesimilareconomicconditions.LigniteproductionHardcoalproductionHardcoalimportsEmployeesincoalproduction01002003004005006000100200300400500800700600Milliontonsa.UnitedKingdomb.Germany01002003004005006000100200300400500800700600Employees(inthousands)Employees(inthousands)Milliontons19581966197419821990199820062010196219701978198619942002201420181958196619741982199019982006201019621970197819861994200220142018151DecarbonizationPolicyImplementation:IllustrativeCaseStudiesLesson3.Long-TermPolicyPackageApproaches,DevelopedwithKeyStakeholders,UnderpinSuccessesTherearelargebenefitstostartingcoaltransitionplanningearly,beforesignificantnegativeimpactsarevisible.Thiscanincludeearlyeffortstograduallyreducecoalproductionandconsumptiontosmooththetransition,preventlock-ineffectsandreducestrandedassetrisks,andfavordiversification(thusavoidingindustrial­concentration).Successfulstrategiesalsotendtoinvolvepolicypackagesthatcombinestructuralreformswithmoretargetedsupport.Forexample,structuralpoliciesmaybegearedtowardincreasingresiliencetoshocks—suchasimprovingaccesstofinancialinstrumentsandborrowing;strengtheningsocialsafetynets,criticalinfrastructureandrelatedservices,andhealthcare;facilitatinggreaterlabormarketflexibilityandmobility;andcreatingalternativeemploymentbyincentivizingeconomicinnovationanddiversification.Targetedpoliciesaimedataffectedworkers,suchasearlyretire-mentpackagesorfinancialandreemploymentsupport,canexistalongsidebroadercommunityorregionallevelinitiatives,suchasskillstraining,investmentsinhumancapital,localeconomicdevelopmentprograms,andenvironmentalregeneration.Akeylessonistheimportanceofhumanandeconomicdevelopmentinterven-tions,asopposedtosimplecompensationmechanisms,formanaginglonger-termimpacts.Usingthisapproachensuresthatcoaltransitionplanningcanbepartoforacatalystforregionalandnationalsocioeconomicdevelopmentplans,includingattractingfinancing.Commonelementsincludeinvestinginandputtingmeasuresinplacetoimproveinfrastructure;developingpoliciesandregulationstoattractnewbusinesses,education,andskillsprograms;supportingresearchanddevelop-ment;andexpandingsoftlocationfactorsinminingregions—suchastertiaryedu-cationinstitutionsandcultural,leisure,andnaturalinfrastructure—toattracttheinwardandpreventtheoutwardmigrationofpeople,business,andinvestment(Diluisoetal.2021).Localownershipof,participationin,andearlymobilizationforpolicydesignandimplementationarealsoimportant.Localeconomicdevelopmentanddiversificationarekey,andpolicydesignneedstorespondtolocalneedsandwants.Economicstruc-turesincoalregionsareoftenconcentratedaroundcoalandrelatedindustries,andcoaltendstobeimportantculturally.Inclusiveprocesses;localleadership;and­mobilizingpublic,private,nongovernmental,andotheractorscanhelpdeveloplocallyrelevantandresponsivetransitionplans.Buildingconsensusaroundtheneedtotransi-tionanddevelopingpoliciesthatareguidedbycommunityneedsandvisionsofanattractivealternativecontributestopoliticalacceptability.InGermany’sRuhrcoalregion,forexample,thetransitionwasmadetangiblebytransformingpreviousindus-trialsitesintolandmarksorculturalsites,markingabreakwiththepastandunveilingamoreforward-lookingvisionfortheregionwhilestillmaintainingadistinctlocalidentity,inadditiontoextensivetrainingandreskillingforrenewableenergyjobs.152RealityCheckOtherinitiativesincludedopeninguniversities,expandingtheeducationsystem,andimprovingtransportinfrastructure.Activatinglocalstakeholderscanalsohelpwithimplementation.Forexample,coalcompaniescanprovideskillstrainingandjobstransitionsupport;localgovernment,unions,orcommunitygroupscancoordinatedialogueprocesses;andlocalbusinessinitiativescancollaboratetocreatealternativeordiversifyemployment­opportunities—forexample,byrepurposingcoalplantsorpivotingproductionorservicestoanalternativeindustry.Institutionalcapacitysupportmayalsobeneededtoensurelocalactorscan,andareincentivizedto,fulfillthesefunctions.IntheUkrainecoaladjustment,whichisslightlydifferentfromacoaltransition,employmentwasreducedbyone-thirdinjustfouryears(1998–2002)withoutanymajorsociopoliticalbacklash.Inthiscase,strengtheningcoalindustrymanagementbyintroducingcommercialandoperationalplansandmanagementcontractshelpedimprovegovernancecapacity,accountability,andacceptability.Othersuccessfactorsincludedstakeholderengagementandreemploymentsupport.Genderdimensionscanbemainstreamedformoreinclusiveoutcomes.Whenitcomestospecificsupportforworkers,itisworthnotingthatmanyindirectjobsarealsoaffected.Policiesthatonlytargetminersmaycontributetoexcludinganddisad-vantagingthefemaleworkerswhorelyonthecoalsector.Thereisalsosomeevidencethatjobtransitionsmightcontributetocrowdingoutfemaleworkerswhencompeti-tionforlimitedjobsincreases.Forexample,beforeRomaniarestructureditsminingsector,womenaccountedfor16percentoftheworkforce;sevenyearslater,thishadreducedtojust7percent.Gendermainstreaminginpolicydevelopmentcanhelpensuregender-inclusivetransitionsandeconomicdevelopmentpathways.Policiesthatincludepsychologicalhealthandsupportforhouseholdsorfamilymembersareothergender-sensitiveapproaches.Lesson4.EnvironmentalRehabilitationandRegenerationAreKeyEnablersofAlternativeEconomicDevelopmentCoalmining,powergeneration,andrelatedindustriescausesignificantenvironmentaldegradationthatcanlimitthepotentialforalternativeeconomicactivities,suchasfarm-ingortourism.Communitieslivingincoalregionscanexperiencelong-termimpactsofsuchenvironmentalpollution—includingnegativehealthimpacts,poorwaterquality,soilcontamination,andsafetyissues—longaftertheindustryhasleft.Historicalexperi-encessuggestthatthiselementofcoal(orotherindustrial)transitionsisnotalways­adequatelyplannedfor,hinderingthelonger-termeconomicrenewalofformercoal-dependentregions.Aswellasstrengtheningregulationsandenforcementmechanisms(includingclearlyestablishing“polluterpays”mechanismsinmininglicensestocreate153DecarbonizationPolicyImplementation:IllustrativeCaseStudiesappropriateincentives),earlierandmoreprogressiverehabilitationeffortscanensureenvironmentallegaciesareaddressedwhilecoalminingcompaniesarestillpresent.Lesson5.NationallyCoordinatedFiscalSupportPlaysanImportantRoleBottom-upandlocallyledapproachesareimportant,butasuccessfulcoaltransitionrequiressignificantnational-levelsupportandcoordination.Considerableresourcesareneededforsectoraladjustmentsortransitions,andinmosthistoricalcases(primar-ilyfromtheEU),nationalgovernmentshavehadtocoverthem,aslocalresourceshavebeeninsufficientandlocalfiscalcapacitywaserodedbytheeconomicimpactofthecoaltransition.Afullcost-benefitanalysisneedstoincludethecostofdirectandhid-dencoalsectorsubsidies,andthecostsofenvironmentalandpublichealthexternali-tiesfromcoalminingandcombustion,whicharetypicallyseveralmagnitudeslargerthanthedirecteconomicbenefitsofcoaluse(orthefiscalcostsofthecoaltransition).Countriescanusecarbonpricing,levies,taxes,andothertoolstocompensateforthesecostsandraiserevenuestopayforthecoaltransition.Nationalcoordinationisespe-ciallyimportantinthisregardtoensurethatraisedfundsareappropriatelydirectedandfullyutilized.154RealityCheckNotes1.ThiscasestudydrawsheavilyfromWorldBank(forthcominga),OperationalizingLong-TermDecarbonizationStrategies:LessonsforPractitioners.2.PresidentialRegulationNo.98/2021.Thetextoftheregulationisavailableathttps://jdih.setkab​.go.id/PUUdoc/176561/Salinan_Perpres_Nomor_98_Tahun_2021.pdf.3.Formoreinformation,seethewebsiteoftheForestCarbonPartnershipFacilityathttps://www.forestcarbonpartnership.org​/­country/indonesia.4.See“MeasurementMonitoringandReporting:Indonesia:EastKalimantanProvince,”availableonthewebsiteofthegovernmentofEastKalimantanProvinceathttps://mrv.kaltimprov.go.id​/en.5.Emissionsdatainthisparagraphisfor2021andisprovidedbytheMinistryofEnvironmentandForestry.6.Thetextoftheactisavailableathttps://www.­legislation​.gov.uk/ukpga/2008/27/contents.7.Forexample,seetheliteraturesummaryinHeineandBlack(2019).8.DataarefromtheGreenTransitionNavigator,whichisavailableathttps://green-transition​-navigator.org/.9.Theproposalisstillpendingformalapproval.10.Basedon2020datafromFAOSTAT,EmissionsTotal,athttps://www.fao​.org/faostat/en/#data​/GT.11.ThiscasestudydrawsheavilyfromWorldBank(2020a),“CleanBusinLAC:LessonsfromChile’sExperiencewithE-mobility:TheIntegrationofE-busesinSantiago.”ReferencesAcosta,P.,andM.D.Curt.2019.“UnderstandingtheExpansionofOilPalmCultivation:ACase-StudyinPapua.”JournalofCleanerProduction219:199–216.https://doi.org/10.1016/j​.jclepro.2019.02.029.Ahmadi,Y.,andA.Yamazaki.2020.“TheEffectivenessofRevenue-NeutralCarbonTaxes.”GRIPSDiscussionPaper19-36,NationalGraduateInstituteforPolicyStudies.Aker,J.C.,andJ.Kelsey.2021.“HarvestingtheRain:TheAdoptionofEnvironmentalTechnologiesintheSahel.”WorkingPaper29518,NationalBureauofEconomicResearch.https://doi​.org/10.3386​/w29518.Akinbami,O.M.,R.O.Samuel,andM.O.Bodunrin.2021.“TheStateofRenewableEnergyDevelopmentinSouthAfrica:AnOverview.”AlexandriaEngineeringJournal60(6):5077–93.Ali,S.2016.“Egypt,ArabRepublicof—EgyptVehicleScrappingandRecyclingProgram:P119483—ImplementationStatusResultsReport:Sequence03(English).”WorldBank,June22.https://documents.worldbank.org/en/publication/documents-reports/documentdetail​/554341468023371923/egypt-arab-republic-of-egypt-vehicle-scrapping-and-recycling​-program​-p119483-implementation-status-results-report-sequence-03.Arifanti,V.B.2020.“MangroveManagementandClimateChange:AReviewinIndonesia.”IOPConferenceSeries:EarthandEnvironmentalScience487:012022.Assunçãoa,J.,C.Gandoura,andR.Rochad.2019.“DETERringDeforestationintheAmazon:EnvironmentalMonitoringandLawEnforcement.”https://www.climatepolicyinitiative.org​/wp-content/uploads/2019/11/Assuncao-Gandour-Rocha-WP2019-DETERring-Deforestation​-in-the-Amazon-1.pdf.Azevedo,D.,H.Wolff,andA.Yamazaki.Forthcoming.“DoCarbonTaxesKillJobs?Firm-LevelEvidencefromBritishColumbia.”ClimateChangeEconomics.155DecarbonizationPolicyImplementation:IllustrativeCaseStudiesAzizuddin,K.2022.“ColombiaLaunchesFirstLatAmGreenTaxonomy,ExcludesNuclearandGas.”ResponsibleInvestor,April13.https://www.responsible-investor.com/colombia-launches-first​-latam-green-taxonomy​-excludes-nuclear-and-gas/.Bandyopadhyay,S.2017.“RenewableTargetsforIndia.”CleanTechnologiesandEnvironmentalPolicy19(2):293–94.https://doi.org/10.1007/s10098-017-1335-z.Banerjee,O.,M.Cicowiez,R.Vargas,E.Molina-Pérez,andŽ.Malek.2022.“DecarbonizationofCostaRica’sAgriculture,ForestryandOtherLandUsesSectors:AnApplicationoftheIEEM+ESMApproach.”IDBWorkingPaper01200.https://publications.iadb.org/en/decarbonization-costa​-ricas-agriculture-forestry-and-other-land-uses-sectors-application-ieem-esm.BaselCommittee.2022.“PrinciplesfortheEffectiveManagementandSupervisionofClimate-RelatedFinancialRisks.”https://www.bis.org/bcbs/publ/d532.htm.Bataille,C.,H.Waisman,andA.Vogt-Schib.2021.“DeepDecarbonizationPathwaysinLatinAmericaandtheCaribbean(DDP-LAC):AnAssessmentofLow-EmissionDevelopmentStrategiesinSixLACCountries.”EnergyStrategyReview.https://www.sciencedirect.com/journal/energy​-strategy-reviews/special-issue/105SPX6M5R6.Beck,M.,N.Rivers,R.Wigle,andH.Yonezawa.2015.“CarbonTaxandRevenueRecycling:ImpactsonHouseholdsinBC.”ResourceandEnergyEconomics41:40–69.Behuria,P.2020.“ThePoliticsofLateDevelopmentinRenewableEnergySectors:DependencyandContradictoryTensionsinIndia’sNationalSolarMission.”WorldDevelopment126.https://doi​.org/10.1016/j.worlddev.2019.104726.Blondel,B.,C.Mispelon,a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